ASPEN AEROGELS INC (Form: 10-Q, Received: 05/06/2016 16:15:45)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36481

ASPEN AEROGELS, INC.

(Exact name of registrant as specified in its charter)

Delaware

04-3559972

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

30 Forbes Road, Building B

Northborough, Massachusetts

01532

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (508) 691-1111

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of April 30, 2016, the registrant had 23,233,762 shares of common stock outstanding.

ASPEN AEROGELS, INC.

INDEX TO FORM 10-Q


		Page
	PART I FINANCIAL INFORMATION

Item 1.	Financial Statements		1

	Consolidated Balance Sheets (unaudited) as of March 31, 2016 and December 31, 2015		1

	Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2016 and 2015		2

	Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2016 and 2015		3

	Notes to Consolidated Financial Statements (unaudited)		4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		10

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		21

Item 4.	Controls and Procedures		22

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings		23

Item 1A.	Risk Factors		23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		23

Item 3.	Defaults Upon Senior Securities		24

Item 4.	Mine Safety Disclosures		24

Item 5.	Other Information		24

Item 6.	Exhibits		24

	SIGNATURES		25

Trademarks, Trade Names and Service Marks

We own or have rights to use “Aspen Aerogels,” “Cryogel,” “Pyrogel,” “Spaceloft,” the Aspen Aerogels logo and other trademarks, service marks and trade names of Aspen Aerogels, Inc. appearing in this quarterly report on Form 10-Q. Solely for convenience, the trademarks, service marks and trade names referred to in this report are without the ^® and TM symbols, but such references are not intended to indicate, in any way, that the owner thereof will not assert, to the fullest extent under applicable law, such owner’s rights to these trademarks, service marks and trade names. This report contains additional trademarks, service marks and trade names of other companies, which, to our knowledge, are the property of their respective owners.

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements.

ASPEN AEROGELS, INC.

Consolidated Balance Sheets

(Unaudited)


	March 31, 2016			December 31, 2015
	(In thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents	$	29,357		$	32,804
Accounts receivable, net of allowances of $126 and $89		23,207			20,624
Inventories		6,139			6,532
Prepaid expenses and other current assets		707			1,687

Total current assets		59,410			61,647
Property, plant and equipment, net		79,539			78,322
Other assets		94			105

Total assets	$	139,043		$	140,074

Liabilities and Stockholders’ Equity
Current liabilities:
Capital leases, current portion	$	54		$	67
Accounts payable		12,745			10,684
Accrued expenses		3,441			5,568
Deferred revenue		431			681
Other current liabilities		241			409

Total current liabilities		16,912			17,409
Capital leases, excluding current portion		30			40
Other long-term liabilities		136			151

Total liabilities		17,078			17,600

Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.00001 par value; 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2016 and December 31, 2015;		—			—
Common stock, $0.00001 par value; 125,000,000 shares authorized, 23,233,762 shares issued and outstanding at March 31, 2016; 23,184,852 shares issued and outstanding at December 31, 2015		—			—
Additional paid-in capital		529,263			527,975
Accumulated deficit		(407,298	)		(405,501	)

Total stockholders’ equity		121,965			122,474

Total liabilities and stockholders’ equity	$	139,043		$	140,074

See accompanying notes to unaudited consolidated financial statements.

ASPEN AEROGELS, INC.

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,
	2016			2015
	(In thousands, except share and per share data)
Revenue:
Product	$	32,286		$	23,211
Research services		535			289

Total revenue		32,821			23,500
Cost of revenue:
Product		25,992			18,845
Research services		302			141

Gross profit		6,527			4,514
Operating expenses:
Research and development		1,310			1,304
Sales and marketing		3,062			2,332
General and administrative		3,913			3,623

Total operating expenses		8,285			7,259

Loss from operations		(1,758	)		(2,745	)

Interest expense, net		(39	)		(45	)

Total interest expense, net		(39	)		(45	)

Net loss	$	(1,797	)	$	(2,790	)

Net loss per share:
Basic	$	(0.08	)	$	(0.12	)

Diluted	$	(0.08	)	$	(0.12	)

Weighted-average common shares outstanding:
Basic and diluted		23,063,471			22,992,273

See accompanying notes to unaudited consolidated financial statements.

ASPEN AEROGELS, INC.

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
	2016			2015
	(In thousands)
Cash flows from operating activities:
Net loss	$	(1,797	)	$	(2,790	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,410			2,184
Stock compensation expense		1,370			1,295
Other		(13	)		—
Changes in operating assets and liabilities:
Accounts receivable		(2,291	)		(1,336	)
Inventories		393			(1,008	)
Prepaid expenses and other assets		966			(339	)
Accounts payable		1,508			(471	)
Accrued expenses		(2,203	)		(2,263	)
Deferred revenue		(542	)		1,070
Other long-term liabilities		(15	)		—

Net cash used in operating activities		(214	)		(3,658	)

Cash flows from investing activities:
Capital expenditures		(3,128	)		(10,531	)
Purchases of marketable securities		—			(2,501	)

Net cash used in investing activities		(3,128	)		(13,032	)

Cash flows from financing activities:
Repayment of obligations under capital lease		(23	)		(19	)
Payments made for employee restricted stock tax withholdings		(82	)		—

Net cash used in financing activities		(105	)		(19	)

Net decrease in cash and cash equivalents		(3,447	)		(16,709	)
Cash and cash equivalents at beginning of period		32,804			49,719

Cash and cash equivalents at end of period	$	29,357		$	33,010

Supplemental disclosures of cash flow information:
Interest paid	$	52		$	45

Income taxes paid	$	—		$	—

Supplemental disclosures of non-cash activities:
Changes in accrued capital expenditures	$	484		$	(341	)

Advanced billings	$	292		$	—

See accompanying notes to unaudited consolidated financial statements.

ASPEN AEROGELS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) Description of Business and Basis of Presentation

Nature of Business

Aspen Aerogels, Inc. (the Company) is an energy technology company that designs, develops and manufactures innovative, high-performance aerogel insulation. The Company also conducts research and development related to aerogel technology supported by funding from several agencies of the U.S. government and other institutions in the form of research and development contracts.

The Company maintains its corporate offices in Northborough, Massachusetts. The Company has two wholly owned subsidiaries: Aspen Aerogels Rhode Island, LLC and Aspen Aerogels Germany, GmbH.

Unaudited Interim Financial Information

The accompanying unaudited interim consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes in our Annual Report on Form 10-K for the year ended December 31, 2015 (the Annual Report), filed with the Securities and Exchange Commission on March 4, 2016.

In the opinion of the Company’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments that are of a normal recurring nature and necessary for the fair statement of the Company’s financial position as of March 31, 2016 and the results of its operations and cash flows for the three months ended March 31, 2016 and 2015. The Company has evaluated events through the date of this filing.

The results of operations for the three months ended March 31, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 or any other period.

There have been no changes to the Company’s significant accounting policies described in the Annual Report that have had a material impact on the Company’s consolidated financial statements and notes thereto.

Principles of Consolidation

The accompanying consolidated financial statements, which have been prepared in accordance with U.S. GAAP, include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements requires the Company to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include allowances for doubtful accounts, sales returns and allowances, inventory valuation, the carrying amount of property and equipment, stock-based compensation and deferred income taxes. The Company evaluates its estimates and assumptions on an on-going basis using historical experience and other factors, including the current economic environment, which are believed to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatile equity markets and declines in business investment increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

(2) Significant Accounting Policies

Cash and Cash Equivalents

Cash equivalents include short-term, highly liquid instruments, which consist of money market accounts. All cash and cash equivalents are maintained with major financial institutions in North America. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk.

Deferred Revenue

The Company records deferred revenue for product sales when (i) the Company has delivered products but other revenue recognition criteria have not been satisfied, (ii) payments have been received in advance of products being delivered or (iii) amounts are billed in accordance with contractual terms in advance of products being delivered.

Stock-based Compensation

Stock-based compensation expense is measured at the grant date based on the fair value of the award. Expense is recognized on a straight-line basis over the requisite service period for all awards with service conditions. For performance-based awards, the grant date fair value is recognized as expense when the condition is probable of being achieved, and then on a graded basis over the requisite service period. The Company uses the Black-Scholes option-pricing model to determine the fair value of service-based option awards, which requires a number of complex and subjective assumptions including fair value of the underlying security, the expected volatility of the underlying security, a risk-free interest rate and the expected term of the option. The fair value of restricted stock and restricted stock unit grants is determined using the closing trading price of the Company’s common stock on the date of grant. The fair value of awards containing market conditions is determined using a Monte Carlo simulation model based upon the terms of the conditions, the expected volatility of the underlying security, and other relevant factors.

During the three months ended March 31, 2016, the Company granted 420,284 restricted common stock units (RSUs) and non-qualified stock options (NSOs) to purchase 259,469 shares of common stock to employees under the 2014 Employee, Director and Consultant Equity Incentive Plan (the 2014 Equity Plan). The employee RSUs and NSOs will vest over a three year period.

Stock-based compensation is included in cost of sales or operating expenses, as applicable, and consists of the following:


	Three Months Ended March 31,
	2016		2015
	(In thousands)
Cost of product revenue	$	192	$	191
Research and development expenses		140		172
Sales and marketing expenses		261		230
General and administrative expenses		777		702

Total stock-based compensation	$	1,370	$	1,295

Pursuant to the “evergreen” provisions of the 2014 Equity Plan, the number of shares of common stock authorized for issuance under the plan automatically increased by 463,697 shares to 6,069,201 shares effective January 1, 2016.

As of March 31, 2016, 2,619,142 shares of common stock were reserved for issuance upon the exercise or vesting, as appropriate, of outstanding stock-based awards granted under the 2014 Equity Plan. In addition, 93,233 shares of common stock are reserved for issuance upon the exercise of outstanding stock options granted under the Company’s 2001 Equity Plan. Any cancellations or forfeitures of the options outstanding under the 2001 Equity Plan will result in the shares reserved for issuance upon exercise of such options becoming available for grant under the 2014 Equity Plan. As of March 31, 2016, there were 3,011,912 shares of common stock available for grant under the 2014 Equity Plan.

Earnings per Share

The Company calculates net loss per common share based on the weighted-average number of common shares outstanding during each period. Potential common stock equivalents are determined using the treasury stock method. The weighted-average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, RSUs and warrants. Common equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive.

Segments

Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s chief operating decision maker reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company views its operations and manages its business as one operating segment.

Information about the Company’s revenues, based on shipment destination or services location, is presented in the following table:


	Three Months Ended March 31,
	2016		2015
	(In thousands)
Revenue:
U.S.	$	11,413	$	10,684
International		21,408		12,816

Total	$	32,821	$	23,500

Recently Issued Accounting Standards

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). The amendment is to simplify several aspects of the accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in ASU 2016-09 are effective for interim and annual reporting periods beginning after December 15, 2016. The Company is currently assessing the impact of ASU 2016-09 on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (FASB ASU 2016-02). FASB ASU 2016-02 changes the accounting for leases and includes a requirement to record all leases on the consolidated balance sheets as assets and liabilities. This update is effective for fiscal years beginning after December 15, 2018. Early application is permitted. The Company has not yet selected a transition method and is evaluating the effect the updated standard will have on its consolidated financial statements and related disclosures.

In August 2015, the FASB issued a deferral of ASU 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. As a result of the deferral, public entities are required to apply the revenue recognition standard for annual reporting period beginning on or after December 15, 2017, including interim periods within that annual reporting period. Early application is not permitted. We have not yet selected a transition method and are evaluating the effect that the updated standard will have on our consolidated financial statements and related disclosures.

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

(3) Inventories

Inventories consist of the following:


	March 31, 2016		December 31, 2015
	(In thousands)
Raw materials	$	3,979	$	4,432
Finished goods		2,160		2,100

Total	$	6,139	$	6,532

(4) Property, Plant and Equipment, Net

Property, plant and equipment consist of the following:


	March 31, 2016			December 31, 2015			Useful life
	(In thousands)
Construction in progress	$	8,152		$	5,138		—
Buildings		23,885			23,884		30 years
Machinery and equipment		105,177			104,658		3-10 years
Computer equipment and software		6,966			6,888		3 years

Total		144,180			140,568
Accumulated depreciation		(64,641	)		(62,246	)

Property, plant and equipment, net	$	79,539		$	78,322

Depreciation expense was $2.4 million and $2.2 million for the three months ended March 31, 2016 and 2015, respectively.

Construction in progress totaled $8.2 million and $5.1 million at March 31, 2016 and December 31, 2015, respectively. Construction in progress included engineering designs and other pre-construction costs for the planned manufacturing facility in Statesboro, Georgia of $4.7 million and $2.3 million at March 31, 2016 and December 31, 2015, respectively.

(5) Accrued Expenses

Accrued expenses consist of the following:


	March 31, 2016		December 31, 2015
	(In thousands)
Employee compensation	$	2,272	$	4,184
Other accrued expenses		1,169		1,384

Total	$	3,441	$	5,568

(6) Commitments and Contingencies

Asset Retirement Obligation

The Company has asset retirement obligations (ARO) arising from requirements to perform certain asset retirement activities upon the termination of its Northborough, Massachusetts facility lease and upon disposal of certain machinery and equipment. The liability was initially measured at fair value and subsequently adjusted for accretion expense and changes in the amount or timing of the estimated cash flows. The corresponding asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and depreciated over the asset’s remaining useful life.

A summary of ARO activity consists of the following:


	Three Months Ended March 31, 2016
	(In thousands)
Balance at beginning of period	$	397
Settlement costs		(156	)

Balance at end of period	$	241

During the three months ended March 31, 2016, the Company incurred approximately $0.2 million in settlement costs in support of completing the restoration of 31,577 square feet of space formerly utilized for manufacturing operations in the Northborough, Massachusetts facility. This manufacturing space will be vacated and returned to the landlord on or before June 30, 2016. The remaining ARO reserve totaling $0.2 million is the maximum obligation to restore the remaining space in the Northborough facility currently utilized by the Company as its corporate headquarters.

Revolving Line of Credit

The Company maintains a revolving credit facility with Silicon Valley Bank which expires on August 31, 2016. The Company may borrow up to $20 million under the facility subject to compliance with certain covenants and borrowing base limitations. At the Company’s election, the interest rate applicable to borrowings under the revolving credit facility may be based on the prime rate or LIBOR. Prime rate-based rates vary from prime rate plus 0.75% per annum to prime rate plus 1.75% per annum, while LIBOR-based rates vary from LIBOR plus 3.75% per annum to LIBOR plus 4.25% per annum. In addition, the Company is required to pay a monthly unused revolving line facility fee of 0.5% per annum of the average unused portion of the revolving credit facility. The revolving credit facility is secured by a first priority security interest in all assets of the Company, including those at the East Providence facility, except for certain exclusions.

At both March 31, 2016 and December 31, 2015, the Company had no amounts drawn on the revolving credit facility. The Company had outstanding letters of credit backed by the revolving credit facility of $2.7 million at March 31, 2016 and December 31, 2015, which reduce the funds otherwise available to the Company under the facility. Based on the available borrowing base, the effective amount available to the Company under the revolving credit facility at March 31, 2016 was $13.0 million after consideration of the $2.7 million of outstanding letters of credit. Under the revolving credit facility, the Company is required to comply with financial covenants relating to, among other items, minimum Adjusted EBITDA, maximum unfinanced capital expenditures and other non-financial covenants. At March 31, 2016, the Company was in compliance with all such financial covenants.

Letters of Credit

Pursuant to the terms of its Northborough, Massachusetts facility lease, the Company has been required to provide the landlord with letters of credit securing certain obligations. In addition, the Company has been required to provide certain customers with letters of credit securing obligations under commercial contracts. The Company had letters of credit outstanding for $2.7 million at March 31, 2016 and December 31, 2015. These letters of credit are secured by the Company’s revolving credit facility.

Litigation

The Company is, from time to time, a party to litigation that arises in the normal course of its business operations. See Part II, Item 1 (“Legal Proceedings”) of this Quarterly Report on Form 10-Q for a description of certain of the Company’s current legal proceedings. The Company is not presently a party to any litigation for which it believes a loss is probable requiring an amount to be accrued or a possible loss contingency requiring disclosure.

(7) Net Loss Per Share

The computation of basic and diluted net loss per share consists of the following:


	Three Months Ended March 31,
	2016			2015
	(In thousands, except share and per share data)
Numerator:
Net loss	$	(1,797	)	$	(2,790	)

Denominator:
Weighted average shares outstanding, basic and diluted		23,063,471			22,992,273

Net loss per share, basic and diluted	$	(0.08	)	$	(0.12	)

Potentially dilutive common shares that were excluded from the computation of diluted net loss per share because they were anti-dilutive consist of the following:


	Three Months Ended March 31,
	2016		2015
Common stock options		1,952,879		1,231,542
Restricted common stock units		759,510		524,847
Common stock warrants		131		131
Restricted common stock awards		132,130		54,089

Total		2,844,650		1,810,609

In the table above, anti-dilutive shares consist of those common stock equivalents that have (i) an exercise price above the average stock price for the period or (ii) related average unrecognized stock compensation expense sufficient to buy-back the entire amount of shares. The Company excludes the shares issued in connection with restricted stock awards from the calculation of basic weighted average common shares outstanding until the restrictions lapse.

