DEF 14A 1 aciadef14a04032019.htm DEF 14A Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment No.    )
 
  
Filed by the Registrant x
 
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Check the appropriate box:
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Preliminary Proxy Statement
 
 
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Definitive Proxy Statement
 
 
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Definitive Additional Materials
 
 
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Soliciting Material Pursuant to §240.14a-12
ACACIA COMMUNICATIONS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
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April 3, 2019
Dear Acacia Stockholder:
I am pleased to invite you to attend the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) of Acacia Communications, Inc. (“Acacia”) to be held on Thursday, May 16, 2019, at 10:00 a.m. Eastern Time at 3 Mill and Main Place, 3rd Floor, Suite 300, Maynard, MA 01754.
Details regarding the meeting and the business to be conducted are more fully described in the accompanying Notice of 2019 Annual Meeting of Stockholders and Proxy Statement.
Pursuant to the Securities and Exchange Commission rules that allow issuers to furnish proxy materials to stockholders over the Internet, we are posting the proxy materials on the Internet and delivering a notice of the Internet availability of the proxy materials. On or about April 3, 2019, we will begin mailing to our stockholders a Notice of Internet Availability (the “Notice”) containing instructions on how to access or request a copy of our Proxy Statement for the Annual Meeting and our Annual Report on Form 10-K for the year ended December 31, 2018.
Your vote is important. Whether or not you plan to attend the Annual Meeting, I hope you will vote as soon as possible. You may vote over the Internet or in person at the Annual Meeting or, if you requested printed copies of proxy materials, you also may vote by mailing a proxy card or vote by telephone. Please review the instructions on the Notice or on the proxy card regarding your voting options.
Thank you for being an Acacia stockholder. We look forward to seeing you at our Annual Meeting.
 
Sincerely,
ceosignaturea01.jpg
Murugesan “Raj” Shanmugaraj
President and Chief Executive Officer

 
YOUR VOTE IS IMPORTANT
 
In order to ensure your representation at the Annual Meeting, whether or not you plan to attend the Annual Meeting, please vote your shares as promptly as possible over the Internet by following the instructions on your Notice or, if you requested printed copies of your proxy materials, by following the instructions on your proxy card. Your participation will help to ensure the presence of a quorum at the Annual Meeting and save Acacia the extra expense associated with additional solicitation. For your vote to be counted, you will need to communicate your voting decision in accordance with the instructions set forth in the proxy materials. Voting your shares in advance will not prevent you from attending the Annual Meeting, revoking your earlier submitted proxy in accordance with the instructions set forth in the proxy materials or voting your stock in person.
 



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ACACIA COMMUNICATIONS, INC.
3 MILL AND MAIN PLACE
3RD FLOOR, SUITE 300
MAYNARD, MA 01754
NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS

Notice is hereby given that Acacia Communications, Inc. will hold its 2019 Annual Meeting of Stockholders (the “Annual Meeting”) on Thursday, May 16, 2019, at 10:00 a.m. Eastern Time at 3 Mill and Main Place, 3rd Floor, Suite 300, Maynard, MA 01754, for the following purposes:
•
To elect three Class III directors, Peter Y. Chung, John Ritchie and Vincent T. Roche, to hold office until our 2022 annual meeting of stockholders or until their successors are duly elected and qualified, subject to their earlier resignation or removal;
•
To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019;
•
To conduct a non-binding, advisory vote to approve the compensation of our named executive officers; and
•
To transact any other business that properly comes before the Annual Meeting (including adjournments and postponements thereof).
Only stockholders of record at the close of business on March 22, 2019 (the “Record Date”) are entitled to notice of and to vote at the Annual Meeting as set forth in the enclosed proxy statement (the “Proxy Statement”). If you plan to attend the Annual Meeting in person, you should be prepared to present photo identification such as a valid driver’s license and verification of stock ownership for admittance. You are entitled to attend the Annual Meeting only if you were a stockholder as of the close of business on the Record Date or hold a valid proxy for the Annual Meeting. If you are a stockholder of record, your ownership as of the Record Date will be verified prior to admittance into the meeting. If you are not a stockholder of record but hold shares through a broker, trustee, or nominee, you must provide proof of beneficial ownership as of the Record Date, such as an account statement or similar evidence of ownership. Please allow ample time for the admittance process. For instructions on how to vote your shares, please refer to the instructions on the Notice of Internet Availability of Proxy Materials you received in the mail, the section titled “Voting” beginning on page 1 of the attached Proxy Statement or, if you requested to receive printed proxy materials, your enclosed proxy card.
 
By Order of our Board of Directors,
janenesignaturea01.jpg
Janene I. Asgeirsson
Chief Legal Officer and Secretary
 
Maynard, Massachusetts
April 3, 2019



TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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PROXY STATEMENT
FOR THE 2019 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, MAY 16, 2019
GENERAL INFORMATION
Our board of directors (“Board of Directors” or “Board”) solicits your proxy on our behalf for the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) and at any postponement or adjournment of the Annual Meeting for the purposes set forth in the accompanying Notice of Meeting and this Proxy Statement. The Annual Meeting will be held at 10:00 a.m. Eastern Time on Thursday, May 16, 2019 at 3 Mill and Main Place, 3rd Floor, Suite 300, Maynard, MA 01754. We made this Proxy Statement available to stockholders beginning on April 3, 2019.
In this Proxy Statement the terms “Acacia,” “the Company,” “our company,” “we,” “us,” and “our” refer to Acacia Communications, Inc. The mailing address of our principal executive offices is Acacia Communications, Inc., 3 Mill and Main Place, Suite 400, Maynard, MA  01754. All website addresses set forth in this Proxy Statement are for information only and are not intended to be an active link or to incorporate any website information into this document.
Internet Availability of Proxy Materials
 
We are providing access to our proxy materials over the Internet. On April 3, 2019, we mailed a Notice of Internet Availability of Proxy Materials (the “Notice”) to stockholders, unless they requested a printed copy of proxy materials. The Notice contains instructions on how to access our proxy materials and how to vote. If you would like to receive a paper or e-mail copy of our proxy materials, please follow the instructions in the Notice. If you requested printed versions of these materials by mail, they will also include a proxy card for the Annual Meeting.
 
 
 
Record Date
 
March 22, 2019
 
 
 
Quorum
 
A majority of the issued and outstanding shares of stock entitled to vote on the Record Date must be present in person or represented by proxy to constitute a quorum.
 
 
 
Shares Outstanding
 
40,500,775 shares of common stock outstanding and entitled to vote as of March 22, 2019.
 
 
 
Voting
 
There are four ways a stockholder of record can vote:

 
 
(1)  By Internet: If you are a stockholder as of the Record Date, you may vote over the Internet by following the instructions provided in the Notice.
 
 
(2)  By Telephone: If you requested printed copies of proxy materials and are a stockholder as of the Record Date, you can vote by telephone by following the instructions on your proxy card.
 
 
(3)  By Mail: If you requested printed copies of proxy materials and are a stockholder as of the Record Date, you can vote by mailing your proxy as described in the proxy materials.
 
 
(4)  In Person: If you are a stockholder as of the Record Date, you may vote in person at the meeting. Submitting a proxy will not prevent a stockholder from attending the Annual Meeting, revoking their earlier-submitted proxy in accordance with the process outlined below, and voting in person.

 
 
In order to be counted, proxies submitted by telephone or Internet must be received by 11:59 p.m. Eastern Time on May 15, 2019. Proxies submitted by U.S. mail must be received before the start of the Annual Meeting.
 
 
If you hold your shares through a bank or broker, please follow their instructions.
 
 
 
Revoking Your Proxy
 
Stockholders of record may revoke their proxies by attending the Annual Meeting and voting in person, by filing an instrument in writing revoking the proxy or by filing another duly executed proxy bearing a later date with our Secretary before the vote is counted or by voting again using the telephone or Internet before the cutoff time (11:59 p.m. Eastern Time on May 15, 2019). Your latest telephone or Internet proxy is the one that will be counted. If you hold shares through a bank or broker, you may revoke any prior voting instructions by contacting that firm.
 
 
 

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Votes Required to Adopt Proposals
 
Each share of our common stock outstanding on the Record Date is entitled to one vote on any proposal presented at the Annual Meeting:

For Proposal One, the election of directors, the three nominees receiving the highest number of votes properly cast “FOR” election, or a “plurality” of the votes properly cast, will be elected as directors; provided, that any director nominee standing for election to the Board who receives a greater number of “withhold” votes than votes “FOR” must offer to tender his resignation to our Board of Directors promptly following the certification of election results. Our Board of Directors must then accept or reject such resignation within 90 days following the certification of election results and publicly disclose its decision. For additional information, see “Proposal One—Board Procedures in Connection with Majority Withhold Vote in Uncontested Director Elections” included in this Proxy Statement.

For Proposal Two, a majority of the votes properly cast “FOR” the proposal is required to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019.

For Proposal Three, a majority of the votes properly cast “FOR” the proposal is required to approve the compensation of our named executive officers. Since this proposal is an advisory vote, the result will not be binding on our Board of Directors, the Compensation Committee of our Board of Directors (“Compensation Committee”), or the Company. However, our Board of Directors values input from our stockholders, and our Board of Directors and Compensation Committee will consider the outcome of the vote when making future decisions regarding the compensation of our named executive officers.
 
 
 
Effect of Abstentions and Broker Non-Votes
 
Votes withheld from any nominee, abstentions and “broker non-votes” (i.e., where a broker has not received voting instructions from the beneficial owner and for which the broker does not have discretionary power to vote on a particular matter) are counted as present for purposes of determining the presence of a quorum. Abstentions have no effect on the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019 or the advisory vote to approve the compensation of our named executive officers.

Under the rules that govern brokers holding shares for their customers, brokers who do not receive voting instructions from their customers have the discretion to vote uninstructed shares on routine matters, but do not have discretion to vote such uninstructed shares on non-routine matters. Only Proposal Two, the ratification of the appointment of Deloitte & Touche LLP, is considered a routine matter where brokers are permitted to vote shares held by them without instruction. If your shares are held through a broker, those shares will not be voted with regard to Proposals One or Three unless you affirmatively provide the broker instructions on how to vote. Broker non-votes also will have no effect on the outcome of these proposals.
 
 
 
Voting Instructions
 
If you complete and submit your proxy voting instructions, the persons named as proxies will follow your instructions. If you submit proxy voting instructions but do not direct how your shares should be voted on each item, the persons named as proxies will vote “FOR” the election of the nominees for directors, “FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm, and “FOR” the non-binding advisory vote to approve the compensation of our named executive officers. The persons named as proxies will vote on any other matters properly presented at the Annual Meeting in accordance with their best judgment, although we have not received timely notice of any other matters that may be properly presented for voting at the Annual Meeting.
 
 
 
Voting Results
 
We will announce preliminary results at the Annual Meeting. We will report final results by filing a Form 8-K within four business days after the Annual Meeting. If final results are not available at that time, we will provide preliminary voting results in the Form 8-K and final results in an amendment to the Form 8-K after they become available.
 
 
 
Additional
Solicitation / Costs
 
We are paying for the distribution of the proxy materials and solicitation of the proxies. In addition to solicitations by mail, our directors, officers and employees, without additional renumeration, may solicit proxies by telephone, facsimile, email, personal interviews and other means. We have engaged The Proxy Advisory Group, LLC to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of customary disbursements, which are not expected to exceed $15,000 in total. As part of our proxy and solicitation of proxies process, we reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to our stockholders. Proxy solicitation expenses that we will pay include those for preparation, mailing, returning and tabulating the proxies.
 
 
 

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Householding
 
Some banks, brokers, and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of the Notice, Proxy Statement, and Annual Report on Form 10-K for the year ended December 31, 2018, as applicable, is being delivered to multiple stockholders sharing an address unless we have received contrary instructions. We will promptly deliver a separate copy of any of these documents to you if you write to us at Investor Relations at Acacia Communications, Inc., 3 Mill and Main Place, Suite 400, Maynard, MA 01754 or call us at (212) 871-3927. If you want to receive separate copies of the Notice, Proxy Statement, or Annual Report on Form 10-K in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address or telephone number.


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PROPOSAL ONE
ELECTION OF DIRECTORS
Number of Directors; Board Structure
Our Board of Directors is divided into three staggered classes of directors as nearly equal in number as possible. One class is elected each year at the annual meeting of stockholders for a term of three years or until the election and qualification of their successors in office. The term of the Class III directors expires at the Annual Meeting. The term of the Class I directors expires at the 2020 annual meeting. The term of the Class II directors expires at the 2021 annual meeting.
Nominees
Based on the recommendation of our Nominating and Corporate Governance Committee of our Board of Directors (“Nominating and Corporate Governance Committee”), our Board of Directors has nominated Peter Y. Chung, John Ritchie and Vincent T. Roche for election as directors to serve for a three-year term ending at the 2022 annual meeting or until their successors are elected and qualified. Each of the nominees is a current member of our Board of Directors and has consented to serve if elected.
Unless you direct otherwise through your proxy voting instructions, the persons named as proxies will vote all proxies received “FOR” the election of each nominee. If any nominee is unable or unwilling to serve at the time of the Annual Meeting, the persons named as proxies may vote for a substitute nominee chosen by our Board of Directors. In the alternative, the proxies may vote only for the remaining nominees, leaving a vacancy on our Board of Directors. Our Board of Directors may fill such vacancy at a later date or reduce the size of our Board of Directors. We have no reason to believe that any of the nominees will be unwilling or unable to serve if elected as a director.
Board Procedures in Connection with Majority Withhold Vote in Uncontested Director Elections

In February 2019, our Board of Directors adopted the “Resignation Policy in Connection with Majority Withhold Vote.” The resignation policy provides that in an uncontested election of directors of the Company, any nominee standing for election as a director who receives more “withhold” than “for” votes (a “Majority Withhold Vote”), is expected, promptly following certification of the stockholder vote, to offer to the Board to tender his or her resignation as a director for consideration by the Board in accordance with the procedures summarized below and set forth in our corporate governance guidelines. For purposes of the resignation policy, an “uncontested election” means an election in which the number of nominees for election as director is equal to the number of directors to be elected.

Our Nominating and Corporate Governance Committee, or in the event our Nominating and Corporate Governance Committee is comprised of fewer than three independent directors or if any member of the Nominating and Corporate Governance Committee is required to offer his or her resignation in accordance with this policy, a special committee of at least three independent directors designated by the Board, will consider the resignation, taking into consideration the best interests of our company and its stockholders, and will recommend to the Board, among other actions, whether or not to accept the resignation. In its deliberations about the proper recommendation, our Nominating and Corporate Governance Committee (or the special committee) will consider all factors it deems relevant, including, as it deems appropriate any stated reasons of stockholders for the Majority Withhold Vote, any alternatives for curing the underlying cause of the Majority Withhold Vote, the total number of shares voted, how such shares were voted, the number of broker non-votes, the director’s tenure, the director’s qualifications, the criteria for nomination as a director set forth in our corporate governance guidelines, the director’s past and expected future contributions to our company and the overall composition of the Board, including whether the director’s resignation would cause us to fail to meet any applicable Securities and Exchange Commission (“SEC”) or stock exchange requirement.

Our Board will then act on our Nominating and Corporate Governance Committee’s (or the special committee’s) recommendation within 90 days following the certification of the stockholder vote. The Board will consider all factors considered by our Nominating and Corporate Governance Committee (or the special committee) and such additional factors that the Board deems relevant. Following the Board’s decision, we will promptly publicly disclose the Board’s decision regarding the offer to resign and, if such offer is rejected, the rationale behind the decision.
Recommendation of our Board of Directors
 
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF PETER Y. CHUNG, JOHN RITCHIE AND VINCENT T. ROCHE.
 

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The biographies of each of the director nominees and continuing directors below contain information regarding each such person’s service as a director on our Board of Directors, business experience, director positions at other publicly traded companies held currently or at any time during the last five years and other experiences, qualifications, attributes or skills that caused our Board of Directors and Nominating and Corporate Governance Committee to determine that the person should serve or continue to serve as a director of the Company. In addition to the information presented below regarding each such person’s specific experience, qualifications, attributes and skills that led our Board of Directors and Nominating and Corporate Governance Committee to the conclusion that he or she should serve or continue to serve as a director, we also believe that each of our directors has a reputation for integrity, honesty and adherence to high ethical standards. Each of our directors has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to our company and our Board of Directors, including a commitment to understanding our business and industry. We also value our directors’ experience in relevant areas of business management and on other boards of directors and board of directors’ committees.
Our corporate governance guidelines also dictate that a majority of our Board of Directors be comprised of independent directors whom our Board of Directors has determined have no material relationship with the Company and are otherwise “independent” directors under the published listing rules of The Nasdaq Stock Market LLC (“Nasdaq”).
The names of the nominees for election as Class III directors at the Annual Meeting and of the incumbent Class I and Class II directors, and certain information about them, including their ages, are included below.
 
Name
 
Age
 
Principal Occupation
 
Director Since
Nominees for election as Class III directors with terms expiring in 2019:
 
 
Peter Y. Chung(1)*(2)(3)
 
51
 
Managing Director and Chief Executive Officer of Summit Partners, L.P.
 
2013
John Ritchie(2)*
 
53
 
Senior Vice President, Chief Financial Officer and Chief Operating Officer of Aerohive Networks, Inc.
 
2015
Vincent T. Roche(3)(4)
 
59
 
President and Chief Executive Officer of Analog Devices, Inc.
 
2016
Incumbent Class I directors with terms expiring in 2020:
 
 
Murugesan “Raj” Shanmugaraj
 
61
 
President and Chief Executive Officer of Acacia Communications, Inc.
 
2010
Benny P. Mikkelsen
 
59
 
Founder, Chief Technology Officer of Acacia Communications, Inc.
 
2009
David J. Aldrich(2)(3)
 
62
 
Chairman of the Board of Skyworks Solutions, Inc.
 
2017
Incumbent Class II directors with terms expiring in 2021:
 
 
Eric A. Swanson(1)
 
58
 
Affiliate of the Research Laboratory of Electronics at the Massachusetts Institute of Technology
 
2009
Stan J. Reiss(3)*
 
47
 
General Partner of Matrix Partners
 
2009
*         Committee Chair.
(1)      Member of our Nominating and Corporate Governance Committee.
(2)      Member of our Audit Committee.
(3)      Member of our Compensation Committee.
(4)      Chair of our Board of Directors.
Nominees for Election for a Three-Year Term Ending at the 2022 Annual Meeting
Peter Y. Chung, 51, has served as a Director of our company since April 2013. Mr. Chung is a managing director and the chief executive officer of Summit Partners, L.P., a global alternative investment firm, where he has been employed since 1994. He is currently a director of A10 Networks, Inc., a provider of secure application solutions, and MACOM Technology Solutions Holdings, Inc., a provider of analog semiconductor solutions. Previously, Mr. Chung served as a director of various other entities, including Ubiquiti Networks, Inc., a developer of networking technology for service providers and enterprises. Mr. Chung holds an A.B. in economics from Harvard University and an M.B.A. from the Stanford University Graduate School of Business. We believe that Mr. Chung is qualified to serve as a Director of our company due to his wide-ranging experience in investment banking, private equity and venture capital investing in the communications technology sector and his participation on other private and public company boards of directors.
John Ritchie, 53, has been a Director of our company since April 2015. Since August 2015, Mr. Ritchie has been the senior vice president, chief financial officer of Aerohive Networks, Inc., a computer networking equipment company, and he was also appointed to serve as its chief operating officer in February 2017. From April 2013 to April 2015, Mr. Ritchie served as the chief financial officer of Telerik AD, a software development tools company. Prior to that, from May 2010 to March 2013, Mr. Ritchie was the chief financial officer of Ubiquiti Networks, Inc., a developer of networking technology for service providers and enterprises.

