UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
Check the appropriate box:
☒ | Preliminary Proxy Statement | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
☐ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material |
BIOLASE, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)all boxes that apply):
☒ | No fee required. | |||
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Fee paid previously with preliminary materials. | ||||
☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act | |||
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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION
BIOLASE, INC.
ANNUALSPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 2018JULY 20, 2023
Dear Stockholder:
You are cordially invited to attend the 2018 annuala special meeting of stockholders (the “annualspecial meeting”) of BIOLASE, Inc., a Delaware corporation (the “Company”), on May 9, 2018,July 20, 2023, at 11:00 a.m. local time at the Company’s corporate headquarters, located at 4 Cromwell, Irvine, California 92618.27042 Towne Centre Drive, Suite 270, Lake Forest, CA 92610. At the annualspecial meeting, you will be asked to vote on the electionamendment of our certificate of incorporation to effect a reverse stock split of our common stock and such other business as may properly come before the four directors named in this proxy statement to the Company’s board of directors (our “Board”) and other matters described in the accompanying proxy materials.meeting.
YOUR VOTE IS IMPORTANT
Your vote is important, and all stockholders are cordially invited to attend the annualspecial meeting in person. Whether or not you expect to attend the annualspecial meeting, we urge you to complete, date, sign and return the enclosed proxy card or the enclosed voting instruction card as promptly as possible, or to votesubmit a proxy or voting instructions by Internet or by telephone, to ensure your representation at the annualspecial meeting. Internet or telephonic means for submitting proxies or voting isinstructions are available by following the instructions provided on the proxy card or the voting instruction card.card, as applicable. As a result of the dividend of the shares of Series I Preferred Stock distributed on June 16, 2023, each holder of shares of our common stock also holds a number of one one-thousandths of a share of our Series I Preferred Stock equal to the whole number of shares of common stock held by such holder. Because any one one-thousandths of a share of Series I Preferred Stock that are not present in person or by proxy at the special meeting as of immediately prior to the opening of the polls at the special meeting will be automatically redeemed, if you fail to submit a proxy to vote your shares or attend the special meeting in order to do so, your shares of Series I Preferred Stock will be redeemed immediately prior to the opening of the polls at the special meeting and will not be entitled to vote at the special meeting.
Our Board recommends that you vote “FOR” the electionProposal One to amend our certificate of its nominees, Harold C. Flynn, Jr., Dr. Richard B. Lanman, Dr. Jonathan T. Lord and James R. Talevich, “FOR” Proposals 2, 4, 5 and 6 and “ONE YEAR” on Proposal 3.incorporation to effect a reverse stock split of our common stock.
Our Board is deeply committed to the Company, its stockholders and enhancing stockholder value. We look forward to seeing you at the annualspecial meeting.
Sincerely, | ||
Jonathan T. Lord, M.D. | John R. Beaver | |
Chairman of the Board |
President and Chief Executive Officer |
Irvine, California — [●]Lake Forest, California—June , 20182023
PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION
BIOLASE, INC.
NOTICE OF ANNUALSPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 9, 2018JULY 20, 2023
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the annualspecial meeting of stockholders of BIOLASE, Inc., a Delaware corporation (the “Company”), will be held on May 9, 2018,July 20, 2023, at 11:00 a.m. local time at the Company’s corporate headquarters, located at 4 Cromwell, Irvine,27042 Towne Centre Drive, Suite 270, Lake Forest, California 92618,92610, to consider the following matters, as more fully described in the proxy statement accompanying this notice:
1. the election of the four directors named in the proxy statement accompanying this notice to serve until the next annual meeting of stockholders and until their successors are duly elected and qualified or until their earlier resignation or removal;
2. the advisory vote to approve the compensation of the Company’s named executive officers;
3. the advisory vote to approve the frequency of future stockholder advisory votes on the compensation of our named executive officers;
4. the approval of the Company’s 2018 Long-Term Incentive Plan;
5. the approvaladoption of an amendment to the Company’s Certificate of Incorporation to effect a reverse stock split of Company common stock and reduce(without reducing the authorized number of shares of Company common stock,stock), if and when determined by the Company’s board of directors;
6.2. the ratificationadjournment of the appointmentspecial meeting to a later date or dates, if necessary, to permit further solicitation and vote of BDO USA, LLP as our independent registered public accounting firm forproxies in the fiscal year ending December 31, 2018;event there are not sufficient votes in favor of the amendment to the Company’s Certificate of Incorporation to effect a reverse stock split; and
7.3. the transaction of such other business as may properly come before the meeting, or any adjournment or postponement thereof.
Stockholders of record at the close of business on March 21, 2018June 20, 2023 are entitled to notice of and to vote at our annualspecial meeting and any adjournment or postponement thereof. Notwithstanding the foregoing, holders of our outstanding shares Series I Preferred Stock will only be entitled to vote such shares on the proposal to amend the Company’s Certificate of Incorporation and will only be able to vote such shares of Series I Preferred Stock on such proposal to the extent that such shares have not been automatically redeemed in the Initial Redemption as described below in the accompanying proxy statement. All stockholders are cordially invited to attend the meeting in person.
YOUR VOTE IS IMPORTANT.
Whether or not you plan to attend the special meeting please sign in person and returnregardless of the enclosednumber of shares you may own, WE URGE YOU TO VOTE, YOUR VOTE IS IMPORTANT.
If you have any questions regarding the accompanying proxy card as promptly as possible in the envelope enclosed forstatement or how to vote your convenience,shares, you may contact D.F. King & Co., Inc., our proxy solicitor, toll-free at (800) 347-4750 or please vote viacollect at (212) 269-5550 or email at BIOL@dfking.com.
On or about June , 2023, we will commence mailing of our proxy materials. Our proxy materials are also available over the Internet or by telephone. If you receive more than one proxy card because your shares are registered in different names and addresses, each proxy card should be signed and returned to assure that all of your shares are represented at the annual meeting. Proxies forwarded by or for banks, brokers or other nominees should be returned as requested by them. The prompt return of proxies will save the expense involved in further communication.
www.investorvote.com/BIOL. You can find detailed information regarding voting in the section entitled “General Information” on pages 1 through 57 of the accompanying proxy statement.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUALSPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 9, 2018JULY 20, 2023
The notice of the annualspecial meeting and proxy statement and the Company’s Annual Report onForm 10-K for the fiscal year ended December 31, 2017, are available at www.investorvote.com/BIOL and at www.biolase.com under “About Us” by clicking on the “Investor Relations” tab and selecting “SEC Filings.”
BY ORDER OF THE BOARD OF |
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Michael Carroll, |
Secretary |
Lake Forest, California—June , |
In the event it is not possible or advisable to hold the special meeting at a physical location, we will host a virtual-only special meeting. If we determine to host a virtual-only special meeting, we will announce our decision by press release and posting on our website at http://www.BIOLASE.com, as well as through an SEC filing. If you are planning to attend the special meeting, please be sure to check our website for any updates in the days before our special meeting. As always, we encourage you to submit a proxy to vote your shares prior to the special meeting.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | ||||
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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION
BIOLASE, INC.
4 Cromwell27042 Towne Centre Drive, Suite 270
Irvine, California 92618Lake Forest, CA 92610
ANNUALSPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 2018JULY 20, 2023
PROXY STATEMENT
This proxy statement is furnished to stockholders of BIOLASE, Inc., a Delaware corporation (the “Company,” “we,” “our” or “us”), in connection with the solicitation of proxies by our Board of Directors (our “Board”) for use at our 2018 annuala special meeting of stockholders to be held on May 9, 2018,July 20, 2023, and at any adjournment or postponement thereof (our “annualspecial meeting”). Our annualspecial meeting will be held at 11:00 a.m. local time at our corporate headquarters located at 4 Cromwell, Irvine, California 92618.27042 Towne Centre Drive, Suite 270, Lake Forest, CA 92610.
On or about June , 2023, we will commence mailing of the proxy materials which are also available at www.investorvote.com/BIOL. The proxy materials are being sent to stockholders who owned our common stock and Series I Preferred Stock at the close of business on June 20, 2023, the record date for the special meeting (the “Record Date”). This proxy statement andcontains important information for you to consider when deciding how to vote on the accompanying proxy card are first being sent or given to stockholders on or about [●], 2018.matters brought before the meeting. Please read it carefully.
Q. | Why am I receiving these materials? |
A. | We sent you this proxy statement because our Board is soliciting your proxy to vote at our |
Q. | What proposals will be voted on at our |
A. | Stockholders will vote on |
the |
2. | The approval of an adjournment of the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event there are not sufficient votes in favor of the Amendment Proposal (the “Adjournment Proposal”). |
We will also consider other business, if any, that properly comes before our annualspecial meeting.
Q. | How does our Board recommend that stockholders vote on the proposals? |
A. | Our Board recommends that stockholders vote “FOR” the |
Q. | Who is entitled to vote? |
A. | The record date for our |
[ _] shares of our |
Q. | How many votes are allocated to each share of common stock and each share of Series I Preferred Stock? |
Each share of our common stock outstanding as of the record date is entitled to one vote per share on all matters properly brought before our special meeting. As previously announced on June 5, 2023, the Board declared a dividend of one one-thousandth (1/1,000th) of a share of Series I Preferred Stock for each outstanding share of common stock to stockholders of record of common stock as of 5:00 p.m. Eastern Time on June 16, 2023. The holders of Series I Preferred Stock have 1,000,000 votes per whole share of Series I Preferred Stock (i.e., 1,000 votes per one one-thousandth of a share of Series I Preferred Stock) and are entitled to vote with the common stock, together as a single class, on the Amendment Proposal and the Adjournment Proposal, but are not otherwise entitled to vote on the other proposals to be presented at the special meeting. Notwithstanding the foregoing, each share of Series I Preferred Stock redeemed pursuant to the Initial Redemption will have no voting power with respect to the Amendment Proposal or any other matter. When a holder of common stock submits a vote on the Amendment Proposal, the corresponding number of fractional shares of Series I Preferred Stock held by such holder will be automatically voted in a mirrored fashion unless otherwise indicated. For example, if a stockholder holds 10 shares of common stock (entitled to one vote per share) and votes in favor of the Amendment Proposal, then 10,010 votes will be recorded in favor of the Amendment Proposal, because the stockholder’s shares of Series I Preferred Stock will automatically be voted in favor of the Amendment Proposal alongside such stockholder’s shares of common stock.
All shares of Series I Preferred Stock that are not present in person or by proxy at the special meeting as of immediately prior to the opening of the polls at the special meeting will be automatically redeemed (the “Initial Redemption”). Any outstanding shares of Series I Preferred Stock that have not been redeemed pursuant to the Initial Redemption will be redeemed in whole, but not in part, (i) if and when ordered by our Board or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation effecting the reverse stock split.
Q. | What do I need for admission to our |
A. | Admittance is limited to stockholders of record of the |
Q. | How can I |
A. | Whether you |
If
By Internet—if you holdhave Internet access, you may submit a proxy or voting instructions to vote your shares by logging into the secure website, which will be listed on your proxy card or voting instruction card, as applicable, and following the instructions provided.
By Telephone—if you have telephone access, you may submit a proxy or voting instructions to vote your shares by calling the toll-free number listed on the proxy card or voting instruction card, as applicable, and following the instructions provided.
By Mail—if you requested printed copies of the proxy materials, you may submit your proxy by mail by signing your proxy card if your shares are registered or, for shares held beneficially in street name, via aby following the voting instructions included by your broker, bank or other nominee,agent, and mailing it in accordance with the instructions provided. If you may directprovide specific voting instructions, your shares will be voted as you have instructed.
Proxies submitted via the Internet or by telephone should be received by 1:00 a.m. Central Time on July 20, 2023 in order to ensure that your vote without attending our annual meeting by signing, dating and mailingis counted. Submitting your voting instruction card inproxy via the enclosed postage-paid envelope. Internet or telephonicby telephone will not affect your right to vote in person should you later decide to attend the special meeting. Even if you plan to attend the special meeting, we encourage you to submit your proxy to vote your shares in advance of the special meeting.
We provide Internet and telephone proxy voting may alsowith procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be available. Please seeaware that you must bear any costs associated with your voting instruction card for instructions.Internet and telephone access, such as usage charges from Internet access providers and telephone companies.
Q. | Can I change my vote or revoke my proxy? |
A. | You may revoke your proxy or change your vote |
Attendance at our annual meeting will not, by itself, revoke a proxy.
If your shares are held in the name of a bank, broker or other nominee, you may change your vote by submitting new voting instructions to your bank, broker or other nominee. Please note that if your shares are held of record by a bank, broker or other nominee, and you decide to attend and vote at our annual meeting, your vote in person at our annual meeting will not be effective unless you present a legal proxy, issued in your name from the record holder (your bank, broker or other nominee).
Q. | What constitutes a quorum? |
A. | The presence, |
Shares represented by properly completed proxy cards marked with voting instructions or returned without voting instructions are counted as present for the purpose of determining whether a quorum is present. Also, broker non-votes will be counted as present for the purpose of determining whether a quorum is present at the special meeting, as further described below under “What is a broker non-vote?” and “How will my shares be voted if I return a blank proxy card or a blank voting instruction card?”
Q. | What is a broker non-vote? |
A. | Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain “routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect to |
A broker non-vote occurs when a broker, bank or other nominee does not vote on a non-routine matter because the beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other nominee exercise their discretionary voting authority on Proposal Six, such shares will be considered present at the annual meeting for quorum purposes and broker non-votes will occur as to each of the other proposals presented at the annual meeting (Proposals One, Two, Three, Four and Five). Broker non-votes will have no impact on the voting results of Proposals One, Two, Three or Four, but will have the same impact as a vote “AGAINST” Proposal Five.
Q. | What vote is required to approve each matter to be considered at our |
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Our bylaws contemplate that, in the case of an uncontested election, if an incumbent director nominated for re-election fails to receive the affirmative vote of a majority of the votes cast at an annual meeting, such director will tender a resignation to become effective upon the acceptance of such resignation by the Nominating and Corporate Governance Committee. Subject to certain exceptions, the Nominating and Corporate Governance Committee (or other committee of independent directors under certain circumstances) is required to accept or reject such resignation within ninety (90) days following the certification of the election results of the annual meeting. The Company will then publicly disclose the decision of the Nominating and Corporate Governance Committee by filing a Current Report onForm 8-K with the Securities and Exchange Commission (the “SEC”).
Say-on-PayAdjournment Proposal (Proposal Two). Proposal Two asks our stockholders to approve, on an advisory basis,will be approved if the compensationholders of the Company’s named executive officers. The affirmative vote of thea majority in voting power of the shares of our common stock and Series I Preferred Stock present in person or represented by proxy at the special meeting and entitled to vote at the annual meeting is required for approval of Proposal Two.on such proposal. An abstention on Proposal Two will have the same effect
as a vote “AGAINST” Proposal Two. A broker non-vote will not have any effect on Proposal Two and will not be counted. Proposal Two is an advisory vote only, and, therefore, it will not bind the Company or our Board. However, our Board and the Compensation Committee will consider the voting results, as appropriate, when making future decisions regarding executive compensation.
Say-on-Frequency Proposal (Proposal Three). Proposal Three asks our stockholders to approve, on an advisory basis, the frequency of future stockholder advisory votes on the compensation of our named executive officers as either every one year, two years or three years. The affirmative vote of the majority of the shares of our common stock present in person or represented by proxy and entitled to vote at the annual meeting is required to approve one year, two years, or three years as the stockholders’ recommended frequency on this Proposal. However, if none of the options receives the vote of a majority, the option receiving the greatest number of votes will be considered the frequency recommended by our stockholders. Proposal Three is an advisory vote only, and, therefore, it will not bind the Company or our Board. Our Board may decide that it is in the best interest of our stockholders to hold the advisory vote on the compensation of our named executive officers more or less frequently than the option recommended by our stockholders. However, our Board and the Compensation Committee will consider the voting results, as appropriate, when determining the frequency of such future votes. An abstention would have the same effect as a vote against any particular option, but would not affect our Board’s determination of the option recommended by our stockholders if no option receives a majority vote. A broker non-vote on Proposal Three will have no effect.