(8) Income Taxes

The Company incurred net operating losses and recorded a full valuation allowance against net deferred tax assets for all periods presented. Accordingly, the Company has not recorded a provision for federal or state income taxes.

Item 2.

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

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2015, filed with the Securities and Exchange Commission on March 4, 2016, which we refer to as the Annual Report.

Certain matters discussed in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q, words such as “may,” “will,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.

Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods.

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified under Part II, Item 1A of this Quarterly Report on Form 10-Q, and under “Risk Factors” in Item 1A of the Annual Report.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

You should read the following discussion and analysis of financial condition and results of operations together with Part I Item 1 “Financial Information” and our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.

Overview

We design, develop and manufacture innovative, high-performance aerogel insulation. We believe our aerogel blankets deliver the best thermal performance of any widely used insulation product available on the market today and provide a combination of performance attributes unmatched by traditional insulation materials. Our end-use customers select our products where thermal performance is critical and to save money, reduce energy use, preserve operating assets and protect workers.

Our insulation is used by oil producers and the owners and operators of refineries, petrochemical plants, LNG facilities, power generating assets and other energy infrastructure. Our Pyrogel and Cryogel product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption. We also derive product revenue from the building and construction and other end markets. Customers in these markets use our aerogels for applications as diverse as wall systems, military and commercial aircraft, trains, buses, appliances, apparel, footwear and outdoor gear.

We generate product revenue through the sale of our line of aerogel blankets. We market and sell our products primarily through a sales force based in North America, Europe and Asia. The efforts of our sales force are supported by a small number of sales consultants with extensive knowledge of a particular market or region. Our sales force is responsible for establishing and maintaining customer and partner relationships, delivering highly technical information and ensuring high-quality customer service.

Our salespeople work directly with end-use customers and engineering firms to promote the qualification, specification and acceptance of our products. We also rely on an existing and well-established channel of qualified insulation distributors and contractors in more than 30 countries around the world that ensures rapid delivery of our products and strong end-user support. Our salespeople also work to educate insulation contractors about the technical and operating cost advantages of our aerogel blankets.

We also perform research services under contracts with various agencies of the U.S. government, including the Department of Defense and the Department of Energy, and other institutions. Research performed under contract with government agencies and other institutions enables us to develop and leverage technologies into broader commercial applications.

We manufacture our products using our proprietary process and technology at our facility in East Providence, Rhode Island. We completed the construction and start-up of a third production line in the East Providence facility during the first quarter of 2015 with a total construction cost of $31.8 million. The third production line increased our annual nameplate capacity to 50 million to 55 million square feet of aerogel blankets, depending on product mix.

On February 15, 2016, we entered into an Inducement Agreement with the Development Authority of Bulloch County, the City of Statesboro, Georgia and Bulloch County, Georgia (collectively, the Statesboro Entities). Pursuant to the Inducement Agreement, the Statesboro Entities will provide various incentives to induce us to invest $70 million in constructing and equipping our planned second manufacturing facility in Statesboro, Georgia and to create 106 full-time jobs. We will also receive statutory incentives for economic development provided by the State of Georgia.

Incentives afforded by the Statesboro Entities to the Company include, but are not limited to, property tax reductions and utility and site infrastructure improvements. The Development Authority will lease to us a 43.2 acre property for a term of five years, with an option to renew, in consideration for the payment of nominal rent, and grant us an option to purchase the property upon the earlier of the expiration or termination of the lease at a nominal price.

In addition, we entered into a (i) PILOT Agreement with the Statesboro Entities that sets forth our rights and obligations with respect to the incentives received pursuant to the Inducement Agreement and (ii) a Performance and Accountability Agreement with other state authorities, which provides for a grant of $250,000. Pursuant to these agreements, in the event that we fail to meet at least 80% of the investment and job creation goals within 36 months following the earlier to occur of (i) the completion and issuance of the certificate of occupancy with respect to the planned second manufacturing facility or (ii) June 30, 2018, we may be required to repay portions of property tax savings and other incentives. In addition, we must maintain our achievement of 80% of the investment and job creation goals for a period of 84 months.

Our revenue for the three months ended March 31, 2016 was $32.8 million, which represented an increase of 40% from the three months ended March 31, 2015. Net loss for the three months ended March 31, 2016 was $1.8 million and net loss per diluted share was $0.08. Net loss for the three months ended March 31, 2015 was $2.8 million and net loss per diluted share was $0.12.

Key Metrics and Non-GAAP Financial Measures

We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

Square Foot Operating Metric

We price our product and measure our product shipments in square feet. We estimate our annual nameplate capacity to be 50 million to 55 million square feet of aerogel blankets depending on product mix. We believe the square foot operating metric allows us and our investors to measure the growth in our manufacturing capacity and product shipments on a uniform and consistent basis. The following chart sets forth product shipments associated with recognized revenue in square feet for the periods presented:


	Three Months Ended March 31,
	2016		2015
	(In thousands)
Product shipments in square feet		11,846		8,780

Adjusted EBITDA

We use Adjusted EBITDA, a non-GAAP financial measure, as a means to assess our operating performance. We define Adjusted EBITDA as net income (loss) before interest expense, taxes, depreciation, amortization, stock-based compensation expense and other items, which occur from time to time, that we do not believe are indicative of our core operating performance. Adjusted EBITDA is a supplemental measure of our performance that is not presented in accordance with U.S. GAAP. Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other measure of financial performance calculated and presented in accordance with U.S. GAAP. In addition, our definition and presentation of Adjusted EBITDA may not be comparable to similarly titled measures presented by other companies.

We use Adjusted EBITDA:

•

as a measure of operating performance because it does not include the impact of items that we do not consider indicative of our core operating performance;

•

for planning purposes, including the preparation of our annual operating budget,

•

to allocate resources to enhance the financial performance of our business; and

•

as a performance measure used under our bonus plan.

We also believe that the presentation of Adjusted EBITDA provides useful information to investors with respect to our results of operations and in assessing the performance and value of our business. Various measures of EBITDA are widely used by investors to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, capital structures and the methods by which assets were acquired.

Although measures similar to Adjusted EBITDA are frequently used by investors and securities analysts in their evaluation of companies, we understand that Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for net income, income from operations, net cash provided by operating activities or an analysis of our results of operations as reported under U.S. GAAP. Some of these limitations are:

•

Adjusted EBITDA does not reflect our historical cash expenditures or future requirements for capital expenditures or other contractual commitments;

•

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

•

Adjusted EBITDA does not reflect stock-based compensation expense;

•

Adjusted EBITDA does not reflect our income tax expense or cash requirements to pay our income taxes;

•

Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

•

Although depreciation, amortization and impairment charges are non-cash charges, the assets being depreciated, amortized or impaired will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for these replacements; and

•

Other companies in our industry may calculate EBITDA or Adjusted EBITDA differently than we do, limiting their usefulness as a comparative measure.

Because of these limitations, our Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to reinvest in the growth of our business or as a measure of cash available for us to meet our obligations.

To properly and prudently evaluate our business, we encourage you to review the U.S. GAAP financial statements included elsewhere in this Quarterly Report on Form 10-Q, and not to rely on any single financial measure to evaluate our business.

The following table presents a reconciliation of net loss, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the periods presented:


	Three Months Ended March 31,
	2016			2015
	(In thousands)
Net loss	$	(1,797	)	$	(2,790	)
Depreciation and amortization		2,410			2,184
Stock-based compensation (1)		1,370			1,295
Interest expense		39			45

Adjusted EBITDA	$	2,022		$	734

(1)	Represents non-cash stock-based compensation related to vesting and modifications of stock option grants, vesting of RSUs and vesting of restricted common stock.

Our Adjusted EBITDA is affected by a number of factors including volume and mix of aerogel products sold, average selling prices, average material costs, our actual manufacturing costs, the costs associated with and timing of expansions and start-up of additional production capacity, and the amount and timing of operating expenses. As we build out our manufacturing capacity, we expect increased manufacturing expenses will periodically have a negative impact on Adjusted EBITDA, but will set the framework for improved Adjusted EBITDA moving forward. Accordingly, we expect that our Adjusted EBITDA will vary from period to period as we continue to expand our manufacturing capacity.

Components of Our Results of Operations

Revenue

We recognize product revenue from the sale of our line of aerogel products and research services revenue from the provision of services under contracts with various agencies of the U.S. government and other institutions. Product revenue is recognized upon transfer of title and risk of loss, which is generally upon shipment or delivery.

Cost of Revenue

Cost of revenue for our product revenue consists primarily of materials and manufacturing expense, including direct labor, utilities, maintenance expense and depreciation on manufacturing assets. Cost of product revenue is recorded when the related product revenue is recognized. Cost of product revenue also includes stock-based compensation of manufacturing employees and shipping costs.

Material is our most significant component of cost of product revenue and includes fibrous batting, silica materials and additives. Material costs as a percentage of product revenue vary from product to product due to differences in average selling prices, material requirements, blanket thicknesses and manufacturing yields. As a result, material costs as a percentage of revenue will vary from period to period due to changes in the mix of aerogel products sold. However, in general, we expect material costs in the aggregate to decline as a percentage of revenue as we seek to achieve higher selling prices, material sourcing improvements and manufacturing yield enhancements for our aerogel products.

Manufacturing expense is also a significant component of cost of revenue. As we increase manufacturing capacity through our planned construction and operation of a second manufacturing facility and, over time, potentially expand the production lines at this second manufacturing facility, we expect manufacturing expense as a percentage of product revenue will increase in the near-term following each expansion but will decrease in the long-term with increased revenues supported by the effect of completed capacity expansions.

Cost of revenue for our research services revenue consists of direct labor costs of research personnel engaged in the contract research, third-party consulting expense, and associated direct material costs. This cost of revenue also includes overhead expenses associated with project resources, development tools and supplies. Cost of revenue for our research services revenue is recorded when the related research services revenue is recognized.

Gross Profit

Our gross profit as a percentage of revenue is affected by a number of factors, including the mix of aerogel products sold, average selling prices, average material costs, our actual manufacturing costs and the costs associated with expansions and start-up of production capacity. Accordingly, we expect our gross profit in absolute dollars and as a percentage of revenue to vary from period to period. As we continue to build out our manufacturing capacity, we expect increased manufacturing expenses will periodically have a significant negative impact on gross profit in the short-term. However, in general, we expect gross profit to improve as a percentage of revenue in the long-term due to expected increases in manufacturing productivity and, production volumes, supported by expected capacity expansions, improvements in manufacturing yields and realization of material purchasing efficiencies.

Operating Expenses

Operating expenses consist of research and development, sales and marketing, and general and administrative expenses. The largest component of our operating expenses is personnel costs, consisting of salaries, benefits, incentive compensation and stock-based compensation. We expect to continue to hire a significant number of new employees in order to support our anticipated growth. In any particular period, the timing of additional hires could materially affect our operating expenses, both in absolute dollars and as a percentage of revenue.

Research and Development Expenses

Research and development expenses consist primarily of expenses for personnel engaged in the development of next generation aerogel compositions, form factors and manufacturing technologies. These expenses also include testing services, prototype expenses, consulting services, equipment depreciation, facilities costs and related overhead. We expense research and development costs as incurred. We expect to continue to devote substantial resources to the development of new aerogel technology. We believe that these investments are necessary to maintain and improve our competitive position. We expect to continue to invest in research and engineering personnel and the infrastructure required in support of their efforts. We expect that our research and development expenses will increase in absolute dollars but decrease as a percentage of revenue in the long-term.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, travel and related costs, consulting expenses and facilities-related costs. We plan to expand our sales force and sales consultants globally to drive anticipated growth in customers and demand for our products. We expect that sales and marketing expenses will increase in absolute dollars but decrease as a percentage of revenue in the long-term.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, legal expenses, consulting and professional services, audit and tax consulting costs, and expenses for our executive, finance, human resources and information technology organizations. General and administrative expenses have increased as we have incurred additional costs related to operating as a publicly-traded company, which include costs of compliance with securities, corporate governance and related laws and regulations, investor relations expenses, increased insurance premiums, including director and officer insurance, and increased audit and legal fees. In addition, we expect our general and administrative expenses to increase as we add general and administrative personnel to support the anticipated growth of our business and continued expansion of our manufacturing operations. We also expect that the patent enforcement actions, described in more detail under “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q, will result in a near term increase in legal expense and, if such litigation is protracted, could result in significant additional legal expense over the medium to long term. In the longer term, we expect that general and administrative expenses will increase in absolute dollars but decrease as a percentage of revenue.

Interest Expense

For the three months ended March 31, 2016 and 2015, interest expense consisted primarily of fees related to our revolving credit facility.

Provision for Income Taxes

We have incurred net losses since inception and have not recorded benefit provisions for U.S. federal income taxes or state income taxes since the tax benefits of our net losses have been offset by valuation allowances due to the uncertainty associated with the utilization of net operating loss carryforwards.

Results of Operations

Three months ended March 31, 2016 compared to the three months ended March 31, 2015

The following tables set forth a comparison of the components of our results of operations for the periods presented:

Revenue


	Three Months Ended March 31,
	2016					2015					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percentage
	($ In thousands)
Revenue:
Product	$	32,286		98	%	$	23,211		99	%	$	9,075		39	%
Research services		535		2	%		289		1	%		246		85	%

Total revenue	$	32,821		100	%	$	23,500		100	%	$	9,321		40	%

The following chart sets forth product shipments in square feet for the periods presented:


	Three Months Ended March 31,				Change
	2016		2015		Amount		Percentage
Product shipments in square feet (in thousands)		11,846		8,780		3,066		35	%

Total revenue increased $9.3 million, or 40%, to $32.8 million for the three months ended March 31, 2016 from $23.5 million in the comparable period in 2015, primarily as a result of an increase in product revenue.

Product revenue increased by $9.1 million, or 39%, to $32.3 million for the three months ended March 31, 2016 from $23.2 million in the comparable period in 2015. This increase was principally the result of an increase in sales of our aerogel products in the petrochemical market in Asia, the subsea market, and the building and construction market in Europe. In particular, this increase reflects product sales of $6.7 million for use in a petrochemical facility by a major Asian energy company and $2.1 million for use in a subsea project in the Gulf of Mexico by a French contractor. The increase in product revenue during the quarter ended March 31, 2016 also reflects price increases enacted in late 2015 and was supported by the increase in manufacturing capacity associated with operation of the third production line in the East Providence facility which began operation at the end of the first quarter in 2015.

The average selling price per square foot of our products increased by $0.09, or 3.4%, to $2.73 per square foot for the three months ended March 31, 2016 from $2.64 per square foot for the three months ended March 31, 2015. This increase in average selling price contributed $1.0 million to the increase in product revenue. In volume terms, product shipments increased 3.1 million square feet, or 35%, to 11.8 million square feet of aerogel products for the three months ended March 31, 2016, as compared to 8.8 million square feet for the three months ended March 31, 2015. The increase in product volume contributed approximately $8.1 million to the increase in product revenue.

Research services revenue increased $0.2 million, or 85%, to $0.5 million for the three months ended March 31, 2016 from $0.3 million in the comparable period in 2015. The increase was primarily due to the timing and amount of funding available under existing research contracts during the three months ended March 31, 2016 from the comparable period in 2015.

Product revenue was 98% and 99% of total revenue for the three months ended March 31, 2016 and 2015, respectively. Research services revenue was 2% and 1% of total revenue for the three months ended March 31, 2016 and 2015, respectively. We expect that product revenue will continue to constitute the vast majority of total revenue generated during 2016.

We expect a cumulative decline in product revenue in the range of 5% to 10% during the remaining three quarters of 2016. This expected decrease in product revenue is due to the lower demand in the subsea market, which is currently under pressure as a result of the prolonged decrease in the market price of oil. As a result, we expect total revenue for the year ending December 31, 2016 to range between $117 million and $125 million.

Cost of Revenue


	Three Months Ended March 31,
	2016								2015								Change
	Amount		Percentage of Related Revenue			Percentage of Total Revenue			Amount		Percentage of Related Revenue			Percentage of Total Revenue			Amount		Percentage
	($ in thousands)
Cost of revenue:
Product	$	25,992		81	%		79	%	$	18,845		81	%		80	%	$	7,147		38	%
Research services		302		56	%		1	%		141		49	%		1	%		161		114	%

Total cost of revenue	$	26,294		80	%		80	%	$	18,986		81	%		81	%	$	7,308		38	%

Total cost of revenue increased $7.3 million, or 38%, to $26.3 million for the three months ended March 31, 2016 from $19.0 million in the comparable period in 2015. The increase in total cost of revenue was the result of an increase of $5.1 million in material costs, an increase of $2.0 million in manufacturing expense to support increased product revenue and an increase of $0.2 million in cost of research services.