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Previously, Mr. Ritchie held several executive positions, in each case most recently the position of chief financial officer, at Electronics For Imaging, Inc., a provider of products, technology and services enabling analog to digital imaging transformation, and Splash Technology Holdings, Inc., which develops, produces, and markets color servers. Mr. Ritchie holds a B.S. in business administration from San Jose State University. We believe that Mr. Ritchie is qualified to serve as a Director of our company due to his service as the chief financial officer of several publicly traded companies.
Vincent T. Roche, 59, has served as a Director of our company since June 2016 and as the Chair of our Board of Directors since May 2017. Mr. Roche is the president and chief executive officer and a director of Analog Devices, Inc., a global leader in high-performance semiconductors for signal processing applications, where he has worked since 1988 and has been part of the senior management team since 2009. Mr. Roche holds a B.S. in electrical engineering from the University of Limerick in Ireland. We believe that Mr. Roche is qualified to serve as a Director of our company due to his leadership expertise, including service as chief executive officer of a large international public company, as well as his technical understanding of the optical networking industry.
Directors Continuing in Office Until the 2020 Annual Meeting
Murugesan “Raj” Shanmugaraj, 61, has served as our President and Chief Executive Officer and as a Director of our company since April 2010. Prior to joining Acacia, from February 2002 to February 2010, Mr. Shanmugaraj was the vice president of business development in the optical networking division of Alcatel-Lucent USA, Inc., a network equipment manufacturer. Prior to that, Mr. Shanmugaraj founded and served as the chief executive officer of Astral Point Communications Inc., an optical equipment company, which was acquired by Alcatel-Lucent USA, Inc. in 2001, and held various senior executive level positions at PictureTel Corp., a commercial videoconferencing product company, Multilink, Inc., an engineering and product development-based manufacturer of telecommunications network components, and Motorola Inc., a multinational telecommunications company. Mr. Shanmugaraj holds an M.S. in electrical and computer engineering from the University of Iowa and a B.E. in electronics and communications from the National Institute of Technology, Trichy in India. We believe that Mr. Shanmugaraj is qualified to serve on our Board of Directors due to his extensive leadership experience in the optics and network industries, his extensive knowledge of our company and his service as our President and Chief Executive Officer.
Benny P. Mikkelsen, 59, one of the founders of our company, has served as our Chief Technology Officer and as a Director of our company since June 2009. Prior to joining Acacia, Mr. Mikkelsen co-founded and served as the vice president of technology of Mintera Corporation, a high-speed transceiver company. Prior to that, he held various engineering positions with Bell Laboratories, a research and scientific development company owned by Alcatel-Lucent USA, Inc. Mr. Mikkelsen holds an M.S. and Ph.D. in electrical engineering from the Technical University of Denmark. We believe that as a founder, and based on Mr. Mikkelsen’s deep experience in the optics and network industries, his extensive knowledge of our company and his service as our Chief Technology Officer, Mr. Mikkelsen provides a valuable contribution to our Board of Directors.
David J. Aldrich, 62, has served as a Director of our company since September 2017. Mr. Aldrich is the chairman of the board of directors of Skyworks Solutions, Inc., a provider of analog semiconductors enabling wireless networking solutions, where he also served as its chief executive officer from its formation in 2002, in connection with a merger between Alpha Industries, Inc. and Conexant Systems, Inc., until May 2016 and as its executive chairman from May 2016 to May 2018. He is currently the lead independent director of Belden Inc., a provider of end-to-end signal transmission solutions. Previously, Mr. Aldrich served in various senior management and executive positions at Alpha Industries, most recently as its chief executive officer. Before that, Mr. Aldrich held senior management positions at the Adams-Russell Company, a supplier of microwave and low frequency electronic components, and MACOM Technology Solutions Holdings, Inc., a provider of analog semiconductor solutions for use in radio frequency, microwave and millimeter wave applications. Mr. Aldrich holds a B.A. in political science from Providence College and an M.B.A. from the University of Rhode Island. We believe that Mr. Aldrich is qualified to serve as a Director of our company due to his extensive leadership and experience in guiding private and publicly-traded global technology companies, including service as chief executive officer.
Directors Continuing in Office Until the 2021 Annual Meeting
Eric A. Swanson, 58, has served as a Director of our company since August 2009 and also served as the Chair of our Board of Directors from August 2009 until May 2017. Mr. Swanson is an affiliate of the Research Laboratory of Electronics at the Massachusetts Institute of Technology and is a Fellow of the Institute of Electrical and Electronics Engineers (IEEE) and The Optical Society (OSA). Previously, Mr. Swanson co-founded Sycamore Networks, Inc., a developer and marketer of intelligent optical networking products for fixed line and mobile network operators, and served as a vice president, general manager and chief scientist. Mr. Swanson holds a B.S. in electrical engineering from the University of Massachusetts at Amherst and an M.S. in electrical engineering from the Massachusetts Institute of Technology. We believe that Mr. Swanson is qualified to serve as a Director of our company due to his extensive experience in the telecommunication and photonics industries, his deep knowledge of our Company, and his experience on other boards of directors.

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Stan J. Reiss, 47, has served as a Director of our company since August 2009. Mr. Reiss is a general partner of Matrix Partners, a venture capital investment firm specializing in technology companies, where he has worked since July 2000. Prior to that, Mr. Reiss was an engagement manager at McKinsey & Company. Mr. Reiss holds a B.S. in electrical engineering from Cornell University, M.S. degrees in electrical engineering and operations research from the Massachusetts Institute of Technology and an M.B.A. from the Harvard Business School. We believe that Mr. Reiss is qualified to serve as a Director of our company due to his extensive experience as a venture capitalist in the technology sector and his involvement with several private company boards of directors.
Executive Officers
In addition to Mr. Shanmugaraj, our President and Chief Executive Officer (“CEO”), and Mr. Mikkelsen, our Chief Technology Officer (“CTO”), who also serve as directors, our executive officers, as defined under SEC rules and regulations, are:
John F. Gavin, 59, has served as our Chief Financial Officer since February 2012 and as our Treasurer since 2016. Prior to joining Acacia, from January 2011 to February 2012, Mr. Gavin was the chief financial officer of Hiperos LLC, a software-as-a-service company. From June 2005 to January 2011, he served as the chief operating officer of Akorri Networks, Inc., a data center virtualization management company, where he also served as the interim acting chief executive officer in 2010. Previously, Mr. Gavin served as the chief financial officer and chief operating officer of SMaL Camera Technologies, Inc., a designer of CMOS digital imaging solutions for a variety of business and consumer applications, the chief financial officer of Pirus Networks, Inc., a provider of multi-protocol storage networking switching products, and the chief financial officer of C-Port Corporation, a developer of CMOS microprocessor-based technologies for communications routers and switches. Mr. Gavin also served in various roles, most recently as the vice president of finance, sales and marketing North America, at Digital Equipment Corporation, a vendor of computer systems, for over 17 years. Mr. Gavin holds a B.S. in accounting from Stonehill College and a M.B.A. from Anna Maria College.
Eric L. Fisher, 47, has served as our Vice President of Global Sales since July 2018 and previously served as our Vice President of Sales from July 2017 to July 2018. Prior to joining Acacia, from January 2013 to July 2017, Mr. Fisher held various management positions at Altera Corporation, which was acquired by Intel Corporation in 2015, most recently as its vice president of sales, Americas and global key accounts. Mr. Fisher holds a B.S. in engineering management from the Missouri University of Science and Technology and an M.B.A. from the Paul Merage School of Business at the University of California, Irvine.
Christian J. Rasmussen, 50, one of the founders of our company, has served as our Vice President of Digital Signal Processing and Optics since June 2015 and previously served as our Director of Digital Signal Processing and Optics from June 2009 to June 2015. Prior to joining Acacia, Mr. Rasmussen was a principal optical engineer of Mintera Corporation, a high-speed transceiver company. Mr. Rasmussen holds an M.S. in electrical engineering and a Ph.D. in optical communications from the Technical University of Denmark.
Mehrdad Givehchi, 53, one of the founders of our company, has served as our Vice President of Hardware and Software since June 2015 and previously served as our Director of Hardware and Software from June 2009 to June 2015. Prior to joining Acacia, Mr. Givehchi was the consulting optical engineer of Mintera Corporation, a high-speed transceiver company. Prior to that, he served as the principal hardware engineer of Sycamore Networks, Inc., a developer and marketer of intelligent networking products for fixed line and mobile network operators, and as the principal hardware engineer of Tektronix, Inc., a designer of test and measurement equipment. Mr. Givehchi holds a B.S. in electrical engineering from Worcester Polytechnic Institute.
Bhupendra C. Shah, 60, has served as our Vice President of Engineering since June 2009. Prior to joining Acacia, Mr. Shah was the director of engineering at Juniper Networks, Inc., a provider of networking products. Prior to that, he was the director of hardware and software development at Broadcom Corporation, a fabless semiconductor company. Previously, Mr. Shah co-founded and served as the vice president of engineering of Atlantic Cores Incorporated, a developer of standard products and on-chip intellectual property. Mr. Shah holds a B.S. in electrical engineering from the University of Lowell.

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CORPORATE GOVERNANCE
Director Independence
Rule 5605 of the Nasdaq listing rules requires a majority of a listed company’s board of directors to be comprised of independent directors within one year of listing. In addition, the Nasdaq listing rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent and that members of the Audit Committee of our Board of Directors (“Audit Committee”) also satisfy independence criteria set forth in Rule 10A-3 under the 1934 Securities and Exchange Act, as amended (“Exchange Act”). Under Rule 5605(a)(2), a director will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of our Audit Committee, our Board of Directors, or any other Board of Directors committee, accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries.
At least annually, our Board of Directors will evaluate all relationships between us and each director in light of relevant facts and circumstances for the purposes of determining whether a material relationship exists that might signal a potential conflict of interest or otherwise interfere with such director’s ability to satisfy his or her responsibilities as an independent director. Based on this evaluation, our Board of Directors will make an annual determination of whether each director is independent within the meaning of the independence standards of Nasdaq, the SEC and of our applicable Board committees.
Our Board of Directors has determined that each of Messrs. Aldrich, Chung, Ritchie, Reiss, Roche and Swanson is independent as independence is currently defined under Rule 5605(a)(2) of the Nasdaq listing rules. With respect to our Audit Committee, our Board of Directors determined that each of Messrs. Aldrich, Chung and Ritchie satisfies the independence standards for audit committee membership established by the SEC and the Nasdaq listing rules. Our Board of Directors also determined that Messrs. Aldrich, Chung, Reiss and Roche who comprise our Compensation Committee, and Messrs. Chung and Swanson, who comprise our Nominating and Corporate Governance Committee, satisfy the independence standards for such committees established by the SEC and the Nasdaq listing rules, as applicable. In making such determinations, our Board of Directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances our Board of Directors deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director and any institutional stockholder with which he is affiliated.
Board Leadership Structure
Our corporate governance guidelines provide that the roles of chair of the board of directors and chief executive officer may be separated or combined in order to provide our Board of Directors with flexibility in establishing a leadership structure that works best for our company at a particular time. When these positions are combined, our independent directors elect a “lead director” annually, upon recommendation by our Nominating and Corporate Governance Committee. Our Board of Directors has considered the current leadership structure and determined that at this time the roles of chair of the board of directors and chief executive officer should continue to be separate. Separate chair and chief executive officer positions allows Mr. Shanmugaraj, who has served as our CEO since April 2010, to focus on setting the strategic direction of our company and on the day-to-day leadership, performance and business operations of our company, while allowing our Chair of the Board of Directors to provide guidance to our CEO, set the agenda for Board meetings and lead our Board in its fundamental role of providing advice to and oversight of management. Our Board of Directors believes that Mr. Roche, elected as the Chair of our Board of Directors in May 2017, and operating as an independent director with significant personal experience as a long-standing chief executive officer and board member of a publicly traded company, is best situated at this time to ensure that our Board of Directors’ attention and efforts are focused on critical matters. As our Board of Directors has determined that each of our directors other than Messrs. Shanmugaraj and Mikkelsen is independent, our Board of Directors believes that the independent directors provide effective oversight of management. In addition, our Board of Directors believes that its leadership structure is appropriate because it strikes an effective balance between strategic development and independent leadership and management oversight in the board process.
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer. A current copy of the code is posted under the heading “Corporate Governance” on the Investors and Media section of our website, which is located at ir.acacia-inc.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K to the extent required by applicable law, the rules of the SEC or the Nasdaq listing rules.

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Corporate Governance Guidelines
Our Board of Directors has adopted corporate governance guidelines to assist in the exercise of its duties and responsibilities and to serve the best interests of our company and our stockholders. Among other things, the guidelines provide that:
•
our Board’s principal responsibility is to oversee the management of our company;
•
a majority of the members of our Board of Directors must be independent directors;
•
the independent directors will meet in executive session at least twice a year;
•
directors have full and free access to management and, as necessary, independent advisors;
•
new directors participate in an orientation program and all directors are expected to participate in continuing director education on an ongoing basis; and
•
our Board of Directors will conduct an annual self-evaluation to determine whether it and its committees are functioning effectively.
In February 2019, our Board of Directors approved an update to the corporate governance guidelines to provide that, in any uncontested director election, any nominee for election who receives more “withholds” than votes “for” his or her election, is expected to promptly offer to our Board of Directors to tender his or her resignation as a director for consideration by the Board. Pursuant to the corporate governance guidelines, our Board of Directors must accept or reject a resignation within 90 days following the certification of election results and publicly disclose its decision in accordance with the procedures set forth in our corporate governance guidelines. For a summary description of these procedures, see “Proposal One—Board Procedures in Connection with Majority Withhold Vote in Uncontested Director Elections” included in this Proxy Statement.
A current copy of the guidelines is posted under the heading “Corporate Governance” on the Investor Relations section of our website, which is located at ir.acacia-inc.com.
Corporate Responsibility

We concentrate not only on what is essential to our business success, but also on what we believe is beneficial for our employees, our communities and our shared natural environment. Our corporate responsibility initiatives include:
•
Responsible Manufacturing. Our products are tested, built and inspected by our contract manufacturers who are members of the “Responsible Business Alliance.” The Responsible Business Alliance, the world’s largest industry coalition dedicated to corporate social responsibility in global supply chains, has adopted a code of conduct that sets forth a set of social, environmental and ethical industry standards. The standards set out in the code reference international norms and standards including the Universal Declaration of Human Rights, International Labour Organization International Labor Standards, Organisation for Economic Co-operation and Development Guidelines for Multinational Enterprises, International Organization for Standardization and Social Accountability International standards and many more. Member organizations are required to comply with all aspects of the code.
•
Economic Impact. In the age of information and communication technologies, the energy consumed by telecommunications networks is increasing rapidly. Our coherent optical interconnect products, which are used in communications networks around the world, have consistently been designed to operate on low power, significantly reducing the amount of electricity needed to operate and cool the networks in which they reside. Since 2013, we have been able to reduce the power consumed by our coherent optical interconnect products by as much as 85%. Our AC1200 coherent module, which is currently ramping in production, introduces several new key features designed to enable network operators to improve efficiency while reducing network costs.
•
Environmental Impact. At Acacia, we are working toward operating our business in a way that minimizes impacts to the environment. For example, in connection with the build-outs across our corporate headquarters in Maynard, MA, our research center in Holmdel, NJ and our design center in San Jose, CA, we worked closely with our real estate development teams to incorporate sustainability elements, including low-energy lighting and lighting sensors, low-flow and energy efficient fixtures and appliances, and low VOC materials. In addition, we have implemented a technology recycling program available to our employees and to members of the community surrounding our headquarters.
•
Social Responsibility. We strive to be a positive influence in our communities by pursuing socially minded business practices and giving back to our communities in concert with our employees’ individual efforts. Our corporate headquarters in Maynard, MA is helping to revitalize downtown Maynard by bringing to the area hundreds of employees who look to near-by businesses for products and services. In addition, through the Acacia Foundation, which we launched in 2017, we have committed to support Science, Technology, Engineering and Math (“STEM”) related public education efforts by partnering with local non-profit organizations to provide STEM related scholarships and grants to students attending public schools. We also support our employees’ commitment to causes

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that are important to them by matching 50% of their charitable contributions (up to $250 per employee per calendar year) and by providing paid time off for our employees to engage in volunteer activities.
•
Diversity and Inclusion. We believe that diversity of perspective, experience and thought are key to driving creativity, innovation and results. Workforce diversity is an important topic in the technology industry, and we are dedicated to moving the conversation forward.
•
Governance and Ethical Standards. Ethical behavior is a core tenant at Acacia and we conduct our business with a high level of integrity and ethical standards. For more information regarding our governance practices, including our code of business conduct and ethics, see “Corporate Governance” and “Corporate Governance—Code of Business Conduct and Ethics” included in this Proxy Statement.
Board Meetings
Our Board of Directors meets on a regularly scheduled basis during the year to review significant developments affecting us and to act on matters requiring its approval. It also holds special meetings when important matters require action between scheduled meetings. Members of senior management regularly attend meetings to report on and discuss their areas of responsibility, and Ms. Janene Asgeirsson, our Chief Legal Officer and Secretary, generally attends all meetings of our Board of Directors and Board committees. Our Board of Directors met nine times and took action by unanimous written consent five times during the year ended December 31, 2018.
Each of the directors of our Board of Directors attended at least 75% of the aggregate of all meetings of our Board of Directors (during the periods that they served) during 2018. In addition, each of the directors of our Board of Directors attended at least 75% of the aggregate of all meetings of the committees of our Board of Directors upon which they served (during the periods that they served) during 2018, other than Mr. Roche who attended four out of the six Compensation Committee meetings held during 2018. Our Board of Directors regularly holds executive sessions of the independent directors. Executive sessions do not include employee directors or directors who do not qualify as independent under Nasdaq and SEC rules.
Annual Meeting Attendance
It is our policy that members of our Board of Directors are encouraged to attend annual meetings of our stockholders. In 2018, all members of our Board of Directors attended our 2018 annual meeting of stockholders.
Committees
Our amended and restated by-laws provide that our Board of Directors may delegate responsibility to committees. Our Board of Directors has three standing committees: our Audit Committee, our Compensation Committee, and our Nominating and Corporate Governance Committee (collectively, with our Audit Committee and Compensation Committee, the “Committees”). Our Board of Directors has also adopted a written charter for each of the three standing Committees. Each Committee charter is available under the heading “Corporate Governance” on the Investors and Media section of our website, which is located at ir.acacia-inc.com.
Audit Committee
Our Audit Committee’s responsibilities include:
•
appointing, approving the compensation of, and assessing the independence of our registered public accounting firm;
•
overseeing the work of our registered public accounting firm, including through the receipt and consideration of reports from such firm;
•
reviewing and discussing with management and the registered public accounting firm our annual and quarterly financial statements and related disclosures;
•
monitoring our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;
•
overseeing our risk management activities, including review of reports on internal audit matters, cybersecurity, data protection and information technology;
•
establishing policies regarding hiring employees from the registered public accounting firm and procedures for the receipt and retention of accounting related complaints and concerns;
•
meeting independently with our registered public accounting firm and management;