Approval of Our 2018 Plan (Proposal Four). The affirmative vote of the majority of the shares of our common stock present in person or represented by proxy and entitled to vote at the annual meeting is required for the approval of Proposal Four. An abstention on Proposal Four will have the same effect as a vote “AGAINST” Proposal Four. A broker non-vote will not have any effect on Proposal Four and will not be counted.
Reverse Stock Split Proposal (Proposal Five). The affirmative vote of the holders of a majority of the outstanding shares of our common stock outstanding as of the record date is required for the approval of Proposal Five. An abstention or broker non-vote on Proposal Five will have the same effect as a vote “AGAINST” Proposal Five.
Ratification of the Appointment of BDO USA, LLP as Our Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2018. (Proposal Six). The affirmative vote of the majority of the shares of our common stock present in person or represented by proxy and entitled to vote at the annual meeting is required for the approval of Proposal Six. An abstention on Proposal Six will have the same effect as a vote “AGAINST” Proposal Six. Brokers will have discretionary authority to vote on this proposal. Accordingly, there will not be any broker non-votes on Proposal Six.the Adjournment Proposal.
Q. | What is the deadline for submitting a proxy? |
A. | To ensure that proxies are received in time to be counted prior to our |
Q. | What does it mean if I receive more than one set of proxy |
A. | If you hold your shares in more than one account, you will receive |
Q. | What happens if I |
A. | If you are a holder of record of shares of our common stock and |
If you hold your shares in street name via a broker, bank or other nominee and do not provide the broker, bank or other nominee with voting instructions, (including by signing and returning a blankassuming your broker, bank or other nominee exercises its voting instruction card),discretion with respect to your shares:shares, your shares of common stock and your shares of Series I Preferred Stock with respect to the Amendment Proposal and the Adjournment Proposal:
will be counted as present for purposes of establishing a quorum;quorum (including any such shares of Series I Preferred Stock); and
will be voted in accordance with the broker’s, bank’s or other nominee’s discretion on “routine” matters, which includes only the proposal to ratify the appointment of our auditors for the fiscal year ending December 31, 2018 (Proposal Six);
matters.
Our Board knows of no matter to be presented at our annualspecial meeting other than the election of directors, the say-on-pay proposal, the say-on-frequency proposal, the approval of our 2018 Plan, the reverse stock split proposal, and the ratification of our independent registered public accounting firm.Amendment Proposal. If any other matters properly come before our annualspecial meeting upon which a vote properly may be taken, shares represented by all proxies received by us on the proxy card will be voted with respect thereto as permitted and in accordance with the judgment of the proxy holders.
Q. | Who is making this |
A. | This proxy solicitation is being made on behalf of our Board. We have retained D.F. King & Co, Inc. (“D.F. King”) to provide proxy solicitation services in connection with the special meeting. We will pay D.F. King a fee of approximately $40,000 and will reimburse D.F. King’s reasonable and customary documented out-of-pocket expenses incurred. We will bear the entire cost of solicitation, including the maintenance of the Internet website used to access the proxy materials, maintenance of the Internet website used to vote, preparation, assembly, printing and mailing of this proxy statement, the proxy card and any additional solicitation materials we furnish to our stockholders. Copies of the Company’s solicitation materials will be furnished to brokerage houses, fiduciaries and custodians holding shares in their names that are beneficially owned by others so that they may forward this solicitation material to such beneficial owners. Upon request, we will reimburse such persons for their costs in forwarding such solicitation materials to such beneficial owners. |
Q. | Will a stockholder list be available for inspection? |
A. | In accordance with |
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
ELECTION OF DIRECTORS
General
Our Board currently consists of four directors whose term of office expires at our annual meeting. Our bylaws provide that our Board will consist of no more than five directors.
At a meeting held on February 14, 2018, our Board nominated each of Harold C. Flynn, Jr., Dr. Richard B. Lanman, Dr. Jonathan T. Lord and James R. Talevich (collectively, the “Board Nominees”) for election to our Board at our annual meeting. All of the Board Nominees currently serve on our Board. All of the Board Nominees have consented to be named in this proxy statement and have agreed to serve, if elected, until the 2019 annual meeting of stockholders and until their successors have been duly elected and qualified or until their earlier resignation or removal.
Unless otherwise instructed, the proxy holders will vote the shares represented by proxies received by them “FOR” each of the Board Nominees.
The following table sets forth certain information regarding the Board Nominees. Each of the Board Nominees, other than Mr. Flynn, is a member of the Compensation Committee, Nominating and Corporate Governance Committee and Audit Committee.
Board Nominees
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Recommendation of Our Board
Our Board believes that it is important to ensure that our Board is comprised of highly qualified individuals who have relevant experience and are accomplished in their respective fields. Our Board also believes that it is important for the full Board to work together constructively with a focus on stockholder value and a duty to both the Company and to the interests of all of the Company’s stockholders. Our Board believes that all of the Board Nominees meet these criteria.
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF THE BOARD NOMINEES NAMED ABOVE.
Board Role in Risk Oversight
Our Board takes an enterprise-wide approach to risk management that seeks to complement our organizational objectives, strategic objectives, long-term organizational performance and the overall enhancement of stockholder value. Our Board assesses and considers the risks we face on an ongoing basis, including risks that are associated with our financial position, our competitive position, the impact of our operations on our cost structure, our historical reliance on a small number of distributors, and our reliance on single source suppliers for some of our components. In addition, our Board reviews and assesses information regarding cybersecurity risks with management. Our Board’s approach to risk management includes understanding the risks we face, analyzing them with the latest information available and determining the steps that should be taken to manage those risks, with a view toward the appropriate level of risk for a company of our size and financial condition.
Certain committees of our Board actively manage risk within their given purview and authority. Our Audit Committee, for example, reviews our disclosure controls and our internal controls over financial reporting on a quarterly basis, including our overall risk assessment and our processes and procedures for assessing risks. In addition, our Compensation Committee, in setting performance metrics, creates incentives for our senior executives that encourage only an appropriate level of risk-taking that is commensurate with our Company’s short-term and long-term strategies and their attendant risks.
Board Composition and Qualifications
Each Board Nominee brings a strong and unique set of skills and background to our Board and gives our Board as a whole substantial experience and competence in a wide variety of areas, including service on other boards of directors of both public and private companies, executive management, medical devices, capital equipment, specialty healthcare, consumer products, sales and marketing, international operations, public accounting, corporate finance, risk assessment and manufacturing.
Board Leadership Structure
Our Board currently consists of three non-management directors and our President and Chief Executive Officer, Mr. Flynn. Mr. Lord, one of our independent directors, is Chairman of the Board. Our Board has no policy requiring that the positions of the Chairman of the Board and the Chief Executive Officer be separate or that they be occupied by the same individual. Our Board believes that this matter is properly addressed as part of the succession planning process and that it is in the best interests of the Company for our Board to determine whether to combine the positions from time to time. At this time, our Board believes that the independent Chairman arrangement serves the Company well.
Director Independence
Our Board has determined that each of the Board Nominees, other than Mr. Flynn, is an independent director as defined by the listing standards of the NASDAQ Marketplace Rules (the “NASDAQ Rules”) and the rules and regulations of the SEC. In addition, our Board has determined that each of Paul N. Clark and Dr. Frederic H. Moll, who served on our Board during 2017 prior to their resignations, were independent under the same standards. Mr. Flynn is determined not to be an independent director based on his service as our current President and Chief Executive Officer.
Board Committees and Meetings
Our Board held five meetings (including regularly scheduled and special meetings) during the year ended December 31, 2017. During 2017, each person currently serving as a director attended at least 75% of the
aggregate of (i) the total number of meetings of our Board held during the period for which he was a director and (ii) the total number of meetings held by all committees of our Board on which such director served during the period for which he served. Although we have no policy with regard to director attendance at our annual meetings of stockholders, it is customary for, and we encourage, all of our directors to attend our annual meetings of stockholders. All of our current directors serving at the time attended our 2017 annual meeting of stockholders.
Our Board has established three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each committee operates pursuant to a written charter that has been approved by our Board. A copy of the current charter for each of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee is available on our website at www.biolase.com under “About Us,” then “Investor Relations,” then the link “Corporate Governance.” We do not intend the website address listed in this proxy statement to be an active link or to otherwise incorporate the contents of our website into this proxy statement.
Audit Committee.The Audit Committee currently consists of Mr. Talevich and Drs. Lord and Lanman. Mr. Talevich serves as its Chairman. Our Board has determined that Mr. Talevich qualifies as an “audit committee financial expert” under the SEC rules and meets the financial sophistication requirements of the NASDAQ Rules. Each member of the Audit Committee is independent as defined in the NASDAQ Rules, including the enhanced independence standards for Audit Committee members.
The primary responsibilities of the Audit Committee include, but are not limited to: (i) the appointment, compensation and oversight of the work of our independent auditor; (ii) reviewing and discussing with management and our independent auditor our accounting practices and systems of internal accounting controls, as applicable; (iii) reviewing our financial reports, our accounting and financial policies in general, and procedures and policies with respect to our internal accounting controls; and (iv) reviewing the independence qualifications and quality controls of our independent auditor and approving all auditing services and permitted non-audit services to be performed by the independent auditor. The Audit Committee held five meetings during 2017.
Compensation Committee.The Compensation Committee currently consists of Mr. Talevich and Drs. Lord and Lanman. Dr. Lord serves as its Chairman. Each of the current members of the Compensation Committee (i) is independent as defined in the NASDAQ Rules, considering the additional standards for Compensation Committee members set forth therein, (ii) qualifies as a “non-employee” director under SEC rules and regulations and (iii) qualifies as an “outside” director under the Internal Revenue Code of 1986, as amended (the “Code”).
The Compensation Committee’s primary responsibilities include, but are not limited to: (i) reviewing and developing our general compensation policies; (ii) reviewing and approving the compensation of our Chief Executive Officer and other executive officers, including salary, bonus, long-term incentive and equity compensation, and any other perquisites and special or supplemental benefits; (iii) making awards under and acting as administrator of our equity incentive plans; (iv) overseeing administration of our other employee benefit plans; (v) making recommendations to our Board regarding director compensation; and (vi) producing an annual report on executive compensation for inclusion in our annual proxy statement. The charter for the Compensation Committee requires it to meet at least twice annually. The Compensation Committee held four meetings during 2017.
For compensation decisions relating to our executive officers other than our Chief Executive Officer, our Compensation Committee has historically considered the recommendations of our Chief Executive Officer, based on his assessment of each executive officer’s position and responsibilities, experience and tenure, his observations of each executive officer’s performance during the year and his review of competitive pay practices. Our Chief Executive Officer does not have a role in determining or recommending director compensation. The
Compensation Committee has the sole authority to retain consultants and advisors as it may deem appropriate in its discretion, and the Compensation Committee has the sole authority to approve related fees and other retention terms.
The Compensation Committee has the authority to hire and fire its own outside compensation consultant and any other advisors it deems necessary. Since July 2014, the Compensation Committee has engaged Arnosti Consulting, Inc. (“Arnosti”) to act as its independent consultant. Arnosti provides the Compensation Committee with information regarding market compensation levels, general compensation trends and best practices. The Compensation Committee also asks Arnosti to provide views on the reasonableness of specific pay decisions and actions for our named executive officers, as well as the appropriateness of the design of the Company’s executive compensation programs.
The activities of Arnosti are directed by the Compensation Committee, although Arnosti may communicate with members of management, as appropriate, to gather data and prepare analyses as requested by the Compensation Committee. During 2017, the Compensation Committee asked Arnosti to review market data and advise our Compensation Committee and management on setting executive compensation and the competitiveness and reasonableness of the Company’s executive compensation program; and review and advise the Compensation Committee regarding the Company’s pay for performance, equity grant and dilution levels, each relative to the market.
In 2017, Arnosti did not provide any other services to the Company. The Compensation Committee assessed the independence of Arnosti pursuant to SEC rules and concluded that Arnosti’s work for the Compensation Committee does not raise any conflict of interest.
The Compensation Committee has determined that Arnosti is independent because it does no work for us other than as requested by the Compensation Committee. The Chairman of the Compensation Committee reviews Arnosti’s invoices, which are paid by the Company.
Nominating and Corporate Governance Committee.The Nominating and Corporate Governance Committee currently consists of Mr. Talevich and Drs. Lord and Lanman. Dr. Lord serves as its Chairman. Each of the members of the Nominating and Corporate Governance Committee is independent as defined in the NASDAQ Rules. The Nominating and Corporate Governance Committee is responsible for, among other things: (i) identifying individuals who are qualified to be members of our Board and recommending that our Board select the nominees for directorships; (ii) to the extent deemed appropriate by the committee, developing and recommending to our Board a set of corporate governance principles for the Company; (iii) establishing the criteria and procedures for selecting new directors; (iv) overseeing the process for evaluating our Board and management; and (v) reviewing and reassessing, at least annually, the charter of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held one meeting during 2017.
The Nominating and Corporate Governance Committee considers candidates for membership to our Board suggested by its members and our other Board members, as well as by our management and stockholders. The Nominating and Corporate Governance Committee may also retain a third-party executive search firm to identify candidates. Dr. Lanman, who joined our Board in October 2017, was identified as a candidate for membership to our Board by a non-employee director. All recommendations submitted by stockholders should be submitted to the Chairperson of the Nominating and Corporate Governance Committee, to the attention of the Corporate Secretary, BIOLASE, Inc., 4 Cromwell, Irvine, California 92618 and must be accompanied by (1) a detailed resume of the candidate, (2) an explanation of the reasons why the stockholder believes this candidate is qualified for service on our Board, (3) such other information about the candidate that would be required by the SEC rules to be included in a proxy statement, (4) the consent of the candidate, (5) a description of any relationships, arrangements or undertakings between the stockholder and the candidate regarding the nomination or otherwise and (6) proof of the stockholder’s stockholdings in the Company. A stockholder wishing to formally nominate a director for election at a stockholder meeting must comply with the provisions in the Company’s bylaws addressing stockholder nominations of directors.
The Nominating and Corporate Governance Committee focuses on the following criteria in determining whether a candidate is qualified to serve on our Board: (i) personal and professional integrity, ethics and values; (ii) experience in corporate management, such as serving as an officer or former officer of a publicly held company; (iii) experience in the Company’s industry and with relevant social policy concerns; (iv) experience as a board member of another publicly held company; (v) academic expertise in an area of the Company’s operations; (vi) practical and mature business judgment; (vii) whether the candidate has the time required for preparation, participation and attendance at meetings; and (viii) requirements relating to board and board committee composition under applicable law and the NASDAQ Rules. The Nominating and Corporate Governance Committee, and our Board, may also consider the overall diversity of our Board when making a determination on qualification for service on our Board to ensure that our Board is able to represent the best interests of all of our stockholders and to encourage innovative solutions and viewpoints by considering background, education, experience, business specialization, technical skills and other factors with respect to a particular candidate, as compared to composition of our Board at a given time. The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders on the same basis that it evaluates other nominees for director.
Stockholder Communications
Any stockholder who wishes to communicate with our Board or any individual director may send written communications to our Board or such director c/o Corporate Secretary, BIOLASE, Inc., 4 Cromwell, Irvine, California 92618. The communication must include the stockholder’s name, address and an indication that the person is our stockholder. The Corporate Secretary will review any communications received from stockholders and will forward such communications to the appropriate director or directors, or committee of our Board, based on the subject matter.