Product cost of revenue increased $7.1 million, or 38%, to $26.0 million for the three months ended March 31, 2016 from $18.8 million in the comparable period in 2015. The $7.1 million increase was the result of a $5.1 million increase in material costs and a $2.0 million increase in manufacturing expense year over year. The increase in the level of manufacturing expense was driven by the addition of the third production line in the East Providence facility, which commenced operation at the end of the first quarter of 2015. The increase in manufacturing expense was the result of increases in compensation expense of $0.8 million, maintenance and operating supplies expenses of $0.6 million, utility costs of $0.3 million and depreciation expense of $0.3 million. Material costs increased $5.1 million for the three months ended March 31, 2016 due to a 35% increase in product volume, an unfavorable mix of products sold, and a decline in product yields versus the comparable period in 2015. We expect that product cost of revenue will decrease during the remaining three quarters of 2016 from the levels realized during the three months ended March 31, 2016 due principally to the expected decline in revenue during the period, in combination with expected improvements in manufacturing productivity and yields.

Product cost of revenue as a percentage of product revenue remained consistent at 81% during the three months ended March 31, 2016 from 81% during the three months ended March 31, 2015 due primarily to the impact of price increases enacted during 2015 and the increase in demand for our product, offset, in part, by an unfavorable mix of products sold. We expect that product cost of revenue as a percentage of revenue during the remainder of 2016 will decrease from the levels realized during the three months ended March 31, 2016 due to an expected favorable mix of products sold and improvements in manufacturing productivity and yields.

Research services cost of revenue increased $0.2 million, or 114%, to $0.3 million for the three months ended March 31, 2016 from $0.1 million in the comparable period in 2015. The increase in cost of research services revenue was due to the 85% increase in research services revenue during the three months ended March 31, 2016 and the increased use of outside consultants to perform the contracted research.

Gross Profit


	Three Months Ended March 31,
	2016					2015					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percentage
	($ in thousands)
Gross profit	$	6,527		20	%	$	4,514		19	%	$	2,013		45	%

Gross profit increased $2.0 million, or 45%, to $6.5 million for the three months ended March 31, 2016 from $4.5 million in the comparable period in 2015. The increase reflected $8.3 million related to increased volume supported by output from the third production line and $0.8 million in incremental contribution from an effective 3% sales price increase enacted late in 2015. These increases were offset by a $5.1 million increase in material costs due to the increase in product volume, the unfavorable product mix and the lower manufacturing yields, a $1.9 million increase in manufacturing expense associated with operation of the third production line in the East Providence facility, and $0.1 million in higher contribution due to the increase in research services revenue. We expect gross profit and gross margin to increase during the remainder of 2016 from the level realized during the three months ended March 31, 2016 due to expected improvements in manufacturing productivity and yields, an expected favorable mix of products sold and the continued impact of the 2016 sales price increase.

Gross profit as a percentage of total revenue increased to 20% of total revenue for the three months ended March 31, 2016 from 19% in the comparable period in 2015. We expect gross profit as a percentage of total revenue to increase during the remainder of 2016 from the levels realized during the three months ended March 31, 2016 due to expected improvements in manufacturing productivity and yields, an expected favorable mix of products sold and the continued impact of the 2016 sales price increase enacted late in 2015.

Research and Development Expenses


	Three Months Ended March 31,
	2016					2015					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percentage
	($ in thousands)
Research and development expenses	$	1,310		4	%	$	1,304		6	%	$	6		0	%

Research and development expenses remained flat at $1.3 million for the three months ended March 31, 2016 and the comparable period in 2015. During the remainder of 2016, we expect quarterly research and development expenses to increase slightly from the level realized in the three months ended March 31, 2016. We expect research and development expenses as a percentage of total revenue to increase during the remainder of 2016 due to the expected decline in quarterly revenue during the period.

In the long-term, we expect to increase investment in research, development and engineering personnel, projects and infrastructure in support of efforts to develop new products, technologies and markets. However, we expect that research and development expenses will decline as a percentage of total revenue in the long-term due to projected growth in product revenue.

Sales and Marketing Expenses


	Three Months Ended March 31,
	2016					2015					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percentage
	($ in thousands)
Sales and marketing expenses	$	3,062		9	%	$	2,332		10	%	$	730		31	%

Sales and marketing expenses increased $0.7 million, or 31%, to $3.1 million for the three months ended March 31, 2016 from $2.3 million in the comparable period in 2015. The $0.7 million increase was primarily due to an increase of $0.5 million in payroll and related costs resulting from the hiring of additional sales personnel and $0.2 million in product marketing expenses. During the remainder of 2016, we expect quarterly sales and marketing expenses to decrease slightly from the level realized in the three months ended March 31, 2016. However, we expect sales and marketing expenses as a percentage of total revenue to remain essentially flat during the remainder of 2016 due to an expected offsetting decline in quarterly revenue during the period.

In the long-term, we plan to continue to expand our sales force to support anticipated growth in customers and demand for our products. However, we expect that sales and marketing expenses will decrease as a percentage of total revenue in the long-term due to projected growth in product revenue.

General and Administrative Expenses


	Three Months Ended March 31,
	2016					2015					Change
	Amount		Percentage of Revenue			Amount		Percentage of Revenue			Amount		Percentage
	($ in thousands)
General and administrative expenses	$	3,913		12	%	$	3,623		15	%	$	290		8	%

General and administrative expenses increased $0.3 million, or 8%, to $3.9 million during the three months ended March 31, 2016 from $3.6 million in the comparable period in 2015. The $0.3 million increase was primarily the result of an increase in legal and professional fees of $0.2 million primarily in connection with patent enforcement actions, compensation related expenses of $0.1 million and stock-based compensation expense of $0.1 million, offset by a decrease in depreciation expense of $0.1 million. We expect general and administrative expenses to increase during 2016 due to expected growth in patent enforcement costs in support of our intellectual property portfolio and increased investment in information systems.

General and administrative expenses as a percentage of total revenue decreased to 12% for the three months ended March 31, 2016 from 15% in the comparable period in 2015.

We expect to continue to increase general and administrative personnel and expense levels in the long term to support the anticipated growth of our business and continued expansion of our manufacturing operations. We also expect that the patent enforcement actions, described in more detail under “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q, will result in a near term increase in legal expense and, if such actions are protracted, could result in significant additional legal expense over the medium to long term. In the longer term, we expect that general and administrative expenses will increase in absolute dollars but decrease as a percentage of revenue.

Other Income (Expense)


	Three Months Ended March 31,
	2016						2015						Change
	Amount			Percentage of Revenue			Amount			Percentage of Revenue			Amount		Percentage
	($ in thousands)
Interest expense	$	(39	)		0	%	$	(45	)		0	%	$	6		13	%

Interest expense of less than $0.1 million during the three months ended March 31, 2016 and 2015 was comprised primarily of costs related to our revolving credit facility.

Liquidity and Capital Resources

Overview

We have experienced significant losses and invested significant resources since our inception to develop and commercialize our aerogel technology and to build a manufacturing infrastructure capable of supplying aerogel products at the volumes and costs required by our customers. These investments have included research and development and other operating expenses, capital expenditures and investment in working capital balances.

We have been experiencing revenue growth as we gain share in our target markets. Despite an expected decline in revenue for the remainder of 2016, our current financial forecast anticipates long-term revenue growth, with increasing levels of gross profit and improved cash flows from operations. However, we expect to incur significant capital expenditures through 2020 related to the expansion of our manufacturing capacity to support the expected growth in demand.

We believe that our existing cash balance and available credit will be sufficient to fund a portion of the design, development and construction of our second manufacturing facility. We expect to supplement our cash balance and available credit with anticipated cash flows from operations, local government grants, debt financings and potentially equity financings to provide the capital required to complete the first production line in our second manufacturing facility.

Primary Sources of Liquidity

Our principal sources of liquidity are currently our cash and cash equivalents and our revolving credit facility with Silicon Valley Bank. Cash and cash equivalents consist primarily of cash and money market accounts on deposit with banks. As of March 31, 2016, we had $29.4 million of cash and cash equivalents.

At March 31, 2016, our only debt obligations were $0.1 million related to capital lease obligations. At March 31, 2016, we also had $2.7 million of outstanding letters of credit secured by a revolving credit facility with Silicon Valley Bank.

We initially entered into the revolving credit facility with Silicon Valley Bank in March 2011. This facility was amended from time to time through 2014. On September 3, 2014, we further amended the loan and security agreement to extend the maturity date of the revolving credit facility to August 31, 2016 and to increase the maximum amount we are permitted to borrow, subject to continued covenant compliance and borrowing base requirements, from $10 million to $20 million. At our election, the interest rate applicable to borrowings under the amended revolving credit facility may be based on the prime rate or LIBOR. Prime rate-based rates vary from prime rate plus 0.75% per annum to prime rate plus 1.75% per annum, while LIBOR-based rates vary from LIBOR plus 3.75% per annum to LIBOR plus 4.25% per annum. In addition, we are required to pay a monthly unused revolving line facility fee of 0.5% per annum of the average unused portion of the revolving credit facility.

Due to the borrowing base limitations of the revolving credit facility, the effective amount available to us under the facility at March 31, 2016 was $13.0 million after giving effect to the $2.7 million of letters of credit outstanding. As of March 31, 2016, we had no outstanding balances drawn on the revolving credit facility.

We are considering various options with respect to our revolving credit facility that expires on August 31, 2016, including a possible extension or amendment of the facility or a potential refinancing,

Analysis of Cash Flow

Net Cash Used in Operating Activities

During the three months ended March 31, 2016, net cash used in operating activities declined by $3.4 million to $0.2 million from $3.7 million during the comparable period in 2015. This improvement was primarily the result of an increase in cash provided by changes in operating assets and liabilities of $2.1 million and an improvement in net loss adjusted for non-cash items of $1.3 million.

Net Cash Used in Investing Activities

Net cash used in investing activities is primarily related to capital expenditures to support our growth and investment in marketable securities. Net cash used in investing activities for the three months ended March 31, 2016 and 2015 was $3.1 million and $13.0 million, respectively.

Net cash used in investing activities for the three months ended March 31, 2016 included a total of $3.1 million in capital expenditures for engineering design and other pre-construction costs related to our planned manufacturing facility in Statesboro, Georgia, and machinery and equipment to improve the throughput and efficiency of our East Providence facility. Net cash used in investing activities for the three months ended March 31, 2015 included $10.5 million of capital expenditures primarily to construct the third production line in our East Providence manufacturing facility and $2.5 million for the purchase of marketable securities.

Net Cash Used in Financing Activities

Net cash used in financing activities for the three months ended March 31, 2016 totaled $0.1 million and consisted of $0.1 million for payments made for employee tax withholdings associated with the vesting of restricted stock units and less than $0.1 million for repayments of obligations under capital leases. Net cash used in financing activities for the three months ended March 31, 2015 totaled less than $0.1 million for repayments of obligations under capital leases.

Off Balance Sheet Arrangements

Since inception, we have not engaged in any off balance sheet activities as defined in Item 303(a)(4) of Regulation S-K.

Contractual Obligations and Commitments

There have been no material changes to our contractual obligations and commitments as reported in our Annual Report on Form 10-K for the year ending December 31, 2015, filed with the SEC on March 4, 2016.

Recent Accounting Pronouncements

Information regarding new accounting pronouncements is included in note 2 to our unaudited consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in these accounting policies have the greatest potential impact on our financial statements; and therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See our Annual Report on Form 10-K for the year ended December 31, 2015, filed on March 4, 2016 with the Securities and Exchange Commission, and note 2 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information about these critical accounting policies, as well as a description of our other significant accounting policies.

Certain Factors That May Affect Future Results of Operations

The Securities and Exchange Commission, or SEC, encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other important factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about: our beliefs in the appropriateness of our assumptions, the accuracy of our estimates regarding expenses, loss contingencies, future revenues, future profits, capital requirements, and the need for additional financing; the performance of our aerogel blankets; our plans to construct a second manufacturing facility in Statesboro, Georgia; the estimated effects of our planned second manufacturing facility on our annual nameplate capacity; our estimates of annual production capacity; our beliefs about the usefulness of the square foot operating metric; our beliefs about the financial metrics that are indicative of our core performance; our beliefs about the usefulness of our presentation of Adjusted EBITDA; our expectations about the effect of manufacturing capacity on financial metrics such as Adjusted EBITDA; our beliefs about the outcome, effects or estimated costs of current or potential litigation or their respective timing, including expected legal expense in connection with the Company’s patent enforcement actions; our expectations about hiring additional personnel; our plans to devote substantial resources to the development of new aerogel technology; our expectations about product mix; our beliefs about the impact of sales price increases;

our expectations about future material costs and manufacturing expenses as a percentage of revenue; our expectations of future gross profit and the effect of manufacturing expenses, manufacturing capacity and productivity on gross profit; our expectations about our resources and other investments in new technology and related research and development activities and associated expenses; our expectations about short and long term (a) research and development (b) general and administrative and (c) sales and marketing expenses; our expectations of continued revenue growth, increased gross profit, and improving cash flows over the long term; our expectations about incurring significant capital expenditures in the future; our expectations about the expansion of our workforce and resources and its effect on sales and marketing, general and administrative, and related expenses; our expectations about future product revenue and growth of demand for our products; our expectations about the effect of stock based compensation on various costs and expenses; our expectations about potential sources of future financing; our beliefs about the impact of accounting policies on our financial statements; our beliefs about the effect of interest rates, inflation and foreign currency fluctuations on our results of operations and financial condition; and our beliefs about the expansion of our international operations.

Words such as “may,” “will,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and under the heading “Risk Factors” contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2015.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q might not occur. Stockholders and other readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to Aspen Aerogels, Inc. or to any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure results primarily from fluctuations in interest rates as well as from inflation. In the normal course of business, we are exposed to market risks, including changes in interest rates which affect our line of credit under our revolving credit facility as well as cash flows. We may also face additional exchange rate risk in the future as we expand our business internationally.

Interest Rate Risk

We are exposed to changes in interest rates in the normal course of our business. At March 31, 2016, we had unrestricted cash and cash equivalents of $29.4 million. These amounts were held for working capital and capital expansion purposes and were invested primarily in deposit and money market accounts at a major financial institution in North America. Due to the short-term nature of these investments, we believe that our exposure to changes in the fair value of our cash as a result of changes in interest rates is not material.

As of March 31, 2016, we have no debt outstanding other than capital lease obligations of approximately $0.1 million with fixed interest rates. At March 31, 2016, we also had $2.7 million of outstanding letters of credit.

In September 2014, we amended our loan and security agreement to extend the maturity date of the revolving credit facility to August 31, 2016 and to increase the maximum amount we are permitted to borrow, subject to continued covenant compliance and borrowing base requirements, from $10 million to $20 million. At our election, the interest rate applicable to borrowings under the amended revolving credit facility may be based on the prime rate or LIBOR. Prime rate-based rates vary from prime rate plus 0.75% per annum to prime rate plus 1.75% per annum, while LIBOR-based rates vary from LIBOR plus 3.75% per annum to LIBOR plus 4.25% per annum. In addition, we are required to pay a monthly unused revolving line facility fee of 0.5% per annum of the average unused portion of the revolving credit facility.

Due to the borrowing base limitations, the effective amount available to us under the revolving credit facility at March 31, 2016 was $13.0 million after giving effect to the $2.7 million of letters of credit outstanding. As of March 31, 2016, we had no outstanding balances drawn on the revolving credit facility.

Inflation Risk

Although we expect that our operating results will be influenced by general economic conditions, we do not believe that inflation has had a material effect on our results of operations during the periods presented in this report. However, our business may be affected by inflation in the future.

Foreign Currency Exchange Risk

We are subject to inherent risks attributed to operating in a global economy. Principally all of our revenue, receivables, purchases and debts are denominated in U.S. dollars.

Item 4.

Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures . We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As of March 31, 2016, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our principal executive officer and principal financial officer have concluded, that, as of March 31, 2016, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Controls . During the three months ended March 31, 2016, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings.

On May 5, 2016, we filed a complaint for patent infringement against Nano Tech Co., Ltd. and Guangdong Alison Hi-Tech., Ltd. (together, the “Respondents”) in the United States International Trade Commission (the “ITC”). The ITC complaint alleges that these two China-based companies have engaged and are engaging in unfair trade practices by importing and selling aerogel products in the United States that infringe several of the Company’s patents. In the ITC complaint, we are seeking exclusion orders directing United States Customs and Border Protection to stop the importation of infringing products.

Due to their nature, it is difficult to predict the outcome or the costs involved in any litigation. Furthermore, the Respondents may have significant resources and interest to litigate and therefore, this litigation could be protracted and may ultimately involve significant legal expenses. In addition to the foregoing, the Company has been and may be from time to time party to other legal proceedings that arise in the ordinary course of business and to other patent enforcement actions to assert the Company’s patent rights.

Item 1A.

Risk Factors.

There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Unregistered Sales of Equity Securities. Not applicable.

(b) Use of Proceeds from Initial Public Offering of Common Stock. We registered shares of our common stock in connection with our initial public offering pursuant to a registration statement on Form S-1 (File No. 333-195523), which was declared effective by the SEC on June 12, 2014, and a registration statement on Form S-1 (File No. 333-196719) filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, or the Securities Act.