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•
reviewing and approving or ratifying any related person transactions;
•
reviewing and approving updates to our insider trading policy and 10b5-1 plan guidelines;
•
reviewing and approving any recommendations made by our trading compliance committee regarding the waiver of any lock-up provisions or blackout trading restrictions;
•
receiving quarterly reports from the chair of our trading compliance committee and chair of our disclosure committee regarding the activities of such committees; and
•
preparing the audit committee report required by SEC rules.
All audit services and all non-audit services, other than de minimis non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our Audit Committee.
Our Board of Directors has determined that each member of our Audit Committee meets the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq. Our Board of Directors has designated Mr. Ritchie as an “audit committee financial expert,” as defined under the applicable rules of the SEC based on his almost 30 years of experience in financial roles at public and private companies, including his service as the chief financial officer of three public and two private companies, and his service in leadership roles in multiple transactions, including initial and follow-on public offerings, mergers and acquisitions, convertible debt and credit arrangement transactions, which required sophisticated financial expertise.
Our Audit Committee met eight times and took action by unanimous written consent one time during the year ended December 31, 2018. Our Audit Committee operates under a written charter adopted by our Board of Directors, a current copy of which is available under the heading “Corporate Governance” on the Investors and Media section of our website, which is located at ir.acacia-inc.com.
Compensation Committee
Our Compensation Committee’s responsibilities include:
•
reviewing and approving corporate goals and objectives relevant to our Chief Executive Officer’s compensation;
•
determining our Chief Executive Officer’s compensation;
•
reviewing and approving, or making recommendations to our Board of Directors with respect to, the compensation of our other executives;
•
overseeing an evaluation of our senior executives;
•
overseeing and administering our equity incentive plans;
•
delegating to one or more of our executives the power to grant options or other stock awards pursuant to and in accordance with our equity incentive plans to our and our subsidiaries’ employees who are not directors or executives of our company, to the extent permitted by and consistent with applicable law and consistent with the terms of these plans;
•
reviewing and making recommendations to our Board with respect to senior executive and other key employee succession planning;
•
reviewing and making recommendations to our Board of Directors with respect to director compensation; and
•
preparing the annual compensation committee report required by SEC rules.
Typically, our Compensation Committee meets quarterly and with greater frequency if necessary. The agenda for each meeting is usually developed by our Compensation Committee, in consultation with our CEO and our Chief Human Resources Officer (“CHRO”). Our Compensation Committee meets regularly in executive session. Our CEO and CHRO may not participate in, or be present during, any deliberations or determinations of our Compensation Committee regarding their respective compensation. Our Compensation Committee has the authority to obtain, at our expense, advice and assistance from compensation consultants and internal and external legal, accounting or other advisers and other external resources that our Compensation Committee considers necessary or appropriate in the performance of its duties. Our Compensation Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to our Compensation Committee, other than in-house legal counsel and certain other types of advisers, only after assessing the independence of such person in accordance with SEC and Nasdaq requirements that bear upon the adviser’s independence; however, there is no requirement that any adviser be independent.

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Our Compensation Committee met six times and took action by unanimous written consent seven times during the year ended December 31, 2018. Our Compensation Committee operates under a written charter adopted by our Board of Directors, a current copy of which is available under the heading “Corporate Governance” on the Investors and Media section of our website, which is located at ir.acacia-inc.com.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee’s responsibilities include:
•
identifying individuals qualified to become members of our Board;
•
recommending to our Board of Directors the persons to be nominated for election as directors and to each of the Committees;
•
reviewing and making recommendations to our Board with respect to director succession planning;
•
developing and recommending to our Board corporate governance principles; and
•
overseeing an annual evaluation of our Board.
Our Nominating and Corporate Governance Committee met five times and took action by unanimous written consent one time during the year ended December 31, 2018. Our Nominating and Corporate Governance Committee operates under a written charter adopted by our Board of Directors, a current copy of which is available under the heading “Corporate Governance” on the Investors and Media section of our website, which is located at ir.acacia-inc.com.
Compensation Consultants
Our Compensation Committee may, in its sole discretion, retain or obtain the services of one or more compensation consultants to provide advice, recommendations and guidance on our executive compensation programs, and to conduct competitive benchmarking against a selected peer group of publicly traded companies. Although our Compensation Committee considers the advice and recommendations of independent compensation consultants as to our executive compensation program, our Compensation Committee ultimately makes its own decisions about these matters. At the time of any engagement and annually thereafter, our Compensation Committee will review information regarding the independence and potential conflicts of interest of any compensation consultant it may engage, taking into account, among other things, the factors set forth in the Nasdaq listing standards.
In 2018, our Compensation Committee engaged Radford, an AON plc company (“Radford”), as its independent compensation consultant. For additional information related to our Compensation Committee’s engagement of Radford, see “Executive Compensation—Compensation Discussion and Analysis—Determining Executive Compensation” included in this Proxy Statement. With respect to services provided in 2018, our Compensation Committee concluded that the engagement of Radford did not raise any conflict of interest. Outside of services provided to our Compensation Committee, Radford provided nominal additional services to the Company in 2018 related to benchmarking data with respect to the benefits that we offer to all of our employees and compensation paid to certain non-executive positions. These additional services help to ensure that our benefits and compensation practices are competitive so that we can attract, reward, motivate and retain our employees. The total amount paid to Radford in connection with these additional engagements was less than $120,000 in 2018.
Compensation Committee Interlocks and Insider Participation
None of our executives serve as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers who serve as members of our Board of Directors or our Compensation Committee. None of the members of our Compensation Committee is an officer or employee of our company, nor have they ever been an officer or employee of our company.
Board Processes
Oversight of Risk
Our Board of Directors oversees our risk management processes directly and through its Committees. Our management is responsible for risk management on a day-to-day basis, and throughout the year, regularly reports to our Board of Directors (or an appropriate Committee in the case of risks that are under the purview of a particular Committee) regarding risk identification, risk management and risk mitigation strategies. The role of our Board of Directors and its Committees is to oversee the risk management activities of our management. Our Board of Directors and Committees fulfill their oversights duties by discussing with management the policies and practices utilized by management in assessing and managing risks and by providing input on those policies and practices. In general:

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•
Our Board of Directors’ oversees risk management activities related to, and receives regular reports from management on, areas of material risk to the Company, including operational, financial, legal, regulatory, strategic transaction, capital allocation, organizational structure and reputational risks.
•
Our Audit Committee oversees our risk management activities as they apply to our financial statement integrity and financial reporting and controls, and to our legal and compliance risks. Our Audit Committee also receives regular reports from our Director of Internal Audit on internal audit matters and receives reports at least annually from our Director of Information Technology on cybersecurity, data protection and information technology.
•
Our Compensation Committee oversees risk management activities relating to our compensation policies and practices, culture and human capital management, our non-executive director compensation program and succession planning for our senior executives, including our CEO, and other key employees.
•
Our Nominating and Corporate Governance Committee oversees risk management activities relating to the adequacy of our governance structure, the composition of our Board of Directors and director succession planning.
Each Committee reports to the full Board of Directors on a regular basis, including reports with respect to each Committee’s risk oversight activities as appropriate. In addition, since risk issues often overlap, Committees from time to time request that the full Board of Directors discuss particular risks.
Director Nomination Process
Our Board of Directors is responsible for selecting, subject to stockholder approval, its own members. Our Board of Directors delegates the selection and nomination process to our Nominating and Corporate Governance Committee, with the expectation that other members of our Board of Directors, and of executive management, will be requested to take part in the process as appropriate.
The process followed by our Nominating and Corporate Governance Committee to identify and evaluate director candidates may include requests to members of our Board of Directors and others for recommendations, evaluation of the performance on our Board of Directors and its Committees of any existing directors being considered for nomination, consideration of biographical information and background material relating to potential candidates and, particularly in the case of potential candidates who are not then serving on our Board of Directors, interviews of selected candidates by members of our Nominating and Corporate Governance Committee and our Board of Directors.
Generally, our Nominating and Corporate Governance Committee identifies candidates for director nominees in consultation with management, through the use of search firms or other advisers, through the recommendations submitted by stockholders or through such other methods as our Nominating and Corporate Governance Committee deems to be helpful to identify candidates. Once candidates have been identified, our Nominating and Corporate Governance Committee confirms that the candidates meet all of the minimum qualifications for director nominees established by our Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee may gather information about the candidates through interviews, detailed questionnaires, comprehensive background checks or any other means that our Nominating and Corporate Governance Committee deems to be appropriate in the evaluation process. Our Nominating and Corporate Governance Committee then discusses and evaluates the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of our Board of Directors. Based on the results of the evaluation process, our Nominating and Corporate Governance Committee recommends candidates for our Board of Directors’ approval as director nominees for election to our Board of Directors. In considering whether to recommend any particular candidate for inclusion in our Board of Directors’ slate of recommended director nominees, our Nominating and Corporate Governance Committee applies the criteria set forth in our corporate governance guidelines described above under “Corporate Governance Guidelines.”
All of the director nominees are currently members of our Board of Directors. The nominee biographies under “Nominees for Election for a Three-Year Term Ending at the 2022 Annual Meeting” and the matrix outlining certain specific director qualifications set forth below under “Director Criteria, Qualifications and Expertise” indicate the experience, qualifications, attributes and skills of each of our current directors that led our Nominating and Corporate Governance Committee and our Board of Directors to conclude he should continue to serve as a director of our company. Our Nominating and Corporate Governance Committee and our Board of Directors believe that each of the nominees has the individual attributes and characteristics required of each of our directors, and that the nominees as a group possess the skill sets and specific experience desired of our Board of Directors as a whole.
Stockholders may recommend individuals for consideration by our Nominating and Corporate Governance Committee and Board of Directors as potential director candidates by submitting their names, together with appropriate biographical information and background materials, and information with respect to the stockholder or group of stockholders making the recommendation, including the number of shares of common stock owned by such stockholder or group of stockholders, to our Secretary at Acacia Communications, Inc., 3 Mill and Main Place, Suite 400, Maynard, MA 01754. The specific requirements for the information that is

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required to be provided for such recommendations to be considered are specified in our amended and restated by-laws and must be received by us no later than the date referenced below in “Procedures for Submitting Stockholder Proposals.” Assuming that appropriate biographical and background material has been provided on a timely basis, our Nominating and Corporate Governance Committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.
Stockholders also have the right under our amended and restated by-laws to directly nominate director candidates, without any action or recommendation on the part of the Committee or our Board of Directors, by following the procedures set forth under “Procedures for Submitting Stockholder Proposals” in this Proxy Statement.
In evaluating proposed director candidates, our Nominating and Corporate Governance Committee may consider, in addition to the minimum qualifications and other criteria for membership on our Board approved by our Board of Directors from time to time, all facts and circumstances that it deems appropriate or advisable, including, among other things, the skills of the proposed director candidate, his or her depth and breadth of professional experience or other background characteristics, his or her independence and the needs of our Board of Directors.
Director Criteria, Qualifications and Expertise
Consistent with the criteria set forth in our corporate governance guidelines, our Nominating and Corporate Governance Committee expects every nominee to have the following attributes or characteristics, among others: integrity, honesty, adherence to high ethical standards, business acumen, good judgment and a commitment of service to our company, including a commitment to understand our business and industry. Our Board of Directors then strives to balance the need to have directors with diverse experiences and areas of expertise and knowledge, while also striving to maintain diversity and minority representation. Our Nominating and Corporate Governance Committee has developed a matrix outlining certain specific director qualifications, including those highlighted below, to help ensure that our directors bring to the Board a diversity of experience, qualifications and skills to oversee and address the current issues facing our company.
Experience, Qualification or Skill
 
Vincent T. Roche*
 
David J. Aldrich*
 
Peter Y. Chung*
 
Benny P. Mikkelsen
 
Stan J. Reiss*
 
John Ritchie*
 
Murugesan “Raj” Shanmugaraj
 
Eric A. Swanson*
Operational Expertise
 
ü
 
ü
 
ü
 
 
 
 
 
ü
 
ü
 
 
Technology Experience
 
ü
 
ü
 
ü
 
ü
 
ü
 
 
 
ü
 
ü
International Experience
 
ü
 
ü
 
 
 
ü
 
 
 
ü
 
ü
 
 
Financial Experience
 
 
 
ü
 
ü
 
 
 
ü
 
ü
 
 
 
 
Industry Experience
 
ü
 
ü
 
ü
 
ü
 
ü
 
ü
 
ü
 
ü
Marketing and Sales Experience
 
ü
 
ü
 
 
 
 
 
 
 
 
 
ü
 
ü
Public Company Board and Governance
 
ü
 
ü
 
ü
 
 
 
 
 
ü
 
 
 
 
Mergers and Acquisitions
 
ü
 
ü
 
ü
 
 
 
ü
 
ü
 
ü
 
ü
Research and Academics
 
 
 
 
 
 
 
ü
 
ü
 
 
 
 
 
ü
Government and Regulatory
 
 
 
 
 
 
 
 
 
 
 
ü
 
 
 
ü
Diversity
 
 
 
 
 
ü
 
 
 
 
 
 
 
ü
 
 
* Independent Director
Stockholder Communications
Our Board of Directors provides to every stockholder of the Company the ability to communicate with our Board of Directors, as a whole, and with individual directors through an established process for stockholder communication. For a stockholder communication directed to our Board of Directors as a whole, stockholders may send such communication to the attention of the Company’s Secretary via U.S. Mail or Expedited Delivery Service to: Acacia Communications, Inc., 3 Mill and Main Place, Suite 400, Maynard, MA  01754, Attn: Board of Directors, c/o Secretary.
For a stockholder communication directed to an individual director in his or her capacity as a member of our Board of Directors, stockholders may send such communication to the attention of the individual director via U.S. Mail or Expedited Delivery Service to: Acacia Communications, Inc., 3 Mill and Main Place, Suite 400, Maynard, MA  01754, Attn: [Name of Individual Director], c/o Secretary.

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We will forward by U.S. Mail any such stockholder communication to each director, and to the Chair of our Board of Directors in his or her capacity as a representative of our Board of Directors, to whom such stockholder communication is addressed to the address specified by each such director and the Chair of our Board of Directors, unless there are safety or security concerns that mitigate against further transmission.
Compensation Risk Assessment
We believe that although a significant portion of the compensation provided to our executives and other employees is performance-based, our executive compensation program does not encourage excessive or unnecessary risk taking. This is primarily due to the fact that our compensation programs are designed to encourage our executives and other employees to remain focused on both short-term and long-term strategic goals, in particular in connection with our pay-for-performance compensation philosophy that applies to our executives. In addition, we believe that the equity compensation component of our executive compensation program, which is subject to executive stock ownership guidelines and a clawback policy, assists in protecting against excessive or unnecessary risk taking by providing our executives with a strong link to our long-term performance, creating an ownership culture and helping to align the interests of our executives and our stockholders. For more information regarding our executive stock ownership guidelines and clawback policy, see “Executive Compensation—Compensation Discussion and Analysis—Other Compensation Practices and Policies” included in this Proxy Statement. As a result, we do not believe that our compensation programs are reasonably likely to have a material adverse effect on us.

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PROPOSAL TWO
RATIFICATION OF THE APPOINTMENT OF
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have appointed Deloitte & Touche LLP as our independent registered public accounting firm to perform the audit of our consolidated financial statements for the fiscal year ending December 31, 2019, and we are asking you and other stockholders to ratify this appointment. Deloitte & Touche LLP has served as our independent registered public accounting firm since 2014. In accordance with SEC rules, the firm’s lead audit partner rotates every five years, which occurred most recently in 2018. 
Our Audit Committee annually reviews the independent registered public accounting firm’s independence, including reviewing all relationships between the independent registered public accounting firm and us and any disclosed relationships or services that may impact the objectivity and independence of the independent registered public accounting firm, and the independent registered public accounting firm’s performance. As a matter of good corporate governance, our Board of Directors determined to submit to stockholders for ratification the appointment of Deloitte & Touche LLP. A majority of the votes properly cast is required in order to ratify the appointment of Deloitte & Touche LLP. In the event that a majority of the votes properly cast do not ratify this appointment of Deloitte & Touche LLP, we will review our future appointment of Deloitte & Touche LLP.
Our Audit Committee has adopted a formal policy concerning approval of audit, audit-related and non-audit services, including tax services, to be provided to the Company by its independent registered public accounting firm. The policy requires that all services to be provided by our independent registered public accounting firm including audit and audit-related services and permitted non-audit services, must be preapproved by our Audit Committee, provided that de minimis non-audit services may instead be approved in accordance with applicable SEC rules. Our Board of Directors preapproved all audit, audit-related and non-audit services provided by Deloitte & Touche LLP during fiscal years 2018 and 2017. We expect that a representative of Deloitte & Touche LLP will attend the Annual Meeting and the representative will have an opportunity to make a statement if he or she so chooses. The representative will also be available to respond to appropriate questions from stockholders.
The Report of the Audit Committee of our Board of Directors included in this Proxy Statement is submitted by our Audit Committee. Our Audit Committee consists of the three directors whose names appear in the Report. None of the members of our Audit Committee is an officer or employee of the Company, and our Board of Directors has determined that each member of our Audit Committee is “independent” for audit committee purposes as that term is defined under Rule 10A-3 of the Exchange Act, and the applicable Nasdaq listing rules. See “Corporate Governance—Director Independence” included in this Proxy Statement for additional discussion regarding our Board’s independence determinations with respect to members of our Audit Committee. Each member of our Audit Committee meets the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq. Our Board of Directors has designated Mr. Ritchie as an “audit committee financial expert,” as defined under the applicable rules of the SEC. Our Audit Committee operates under a written charter adopted by our Board of Directors.
Audit Fees
The following table sets forth the aggregate professional fees billed or to be billed by Deloitte & Touche LLP for audit, audit-related and tax services rendered for 2018 and 2017 (in thousands). There were no “other services” fees billed during the periods set forth in the table below.
Fee Category
 
2018
 
2017
Audit Fees
 
$
1,503

 
$
1,726

Audit-Related Fees
 
$
2

 
$
3

Tax Fees
 
$
227

 
$
346

Total Fees
 
$
1,732

 
$
2,075

 
Audit Fees. Represents fees for professional services provided in connection with the audit of our annual consolidated financial statements, the reviews of our quarterly consolidated financial statements and statutory audits.
Audit-Related Fees. Represents fees for accounting tool subscriptions.
Tax Fees. Represents fees for professional services provided for tax compliance, including the preparation of tax returns, tax advice and planning and assistance with foreign operations.


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Recommendation of our Board of Directors
 
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.


