<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No. ____)
Filed by the Registrant [X]
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))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
BIOLASE TECHNOLOGY, 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):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:___________________________________________________
(2) Form, Schedule or Registration Statement No.:_____________________________
(3) Filing Party:_____________________________________________________________
(4) Date Filed:_______________________________________________________________
<PAGE>
BIOLASE TECHNOLOGY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 25, 1999
---------------------
To The Stockholders:
The Annual Meeting of Stockholders of BioLase Technology, Inc. (the "Company")
will be held at the Company's offices, 981 Calle Amanecer, San Clemente,
California, on May 25, 1999, at 2:00 p.m. for the following purposes:
1. To elect four directors to serve until the next Annual Meeting of
Stockholders and until their successors are duly elected and
qualified;
2. To approve the Company's 1998 Stock Option Plan;
3. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the year ending December
31, 1999; and
4. To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
The Board of Directors has fixed the close of business, April 13, 1999, as
the record date for determination of stockholders entitled to notice of and to
vote at the Annual Meeting.
You are cordially invited to attend the meeting in person. However,
whether or not you plan to attend, we urge you to complete, date, sign and
return the enclosed proxy card without delay in the accompanying envelope (to
which no postage need be affixed if mailed in the United States) so that your
shares may be represented at the Annual Meeting.
FEDERICO PIGNATELLI
Chairman
April 21, 1999
<PAGE>
BIOLASE TECHNOLOGY, INC.
981 Calle Amanecer
San Clemente, California 92673
---------------------
PROXY STATEMENT
---------------------
GENERAL INFORMATION
Solicitation, Revocation and Voting of Proxies
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of BioLase Technology, Inc. (the "Company"),
in connection with the Annual Meeting of Stockholders to be held at 2:00 p.m. on
May 25, 1999, at the Company's offices, 981 Calle Amanecer, San Clemente,
California, and at any and all adjournments thereof. It is anticipated that
this Proxy Statement and accompanying proxy will first be mailed to stockholders
on or about April 23, 1999.
The accompanying proxy, if properly executed and returned, will be voted as
specified by the stockholder or, if no vote is indicated, the proxy will be
voted FOR all proposals. As to any other matter of business which may be
brought before the Annual Meeting, a vote may be cast pursuant to the
accompanying proxy in accordance with the judgment of the persons voting the
same, but management does not know of any such other matter of business. A
stockholder may revoke his proxy at any time prior to the voting of shares by
voting in person at the Annual Meeting or by filing with the Secretary of the
Company a duly executed proxy bearing a later date or an instrument revoking the
proxy.
The costs of solicitation of proxies will be paid by the Company. In
addition to soliciting proxies by mail, the Company's officers, directors and
other regular employees, without additional compensation, may solicit proxies
personally or by other appropriate means. Banks, brokers, fiduciaries and other
custodians and nominees who forward proxy soliciting material to their
principals will be reimbursed their customary and reasonable out-of-pocket
expenses.
Record Date and Voting Rights
Only stockholders of record of the Company's Common Stock as of the close
of business on April 13, 1999 will be entitled to vote at the Annual Meeting.
On that date, there were outstanding 17,657,387 shares of Common Stock, which
constituted all of the outstanding voting securities of the Company, each of
which is entitled to one vote per share. A majority of the shares entitled to
vote, represented in person or by proxy, constitutes a quorum at the Annual
Meeting. Abstentions and broker non-votes are counted as present for purposes
of determining the existence of a quorum.
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<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of April 13, 1999
relating to the beneficial ownership of the Company's Common Stock by (1) all
persons known by the Company to beneficially own more than 5% of the outstanding
shares, (2) each director and Named Officer of the Company, and (3) all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Number of Shares Percent
Name Beneficially Owned of Class
----- ------------------ --------
<S> <C> <C>
Federico Pignatelli 433,750 (1) 2.58%
George V. d'Arbeloff 81,517 (1) *
Jeffrey W. Jones 66,000 (1) *
William A. Owens 22,500 (1) *
All Executive Officers and
Directors as a Group (9 persons) 1,146,687 (2) 6.56%
Donald A. La Point 300,000 (1) 1.67%
Advisor's Capital Investments, Inc. 1,512,894 (3) 8.57%
17 Tripp Road
Woodstock, CT 06281
</TABLE>
- ------
* Less than 1%.
(1) Includes shares issuable under options which are exercisable on or within
60 days of April 13, 1999 as follows: Mr. Pignatelli - 251,250 shares; Mr.
d'Arbeloff - 58,335 shares; Mr. Jones - 66,000 shares; Mr. Owens - 22,500
shares; and Donald A. La Point - 300,000 shares. Mr. d'Arbeloff's
beneficial ownership includes 5,000 common stock purchase warrants. The
information as to Mr. La Point is based solely on information known to the
Company.