We received aggregate net proceeds from the offering of approximately $74.7 million, after deducting $4.3 million of underwriting discounts and approximately $3.5 million of offering expenses.

As of March 31, 2016, we have used $19.8 million of the net proceeds of the offering to repay all amounts outstanding under our subordinated notes and our revolving credit facility and $30.6 million of the net proceeds of the offering for capital expenditures related to our third production line. The remainder of the net proceeds is held in a deposit account and money market account with a major financial institution in North America. We have broad discretion in the use of the net proceeds from our initial public offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our stock. There has been no material change in our planned use of the balance of the net proceeds from the offering as described in our final prospectus dated June 12, 2014, filing with the Securities and Exchange Commission on June 16, 2014.

(c) Purchases of Equity Securities By the Issuer and Affiliated Purchasers . We did not repurchase any of our equity securities during the quarter ended March 31, 2016.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

None.

Item 6.

Exhibits.

(a) Exhibits



10.1		Inducement Agreement, dated February 15, 2016, by and between the Registrant and the Development Authority of Bulloch County, the City of Statesboro, Georgia and Bulloch County, Georgia.

10.2		PILOT Agreement, dated February 15, 2016, by and between the Registrant and the Development Authority of Bulloch County, the City of Statesboro, Georgia and Bulloch County, Georgia.

10.3		Performance and Accountability Agreement, dated February 15, 2016, by and between the Registrant and the Development Authority of Bulloch County, the Georgia Department of Community Affairs and the administering agency for the OneGeorgia Authority.

31.1		Certification of principal executive officer under Section 302(a) of the Sarbanes-Oxley Act of 2002.

31.2		Certification of principal financial officer under Section 302(a) of the Sarbanes-Oxley Act of 2002.

32		Certifications of the principal executive officer and the principal financial officer under Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following materials from Aspen Aerogels, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets (unaudited) as of March 31, 2016 and December 31, 2015, (ii) the Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2016 and 2015, (iii) the Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2016 and 2015, and (iv) the Notes to Consolidated Financial Statements (unaudited).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ASPEN AEROGELS, INC.

Date: May 6, 2016	By:	/s/ Donald R. Young
		Donald R. Young
		President and Chief Executive Officer (principal executive officer)

Date: May 6, 2016	By:	/s/ John F. Fairbanks
		John F. Fairbanks
		Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)

Exhibit 10.1

INDUCEMENT AGREEMENT

THIS INDUCEMENT AGREEMENT, dated as of the 15th day of February, 2016, is hereby entered into by and among the DEVELOPMENT AUTHORITY OF BULLOCH COUNTY , a public body corporate and politic created pursuant to the laws of the State of Georgia (the “Development Authority”), the CITY OF STATESBORO, GEORGIA , a municipal corporation created and existing under the laws of the State of Georgia (the “City”), BULLOCH COUNTY, GEORGIA , a county created and existing under the laws of the State of Georgia (the “County”) and ASPEN AEROGELS, INC. , a Delaware corporation (said corporation, together with its successors and assigns, hereinafter called the “Company”).

W I T N E S S E T H :

WHEREAS, the Company currently is considering acquiring, constructing and equipping a new project for the production of various insulation products on site located in the Gateway Industrial Park II (the “Industrial Park”) located in Bulloch County, Georgia (the “Project”); and

WHEREAS, the Company estimates that the total capital investment to be made in connection with the Project will be approximately $70,000,000 and that the Project will create a total of up to 106 jobs; and

WHEREAS, the Development Authority, the City and the County (collectively, the “Local Governmental Entities”) are desirous of inducing the Company to locate the Project in Bulloch County and believe that in assisting with the acquisition, construction and equipping of the Project they will promote and expand for the public good and welfare industry and trade in Bulloch County and its vicinity and will reduce unemployment to the greatest extent possible; and

WHEREAS, the Company is considering alternative sites for the Project located in other states and the economic incentives described herein are critical component to the Company’s decision whether to locate the Project in Bulloch County (the “County”).

NOW, THEREFORE, in order to induce the Company to undertake and locate the Project within the County, the Local Governmental Entities make the following agreements with the Company:

ARTICLE I

LEASE; PURCHASE OPTIONS

Section 1.01. Lease; Purchase Option . The Development Authority represents and warrants that it holds marketable, fee simple title to the property described on Exhibit A attached hereto containing approximately 43.2 acres (the “Project Site”) located in the

Industrial Park. The Development Authority agrees (i) at the request of the Company, to enter into an interim lease of the Project Site pursuant to an Interim Lease Agreement in which shall be in form and substance satisfactory to both parties (the “Interim Lease”) between the Development Authority, as lessor, and the Company, as lessee, and (ii) at the request of the Company, enter into a final lease agreement (the “Lease”) with respect to the Project Site and all improvements located thereon, as well as the machinery, equipment and other personal property installed therein or located thereon (the “Project”)between the Development Authority, as lessor, and the Company, as lessee. The Lease shall contain the provisions described on Exhibit C attached hereto and such other terms and provisions as may be acceptable to the Development Authority and the Company. The Development Authority further agrees that the Company shall have the right and option to (i) purchase the Project site during the period beginning on the date hereof and until the earlier of the third anniversary of the date hereof or the date of the execution and delivery of the Lease for a purchase price of $30,000 per acre (the “Project Site Purchase Option”) and (ii) to purchase the Project from the Development Authority following the expiration or sooner termination of the Lease for a purchase price of $10.00 (the “Purchase Option”). The Purchase Option shall either be incorporated in the Interim Lease and the Lease or set forth in a separate Purchase Option Agreement and the documents required to evidence the Project Site Purchase Option and the Purchase Option shall be recorded in the real estate records of the County.

Section 1.02. Environmental Representation . The Development Authority has had prepared, at its expense, an environmental assessment of the Project Site and has provided a report of that assessment to the Company. To the best of the Development Authority’s knowledge, no portion of the Project Site is affected by any hazardous waste or regulated substance.

Section 1.03. Expansion Property . The Development Authority agrees to enter into a separate purchase option with the Company relating to two parcels of land located adjacent to the Project Site which are described on Exhibit B attached hereto (the “Expansion Property”) and which shall grant to the Company the right or option to purchase all or any portion of such property under which the Company shall have the right or option to purchase said Expansion Property during the first three years following the date the Company receives a certificate of occupancy with respect to the Project (the “Option Period”) for a purchase price mutually agreed by the parties, but in any event no more than the appraised value of the property as determined by a certified appraisal thereof. Following the Option Period, the Development Authority agrees to notify the Company if any third party expresses an interest in acquiring one or both the Expansion Property parcels in order to give the Company an opportunity to discuss with the Development Authority the Company’s interest in acquiring such parcels. The purchase option shall be in form and substance reasonably satisfactory to the Company and the Development Authority and shall provide that upon the purchase by the Company of one of the Expansion Property parcels, such option to purchase and other obligations related to such Expansion Property shall terminate.

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ARTICLE II

BOND FINANCING

Section 2.01. Issuance of Bonds . At the request of the Company, the Development Authority will issue its taxable revenue bonds in one or more series in a principal amount not presently anticipated to exceed $125,000,000 (the “Bonds”) with respect to the Project for the purpose of paying all or a portion of the costs of (i) acquiring, constructing and equipping the Project and (ii) issuing the Bonds. The Company is hereby authorized to commence the planning, design, acquisition, construction, equipping and carrying out of the proposed Project in advance of the issuance of the Bonds and the Company shall be reimbursed for all expenditures made for such purposes from the proceeds of the Bonds when the same are issued and delivered.

Section 2.02. Terms of Bonds . The terms of the Bonds (maturity schedule, interest rates, denominations, redemption provisions, etc.) will be determined by a bond purchase contract to be entered into among the Development Authority, the Company and the purchaser or purchasers of the Bonds, subject to the approval of the Company. At the request of the Company, the Bonds may be issued as “draw down” Bonds under which installment payments are to be made by the purchaser or purchasers thereof when and as needed to pay the costs of the Project.

Section 2.03. Trust Indenture; Security Deed . At the request of the Company, the Development Authority shall enter into a trust indenture with a corporate trustee to be named by the Company or to adopt a bond resolution, which sets forth the terms of the Bonds and the security therefore. If a trust indenture is utilized, the Development Authority will pledge its interest in the Lease and the rentals, revenues and receipts due thereunder to the corporate trustee for the benefit of the Bondholders, and the terms of such trust indenture shall be agreed upon by the Development Authority, the Company and said corporate trustee. In addition, at the request of the Company, the Development Authority shall convey any title which it may hold in and to the Project to said corporate trustee or directly to the holder(s) of the Bonds by a deed to secure debt, security agreement, assignment of leases and rents or any combination thereof for the benefit of the Bondholders.

Section 2.04. Appointment of Bond Counsel and Development Authority Counsel; Preparation of Documents . The parties hereto acknowledge and agree that Alston & Bird LLP shall serve as bond counsel (the “Bond Counsel”) and as counsel to the Company in connection with the issuance of the Bonds. Bond Counsel shall prepare the Lease, Option Agreement, the bond resolution, the trust indenture, if any, and any and all other documents with respect to the security for the bonds and the judicial validation thereof. The Development Authority has retained Steve Rushing to represent it in connection with the issuance of the Bonds and the transactions described herein. Counsel to the Development Authority shall be required to give a standard legal opinion at the closing of the issuance and sale of the Bonds which shall be in form and substance satisfactory to the Company and Bond Counsel. The Company agrees to pay the reasonable fees and expenses of counsel to the Development Authority at the closing of the issuance of the Bonds and the execution and delivery of the Lease (the “Closing Date”) not to exceed $20,000 and which may be paid, at the option of the Company, from the proceeds from the sale or transfer of the Bonds or separately from other Company funds.

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ARTICLE III

TAX RELATED MATTERS

Section 3.01. Ad Valorem Taxation on Project and Inventory . The Development Authority hereby represents and warrants that it is exempt from property taxation and agrees to hold title to any and all real and personal property which is included in the Project. The Governmental Entities hereby represent and warrant that there exists a Level One Freeport in Bulloch County which exempts 100% of property taxation on (i) inventory of goods in the process of being manufactured or produced including raw materials and partly finished goods, (ii) inventory of finished goods manufactured or produced in Georgia held by the manufacturer or producer for a period not to exceed 12 months, and (iii) inventory of finished goods that are stored in a warehouse, dock, or wharf that are destined for shipment outside of Georgia for a period not to exceed 12 months.

Section 3.02. Usufruct Treatment and PILOT Payments . The parties hereto understand and agree that the interest of the Company in the Project is intended and shall be treated as a usufruct and that as such the Company shall not be subject to ad valorem property taxation on the property titled in the name of the Development Authority and leased to the Company pursuant to the Interim Lease and the Lease. However, the Company shall agree to make payments-in-lieu-of property taxes (“PILOT Payments”) and Community Recovery Payments in accordance with the PILOT Agreement attached hereto as Exhibit E. The Local Governmental Entities shall enter into the PILOT Agreement when requested by the Company on or prior to the Closing Date.

Section 3.02. Jobs Tax Credit . The Development Authority hereby represents and warrants that Bulloch County is a Tier 1 County, and that qualifying business enterprises located within Bulloch County are eligible for a job tax credit equal to $4,000 for each new full-time employee per year for five consecutive years and that the Company may elect to apply up to $3,500 of that amount to reduce the Company’s payroll withholding tax.

Section 3.03. Sales Tax Exemption .

(a) The Development Authority hereby acknowledges the applicability of the exemption from State of Georgia sales and use tax for manufacturing and production equipment, primary material handling equipment and computer hardware and software which qualifies for such exemption under applicable law and, at the request of the Company, agrees to assist the Company in order to obtain any such exemption.

(b) It is the understanding and intent of the parties that the Development Authority’s acquisition of title to the Project shall be solely for the purpose of leasing the same to the Company pursuant to the terms of the Lease. It is further the understanding

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and intent of the parties that, for purposes of the sales and use taxes imposed by Chapter 8 of Title 48 of the Official Code of Georgia Annotated, the conveyance to the Development Authority of title to the Project, the lease of the Project to the Company and any purchase of the Project or any portion thereof by the Company as contemplated under the Lease shall not be deemed taxable transactions for sales and use tax purposes in accordance with the holding in Footpress Corporation v. Strickland , 242 Ga. 686, S.E.2d 278 (1978). If requested by the Company, the Development Authority agrees to join with the Company in submitting a ruling request to the Georgia Department of Revenue in order to confirm such sales and use tax treatment.

ARTICLE IV

UTILITIES; RAIL LINE EXTENSION

Section 4.01. Water, Sewer and Natural Gas Rates . The City agrees to charge the Company for water and sewer services the rates, fees, tolls and charges applied to industrial customers of the City located in the unincorporated areas of the County. The City agrees to charge the Company for natural gas services the rates, fees, tolls and charges applicable to the Company’s natural gas classification for rates, fees, tolls and charges. The City further agrees to waive all water, sewer and gas tap fees and related meter vaults otherwise payable with respect to the connection of water, sewer and gas to the Project.

Section 4.02. Infrastructure Requirements . The following infrastructure improvements shall be provided to the Company in connection with the Project at no cost to the Company.

(a) Earthwork Projects . The County agrees to provide sufficient labor and earth moving equipment, at its own expense, to provide earthwork activities with a value of $195,000 to (i) prepare the Project Site for any storm water detention ponds to be constructed on the Project Site as designated and specified by the Company pursuant to a site map provided by the Company to the Development Authority and the City, (ii) prepare the foundation for construction of the railroad spur, and (iii) provide erosion/sediment control procedures at the Project Site while County forces are present and working on the Project Site. Upon receipt by the County of the location and specification for any of the foregoing earthwork projects and written direction from the Company to proceed with such earthwork project, the County shall diligently proceed to commence such earthwork project and to use its best efforts to progress with such earthwork project within the required period for such work as may be required to accommodate the overall Project construction schedule. The parties hereto agree that the County’s financial obligation to construct all of the foregoing earthwork projects shall be limited to $195,000 and that County forces shall not provide any additional work on the earthwork projects beyond that amount. The costs of the earthwork projects shall be calculated based on the amount of cubic yards of soil required to be moved in connection therewith priced at $5.00 per cubic yard. If any of the earthwork projects are incomplete when County forces have provided work valued at $195,000, it shall be the Company’s responsibility to complete the projects at the Company’s expense through some means other than use of County forces

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(b) Utility Extensions . The City agrees to design, construct and extend all (i) offsite water and sanitary sewer and natural gas utilities and (ii) to construct and extend all water, sanitary sewer and natural gas utilities to the location on the Project Site which shall be designated by the Company pursuant to a site map provided by the Company to the Development Authority and the City (the “Utility Extensions”). Said utilities shall have the respective capacities and features described on Exhibit D attached hereto. Upon receipt by the City of the desired location for the extension of the on-site utilities and direction from the Company to proceed with such the extensions, the City shall diligently proceed to commence such utility extensions and to use its best efforts to complete such utility extensions within the period as may be required to accommodate the overall Project construction schedule.

The site preparation and utility extensions described in subparagraphs (a) and (b) above (collectively, the “Infrastructure Improvements”) shall be designed and constructed in compliance with all applicable federal state and local laws and regulations. The plans and specifications for such Infrastructure Improvements shall be submitted as soon as practicable to the Company for the Company’s review and approval. The Local Governmental Entities agree to use their best efforts to obtain in a timely manner any and all easements, rights-of-way and property, through condemnation or otherwise, which may be necessary or desirable in order to complete the Infrastructure Improvements as and when required under this Section 4.02.

Section 4.03. Construction of Pretreatment Plant . The parties hereto acknowledge that it is contemplated that the Company will construct a wastewater pretreatment plant on the Project Site and a sampling station capable of building a flow based composite sample for daily testing. It is understood that an industrial pretreatment permit will be required for such construction and will include limits on biological, chemical and metals concentrations as well as a maximum daily flow which shall be reasonable based on the related treatment plant capacity and requirements and will provide for commercially reasonable testing and reporting schedules and commercially reasonable non-exclusive remedies for violations of the terms of the pretreatment permit. The City agrees that it and its engineering firm will coordinate on a timely basis with the Company and its advisors in connection with the design and construction of such pretreatment plant and that the Company will be permitted to extend payment of the Aid to Construction (“ATC”) fee with respect to the City’s wastewater treatment plant for 24 months.

Section 4.04. Rail Line Extension . The County agrees to promptly apply for, and use its best efforts to obtain, a federal Employment Incentive Program (“EIP”) grant in the amount of $480,000 in order to construct a rail spur from the main Norfolk and Southern to the Project Site (the “Rail Spur”) at a location designated by the Company and to obtain or assist the Company to obtain all necessary permits, approvals, easements, licenses or rights-of-way reasonably necessary or desirable to complete and permit the Company to use the Rail Spur. The Development Authority shall pay for administrative costs of the grant. The Company shall be responsible for paying any costs relating to the

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construction of the Rail Spur in excess of available grant funds. The construction of the Rail Spur as described herein must be finally completed not later than a date required by the Company in order to accommodate its construction schedule; provided, however, the completion date must reasonable in light of when applicable approvals by the railroad or any other third parties may be obtained.