- 17 -


Report of the Audit Committee of the Board of Directors
The information contained in this audit committee report shall not be deemed to be (1) “soliciting material,” (2) “filed” with the SEC under the Securities Act or the Exchange Act, (3) subject to Regulations 14A or 14C of the Exchange Act, or (4) subject to the liabilities of Section 18 of the Exchange Act. No portion of this audit committee report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, through any general statement incorporating by reference in its entirety the proxy statement in which this report appears, except to the extent that Acacia specifically incorporates this report or a portion of it by reference.
Our Audit Committee’s general role is to assist our Board of Directors in monitoring our financial reporting process and related matters. Its specific responsibilities are set forth in its charter.
Our Audit Committee has reviewed the Company’s consolidated financial statements for 2018 and met with management, as well as with representatives of Deloitte & Touche LLP, the Company’s independent registered public accounting firm, to discuss the consolidated financial statements. Our Audit Committee also discussed with members of Deloitte & Touche LLP the matters required to be discussed by the Statement on Auditing Standards No. 1301 (Communications with Audit Committees), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
In addition, our Audit Committee received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with our Audit Committee concerning independence, and discussed with members of Deloitte & Touche LLP its independence.
Based on the foregoing communications, its review of the financial statements and other matters it deemed relevant, our Audit Committee recommended to our Board of Directors that the Company’s audited consolidated financial statements for 2018 be included in the Company’s Annual Report on Form 10-K for 2018.
 
Audit Committee
 
John Ritchie (Chair)
David J. Aldrich
Peter Y. Chung


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PROPOSAL THREE
NON-BINDING, ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
We are requesting stockholder approval of the compensation of the executive officers named in our Summary Compensation Table below (“named executive officers”). We are required to provide our stockholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with Section 14A of the Securities Exchange Act. At the 2018 annual meeting of stockholders, our stockholders voted in favor of holding future “say on pay” votes every year. In accordance with the results of that vote, our Board of Directors determined to submit “say on pay” proposals to our stockholders every year.
As described in detail under the heading “Compensation Discussion and Analysis,” we seek to closely align the interests of our named executive officers with the interests of our stockholders. Our compensation programs are designed to reward our named executive officers for the achievement of short-term and long-term financial, operational and strategic goals and the achievement of increased total stockholder return, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking.
Stockholders are urged to read the “Executive Compensation” and “Compensation Discussion and Analysis” sections of this proxy statement, which discuss how our executive compensation policies and procedures implement our compensation philosophy and contain tabular information and narrative discussion about the compensation of our named executive officers. Our Board of Directors and Compensation Committee believe that these policies and procedures are effective in implementing our compensation philosophy and in achieving our compensation program goals.
The vote on this resolution is not intended to address any specific element of compensation but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or Compensation Committee. The outcome of this advisory vote does not overrule any decision by the Company or the Board of Directors (or any of its Committees), create or imply any change to the fiduciary duties of the Company or the Board of Directors (or any of its Committees), or create or imply any additional fiduciary duties for the Company or the Board of Directors (or any of its Committees). Although the vote is non-binding, our Board of Directors and Compensation Committee value the opinions that stockholders express in their votes and will review the voting results and take them into consideration as they deem appropriate when making future decisions regarding our executive compensation program.
Accordingly, we are asking our stockholders to vote on the following resolution at the Annual Meeting:
RESOLVED, that the stockholders of Acacia Communications, Inc. approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers, as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, including in the Compensation Discussion and Analysis, the compensation tables and the narrative disclosures that accompany the compensation tables.
Recommendation of our Board of Directors
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF, ON AN ADVISORY BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.


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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Our Compensation Committee oversees our executive compensation program. In this role, our Compensation Committee reviews and approves all compensation decisions relating to our named executive officers. This Compensation Discussion and Analysis discusses the compensation policies and programs for our CEO, our Chief Financial Officer (“CFO”) and our three next most highly paid executive officers as determined under the rules of the SEC. Such individuals are referred to as our named executive officers. The narrative discussion set forth in this Compensation Discussion and Analysis is intended to provide additional information related to the data presented in the compensation related tables included throughout the “Executive Compensation” section of this Proxy Statement.

Our named executive officers for 2018 are:
Named Executive Officer
 
Title
Murugesan “Raj” Shanmugaraj
 
President and Chief Executive Officer
John F. Gavin
 
Chief Financial Officer and Treasurer
Eric L. Fisher
 
Vice President of Global Sales
Benny P. Mikkelsen
 
Founder, Chief Technology Officer
Mehrdad Givehchi
 
Founder, Vice President of Hardware and Software
Executive Summary and Compensation Philosophy
Business Overview

We are a leading provider of high-speed coherent optical interconnect products, relied upon by cloud infrastructure operators and content and communication service providers. By implementing optical interconnect technology in a silicon-based platform, a process we refer to as the siliconization of optical interconnect, we believe we are leading a disruption that is analogous to the computing industry’s integration of multiple functions into a microprocessor. Our products fall into three product groups: embedded modules, pluggable modules and semiconductors. Our embedded module and pluggable module product groups consist of optical interconnect modules with transmission speeds ranging from 100 to 1,200 gigabits per second (“Gbps”) for use in long-haul, metro and inter-data center markets. Our semiconductor product group consists of our low-power coherent digital signal processor application-specific integrated circuits and our silicon photonic integrated circuits which are either integrated into our embedded and pluggable modules or sold to customers on a standalone basis for integration into internally developed or other merchant modules. We are also developing a 400ZR module that will expand our pluggable module product group, and enable inter-data center transmission capacity of 400 Gbps in the same compact pluggable form factors used for 400G client optics, including QSFP-DD and OSFP. Our modules perform a majority of the digital signal processing and optical functions in optical interconnects and offer low power consumption, high density and high speeds at attractive price points. Through the use of standard interfaces, our modules can be easily integrated with customers’ network equipment. The advanced software in our modules enables increased configurability and automation, provides insight into network and connection point characteristics and helps identify network performance problems, all of which increase flexibility and reduce operating costs.

2018 Performance Highlights
In the first half of 2018, we saw a continuation of some of the industry challenges that we experienced in 2017, principally related to the slower pace of network deployments in China, one of our key markets. Even so, at the start of 2018, we believed we would see improvements throughout 2018 driven by the strength of our product offerings, our engagements with newer customers and the potential for improved market conditions in China and our other key markets. However, on April 15, 2018, the U.S. Department of Commerce imposed a seven-year denial of export privileges that effectively prohibited us from selling products and providing related support services to our customer, ZTE Kangxun Telecom Co. Ltd. and ZTE Corporation (together, “ZTE”). This action (the “ZTE ban”) continued through July 13, 2018, and created significant uncertainty for our company and our industry as a whole, not only as to whether and to what extent we would be able to reengage with ZTE as a customer in the future, but also as to how China-based carriers would deal with the development in the near and longer-term.
As a result of the ZTE ban, during the second quarter of 2018, our Board of Directors and management revisited our 2018 operating budget and strategic plans and made adjustments that were deemed necessary and appropriate to reflect the reality of the anticipated significant reduction in our 2018 revenue as a result of the ZTE ban. These adjustments included, among other things, a reduction in the year-over-year-growth rate of our operating expenses by reprioritizing our internal project spending to ensure that our core strategic programs remained funded, making adjustments to the timing of new hiring to meet our project priorities and taking

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measures to lower the rate of discretionary spending. We also continued to execute on the programs that we put in place in 2017, including new product development, revenue diversification and initiatives in our manufacturing and quality organizations. Even with the loss of ZTE as a customer, we believed that our execution on these initiatives and programs would provide us with the opportunity to grow our business in the second half of 2018 over the first half of 2018, and would also help to position us as a stronger and more diversified company for the longer term. As a result of our efforts throughout the year, and the return of ZTE as a customer in the third quarter of 2018, our 2018 financial results exceeded the revised expectations that we set during the second quarter of 2018. Please see our Annual Report on Form 10-K filed with the SEC on February 21, 2019, particularly “Management’s Discussion and Analysis” and “Risk Factors,” for further discussion regarding our 2018 results and risks affecting our business.
2018 and 2019 Compensation Highlights
Our executive compensation program includes three key elements: base salary, annual cash incentive compensation and long-term equity incentive compensation. The elements of our executive compensation program are designed to be flexible, to allocate between short-term, long-term, fixed and performance-based compensation and to serve the compensation objectives, compensation practices and governance standards described throughout this Compensation Discussion and Analysis. As described more fully below, in 2018 and 2019 our Compensation Committee made several enhancements to our executive compensation program. Specifically, in 2018, our Compensation Committee modified our long-term equity incentive compensation program to include performance-based awards that vest based on the Company’s percentile achievement of relative total shareholder returns (“relative TSR”), against an external comparator group of companies over a three-year performance period. In July 2018, following the imposition of the ZTE ban in April 2018 and the subsequent revisions made to our 2018 operating budget and strategic plans by our Board and management, our Compensation Committee determined to downward adjust the performance target levels for the performance objectives under our 2018 executive bonus program, in order to continue to incentivize and retain our executives. In approving these downward adjustments, our Compensation Committee reserved its right to exercise, and in fact did exercise, negative discretion with respect to its final determination of 2018 bonus amounts in order to avoid out-sized payouts under our 2018 executive bonus program. In addition, in response to our stockholders’ support of holding “say on pay” votes every year, at our 2018 annual meeting of stockholders, our Board of Directors determined to submit “say on pay” proposals to our stockholders every year. Further, our Compensation Committee recently strengthened the governance of our executive compensation program by adopting a clawback policy and executive stock ownership guidelines.
Compensation Objectives
The primary objectives of the compensation program for our executives, including our named executive officers, are to attract, motivate and retain high-caliber and talented individuals who are committed to our corporate and strategic objectives. In addition to promoting the achievement of key corporate performance measures, our compensation program is also designed to align the incentives of our executives with our stockholders’ interests. Our Compensation Committee is responsible for overseeing the goals and objectives of our executive compensation programs. Because we compete with many other public and private companies within our region and across the country for executives, our Compensation Committee generally targets overall executive compensation that is competitive in our industry and region. Variations to targeted compensation may occur based on the role of the individual, the level of experience and other market factors, such as the demand for executives with certain skills and experience and the costs associated with recruiting qualified executives from other established companies. Our Compensation Committee bases our executive compensation program on the same objectives that guide us in administering the compensation program for all of our employees globally:
•
Compensation is based on the individual’s level of job responsibility
•
Compensation reflects the value of the job in the marketplace
•
Compensation programs are designed to reward performance, both at the individual and corporate levels

Our Compensation Committee considers risk when developing our compensation program and believes that the design of our current compensation program does not encourage excessive or inappropriate risk taking. Our 2018 base salaries provide competitive fixed compensation. Our 2018 executive bonus program provides for annual cash bonuses that are paid only on the achievement of financial objectives that we believe are aligned with the interests of our stockholders. We believe making payment of annual cash bonuses subject to the achievement of such financial objectives and capping the potential payout of any annual cash bonus encourages our executives to focus on the appropriate mix of short- and long-term goals, rather than focusing exclusively on the specific financial metrics that might encourage excessive short-term risk taking. The annual restricted stock unit awards (“RSUs”) granted to our executives are tied to continued service over a four-year period. We believe that the service vesting requirement under these RSU awards encourages our executives to focus on sustaining our long-term performance. The performance-based RSUs (“PRSUs”) granted to our executives in 2018 are subject to performance-based vesting. The number of PRSUs that vest is measured based on the level of achievement of a performance objective, based on the Company’s percentile achievement of relative TSR, against an external comparator group over a three-year performance period running from January 1, 2018 through December 31, 2020. Our Compensation Committee believes that relative TSR is an appropriate performance metric for these PRSUs primarily because it is

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objectively determinable, provides rewards that are aligned to relative performance through varying economic cycles and reflects the delivery of value to stockholders over the three-year performance period. 

Our Compensation Committee believes that the elements of our executive compensation program, which include a combination of short- and long-term, as well as fixed and performance-based, compensation, help to align the interests of our executives with the interests of our stockholders. Depicted below is the amount of short-term, long-term, fixed and performance-based compensation paid to our CEO and other named executive officers in 2018.

paymix.jpg
* Does not equal 100% due to rounding

Executive Compensation Practices and Governance Standards
 We strive to maintain sound compensation practices and governance standards by continually monitoring the evolution of best practices. As in prior years, we incorporated many best practices into our 2018 executive compensation program and we plan to include additional best practices in our 2019 and future executive compensation programs, including the following:

What We Do:
•
Align a significant portion of our executive pay with performance
•
Make payouts under our executive bonus program only to the extent of achievement of financial objectives
•
Include caps on individual payouts under our annual bonus and equity incentive compensation programs
•
NEW: Tie the vesting of our PRSU awards to our percentile achievement of relative TSR against an external comparator group over a three-year performance period
•
NEW: Require that our executives and directors maintain a level of ownership of our stock that complies with our stock ownership guidelines
•
NEW: Maintain a clawback policy that applies to performance-based incentive compensation if an executive engages in intentional misconduct, intentional violations of Company rules or legal or regulatory requirements or commits fraud that, in each case, results in a material restatement of our financial results
•
Regularly evaluate our share utilization by reviewing the dilutive impact of equity awards as a percentage of our outstanding shares
•
Regularly review the relationship between CEO compensation and company performance
•
Maintain an independent compensation committee and retain compensation consultants and advisers who are independent of management
•
NEW: Hold an annual “say on pay” vote
•
Prohibit hedging and pledging of our common stock

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•
Prohibit short sales or purchases of equity derivatives of our common stock

What We Don’t Do:
•
Provide offer letters or employment agreements with multi-year guaranteed salary or bonus increases
•
Provide guaranteed minimum payouts under our annual or long-term incentive programs, other than in limited circumstances during the first year of employment, or guaranteed increases in base salary year-over-year
•
Provide tax gross-ups (except with respect to the reimbursement of relocation expenses and when necessary for tax-equalization purposes when an executive works for us across multiple tax jurisdictions and incurs a higher effective tax rate as a result)
•
Provide guaranteed retirement benefits or non-qualified deferred compensation plans
•
Provide excessive perquisites
Determining Executive Compensation
Our Compensation Committee is responsible for reviewing the performance and potential of each of our executives, including our named executive officers, approving the compensation level of each of our executives, establishing criteria for granting equity awards to our executives and other employees, and approving such awards. Our Compensation Committee typically reviews each component of compensation on an annual basis with the goal of allocating compensation between short-term, long-term, fixed and performance-based compensation. The Compensation Committee ensures that the compensation elements for each of our executives are determined in a manner that fulfills the objectives of our executive compensation program.
Our Compensation Committee has not adopted a formal policy for the allocation of compensation between cash and non-cash components or between short-term and long-term components nor has our Compensation Committee adopted a pre-established ratio between the CEO’s compensation and that of the other named executive officers. Rather, our Compensation Committee, which includes experienced directors who serve as members of the boards and compensation committees of other companies, works closely with our CEO and CHRO, discussing with them the Company’s overall performance, the performance of our CEO and CHRO and their evaluation of and compensation recommendations for the other executives, including our other named executive officers. Our Compensation Committee then utilizes its judgment and experience in making all executive compensation determinations. Our Compensation Committee’s determination of compensation levels is based upon what the members of our Compensation Committee deem appropriate, considering information such as the objectives and compensation practices described above, as well as input from our CEO and CHRO, publicly available information on compensation practices in our industry, and information and advice provided by an independent compensation consultant.
Role of our CEO and CHRO
After the end of the year ended December 31, 2018, our Compensation Committee met with our CEO and CHRO to discuss our business performance, their recommendations and their evaluations of the level of achievement of the financial, corporate and individual objectives set for the executive bonus program of the other executives, including the other named executive officers. The CEO and CHRO also provided joint recommendations on adjustments to the base salaries of the other executives, including the other named executive officers, based on key contributions and performance within the Company so as to ensure their compensation accurately reflects their responsibilities, performance, experience levels and expected future contributions. Our Compensation Committee took into consideration the CEO’s and CHRO’s joint recommendations but made the final decisions on compensation as it deemed appropriate. Our Compensation Committee, without the CEO or CHRO present, determined 2018 performance levels and resulting compensation adjustments for each of the CEO and CHRO.
Role of the Compensation Consultant
In 2017, our Compensation Committee retained Radford, a nationally recognized compensation consulting firm, to serve as its independent compensation consultant with respect to determining our 2018 executive compensation program. In compliance with the disclosure requirements of the SEC regarding the independence of compensation consultants, our Compensation Committee assessed each of the six independence factors established by the SEC and determined that the engagement of Radford did not raise any conflicts of interest or similar concerns. In addition, our Compensation Committee evaluated the independence of its other outside advisers, including outside legal counsel, considering the same independence factors and concluded their work for our Compensation Committee did not raise any conflicts of interest.
During 2017 and 2018, Radford reported directly to our Compensation Committee and did not provide any non-compensation related services to the Company. When requested by our Compensation Committee, Radford made compensation-related recommendations based on the competitive market data described below of ranges for base salary, annual cash incentive

- 23 -


awards and long-term incentive awards that were consistent with the Company’s compensation peer group, for our Compensation Committee to consider. However, Radford did not provide advice with respect to the size of any specific equity award or adjustment to any individual’s compensation. Radford also attended certain Compensation Committee meetings, executive sessions and preparatory meetings with our Compensation Committee chair and certain of our executives, as requested by our Compensation Committee.
Use of Competitive Market Data and Peer Groups
For use in determining our 2018 executive compensation program, in October 2017, our Compensation Committee directed Radford to provide it with competitive market data and analysis based on a select group of peer companies and published survey data, as well as information about current market practices and trends, compensation structures and peer group compensation ranges. The comparative market data Radford provided was based on a compensation peer group selected by our Compensation Committee with input and guidance from Radford and published survey data in cases where there was insufficient data within the peer companies. The compensation peer group was generally comprised of semiconductor and hardware companies that were considered similar to us as of the end of 2017 based on various financial measures such as revenue, market capitalization and growth, and other factors, such as headcount and similarity in compensation philosophies.
For 2018, our compensation peer group consisted of the following 15 semiconductor and hardware companies:
Ambarella, Inc.
Inphi Corp.
Mellanox Technologies, Ltd.
Cavium, Inc.
IPG Photonics Corp.
Oclaro, Inc.
Cognex Corp.
Lumentum Holdings Inc.
Semtech Corp.
Gigamon Inc.
MACOM Technology Solutions Holdings, Inc.
Silicon Laboratories Inc.
Infinera Corporation
MaxLinear, Inc.
Ubiquiti Networks, Inc.