(2) Includes the shares described in note (1) except Mr. La Point's shares;
also includes 2,088 shares owned and 540,832 shares issuable under options
which are exercisable on or within 60 days of April 13, 1999 held by
officers not named in the foregoing table.
(3) Based on a Schedule 13G filed with the Securities and Exchange Commission
(SEC) on February 16, 1999. Advisor's Capital Investments, a registered
investment adviser, disclaims beneficial ownership of 1,437,894 shares as
to which it does not have the sole or shared power to vote or direct the
vote, but does have the shared power to dispose or direct the disposition.
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<PAGE>
PROPOSAL ONE - ELECTION OF DIRECTORS
The four directors to be elected at the Meeting will hold office until the
next Annual Meeting of Stockholders and until the election of their respective
successors. The nominees receiving the highest number of affirmative votes, up
to the number of directors to be elected, will be elected directors. Broker
non-votes and votes withheld have no legal effect. All proxies received by the
Board of Directors will be voted for the nominees listed below if no direction
to the contrary is given. In the event that any nominee is unable or declines
to serve, an event that is not anticipated, the proxies will be voted for the
election of any nominee who may be designated by the Board of Directors.
The nominees for director are:
Name Age Director Since
---- --- --------------
Federico Pignatelli 46 1991
George V. d'Arbeloff 54 1996
Jeffrey W. Jones 42 1998
William A. Owens 58 1998
Mr. Pignatelli has been Chairman of the Board of Directors since 1994 and a
director of the Company since 1991. Since 1995 he has served as Chairman of the
Board and Chief Executive Officer of Studio Management, Inc., the general
partner of Pier 59 Studio, L.P., a limited partnership that operates in New York
City, the world's largest complex of professional photographic and digital
studios. Since 1992 Mr. Pignatelli has also been President of EuroCapital
Partners, Inc., an investment banking firm. Mr. Pignatelli is a director of
Fountain Powerboat Industries, Inc., a high performance sport powerboat and
sport fishing boat manufacturer listed on the Nasdaq National Market System.
From 1990 to 1992, Mr. Pignatelli was associated with Gruntal & Company, an
investment banking firm and brokerage firm, as a Managing Director. Previously,
Mr. Pignatelli was associated with Ladenburg, Thalmann & Co., a New York
investment banking and brokerage firm, as a Managing Director.
Mr. d'Arbeloff has been a director of the Company since 1996. Mr.
d'Arbeloff has served as the Chief Executive Officer of Retail Solutions, Inc.,
a company involved in the development and marketing of inventory control and
scanning-based computer systems for retail stores, since November 1996. From
1967 to November 1996, he served in various executive capacities with Teradyne,
Inc., a manufacturer of testing equipment for the semiconductor and electronics
industries, including Vice President of Corporate Relations from 1995 to 1996,
Vice President and General Manager of the Semiconductor Test Group from 1992 to
1995 and Vice President and General Manager of the Industrial/Consumer Division
of the Semiconductor Test Group from 1982 to 1992.
3
<PAGE>
Mr. Jones was elected President, Chief Executive Officer and a director of
the Company on November 27, 1998. From 1986 until he joined the Company, Mr.
Jones served in various executive capacities, including president and chief
executive officer, with HGM Medical Lasers (and certain related entities), a
Salt Lake City-based manufacturer of medical lasers utilized in ophthalmologic,
dental and anesthetic applications.
Admiral Owens was elected a Director of the Company on August 6, 1998. He
is Co-Chief Executive Officer (since February 1999) and Vice Chairman (since
August 1998) of Teledesic LLC, a company engaged in developing a satellite
communications network. He also serves as Chief Executive Officer of an
affiliated company, Teledesic Holdings Ltd. Admiral Owens was President, Chief
Operating Officer and Vice Chairman of Science Applications International
Corporation, a high-technology company, from March 1996 until August 1998.
Admiral Owens retired from the U.S. Navy in 1996 after 34 years of service.
During his naval career his positions included Vice Chairman of the Joint Chiefs
of Staff, the nation's second-ranking military officer (1993-1996); Deputy Chief
of Naval Operations for Resources, Warfare Requirements and Assessments (1991-
1993); Commander of the U.S. Sixth Fleet (1990-1991); and senior military
assistant to the Office of the Secretary of State (1988-1991). Admiral Owens
also serves as a director of British American Tobacco (Holding Ltd.), Viasat
Inc. and Microvision, Inc.
Information Concerning Board and Committee Meetings
The Company's Board of Directors held five meetings during the fiscal year
ended December 31, 1998 and also acted by written consent several times. George
d'Arbeloff and Federico Pignatelli are the members of the Compensation Committee
and the Audit Committee. The Compensation Committee approves the compensation
of employees whose annual salary equals or exceeds $60,000 and also administers
and generally approves option grants under the Company's stock option plans.