Section 4.05. Building and Land Disturbance Permit Fee Waivers . The County agrees to waive any and all building, land use and land disturbance fees required in connection with the construction of the Project, the Infrastructure Improvements and the Rail Spur.

ARTICLE V

STATE GRANT; EMPLOYEE TRAINING

Section 5.01. State Grant . The parties hereto acknowledge that the State of Georgia (the “State”) has agreed to provide a grant to the Development Authority in the amount of $250,000 to be applied against the costs of site and infrastructure improvements to be incurred by the Company in connection with the construction of the Project (the “State Grant”). The Development Authority agrees to promptly take any and all actions required in order to obtain the State Grant, including, without limitation, preparing and filing an application for the State Grant and all other documents as may be requested by the Department of Economic Development and the Department of Community Affairs in order to be able to obtain and provide to the Company the amount of the State Grant with a target date of December 31, 2016.

Section 5.02. Employee Training . The Development Authority hereby agrees to assist the Company to obtain from the State of Georgia’s “Quick Start Program”, administered by the Georgia Department of Technical and Adult Education (“GDTAE”), a written commitment to (i) design a training program or programs specifically suited for the particular jobs to be created at the Project, (iii) advertise for and interview prospective employees and (iv) conduct training programs for the Company’s employees, all at no cost to the Company. In addition, the Development Authority agrees to provide up to $20,000 of additional private training for Company employees through the Ogeechee Technical College which is specifically suited for employees to be designated by the Company.

ARTICLE VI

LOCAL PERMITS; ONE STOP PERMITTING; TEMPORARY OFFICES

Section 6.01. Permits . Each of the Local Governmental Entities hereby agrees to cooperate with and to use its best efforts to assist the Company in order to obtain in a timely fashion all building permits, licenses, variances, special use permits, site plan and other approvals that the Development Authority or the Company deem to be necessary or desirable in connection with the construction and operation of the Project, including, without limitation, any such permits pertaining to buildings or other improvements, occupancy, signage, curb cuts, driveways (including ingress and egress to public thoroughfares), parking and environmental controls (herein collectively referred to as the “Permits”).

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Section 6.02. One-Stop Permitting . The Local Governmental Entities hereby agree designate a single point of contact to assist the Company to obtain any and all Permits. In this regard, the Development Authority acknowledges that the Company or its agents are authorized to purchase equipment and obtain permits and licenses in order to acquire, construct, install and equip the Project.

Section 6.03. Temporary Office Space . Upon request of the Company, the Development Authority agrees to provide the Company and its employees and agents office space for use in connection with the design, construction and equipping of the Project (the “Temporary Office Space”); provided that the total cost to the Development Authority to provide such Temporary Office Space shall not exceed $24,000. Such Temporary Office Space shall be within 4 miles of the Project Site, shall have a meeting room of sufficient size to accommodate meetings of at least 10 people, and shall have at least two hard walled offices and six work cubicles. The Temporary Office Space shall be equipped with phone and internet connections.

ARTICLE VII

JOBS AND INVESTMENT GOALS

Section 7.01 Inducement . If the Company agrees to locate the Project at the Project Site, nothing herein contained shall obligate the Company to make any particular level of investment or create any particular level of jobs. Rather, the Company’s responsibilities regarding such matters shall be governed exclusively by a separate PILOT Agreement in the form attached hereto as Exhibit E. The Company’s agreement to locate the Project at the Project Site is based, in part, on the incentives being offered by the Local Government Entities as described herein. Such incentives are being offered to induce the Company to locate the Project at the Project Site, with attendant job creation and investment on the part of the Company, all of which constitutes valuable, non-cash consideration to the Local Government Entities and the citizens of the City, of the County and of the State. The Parties acknowledge that the incentives provided for in this Agreement serve a public purpose through the job creation and investment generation represented by the Project. The Parties further acknowledge that the cost/benefit requirements applicable to the Local Government Entities in the course of providing such incentives dictate that some measure of recovery must be applied in the event that the anticipated jobs and investment do not for any reason fully materialize.

ARTICLE VIII

MISCELLANEOUS

Section 8.01. Performance of Agreements by Company . The Local Governmental Entities hereby acknowledges and agree that, if any of the Local Governmental Entities shall default in any of its covenants hereunder, including without limitation the provision of the Infrastructure Improvements or the Rail Spur as, when and where required hereunder, the Company shall have the right (but not the obligation) to

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undertake and perform such covenant or work on behalf of the Local Governmental Entity involved and all funds advanced or costs incurred by the Company in connection therewith shall be deemed an obligation of the defaulting Local Governmental Entity and that Local Governmental Entity agrees to pay upon demand with interest calculated at the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the “prime rate” then in effect; provided that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable for any reason as determined by the Company, the “Prime Rate” shall mean the announced prime rate of interest of Bank of America, N.A..

Section 8.02. Representations and Warranties . The representations and warranties in this Inducement Agreement shall survive the execution and delivery of this Inducement Agreement and the consummation of the transactions contemplated by this Inducement Agreement.

Section 8.03. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall be deemed one and the same instrument.

Section 8.04. No Personal Liability . It is understood and agreed that no present or future member, director, commissioner, officer or employee of any of the Local Governmental Entities shall be liable hereunder or under the Lease or any other agreement executed in connection herewith.

Section 8.05. Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Georgia.

Section 8.06. Amendments . This Agreement may only be amended in a writing executed by all of the parties hereto.

Section 8.07. Assignment . This Agreement may not be assigned by any of the parties hereto without the prior written consent of the others, except that the rights, benefits and obligations of the Company under this Agreement may be transferred and assigned by the Company, in whole or in part, to any one or more individuals, corporations, partnerships (general or limited), joint ventures, or other entities which propose to acquire the Project in whole or in part, with the same effect as if such individuals, corporations, partnership, joint ventures, or other entities were named as the Company in this Agreement. Unless otherwise agreed in writing by the Authority, the assignment of the Company’s rights shall not release the Company from its obligations for costs and indemnification accruing prior to the date of such assignment, but shall release the Company from any further obligations or liabilities under this Agreement, provided the assignee of Company has assumed all of the Company’s obligations hereunder in writing. Notwithstanding the foregoing, the Company’s rights under this Agreement shall be deemed to have been assigned automatically and without the necessity of any further actions or consents to any assignee of the Lease in accordance

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with the terms of the Lease and any release of the Company from its obligations under the Lease will likewise release, and to the same extent, release the Company from its obligations hereunder to the extent such obligations are assumed in writing by such assignee.

Section 8.08. Binding Effect; Third- Party Beneficiaries . This Agreement shall inure to the exclusive benefit of, and be binding upon, the parties hereto and their respective successors and permitted assigns. Nothing expressed or mentioned herein is intended or shall be construed to give any person other than the parties hereto and their permitted assigns any legal or equitable rights, remedies or claims under or with respect to any covenants, conditions or provisions herein contained.

Section 8.09. Confidentiality . The Local Governmental Entities understand the importance to the Company of keeping matters relating to the Project and this Agreement strictly confidential until such matters are publicized with the consent of the Company. Accordingly, each of the Local Governmental Entities hereto agrees to treat, and cause their respective officers, directors, employees and agents to treat, as strictly confidential to the fullest extent permitted by law, the contents of this Agreement and all information provided with respect to the Project, including, without limitation, the location, size, type and ownership or operation of the Project. If a Local Governmental Entity is requested to provide a copy of this Agreement or other documents with respect to the transactions described herein and such Local Governmental Entity determines that it would be compelled to do so under applicable law, such Local Governmental Entity shall give the Company not less than two days prior notice before releasing any such documentation. The Local Governmental Entities further agree to fully corporate and coordinate with the Company in connection with all press releases and other notices or publications concerning the Project and this Agreement proposed to be made by any Local Governmental Entity which shall in each instance be approved by the Company in advance.

Section 8.10. Entire Agreement . Other than the Confidential and Proprietary Information Non-Disclosure Agreement dated December 16, 2014 between Company and the Authority, this Agreement constitutes and represents the entire agreement and understanding between the parties hereto in reference to all matters referred to herein and all previous discussions and promises, representations and understandings relative thereto, if any, between the parties hereto, the same being merged.

Section 8.11. Force Majeure . No party hereto shall be liable for any failure or delay in performance if caused, in whole or in part, by any circumstance or events beyond the reasonable control of such party, including, without limitation, fire; flood; earthquake; acts of God; strikes, boycotts, riots or civil disorders; declared or undeclared wars; casualty; delays in obtaining governmental permits; compliance with government orders; acts of civil or military authority; accidents; industrial disturbances; interruptions of transportation facilities or delays in transit; delays, curtailment or shortages of construction, production, manufacturing or other materials, equipment, raw materials or supplies; failure of any party hereunder to perform, or any delays in the performance of,

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any commitment to such other party relating to the performance of its obligations; or any other cause, whether similar or dissimilar to the foregoing causes (including, without limitation, general, macro or special economic circumstances that adversely affects net revenues or sales volumes), beyond the reasonable control of such party. In the event of any such contingency, the affected party shall notify the other parties of the contingency within a reasonable period of time and shall make commercially reasonable efforts promptly to remove the contingency such that performance may be resumed; provided, however, no party shall be obligated to settle any labor dispute. If as a result of the occurrence of any such contingency, such party’s performance hereunder cannot be completed within the original period for performance, the period for performance shall be extended for a period of time equal to the duration of such contingency and a reasonable period thereafter to allow for completion of performance without prejudice to any of the other rights of such party under this Agreement.

Section 8.12. Termination . So long as none of the Local Governmental Entities is in default of its obligations hereunder, the Development Authority may terminate this Agreement by written notice to the Company if the construction of the Project has not been commenced prior to the third anniversary of the date of this Agreement, or construction of the Project has not been completed prior to the fifth anniversary of the commencement of construction of the Project. So long as the Company is not in default of its obligations hereunder, it may terminate this Agreement at any time by written notice to the Development Authority.

[Remainder of page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Inducement Agreement as of the date first above written.


	DEVELOPMENT AUTHORITY OF BULLOCH COUNTY

[SEAL]

	By:	/s/ L. Bruce Yawn
	Name:	L. Bruce Yawn
	Title:	Chair

[Signature Page – Inducement Agreement]


	CITY OF STATESBORO, GEORGIA

[SEAL]

	By:	/s/ J. Garret Nevil
	Name:	J. Garret Nevil
	Title:	Chairman

[Signature Page – Inducement Agreement]


	BULLOCH COUNTY, GEORGIA

[SEAL]

	By:	/s/ Jan J. Moore
	Name:	Jan J. Moore
	Title:	Mayor

[Signature Page – Inducement Agreement]


	ASPEN AEROGELS, INC.

[SEAL]

	By:	/s/ John F. Fairbanks
	Name:	John F. Fairbanks
	Title:	Chief Financial Officer

[Signature Page – Inducement Agreement]

EXHIBIT A

DESCRIPTION OF PROJECT SITE

Riggs Rail Site; Subject property is located in Gateway Industrial Park II and is off of U.S. Highway 301 South (4 lane) and 6 miles from Interstate 16, in Statesboro, Bulloch County, Georgia.

Also described as:

All that parcel of land lying and being in the 1209 ^th G.M.D., Bulloch County, Georgia containing 43.2 acres and being more particularly described as follows:

BEGINNING at a point located at the intersection of the northwestern right-of-way of the Norfolk Southern Railroad and the northeastern right-of-way of A.J. Riggs Road; THENCE along the right-of-way of A.J. Riggs Road clockwise along the arc of a curve (Radius = 22501.538’) which subtends a chord of N 38°35’07” W a length of 137.83’ to a point; THENCE along the right-of-way of A.J. Riggs Road N 38°24’37” W a distance of 307.42’ to a point; THENCE along the right-of-way of A.J. Riggs Road N 51°35’24” E a distance of 10.00’ to a point; THENCE along the right-of-way of A.J. Riggs Road N 38°24’36” W a distance of 143.16’ to a point; THENCE along the right-of-way of A.J. Riggs Road counterclockwise on the arc of a curve (Radius = 4002.728’) which subtends a chord of N 39°48’28” W a length of 195.36’ to a point; THENCE along the right-of-way of A.J. Riggs Road N 41°16’53” W a distance of 147.85’ to a point; THENCE along the right-of-way of A.J. Riggs Road clockwise on the arc of a curve (Radius = 5610.466’) which subtends a chord of N 40°25’20” W a distance of 161.70’ to a point at the southern end of a right-of-way miter with Gateway Boulevard ; THENCE along said right-of-way miter N 06°39’23” E a distance of 68.83’ to a point; THENCE along the southeastern right-of-way of Gateway Boulevard N 51°39’32” E a distance of 2224.97’ to point in the run of a branch; THENCE along the run of said branch which meanders along a traverse line of S 38°34’13” E a distance of 67.66’ to a point; THENCE along the run of said branch which meanders along a traverse line of S 32°08’50” E a distance of 146.44’ to a point; THENCE along the run of said branch which meanders along a traverse line of S 09°54’32” E a distance of 119.41’; THENCE along the run of said branch which meanders along a traverse line of S 15°59’45” E a distance of 149.31’ to a point; THENCE along the run of said branch which meanders along a traverse line of S 39°59’11” W a distance of 112.20’ to a point; THENCE along the run of said branch which meanders along a traverse line of S 74°53’31” W a distance of 191.36’ to a point; THENCE along the run of said branch which meanders along a traverse line of S 17°19’47” W a distance of 121.60’ to a point; THENCE along the run of said branch which meanders along a traverse line of S 02°28’57” E a distance of 89.85’ to a point; THENCE S 41°16’36” E a distance of 340.59’ to a point on the northwestern right-of-way of the Norfolk Southern Railroad; THENCE along said right-of-way S 48°40’09” W a distance of 687.09’ to a point; THENCE along said right-of-way counterclockwise on

the arc of a curve (Radius = 2899.778’) which subtends a chord of S 41°54’35” W a length of 683.12’; THENCE along said right-of-way S 35°08’43” W a distance of 369.39’ to the POINT OF BEGINNING.

Said parcel bound as follows:

NORTHWEST by Gateway Boulevard.

NORTHEAST by the Development Authority of Bulloch County and Barney L. Allen, Jr.

SOUTHEAST by the northwest right-of-way of Norfolk Southern Railroad.

SOUTHWEST by the northeast right-of-way of A. J. Riggs Road.

EXHIBIT B

DESCRIPTION OF EXPANSION PROPERTY

Parcel One

All that certain parcel of land located in the 1209th G.M.D., Bulloch County, Georgia containing

29.05 acres:

COMMENCING at an iron pipe on the 90 degree bend of the right-of-way of Zell Miller Parkway, at the northwest corner of the property of Viracon of Georgia, Inc.; THENCE South 22°58’02” West for a distance of 140.36 feet to a one-half inch capped rebar (1/2” CRB) on the western right-of-way of Zell Miller Parkway (80’ R/W); THENCE along the western right-of-way of Zell Miller Parkway South 11°47’24” East a distance of 394.71’ to a point which is the POINT OF BEGINNING.

BEGINNING at said point; THENCE along the western right-of-way of Zell Miller Parkway South 11°47’24” East a distance of 633.51’ to a point; THENCE along the western right-of-way of Zell Miller Parkway clockwise on the arc of a curve (Radius 1787.058’) which subtends a chord of South 06°53’33” East a distance of 305.12’ to a point; THENCE North 89°57’37” West a distance of 840.00’ to a point; THENCE North 89°57’37” West a distance of 795.04’ to a point; THENCE North 42°13’46” East a distance of 231.89’ to a point; THENCE North 24°32’00” East a distance of 218.94’ to a point; THENCE North 18°54’38” West a distance of 261.71’ to a point; THENCE

North 27°18’16” East a distance of 343.66’ to a point; THENCE South 89°54’17” East a distance of 1149.39’ to a point which is POINT OF BEGINNING.

Parcel Two

ALL that certain parcel of land located in the 1209 ^th G.M.D., Bulloch County, Georgia and being more particularly described as follows:

COMMENCING at a point located at the intersection of southwestern right-of-way of J.C. Cannady Road and the northwestern right-of-way of the Norfolk Southern Railroad; THENCE counterclockwise along the southwestern right-of-way of J.C. Cannady Road on the arc of a curve (Radius = 1157.12’) which subtends a chord of North 39°09’34” West a distance of 85.43’ to a point; THENCE counterclockwise along the right-of-way

of J.C. Cannady Road on the arc of a curve (Radius = 1157.12’) which subtends a chord of North 43°52’53” West a distance of 105.94’; THENCE along the right-of-way of J.C. Cannady Road North 46°30’57” West a distance of 140.83’ to a point which is the POINT OF BEGINNING.