In connection with determining our 2018 executive compensation program, our Compensation Committee reviewed, for reference, materials prepared by Radford showing peer group compensation levels and practices. Our Compensation Committee used the compensation market data included in those materials and considered the base salary, annual cash incentive award and long-term incentive award peer group compensation ranges provided by Radford in determining the base salary, annual cash incentive awards and long-term incentive awards provided to each of our executives, including our named executive officers, in 2018.
Our Compensation Committee may replace some or all of these companies with others from time to time as changes in market positions and company size, including our own, may suggest more representative peer group companies.
Elements of Compensation
We regularly evaluate how to best compensate our executives based upon market data and the extensive experience of our Compensation Committee with retention and performance practices. For 2018, our executive compensation program had three primary elements, in addition to certain benefits and perquisites:
•
Base salary;
•
Short-term, performance-based annual cash incentive program, or our executive bonus program; and
•
Long-term, equity incentive compensation program, including PRSUs.
Base Salaries
Base salary is provided to ensure that we are able to attract and retain highly-skilled and talented executives. It is intended to provide a fixed level of overall compensation that does not vary based on performance or changes in stockholder value, thereby ensuring that our executives can maintain a standard of living commensurate with their skill sets and experience. Our Compensation Committee believes that base salary should reflect the experience, knowledge, skills and performance records our executives, including our named executive officers, bring to their positions and the general market conditions in the country in which the executives are located. We do not have employment agreements with our employees, including our executives and named executive officers, except where required by local law, and which do not guarantee a minimum period of employment or minimum base salary. See the “Employment and Compensation Arrangements with Named Executive Officers” section of this Compensation Discussion and Analysis for additional information related to the offer letters and other contractual arrangements that we have provided to our named executive officers.

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Our Compensation Committee reviews the base salaries of our executives, including our named executive officers, on an annual basis. Our Compensation Committee determines changes in base salaries based on various factors, including the importance of the executive’s role in our overall business, performance and potential of the executive, general performance of our company, market practices in the country where the named executive officer is located, competitive market data and analysis provided by Radford based on our selected peer group companies and other publicly available information on compensation practices in our industry. Our Compensation Committee does not assign a specific weight to any single factor in making decisions regarding base salary adjustments. In connection with such review, our CEO and CHRO provide joint recommendations and rankings of the executives who directly report to our CEO, including our named executive officers, and our Compensation Committee considers their recommendations in setting the base salaries of such executives.
Prior to our initial public offering in 2016, our Compensation Committee conducted a comprehensive review of our executive compensation program in anticipation of transitioning from a private company compensation structure to a public company compensation structure. As a result of this comprehensive review, our Compensation Committee determined that the total target cash compensation paid to several of our executives, including each of our named executive officers, was below market when compared to similarly situated companies. To address this deficiency, our Compensation Committee determined to increase the total target cash compensation element of our executive compensation program over an approximate two-year phase in period in order to make the total target cash compensation for our executives more competitive with the amounts paid to similarly situated executives at similarly situated public companies. In February 2018, after reviewing the base salaries of our named executive officers and reviewing materials and recommendations, including peer group compensation data, from Radford, our Compensation Committee approved base salary adjustments for our named executive officers. Our Compensation Committee believes that the base salary adjustments in 2018 brought the total target cash compensation paid to our executives, including our named executive officers, to at or, with respect to our founders, above market when compared to similarly situated companies. However, our CEO, whose base salary was increased somewhat in 2018, nevertheless continues, at his request, to receive below market total target cash compensation, with a more significant portion of his total compensation tied to long-term Company performance. The following table sets forth the base salary for our named executive officers for 2017 and 2018:
 
Named Executive Officer

2017
Base Salary (1)

2018
Base Salary (1)

% Change
Murugesan “Raj” Shanmugaraj

$
335,000


$
358,000


6.9
%
John F. Gavin

$
295,000


$
330,000


11.9
%
Eric L. Fisher (2)

—


$
330,000


—

Benny P. Mikkelsen

$
295,000


$
330,000


11.9
%
Mehrdad Givehchi (2)

—


$
315,000


—

   
(1)
Salary changes are effective as of January 1st of the applicable year.
(2)
Messrs. Fisher’s and Givehchi’s base salary for 2017 and the percent change from 2017 to 2018 have been omitted from this table because Messrs. Fisher and Givehchi were not named executive officers in 2017.
Annual Cash Incentive Compensation
We provide an annual cash incentive compensation opportunity to our executives, including our named executive officers, under our executive bonus program. Our Compensation Committee believes that our executive bonus program is an important motivating factor for our executives, in addition to being a significant factor in attracting and retaining our executives. Our executive bonus program is designed to provide rewards to our executives, including our named executive officers, for the Company’s financial performance during the most recent year. We believe that the immediacy of these cash bonuses, in contrast to equity grants under our long-term equity compensation program, which vest over a period of time or based on performance objectives, provides a significant incentive to our executives towards achieving our financial objectives and our overall long-term and strategic goals.
Our Compensation Committee approved our 2018 executive bonus program in February 2018 with input from our CEO and CHRO, which was designed to award cash incentive payments for performance in 2018 to our executives, including our named executive officers, based on the achievement of a revenue performance objective and a non-GAAP income from operations performance objective. In connection with its approval of our 2018 executive bonus program, our Compensation Committee also determined, in consultation with our CEO and CHRO and after taking into consideration our performance for the immediately preceding year, target bonus amounts, represented as a percentage of the base salary in effect on December 31, 2018, for each executive, including our named executive officers. When determining the target bonus amounts for each of our executives, including our named executive officers, our Compensation Committee also considered materials and recommendations, including peer group compensation data, from Radford, which suggested that no adjustments were necessary to the target bonus amounts that had been approved by our Compensation Committee in 2017 under our 2017 executive bonus program.

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The following table sets forth the target bonus amounts for each of our named executive officers under our executive bonus program for 2017 and 2018.


2017
Target Bonus

2018
Target Bonus


Named Executive Officer

(% of annual base salary) (1)

(% of annual base salary) (1)

% Change
Murugesan “Raj” Shanmugaraj

85%

85%

—%
John F. Gavin

60%

60%

—%
Eric L. Fisher (2)

—

60%

—
Benny P. Mikkelsen

60%

60%

—%
Mehrdad Givehchi (2)

—

60%

—
(1)
Bonus target changes are effective as of January 1st of the applicable year.
(2)
Messrs. Fisher’s and Givehchi’s target bonus for 2017 and the percent change from 2017 to 2018 have been omitted from this table because Messrs. Fisher and Givehchi were not named executive officers in 2017.

In 2017, for all executives other than our CEO, 45% of the total target bonus amount was subject to the achievement of the revenue target, 45% of the total target bonus amount was subject to the achievement of the non-GAAP net income target and 10% of the total target bonus amount was subject to the achievement of specified individual performance objectives. In 2017, for our CEO, 50% of the total target bonus amount was subject to the achievement of the revenue target and 50% of the total target bonus amount was subject to the achievement of the non-GAAP net income target. In 2018, for all executives including our CEO, 50% of the total target bonus amount was subject to the achievement of the revenue target and 50% of the total target bonus amount was subject to the achievement of the non-GAAP income from operations target.
Following the imposition of the ZTE ban in April 2018 and the subsequent revisions made to our 2018 operating budget and strategic plans by our Board and management, our Compensation Committee reviewed our 2018 executive bonus program to determine if modifications were appropriate to accommodate the macro-changes impacting the Company’s business and financial performance, while continuing to incentivize and retain our executives. As a result of this review, in July 2018, our Compensation Committee, in consultation with our CEO and CHRO, approved an update to our 2018 executive bonus program to downward adjust the performance target levels for each of the performance objectives. In approving these updates, our Compensation Committee reserved its right to exercise negative discretion with respect to its final determination of 2018 bonus amounts if payouts under the updated 2018 executive bonus program would result in an unintended out-sized payout in the event the ZTE ban were to be lifted prior to the end of 2018. For the purpose of our updated 2018 executive bonus program, the target revenue performance objective was $298.5 million and the target non-GAAP income from operations performance objective was $7.4 million. We define revenue as the total revenues as reported in the Company’s 2018 consolidated income statements and we define non-GAAP income from operations as income from operations as reported on the Company’s consolidated income statements, excluding the impact of stock-based compensation, warranty and other charges arising from a manufacturing process quality issue, ZTE-related inventory write-offs and subsequent adjustments and certain litigation related costs and settlement reserves. The revised performance levels approved by our Compensation Committee were determined, at the time of approval, to be challenging but attainable without taking excessive risk.
The actual bonus amount payable to our executives with respect to the revenue objective and non-GAAP income from operations objective is dependent on achievement of such objectives at no less than the “threshold” level. Once the “threshold” level has been achieved or exceeded, the actual bonus amount payable with respect to such objective is determined by multiplying the portion of the total target bonus amount subject to such objective by the associated multiplier set forth directly across from the actual percent of achievement in the table below, with performance between the established performance levels and the associated multipliers determined on a straight-line basis. By way of example, if the revenue objective had been met at “threshold” the actual bonus amount payable to our CEO with respect to such objective would have been $358,000 multiplied by (85% * 50% * 50%), or $76,075 in actual bonus amount attributable to revenue objective. This same calculation would then be conducted with respect to the non-GAAP income from operations objective. As a result, the actual bonus amount payable to our executives, including our named executive officers, under our executive bonus program could range from 0% to up to 200% of the total target bonus amount for each of the revenue objective and the non-GAAP income from operations objective.


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Revenue Objective Performance Level

Achievement of Revenue Objective

Revenue Objective Multiplier
Below Threshold

—

—
Threshold

90%

50%
Target

100%

100%
Stretch

115%

150%
Maximum

130%

200%

Non-GAAP Income from Operations Performance Level

Achievement of Non-GAAP Income from Operations Objective

Non-GAAP Income from Operations Multiplier
Below Threshold

—

—
Threshold

85%

85%
Target

100%

100%
Stretch

125%

150%
Maximum

150%

200%


In February 2019, our Compensation Committee reviewed actual achievement against the performance target levels and determined the amount of bonuses to be paid under our 2018 executive bonus program. Because the Company’s 2018 revenues of $339.9 million and non-GAAP income from operations of $27.4 million came in above the threshold amounts set forth above, our Compensation Committee determined that the revenue and non-GAAP income from operations targets were achieved at the rate of 114% and 370%, respectively, with the 370% achievement of the non-GAAP income from operations objective reduced to 200% per the multiplier cap described above. This resulted in a combined achievement rate, after the imposition of the multipliers described above, of 173% for each of our executives, including our named executive officers. Noting the return of ZTE as a customer during the third quarter of 2018, our Compensation Committee decided that payout of bonuses at a combined achievement rate of 173% would result in an unintended out-sized payment to our executives and, therefore, determined to exercise its right to apply negative discretion to reduce the combined achievement rate to 125%.

The following table sets forth the 2018 target and actual bonus amounts for each of our named executive officers under our 2018 executive bonus program and the 2017 actual bonus amounts for each of our named executive officers under our 2017 executive bonus program, other than Messrs. Fisher and Givehchi who were not named executive officers in 2017.
Named Executive Officer

2018 Target Bonus

2018
Payment

2017
Payment
Murugesan “Raj” Shanmugaraj

$
304,300


$
380,375


—

John F. Gavin

$
198,000


$
247,500


$
17,700

Eric L. Fisher (1)

$
198,000


$
247,500


—

Benny P. Mikkelsen

$
198,000


$
247,500


$
17,700

Mehrdad Givehchi (1)

$
189,000


$
236,250


—

(1)
Messrs. Fisher’s and Givehchi’s 2017 bonus payment amounts have been omitted from this table because Messrs. Fisher and Givehchi were not named executive officers in 2017.
Long-Term Equity Incentive Compensation
Our executives, including our named executive officers, are eligible to receive long-term equity incentive awards, which are intended to align their interests with the interests of our stockholders. Since the completion of our initial public offering in 2016, our long-term equity incentive compensation awards have been made in the form of RSUs that are settled in shares of our common stock. We believe that long-term equity incentive awards provide a strong link between our executives’ compensation and our long-term performance and the creation of stockholder value.
All RSU awards are approved by our Compensation Committee. Our Compensation Committee grants long-term equity incentive awards to our executives, including our named executive officers, on an annual basis, generally in the first quarter of the year. In determining the size of long-term equity incentive awards for our executives, our Compensation Committee reviews competitive market data provided by Radford and grants awards intended to be competitive with the prevailing market practice. In

- 27 -


addition to the competitive market data, our Compensation Committee also considers a number of other factors including the recommendations of our CEO and CHRO (except with respect to their own awards), our company’s overall performance, the individual executive’s performance, the relative ease or difficulty of replacing the executive with a well-qualified person and the number of well-qualified candidates available to assume the executive’s role, the amount of equity previously awarded to the executive as well as the portion of previously awarded equity that remains unvested and the Company’s annual equity burn rates.
Time-Based Equity Awards
In 2018, our Compensation Committee granted RSUs to our executives, including our named executive officers. The number of shares subject to these RSUs was determined by dividing the “Target Value” shown below by $39.02, the closing price of a share of our common stock on the Nasdaq Global Select Market on February 7, 2018, which was the grant date of such RSUs, rounded down to the next whole share.
Named Executive Officer

2018 Target Value

Shares Underlying RSUs (#)
Murugesan “Raj” Shanmugaraj

$
1,408,000


36,084
John F. Gavin

$
930,000


23,833
Eric L. Fisher

$
880,000


22,552
Benny P. Mikkelsen

$
880,000


22,552
Mehrdad Givehchi

$
880,000


22,552
These RSUs vest over a period of four years of continued employment, with 25% vesting on each anniversary of the vesting commencement date. Vesting of RSUs is subject to the applicable named executive officer’s continued provision of services to the Company through the applicable vesting date, except in the case of death or disability where vesting will accelerate in full. We believe that time-based vesting promotes retention by providing an incentive for our executives to remain in our employment throughout the vesting period. These RSUs are subject to the acceleration provisions of our Severance and Change in Control Benefits Plan. Please refer to the “Other Benefits—Severance and Change in Control Benefits” section of this Compensation Discussion and Analysis for additional information.
Performance-Based Equity Awards
In 2018, our Compensation Committee also granted PRSUs to our executives, including our named executive officers. These PRSUs are subject to performance-based vesting. The number of PRSUs that vest is measured based on the level of achievement of a performance objective, based on the Company’s percentile achievement of relative TSR against the external comparator group described below over the three-year performance period, running from January 1, 2018 through December 31, 2020. The number of target shares subject to the PRSUs granted to our named executive officers in 2018 by our Compensation Committee was determined by dividing the “Target Value” shown below by $39.02, the closing price of a share of our common stock on the Nasdaq Global Select Market on February 7, 2018, which was the grant date of such PRSUs, rounded down to the next whole share. The maximum number of shares subject to the PRSUs granted to our named executive officers in 2018 was then determined by multiplying the number of “Shares Underlying PRSUs (Target)” below by 200%.
Named Executive Officer

2018 Target Value

Shares Underlying PRSUs (Target) (#)

Shares Underlying PRSUs (Maximum) (#)
Murugesan “Raj” Shanmugaraj

$
272,000


6,970


13,940

John F. Gavin

$
170,000


4,356


8,712

Eric L. Fisher

$
170,000


4,356


8,712

Benny P. Mikkelsen

$
170,000


4,356


8,712

Mehrdad Givehchi

$
170,000


4,356


8,712

The payout matrix for the PRSUs granted in 2018 is presented in the table below (if performance is between the specified levels, the payout will be interpolated):


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Relative TSR Percentile Rank

Payout Factor
≥ 90th Percentile

200%
75th Percentile

150%
50th Percentile

100%
35th Percentile

50%
< 35th Percentile

—

Achievement of the performance objective is determined and certified by our Compensation Committee following the end of the three-year performance period. Vesting of the PRSUs is also subject to the applicable executive’s continued provision of services to the Company through the vesting date, except in the case of death or disability where vesting will be pro-rated for time worked during the performance period. If the relative TSR of our common stock over the three-year performance period is below the 35th percentile, the PRSU awards granted to our executives will be forfeited. In the event of a “change in control” of our company during the performance period, pursuant to which consideration is received by holders of our common stock, the performance period will be deemed to end upon the closing date of the change in control and achievement of the relative TSR objective will be determined based on the price paid to holders of our common stock in connection with the change in control.
For purposes of our 2018 PRSUs, our external comparator group consisted of the following 14 companies, which our Compensation Committee determined were similar to our company in terms of key drivers of stockholder value, including business model and strategic focus.
ADVA Optical Networking SE
Infinera Corporation
MaxLinear, Inc.
Applied Optoelectronics, Inc.
Inphi Corporation
Mellanox Technologies, Ltd.
Ciena Corporation
Lumentum Holdings Inc.
Neophotonics Corporation
Finisar Corporation
MACOM Technology Solutions Holdings, Inc.
Oclaro, Inc.*
II-IV Incorporated
Marvell Technology Group Ltd.
 
* Oclaro, Inc. was subsequently acquired by Lumentum Holdings Inc.
For information regarding the PRSUs granted to our executives, including our named executive officers, in 2017, see the “Outstanding Equity Awards at Fiscal Year-End” table included in this Proxy Statement.
Other Benefits
Employee Benefits and Perquisites
Our executives, including our named executive officers, are eligible to participate in the same benefits that are provided to all employees generally, including medical, dental and vision benefits, group term life insurance, charitable gift matching program and participation in our 401(k) plan, which includes matching of employee 401(k) contributions up to a specified amount.
Severance and Change in Control Benefits
In August 2018, our Compensation Committee approved an amendment and restatement of the Acacia Communications, Inc. Severance and Change in Control Benefits Plan (the “Severance Plan”). The Severance Plan provides severance benefits to our executives, including our named executive officers, if their employment is terminated by us “without cause” or, only in connection with a “change in control” of our company, they terminate employment with us for “good reason” (as each of those terms is defined in the Severance Plan).
Under the Severance Plan, if we terminate an eligible executive’s employment without cause prior to or more than 12 months following the closing of a change in control of our company (an “Involuntary Termination”), the executive is entitled to (i) continue receiving his or her base salary for a specified period following the date of termination (in the case of our CEO, for 12 months, and, in the case of all other participants, for nine months), (ii) Company contributions to the cost of health care continuation under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), for U.S. based eligible executives, or substantially equivalent medical benefits for non-U.S. based eligible executives, for up to 12 months following the date of termination of employment (or, to the extent a non-U.S. based eligible executive is then receiving a stipend from us in lieu of benefits coverage, continued payment of such stipend for up to 12 months following the date of termination of employment), and (iii) the amount of any unpaid annual bonus determined by our Board of Directors to be payable to the executive for any completed bonus period which ended prior to the date of such executive’s termination. In addition, under the terms of the Severance Plan all the executive’s outstanding equity awards that vest solely based on the passage of time will be accelerated and become vested to the extent the award would have vested if the executive

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had remained employed through a specified period following the date of termination (in the case of our CEO, for 12 months, and, in the case of all other participants, for nine months). The vesting of outstanding performance-based equity awards in connection with an Involuntary Termination is determined in accordance with the terms of the applicable award agreements.
The Severance Plan also provides that, if, within 12 months following a change in control of our company, we terminate an eligible executive’s employment without cause or such executive terminates his or her employment with us for good reason (a “Change in Control Termination”), the executive is entitled to (i) a single lump-sum payment equal to a percentage of his or her annual base salary (in the case of our CEO, 200% and, in the case of all other participants, 100%), (ii) a single lump sum payment in an amount equal to a percentage of his or her target annual bonus for the year in which the termination of employment occurs (in the case of our CEO, 150% and, in the case of all other participants, 100%), (iii) Company contributions to the cost of health care continuation under COBRA, for U.S. based eligible executives, or substantially equivalent medical benefits for non-U.S. based eligible executives, for up to 12 months following the date of termination of employment (or, to the extent a non-U.S. based eligible executive is then receiving a stipend from us in lieu of benefits coverage, continued payment of such stipend for up to 12 months following the date of termination of employment), and (iv) the amount of any unpaid annual bonus determined by our Board of Directors to be payable to the executive for any completed bonus period which ended prior to the date of such executive’s termination. In addition, under the terms of the Severance Plan all of the executive’s outstanding unvested time-based equity awards will immediately vest in full on the date of such termination. The vesting of outstanding performance-based equity awards in connection with a Change in Control Termination is determined in accordance with the terms of the applicable award agreements.