Section 16(a) Beneficial Ownership Reporting Compliance
The members of our Board, executive officers and beneficial holders of more than ten percent of the outstanding shares of our common stock are subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) which requires them to file reports with respect to their ownership of our securities. To our knowledge, based solely upon the copies of Section 16(a) reports and written representations which we received from such persons for their 2017 fiscal year transactions in our common stock and their common stock holdings, we believe that all reporting requirements under Section 16(a) for such fiscal year were met in a timely manner by our directors, executive officers and greater than ten percent beneficial owners, except for the following late filings: (i) a Form 4 related to the vesting of restricted units held by Mr. Flynn filed on March 23, 2017, (ii) a Form 4 related to the conversion of preferred stock into common stock and the lifting of certain restrictions on warrants held by Mr. Feinberg filed on July 5, 2017, and (iii) a Form 4 related to purchases of common stock by Mr. Schuler filed on July 13, 2017.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics. This code of ethics applies to all of our directors, executive officers and employees. This code of ethics is publicly available on our website at www.biolase.com under “About Us,” then “Investor Relations,” using the links “Corporate Governance,” followed by “Conduct,” and in print upon request to the Secretary at BIOLASE, Inc., 4 Cromwell, Irvine, California 92618. If we make amendments to the code of ethics or grant any waiver that we are required to disclose, we will disclose the nature of such amendment or waiver on our website.
Certain Relationships and Related Transactions
Pursuant to its charter, the Audit Committee is required to review any insider or related party transactions. In connection with this requirement, our written policy for the review of related party transactions (transactions
with the Company or any of its subsidiaries involving our directors, director nominees, executive officers or holders of more than five percent of our outstanding common stock or any member of the immediate family of the foregoing) is reviewed by our Audit Committee and our Board at least annually. Under our policy, any related party transactions require prior approval by the Audit Committee or by a majority of the disinterested members of our Board. In addition, transactions involving our directors are disclosed and reviewed by the Nominating and Corporate Governance Committee in its assessment of our directors’ independence. To the extent any related party transactions are ongoing business relationships, the transactions are reviewed annually by the Audit Committee. Related party transactions must be on terms no less favorable to the Company than those that it believes could be obtained from unaffiliated third parties.
Since January 1, 2017, there has not been, and there is not currently proposed, any transaction or series of related transactions in which we were or are to be a participant or are currently a participant involving an amount in excess of $120,000 and in which (a) any director, nominee for director, executive officer or stockholder known to the Company to be the beneficial owner of more than five percent of our outstanding common stock or (b) any member of the immediate family of any person identified in clause (a) had or will have a direct or indirect material interest.
The following table sets forth all compensation earned or paid to our non-employee directors during the year ended December 31, 2017. Mr. Flynn, the Company’s current President and Chief Executive Officer, did not earn any compensation for his services as a director in 2017.
Name | Fees Earned or Paid in Cash | Stock Awards (1) | Option Awards (1) | All Other Compensation | Total | |||||||||||||||
Paul N. Clark(2) | $ | — | $ | 82,016 | $ | 158,755 | $ | — | $ | 240,771 | ||||||||||
Richard B. Lanman, M.D.(3) | — | — | 71,124 | — | 71,124 | |||||||||||||||
Jonathan T. Lord, M.D. | — | 42,605 | 135,548 | — | 178,153 | |||||||||||||||
Frederic H. Moll, M.D.(4) | — | 42,605 | 104,148 | — | 146,753 | |||||||||||||||
James R. Talevich | — | 44,736 | 90,017 | — | 134,753 |
If you have any questions about how to vote your shares, you may contact our |
Our non-employee directors other than the Chairman of the Board receive annual compensation consisting of a stock option based upon a cash value of $85,000,D.F. King & Co, Inc.
48 Wall Street, 22nd Floor
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Banks and the Chairman of the Board receives annual compensation consisting of a stock option based upon a cash value of $170,000. In addition to the foregoing, the Chairman of the Audit Committee receives annual compensation consisting of a stock option based upon a cash value of $20,000, members of the Audit Committee (other than the Chairman of the Audit Committee) receive annual compensation consisting of a stock option based upon a cash value of $15,000, the Chairman of the Compensation Committee receives annual compensation consisting of a stock option based upon a cash value of $15,000 and members of the Compensation Committee (other than the Chairman of the Compensation Committee) receive annual compensation consisting of a stock option based upon a cash value of $7,500. No additional compensation was provided in 2017 for service on the Nominating and Corporate Governance Committee. New non-employee directors elected or appointed other than at an annual meeting of stockholders receive compensation on a pro rata basis. Each option grant vests in equal monthly installments over a consecutive 12-month period, commencing one month from the date of grant. The number of shares of our common stock for which stock options are exercisable with respect to each such stock option grant is calculated as follows: the sum total cash value of the compensation that a director is entitled to receive based upon such director’s service, as described above, less the portion of such compensation that such director elects to receive in cash, multiplied by three and divided by the average share price of our common stock for the trailing 12 months prior to the date of grant.Brokers Call: (212) 269-5550
In addition, upon his election to our Board, Dr. Lanman received a stock option to purchase 135,333 shares of our common stock at $0.76 per share on November 1, 2017. Each stock option is immediately exercisable for all of the option shares. However, any shares of our common stock purchased under such option are subject to
repurchase by the Company, at the lower of the exercise price paid per share or the fair market value per share (determined at the time of repurchase), should Dr. Lanman cease Board service prior to vesting of such shares. The shares of our common stock subject to the option grant vest, and the Company’s right of repurchase lapses, in four successive quarterly installments upon Dr. Lanman’s completion of each quarter of service as a non-employee director measured from the grant date. The shares of our common stock subject to the option grant will immediately vest in full if certain changes in control or ownership occur or if Dr. Lanman dies or becomes disabled while serving as a director.
The following table sets forth the aggregate grant date fair value of each grant of stock options and RSUs awarded to our non-employee directors in 2017.
Director | Grant Date | Type of Award | Exercise Price | Number of Shares Underlying Stock Awards Originally Granted | Aggregate Grant Date Fair Value | |||||||||||||
Paul N. Clark | May 10, 2017 | Option | $ | 1.21 | 203,345 | $ | 158,755 | |||||||||||
Paul N. Clark | May 10, 2017 | RSU | n/a | 67,782 | 82,016 | |||||||||||||
Richard B. Lanman, M.D. | November 1, 2017 | Option | 0.75 | 135,333 | 67,379 | |||||||||||||
Richard B. Lanman, M.D. | November 8, 2017 | Option | 0.57 | 9,868 | 3,745 | |||||||||||||
Jonathan T. Lord, M.D. | May 10, 2017 | Option | 1.21 | 105,634 | 82,470 | |||||||||||||
Jonathan T. Lord, M.D. | May 10, 2017 | RSU | n/a | 35,211 | 42,605 | |||||||||||||
Jonathan T. Lord, M.D. | September 11, 2017 | Option | 0.54 | 65,385 | 23,194 | |||||||||||||
Jonathan T. Lord, M.D. | September 12, 2017 | Option | 0.61 | 65,891 | 26,459 | |||||||||||||
Jonathan T. Lord, M.D. | November 8, 2017 | Option | 0.57 | 9,027 | 3,425 | |||||||||||||
Frederic H. Moll, M.D. | May 10, 2017 | Option | 1.21 | 105,634 | 82,470 | |||||||||||||
Frederic H. Moll, M.D. | May 10, 2017 | RSU | n/a | 35,211 | 42,605 | |||||||||||||
James R. Talevich | May 10, 2017 | Option | 1.21 | 110,915 | 86,593 | |||||||||||||
James R. Talevich | May 10, 2017 | RSU | n/a | 36,972 | 44,736 | |||||||||||||
James R. Talevich | November 8, 2017 | Option | 0.57 | 9,868 | 3,745 |
The following table sets forth the number of shares underlying outstanding stock options (vested and unvested) and unvested RSU awards held as of December 31, 2017 by each of the persons who served as a non-employee director during 2017.
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COMPENSATION DISCUSSION AND ANALYSIS
This compensation discussion and analysis section discusses the compensation policies and programs for our named executive officers, which consist of:
The Compensation Committee of our Board is primarily responsible for overseeing the development and administration of the total compensation program for corporate officers and key executives and administering our executive incentive bonus and stock plans.
Compensation Objectives
It is important that we employ energetic people who are enthusiastic about our mission and our products, and we believe this must start at the top with our executive officers who set an example for the entire company. We are engaged in a very competitive industry, and our success depends upon our ability to attract and retain qualified executive officers by offering them competitive compensation packages. Our compensation programs for our executive officers are designed to attract and retain such key executive officers and to reward them in a fashion commensurate with our corporate performance and the value created for our stockholders. Our compensation programs are also designed to support our short-term and long-term strategic goals and values and reward the individual contributions of our executive officers to our success.
Our policy is to provide our executive officers with competitive compensation opportunities that reward their contribution to our financial success and individual performance, while providing financial stability and security. Accordingly, the compensation package for executive officers is mainly comprised of the following compensation elements: (1) a base salary, designed to be competitive with salary levels in the industry and to reflect individual performance; (2) an annual discretionary bonus payable in cash and based on the review of certain annual financial and other performance measures, designed to support our short-term performance; and (3) where appropriate, long-term stock-based incentive awards, designed to support our long-term performance and strengthen the mutual interests between our executive officers and our stockholders. We believe that each of these elements and their combination supports our overall compensation objectives.
Determination of Compensation Awards
The Compensation Committee determines the compensation to be paid to our executive officers. For compensation decisions relating to our executive officers other than our Chief Executive Officer, our Compensation Committee has historically considered the recommendations of our Chief Executive Officer, based on his assessment of each executive officer’s position and responsibilities, experience and tenure, his observations of each executive officer’s performance during the year and his review of competitive pay practices. In addition, as noted earlier in this proxy statement, Arnosti provides independent executive consulting services to the Compensation Committee. The Compensation Committee reviews the total compensation levels and the distribution of compensation among the compensation elements identified above for each of our executive officers. The Compensation Committee determines the total compensation levels for our executive officers by considering each executive officer’s position and responsibilities, the individual’s performance of his job-related duties and responsibilities and our financial performance, in the context of our compensation policies and objectives and competitive market data (evaluated with the assistance of Arnosti) applicable to each executive officer’s position.
The principal factors that were taken into account in establishing each executive officer’s compensation package for 2017 are described below. The Compensation Committee may in its discretion apply entirely different factors, such as different measures of financial performance, in future years.
Market Comparisons
The Compensation Committee periodically reviews competitive market data with the assistance of Arnosti, as they believe that compensation decisions are complex and require a deliberate review of Company
performance and the market’s compensation levels, as well as the overall business environment and the contributions of each individual. Accordingly, the Committee’s approach is to consider competitive compensation practices as a relevant factor rather than establishing compensation at specific benchmark percentiles. We believe that this enables us to respond to dynamics in the labor market and provides us with flexibility in maintaining and enhancing our executive officers’ engagement, focus, motivation and enthusiasm for our future.
Components of Compensation
During 2017, our executive officers’ direct compensation was composed of base salary, annual incentive bonuses, and equity compensation. Based on 2017 Company performance, the Compensation Committee did not award annual incentive bonuses to the named executive officers.
The Compensation Committee monitors the results of the annual advisory “say-on-pay” proposal and incorporates such results as one of many factors considered in connection with the discharge of its responsibilities. Because a substantial majority of our stockholders approved the compensation program described in our proxy statement in 2017, the Compensation Committee did not implement any changes to our executive compensation program as a result of the stockholder advisory vote.
Base Salaries
Our executive officers’ base salaries are assessed annually by the Compensation Committee, taking into account each officer’s position and responsibilities, including accomplishments and contributions, experience and tenure. In addition, the Compensation Committee considered our stockholders’ previous approval, on an advisory basis, of the compensation of the Company’s named executive officers, as well as the Company’s recent performance and current market conditions.
Mr. Flynn.Until September 11, 2017, Mr. Flynn received an annual base salary of $425,000, which was negotiated at the time he joined the Company and was based on comparable market data, as well as ourcompensation goals and objectives. However, on September 11, 2017, Mr. Flynn, agreed to an aggregate reduction in his base salary of $60,000 through the period ended March 3, 2018, in exchange for a grant of RSUs with a grant date fair value equal to $69,000. These performance-based RSUs vest over a one-year performance period based on pre-established revenue goals. These revenue goals were designed to be challenging but achievable with strong Company performance.
Mr. Beaver. Under the terms of Mr. Beaver’s 2017 employment agreement, Mr. Beaver receives an annual base salary of $325,000. His base salary was negotiated at the time he joined the Company and was based on comparable market data, as well as our compensation goals and objectives.
Mr. Boutoussov.Until September 11, 2017, Mr. Boutoussov received an annual base salary of $275,000, which was based on 2015 competitive market data presented by Arnosti. However, on September 11, 2017, Mr. Boutoussov, agreed to an aggregate reduction in his base salary of $22,000 through the period ended March 3, 2018, in exchange for a grant of RSUs with a grant date fair value equal to $25,300. These performance-based RSUs vest over a one-year performance period based on pre-established revenue goals. These revenue goals were designed to be challenging but achievable with strong Company performance.
Mr. Nelson. Under the terms of Mr. Nelson’s 2017 employment agreement, Mr. Nelson’s annual base salary was $325,000. His base salary was negotiated at the time he joined the Company and was based on comparable market data, as well as our compensation goals and objectives.
Annual Bonuses and Stock-Based Incentive Awards
Annual cash bonuses are intended to reward accomplishment of our overall corporate performance and objectives for a fiscal year. During 2017 the Compensation Committee determined stock options and RSUs could
also be utilized as a tool to incentivize certain executive members of management, and to further align management and stockholder interests. Stock-based incentives align the interests of our executive officers with those of our stockholders and provide each individual with a significant incentive to manage us from the perspective of an owner with an equity stake in our business. Stock options allow our executive officers to purchase shares of our common stock at a fixed price per share (which is at least the closing sale price of our stock on the grant date) over a specified period of time. Stock options generally become exercisable in a series of installments over either a three- or four-year period, contingent upon the officer’s continued employment with us. Accordingly, stock options provide a return to the executive officer only if he remains employed by us during the vesting period, and then only if the market price of the shares appreciates over the option term. As such, stock options not only reward our corporate performance but are also a key retention tool. RSUs are also utilized as a tool to incentivize certain executive members of management, and to further align management and stockholder interest. The size of the equity grant to each executive officer, including any grant considered for our Chief Executive Officer and our other named executive officers, is set at a level that is intended to create a meaningful opportunity for stock ownership based on the individual’s position with us, the individual’s performance of his job-related duties and responsibilities in recent periods and his potential for future responsibility and promotion over the option term. The Compensation Committee also takes into account the number of unvested equity awards held by the executive officer in order to maintain an appropriate level of equity incentive for that individual. The weight given to each of these factors varies from individual to individual.
Mr. Flynn.Mr. Flynn was eligible to receive an annual performance bonus of up to 60% his base salary, based upon the achievement of certain criteria as established by the Compensation Committee relating to product sales and strategy. These performance goals were designed to be challenging, yet achievable with strong management performance. On February 6, 2017, Mr. Flynn was granted 1,000,000 RSUs that vest as follows: (i) one-quarter on the two-year anniversary of the award date, (ii) one-eighth on the three-year anniversary of the award date, (iii) one-eighth on the fourth-year anniversary of the award date, and (iv) one-half based upon specific performance criteria relating to revenue and cash goals over the 2017-2018 performance period, as established by the Compensation Committee, subject to Mr. Flynn’s continued service with the Company through the applicable vesting dates. On November 14, 2017, Mr. Flynn received a stock option to purchase 20,000 shares of common stock, vesting based upon specific performance criteria relating to Company revenue goals over the fourth quarter 2017 performance period. The performance goals were designed to be challenging but achievable with strong Company performance. However, based on achievement, this award was forfeited on December 31, 2017.