BEGINNING at said point; THENCE North 42°42’19” West a distance of 1044.43’ to a point; THENCE North 41°56’30” West a distance of 1044.43’ to a point; THENCE South 89°53’38” East a distance of 1177.67’ to a point; THENCE South32°33’38” East a distance of 377.83’ to a point; THENCE South 24°46’22” West a distance of 333.40’ to a point; THENCE South 67°51’40” East a distance of 784.66’ to a point; THENCE South 32°04’21” West a distance of 84.98’ to a point; THENCE South 32°08’51” West a distance of 125.07’ to a point; THENCE South 32°07’47” West a distance of 126.98’ to a point; THENCE South 32°08’05” West a distance of 22.94’ to a point; THENCE South 32°05’47” West a distance of 76.73’ to a point; THENCE 32°04’37” West a distance of 68.08’ to a point; THENCE South 32°09’08” West a distance of 32.22’ to a point; THENCE South 32°07’05” West a distance of 117.97’ to a point; THENCE South 32°08’47” West a distance of 120.48’ to a point on the northeastern right-of-way of J.C. Cannady Road; THENCE along the right-of-way of J.C. Cannady Road North 46°30’57” West a distance of 130.00’ to a point; THENCE along the right-of-way of J.C. Cannady Road South 43°29’03” West a distance of 80.00’ to a point which is the POINT OF BEGINNING.

Said parcel contains 30.00 acres.

EXHIBIT C

DESCRIPTION OF LEASE AGREEMENT

The Lease Agreement (the “Lease”) between the Development Authority and the Company shall include the following general provisions:

1. Term . The basic term of the Lease will commence as of its date of execution and expire day before the fifth (5 ^th ) anniversary of the commencement date, subject to renewals thereafter at the option of the Company; provided, however, in no event shall the basic term of the Lease extend beyond the thirty-first (31 ^st ) day of December of the tenth (10 ^th ) year following the year in which the Project was completed and available for occupancy (the “Lease Term”), or upon earlier termination as provided therein.

2. Rent . The amounts payable under the Lease as rent will be paid directly to the Bondholders or to a corporate trustee to be selected by the Company for the benefit of the Bondholders, as the case may be, at such times and in such amounts as shall be timely and sufficient to pay the principal of, premium, if any, and interest on the Bonds as the same shall become due and payable. The obligation of the Company to make all payments required under the Lease shall be absolute and unconditional after the delivery of the Bonds.

3. Net Lease . The Lease shall be deemed a “net lease” and the Company will pay all customary assessments or utility charges which may be lawfully levied, assessed or charged upon the Company or the Project or the payments derived from the Lease if failure to pay would result in a lien or charge upon the Project or the revenues of the Development Authority therefrom.

4. Bond Proceeds . The proceeds from the sale of the Bonds shall be used to finance the Project in accordance with the requirements of the Lease. To the extent moneys representing bond proceeds are held in any fund or account pending their disbursement to pay acquisition, construction or equipping costs, such moneys may be invested in obligations which represent legal investments for bond proceeds of the Development Authority.

5. Maintenance; Repair; Modifications . The Company shall agree to keep the Project in reasonably safe condition as its operations shall permit and to keep the Project in good repair and in good operating condition as is consistent with its normal operating policies. The Company shall be permitted to make additions, modifications and improvements to the Project so long as the Project shall continue to be a project which may be financed by the Development Authority under applicable law.

6. Equipment . The Company shall be permitted in its sole discretion to replace, substitute, dispose of or transfer obsolete, worn-out, unsuitable or unwanted

machinery, equipment and related personal property included in the Project. At the request of the Company, the Development Authority shall execute and deliver any and all bills of sale, releases or other documents which may be required in connection with any such replacement, substitution, disposition or transfer. All equipment so substituted shall be transferred to the Development Authority and included under the Lease.

7. Insurance . The Company shall keep the Project insured against loss, damage or perils, and will carry public liability insurance covering personal injury, death or property damage with respect to the Project, consistent with its normal operating policies, but the Company may at any time elect to be self-insured.

8. Compliance with Laws . The Company will agree to endeavor to construct, occupy and maintain the Project in accordance with all applicable federal, state, county and municipal laws, ordinances, rules and regulations, including, without limitation, all environmental laws; provided, however, the Company shall be permitted to contest in good faith, at its expense and in its name or in the name of the Development Authority, the validity or application of any such laws, ordinances, rules or regulations.

9. Limited Obligations of the Development Authority . The Lease shall provide that in the performance of the agreements contained therein on the part of the Development Authority, any obligation it may incur for the payment of money shall not be a general debt on its part or of the City, the County or the State of Georgia, but shall be payable solely from the payments received under the Lease or from bond proceeds and, under certain circumstances, insurance proceeds and condemnation awards.

10. Indemnification . The Lease shall contain agreements providing for the indemnification of the Development Authority and the individual directors, officers, agents and employees thereof for all expenses incurred by them and for any claim of loss suffered or damage to property or any injury or death by any person incurred in connection with the planning, design, acquisition, construction, equipping, installation, financing and carrying out of the Project or the operation of the Project, including but not limited to violations of state or federal environmental laws, except any loss resulting from the negligence, willful misconduct or bad faith of such indemnified parties.

11. Termination . The Company shall have the option exercisable at any time to terminate the Lease provided that it shall have paid (or caused the same to have been paid) the outstanding principal amount of the Bonds and all accrued and unpaid interest thereon.

12, Subordination of Fee . Under the Lease, if requested by the Company the Development Authority shall subordinate its interest in the Project to any loans to the Company that are secured by the Project, so long as the liability of the Development Authority shall be absolutely limited to its interest in the Project.

EXHIBIT D

UTILITY REQUIREMENTS

Water – The main water line shall be a six inch PVC portable water main with a six inch water meter and reduced pressure zone backflow assembly, together with a ten inch double check valve. Said water lines shall be extended to a maximum of 390 feet or to within five feet of the proposed building, whichever is less. There shall also be included a maximum of 50 feet of two inch PVC irrigation main with a two inch meter and backflow preventer.

2.	Sewer – The sewer line shall be an eight inch pipe and shall be extended a maximum of 750 feet or to within five feet of the proposed building, whichever is less.

3.	Natural Gas – The gas main shall be of a sufficient size and pressure required by the Company and shall be extended to a maximum of 390 feet or to within five feet of the proposed building, whichever is less.

EXHIBIT E

PILOT AGREEMENT

EXHIBIT 10.2

PILOT AGREEMENT

THIS PILOT AGREEMENT (this “ Agreement ” or “ PILOT Agreement ”) is dated February 15, 2016, and is entered into by and between the DEVELOPMENT AUTHORITY OF BULLOCH COUNTY , a public body corporate and politic created and existing under the Constitution and laws of the State of Georgia (the “ Authority ”) and ASPEN AEROGELS, INC. , a Delaware corporation (the “ Company ”), in order to evidence their agreements as the respective parties hereto. BULLOCH COUNTY, GEORGIA (the “ County ”), the CITY OF STATESBORO, GEORGIA (the “ City ”), and the BOARD OF TAX ASSESSORS OF BULLOCH COUNTY (the “ Board of Assessors ”), are each executing an Acknowledgment hereof attached to this Agreement in order to acknowledge its agreement to the provisions hereof which are applicable to it.

The Authority has been duly created and is validly existing as an instrumentality of the County, and is a public body corporate and politic, all as more particularly set forth in O.C.G.A. § 36-62-1 et seq . (the “ Development Authorities Law ”). Pursuant to the Development Authorities Law, the Authority is created for the purpose of developing and promoting trade, commerce, industry, and employment opportunities for the public good and the general welfare and to promote the general welfare of the State of Georgia (the “ State ”). Pursuant to the public purposes for which it has been created, the Authority agrees to the provision to the Company of the incentives described below in consideration of the Company’s agreement, as set forth below, to locate the Project (as hereinafter defined) within the borders of the County, with attendant job creation and investment on the part of the Company, all of which constitutes valuable, non-cash consideration to the Authority, the County, the City, and their citizens. All capitalized terms defined herein shall have the meanings so provided throughout this Agreement.

1.	THE PROJECT.

1.1 The Project . The Company currently is considering acquiring, constructing and equipping a new project for the production of various insulation products on site located in the Gateway Industrial Park II (the “ Industrial Park ”) located in Bulloch County, Georgia (the “ Project ”). The Company estimates that the total capital investment to be made in connection with the Project will be approximately $70,000,000 and that the Project will create a total of up to 106 jobs.

2.	BOND FINANCING.

2.1 The Bonds . The Authority shall initially issue its economic development revenue bonds (the “ Bonds ”) in a principal amount not to exceed $125,000,000 (the “ Maximum Bond Amount ” ), to pay or to reimburse the Company or the Authority, or both, for costs of the Project as permitted by the Development Authorities Law. It is acknowledged by the parties hereto that the anticipated amount of the capital investment with respect to the Project exceeds the limits in the Internal Revenue Code of 1986, as amended (the “ Code ”) applicable to the issuance of tax-exempt bonds and therefore the Bonds will not qualify for tax-exempt status under the applicable provisions of the Code. The Company shall be responsible for the arrangements pertaining to the sale of the Bonds.

2.2 Project Site; Lease . The Authority represents and warrants that it holds marketable, fee simple title to the property described on Exhibit A attached hereto containing approximately 43.2 acres (the “ Project Site ”) located in the Industrial Park. The Authority agrees (i) at the request of the Company, to enter into a lease agreement (the “ Lease ”) with respect to the Project Site and all improvements located thereon, as well as the machinery, equipment and other personal property installed therein or located thereon as part of the Project between the Authority, as lessor, and the Company, as lessee. The Lease shall contain the provisions described on Exhibit B attached hereto and such other terms and provisions as may be acceptable to the Authority and the Company.

3 .	*AD VALOREM* TAX SAVINGS; ORDINARY PILOT PAYMENTS.

3.1 Project Exempt from Property Taxation . The parties to this Agreement understand and agree that the Authority is not subject to ad valorem taxation on its interest in either the real property or the personal property of the Project. The parties further acknowledge and agree that (i) the interest of the Company in the real property portions of the Project is intended and shall be treated as a usufruct, (ii) the interest of the Company in the personal property portions of the Project is intended and shall be treated as a bailment for hire. As a result, the Project shall not be subject to ad valorem property taxation on the property titled in the name of the Development Authority and leased to the Company pursuant to the Lease. The Board of Assessors acknowledges and attests to its familiarity with the form of the Lease, and expressly confirms that neither the interest of the Authority nor the interest of the Company in the real and personal property portions of the Project will be subject to ad valorem taxation. This Agreement shall be among the documents that are judicially validated in connection with the validation of the Bonds.

3.2 Tax Filings; Determination of Tax Values . During the first calendar year following the completion of the Project and issuance of the certificate of occupancy with respect thereto (the “ Tax Commencement Year ”) and for each calendar year thereafter, (i) the Company agrees to file with the Board of Tax Assessors a personal property tax return identifying all of the personal property located in the County as of January 1 of that year which is titled in the name of the Authority, and (ii) the Board of Tax Assessors shall determine the fair market value of the real property portions of the Project using its standard assessment policies and procedures applicable to industrial property. Based on the foregoing and the mileage rate applicable to the Bulloch County School System (the “ School System ”), the County shall prepare or cause to be prepared and submitted to the Company a bill indicating the portion of the property taxes that would have been due and payable with respect to School System and the Statesboro Fire District if the Company held full legal title to the Project as of January 1 of that year (the “ PILOT Payment Bill ”).

3.3 Tax Value Contest Rights . Notwithstanding the foregoing, the parties hereto acknowledge and agree that the Company shall have the right, at its own expense

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and in its own name or in the name and on the behalf of the Authority, to contest the determination of the fair market value of the real and/or personal property portions of the Project or the calculation of such PILOT payments. The Company shall have all of the same rights and remedies as it would have in the case of a dispute over ad valorem property taxes, including, without limitation, the right to dispute the valuation used by the Board of Assessors. Without limitation, the Authority, the Board of Assessors and the Company agree that the Company shall have the right of arbitration provided in O.C.G.A. Sec. 48-5-311(f) and the right of appeal to the Superior Court provided in O.C.G.A. Sec. 48-5-311(g).

3.4 PILOT Payments . The Company expressly acknowledges and agrees that commencing with the Tax Commencement Year and for each calendar year thereafter during the term of the Lease it shall be obligated to make annual payments in lieu of taxes in the amount set forth in the PILOT Payment Bill prepared by the Board of Tax Assessors in accordance with Section 3.2 hereof, subject to the right of the Company to contest the same as described in Section 3.3 hereof (the “ PILOT Payments ”). Such PILOT Payments will be due and payable at the same time as property taxes would ordinarily be payable in each year. Failure to make such PILOT Payments in accordance with this Agreement after the notice and cure rights provided therein) will constitute an event of default under the Lease and will permit the Authority to terminate the Lease.

3.5 Reversion to Normal Taxability . If the option to purchase the Project set forth in the Purchase Option Agreement between the Authority and the Company is exercised by the Company or if the Lease is otherwise terminated or expires, the Project will be taxable according to normal ad valorem property taxation rules that are applicable to privately-owned property.

3.6 Board of Tax Assessors . The provisions of this Agreement relative to the assessment and taxability of the Project for ad valorem property tax purposes are the obligation and responsibility of the Board of Assessors. By its Acknowledgement, the Board of Tax Assessors is joining in this Agreement to acknowledge that this Agreement is consistent with applicable requirements and that the Board of Tax Assessors intends and agrees to classify, for taxation purposes, the respective interests of the Authority and the Company in the Project as contemplated in this Agreement. The County and the City also acknowledge and agree to such provisions, and agree that the Board of Tax Assessors shall comply with the foregoing.

4.	RECOUPMENT OF INCENTIVES:

4.1 Inducement . The Company’s agreement to consider locating the Project at the Project Site is based, in part, on the incentives being provided by the Development Authority, the State of Georgia and by the other public bodies signing Acknowledgements hereof. Such incentives are being provided to induce the Company to make capital investments of $70,000,000 in connection with the Project (the “ Community Investment Goal ”) and to create 106 full-time jobs in connection with the Project (the “ Community Jobs Goal ”). The making of such capital investments in the County and the creation of such local jobs by the Company constitutes valuable, non-cash

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consideration to the Authority and the citizens of the County and of the State. The parties acknowledge that the incentives provided for in this Agreement serve a public purpose through the estimated job creation and investment generation in connection with the Project. The parties further acknowledge that the cost/benefit requirements applicable to the Authority in the course of providing such incentives dictate that some measure of recovery must be applied in the event that a significant portion of the anticipated jobs and investment do not for any reason fully materialize. It is the intention of the parties hereto that the Company will within 36 months following the earlier to occur of (i) the completion and issuance of the certificate of occupancy with respect to the Project or (ii) June 30, 2018 (the “ Commencement Date ” ) achieve 80% of the average of the Community Investment and Jobs Goals actually achieved and maintain such level for the next 84 months (said 84 month period herein described as the “ Performance Period ” and said period commencing on the Commencement Date and continuing to the end of the Performance Period is herein called the “Goal Period”). If the Company does not achieve 80% of the average of the Community Investment and Jobs Goals in any Goal Year (as hereinafter described), then the Company may be required to repay all or a portion of the property tax savings and other incentives otherwise offered to the Company in this Agreement for such Goal Year in accordance with the provisions of this Article 4. The following provisions of this Agreement, together with the Schedules attached hereto, are intended to further prescribe and define the foregoing intentions of the parties.

4.2 Community Jobs Goal . For purposes of this Agreement, the types of jobs that would qualify to be counted against the Community Jobs Goal shall be defined and determined, from time to time, as provided on Schedule B-1 attached hereto (and by reference made a part hereof). Schedule B-1 also determines how the number of full-time jobs shall be calculated.

4.3 Community Jobs Percentage . At the end of each 12-month period during the Goal Period (each a “ Goal Year ”), the number of full-time jobs at the Project shall be calculated and shall be divided by the applicable Community Jobs Goal and converted to a percentage to determine the “ Community Jobs Percentage. ”

4.4 Community Investment Goal . For purposes of the Community Investment Goal the investment at the Project shall be calculated on a cumulative basis from July 21, 2015 to the end of the Reporting Period. Schedule B-2 attached hereto (and by reference made a part hereof) provides rules that shall apply to satisfying the Community Investment Goal.

4.5 Community Investment Shortfall Percentage . At the end of each Goal Year during the Goal Period, the Company shall calculate the cumulative amount of capital investment by the Company with respect to the Project and shall divide such amount by the applicable Community Investment Goal and convert the result to a percentage to determine the “ Community Investment Percentage .”

4.6 Annual Report . The Company agrees to file with the Authority an annual report (the “ Annual Report ”) within 60 days of the end of each Goal Year during the

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Goal Period (each such year, an “ Annual Report Year ”) containing the calculation of the Community Investment Percentage and the Community Jobs Percentage. The average of the Community Jobs Percentage and the Community Investment Percentage shall be the “ Project Goals Percentage ,” which shall also be calculated and stated in the Annual Report; provided, however, for purposes of calculating the Project Goals Percentage neither the Community Jobs Percentage nor the Community Investment Percentage may exceed 110%. Each Annual Report shall be in substantially the form of Schedule B-3 attached hereto (and by reference made a part hereof), as revised for the matters being reported.