The Severance Plan also provides that, in the event of a termination due to the death or disability of an executive (a “Death or Disability Termination”), whether or not prior to or following a change in control of our company, such executive or his or her estate will be entitled to (i) the Involuntary Termination or Change in Control Termination severance benefits, as applicable, described above, (ii) the vesting in full of all of the executive’s outstanding equity awards that vest solely based on the passage of time as of the date of such termination, and (iii) if the Death or Disability Termination occurs prior to or more than 12 months following a change in control of our company, a single lump sum payment in an amount equal to a pro rata portion of his or her target annual bonus for the year in which the termination of employment occurs. The vesting of outstanding performance-based equity awards in connection with a Death or Disability Termination is determined in accordance with the terms of the applicable award agreements.
All payments and benefits provided under the Severance Plan are contingent upon the execution and effectiveness of a release of claims by the executive, or the executive’s personal representative or estate, in our favor and continued compliance by the executive with any proprietary information and inventions, nondisclosure, non-competition, non-solicitation (or similar) agreement to which we and the executive are party.
In addition to benefits provided under the Severance Plan, under the terms of award agreements between us and our executives for equity awards issued to the executives prior to our initial public offering, upon the occurrence of a change in control of our company, the executive will get credit for an additional six months of service.
Please refer to the “Potential Payments Upon Termination or Change in Control” table included in this Proxy Statement for the estimated amounts payable to each of our named executive officers pursuant to the Severance Plan in the event of an Involuntary Termination, a Change in Control Termination or a Death or Disability Termination.
Employment and Compensation Arrangements with Named Executive Officers

Offer Letters and Employment Agreements
We have entered into employee offer letters with each of our executives, including our named executive officers, other than one executive, who was not one of our named executive officers in 2018 and whose primary location of employment is Denmark, pursuant to which such executives are employed “at will,” meaning that, subject to any statutorily imposed notice period, the executive or we may terminate the employment arrangement at any time. Such offer letters establish the executive’s title, initial compensation arrangements and eligibility for benefits made available to employees generally. Because employment agreements are required under Danish law, we, through our wholly owned subsidiary Acacia Communications Europe A/S, entered into an employment agreement with our Denmark-based executive, which is generally consistent with the offer letters provided to our other named executive officers, except that the employment agreement provides for a statutorily required six months’ notice period prior to the termination of the executive’s employment by us or by the executive (which would run concurrently with any severance period that the executive is eligible to receive). Except with respect to the employee offer letter that we entered into with Mr. Fisher upon the commencement of his employment in 2017, our employee offer letters do not guarantee minimum payout under our executive bonus program. Under the employee offer letter that we entered into with Mr. Fisher, we guaranteed payout of 100% of his pro-rated 2017 executive bonus.


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Other Agreements
We have also entered into non-competition, non-solicitation, confidentiality and assignment agreements with each of our executives, including our named executive officers. Under the non-competition, non-solicitation, confidentiality and assignment agreements, each executive has agreed (i) not to compete with us during his or her employment and for a period of one year after the termination of his employment, (ii) not to solicit our employees or customers during his or her employment and for a period of one year after the termination of his or her employment, (iii) to protect our confidential and proprietary information, and (iv) to assign to us related intellectual property that is developed during the course of his or her employment, that results from tasks assigned by us or that results from the use of our property, premises, or confidential information.
Other Compensation Practices and Policies
Clawback Policy
In March 2019, our Compensation Committee approved a clawback policy that is applicable in the event of (1) a restatement of our financial results for periods ending on or after the policy effective date due to our material noncompliance with any financial reporting requirement under the U.S. federal securities laws and (2) a determination by our Board of Directors, or a committee thereof, that an act or omission of a current or former executive officer of the Company involving intentional misconduct, intentional violation of any of Company rules or any applicable legal or regulatory requirements or fraud, in each case, contributed to the circumstances requiring the restatement. The clawback policy applies to current and former “executive officers” as defined under Rule 3b-7 and Rule 16(a)-1(f) of the Securities Exchange Act of 1934, as amended, or the Exchange Act (“Section 16 officers”), which includes our named executive officers and our Principal Accounting Officer, and to performance-based incentive compensation that is granted after the policy effective date.
Under the clawback policy, our Board of Directors, or a committee thereof, can, in its discretion, recover from the Section 16 officer who engaged in the intentional misconduct, intentional violation of Company rules or legal or regulatory requirements or fraud, up to 100% of any performance-based incentive compensation, including compensation under our executive bonus and performance-based equity incentive programs, received by such Section 16 officer from the Company during the one-year period preceding the date on which we are required to prepare the restatement of our financial results.
The Dodd-Frank Act requires the SEC to direct the national securities exchanges to prohibit the listing of any security of an issuer that does not develop and implement a clawback policy. At this time, the SEC has not finalized rules related to clawback policies. We intend to update our clawback policy to reflect any applicable rules implementing the Dodd-Frank Act clawback requirements that are finalized, released and become effective.
Further, under Section 304 of the Sarbanes-Oxley Act, if we are required to restate our financial results due to material noncompliance with any financial reporting requirements as a result of misconduct, our CEO and CFO could be required to reimburse the Company for (1) any bonus or other incentive-based or equity-based compensation received during the twelve months following the first public issuance of the non-complying document, and (2) any profits realized from the sale of our securities during those twelve months.
Anti-Hedging and Anti-Pledging Policies and 10b5-1 Plan Guidelines
Our insider trading policy prohibits all members of our Board of Directors, executives, and other employees from buying our securities on margin, holding such securities in a margin account, buying or selling derivatives on such securities, and engaging in short sales involving such securities. In addition, our insider trading policy prohibits all members of our Board of Directors, executives, and other employees from pledging our securities as collateral for a loan. Our employees, including our executive officers, are subject to our 10b5-1 plan guidelines, which impose restrictions on the purchase and sale of shares of our common stock pursuant to 10b5-1 plans. These guidelines impose on our executive officers a limitation on the percentage of their stock holdings that may be sold in any calendar year and rolling 12-month period.
Executive Officer Stock Ownership Guidelines
In March 2019, our Compensation Committee adopted executive officer stock ownership guidelines applicable to our Section 16 officers, which includes our named executive officers. Shares owned outright by our Section 16 officers, including shares purchased on the open market or acquired through participating in our employee stock purchase plan, and shares subject to unvested RSUs count toward meeting this objective. Unearned PRSUs and unexercised stock options are excluded. Our executive officer stock ownership guidelines require that our Section 16 officers, other than our CEO, hold equity in the Company with a value equal to at least one times the Section 16 officer’s annual base cash compensation, and that our CEO hold equity in the Company with a value equal to at least three times his annual base cash compensation.  Our executive officer stock ownership guidelines provide for a five-year phase-in period from the time the Section 16 officer first becomes subject to the guidelines and compliance with the guidelines is measured on December 31st of each year. Similar to our non-executive director stock ownership guidelines, our executive officer stock ownership guidelines include certain share retention obligations that apply to Section 16 officer who have not met the minimum

- 31 -


equity ownership requirements by the end of their phase-in date or who cease to hold the minimum equity ownership at any time following such date. 
Tax Deductibility
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), generally disallows a tax deduction to public companies for compensation in excess of $1 million paid in any taxable year to each of the company’s chief executive officer, chief financial officer and the three most highly compensated officers (other than the chief executive officer and chief financial officer). Historically, compensation paid to a company’s chief financial officer and compensation that qualified under Section 162(m) as performance-based compensation was exempt from the deduction limitation. However, subject to certain transition rules, the tax reform legislation signed into law on December 22, 2017 expanded the deduction limitation to apply to compensation in excess of $1 million paid in any taxable year to a company’s chief financial officer and eliminated the qualified performance-based compensation exception. As a result, for taxable years beginning after December 31, 2017, all compensation in excess of $1 million paid to each of the executives described above (other than certain grandfathered compensation or compensation paid pursuant to certain equity awards granted during the transition period following our IPO) will not be deductible by us. Our Compensation Committee reserves the right to use its business judgment to authorize compensation payments that may be subject to the limitation under Section 162(m) when the compensation committee believes that compensation is appropriate and in the best interests of our company and our stockholders.
Accounting for Stock-Based Compensation
We follow Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic, Compensation - Stock Compensation (“ASC Topic 718”), for our stock-based compensation awards to employees. ASC Topic 718 requires companies to measure the compensation expense for all share-based payment awards made to employees and directors, including stock options, restricted stock awards (“RSAs”), RSUs and PRSUs, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executives may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income statements over the period that an employee or director is required to render service in exchange for the option or other award. Our Compensation Committee considers the impact of ASC Topic 718 when making equity-based awards.
Indemnification of Officers and Directors
Our restated certificate of incorporation limits the personal liability of directors for breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporation Law and provides that no director will have personal liability to us or to our stockholders for monetary damages for breach of fiduciary duty or other duty as a director. However, these provisions do not eliminate or limit the liability of any of our directors:

•
for any breach of the director’s duty of loyalty to us or our stockholders;
•
for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
•
for voting or assenting to unlawful payments of dividends, stock repurchases or other distributions; or
•
for any transaction from which the director derived an improper personal benefit.
Any amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to such amendment or repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the Delaware General Corporation Law.
In addition, our restated certificate of incorporation provides that we must indemnify our directors and officers and we must advance expenses, including attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to very limited exceptions.
We maintain a general liability insurance policy that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers. In addition, we have entered into indemnification agreements with all of our directors. These indemnification agreements may require us, among other things, to indemnify each such director and executives for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by him in any action or proceeding arising out of his service as one of our directors.
Certain of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities incurred in their capacity as members of our Board of Directors. We have agreed that we will be the

- 32 -


indemnitor of “first resort,” however, with respect to any claims against these directors for indemnification claims that are indemnifiable by both us and their employers. Accordingly, to the extent that indemnification is permissible under applicable law, we will have full liability for such claims (including for the advancement of any expenses) and we have waived all related rights of contribution, subrogation or other recovery that we might otherwise have against these directors’ employers.

- 33 -


Report of the Compensation Committee of the Board of Directors

Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on the review and discussions, our Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement for the year ended December 31, 2018.

Compensation Committee

Stan J. Reiss (Chair)
Peter Y. Chung
Vincent T. Roche

- 34 -


Summary Compensation Table
The following table presents information regarding the total compensation awarded to, earned by, or paid to our named executive officers. Messrs. Fisher’s and Givehchi’s compensation for the year ended December 31, 2016 and December 31, 2017 have not been included in the table below because they were not named executive officers for 2016 or 2017.

Name and Principal Position

Year

Salary
($)

Stock
Awards  ($)(1)

Non-Equity Incentive Plan Compensation ($)

 

All Other
Compensation ($)

 

Total ($)
Murugesan “Raj” Shanmugaraj

2018

357,558

1,791,166

380,375

(2)

34,497

(3)

2,563,596
President and Chief Executive Officer and Director

2017

334,616

3,445,617

—




28,930



3,809,163

2016

299,923

1,707,500

361,620

(4)

24,097



2,393,140
John F. Gavin

2018

329,327

1,169,440

247,500

(2)

40,264

(5)

1,786,531
Chief Financial Officer

2017

294,327

2,146,256

17,700

(6)

28,951



2,487,234

2016

246,808

1,410,000

213,200

(4)

29,451



1,899,459
Eric L. Fisher

2018

330,000

1,119,456

247,500

(2)

44,567

(7)

1,741,523
Vice President of Global Sales
































Benny Mikkelsen

2018

329,327

1,119,456

247,500

(2)

27,701

(8)

1,723,984
Founder, Chief Technology Officer and Director

2017

294,327

2,146,256

17,700

(6)

46,556



2,504,839

2016

246,808

1,410,000

213,200

(4)

19,887



1,889,895
Mehrdad Givehchi

2018

314,616

1,119,456

236,250

(2)

41,402

(9)

1,711,724
Founder, Vice President of Hardware and Software

































(1)
The amounts reported in this column represent the aggregate grant date fair value of the RSUs and PRSUs granted to our named executive officers during the applicable year pursuant to our 2016 Equity Incentive Plan, as computed in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the RSUs and PRSUs reported in this column are set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates—Stock-Based Compensation” section of our Annual Report on Form 10-K for the year ended December 31, 2018. In accordance with the rules promulgated by the SEC, the amounts shown for awards with performance and service-based vesting conditions exclude the impact of estimated forfeitures. The aggregate grant date fair value of the PRSUs is based on a Monte Carlo simulation valuation model that assumed the probable outcome of the achievement of the applicable objectives, if applicable. In February 2019, our Compensation Committee determined and certified that with respect to the PRSUs granted in 2017, which had a revenue growth objective and a stock price objective, these objectives had not been achieved during the performance period and, as a result, no PRSUs were earned and these PRSUs were forfeited. The grant date maximum value of the 2018 stock awards for Mr. Shanmugaraj was $1,951,936 for Mr. Gavin was $1,269,906 and for Messrs. Fisher, Mikkelsen, and Givehchi was $1,219,921 each, determined by multiplying the total number of RSUs and maximum PRSUs by $39.02, the closing price of a share of our common stock on the Nasdaq Global Select Market on February 7, 2018, which was the grant date of the 2018 stock awards.
(2)
The amount shown represents an amount earned for 2018 performance that was paid in 2019.
(3)
The amount shown includes the following benefits paid by us on behalf of Mr. Shanmugaraj: (a) $11,000 in matching contributions for our 401(k) plan, (b) $14,819 in insurance premiums related to our company health plan, (c) $1,234 for insurance premiums related to our group term life insurance, (d) $460 for insurance premiums related to our long term disability, (e) $100 for a charitable contribution match and (f) a one-time cash payment of $6,885 representing accrued but unused vacation time that was earned in 2018 and paid in 2019 following our adoption of a flexible paid time off policy.
(4)
The amount shown represents an amount earned for 2016 performance that was paid in 2017.
(5)
The amount shown includes the following benefits paid by us for the benefit of Mr. Gavin: (a) $11,000 in matching contributions for our 401(k) plan, (b) $14,819 in insurance premiums related to our company health plan, (c) $804 in insurance premiums related to our group term life insurance, (d) $460 in insurance premiums related to our long term disability and (e) a one-time cash payment of $13,181 representing accrued but unused vacation time that was earned in 2018 and paid in 2019 following our adoption of a flexible paid time off policy.

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(6)
The amount shown represents an amount earned for 2017 performance that was paid in 2018.
(7)
The amount shown includes the following benefits paid by us for the benefit of Mr. Fisher: (a) $8,250 in matching contributions for our 401(k) plan, (b) $14,819 in insurance premiums related to our company health plan, (c) $270 in insurance premiums related to our group term life insurance, (d) $460 in insurance premiums related to our long term disability and (e) a one-time cash payment of $5,889 representing accrued but unused vacation time that was earned in 2018 and paid in 2019 following our adoption of a flexible paid time off policy. In addition, the amount shown includes a gross-up payment of $14,880 for tax equalization purposes as Mr. Fisher works for us across multiple tax jurisdictions and incurs a higher effective tax rate as a result.
(8)
The amount shown includes the following benefit paid by us for the benefit of Mr. Mikkelsen: (a) $13,745 in insurance premiums related to our company health plan, (b) $804 in insurance premiums related to our group term life insurance and (c) $460 in insurance premiums related to our long term disability and (d) a one-time cash payment of $12,692 representing accrued but unused vacation time that was earned in 2018 and paid in 2019 following our adoption of a flexible paid time off policy.
(9)
The amount shown includes the following benefits paid by us for the benefit of Mr. Givehchi: (a) $11,000 in matching contributions for our 401(k) plan, (b) $10,128 in insurance premiums related to our company health plan, (c) $430 in insurance premiums related to our group term life insurance, (d) $460 in insurance premiums related to our long term disability and (e) a one-time cash payment of $19,385 representing accrued but unused vacation time that was earned in 2018 and paid in 2019 following our adoption of a flexible paid time off policy.

The sum of individual components discussed in the footnotes above or other tables included in this Proxy Statement may not equal the totals reflected in the Summary Compensation Table due to rounding.


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2018 Grants of Plan-Based Awards Table
 
The following table sets forth information regarding grants of plan-based awards made to our named executive officers during the year ended December 31, 2018.    
Name

Grant
Date

Estimated Future Payouts Under Equity Incentive Plan Awards (1)

All Other Stock Awards: Number of Shares of Stock or Units (#) (2)

Grant Date Fair Value of Stock and Option Awards ($) (3)


Threshold (#)

Target (#)

Maximum (#)


Murugesan “Raj” Shanmugaraj

2/7/2018

3,485


6,970


13,940


—


383,168



2/7/2018




—


—


36,084


1,407,998

John F. Gavin

2/7/2018

2,178


4,356


8,712


—


239,477



2/7/2018




—


—


23,833


929,964

Eric L. Fisher

2/7/2018

2,178


4,356


8,712


—


239,477



2/7/2018




—


—


22,552


879,979

Benny P. Mikkelsen

2/7/2018

2,178


4,356


8,712


—


239,477



2/7/2018




—


—


22,552


879,979

Mehrdad Givehchi

2/7/2018

2,178


4,356


8,712


—


239,477



2/7/2018




—


—


22,552


879,979

    
(1)
Represents the aggregate number of shares underlying PRSUs granted to our named executive officers under our 2016 Equity Incentive Plan in 2018 that may be earned if the relative TSR objective is achieved at the target or maximum performance level. The performance period for the relative TSR objective is three years running from January 1, 2018 to December 31, 2020 and, if our Compensation Committee determines and certifies that the performance objective has been achieved, such PRSUs would vest in full following the end of the performance period. For a description of the PRSUs granted in 2018, see “Executive Compensation—Compensation Discussion and Analysis—Elements of Compensation—Long-Term Equity Incentive Compensation—Performance Based Equity Awards” included in this Proxy Statement.
(2)
Consists of the aggregate number of shares underlying RSU awards granted to our named executive officers under our 2016 Equity Incentive Plan in 2018. These RSUs vest over a period of four years of continued employment, with 25% vesting on each anniversary of the vesting commencement date.
(3)
The amounts reported in this column represent the aggregate grant date fair value of the RSUs and PRSUs granted to our named executive officers during the applicable year pursuant to our 2016 Equity Incentive Plan, as computed in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the RSUs and PRSUs reported in this column are set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates—Stock-Based Compensation” section of our Annual Report on Form 10-K for the year ended December 31, 2018. In accordance with the rules promulgated by the SEC, the amounts shown for awards with performance-based vesting exclude the impact of estimated forfeitures.

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Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information regarding outstanding equity awards held by each named executive officer as of December 31, 2018.