Mr. Beaver. Mr. Beaver was eligible to receive an annual performance bonus of up to 50% of his base salary, based upon the achievement of certain criteria as established by the Compensation Committee. In 2017, Mr. Beaver received an inducement grant of non-qualified stock options to purchase 600,000 shares of our common stock. The exercise price of such options was $0.59 per share and such options vest as follows: (i) one-sixth vest on the one-year anniversary of grant, (ii) one-half vests ratably on a monthly basis over a three-year period after the one-year anniversary of grant, and (iii) one-third vests based upon certain performance criteria relating to revenue and cash goals over the 2018-2019 performance period, as established by the Compensation Committee, in all cases subject to Mr. Beaver’s continued service through the applicable vesting date. On November 14, 2017, Mr. Beaver received a stock option to purchase 20,000 shares of our common stock, vesting based upon specific performance criteria relating to Company revenue goals over the fourth quarter 2017 performance period. The performance goals were designed to be challenging but achievable with strong Company performance. However, based on achievement, this award was forfeited on December 31, 2017.
Mr. Boutoussov.Mr. Boutoussov was eligible to receive an annual performance bonus of up to 40% his base salary, which was determined based on a qualitative assessment of employee performance and revenue generation. On November 14, 2017, Mr. Boutoussov received a stock option to purchase 20,000 shares of common stock, vesting based upon specific performance criteria relating to Company revenue goals over the fourth quarter 2017 performance period. The performance goals were designed to be challenging but achievable with strong Company performance. However, based on achievement, this award was forfeited on December 31,
2017. On May 9, 2017, Mr. Boutoussov received a grant of 70,000 RSUs, which vest as follows: (i) one-fourth will vest on May 5, 2018, (ii) one-fourth will vest on May 9, 2019, and (iii) one-half will vest based on achievement of certain performance criteria relating to Company revenue goals over the 2017-2018 performance period. The one-fourth of such RSUs relating to Company revenue goals over the 2017 performance period was forfeited as of December 31, 2017 based on failure to satisfy the performance criteria.
Mr. Nelson. Mr. Nelson was eligible to receive an annual performance bonus of up to 50% of his based salary, based upon the achievement of certain criteria as established by the Compensation Committee. In 2017, Mr. Nelson was granted non-qualified stock options to purchase 600,000 shares of our common stock. The exercise price of such options was $1.28 per share and such options vest as follows: (i) with respect to 400,000 of the stock options, one-fourth vest on the one-year anniversary of grant, and the remaining three-fourths vest ratably on a monthly basis over a three-year period, and (ii) with respect to 200,000 of the stock options, based upon certain performance criteria relating to revenue and cash goals over the 2017-2018 performance period as established by the Compensation Committee, in all cases subject to Mr. Nelson’s continued service through the applicable vesting date.
Severance and Change of Control Arrangements
All 2017 named executive officers are employed by the Company on an “at will” basis. Pursuant to the terms of select employment agreements, severance benefits may be provided in the event that either the Company terminates employment without cause or the officer resigns for good reason. Please see the “Potential Payments Upon Termination or Change in Control” section below for a quantification of the amounts to be received by each NEO assuming a termination of employment or a change in control occurred as of December 31, 2017.
Perquisites
Pursuant to the terms of Mr. Beaver’s employment agreement, he has agreed to relocate his primary residence from Texas to a location within reasonable commuting distance to Irvine, California on or before July 1, 2018. Under the terms of his agreement, Mr. Beaver is eligible to receive a relocation stipend of up to $47,500, payable bi-weekly in $2,500 installments, from the effective date of his employment until the earlier of his relocation or July 1, 2018.
2017 Summary Compensation Table
The following table shows compensation information for each of our named executive officers, which we sometimes refer to as “NEOs” in this proxy statement:
Name and Principal Position | Year | Salary ($)(3) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($)(2) | Total ($) | ||||||||||||||||||||||||
Harold C. Flynn, Jr. | 2017 | 388,077 | — | 1,619,000 | 7,604 | — | 871 | 2,015,552 | ||||||||||||||||||||||||
President and Chief Executive Officer | 2016 | 441,346 | — | 1,450,000 | 1,530,048 | — | 690 | 3,422,084 | ||||||||||||||||||||||||
John R. Beaver | 2017 | 75,000 | — | — | 250,312 | — | 15,322 | 340,634 | ||||||||||||||||||||||||
Senior Vice President and Chief Financial Officer | ||||||||||||||||||||||||||||||||
Dmitri Boutoussov | 2017 | 261,461 | — | 110,700 | 7,604 | — | 913 | 380,678 | ||||||||||||||||||||||||
Vice President of Research and Development | 2016 | 285,577 | — | 117,480 | 31,480 | — | 621 | 435,158 | ||||||||||||||||||||||||
Mark J. Nelson | 2017 | 39,041 | — | — | 533,285 | — | 38 | 572,364 | ||||||||||||||||||||||||
Former Senior Vice President and Chief Financial Officer |
Outstanding Equity Awards at Fiscal Year-End 2017
The following table sets forth summary information regarding the outstanding equity awards held by each of our named executive officers at December 31, 2017.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Securities Underlying Unexercised Unearned Options | Option Exercise Price | Option Expiration Date | Equity Incentive Plan Awards: Number of Unearned Shares, Units or other Rights That Have Not Vested(#) | Market Value of Shares of Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or other Rights That Have Not Vested(#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or other Rights That Have Not Vested($) | |||||||||||||||||||||||||||
Harold C. Flynn, Jr. | 525,625 | (3) | 344,375 | (3) | — | 1.64 | 07/13/25 | — | — | — | — | |||||||||||||||||||||||||
— | — | — | — | — | 500,000 | (6) | 213,200 | (6) | 300,000 | (7) | 127,920 | (7) | ||||||||||||||||||||||||
133,328 | (4) | 266,672 | (4) | — | 1.44 | 08/25/26 | — | — | — | — | ||||||||||||||||||||||||||
— | 1,000,000 | (5) | — | 1.45 | 11/08/26 | — | — | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | — | — | 160,465 | (11) | 69,000 | (11) | ||||||||||||||||||||||||||
John R. Beaver | — | 400,000 | (12) | — | 0.59 | 10/02/2027 | — | — | — | — | ||||||||||||||||||||||||||
— | — | 33,333 | (13) | 0.59 | 10/02/2027 | — | — | — | ||||||||||||||||||||||||||||
— | — | 33,333 | (13) | 0.59 | 10/02/2027 | — | — | — | — | |||||||||||||||||||||||||||
— | — | 33,333 | (13) | 0.59 | 10/02/2027 | — | — | — | — | |||||||||||||||||||||||||||
— | — | 33,335 | (13) | 0.59 | 10/02/2027 | — | — | — | — | |||||||||||||||||||||||||||
— | — | 33,333 | (13) | 0.59 | 10/02/2027 | — | — | — | — | |||||||||||||||||||||||||||
— | — | 33,333 | (13) | 0.59 | 10/02/2027 | — | — | — | — | |||||||||||||||||||||||||||
Dmitri Boutoussov | 116,231 | (2) | — | — | 2.64 | 01/02/25 | — | — | — | — | ||||||||||||||||||||||||||
105,939 | (1) | 39,349 | (1) | — | 2.64 | 01/02/25 | — | — | — | |||||||||||||||||||||||||||
50,000 | — | — | 5.00 | 03/23/18 | — | — | — | — | ||||||||||||||||||||||||||||
22, 917 | 27,083 | (8) | — | 0.86 | 02/26/26 | — | — | — | — | |||||||||||||||||||||||||||
— | — | — | — | — | — | — | 58,837 | (11) | 25,300 | (11) | ||||||||||||||||||||||||||
— | — | — | — | — | 17,500 | (10) | 7,462 | (10) | ||||||||||||||||||||||||||||
— | — | — | — | — | 37,500 | (14) | 15,990 | (14) | — | — | ||||||||||||||||||||||||||
— | — | — | — | — | 35,000 | (9) | 14,924 | (9) | — | — |
Potential Payments upon Termination or Change of Control
As described below, pursuant to the terms of select employment agreements, severance benefits may be provided in the event that the Company terminates employment without cause, the officer resigns for good reason or following a change in control. The Company also offers a 401(k) defined contribution savings plan to all of its employees. Effective July 1, 2017, the Compensation Committee approved a matching contribution of 10% on employee deferrals of up to 10% of applicable total compensation. The following is a description and quantification of the benefits that the executive would have received assuming a termination as of December 31, 2017.
Mr. Flynn.In the event that Mr. Flynn is terminated without cause (or resigns for good reason), he is entitled to (i) 12 months of base salary as of the date of termination, payable over 26 equal installments, and (ii) paid COBRA premiums for the 12-month period following such termination. In the event that Mr. Flynn is terminated within 12 months following a change in control, in addition to the above severance benefits, (i) Mr. Flynn will also receive his target performance bonus then in effect, (ii) his unvested stock options will vest and be exercisable, and (iii) one-half of his performance-based equity awards will vest.
Mr. Beaver. In the event that Mr. Beaver is terminated without cause, he is entitled to (i) 12 months of base salary as of the date of termination, payable over 26 equal installments, and (ii) paid COBRA premiums for the 12-month period following such termination. In the event that Mr. Beaver is terminated within 12 months following a change in control, in addition to the above severance benefits, all of his time-based vesting stock options that are unvested will vest and be exercisable, and one-half of his performance-based vesting stock options that are unvested will vest and be exercisable.
Mr. Boutoussov.In the event that Mr. Boutoussov is terminated within 18 months following a change in control, Mr. Boutoussov is entitled to (i) 12 months of base salary as of the date of termination, plus the fullamount of any performance bonus target then in effect, and (ii) paid COBRA premiums for the 12-month period following such termination.
Mr. Nelson. Upon his resignation in May 2017, Mr. Nelson was not eligible for any severance payments.
EQUITY COMPENSATION PLAN INFORMATION
Our 2002 Stock Incentive Plan, as amended (the “2002 Stock Incentive Plan”) is designed to attract and retain the services of individuals essential to the Company’s long-term growth and success. The following table summarizes information as of December 31, 2017 with respect to the shares of our common stock that may be issued upon exercise of stock options, warrants or rights under our 2002 Stock Incentive Plan.
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options and release of RSUs | Weighted Average Exercise Price of Outstanding Options | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column) | |||||||||
Equity Compensation Plans Approved by Stockholders | 8,526,388 | $ | 1.80 | 3,059,916 | ||||||||
Equity Compensation Plans Not Approved by Stockholders | — | — | — | |||||||||
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Total | 8,526,388 | $ | 1.80 | 3,059,916 | ||||||||
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ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS
As required by Section 14A of the Exchange Act, we are asking our stockholders to vote, on an advisory basis, to approve the compensation of our NEOs as described in this proxy statement. We believe that the compensation policies for the NEOs are designed to attract, motivate and retain talented executive officers and are aligned with the long-term interests of our stockholders. Stockholders are urged to read the Compensation Discussion and Analysis section, beginning on page 16 of this proxy statement, which discusses in detail our 2017 executive compensation program and decisions made by the Compensation Committee.
Compensation Committee Stays Current on Best Practices
We regularly update our Compensation Committee and entire Board on compensation best practices and trends. The Compensation Committee meets from time to time without management present.
“Say-on-Pay” Vote
This advisory stockholder vote, commonly referred to as a “say-on-pay” vote, gives stockholders the opportunity to approve or not approve the compensation of the NEOs that is disclosed in this proxy statement by voting “FOR” or “AGAINST” the following resolution (or by abstaining with respect to the resolution):
RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, which disclosure includes the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure in this proxy statement.
This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices described in this proxy statement. Because your vote is advisory, it will not be binding on our Board, the Compensation Committee or the Company. However, our Board and the Compensation Committee value the opinions of our stockholders and will take into account the outcome of the stockholder vote on this proposal at our annual meeting when considering future executive compensation arrangements.
Recommendation of Our Board
OUR BOARD UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.BIOL@dfking.com
ADVISORY VOTE TO APPROVE THE FREQUENCY OF AN ADVISORY VOTE ON
THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
As required by Section 14A of the Exchange Act, in addition to providing stockholders with the opportunity to cast an advisory vote on executive compensation, commonly referred to as a “say-on-pay” vote, we are also providing stockholders with the opportunity to cast an advisory vote on whether the advisory vote on executive compensation should be held every one, two or three years, commonly known as a “say-on-frequency” vote. Because our last say-on-frequency vote was held at the 2012 annual meeting, we are again holding a say-on-frequency vote at the annual meeting. At our 2012 annual meeting, a majority of stockholders voting on the matter indicated a preference for holding the say-on-pay vote on an annual basis. Accordingly, our Board resolved that the non-binding advisory vote to approve the compensation of our named executive officers would be held on an annual basis at least until the next say-on-frequency vote.
Our Board values stockholders’ opinions and believes it would benefit from direct, timely feedback on the Company’s executive compensation program. Accordingly, after careful consideration, our Board has recommended a frequency of every one year for the say-on-pay vote. We believe that say-on-pay votes should be conducted every year so that our stockholders have an opportunity to express their views on our executive compensation programs, policies and practices on an annual basis. Setting a period of one year for say-on-pay votes will provide stockholders with an opportunity to annually assess the effectiveness of our executive compensation programs, while providing us with timely feedback from our stockholders about our compensation structure. An annual say-on-pay vote will provide the highest level of accountability and communication, as it gives us an opportunity each year to engage in a dialogue with our stockholders to better understand the results of the advisory vote and to respond swiftly to stockholder feedback by making adjustments to our compensation practices, as appropriate. We also believe that from a corporate governance perspective, an annual say-on-pay vote would ensure procedural consistency from year to year.
The proxy card provides stockholders with the opportunity to choose among four options (holding the vote every one, two or three years, or abstaining). The following resolution is submitted to stockholders for an advisory vote at the annual meeting:
RESOLVED, that the stockholders advise the Company to hold a non-binding advisory stockholder vote to approve the compensation paid to the Company’s named executive officers every:
The affirmative vote of the majority of the shares of our common stock present in person or represented by proxy and entitled to vote at the annual meeting is required to approve one year, two years, or three years as the stockholders’ recommended frequency on this Proposal. However, if none of the options receives the vote of a majority, the option receiving the greatest number of votes will be considered the frequency recommended by our stockholders. As this is an advisory vote, the results will not be binding on the Company, our Board or the Compensation Committee. Our Board may decide that it is in the best interest of our stockholders to hold the advisory vote on the compensation of our named executive officers more or less frequently than the option recommended by our stockholders. However, our Board and the Compensation Committee will consider the voting results, as appropriate, when determining the frequency of such future votes.
Recommendation of Our Board
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE FREQUENCY OF EVERY “ONE YEAR” FOR FUTURE ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
APPROVAL OF THE COMPANY’S
2018 LONG-TERM INCENTIVE PLAN
At the annual meeting, our stockholders will be asked to approve the BIOLASE, Inc. 2018 Long-Term Incentive Plan. The 2018 Plan was approved by our Board on February 14, 2018, subject to stockholder approval. The purposes of the 2018 Plan are to:
Under the 2018 Plan, the Company may grant:
As of March 15, 2018, approximately 10 officers, 191 employees and three non-employee directors would be eligible to participate in the 2018 Plan. Upon approval of the 2018 Plan, no additional awards will be granted under the BIOLASE, Inc. 2002 Stock Incentive Plan or any other equity plan maintained by the Company that is outstanding as of the effective date of the 2018 Plan (each, a “Prior Plan”).
Plan Highlights
Some of the key features of the 2018 Plan include:
Description of the 2018 Plan
The following description is qualified in its entirety by reference to the 2018 Plan, a copy of which is attached to this proxy statement as Exhibit A and incorporated herein by reference.