During 1998, the Compensation Committee held two meetings and also acted by
written consent several times. The Audit Committee assists the Board of
Directors in selecting independent auditors to audit the Company's financial
statements, reviews the audit with the auditors and management, and consults
with the auditors and management regarding risk management and the adequacy of
the Company's financial and accounting procedures and controls. The Audit
Committee met once in 1998. The Company does not have a nominating committee.
Directors' Compensation
The Company's directors do not receive cash directors' fees, but are
reimbursed for business expenses incurred in connection with their duties as
directors.
Under the Company's 1993 Stock Option Plan, each non-employee director is
automatically granted a stock option to purchase 30,000 shares of Common Stock
on the date he is first elected a director and on the date of each annual
meeting of stockholders at which he is reelected, at an exercise price equal to
the market price of the Common Stock on that date. On May 19, 1998, the Board
of Directors amended the 1993 Plan to increase the number of options
automatically granted
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<PAGE>
to non-employee directors each year from 20,000 to 30,000. On May 19, 1998, each
of George V. d'Arbeloff and Federico Pignatelli received options to purchase
30,000 shares of Common Stock at an exercise price of $3.9375 per share. These
options vested at the rate of 7,500 shares per quarter. Pursuant to the 1993
Plan, William A. Owens was automatically granted an option to purchase 22,500
shares at an exercise price of $3.125 per share on August 6, 1998, the date he
was first elected a director. All of these options expire on the first to occur
of ninety days after termination of service as a director or the tenth
anniversary of the grant date.
At this Annual Meeting the Company is seeking stockholder approval of the
1998 Stock Option Plan (the "Plan") as described below under "Proposal Two -
Approval of the 1998 Stock Option Plan." The Plan provides for annual automatic
option grants to non-employee directors as described under the subheading
"Annual Automatic Option Grants to Non-Employee Directors." If the Plan is
approved by the stockholders, the Company's non-employee directors, George V.
d'Arbeloff, Federico Pignatelli and William A. Owens, will each be entitled to
receive annual option grants to purchase 30,000 shares. As a result, such
directors have an interest in the approval of the 1998 Plan.
5
<PAGE>
PROPOSAL TWO - APPROVAL OF THE 1998 STOCK OPTION PLAN
The Board of Directors has determined that it is advisable and in the best
interest of the Company and its stockholders to provide incentive for the
encouragement of the highest level of performance by selected employees,
directors, consultants and advisors of the Company by enabling such persons to
acquire a proprietary interest in the Company. Accordingly, in November 1998
the Board of Directors approved and adopted the 1998 Stock Option Plan (the
"Plan") pursuant to which up to 1,000,000 shares of Common Stock may be issued
as stock awards or upon the exercise of stock options granted to eligible
participants. In connection with its recruitment of Jeffrey W. Jones and Keith
G. Bateman to serve as executive officers of the Company, the Company has
granted an aggregate of 607,000 stock options to such persons under the Plan.
The grant of these options is not contingent on stockholder approval of the
Plan. If the stockholders do not approve the Plan, however, no additional
awards will be granted under the Plan.
The Company's stockholders previously approved various stock option plans
under which an aggregate of 2,025,000 shares of Common Stock may be issued. At
April 13, 1999, there were 1,423,960 outstanding options under such plans,
328,366 shares of Common Stock had been issued pursuant to such plans, and
272,674 shares of Common Stock were available for future issuance under such
plans. Due to the limited number of shares available for option grants under
the Company's existing plans, the Board of Directors decided to adopt the Plan
so that the Company would be able to continue to grant awards as a means of
attracting, retaining and motivating employees, directors, consultants and
advisors.
The following summary of the principal provisions of the Plan is subject
to the full text thereof. A copy of the Plan may be obtained from the Company
by any stockholder upon written request.
General Nature and Purpose of the Plan
Stock options and restricted or unrestricted stock awards (collectively,
"Awards") may be granted under the Plan. Options issued under the Plan may be
either incentive stock options ("Incentive Options") under Section 422 of the
Internal Revenue Code of 1986 (the "Code"), or non-qualified stock options
("Non-qualified Options"). The underlying objective of the Plan is to further
the interests of the Company by strengthening the desire of employees and
consultants to continue their employment with the Company and by inducing
individuals to become employees, directors, consultants or advisors of the
Company through the grant of Awards.