 

Option Awards

Stock Awards

Name

Number of Securities Underlying Unexercised Options Exercisable (#)



Option Exercise Price ($)

Option Expiration Date

Number of Shares or Units of Stock That Have Not Vested (#)

 

Market Value of Shares or Units of Stock That Have Not Vested ($)(1)

Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#)



 Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($)(1)

Murugesan “Raj” Shanmugaraj









27,263


(2)

1,035,994




















30,000


(3)

1,140,000




















18,294


(4)

695,172




















36,084


(5)

1,371,192




























18,175


(6)

690,650




















6,970


(7)

264,860


John F. Gavin

166,500


(8)

0.41


3/15/2022

17,040


(9)

647,520




















25,000


(10)

950,000




















5,544


(11)

210,672




















23,833


(12)

905,654




























11,268


(6)

428,184




















4,356


(7)

165,528


Eric L. Fisher









27,861


(13)

1,058,718




















22,552


(14)

856,976




























6,191


(6)

235,258




















4,356


(7)

165,528


Benny Mikkelsen









17,040


(9)

647,520




















25,000


(10)

950,000




















18,294


(4)

695,172




















22,552


(14)

856,976




























11,268


(6)

428,184




















4,356


(7)

165,528


Mehrdad Givehchi









17,040


(9)

647,520




















25,000


(10)

950,000




















18,294


(4)

695,172




















22,552


(14)

856,976




























11,268


(6)

428,184




















4,356


(7)

165,528

















































(1)
The value of equity awards is based on the closing price of our common stock on the Nasdaq Global Select Market on December 31, 2018.

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(2)
Represents an RSU award granted on March 17, 2017 for 36,350 shares of common stock under our 2016 Equity Incentive Plan. 25% of the RSUs vested on March 17, 2018, with the remainder vesting in equal installments of 25% on each one-year anniversary thereafter, and will become fully vested on March 17, 2021.
(3)
Represents an RSU award granted on April 28, 2016 for 60,000 shares of common stock under our 2016 Equity Incentive Plan. 25% of the RSUs vested on May 12, 2017, with the remainder vesting in equal installments of 25% on each one-year anniversary thereafter, and will become fully vested on May 12, 2020.
(4)
Represents an RSU award granted on October 21, 2015 for 97,563 shares of common stock under our 2009 Stock Plan. 25% of the RSUs vested on August 13, 2016, with the remainder vesting in equal installments of 8.33% on each three-month anniversary thereafter, and will become fully vested on August 13, 2019.
(5)
Represents an RSU award granted on February 7, 2018 for 36,084 shares of common stock under our 2016 Equity Incentive Plan. 25% of the RSUs vested on February 1, 2019, with the remainder vesting in equal installments of 25% on each one-year anniversary thereafter, and will become fully vested on February 1, 2022.
(6)
Represents the aggregate number of shares underlying PRSUs granted to our named executive officers on March 17, 2017 under our 2016 Equity Incentive Plan that may be earned if the Revenue Growth Objective and/or the Stock Price Objective is achieved at the target performance level over a two-year measurement period running from January 1, 2017 to December 31, 2018 and would then be subject to time-based vesting over a two-year period subject to continued service. In February 2019, our Compensation Committee determined and certified that the Revenue Growth Objective and the Stock Price Objective had not been achieved during the performance period and, as a result, no PRSUs were earned and these PRSUs were forfeited.
(7)
Represents the aggregate number of shares underlying PRSUs granted to our named executive officers on February 7, 2018 under our 2016 Equity Incentive Plan that may be earned if the relative TSR objective is achieved at the target performance level. The performance period for the relative TSR objective is three years running from January 1, 2018 to December 31, 2020 and, if our Compensation Committee determines and certifies that the performance objective has been achieved, such PRSUs would vest in full following the end of the performance period. For a description of the PRSUs granted in 2018, see “Executive Compensation—Compensation Discussion and Analysis—Elements of Compensation—Long-Term Equity Incentive Compensation—Performance Based Equity Awards” included in this Proxy Statement.
(8)
Represents a stock option award granted on March 15, 2012 for 220,000 shares of common stock under our 2009 Stock Plan that fully vested on February 27, 2017.
(9)
Represents an RSU award granted on March 17, 2017 for 22,719 shares of common stock under our 2016 Equity Incentive Plan. 25% of the RSUs vested on March 17, 2018, with the remainder vesting in equal installments of 25% on each one-year anniversary thereafter, and will become fully vested on March 17, 2021.
(10)
Represents an RSU award granted on April 28, 2016 for 50,000 shares of common stock under our 2016 Equity Incentive Plan. 25% of the RSUs vested on May 12, 2017, with the remainder vesting in equal installments of 25% on each one-year anniversary thereafter, and will become fully vested on May 12, 2020.
(11)
Represents an RSU award granted on October 21, 2015 for 29,564 shares of common stock under our 2009 Stock Plan. 25% of the RSUs vested on August 13, 2016, with the reminder vesting in equal installments of 8.33% on each three-month anniversary thereafter, and will become fully vested on August 13, 2019.
(12)
Represents an RSU award granted on February 7, 2018 for 23,833 shares of common stock under our 2016 Equity Incentive Plan. 25% of the RSUs vested on February 1, 2019, with the remainder vesting in equal installments of 25% on each one-year anniversary thereafter, and will become fully vested on February 1, 2022.
(13)
Represents an RSU award granted on July 5, 2017 for 37,147 shares of common stock under our 2016 Equity Incentive Plan. 25% of the RSUs vested on July 5, 2018, with the reminder vesting in equal installments of 25% on each one-year anniversary thereafter, and will become fully vested on July 5, 2021.
(14)
Represents an RSU award granted on February 7, 2018 for 22,552 shares of common stock under our 2016 Equity Incentive Plan. 25% of the RSUs vested on February 1, 2019, with the remainder vesting in equal installments of 25% on each one-year anniversary thereafter, and will become fully vested on February 1, 2022.


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2018 Stock Vested Table
The following table sets forth information regarding the vesting of stock awards for each of our named executive officers during the year ended December 31, 2018. There were no option exercises by our named executive officers in 2018.

 
 
Stock Awards
 
 
Number of
Shares
Acquired on
Vesting
 
Value
Realized on
Vesting
Name
 
(#)
 
($) (1)
Murugesan “Raj” Shanmugaraj
 
54,728

 
2,041,711

John F. Gavin
 
25,570

 
925,354

Eric L. Fisher
 
9,286

 
322,224

Benny P. Mikkelsen
 
49,147

 
1,825,778

Mehrdad Givehchi
 
49,147

 
1,825,778


(1)
The value realized on vesting is based on the closing market price per share of our common stock on the vesting date, multiplied by the number of shares that vested.

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Equity Compensation Plan Information

Our equity compensation plans consist of our 2009 Stock Plan, our 2016 Equity Incentive Plan, and our 2016 Amended and Restated Employee Stock Purchase Plan. Prior to our 2016 initial public offering, we granted awards under the 2009 Stock Plan. Following our initial public offering, any remaining shares available for issuance under our 2009 Stock Plan were added to the shares reserved for issuance under our 2016 Equity Incentive Plan. No awards were granted under the 2009 Stock Plan as of and after the effective date of the 2016 Equity Incentive Plan, but awards granted under the 2009 Stock Plan remain outstanding.
The following table shows certain information concerning all of our equity compensation plans in effect as of December 31, 2018:
 
 
Number of securities to be issued upon exercise of outstanding options, warrants and rights
 
 
 
Weighted-average exercise price of outstanding options, warrants and rights ($)(1)
 
Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders
 
 
 
 
 
 
 
 
2009 Stock Plan(2)
 
1,269,552

 
(3
)
 
5.77

 
—

2016 Equity Incentive Plan(4)
 
2,171,079

 
(5
)
 
54.69

 
3,203,355

2016 Amended and Restated Employee Stock
   Purchase Plan(6)
 
—

 
 
 
—

 
807,421

Equity compensation plans not approved by security holders
 
—

 
 
 
—

 
—

Total number of securities reserved for issuance
 
3,440,631

 
 
 
9.78

 
4,010,776


(1)
The weighted-average exercise price information does not include any outstanding RSAs, RSUs or PRSUs.
(2)
No grants were made under the 2009 Stock Plan after May 12, 2016, which was the effective date of the registration statement with respect to our initial public offering.
(3)
This amount includes 1,024,518 shares subject to outstanding stock options and 245,034 shares subject to outstanding RSUs.
(4)
The number of shares of common stock reserved for issuance under the 2016 Equity Incentive Plan automatically increases on January 1 of each year, beginning with the year ending December 31, 2017 and continuing through and including the year ending December 31, 2025 by an amount equal to the lowest of (i) 3,600,000 shares of our common stock, (ii) 4.0% of the number of shares of our common stock outstanding on the first day of such year and (iii) an amount determined by our Board of Directors. Pursuant to the terms of the 2016 Equity Incentive Plan, an additional 1,640,964 shares were added to the number of available shares effective January 1, 2019.
(5)
This amount includes 91,575 shares subject to outstanding stock options and 2,079,504 shares subject to outstanding RSUs and the maximum number of shares underlying PRSUs granted to our executives in 2017 and 2018.
(6)
The number of shares of common stock reserved for issuance under the 2016 Amended and Restated Employee Stock Purchase Plan automatically increases on January 1 of each year, beginning with the year commencing January 1, 2017 and ending on December 31, 2026 by an amount equal to the lowest of (i) 900,000 shares of our common stock, (ii) 1.0% of the number of shares of our common stock outstanding on the first day of such year and (iii) an amount determined by our Board of Directors. Pursuant to the terms of the 2016 Amended and Restated Employee Stock Purchase Plan, our Board of Directors determined that no additional shares would be added to the number of available shares on January 1, 2019.

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CEO Pay Ratio
Our CEO pay ratio is calculated in accordance with Item 402(u) of Regulation S-K and provides a reasonable estimate of the ratio of our CEO’s annual total compensation, as reported in the “Summary Compensation Table” included in this Proxy Statement, to the median of the annual total compensation of all employees other than the CEO.
CEO total compensation
$2,563,596
Median employee annual total compensation
$189,703
Ratio of our CEO to median employee
13.5 to 1
In determining the median employee, we used the methodology, assumptions, and estimates described below:
•
We identified the median employee by reviewing the base salary, target bonus amount, and equity awards for all employees worldwide, excluding our CEO, who were employed on December 31, 2018.
•
We included employees working on a full-time, part-time, or interim basis, as well as contractual employees (as determined by the legal framework in a particular jurisdiction for contractual status).
•
We annualized the base salary and target bonus amount for any full-time employees who were hired in 2018 but did not work for us for the entire year.
•
Cost of living adjustments were not applied, nor were any of our employees excluded based on geographic location.
•
For employees not paid in U.S. dollars, we applied a local currency-to-U.S. dollar exchange rate from OANDA Corporation based on the daily average for all of 2018.
Annual total compensation for the median employee was then calculated using the same methodology we use for calculating CEO pay as outlined in the Summary Compensation Table.



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Potential Payments Upon Termination or Change in Control
The table below shows the benefits potentially payable to each of our named executive officers if his employment were terminated by us without cause, if his employment terminates as a result of his death or disability, if there were a change in control of our company (regardless of whether the named executive officer was terminated), or if a termination without cause or for good reason took place within 12 months following a change in control of our company. The amounts included in the table below do not include payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. The amounts indicated are based on the payments and benefit costs that would have been incurred by our company if the named executive officer’s employment had terminated as of December 31, 2018. Where applicable, the value of one share of our common stock on December 31, 2018 was $38.00, which was the closing price of our common stock on the Nasdaq Global Select Market as of that date.


Termination Prior to or More Than 12 Months Following a Change in Control

Termination Within 12 Months Following a Change in Control Without Cause/Resignation for Good Reason; Termination Due to Death or Disability ($)(3)

Change in Control Regardless of Termination ($)(4)
Name

Without Cause ($)(1)

Termination Due to Death or Disability ($)(2)


Murugesan “Raj” Shanmugaraj












Cash Severance and Bonus(5)

662,300


966,600


1,476,750


—

Benefits Continuation(6)

16,819


16,819


16,819


—

Acceleration of Unvested Equity(7)

1,953,314


4,330,645


4,507,218


371,868

     Total Payments

2,632,433


5,314,064


6,000,787


371,868

John F. Gavin








Cash Severance and Bonus(5)

445,500


643,500


726,000


—

Benefits Continuation(6)

16,819


16,819


16,819


—

Acceleration of Unvested Equity(7)

1,127,916


2,769,022


2,879,374


263,834

     Total Payments

1,590,235


3,429,341


3,622,193


263,834

Eric L. Fisher












Cash Severance and Bonus(5)

445,500


643,500


726,000


—

Benefits Continuation(6)

16,819


16,819


16,819


—

Acceleration of Unvested Equity(7)

567,150


1,970,870


2,081,222


—

     Total Payments

1,029,469


2,631,189


2,824,041


—

Benny Mikkelsen








Cash Severance and Bonus(5)

445,500


643,500


726,000


—

Benefits Continuation(6)

16,762


16,762


16,762


—

Acceleration of Unvested Equity(7)

1,600,256


3,204,844


3,315,196


324,368

     Total Payments

2,062,518


3,865,106


4,057,958


324,368

Mehrdad Givehchi












Cash Severance and Bonus(5)

425,250


614,250


693,000


—

Benefits Continuation(6)

11,560


11,560


11,560


—

Acceleration of Unvested Equity(7)

1,600,256


3,204,844


3,315,196


324,368

     Total Payments

2,037,066


3,830,654


4,019,756


324,368


(1)
Represents cash payments and the value of benefits payable under the Severance Plan described above if we terminate the named executive officer’s employment without cause prior to or more than 12 months following a change in control of our company. As of December 31, 2018, the named executive officer would have been entitled to continue to receive his base salary for a specified period of time (12 months for Mr. Shanmugaraj and nine months for all other named executive officers) contributions to the cost of health care continuation under COBRA for up to 12 months and the amount of any earned but unpaid bonus under our executive bonus program. In addition, all of the named executive officer’s outstanding

- 43 -


time-based equity awards would be accelerated and become vested to the extent the award would have vested if the executive had remained employed through a specified period of time following the date of termination (12 months for Mr. Shanmugaraj and nine months for all other named executive officers). These benefits are referred to below as the involuntary termination benefits. Acceleration of performance-based equity awards would be determined as set forth in note (7) below.
(2)
Represents cash payments and the value of benefits payable under the Severance Plan described above upon termination due to a named executive officer’s death or disability prior to or more than 12 months following a change in control of our company. As of December 31, 2018, the named executive officer or his estate would have been entitled to the involuntary termination benefits described in note (1) above, except that (i) all of the named executive officer’s outstanding time-based equity awards would be accelerated in full and (ii) the named executive officer or his estate would also be entitled to receive a single lump-sum payment in an amount equal to the named executive officer’s target bonus amount under our executive bonus program, pro-rated for the year in which the termination of employment occurs. Acceleration of performance-based equity awards would be determined as set forth in note (7) below.
(3)
Represents the cash payments and the value of benefits payable under the Severance Plan described above upon termination of the named executive officer’s employment without cause or if such executive resigns for good reason, within 12 months following a change in control of our company. As of December 31, 2018, the named executive officer would have been entitled to a single lump-sum payment equal to a percentage of his base salary (200% for Mr. Shanmugaraj and 100% for all other named executive officers) a single lump-sum payment in an amount equal to a percentage of his or her target annual bonus for the year in which the termination of employment occurs (150% for Mr. Shanmugaraj and 100% for all other named executive officers), contributions to the cost of health care continuation under COBRA for up to 12 months, and the amount of any earned but unpaid bonus under our executive bonus program. In addition, all of the named executive officer’s outstanding time-based equity awards would be accelerated and become fully vested. These benefits are referred to below as the change in control termination benefits. In the event the named executive officer’s employment was terminated due to death or disability within 12 months of a change in control of our company, the named executive officer or his estate would be entitled to the change in control termination benefits described above. In either case, acceleration of performance-based equity awards would be determined as set forth in note (7) below.
(4)
Equity awards granted prior to our initial public offering provide that upon the occurrence of a change in control of our company, the named executive officer will get credit for an additional six months of service.
(5)
For terminations in which the named executive officer or his estate is entitled to payment for any earned but unpaid bonus under our executive bonus program, we have estimated the payout assuming the bonus would be paid at target.
(6)
The cost of benefits continuation is calculated based on the estimated cost to us of providing COBRA benefits with the same subsidy provided by the Company to regular employees covered by these benefits.
(7)
Acceleration of performance-based equity awards is determined in accordance with the terms of the applicable grant agreement. With respect to the performance-based equity awards granted in 2017, no acceleration of unvested equity is allowed. For the performance-based equity awards granted in 2018, pro-rated acceleration of unvested equity is allowed for termination due to death or disability, and, in the event of a “change in control” of our company during the performance period, pursuant to which consideration is received by holders of our common stock, the performance period will be deemed to end upon the closing date of the change in control and achievement of the relative TSR objective will be determined based on the price paid to holders of our common stock in connection with the change in control. For purpose of the above table, the cash value of performance-based equity accelerations is based on the target number of shares of the applicable equity award for each named executive officer.

- 44 -


DIRECTOR COMPENSATION
Director Compensation Program
Our Compensation Committee reviews our non-employee director compensation program on an annual basis and recommends changes, based on publicly available information and information and advice provided by an independent compensation consultant, that it deems necessary to attract and retain highly-skilled directors to our Board of Directors for review and approval.
In 2018, under our non-employee director compensation program, our non-employee directors receive the cash compensation set forth below, and an annual RSU award grant having an aggregate fair market value of $200,000 on the date of grant. In addition, new non-employee directors are also eligible for an initial RSU award having an aggregate fair market value of $300,000, on the date of grant, to be granted at our first Board of Directors meeting occurring on or following such director’s initial election to our Board of Directors. Each such RSU award will vest in equal annual installments on the first, second and third anniversary of the grant date subject to the director’s continuing to serve on our Board of Directors on such date. Annual RSU awards are made each year on the date of the annual meeting of stockholders. Each such RSU award will vest in full on the date of the next annual stockholder meeting following the date of grant subject to the director’s continuing to serve on our Board of Directors on such date. All RSU awards granted to our non-employee directors provide for the immediate acceleration of all vesting thereunder in the event of a change in control event, as defined in the applicable award agreement. 
In 2018, each non-employee director was eligible to receive compensation for his or her service on our Board of Directors or Committees thereof consisting of annual cash retainers paid quarterly in arrears, as follows:
 
Position
 
Retainer ($)
Board Member
 
35,000

Board Chair, in addition to Board Member retainer amount
 
25,000

Audit Committee Chair
 
20,000

Compensation Committee Chair
 
14,000

Nominating and Corporate Governance Committee Chair
 
8,000

Audit Committee Member
 
7,500

Compensation Committee Member
 
6,000

Nominating and Corporate Governance Committee Member
 
4,500

 
We also have a policy of reimbursing our directors for their reasonable out-of-pocket expenses incurred in attending our Board of Directors and Committee meetings.
The table below shows all compensation to our non-employee directors during 2018.
Name
 
Fees earned or paid in cash
($)(1)

Stock
awards
($)(2)

Total ($)
Vincent T. Roche(6)
 
66,000


199,987


265,987

David J. Aldrich(7)
 
42,500


199,987


242,487

Peter Y. Chung(8)
 
56,500


199,987


256,487

Stan J. Reiss(9)
 
49,000


199,987


248,987

John Ritchie(10)
 
55,000


199,987


254,987

Eric A. Swanson(11)
 
39,500


199,987


239,487


(1)
Represents annual cash retainers earned for service on our Board of Directors and Committees.
(2)
The amounts reported in this column represent the aggregate grant date fair value of an RSU award of 6,144 shares of common stock granted to our non-executive directors on May 17, 2018 under our 2016 Equity Incentive Plan, as computed in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the RSUs reported in this column are set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations—

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Critical Accounting Policies and Significant Judgments and Estimates—Stock-Based Compensation” section of our Annual Report on Form 10-K for the year ended December 31, 2018.