Administration
The 2018 Plan will be administered by a committee designated by our Board (the “Plan Committee”), consisting of two or more members of our Board, each of whom may be (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) “independent” within the meaning of the rules of the NASDAQ Capital Market or, if our common stock is not listed on the NASDAQ Capital Market, within the meaning of the rules of the principal stock exchange on which our common stock is then traded. It is expected that the Compensation Committee will administer the 2018 Plan.
Subject to the express provisions of the 2018 Plan, the Plan Committee will have the authority to select eligible persons to receive awards and determine all of the terms and conditions of each award. All awards will be evidenced by an agreement containing such provisions not inconsistent with the 2018 Plan as the Plan Committee will approve. The Plan Committee will also have authority to establish rules and regulations for administering the 2018 Plan and to decide questions of interpretation or application of any provision of the 2018 Plan. The Plan Committee may, in its sole discretion and for any reason at any time, take action such that (i) any or all outstanding stock options and SARs will become exercisable in part or in full, (ii) all or a portion of a restriction period on any award will lapse, (iii) all or a portion of any performance period applicable to any award will lapse and (iv) any performance measures applicable to any outstanding award will be deemed satisfied at target, maximum or any other level.
The Plan Committee may delegate some or all of its power and authority under the 2018 Plan to our Board (or any members thereof) or, subject to applicable law, a subcommittee of our Board, a member of our Board, the President and Chief Executive Officer or other executive officer of the Company as the Plan Committee deems appropriate, except that it may not delegate its power and authority to a member of our Board, the President and Chief Executive Officer or any executive officer with regard to awards to persons who are subject to Section 16 of the Exchange Act.
Available Shares
Subject to the adjustment provisions set forth in the 2018 Plan, the number of shares of our common stock available for awards under the 2018 Plan is 10,602,736, other than substitute awards granted in connection with a corporate transaction, reduced by the number of shares granted under the Prior Plan on or after March 15, 2018. All of the available shares of our common stock under the 2018 Plan may be issued in connection with incentive stock options. If the reverse stock split described in Proposal Five is approved by our stockholders, then, in accordance with the adjustment provisions set forth in the 2018 Plan, the number of shares of our common stock available for awards under the 2018 Plan will be reduced based on the ratio elected by our Board within the Split Ratio Range, as described further inProposal Five: Approval of an Amendment to Our Certification of Incorporation to Effect a Reserve Stock Split of Our Common Stock and Reduce the Authorized Shares of Our Common Stock, If and When Determined by Our Board.
The number of available shares will be reduced by the sum of the aggregate number of shares of our common stock which become subject to outstanding stock options, free-standing SARs, Stock Awards and performance awards. To the extent that shares of our common stock subject to an outstanding stock option, free-standing SAR, Stock Award or performance award granted under the 2018 Plan or a Prior Plan, other than substitute awards granted in connection with a corporate transaction, are not issued or delivered by reason of (i) the expiration, termination, cancellation or forfeiture of such award (excluding shares of our common stock subject to a stock option cancelled upon settlement of a related tandem SAR or subject to a tandem SAR cancelled upon exercise of a related option) or (ii) the settlement of such award in cash, then such shares of our common stock will again be available under the 2018 Plan. In addition, shares of our common stock subject to an award under the 2018 Plan or a Prior Plan will again be available for issuance under the 2018 Plan if such shares are (a) shares that were subject to a stock option or stock-settled SAR and were not issued or delivered upon the net settlement or net exercise of such option or SAR or (b) shares delivered to or withheld by the Company to pay the purchase price or the withholding taxes relating to an outstanding award. Notwithstanding the foregoing, shares repurchased by the Company on the open market with the proceeds of a stock option exercise will not again be available for issuance under the 2018 Plan. At the time the 2018 Plan becomes effective, none of the shares of our common stock available for future grant under the Prior Plans shall be available under such Prior Plans or the 2018 Plan.
The aggregate value of cash compensation and the grant date fair value of shares of our common stock that may be awarded or granted during any fiscal year of the Company to any non-employee director shall not exceed $700,000.
Change in Control
Subject to the terms of the applicable award agreement, in the event of a change in control, our Board, as constituted prior to the change in control, may, in its discretion take one of the following actions: (i) require that (a) some or all outstanding stock options and SARs will become exercisable in full or in part, either immediately or upon a subsequent termination of employment, (b) the restriction period applicable to some or all outstanding Stock Awards will lapse in full or in part, either immediately or upon a subsequent termination of employment, (c) the performance period applicable to some or all outstanding awards will lapse in full or in part, and (d) the performance measures applicable to some or all outstanding awards will be deemed satisfied at the target, maximum or any other level; (ii) require that shares of our common stock resulting from or succeeding to the business of the Company pursuant to such change in control, or the parent thereof, be substituted for some or all of the shares of our common stock subject to outstanding awards as determined by our Board; and/or (iii) require outstanding awards to be surrendered to the Company in exchange for a payment of cash, shares of our common stock resulting from the change in control, or the parent thereof, or a combination of cash and shares.
Under the terms of the 2018 Plan, a change in control is generally defined as a change in ownership or control of the Company effected through any of the following transactions: (i) a merger, consolidation or other reorganization approved by our stockholders, unless our stockholders receive more than 50% of the total voting power of the resulting company; (ii) the sale, transfer or other disposition of all or substantially all of the Company’s assets; or (iii) an acquisition of more than 50% of the total voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to our stockholders.
Effective Date, Termination and Amendment
If approved by the affirmative vote of a majority of the shares of our common stock present in person or represented by proxy at the annual meeting, the 2018 Plan will become effective as of the date on which the 2018 Plan was approved by our stockholders, and will terminate as of the first annual meeting to occur on or after the tenth anniversary of the effective date, unless earlier terminated by our Board. Awards hereunder may be made at any time prior to the termination of the 2018 Plan, provided that no incentive stock option may be granted later than ten years after the date on which the 2018 Plan was approved by our Board. Our Board may amend the 2018
Plan at any time, subject to stockholder approval if (i) required by applicable law, rule or regulation, including any rule of the NASDAQ Capital Market or any other stock exchange on which our common stock is then traded, or (ii) our Board seeks to modify the stock option and SAR repricing provisions in the 2018 Plan. No amendment may materially impair the rights of a holder of an outstanding award without the consent of such holder.
Eligibility
Participants in the 2018 Plan will consist of such officers, other employees, non-employee directors, consultants, independent contractors and agents and persons expected to become officers, other employees, non-employee directors, consultants, independent contractors and agents of the Company and its subsidiaries, as selected by the Plan Committee.
Stock Options and SARs
The 2018 Plan provides for the grant of non-qualified stock options, incentive stock options and SARs. The Plan Committee will determine the conditions to the exercisability of each stock option and SAR.
Each stock option will be exercisable for no more than ten years after its date of grant, unless the stock option is an incentive stock option and the optionee owns greater than ten percent (10%) of the voting power of all shares of our capital stock (a “ten percent holder”), in which case the stock option will be exercisable for no more than five years after its date of grant. Except in the case of substitute awards granted in connection with a corporate transaction, the exercise price of a stock option will not be less than 100% of the fair market value of a share of our common stock on the date of grant, unless the stock option is an incentive stock option and the optionee is a ten percent holder, in which case the stock option exercise price will be the price required by the Code, currently 110% of fair market value.
Each SAR will be exercisable for no more than ten years after its date of grant provided that no SAR granted in tandem with a stock option (a “tandem SAR”) will be exercisable later than the expiration, termination, cancellation, forfeiture or other termination of the related stock option. The base price of an SAR will not be less than 100% of the fair market value of a share of our common stock on the date of grant (or, if earlier, the date of grant of the stock option for which the SAR is exchanged or substituted), provided that the base price of a tandem SAR will be the exercise price of the related stock option. An SAR entitles the holder to receive upon exercise (subject to withholding taxes) shares of our common stock (which may be restricted stock), cash or a combination thereof with a value equal to the difference between the fair market value of our common stock on the exercise date and the base price of the SAR.
All of the terms relating to the exercise, cancellation or other disposition of stock options and SARs following the termination of employment of a participant, whether by reason of disability, retirement, death or any other reason, will be determined by the Plan Committee.
The Plan Committee shall not, without the approval of our stockholders, (i) reduce the purchase price or base price of any previously granted stock option or SAR, (ii) cancel any previously granted stock option or SAR in exchange for another stock option or SAR with a lower purchase price or base price or (iii) cancel any previously granted stock option or SAR in exchange for cash or another award if the purchase price of such option or the base price of such SAR exceeds the fair market value of a share of our common stock on the date of such cancellation, in each case, other than in connection with a change in control or the adjustment provisions set forth in the 2018 Plan.
Stock Awards
The 2018 Plan provides for the grant of Stock Awards. The Plan Committee may grant a Stock Award as restricted stock, RSUs or as an other stock award. Except as otherwise determined by the Plan Committee, Stock
Awards will be non-transferable and subject to forfeiture if the holder does not remain continuously in the employment of the Company during the restriction period or if specified performance measures (if any) are not attained during the performance period.
Unless otherwise set forth in a restricted stock award agreement, the holder of shares of restricted stock will have rights as a stockholder of the Company, including the right to vote and receive dividends with respect to the shares of restricted stock. Distributions and dividends with respect to shares of our common stock, including regular cash dividends, will be deposited with the Company and will be subject to the same restrictions as the restricted stock.
The agreement awarding RSUs will specify (i) whether such award may be settled in shares of our common stock, cash or a combination thereof, and (ii) whether the holder will be entitled to receive dividend equivalents, with respect to such award. Any dividend equivalents with respect to RSUs will be subject to the same restrictions as such RSUs. Prior to settlement of an RSU, the holder of an RSU will have no rights as a stockholder of the Company.
The Plan Committee may grant other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of our common stock, including shares of our common stock granted as a bonus and not subject to any vesting conditions, dividend equivalents, deferred stock units, stock purchase rights and shares of our common stock issued in lieu of obligations of the Company to pay cash under any compensatory plan or arrangement, subject to such terms as shall be determined by the Plan Committee. Dividend equivalents paid with respect to the other stock awards contemplated by this paragraph will be subject to the same vesting conditions as the underlying awards.
All of the terms relating to the satisfaction of performance measures and the termination of a restriction period, or the forfeiture and cancellation of a Stock Award upon a termination of employment, whether by reason of disability, retirement, death or any other reason or during a paid or unpaid leave of absence, will be determined by the Plan Committee.
Performance Awards
The 2018 Plan also provides for the grant of performance awards. The agreement relating to a performance award will specify whether such award may be settled in shares of our common stock (including shares of restricted stock), cash or a combination thereof. The agreement relating to a performance award will provide, in the manner determined by the Plan Committee, for the vesting of such performance award if the specified performance measures are satisfied or met during the specified performance period and such performance goals will be determined by the Plan Committee at the time of grant. Any dividend or dividend equivalents with respect to a performance award will be subject to the same restrictions as such performance award.
The performance measures of a performance award may consist of, but shall not be limited to, one or more of the following objective or subjective corporate-wide or subsidiary, division, operating unit, line of business, project, geographic or individual measures: the attainment by a share of our common stock of a specified Fair Market Value (as defined in the 2018 Plan) for a specified period of time; increase in stockholder value; earnings per share; return on or net assets; return on equity; return on investments; return on capital or invested capital; total stockholder return; earnings or income of the Company before or after taxes and/or interest; earnings before interest, taxes, depreciation and amortization (“EBITDA”); EBITDA margin; operating income; revenues; operating expenses, attainment of expense levels or cost reduction goals; market share; cash flow, cash flow per share, cash flow margin or free cash flow; interest expense; economic value created; gross profit or margin; operating profit or margin; net cash provided by operations; price-to-earnings growth; and strategic business criteria, consisting of one or more objectives based on meeting specified goals relating to market penetration, customer acquisition, business expansion, cost targets, customer satisfaction, reductions in errors and omissions, reductions in lost business, management of employment practices and employee benefits, supervision of
litigation, supervision of information technology, quality and quality audit scores, efficiency, product development and acquisitions or divestitures or any combination of the foregoing. Notwithstanding the foregoing, the Plan Committee may establish any other objective or subjective performance goal, whether or not listed in the 2018 Plan. Performance goals shall be subject to such other special rules and conditions as the Plan Committee may establish at any time.
Prior to the settlement of a performance award in shares of our common stock, the holder of such award will have no rights as a stockholder of the Company with respect to such shares. All of the terms relating to the satisfaction of performance measures and the termination of a performance period, or the forfeiture and cancellation of a performance award upon a termination of employment with or service to, whether by reason of disability, retirement, death or any other reason or during a paid or unpaid leave of absence, will be determined by the Plan Committee.
U.S. Federal Income Tax Consequences
The following is a brief summary of certain United States federal income tax consequences generally arising with respect to awards under the 2018 Plan. This discussion does not address all aspects of the United States federal income tax consequences of participating in the 2018 Plan that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-United States tax consequences of participating in the 2018 Plan. Each participant is advised to consult his or her personal tax advisor concerning the application of the United States federal income tax laws to such participant’s particular situation, as well as the applicability and effect of any state, local or non-United States tax laws before taking any actions with respect to any awards.
Section 162(m) of the Code
Section 162(m) of the Code limits to $1 million the amount that a publicly held corporation is allowed each year to deduct for compensation paid to the corporation’s “covered employees.” “Covered employees” include the corporation’s chief executive officer, chief financial officer and the three next most highly compensated executive officers. If an individual is determined to be a covered employee for any year beginning after December 31, 2016, then that individual will continue to be a covered employee for future years, regardless of changes in the individual’s compensation or position.
Stock Options
A participant will not recognize taxable income at the time a stock option is granted, and the Company will not be entitled to a tax deduction at that time. A participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) upon exercise of a non-qualified stock option equal to the excess of the fair market value of the shares of our common stock purchased on such date over their exercise price, and the Company will be entitled to a corresponding deduction, except to the extent the deduction limits of Section 162(m) of the Code apply. A participant will not recognize income (except for purposes of the alternative minimum tax) upon exercise of an incentive stock option. If the shares of our common stock acquired by exercise of an incentive stock option are held for at least two years from the date the stock option was granted and one year from the date it was exercised, any gain or loss arising from a subsequent disposition of those shares will be taxed as long-term capital gain or loss, and the Company will not be entitled to any deduction. If, however, those shares are disposed of within the above-described period, then in the year of that disposition the participant will recognize compensation taxable as ordinary income equal to the excess of the lesser of (i) the amount realized upon that disposition and (ii) the fair market value of those shares on the date of exercise over the exercise price, and the Company will be entitled to a corresponding deduction, except to the extent the deduction limits of Section 162(m) of the Code apply.
SARs
A participant will not recognize taxable income at the time SARs are granted, and the Company will not be entitled to a tax deduction at that time. Upon exercise, the participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) in an amount equal to the fair market value of any shares of our common stock delivered and the amount of cash paid by the Company. This amount is deductible by the Company as compensation expense, except to the extent the deduction limits of Section 162(m) of the Code apply.
Stock Awards
A participant will not recognize taxable income at the time restricted stock is granted, and the Company will not be entitled to a tax deduction at that time, unless the participant makes an election to be taxed at that time. If such election is made, the participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) at the time of the grant in an amount equal to the excess of the fair market value of the shares of our common stock at such time over the amount, if any, paid for those shares. If such election is not made, the participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) at the time the restrictions constituting a substantial risk of forfeiture lapse in an amount equal to the excess of the fair market value of the shares of our common stock at such time over the amount, if any, paid for those shares. The amount of ordinary income recognized by making the above-described election or upon the lapse of restrictions constituting a substantial risk of forfeiture is deductible by the Company as compensation expense, except to the extent the deduction limits of Section 162(m) of the Code apply.