4.7 Community Recovery Payments . If the Annual Report for any Goal Year during the Performance Period shows that, for such Goal Year, the Project Goals Percentage is less than 80% (a “Shortfall Year”), then the Company, in such Annual Report, shall calculate the amount of the “ Community Recovery Payments .” If the Project Goals Percentage as shown in the Annual Report for the Goal Year immediately succeeding a Shortfall Year is less than 80%, then the Company shall pay the Community Recovery Payments for the prior Shortfall Year.

4.8 Failure to Make Required Payments; Failure to File Report . If the Company fails to pay any Community Recovery Payment when due, interest shall be paid by the Company thereon at the rate of 6% per annum from the thirtieth (30 ^th) day following the date of the Authority notice to the Company of a failure to make such payment until paid. If there has been a failure to pay any Community Recovery Payment which is not cured within thirty (30) days following a written notice from the Authority, the Authority shall be entitled to enforce its rights under this Article 4, and the Company shall indemnify the Authority for all costs of enforcement, including reasonable and actual attorneys’ fees and court costs.

If the Company fails to provide to the Authority an Annual Report for any year as required pursuant to Section 4.6 and such failure continues for thirty (30) days following a written notice from the Authority, the Authority shall have the right to inspect the books and records of the Company regarding employment and capital investment in connection with the Project (subject to the confidentiality policies of the Company) in order to calculate the Project Goals Percentage and to determine the amount of Community Recovery Payments, if any, due from the Company hereunder.

4.9 Extension of Deadlines Not Unreasonably Withheld . Notwithstanding anything herein to the contrary, in the event that an extension of the Performance Period or the due date of any Annual Report is needed in order to permit the Company to satisfy its obligations hereunder, and the Company has shown diligence in attempting to timely meet such obligations, the Authority agrees to not unreasonably withhold its consent to the extension of the period to time required to satisfy such obligations.

5.	DELAY; TERMINATION OF AGREEMENT.

5.1 Delay . No party hereto shall be liable for any failure or delay in performance if caused, in whole or in part, by any circumstance or events beyond the

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reasonable control of such party, including, without limitation, fire; flood; earthquake; acts of God; strikes, boycotts, riots or civil disorders; declared or undeclared wars; casualty; delays in obtaining governmental permits; compliance with government orders; acts of civil or military authority; accidents; industrial disturbances; interruptions of transportation facilities or delays in transit; delays, curtailment or shortages of construction, production, manufacturing or other materials, equipment, raw materials or supplies; failure of any party hereunder to perform, or any delays in the performance of, any commitment to such other party relating to the performance of its obligations; or any other cause, whether similar or dissimilar to the foregoing causes (including, without limitation, general, macro or special economic circumstances that adversely affects net revenues or sales volumes), beyond the reasonable control of such party. In the event of any such contingency, the affected party shall notify the other parties of the contingency within a reasonable period of time and shall make commercially reasonable efforts promptly to remove the contingency such that performance may be resumed; provided, however, no party shall be obligated to settle any labor dispute. If as a result of the occurrence of any such contingency, such party’s performance hereunder cannot be completed within the original period for performance, the period for performance shall be extended for a period of time equal to the duration of such contingency and a reasonable period thereafter to allow for completion of performance without prejudice to any of the other rights of such party under this Agreement.

5.2 Termination Rights .

(a) So long as none of the Local Governmental Entities is in default of its obligations hereunder, the Development Authority may terminate this Agreement by written notice to the Company if the acquisition, construction and equipping of the Project (the “ Construction ”) has not been commenced prior to the third anniversary of the date of this Agreement, or Construction has not been completed prior to the fifth anniversary of the commencement of Construction. Any such termination shall be evidenced by a written notice from the terminating party to the other parties hereto.

(b) So long as the Company is not in default under this Agreement, the Company may terminate this Agreement at any time by written notice to the Development Authority; provided, that upon such termination the Company shall reimburse the Local Governmental Entities for their actual costs in providing the incentives described in the Incentives Table appearing on Schedule B hereto. If the Company has exercised its right to purchase the Project site, it shall also pay to the Development Authority the cost of such property as described on Schedule B.

5.3 Effect of Termination . If any party terminates this Agreement pursuant to a right provided herein or if this Agreement expires, this Agreement shall terminate or expire as to all parties without any further liability on the part of any party, except as may theretofore have accrued, or except as otherwise expressly provided in this Agreement, or shall exist as a result of any prior breach hereof.

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6.	MISCELLANEOUS.

6.1 Intergovernmental Agreement . By their respective Acknowledgements at the end hereof, the City, the County and the Board of Tax Assessors agree to the provisions applicable to them. The Agreement shall also constitute an intergovernmental agreement under Georgia Constitution Art. IX, Sec. III, Para. I between and among the Authority, the City, the County and the Board of Tax Assessors. Such intergovernmental agreement is subject to the 50-year term limit contained in such provision of the Georgia Constitution, but shall expire earlier upon its complete performance.

6.2 Assignment

6.2.1 By the Authority . The Authority may not assign its rights and obligations hereunder except to another public body of the State which has the power to perform the Authority’s obligations hereunder and which assumes all the Authority’s obligations hereunder either in writing or by operation of law.

6.2.2 By the Company. All rights and benefits of the Company under this Agreement and the Authority’s resolution authorizing this Agreement may be transferred and assigned by the Company, in whole or in part, to any one or more individuals, corporations, partnerships (general or limited), joint ventures, or other entities which propose to acquire the Project in whole or in part, with the same effect as if such individuals, corporations, partnership, joint ventures, or other entities were named as the Company in this Agreement. Unless otherwise agreed in writing by the Authority, the assignment of the Company’s rights shall not release the Company from its obligations for costs and indemnification accruing prior to the date of such assignment, but shall release the Company from any further obligations or liabilities under this Agreement, provided the assignee of Company has assumed all of the Company’s obligations hereunder in writing. Notwithstanding the foregoing, the Company’s rights under this Agreement shall be deemed to have been assigned automatically and without the necessity of any further actions or consents to any assignee of the Lease in accordance with the terms of the Lease and any release of the Company from its obligations under the Lease will likewise release, and to the same extent, release the Company from its obligations hereunder to the extent such obligations are assumed in writing by such assignee.

6.3 Notices . Any notice required to be given by any party pursuant to this Agreement, shall be in writing and shall be deemed to have been properly given, rendered or made only if personally delivered, or if sent by Federal Express or other comparable commercial overnight delivery service, addressed to each other party at the addresses set forth below (or to such other address as the Authority or the Company may designate to each other from time to time by written notice), and shall be deemed to have been given, rendered or made on the day so delivered or on the first business day after having been deposited with the courier service:

If to the Authority:

Development Authority of Bulloch County

Post Office Box 303

Statesboro, Georgia 30459

Attention: Chairman

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with a copy to:		Stephen T. Rushing, Esq. Taulbee, Rushing, Snipes, Marsh & Hodgin, LLC Post Office Box 327 Statesboro, Georgia 30459

If to the Board of Assessors:		Bulloch County Board of Assessors Statesboro, Georgia Attention: Chief Appraiser

If to the Board of Commissioners:		Bulloch County Board of Commissioners 115 North Main Street Statesboro, Georgia 30459 Attention: Chairman

If to the Company:		Aspen Aerogels, Inc. 30 Forbes Road, Building B Northborough, MA 01532 Attention: President

with a copy to:		Glenn R. Thomson, Esq. Alston & Bird LLP 1201 West Peachtree Street Atlanta, Georgia 30309-3424

6.4 Confidential Information . All confidential information acquired by the Authority, the City, the County or the Board of Assessors relating to the Company, shall be held in confidence by them, subject to their legal obligations as public bodies, including, without limitation O.C.GA. § 15-18-70, et seq . and § 50-14-1, et seq . The Company and its advisors shall, prior to the execution and delivery hereof, treat the contents of this Agreement as confidential, and, without limitation, shall not disclose such contents to competing communities or States.

6.5 No Partnership or Agency . No partnership or agency relationship between or among the parties shall be created as a result of this Agreement.

6.6 Survival of Agreement . This Agreement shall survive the issuance of the Bonds and the expiration or termination of the Lease but may be modified or superseded in whole or in part by the Lease or any of the other documents and agreements executed in connection with the issuance of the Bonds (collectively, the “ Definitive Documents ”) to the extent that the Definitive Documents expressly so provide.

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6.7 Governing Law; Jurisdiction and Venue . The transactions contemplated hereunder and the validity and effect of this Agreement are exclusively governed by, and shall be exclusively construed and enforced in accordance with, the laws of the State of Georgia, except for the state’s conflict of law rules.

6.8 Amendments . Any amendments, deletions, additions, changes or corrections hereto must be in writing executed by the parties hereto.

6.9 Entire Agreement . This Agreement, together with the Definitive Documents, constitutes the entire agreement between the parties with respect to the subject matter hereof.

6.10 Counterparts . This Agreement may be signed in counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

6.11 No Personal Liability of Representatives of Public Bodies . No official, member, director, officer, agent, or employee of the Authority, the City, the County or the Board of Tax Assessors shall have any personal liability under or relating to this Agreement. Rather, the agreements, undertakings, representations, and warranties contained herein are and shall be construed only as corporate agreements, undertakings, representations, and warranties, as appropriate, of such public bodies. Without limitation, and without implication to the contrary, all parties hereto waive and release any and all claims against each such official, member, director, officer, agent, or employee, personally, under or relating to this Agreement, in consideration of the entry of such public bodies into this Agreement.

6.12 No Personal Liability of Representatives of Company . No official, member, manager, director, officer, agent, or employee of the Company shall have any personal liability under or relating to this Agreement. Rather, the agreements, undertakings, representations, and warranties contained herein are and shall be construed only as corporate agreements, undertakings, representations, and warranties, as appropriate, of such entity. Without limitation, and without implication to the contrary, all parties hereto waive and release any and all claims against each such official, member, manager, director, officer, agent, or employee, personally, under or relating to this Agreement, in consideration of the entry of such entity into this Agreement.

6.13 Captions . The captions and title heading included in this Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions of this Agreement.

6.14 Time is of the Essence . Time is of the essence for this Agreement.

[Signature Pages Follow]

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IN WITNESS WHEREOF , the parties have executed this PILOT Agreement and caused it to be delivered as of the date first above written.

AUTHORITY :

DEVELOPMENT AUTHORITY OF BULLOCH COUNTY


By:		/s/ L. Bruce Yawn
		Chairman

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COMPANY:

ASPEN AEROGELS, INC.,
a Delaware corporation

By:		/s/ John F. Fairbanks
Name:		John F. Fairbanks
Title:		Chief Financial Officer

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ACKNOWLEDGED

The undersigned acknowledges this Agreement and agrees to the provisions hereof that are applicable to it.

BULLOCH COUNTY, GEORGIA


By:		/s/ J. Garret Nevil
		Chairman, Board of Commissioners

Attest:		/s/ Olympia Gaines
		Clerk, Board of Commissioners

(SEAL)

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ACKNOWLEDGED

The undersigned acknowledges this Agreement and agrees to the provisions hereof that are applicable to it.


CITY OF STATESBORO, GEORGIA

By:		/s/ Jan J. Moore
		Mayor


Attest:		/s/ Sue Starling
		Clerk

(SEAL)

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ACKNOWLEDGED

The undersigned acknowledges this Agreement and agrees to the provisions hereof that are applicable to it.


BOARD OF TAX ASSESSORS OF BULLOCH COUNTY

By:		/s/ M. Hulsey
Title:		Chairman

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SCHEDULE A

DESCRIPTION OF THE PREMISES

Riggs Rail Site; Subject property is located in Gateway Industrial Park II and is off of U.S. Highway 301 South (4 lane) and 6 miles from Interstate 16, in Statesboro, Bulloch County, Georgia.

Also described as:

All that parcel of land lying and being in the 1209 ^th G.M.D., Bulloch County, Georgia containing 43.2 acres and being more particularly described as follows:

a distance of 687.09’ to a point; THENCE along said right-of-way counterclockwise on the arc of a curve (Radius = 2899.778’) which subtends a chord of S 41°54’35” W a length of 683.12’; THENCE along said right-of-way S 35°08’43” W a distance of 369.39’ to the POINT OF BEGINNING.

Said parcel bound as follows:

NORTHWEST by Gateway Boulevard.

NORTHEAST by the Development Authority of Bulloch County and Barney L. Allen, Jr.

SOUTHEAST by the northwest right-of-way of Norfolk Southern Railroad.

SOUTHWEST by the northeast right-of-way of A. J. Riggs Road.

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SCHEDULE B

COMMUNITY INCENTIVES SCHEDULE

1.	The recovery value (“ Recovery Value ”) of the Community Incentive identified below shall be as specified below (the “ Incentives Table ”), with any payments to be made as provided in this Community Incentives Schedule to the public bodies indicated as follows:

Incentives Table


Community Incentive	Recovery Value	Recovery Factor	Recovery Paid To
Property Tax Savings on Project	Actual amount of ad valorem property taxes on Project saved, less any payments in lieu of taxes paid pursuant to Section 4.7 of this Agreement	100% for each Goal Year	Appropriate Taxing Authorities, Pro Rata in Proportion to Applicable Millage Rates

Project Site (Approx. 43.2 acres	The lesser of $30,000 per acre (pro-rated for fractions of an acre) or the fair market value of the property as of the date of this Agreement	12.5% for Goals Years 3-10.	Authority

Local Building Permit Fees	Actual amount saved, presently estimated at $0.27 per square foot	12.5% for Goal Years 3-10.	City and County, as applicable

Water, Sewer and Gas Tap Fees	Actual amount saved, presently estimated at $ *	12.5% for Goal Years 3-10.	City

Storm water, detention pond and rail spur bed earthworks construction	Actual cost of the site work calculated at $5.00 per square yard, presently estimated at $195,000	12.5% for Goal Years 3-10	County

Infrastructure and Utility extensions	Actual cost of such work presently estimated at $ 415,800	12.5% for Goal Years 3-10	City

*	Included in Infrastructure and Utility extension figure

If the Annual Report for any Goal Year during the Performance Period shows that, for such Goal Year, the Project Goals Percentage is less than 80% (a “Shortfall Year”), then the Company, in such Annual Report, shall calculate the amount of the “ Community Recovery Payments ” with respect to the incentive listed in the Incentives Table above. If the Project Goals Percentage as shown in the Annual Report for the Goal Year immediately succeeding a Shortfall Year is less than 80%, then the Company shall pay the Community Recovery Payments for the prior Shortfall Year. The Community Recovery Payment for any Goal Year shall be calculated as follows: the Recovery Values as so determined for such year shall be multiplied by the Recovery Factors which shall produce the Recovery Amounts. The Recovery Amounts shall be multiplied by the difference between one hundred percent (100%) minus the Project Goals Percentage which shall produce the Community Recovery Payment. The Company shall pay the amount of the Community Recovery Payment to the appropriate public body specified above simultaneously with its delivery of the applicable Annual Report as required by this Agreement. If the Project Goals Percentage for any Goal Year is 80% or more, there shall be no Community Recovery Payment due for that Goal Year or the immediately preceding Goal Year. In not event shall there be a Community Recovery Payment with respect to any Goal Year prior to the Performance Period. However, notwithstanding the foregoing, in calculating the potential Community Recovery Payment for the first Goal Year during the Performance Period, the Recovery Amount with respect to property tax savings shall equal the total actual amount of ad valorem property taxes saved with respect to the Project (less the amount of any payments in lieu of taxes paid pursuant to Section 4.7 of this Agreement) during the first three Goal Years.

SCHEDULE B-1

RULES FOR SATISFYING THE COMMUNITY JOBS GOAL

1.	For purposes of this Agreement and satisfaction of the Community Jobs Goal, the number of new “full-time jobs” shall be defined and determined, from time to time, as follows:

Full-time job – means a job with no predetermined end date, with a regular work week of 35 hours or more for the period in question; leased, contract, or third party jobs will be considered full-time employees of the Company if such jobs are created in connection with the Project.

2.	The number of full-time jobs shall be calculated as provided below.

The number of jobs shall be determined based on the number of full-time employees subject to Georgia income tax withholding as of December 31 of such calendar year.

The monthly average number of full-time employees in the Annual Report Year shall be determined by the following method:

(i)

for each month of the Annual Report Year, count the total number of full-time employees of the business enterprise that are subject to Georgia income tax withholding as of the last payroll period of the month or as of the payroll period during each month used for the purpose of reports to the Georgia Department of Labor;

(ii)

add the monthly totals of full-time employees; and

(iii)

divide the result by the number of months the business enterprise was in operation during the Annual Report Year. Transferred jobs and replacement jobs may not be included in the monthly totals.

SCHEDULE B-2

RULES FOR SATISFYING THE COMMUNITY INVESTMENT GOAL

1.	Capital investments in the Project by the Company shall be counted regardless of whether or not the property financed by such capital investment is leased to the Company under the Lease.