The following table sets forth, with respect to each of our non-employee directors, the aggregate number of RSUs outstanding as of December 31, 2018:

Name
 
Stock Awards (#)
Vincent T. Roche
 
8,342 (3)
David J. Aldrich
 
10,522 (4)
Peter Y. Chung
 
6,144 (5)
Stan J. Reiss
 
6,144 (5)
John Ritchie
 
6,144 (5)
Eric A. Swanson
 
6,144 (5)

(3)
Represents a new director RSU award granted on July 19, 2016 for 6,462 shares of common stock under our 2016 Equity Incentive Plan (this award vested as to 33% of the RSUs on June 1, 2017, an additional 33% on June 1, 2018, and as to the remaining 34% of the RSUs on June 1, 2019), and an RSU award granted on May 17, 2018 for 6,144 shares of common stock under our 2016 Equity Incentive Plan that will become fully vested on May 17, 2019.
(4)
Represents a new director RSU award granted on September 13, 2017 for 6,533 shares of common stock under our 2016 Equity Incentive Plan (this award vests as to 33% of the RSUs on September 13, 2018, an additional 33% on September 13, 2019, and as to the remaining 34% of the RSUs on September 13, 2020), and an RSU award granted on May 17, 2018 for 6,144 shares of common stock under our 2016 Equity Incentive Plan that will become fully vested on May 17, 2019.
(5)
Represents an RSU award granted on May 17, 2018 for 6,144 shares of common stock under our 2016 Equity Incentive Plan that will become fully vested on May 17, 2019.

(6)
During 2018, Mr. Roche served as a member of our Compensation Committee and as the Chair of our Board of Directors.
(7)
During 2018, Mr. Aldrich served as a member of our Audit Committee. Mr. Aldrich was also appointed to serve as a member of our Compensation Committee on April 1, 2019.
(8)
During 2018, Mr. Chung served as a member of our Audit Committee and Compensation Committee, and as the Chair of our Nominating and Corporate Governance Committee.
(9)
During 2018, Mr. Reiss served as the Chair of our Compensation Committee.
(10)
During 2018, Mr. Ritchie served as the Chair of our Audit Committee.
(11)
During 2018, Mr. Swanson served as a member of our Nominating and Corporate Governance Committee.
As a general matter, we do not provide any additional compensation to Mr. Shanmugaraj, our CEO, or Mr. Mikkelsen, our Chief Technology Officer, for their service as members of our Board of Directors. The compensation paid to Messrs. Shanmugaraj and Mikkelsen as executives in 2018 is set forth above under “Executive Compensation—Summary Compensation Table.” 
Non-Employee Director Stock Ownership Guidelines
In 2017, our Compensation Committee adopted stock ownership guidelines applicable to our non-employee directors, referred to as our Non-Employee Director Stock Ownership Policy. The Non-Employee Director Stock Ownership Policy requires that our non-employee directors hold equity in the Company with a value equal to at least three times the director’s annual cash retainer for service on our Board of Directors. The Non-Employee Director Stock Ownership Policy provides for a phase-in period, such that an individual subject to the guidelines is required to be in compliance with the minimum equity ownership requirement by the later of December 31, 2020 or the first December 31st that occurs following the five-year anniversary of date on which the non-employee director first became subject to the Non-Employee Director Stock Ownership Policy. The Non-Employee Director Stock Ownership Policy also includes certain share retention obligations that apply to non-employee directors who have not met the minimum equity ownership requirements by the end of their phase-in date or who cease to hold the minimum equity ownership at any time following such date. As of March 15, 2019, each of our non-employee directors either met the above stock ownership guidelines or is expected to meet the applicable ownership guidelines within the specified time period.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to us regarding the beneficial ownership of our common stock as of March 15, 2019, for:
•
each of our directors;
•
each of our named executive officers;
•
our directors and executive officers as a group; and
•
each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock based on currently available information filed with the SEC.
The table lists applicable percentage ownership based on 40,473,783 shares of common stock outstanding as of March 15, 2019.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our common stock. Shares of our common stock subject to options that are currently exercisable or exercisable within 60 days after March 15, 2019 and underlying RSUs that vest within 60 days after March 15, 2019 are considered outstanding and beneficially owned by the person holding the options and restricted stock for the purpose of calculating the percentage ownership of that person but not for the purpose of calculating the percentage ownership of any other person. Except as otherwise noted, the persons and entities in this table have sole voting and investing power with respect to all of the shares of our common stock beneficially owned by them, subject to community property laws, where applicable. Except as otherwise set forth below, the address of each beneficial owner is c/o Acacia Communications, Inc. 3 Mill and Main Place, Suite 400, Maynard, MA  01754.
Name of Beneficial Holder
 
Number of
Shares
Beneficially
Owned
 
Percentage of Class
5% Stockholders
 
 

 
 

Capital Research Global Investors (1)
 
3,423,288

 
8.5
%
Capital World Investors (2)
 
3,056,500

 
7.6
%
The Vanguard Group (3)
 
2,672,157

 
6.6
%
Named Executive Officers and Directors
 
 

 
 

Murugesan “Raj” Shanmugaraj (4)
 
958,092

 
2.4
%
John F. Gavin (5)
 
203,509

 
*

Eric Fisher (6)
 
4,501

 
*

Benny P. Mikkelsen (7)
 
892,661

 
2.2
%
Mehrdad Givehchi (8)
 
627,538

 
1.5
%
Vincent T. Roche (9)
 
13,040

 
*

David J. Aldrich (10)
 
2,155

 
*

Peter Y. Chung (11)
 
10,590

 
*

Stan J. Reiss (12)
 
264,444

 
*

John Ritchie (13)
 
15,166

 
*

Eric A. Swanson (14)
 
17,806

 
*

All executive officers and directors as a group (13 persons) (15)
 
3,817,219

 
9.3
%
*
Represents beneficial ownership of less than 1% of our outstanding common stock.

(1)
The information shown is based upon disclosures filed on a Schedule 13G on February 14, 2019 by Capital Research Global Investors. In such filing, Capital Research Global Investors lists its address as 333 South Hope Street, Los Angeles, California 90071, and indicates that it has sole voting power and sole dispositive power with respect to 3,423,288 shares of common stock.
(2)
The information shown is based upon disclosures filed on a Schedule 13G on February 14, 2019 by Capital World Investors. In such filing, Capital World Investors lists its address as 333 South Hope Street, Los Angeles, California 90071, and indicates that it has sole voting power and sole dispositive power with respect to 3,056,500 shares of common stock.
(3)
The information shown is based upon disclosures filed on a Schedule 13G on February 11, 2019 by The Vanguard Group. In such filing, The Vanguard Group lists its address as 100 Vanguard Blvd, Malvern, Pennsylvania 19355, and indicates that it

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has sole voting power with respect to 31,382 shares and shared voting power with respect to 1,600 shares, and sole dispositive power with respect to 2,642,225 shares and shared dispositive power with respect to 29,932 shares.
(4)
Consists of (i) 603,849 shares of common stock held by Mr. Shanmugaraj, (ii) 30,186 shares of common stock issuable to Mr. Shanmugaraj upon vesting of restricted stock units within 60 days of March 15, 2019, (iii) 169,360 shares of common stock held by The Shanmugaraj Irrevocable Children’s Trust and (iv) 154,697 shares of common stock held by The Malini Shanmugaraj 2016 QTIP Trust. The trustees of The Shanmugaraj Irrevocable Children’s Trust are Murugesan Shanmugaraj, Steve Stelljes and Malini Shanmugaraj and they share voting and dispositive power with respect to the shares held by the trust. The trustees of The Malini Shanmugaraj 2016 QTIP Trust are Malini Shanmugaraj and Steve Stelljes and they share voting and dispositive power with respect to the shares held by the trust.
(5)
Consists of (i) 16,981 shares of common stock held by Mr. Gavin, (ii) options held by Mr. Gavin to purchase 166,500 shares of common stock that may be exercised within 60 days of March 15, 2019 and (ii) 20,028 shares of common stock issuable to Mr. Gavin upon vesting of RSUs within 60 days of March 15, 2019.
(6)
Consists of 4,501 shares of common stock held by Mr. Fisher.
(7)
Consists of (i) 803,383 shares of common stock held by Mr. Mikkelsen (ii) 24,278 shares of common stock issuable to Mr. Mikkelsen upon vesting of RSUs within 60 days of March 15, 2019 and (iii) 65,000 shares held by the Chen-Rasmussen Childrens Trust U/A DTD 1/12/2017 of which Mr. Mikkelsen is a trustee.
(8)
Consists of (i) 305,090 shares of common stock held by Mr. Givehchi, (ii) 24,278 shares of common stock issuable to Mr. Givehchi upon vesting of RSUs within 60 days of March 15, 2019 and (iii) 298,170 shares of common stock held by Givehchi LLC.
(9)
Consists of 13,040 shares of common stock held by Mr. Roche.
(10)
Consists of 2,155 shares of common stock held by Mr. Aldrich.
(11)
Consists of 10,590 shares of common stock held by Mr. Chung.
(12)
Consists of (i) 189,992 shares of common stock held by Mr. Reiss, (ii) 23,002 shares of common stock held by The Reiss Family Irrevocable Trust and (iii) 51,450 shares of common stock held by Matrix VIII US Management Co., L.L.C., or Matrix VIII US MC. Mr. Reiss, by virtue of his management position in Matrix VIII US MC, has sole voting and dispositive power with respect to the Matrix VIII US MC shares. Mr. Reiss disclaims beneficial ownership of the Matrix VIII US MC shares, except to the extent of his pecuniary interest therein.
(13)
Consists of 15,166 shares of common stock held by Mr. Ritchie.
(14)
Consists of 17,806 shares of common stock held by Mr. Swanson.
(15)
Includes (i) 3,436,823 shares of common stock, (ii) options to purchase 236,581 shares of common stock that may be exercised within 60 days of March 15, 2019 and (iii) 143,815 shares of common stock issuable upon vesting of RSUs within 60 days of March 15, 2019, and excludes all shares of common stock subject to PRSUs because the performance measurement period for such PRSUs has not yet expired and therefore no shares under such awards are issuable within 60 days of March 15, 2019.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers and persons who own more than 10% of our common stock, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership. Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all such reports.
To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, we believe that for 2018, all required reports were filed on a timely basis under Section 16(a), except that for Francis J. Murphy, our Vice President of Finance and Principal Accounting Officer, one Form 4 was filed on April 4, 2018 with respect to the acquisition of restricted stock units covering 5,035 shares of our common stock on March 15, 2018, and one Form 4 was filed on December 7, 2018 with respect to the disposition of 377 shares of our common stock on December 3, 2018.

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RELATED PERSON TRANSACTIONS
Policies and Procedures for Related Person Transactions
Our Board of Directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which our company is a participant, the amount involved exceeds $120,000 and one of our executive officers, directors, director nominees or 5% stockholders, or their immediate family members (each, a “related person”) has a direct or indirect material interest.
If a related person proposes to enter into such a transaction, arrangement or relationship (a “related person transaction”) the related person must report the proposed related person transaction to our principal accounting officer. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by our Audit Committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, our Audit Committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chair of our Audit Committee to review and, if deemed appropriate, approve proposed related person transactions that arise between Audit Committee meetings, subject to ratification by our Audit Committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually by our Audit Committee.
A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by our Audit Committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, our Audit Committee will review and consider:
•
the related person’s interest in the related person transaction;
•
the approximate dollar value of the amount involved in the related person transaction;
•
the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
•
whether the transaction was undertaken in the ordinary course of our business;
•
whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;
•
the purpose of, and the potential benefits to us of, the transaction; and
•
any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.
Our Audit Committee may approve or ratify the transaction only if it determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, our company’s best interests. Our Audit Committee may impose any conditions on the related person transaction that it deems appropriate.
In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, our Board has determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
•
interests arising solely from the related person’s position as a director of another entity that is a participant in the transaction where (a) the related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) interests arising solely from the ownership of a class of the Company’s equity securities if all holders of that class of equity securities receive the same benefit on a pro rata basis, (c) compensation arrangements with executives if the compensation has been approved, or recommended to our Board of Directors for approval, by our Compensation Committee, (d) compensation for services as a director of the Company if such compensation will be publicly reported pursuant to SEC rules, (e) interests arising solely from indebtedness of a 5% stockholder (or their immediate family member), (f) a transaction where the rates or charges involved in the transaction are determined by competitive bids, (g) a transaction that involves the rendering of services as a common or contract carrier or public utility at rates or charges fixed in conformity with law or governmental authority, and (h) a transaction that involves services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services; and
•
a transaction that is specifically contemplated by provisions of our restated certificate of incorporation or our amended and restated by-laws.
The policy provides that transactions involving compensation of executives shall be reviewed and approved by our Compensation Committee in the manner specified in its charter.

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Related Person Transactions
Since January 1, 2018, we have engaged in the following transactions with our directors, executive officers and holders of more than 5% of our voting securities, and affiliates of our directors, executive officers and holders of more than 5% of our voting securities. Each of these transactions was reviewed in accordance with our related person transaction policy. We believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties.
Supply Purchases from ADI and MACOM
One of our directors, Vincent T. Roche, is also the President and Chief Executive Officer and a member of the board of directors of Analog Devices, Inc. (“ADI”). We, through our contract manufacturers, periodically purchase supplies from ADI pursuant to purchase orders negotiated on an arm’s length basis between ADI and our contract manufacturers at prevailing prices. These purchased supplies are used as content in certain of our manufactured products. Based on shipments under such purchase orders, our contract manufacturers made purchases from ADI of approximately $3.8 million during the year ended December 31, 2018. In addition, in 2018, we entered into a product development agreement with ADI related to the development of integrated circuits for $1.5 million, of which $0.8 million of costs were incurred during the year ended December 31, 2018.
One of our directors, Peter Y. Chung, is also a member of the board of directors of MACOM Technology Solutions, Inc. (“MACOM”). We, through our contract manufacturers, periodically purchase supplies from MACOM. These purchased supplies are used as content in certain of our manufactured products. Based on shipments, our contract manufacturers made purchases from MACOM of approximately $0.3 million during the year ended December 31, 2018.
Issuance of Securities to Executive Officers
On February 7, 2018, we issued 36,084 RSUs to Mr. Shanmugaraj, 23,833 RSUs to Mr. Gavin, and 22,552 RSUs each to Messrs. Fisher, Mikkelsen and Givehchi, in each case subject to the terms of our 2016 Equity Incentive Plan. The grant date fair value of the RSUs granted was $1,407,998 for Mr. Shanmugaraj, $929,964 for Mr. Gavin, and $879,979 for the other named executive officers. These RSU awards vest based on satisfaction of a time-based requirement, which will be satisfied with respect to 25% of the RSUs on February 1, 2019, and with respect to an additional 25% of the RSUs each year thereafter. In the event that we are subject to a change in control (as defined in the Severance Plan), the RSUs will be subject to the acceleration provisions of the Severance Plan.
In addition to the time-based RSUs described above, on February 7, 2018, we issued a target of 6,970 PRSUs to Mr. Shanmugaraj, and a target of 4,356 PRSUs each to Messrs. Gavin, Fisher, Mikkelsen and Givehchi, in each case subject to the terms of our 2016 Equity Incentive Plan. The grant date fair value of the PRSUs granted was $383,168 for Mr. Shanmugaraj and $239,477 for each of the other named executive officers. These PRSUs are subject to performance-based vesting. The number of PRSUs that vest is measured based on the level of achievement of a performance objective, based on the Company’s percentile achievement of relative TSR against an external comparator group over the three-year performance period, running from January 1, 2018 through December 31, 2020. In the event of “change in control” of our company during the three-year performance period, pursuant to which consideration is received by holders of our common stock, the performance period will be deemed to end upon the closing date of the change in control and achievement of the relative TSR objective will be determined based on the price paid to holders of our common stock in connection with the change in control.
Arrangements with Executive Officers and Directors
For a description of the compensation arrangements that we have with our executives, including our named executive officers, and directors, see “Executive Compensation” and “Director Compensation,” respectively, included in this Proxy Statement.

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TRANSACTION OF OTHER BUSINESS
Our Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, the persons appointed in the accompanying proxy intend to vote the shares represented thereby in accordance with their best judgment on such matters, under applicable laws.
ADDITIONAL INFORMATION
Procedures for Submitting Stockholder Proposals
Requirements for Stockholder Proposals to be Brought Before the Annual Meeting 
Our amended and restated by-laws provide that, for nominations of persons for election to our Board of Directors or other proposals to be considered at an annual meeting of stockholders, a stockholder must give written notice to our Secretary at 3 Mill and Main Place, Suite 400, Maynard, MA  01754, not later than the close of business 90 days, nor earlier than the close of business 120 days, prior to the first anniversary of the date of the preceding year’s annual meeting. However, our amended and restated by-laws also provide that in the event the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice must be delivered not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Except as noted in this paragraph, to be timely, a notice with respect to our 2020 annual meeting must be delivered to the Secretary no earlier than January 17, 2020 and no later than February 16, 2020. Any nomination must include all information relating to the nominee that is required to be disclosed in solicitations of proxies for election of directors in election contests or is otherwise required under Regulation 14A of the Exchange Act, the person’s written consent to be named in the proxy statement and to serve as a director if elected and such information as we might reasonably require to determine the eligibility of the person to serve as a director. As to other business, the notice must include a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting, and any material interest of such stockholder (and the beneficial owner) in the proposal. The proposal must be a proper subject for stockholder action. In addition, to make a nomination or proposal, the stockholder must be of record at the time the notice is made and must provide certain information regarding itself (and the beneficial owner), including the name and address, as they appear on our books, of the stockholder proposing such business, the number of shares of our capital stock which are, directly or indirectly, owned beneficially or of record by the stockholder proposing such business or its affiliates or associates (as defined in Rule 12b-2 promulgated under the Exchange Act) and certain additional information as specified in our amended and restated by-laws.
Requirements for Stockholder Proposals to be Considered for Inclusion in the Company’s Proxy Materials 
Any stockholder who wishes to submit a proposal for inclusion in our proxy materials must comply with Rule 14a-8 promulgated under the Exchange Act. For such proposals to be included in our proxy materials relating to our 2020 annual meeting of stockholders, all applicable requirements of Rule 14a-8 must be satisfied and we must receive such proposals no later than December 5, 2019. Such proposals must be delivered to our Secretary, c/o Acacia Communications, Inc., 3 Mill and Main Place, Suite 400, Maynard, MA  01754.

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