A participant will not recognize taxable income at the time an RSU is granted and the Company will not be entitled to a tax deduction at that time. Upon settlement of RSUs, the participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) in an amount equal to the fair market value of any shares of our common stock delivered and the amount of any cash paid by the Company. The amount of ordinary income recognized is deductible by the Company as compensation expense, except to the extent the deduction limits of Section 162(m) of the Code apply.
The tax treatment, including the timing of taxation, of other stock awards will depend on the terms of such awards at the time of grant.
Performance Awards
A participant will not recognize taxable income at the time performance awards are granted, and the Company will not be entitled to a tax deduction at that time. Upon settlement of performance awards, the participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) in an amount equal to the fair market value of any shares of our common stock delivered and the amount of cash paid by the Company. This amount is deductible by the Company as compensation expense, except to the extent the deduction limits of Section 162(m) of the Code apply.
New Plan Benefits
The Plan Committee has the discretion to grant awards under the 2018 Plan and, therefore, it is not possible as of the date of this proxy statement to determine future awards that will be received by NEOs or others under the 2018 Plan. Please see the section entitled “Compensation Discussion and Analysis” for grants made to each of the NEOs under the Prior Plan during 2017.
As discussed above, the 2018 Plan is being submitted for approval by our stockholders at the annual meeting. If our stockholders approve this proposal, the 2018 Plan will become effective as of the date on which
the 2018 Plan was approved by stockholders, and awards may be granted under the 2018 Plan. If our stockholders do not approve the 2018 Plan, it (and any awards thereunder) will not become effective, and the Company will continue to grant awards under the Prior Plan.
Recommendation of our Board
OUR BOARD RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE 2018 PLAN.
APPROVALADOPTION OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF OUR COMMON STOCK AND REDUCE(WITHOUT REDUCING THE AUTHORIZED NUMBER OF SHARES OF OUR COMMON STOCK,STOCK), IF AND WHEN DETERMINED BY OUR BOARD
Overview
The reverse stock splitAmendment Proposal is a proposal if approved, would not immediately causeto adopt a reverse stock split or a reduction in the numberseries of authorized shares of our common stock, but rather would grant authorization to our Board to effect a reverse stock split and reduce the number of authorized shares of our common stock, if, and when determined by our Board. Our Board has deemed it advisable, approved, and is hereby soliciting stockholder approval of, an amendmentproposed amendments to our Certificate of Incorporation to (a) effect a reverse stock split at a ratio ranging from one-for-fivebetween one-for-two (1:5) to one-for-fifteen2) and one-for-twenty-five (1:15)25) (the “Split Ratio Range”), in the form set forth in Exhibit BA to this proxy statement, and (b) reducestatement. The reverse split proposal, if approved, would not immediately cause a reverse stock split, but rather would grant authorization to our Board to implement one of the proposed amendments to effect the reverse stock split (without reducing the number of authorized shares of our common stock in the samestock) with a split ratio within the Split Ratio Range.Range, if, and when determined by our Board. Our Board has deemed it advisable, approved and recommended that our stockholders adopt and is hereby soliciting stockholder adoption of the series of amendments to our Certificate of Incorporation to effect a reverse stock split at a ratio within the Split Ratio Range, in the form set forth in Exhibit A to this proxy statement.
If we receive the required stockholder approval, our Board wouldwill have the sole authority to elect, at any time prior to July 23, 2018: (1)20, 2024, whether or not to effect a reverse stock split and (2) if so, the appropriate ratio within the Split Ratio Range. Our Board would have the authority to accordingly reduce the number of authorized shares of our common stock in the same ratio as that of the reverse stock split. Our Board believes that providing the flexibility for our Board to choose an exact split ratio based on then-current market conditions is in the best interests of the Company and our stockholders with the intention to create the greatest marketability for our common stock. Even with stockholder approvaladoption of the reverse stock split proposal, our Board will not be obligated to pursue the reverse stock split and the corresponding reduction in the number of authorized shares of our common stock.split. Rather, our Board will have the flexibility to decide whether or not a reverse stock split (and at what ratio within the Split Ratio Range) is in the best interests of the Company.Company and its stockholders.
If approved by our stockholders and following such approval our Board determines that effecting a reverse stock split is in the best interests of the Company and our stockholders, the reverse stock split would become effective upon filing ana certificate of amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware. As filed, the certificate of amendment would state the number of outstanding shares to be combined into one share of our common stock, at the ratio approved by our Board within the Split Ratio Range. The amendment would also reducenot change the par value of our common stock and would not impact the total number of authorized shares of our common stock. Therefore, upon effectiveness of a reverse stock as set forth below, but would not changesplit, the par value per sharenumber of shares of our common stock. Except for any changes as a result of the treatment of fractional shares, immediately after the reverse stock split, each stockholder would hold the same percentage of outstanding common stock as such stockholder held immediately priorthat are authorized and unissued will increase relative to the reverse stock split.number of issued and outstanding shares of our common stock.
Although we presently intend to effect the reverse stock split only if necessary to regain compliance with the NASDAQNasdaq Capital Market’s minimum bid price requirement, under Section 242(c) of the Delaware General Corporation Law, our Board has reserved the right, notwithstanding our stockholders’ approvaladoption of the proposed amendment of ourthe Certificate of Incorporation at the annualspecial meeting, to abandon the proposed amendment at any time (without further action by our stockholders) before the certificate of amendment of our Certificate of Incorporationwith respect thereto is filed with the Secretary of State of the State of Delaware.Delaware and, to the extent a certificate of amendment is filed to effect the reverse stock split at a ratio within the Split Ratio Range, the Board will abandon each of the other series of amendments provided herein that would have otherwise effected the reverse stock split at each of the other ratios within the Split Ratio Range. Our Board may consider a variety of factors in determining whether or not to proceed with the proposed amendment of ourthe Certificate of Incorporation and the appropriate range within the Split Ratio Range for any such amendment, including overall trends in the stock market, recent changes and anticipated trends in the per shareper-share market price of our common stock, business developments and our actual and projected financial performance. If the closing bid price of our common stock on the NASDAQNasdaq Capital Market reaches a minimum of $1.00 per share and remains at or above that level for a minimum of ten consecutive trading days (or longer, if required by the NASDAQNasdaq Listing Qualifications Panel), as discussed more fully below, our Board may decide to abandon the filing of the proposed amendment of ourthe Certificate of Incorporation.Incorporation in its entirety.
Purpose and Overview of the Reverse Stock Split
Our primary objective in effectuating the reverse stock split would be to attempt to raise the per shareper-share trading price of our common stock to continue our listing on the NASDAQNasdaq Capital Market. To maintain listing, the NASDAQNasdaq Capital Market requires, among other things, that our common stock maintain a minimum closing bid price of $1.00 per share.
On August 9, 2017, we received notice from NASDAQ thatMay 31, 2023, the closing price for our common stock on the Nasdaq Capital Market was $0.0815 per share.
On January 11, 2023, we received a deficiency letter from the Nasdaq Stock Market notifying the Company that, for the last 30 consecutive business days, ending on January 10, 2023, the bid price for the Company’s common stock had failed to maintain Nasdaq’sclosed below the minimum bid price requirementfor continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “minimum bid price rule”). In accordance with Nasdaq rules, the Company was provided an initial period of $1.00 per share. Our original deadline for180 calendar days, or until July 10, 2023, to regain compliance. If the Company does not regain compliance with the minimum bid price requirement was February 5, 2018.rule by July 10, 2023, Nasdaq granted us a 180-day extension periodwill provide written notification to achieve compliance with the minimum bid price requirement, extending the deadline to August 6, 2018 and indicating that if the Company intends to effectuate a reversethat its common stock split in order to regain compliance, it mustmay be completed by July 23, 2018. delisted.
Our Board is seeking stockholder approval foradoption of the Amendment Proposal in order to have the authority to effectuate the reverse stock split as a means of increasing the share price of our common stock at or above $1.00 per share in order to avoid further action by Nasdaq, in the event we are not able to satisfy the minimum bid price requirement in adequate time before the deadline. We expect that the reverse stock split would increase the bid price per share of our common stock above the $1.00 per share minimum price, thereby satisfying this listing requirement. However, there can be no assurance that the reverse stock split would have that effect, initially or in the future, or that it would enable us to maintain the listing of our common stock on the NASDAQNasdaq Capital Market. We are not aware of any present efforts by anyone to accumulate our common stock, and the proposed reverse stock split is not intended to be an anti-takeover device.
In addition, we believe that the low per shareper-share market price of our common stock impairs its marketability to, and acceptance by, institutional investors and other members of the investing public and creates a negative impression of the Company. Theoretically, decreasing the number of shares of our common stock outstanding should not, by itself, affect the marketability of the shares, the type of investor who would be interested in acquiring them or our reputation in the financial community. In practice, however, many investors, brokerage firms and market makers consider low-priced stocks as unduly speculative in nature and, as a matter of policy, avoid investment and trading in such stocks. Moreover, the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower-priced stocks. The presence of these factors may be adversely affecting, and may continue to adversely affect, not only the price of our common stock but also its trading liquidity. In addition, these factors may affect our ability to raise additional capital through the sale of our common stock.
We also believe that a higher stock price could help us attract and retain employees and other service providers. We believe that some potential employees and service providers are less likely to work for a company with a low stock price, regardless of the size of the company’s market capitalization. If the reverse stock split successfully increases the per shareper-share price of our common stock, we believe this increase would enhance our ability to attract and retain employees and service providers. Further, the reverse stock split will result in additional authorized and unissued shares becoming available for general corporate purposes as the Board may determine from time to time, including for use under its equity compensation plans. At our 2022 annual meeting of stockholders, our stockholders approved an amendment to the BIOLASE, Inc. 2018 Long-Term Incentive Plan to increase the number of shares of our common stock available for issuance under the plan by an additional 9,750,000 shares (the “Plan Amendment”). Notwithstanding stockholder approval of the Plan Amendment, we cannot grant any additional awards under the plan because we do not have a sufficient number of authorized shares under our Certificate of Incorporation. The reverse stock split would help ensure that we have adequate shares available to make awards anticipated by the plan (functionally giving full effect to the previously approved Plan Amendment) and allow the Board flexibility for future issuances, including the ability to potentially replace certain cash incentive awards with equity awards.
We hopebelieve that the decrease in the number of shares of our outstanding common stock because of the reverse stock split, and the anticipated increase in the price per share, would possibly promote greater liquidity for our stockholders with respect to their shares. However, liquidity may be adversely affected by the reduced number of shares that would be outstanding if the reverse stock split is effected, particularly if the price per share of our common stock begins a declining trend after the reverse stock split is effectuated.
There can be no assurance that the reverse stock split would achieve any of the desired results. There also can be no assurance that the price per share of our common stock immediately after the reverse stock split would increase proportionately with the reverse stock split, or that any increase would be sustained for any period of time.
If our stockholders do not approve the reverse stock split proposal and our stock price does not otherwise increase to greater than $1.00 per share for at least ten consecutive trading days before August 6, 2018, we expect
our common stock to be subject to a delisting action by the NASDAQ Capital Market. We believe the reverse stock split is the most likely way to assist the stock price in reaching the minimum bid level required by the NASDAQNasdaq Capital Market, although effecting the reverse stock split cannot guarantee that we would be in compliance with the minimum bid price requirement for even the minimum ten-day trading period required by the NASDAQNasdaq Capital Market. Furthermore, the reverse stock split cannot guarantee we would be in compliance with the market capitalization, net worth or stockholders’ equity criteria required to maintain our listing on the NASDAQNasdaq Capital Market.
If our common stock were delisted from the NASDAQNasdaq Capital Market, trading of our common stock would thereafter be conducted on the OTC Bulletin Board or the “pink sheets.” As a result, an investor may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, our common stock. To relist shares of our common stock on the NASDAQNasdaq Capital Market, we would be required to meet the initial listing requirements for either the NASDAQNasdaq Capital Market or the Nasdaq Global Market, which are more stringent than the maintenance requirements.
If our common stock were delisted from the NASDAQNasdaq Capital Market and the price of our common stock were below $5.00 at such time, such stock would come within the definition of “penny stock” as defined in the Exchange Act and would be covered by Rule 15g-9 of the Exchange Act. That rule imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5 million or individuals with net worth in excess of $1 million or annual income exceeding $200,000 or $300,000 jointly with their spouse). For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. These additional sales practice restrictions would make trading in our common stock more difficult and the market less efficient.
In evaluating whether to seek stockholder approval forof the reverse stock split,Amendment Proposal, our Board took into consideration negative factors associated with reverse stock splits. These factors include: the negative perception of reverse stock splits that investors, analysts and other stock market participants may hold; the fact that the stock prices of some companies that have effected reverse stock splits have subsequently declined, sometimes significantly, following their reverse stock splits; the possible adverse effect on liquidity that a reduced number of outstanding shares could cause; and the costs associated with implementing a reverse stock split.
Even if our stockholders approve the reverse stock split,Amendment Proposal, our Board reserves the right not to effect the reverse stock splitproposed amendment in its entirety if in our Board’s opinion it would not be in the best interests of the Company or our stockholders to effect sucha reverse stock split.
Risks Associated with the Reverse Stock Split
We cannot predict whether the reverse stock split, if completed, will increase the market price for our common stock. The history of similar stock split combinations for companies in like circumstances is varied. There is no assurance that:
the market price per share would either exceed or remain in excess of the $1.00 minimum bid price per share as required to maintain the listing of our common stock on the NASDAQNasdaq Capital Market;Market especially
in light of the fact that we effected a one-for-twenty five reverse stock split on April 28, 2022 and our stock price as of May 31, 2023 was below $1.00; |
we would otherwise meet the requirements for continued listing of our common stock on the NASDAQNasdaq Capital Market;
the market price per share of our common stock after the reverse stock split would rise in proportion to the reduction in the number of shares outstanding before the reverse stock split;
the reverse stock split would result in a per shareper-share price that would attract brokers and investors who do not trade in lower-priced stocks;
the reverse stock split would promote greater liquidity for our stockholders with respect to their shares.
In addition, the reverse stock split would reduce the number of outstanding shares of our common stock without reducing the number of shares of available but unissued common stock, increasing the number of authorized but unissued shares of common stock. Therefore, the number of shares of our common stock that are authorized and unissued will increase relative to the number of issued and outstanding shares of our common stock following the reverse stock split. The Board may authorize the issuance of the remaining authorized and unissued shares without further stockholder action for a variety of purposes, except as such stockholder approval may be required in particular cases by our certificate of incorporation, applicable law or the rules of any stock exchange on which our securities may then be listed. The issuance of additional shares would be dilutive to our existing stockholders and may cause a decline in the trading price of our common stock. The issuance of authorized but unissued shares of common stock could be used to deter a potential takeover of us that may otherwise be beneficial to stockholders by diluting the shares held by a potential suitor or issuing shares to a stockholder that will vote in accordance with the Board’s desires. A takeover may be beneficial to independent stockholders because, among other reasons, a potential suitor may offer such stockholders a premium for their shares of stock compared to the then-existing market price. We do not have any plans or proposals to adopt provisions or enter into agreements that may have material anti-takeover consequences.
The market price of our common stock would also beis based on our performance and other factors, some of which are unrelated to the number of shares outstanding. If the reverse stock split is effected and the market price of our common stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of a reverse stock split.
Principal Effects of the Reverse Stock Split on the Market for Our Common Stock
On August 8, 2017,May 31, 2023, the closing bid price for our common stock on the NASDAQNasdaq Capital Market was $0.59$0.0815 per share. On March 21, 2018, the closing bid price for our common stock was $0.43. By decreasing the number of shares of our common stock outstanding without altering the aggregate economic interest represented by the shares, we believe the market price would be increased. The greater the market price rises above $1.00 per share, the less risk there would be that we would fail to meet the requirements for maintaining the listing of our common stock on the NASDAQNasdaq Capital Market. However, there can be no assurance that the market price of the common stock would rise to or maintain any particular level or that we would at all times be able to meet the requirements for maintaining the listing of our common stock on the NASDAQNasdaq Capital Market.