2.	Original cost, without regard to depreciation, shall be used in calculating whether the Community Investment Goal is met, except as provided in 3, below.

3.	Transferred equipment relocated by the Company to the Project may be counted at the greater of net book value, or fair market value.

Machinery and equipment leased to the Company under an operating lease (even though such property is not titled to the Authority and is not leased to the Company under the Lease) and other machinery and equipment owned or beneficially owned by the Company but not leased to it under the Lease, shall be counted.

5.	All expenditures in connection with the Project that under any generally accepted accounting principles or applicable federal tax laws and regulations may be capitalized by the Company shall count as capital expenditures.

SCHEDULE B-3

FORM OF ANNUAL REPORT

[DATE]

Development Authority of Bulloch County

Statesboro, Georgia

Re:

PILOT Agreement (the “Agreement”) between the Development Authority of Bulloch County and Aspen Aerogels, Inc. (“Company”) regarding the capital project located in Bulloch County, Georgia (the “Project”) – 20 Annual Report

Dear :

This letter shall serve as the Goal Year Annual Report, as required under the Agreement.

1.	Community Jobs Report

As of the end of the Goal Year, the total number of full-time jobs located at the Project was .

The Community Jobs Goal is 106 jobs. The Community Jobs as of the end of such Goal Year was jobs. The Community Jobs Percentage is %* ( ÷ 106).

2.	Community Investment Report

During the period from July 21, 2015 through the end of the Goal Year, the Company has invested a total of $ with respect to the Project.

The Community Investment Goal is $70,000,000. Therefore, the Community Investment Percentage is %* ($ ÷ $70,000,000).

3.	Community Recovery Payments

The Project Goals Percentage for the Global Year is % (( % + %) ÷ 2). [IF SUCH PROJECT GOALS PERCENTAGE IS LESS THAN 80% A COMMUNITY RECOVERY PAYMENT IS DUE, THAT PAYMENT SHOULD BE CALCULATED HERE BASED ON THE RECOVERY SCHEDULE IN THE AGREEMENT.]

*	Neither the Community Jobs Percentage nor the Community Investment Percentage may exceed 110% for purposes of these calculations.

Please do not hesitate to let us know if you require any additional information.

Sincerely,

Exhibit 10.3

PERFORMANCE & ACCOUNTABILITY AGREEMENT

Georgia Incentive Programs

FUND AWARD NO.

This Performance & Accountability Agreement (this “Agreement”) made and entered into as of February 15, 2016 by and among the Development Authority of Bulloch County , a public body corporate and politic created pursuant to the laws of the State of Georgia (the “ Development Authority”) , and the Georgia Department of Community Affairs , an agency within the executive branch of the State of Georgia (“ DCA ”) and the administering agency for the OneGeorgia Authority, an instrumentality of the state and a public corporation (“ OneGeorgia ”) (hereinafter referred to as the “Administering Agency”), and Aspen Aerogels, Inc. (the “ Company ”).

R E C I T A L S

1.	The purpose of the State of Georgia’s incentive programs, administered through DCA, is to provide financial assistance to eligible applicants to assist the applicant to induce and assist companies to relocate, expand or construct projects in Georgia rather than a competing state; and

2.	The incentive programs include, but are not limited to, the Department of Community Affair’s Regional Economic Business Assistance (“REBA”) program and the OneGeorgia Authority’s EDGE Fund program (“EDGE”); and

3.	The Development Authority has been awarded EDGE funding (“Financial Assistance”) and, in accordance with the Development Authority’s statutory purposes, will utilize the Financial Assistance to participate in a project to assist the Company; and

In consideration for the benefit of such Financial Assistance the Development Authority and Company must, in addition to other requirements: i) complete a project that creates and/or retains a defined number of jobs; and ii) invest a defined amount of new private capital into the Company. (The defined job and private capital investment requirements shall hereinafter be collectively referred to as the “Performance Standards”.); and

5.	The Development Authority and Company’s relocation, location or expansion project for which the Financial Assistance was awarded is more particularly described in the EDGE Fund Award, and that description is incorporated herein by reference, (hereinafter the “Project”); and

Now, therefore, in consideration of the covenants and agreements herein contained, the parties agree as follows:

Award. The Development Authority and the Company’s obligations under this Agreement are contingent upon the Administering Agency awarding Financial Assistance in the amount of $250,000 (“Award Amount”) to the Development Authority. Should the Award include or consist of a loan, the terms of such loan will be set forth in a separate agreement, promissory note and other appropriate documents.

2.	Project Description. Pursuant to the Award, the Development Authority shall use the Award Amount to implement the Project to assist the Company, which is more particularly described in the application and summarized as:

Aspen Aerogels, Inc., a leading energy technology company providing innovative thermal management solutions to the energy insulation market, will locate the Company’s second manufacturing operation in the United States at the Riggs Rail Site in Statesboro – Bulloch County. The Company will create 106 full-time jobs and invest $70,000,000 in real and personal property.

3.	Performance Standards. In consideration for the Development Authority’s assistance, the Company shall meet the following Performance Standards:

The Company shall create 106 new full-time permanent jobs located in Statesboro – Bulloch County. For purposes of this Agreement, a “full-time job” is defined as a position in which an employee is engaged for a minimum of thirty-five (35) hours per week;

The Company shall make or cause to be made a private capital investment in the Project of at least $70,000,000, including the type of expenditures noted in the Award;

The start date for the jobs and private capital investment to be counted will be July 21, 2015;

The Company shall be in full compliance with the Performance Standards within thirty - six (36) months of the date of the issuance of the Certificate of Occupancy for a new facility to be operated by the Company or the completion of installation of the incentive funded asset in the case of an expanded facility (the “Performance Period”). Failure of the Company to meet the Performance Standards before the end of the Performance Period or the failure of the Company to maintain such Performance Standards until the expiration of the Performance Period shall trigger an obligation of the Company to repay all or a portion of the Award Amount as provided in Section 4 hereof unless the Performance Period is extended. At the request of the Development Authority and for good cause shown, the expiration of the Performance Period may be extended, at the sole discretion of the Administering Agency; provided, however, that any such request shall be accompanied by supporting documentation from the Development Authority and Company deemed satisfactory to the Administering Agency;

The start-date for the Performance Period shall be no later than June 30, 2018, which is the date that the Company reasonably expects the facility or the incentive-funded asset to be operational; and

The Company shall maintain documentation to evidence the number of full-time permanent jobs created and maintained and the amount of private investment in the Project until such time as the Performance Standards have been met and the Administering Agency has certified compliance pursuant to Section 5 of this Agreement.

Compliance Threshold and Repayment Amount . In the event the Company fails to i) meet the Performance Standards, or ii) maintain operations for the entirety of the Performance Period, or iii) locate in or operate the business forming a part of the Project funded with the Award, the Company shall repay directly to the Administering Agency all (in the case of the happening of the event identified in Section 4(iii) above) or a portion of the Award Amount in all other cases (in each case, the “Repayment Amount”). For purposes of events of default under Section 4(i) - (ii) above, the Repayment Amount shall be determined as follows:

Compliance Threshold . The Company will be determined to have complied with the Performance Standards if the results of the threshold calculation conducted in accordance with the formula on Exhibit “A” (“Average Actual Performance”) are equal to or greater than eighty percent (80%) (“Compliance Threshold”). The threshold calculation formula is the average of the percentage of created and maintained jobs to committed jobs over the Performance Period and the percentage of actual capital investment to committed investment as of the expiration of the Performance Period.

Adjusted Award Amount . Should the Company’s Average Actual Performance be less than eighty percent (80%) of the Performance Standards (the “Compliance Threshold”), the Company’s Award will be adjusted proportionately by multiplying the Award Amount by the Average Actual Performance. The resulting number will then be subtracted from the Award Amount to determine what amount the Award will be adjusted to, after taking into account under performance (“Adjusted Award Amount”). The Company shall repay to the Administering Agency the difference between the Award Amount and the Adjusted Award Amount. See illustrations in Exhibit “B” : Repayment Calculation. The Award Amount will only be adjusted in the event Company does not meet the Compliance Threshold.

5.	Reporting Requirements. The Company shall file with the Development Authority, no later than thirty (30) days following the expiration of the Performance Period, documentation to evidence the actual number of full-time jobs created and total

amount of private capital invested in the Project; provided, however, that the Development Authority will provide the Company with written notice of any failure to submit such documentation and permit the Company a reasonable period of time to cure any such failure (in no event less than 30 days) before it will constitute grounds for termination of this Agreement. No later than sixty (60) days after the expiration of Performance Period, the Development Authority shall file with the Administering Agency, a report documenting the Company’s performance. Within a reasonable time after receipt of the report from the Development Authority, the Administering Agency will notify the Development Authority of the Company’s compliance or noncompliance with the Performance Standards. The Development Authority shall then provide the Company with such notification.

Notification and Repayment. In the event the Company has failed to meet the Compliance Threshold, the Administering Agency will notify the Development Authority and Company of the Adjusted Award Amount and the Repayment Amount. The Company shall submit the Repayment Amount to the Administering Agency no later than forty-five (45) days after the date of the notification letter from the Administering Agency indicating that the Company has failed to meet the Compliance Threshold. Should the Company fail to remit the Repayment Amount to the Administering Agency in a timely matter, the Administering Agency shall have the right, in its sole discretion, to impose any and all remedies available to it through its administrative processes or to seek remedies available at law or equity.

Adjustment in the Performance Standards. In the event a force majeure or other extraordinary circumstance (including, without limitation, extraordinary economic conditions or events), as will be determined in the reasonable discretion of Administering Agency, that prevents the Company’s from meeting the Performance Standards, the Company may request that Administering Agency adjust the Company’s Compliance Threshold. In the reasonable discretion of Administering Agency, the Compliance Threshold may be adjusted provided that the adjustment will have a direct relationship to the impact that the force majeure or extraordinary circumstance had on the Company’s ability to meet the Performance Standards.

Sale or Change of Ownership of Company. If, prior to or during the Performance Period, the Company (i) assigns its interest in this Agreement to another Person (as hereinafter defined), (ii) merges or consolidates with another Person and is not the surviving Person, or (iii) transfers all or substantially all of its assets to another Person (such surviving Person or transferee, the “Acquiring Company”), then the Company must notify the Development Authority and Administering Agency of such a change in ownership. Additionally, the Acquiring Company must assume the obligations of the Company contained in this Agreement by executing an Assumption Agreement which shall be provided to the Development Authority and the Administering Agency and pursuant to which the Acquiring Company shall be liable for, among other things, the reporting requirements and the payment of any Repayment Amount due and payable hereunder. In lieu of executing an Assumption Agreement, the Company or Acquiring Company may elect to repay the Award

Amount to the Administering Agency. For purposes of this Agreement, the term “Person” shall mean any individual, corporation, partnership, joint venture, limited liability company, or other business entity.

Transfer and Assignment of Repayment. The Development Authority hereby transfers and assigns to Administering Agency all of the Development Authority’s rights, title and interest to the Repayment Amount. The Development Authority acknowledges that, pursuant to the terms of the Agreement, the Company shall remit all Repayment Amounts to the Administering Agency. In the event the Development Authority receives such Repayment Amounts, the Development Authority shall hold such payments in trust for the benefit of the Administering Agency provided that no later than five (5) days after receipt thereof, the Development Authority will deliver, by courier or regular U. S. Mail, such Repayment Amounts to the Administering Agency. Provided the Development Authority requires the Company to meet the Performance Standards, uses its best effort to assist the Company in meeting the Performance Standards, and assists the Administering Agency in collecting Repayment Amount when due, the Administering Agency shall have no recourse against the Development Authority for the Company’s failure to meet the Performance Standards unless the Development Authority explicitly accepts such recourse.

10.

Acceptance and Assumption by Administering Agency. The Administering Agency hereby accepts the transfer and assignment of the Development Authority’s rights, title and interest in, to the Repayment Amount; provided, however, that Administering Agency has not, and shall not have, accepted or assumed any obligations or liabilities of Development Authority that the Development Authority may have with regards to the Project or the Company.

11.

Exhibits. The exhibits hereto will be construed to be a part of this Agreement by such reference or other mention at each point at which such reference or other mention occurs, in the same manner and with the same effect as if each exhibit were set forth in full and at length every time it is referred to or otherwise mentioned.

12.

Severability. If any one or more of the provisions contained herein will for any reason be held by any court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision hereof, and this Agreement will be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

13.	Authorized Signatures. Each of the individuals executing this Agreement represents that they are authorized to execute this Agreement on behalf of their respective entities.

14.	Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.

15.

Assignment . All rights and benefits of the Company under this Agreement may be transferred and assigned by the Company, in whole or in part, to any one or more Persons (the “Assignees”) which propose to acquire all or part of the Project with the same effect as if such Assignees were named as the Company in this Agreement; provided, however, each such Assignee shall execute and deliver to the Administering Agency and the Development Authority an Assumption Agreement pursuant to which such Assignee shall be liable for, among other things, the reporting requirements and payment of any Repayment Amount due and payable hereunder in proportion to its interest in the Project. In addition, in the case of any assignment described herein, the Company agrees to guarantee payment of any Repayment Amount. In lieu of executing an Assumption Agreement, the Company or the Assignees may elect to repay the Award Amount to the Administering Agency.

Signature Page

Performance & Accountability Agreement

Aspen Aerogels Project in Statesboro/Bulloch County, Georgia

IN WITNESS WHEREOF , the parties have hereunto set their signatures and affixed their seals the day and year first written above.


Development Authority of Bulloch County		Georgia Department of Community Affairs

By:	/s/ L. Bruce Yawn	By:	/s/ Camila Knowles
Title:	Chairman	Title:	Commissioner

Date:	11-2-15	Date:	12-18-15

Seal


Aspen Aerogels, Inc.

By:		/s/ John F. Fairbanks
Title:		Chief Financial Officer

Date:		February 15, 2016

Seal

PERFORMANCE & ACCOUNTABILITY AGREEMENT

EXHIBIT “A” - Average Actual Performance

The Average Actual Performance shall be determine by the following formula


STEP 1

Actual Jobs Created or Retained	=	Percentage of Committed Jobs Created
Committed Number of Jobs

Actual Capital Investment	=	Percentage of Committed New
Investment
Committed New Investment


STEP 2

		Percentage of Committed Jobs Created

+ Percentage of Committed New Investment
= Percentage of Commitments Met

PERFORMANCE & ACCOUNTABILITY AGREEMENT

EXHIBIT “B” - Repayment Amount Calculation

(Required only if Average Actual Performance is less than 80%)


STEP 1

		Award Amount
X Average Actual Performance
		Adjusted Award Amount
STEP 2

		Award Amount
- Adjusted Award Amount
		Repayment Amount

Example A – Repayment Required

A $500,000 Award to assist with site development was part of Company A’s consideration to locate in Georgia rather than an out-of-state location. As part of the deal, Company A committed to create 600 jobs and make a $5,000,000 new investment to construct and operate a new production facility in Georgia. At the end of the Performance Period, Company A has actually created 400 jobs and invested $3,500,000 into a smaller facility.

•

Award Amount $500,000

•

Commitment – 600 jobs and $5,000,000 new investment

•

Actual jobs delivered – 400 (66% of Commitment)

•

Actual investment delivered — $3,500,000 (70% of Commitment)

•

66%+70% = 136/2 = 68% [Average Actual Performance]

•

$340,000 (68%) Adjusted Award Amount

•

$160,000 (32%) Repayment Amount

Example B – No Repayment Necessary

A $500,000 Award to assist with the purchase of production equipment was part of Company B’s consideration to locate in Georgia rather than an out-of-state location. As part of the deal, Company B committed to create 600 jobs and make a $5,000,000 capital investment to construct and operate a new manufacturing facility in Georgia. At the end of the Performance Period, Company B has actually created 600 jobs and invested $4,250,000 into a redesigned facility that saved $750,000 in capital investment.

•

Award Amount $500,000

•

Commitment – 600 jobs & $5,000,000 investment

•

Actual jobs delivered – 600 (100%)

•

Actual investment delivered — $4,250,000 (85%)

•

100%+85% = 185/2 = 92.5% Benefit

•

No repayment required

Exhibit 31.1

CERTIFICATIONS UNDER SECTION 302

I, Donald R. Young, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Aspen Aerogels, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 6, 2016		/s/ Donald R. Young
		Donald R. Young
		President and Chief Executive Officer (principal executive officer)

Exhibit 31.2

CERTIFICATIONS UNDER SECTION 302

I, John F. Fairbanks, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Aspen Aerogels, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 6, 2016		/s/ John F. Fairbanks
		John F. Fairbanks
		Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)

Exhibit 32

CERTIFICATIONS UNDER SECTION 906

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Aspen Aerogels, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report for the quarter ended March 31, 2016 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: May 6, 2016				/s/ Donald R. Young
				Donald R. Young
				President and Chief Executive Officer (principal executive officer)

Dated: May 6, 2016				/s/ John F. Fairbanks
				John F. Fairbanks
				Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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