Principal Effects of the Reverse Stock Split on Our Common Stock;Stock and Series H Preferred Shares; No Fractional Shares
If our stockholders approve granting our Board the authority to amend our Certificate of Incorporation to effect a reverse stock split and reduce the number of authorized shares of our common stock,Amendment Proposal, and if our Board decides to effectuate sucha proposed amendment to effect a reverse stock split, the principal effect of the amendment would be (a) to reduce the number of authorized shares of our common stock in the same ratio as that of the reverse stock split, so that the number of authorized shares of our common stock would be reduced from 200,000,000 shares to between and including approximately 13,333,333 and 40,000,000 and (b) to reduce the number of issued and outstanding shares of our common stock including those held by the Company in accordance with the ratio approved by our stockholders and determined by our Board withintreasury stock,
depending on the Split Ratio Range set forth in such amendment, from approximately 102,350,238[ ] shares as of the record date to between [ ] shares and including approximately 6,823,349 and 20,470,047 shares, depending on which ratio within the Split Ratio Range is effectuated by our Board and based upon the number of shares outstanding at the time such reverse stock split is effectuated.[ ] shares. If the reverse stock split is effectuated, the total number of shares of our common stock each stockholder holds would be reclassified automatically into the number of shares of our common stock equal to the number of shares of our common stock each stockholder held immediately beforeprior to the reverse stock split divided by the ratio approved by the Board within the Split Ratio Range approvedand set forth in the applicable amendment. In addition, if our stockholders approve the Amendment Proposal, and if our Board decides to effectuate a proposed amendment to effect a reverse stock split, the principal effect of the amendment on our Series H Preferred Stock would be to adjust the conversion price to multiply it by a fraction of which the numerator shall be the number of shares of common stock (excluding any treasury shares) outstanding immediately before the reverse stock split is effected, and of which the denominator shall be the number of shares of common stock outstanding immediately after effecting the reverse stock split.
Effecting the reverse stock split will not change the total authorized number of shares of our common stock. However, the reduction in the issued and outstanding shares would provide more authorized shares available for future issuance. We have no specific plan, commitment, arrangement, understanding or agreement, either oral or written, regarding the issuance of common stock subsequent to this proposed increase in the number of authorized shares at this time, and we have not allocated any specific portion of the proposed increase in the authorized number of shares to any particular purpose. However, we have in the past conducted certain public and private offerings of our securities, and we will continue to require additional capital in the near future to fund our operations. As a result, it is foreseeable that we will seek to issue such additional shares of common stock in connection with any such capital raising activities, or any of the other activities described above. The Board does not intend to issue any common stock or securities convertible into common stock except on terms that the Board deems to be in the best interests of us and our stockholders.
All shares of Series I Preferred Stock that are not present in person or by proxy at the special meeting as of immediately prior to the opening of the polls at the special meeting will be automatically redeemed in the Initial Redemption. Any outstanding shares of Series I Preferred Stock that were not redeemed pursuant to the Initial Redemption will be redeemed in whole, but not in part, (i) if and when ordered by our stockholdersBoard or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation effecting the reverse stock split. Please refer to the discussion in the General Information section under “How many votes are allocated to each share of common stock and determined byeach share of Series I Preferred Stock?” and “What vote is required to approve each matter to be considered at our Board.special meeting?” for a description of the voting power of the Series I Preferred Stock.
The reverse stock split would affect all of our stockholders uniformly and would not affect any stockholder’s percentage ownership interests, except to the extent that the reverse stock split results in such stockholder owning a fractional share. As soon as practicable after the amendment to our Certificate of Incorporation is filed, Computershare, the Company’sour transfer agent, would act as “exchange agent” and would aggregate all fractional shares and arrange for them to be sold at the then-prevailing prices on the open market on behalf of those stockholders who would otherwise be entitled to receive a fractional share. We expect that the exchangetransfer agent would cause the sale to be conducted in an orderly fashion at a reasonable pace and that it may take several days to sell all of the aggregated fractional shares of our common stock. After completing the sale, registered stockholders would receive a cash payment from the exchangetransfer agent in an amount equal to their pro rata shares of the total net proceeds of these sales. The proceeds would be subject to certain taxes as discussed below. In addition, stockholders would not be entitled to receive interest for the period of time between the filing of the certificate of amendment to ourthe Certificate of Incorporation and the date a stockholder receives payment for the cashed-out shares. The payment amount would be paid to the stockholder in the form of a check in accordance with the procedures outlined below.
After the reverse stock split, a stockholder would have no further interest in the Company with respect to such stockholder’s cashed-out fractional shares. A person otherwise entitled to a fractional interest would not have any voting, dividend or other rights except to receive payment as described above.
Principal Effects of the Reverse Stock Split on Outstanding Options and Warrants
As of the record date, we had outstanding (a) stock options to purchase an aggregate of 10,677,577[ ] shares of our common stock with exercise prices ranging from $0.40$[ ] to $5.07$[ ] per share and (b) warrants to purchase an aggregate of 6,126,269[ ] shares of our common stock with exercise prices ranging from $1.80$[ ] to $4.00$[ ] per share. Under the terms of the stock options and warrants, when the reverse stock split becomes effective, the number of shares of our common stock covered by each of them would be divided by the number of shares being combined into one share of our common stock in the reverse stock split and the exercise or conversion price per share would be increased to a dollar amount equal to the current exercise or conversion price, multiplied by the number of shares being combined into one share of our common stock in the reverse stock split. This results in the same aggregate price being required to be paid upon exercise as was required immediately preceding the reverse stock split. The number of shares reserved under our option plan would decrease to between and including one-fifth and one-fifteenth ofby the number of shares currently included in such plan.ratio approved by the Board within the Split Ratio Range.
Principal Effects of the Reverse Stock Split on Legal Ability to Pay Dividends
Since 2015, our Board has not declared, nor does it have any plans to declare in the foreseeable future, any distributions of cash dividends or other property to holders of common stock, and we are not in arrears on any dividends. Therefore, we do not believe that the reverse stock split would have any effect with respect to future distributions, if any, to holders of our common stock.
Accounting Matters
The reverse stock split would not affect the par value of our common stock or preferred stock, which would remain unchanged at $0.001 per share. As a result, on the effective date of the reverse stock split, the stated capital on our balance sheet attributable to our common stock would be reduced by athe ratio approved by the Board within the Split Ratio Range. In other words, stated capital would be reduced to between and including one-fifth and one-fifteenth of its present amount,by the ratio approved by the Board within the Split Ratio Range, and the additional paid-in capital account would be credited with the amount by which the stated capital is reduced. The per shareper-share net income or loss and net book value of our common stock would be increased because there would be fewer shares of our common stock outstanding.
Exchange of Stock Certificates for Book-Entry Shares
If the reverse stock split is authorized by our stockholders and our Board elects to implement the reverse split, stockholders would be notified as soon as practicable after the effective date that the reverse split has been effected. Holders of pre-reverse split shares would be asked to surrender to the exchange agent certificates representing pre-reverse split shares in exchange for post-reverse split shares of common stock in book-entry form in accordance with the procedures to be set forth in a letter of transmittal to be sent by the Company. Each certificate representing pre-reverse split shares would entitle the holder thereof to receive, only upon surrender of such certificate together with such letter of transmittal properly completed by the holder, post-reverse split shares and cash in lieu of fractional shares, if any, without interest. No new post-reverse split share certificates will be issued to stockholders.
If a stockholder is entitled to a payment in lieu of any fractional share interest, such payment would be made as described above under the heading “Principal Effect of the Reverse Stock Split on Our Common Shares; No Fractional Shares.”
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATES AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATES UNTIL REQUESTED TO DO SO.
Beneficial Holders of Our Common Stock (Stockholders Who Hold in “Street Name”)
Upon the reverse stock split, we intend to treat shares held by stockholders in “street name,” through a bank, broker, or other nominee, in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers or other nomineesBrokers would be instructed to effect the reverse stock split for their beneficial holders holding our common stock in “street name.” However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the reverse stock split and making payment for fractional shares. Stockholders holding shares of our common stock with a bank, broker or other nominee and having any questions in this regard should contact their bank, broker or other nominee.broker.
Registered “Book-Entry” Holders of Our Common Stock (Stockholders that are Registered on the Transfer Agent’s Books and Records But Do Not Hold Stock Certificates)
Certain of our registered holders of our common stock may hold some or all of their shares electronically in book-entry form with the transfer agent. These stockholders do not have stock certificates evidencing their ownership of our common stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts.
If a stockholder holds registered shares in book-entry form with the transfer agent, no action needs to be taken to receive post-reverse stock split shares or cash payment in lieu of any fractional share interest, if applicable. If such a stockholder is entitled to post-reverse stock split shares, a transaction statement would automatically be sent to such stockholder’s address of record indicating the number of shares of our common stock held following the reverse stock split.
If such a stockholder is entitled to a payment in lieu of any fractional share interest, a check would be mailed to the stockholder’s registered address as soon as practicable after the effective time of the reverse stock split. By signing and cashing the check, stockholders would warrant that they owned the shares of our common stock for which they received a cash payment. The cash payment is subject to applicable federal and state income tax and state abandoned property laws. No stockholders would be entitled to receive interest for the period of time between the effective time of the reverse stock split and the date payment is received.
No Dissenters’ Rights
Under the Delaware General Corporation Law, stockholders are not entitled to dissenters’ rights with respect to the reverse stock split.
Material Federal Income Tax Consequences of the Reverse Stock Split
The following summary describes certain material U.S. federal income tax consequences of the reverse stock split to holders of our common stock.
For purposes of this summary a “non-U.S. holder” is any beneficial owner of our common stock that is not a “U.S. holder.” A “U.S. holder” is any of the following:
an individual who is or is treated as a citizen or resident of the United States;
a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia;
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust (i) if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more “United States Persons” have the authority to control all substantial decisions of such trust or (ii) that has a valid election in effect to be treated as “United States Persons” for U.S. federal income tax purposes.
This summary does not address all of the tax consequences that may be relevant to any particular stockholder, including tax considerations that arise from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known by stockholders. This summary also does not address the tax consequences to (i) persons that may be subject to special treatment under U.S. federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, U.S. expatriates, persons subject to the alternative minimum tax, traders in securities that elect to mark to market and dealers in securities or currencies, (ii) persons that hold our common stock as part of a position in a “straddle” or as part of a “hedging,” “conversion” or other integrated investment transaction for federal income tax purposes, or (iii) persons that do not hold our common stock as “capital assets” (generally, property held for investment).
This summary is based on the provisions of the Code, U.S. Treasury regulations, administrative rulings and judicial authority, all as in effect as of the date of this proxy statement. Subsequent developments in U.S. federal income tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material effect on the U.S. federal income tax consequences of the reverse stock split.
EACH STOCKHOLDER SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT.
If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership.
Partnerships that hold our common stock, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal income tax consequences of the reverse stock split.
U.S. Holders
The reverse stock split should be treated as a recapitalization for U.S. federal income tax purposes. Therefore, except as described below with respect to cash in lieu of fractional shares, no gain or loss will be
recognized upon the reverse stock split. In addition, the aggregate tax basis in the common stock received pursuant to the reverse stock split should equal the aggregate tax basis in the common stock surrendered (excluding the portion of the tax basis that is allocable to any fractional share), and the holding period for the common stock received should include the holding period for the common stock surrendered.
A U.S. holder that receives cash in lieu of a fractional share of common stock in the reverse stock split generally will be treated as having received such fractional share and then as having received such cash in redemption of such fractional share interest. A U.S. holder generally will recognize gain or loss measured by the difference between the amount of cash received and the portion of the basis of the pre-reverse stock split common stock allocable to such fractional interest. Such gain or loss generally will constitute capital gain or loss and will be long-term capital gain or loss if the U.S. holder’s holding period in our common stock surrendered in the reverse stock split was greater than one year as of the date of the exchange.
U.S. Information Reporting and Backup Withholding
Information returns generally will be required to be filed with the Internal Revenue Service (“IRS”) with respect to the receipt of cash in lieu of a fractional share of our common stock pursuant to the reverse stock split in the case of certain U.S. holders. In addition, U.S. holders may be subject to a backup withholding tax at the rate specified in the Code on the payment of such cash if they do not provide their taxpayer identification numbers in the manner required or otherwise fail to comply with applicable backup withholding tax rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or allowed as a credit against the U.S. holder’s federal income tax liability, if any, provided the required information is timely furnished to the IRS.
Non-U.S. Holders
Generally, non-U.S. holders will not recognize any gain or loss upon completion of the reverse stock split. In particular, gain or loss will not be recognized with respect to cash received in lieu of a fractional share provided that (a) such gain or loss is not effectively connected with the conduct of a trade or business in the United States (or, if certain income tax treaties apply, is not attributable to a non-U.S. holder’s permanent establishment or fixed base in the United States), (b) with respect to non-U.S. holders who are individuals, such non-U.S. holders are present in the United States for less than 183 days in the taxable year of the reverse stock split and other conditions are met, and (c) such non-U.S. holders comply with certain certification requirements.
U.S. Information Reporting and Backup Withholding Tax
In general, backup withholding and information reporting will not apply to payments of cash in lieu of a fractional share of our common stock to a non-U.S. holder pursuant to the reverse stock split if the non-U.S. holder certifies under penalties of perjury that it is a non-U.S. holder and the applicable withholding agent does not have actual knowledge to the contrary. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or allowed as a credit against the non-U.S. holder’s U.S. federal income tax liability, if any, provided that certain required information is timely furnished to the IRS. In certain circumstances the amount of cash paid to a non-U.S. holder in lieu of a fractional share of our common stock, the name and address of the beneficial owner and the amount, if any, of tax withheld may be reported to the IRS.
Recommendation of our Board
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVALADOPTION OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF OUR COMMON STOCK AND REDUCE(WITHOUT REDUCING THE AUTHORIZED NUMBER OF SHARES OF OUR COMMON STOCK,STOCK), IF AND WHEN DETERMINED BY OUR BOARD.
AUDIT COMMITTEE REPORTPROPOSAL TWO
The Audit Committee overseesAPPROVAL OF THE ADJOURNMENT PROPOSAL
Background of and Rationale for the Adjournment Proposal
Our Board believes that if the number of shares of our independent registered public accounting firmcommon stock outstanding and assistsSeries I Preferred Stock entitled to vote at the special meeting is insufficient to approve the Amendment Proposal, it is in the best interests of the stockholders to enable our Board in fulfilling its oversight responsibilities on matters relating to continue to seek to obtain a sufficient number of additional votes to approve the integrity of our financial statements, our compliance with legal and regulatory requirements and the independent registered public accounting firm’s qualifications and independence by meeting regularly with the independent registered public accounting firm and financial management personnel. Management is responsible for the preparation, presentation and integrity of our financial statements; establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(f)); evaluating the effectiveness of disclosure controls and procedures; and evaluating any change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed our financial statements as of and for the fiscal year ended December 31, 2017 with management and BDO USA, LLP, our independent registered public accounting firm. The Audit Committee also discussed with BDO USA, LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. This included a discussion of the independent registered public accounting firm’s judgments as to the quality, not just the acceptability, of our accounting principles and such other matters that generally accepted auditing standards require to be discussed with the Audit Committee. The Audit Committee also received the written disclosures and the letter from BDO USA, LLP required by the applicable requirements of the Public Company Accounting Oversight Board and the Audit Committee discussed the independence of BDO USA, LLP with that firm.
Based on the Audit Committee’s review and discussions noted above, the Audit Committee recommended to our Board, and our Board approved, that the audited financial statements be included in our Annual Report onForm 10-K for the fiscal year ended December 31, 2017 for filing with the SEC. The Audit Committee also appointed BDO USA, LLP as our independent registered public accounting firm for fiscal year ending December 31, 2018.
Submitted by the Audit Committee of our Board:
James R. Talevich, Chairman
Jonathan T. Lord, M.D.
Richard B. Lanman, M.D.
Date: [●], 2018
RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2018
The Audit Committee has appointed BDO USA, LLP as our independent registered public accounting firm for 2018. Our Board and the Audit Committee are asking our stockholders to ratify the appointment by the Audit Committee of BDO USA, LLP as the independent public accounting firm to conduct the audit of our financial statements for the fiscal year ending December 31, 2018. Stockholder ratification of such selection is not required by our bylaws or any other applicable legal requirement. However, our Board is submitting the selection of BDO USA, LLP to our stockholders for ratification as a matter of good corporate governance.Amendment Proposal.
In the event ourAdjournment Proposal, we are asking stockholders fail to ratifyauthorize the selection, the Audit Committee will reconsider whether or not to continue to retain BDO USA, LLP for the fiscal year ending December 31, 2018. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointmentholder of a different independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change should be made.
A representative of BDO USA, LLP is expected to be present at our annual meeting, will have the opportunity to make a statement if he or she desires to do so and is expected to be available to respond to appropriate questions.
Principal Accountant Fees and Services
The following table presents fees billed and billable to us for professional services rendered by BDO USA, LLP for the fiscal years ended December 31, 2017 and 2016.
Fiscal Year Ended December 31, 2017 | Fiscal Year Ended December 31, 2016 | |||||||
Audit Fees(1) | $ | 291,246 | $ | 244,650 | ||||
Audit-Related Fees | — | — | ||||||
Tax Fees | — | — | ||||||
All Other Fees | — | — | ||||||
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Total | $ | 291,246 | $ | 244,650 | ||||
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Determination of Independence
In considering the nature of the services provided by our independent registered public accounting firm, the Audit Committee determined that such services are compatible with the provision of independent audit services. The Audit Committee discussed these services with our independent registered public accounting firm and our management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.
Pre-Approval Policy
According to policies adopted by the Audit Committee and ratifiedproxy solicited by our Board to ensure compliance withvote in favor of adjourning or postponing the SEC’s rules regarding auditor independence, all auditspecial meeting or any adjournment or postponement thereof. If our stockholders approve this proposal, we could adjourn or postpone the special meeting, and non-audit servicesany adjourned session of the special meeting, to be provideduse the additional time to solicit additional proxies in favor of the Amendment Proposal.
Additionally, approval of the Adjournment Proposal could mean that, in the event we receive proxies indicating that a majority in voting power of the outstanding shares of our common stock and Series I Preferred Stock entitled to vote on the Amendment Proposal vote against the Amendment Proposal, we could adjourn or postpone the special meeting without a vote on the Amendment Proposal and use the additional time to solicit the holders of those shares to change their vote in favor of the Amendment Proposal.
Vote Required
The affirmative “FOR” vote of a majority in voting power of the shares of our common stock and Series I Preferred Stock present in person or represented by our independent
registered public accounting firm must be approved byproxy at the Audit Committee. This policy generally provides that wespecial meeting and entitled to vote on the Adjournment Proposal is required to approve such proposal. An abstention will have the same practical effect as a vote against this proposal. Brokers will have discretionary authority to vote on this proposal. Accordingly, there will not engagebe any independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee.
From time to time, the Audit Committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval will be detailed as to the particular service or type of services to be provided and is also generally subject to a maximum dollar amount. In providing any pre-approval, the Audit Committee considers whether the services to be approved are consistent with the SEC’s rulesbroker non-votes on auditor independence.
All fees paid to BDO USA, LLP in 2017 and 2016 were pursuant to engagements pre-approved by the Audit Committee, and none of those engagements made use of the exception to pre-approval contained inRegulation S-X, Rule 2-01(c)(7)(i)(C).Proposal Two.
Recommendation of Ourour Board and Audit Committee
OUR BOARD AND OUR AUDIT COMMITTEE UNANIMOUSLY RECOMMEND THAT OUR STOCKHOLDERSRECOMMENDS A VOTE “FOR” THE RATIFICATIONAPPROVAL OF THE APPOINTMENT OF BDO USA, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018.ADJOURNMENT PROPOSAL
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information relating to the beneficial ownershipAs of our common stock by eachMay 25, 2023, there was no person, entity or group known to the Company to be the beneficial owner of more than five percent (5%) of the outstanding shares of our common stock or Series I Preferred Stock based on a review of publicly available statements of beneficial ownership filed with the SEC and Company records. Percentage ownership is based on 102,344,682 shares of our common stock being issued and outstanding as of March 15, 2018.
Name and Address | Amount and Nature of Beneficial Ownership | Percentage of Class | ||||||
Larry N. Feinberg(1) | 33,517,597 | 31.9 | % | |||||
200 Greenwich Avenue Greenwich, Connecticut 06830 | ||||||||
Jack W. Schuler(2) | 34,692,178 | 33.0 | % | |||||
100 N. Field Drive, Suite 360 Lake Forest, Illinois 60045 |
Such beneficial ownership includes warrants held by each of Mr. Feinberg, Oracle Associates and Oracle Investment, which are exercisable for 2,651,332 shares of our common stock each, (ii) in the case of Oracle Partners, for 2,045,412 shares of our common stock, (iii) in the case of Institutional Partners, for 317,834 shares of our common stock, and (iv) in the case of Ten Fund, for 288,086 shares of our common stock, totaling 10,605,328 shares issuable upon exercise of warrants held by the Oracle Reporting Persons.
Each of Mr. Feinberg, Oracle Partners, Institutional Partners, Ten Fund, Oracle Associates and Oracle Investment (the “Oracle Standstill Parties”) is a party to that certain Standstill Agreement, dated as of November 10, 2015 and amended as of August 1, 2016 and November 9, 2017, with the Company, pursuant to which the Oracle Reporting Persons agreed, among other things, that neither they, nor any of their affiliates or associates would purchase or acquire any additional shares of our common stock, if, after such purchase or acquisition, the aggregate beneficial ownership of the Oracle Reporting Persons and their affiliates and associates would exceed 41% of the issued and outstanding shares of our common stock.
In accordance with SEC rules, the percentage indicated in the table above is based on 102,344,682 shares of our common stock outstanding as of March 15, 2018, together with the addition of 2,651,332 shares issuable upon exercise of the warrants held by the Oracle Reporting Persons.
Each of the Schuler Reporting Persons is a party to that certain Standstill Agreement, dated as of November 10, 2015 and amended as of August 1, 2016 and November 9, 2017, with the Company, pursuant to which the Schuler Reporting Persons agreed, among other things, that neither they, nor any of their affiliates or associates would purchase or acquire any additional shares of our common stock, if, after such purchase or acquisition, the aggregate beneficial ownership of the Schuler Reporting Persons and their affiliates and associates would exceed 41% of the issued and outstanding shares of our common stock.
In accordance with SEC rules, the percentage indicated in the table above is based on 102,344,682 shares of our common stock outstanding as of March 15, 2018, together with the addition of 2,651,331 shares issuable upon exercise of the warrants held by the Schuler Reporting Persons.
The following table sets forth the beneficial ownership of shares of our common stock and Series I Preferred Stock as of March 15, 2018May 25, 2023, following the distribution of the Series I Preferred Stock on that date, by (i) each current director and director nominee, (ii) each named executive officer and (iii) all current directors and executive officers as a group. Except as indicated in the footnotes to this table, theThe persons named in the table have sole voting and investment power with respect to all shares of our common stock and Series I Preferred Stock shown as beneficially owned by them, subject to community property laws, where applicable. Percentage ownership is based on 102,344,68227,734,142 shares of our common stock outstanding as of March 15, 2018.May 24, 2023. Shares underlying stock options or warrants exercisable within 60 days of March 15, 2018May 24, 2023 are deemed outstanding for the purpose of computing the percentage ownership of the
person or persons holding such options or warrants, but are not deemed outstanding for computing the percentage ownership of any other persons.
Name | Owned Shares of Common Stock | Number of Shares Underlying Options or Warrants Exercisable or RSUs Releasable Within 60 Days of March 15, 2018 | Percentage of Class | |||||||||
Harold C. Flynn, Jr.(1)(2) | 228,690 | (4) | 806,001 | (6) | 1.0 | % | ||||||
Richard B. Lanman, M.D.(1) | — | 145,201 | * | |||||||||
Jonathan T. Lord, M.D.(1) | 467,145 | (4) | 680,727 | (7) | 1.1 | % | ||||||
James R. Talevich(1) | 64,906 | (5) | 490,765 | * | ||||||||
John R. Beaver(2) | — | 41,666 | * | |||||||||
Dmitri Boutoussov(2) | 36,159 | 361,053 | * | |||||||||
David C. Dreyer(2)(3) | 123,000 | — | * | |||||||||
Mark J. Nelson(2)(8) | 19,200 | 9,346 | (9) | * | ||||||||
All current directors and executive officers as a group (six persons) | 796,900 | 2,525,413 | 3.2 | % |
Name | Shares of Common Stock(1) | Shares of Series I Preferred Stock(2) | Percentage of Voting Power on Amendment Proposal(3) | |||||||||
John R. Beaver | 18,989 | (4) | 18.989 | * | ||||||||
Jonathan T. Lord, M.D. | 59,925 | (5) | 59.925 | * | ||||||||
Kathleen T. O’Loughlin, D.D.S. | 3,958 | (6) | 3.958 | * | ||||||||
Jess Roper | 18,287 | (7) | 18.287 | * | ||||||||
Martha Somerman, D.D.S. | 3,958 | (6) | 3.958 | * | ||||||||
Carol Gomez Summerhays, D.D.S. | 3,958 | (6) | 3.958 | * | ||||||||
Kenneth P. Yale, D.D.S., J.D. | — | — | * | |||||||||
Jennifer Bright | 9,068 | (8) | 9.068 | * | ||||||||
Steven Sandor | 11,936 | (9) | 11.936 | * | ||||||||
All current directors and executive officers as a group (9 persons) | 130,079 | 130.079 | * |
* | Represents less than 1%. |
(1) | There were no shares of common stock underlying options or warrants exercisable or RSUs releasable within 60 days of May 24, 2023. |
(2) | On June 5, 2023, our Board declared a dividend of one one-thousandth (1/1,000th) of a share of Series I Preferred Stock for each outstanding share of common stock to holders of record of common stock as of 5:00 p.m. Eastern Time on June 16, 2023. Shares of Series I Preferred Stock will not be distributed with respect to any options or warrants to purchase our common stock unless such options or warrants are exercised prior to such record date. |
(3) | All shares of Series I Preferred Stock that are not present in person or by proxy at the |
(4) | Includes |
(5) | Includes |
(6) | Includes |
(7) | Includes |
(8) | Includes vested options to purchase 405 shares of our common stock. |
(9) | Includes vested options to purchase |
Proxy Solicitation Costs
We will bear the entire cost of solicitation, including the preparation, assembly, printing and mailing of this proxy statement, the proxy card and any additional solicitation materials we furnish to our stockholders. Copies of the Company’s solicitation materials will be furnished to brokerage houses, fiduciaries and custodians holding shares in their names that are beneficially owned by others so that they may forward this solicitation material to such beneficial owners. Upon request, we will reimburse such persons for their costs in forwarding such solicitation materials to such beneficial owners.
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements, annual reports and notices of internet availability of proxy materials with respect to two or more stockholders sharing the same address by delivering a single copy of the applicable document(s) addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
Brokers with account holders who are stockholders of the Company may be “householding” our proxy materials. A single proxy statement or notice may be delivered to multiple stockholders sharing an address unless
contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you notify your broker or the Company that you no longer wish to participate in “householding.”
If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement, annual report or notice you may (1) notify your broker, or (2) direct your written request to: BIOLASE, Inc., 4 Cromwell, Irvine, California 92618,27042 Towne Centre Drive, Suite 270, Lake Forest, CA 92610, Attention: Corporate Secretary.Secretary, or (3) call (833) 246-5273. Stockholders who currently receive multiple copies of our proxy statement and/or notice at their address and would like to request “householding” of their communications should contact their broker. In addition, the Company will promptly deliver, upon written or oral request to the address or telephone number above, a separate copy of the proxy statement, annual report and/or notice to a stockholder at a shared address to which a single copy of the document(s) was delivered.
Stockholder Proposals and Nominations
Pursuant to Rule 14a-8 under the Exchange Act, in order to be included in our proxy statement and form of proxy for the 20192024 annual meeting of stockholders, stockholder proposals must be received at our principal executive offices, 4 Cromwell, Irvine, California 92618,27042 Towne Centre Drive, Suite 270, Foothill Ranch, CA 92610, Attention: Corporate Secretary, no later than [•], 2018,November 18, 2023, and must comply with additional requirements established by the SEC. If we change the date of our next annual meeting of stockholders by more than 30 days from the date of the previous year’s annual meeting of stockholders, then the deadline is a reasonable time before we begin to print and send our proxy materials.
Pursuant to our bylaws, a stockholder proposal of business submitted outside of the process established in Rule 14a-8 and stockholder nominations of directors will be considered untimely if received before January 9, 2019December 30, 2023 or after February 8, 2019. However, ifJanuary 29, 2024. Such notice of proposed business or nomination must otherwise meet the daterequirements set forth in our bylaws. In addition to satisfying the foregoing requirements under our bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of our next annual meeting of stockholders is moredirector nominees other than 30 days before or more than 60 days after May 9, 2019,management’s nominees must provide notice that sets forth the deadline isinformation required by Rule 14a-19 under the Exchange Act no 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 by the Company.February 27, 2024 and otherwise comply with Rule 14a-19.
Annual Report
A copy of our Annual Report onForm 10-K for for the fiscal year ended December 31, 2017,2022, which includes the financial statements, but excludesis available at www.biolase.com under “About Us” by clicking on the “Investor Relations” tab and selecting “SEC Filings.” Our Annual Report on Form 10-K for exhibits,the fiscal year ended December 31, 2022 is being mailed concurrently with this proxy statement to all stockholders entitled to notice of and to vote at our annual meeting.also available on the SEC’s website.
Other Matters
We know of no other matters that will be presented for consideration at our annualspecial meeting. If any other matters properly come before our annualspecial meeting upon which a vote properly may be taken, shares represented
by all proxies received by us on the proxy card will be voted with respect thereto as permitted and in accordance with the judgment of the proxy holders.
BY ORDER OF THE BOARD OF DIRECTORS
Jonathan T. Lord, M.D.
BY ORDER OF THE BOARD OF DIRECTORS | |||||||||||||||||||||||||||||||||||||||||
Jonathan T. Lord, M.D. | |||||||||||||||||||||||||||||||||||||||||
Chairman of the Board
FORM OF SIXTH AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION OF BIOLASE, INC. BIOLASE, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, hereby certifies as follows:
THIRD. The total number of shares of stock which the Corporation shall have the authority to issue is Upon the filing and effectiveness (the “Effective Time”) pursuant to the General Corporation Law of the State of Delaware of this Sixth Amendment to Restated Certificate of Incorporation of the Corporation, each [●] No fractional shares shall be issued in connection with the Reverse Stock Split. In lieu thereof, the aggregate of all fractional shares otherwise issuable to the holders of record of common stock shall be issued to the transfer agent, as agent for the accounts of all holders of record of common stock and otherwise entitled to have a fraction of a share issued to them. The sale of all of the fractional interests will be effected by the transfer agent as soon as practicable after the Effective
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