Securities Subject to the Plan
The Plan authorizes the issuance thereunder of 1,000,000 shares of the
Company's Common Stock, which represents 5.7% of the shares outstanding on April
13, 1999. In the event of any change in the number of outstanding shares of
Common Stock by reason of reorganization, merger, recapitalization,
reclassification, stock dividend, stock split, exchange or combination of shares
or
6
<PAGE>
other similar transactions, appropriate and proportionate adjustment will be
made in the number of shares subject to outstanding Awards and the exercise
price thereof.
Administration
The Plan may be administered either by a committee consisting of at least
two directors appointed by the Board of Directors or by the Board of Directors.
If a committee is appointed, the Board of Directors, instead of that committee,
may at any time take any action permitted to be taken by such committee under
the Plan. As used herein, the term "Committee" refers to the body, whether a
committee or the Board of Directors, which is at the time administering the
Plan. Currently the Plan is administered by the Compensation Committee which
consists of George d'Arbeloff and Federico Pignatelli, who are eligible for
automatic annual option grants under the Plan, as described below. The
Committee has full authority, subject to the provisions of the Plan, to grant
Awards, to designate the recipients and determine the terms of the Awards, to
establish rules and regulations which it deems appropriate for the proper
administration of the Plan, and to interpret and make determinations under the
Plan. Members of the Committee serve at the discretion of the Board.
Eligibility
Awards may be granted to persons who are employees, directors, consultants
or advisors of the Company or any subsidiary or parent company of the Company.
Incentive Options may be granted only to employees of the Company or any
subsidiary or parent of the Company. At April 13, 1999, the Company had 63
employees and three non-employee directors who were eligible to receive Awards
under the Plan. At April 13, 1999, executive officers as a group (six persons)
held options to purchase 1,152,000 shares, non-employee directors as a group
(three persons) held options to purchase 337,085 shares, and all current and
former employees as a group (other than executive officers) held options to
purchase 415,210 shares of Common Stock under all of the Company's option plans.
There are no restricted stock awards outstanding.
In connection with his becoming an executive officer of the Company, in
January 1999 the Company granted Keith G. Bateman ten-year options to purchase
100,000 shares of Common Stock under the Plan at an exercise price of $2.125 per
share, the fair market value on the date of grant. These options vest as to
50,000 shares over a six month period and as to 50,000 shares if a sales target
for the year ending December 31, 1999 is achieved. For information concerning
the stock options granted to Jeffrey W. Jones under the Plan and options
previously granted to certain executive officers and directors of the Company
under the Company's other plans, see "Executive Compensation" and "Proposal One
- - Election of Directors - Compensation of Directors." See also "Report of the
Compensation Committee" for information concerning the Compensation Committee's
policies concerning option grants to executive officers.
7
<PAGE>
Terms and Conditions of Options
Options granted under the Plan expire on such date as is determined by the
Committee, unless earlier terminated as provided in the Plan, but in no event
later than ten years after the grant date (five years with respect to Incentive
Options granted to an optionee who owns, or would be considered to own by reason
of Section 424(d) of the Code, more than 10% of the outstanding Common Stock of
the Company or any subsidiary on the grant date).
An option may be exercisable in installments as determined on the grant
date by the Committee. The exercise price for options is determined by the
Committee at the time of grant, subject to the following: (1) the exercise price
of an Incentive Option may not be less than 100% of the fair market value of the
Common Stock on the grant date (110% of the fair market value in the case of
Incentive Options granted to a person who on the grant date owns or is
considered to own more than 10% of the outstanding Common Stock); and (2) the
exercise price of a Non-qualified Option may not be less than 85% of the fair
market value of the Common Stock on the grant date. On April 13, 1999, the
closing price of the Company's Common Stock on Nasdaq was $2.25 per share.
If the aggregate fair market value (determined at the time each Incentive
Option is granted) of Common Stock for which all Incentive Options held by an
optionee (whether granted under the Plan or any other plan of the Company) are
exercisable for the first time during any calendar year exceeds $100,000, the
amount of such excess will be treated as a Non-qualified Option.
The exercise price of an option is payable in cash or, with the approval of
the Committee, in shares of the Company's Common Stock that have been owned by
the optionee for at least six months, by full recourse promissory note secured
by the shares purchased, by cancellation of indebtedness of the Company to the
optionee, by waiver of compensation due or accrued for services rendered, or
through a same day sale arranged through a broker.
If an optionee ceases to be employed or retained by the Company for any
reason other than death or permanent disability (as defined in the Plan), the
option generally expires on the earlier of three months from the date of such
termination or expiration of the term of the option. During the period between
the optionee's termination and expiration of the option, the option may only be
exercised to the extent that it was exercisable on the date of such termination.
Upon the death or permanent disability of an optionee while an employee,
director, consultant or advisor, the option generally expires on the earlier of
one year from the date of death or permanent disability or expiration of the
term of the option, but can be exercised only to the extent that it could have
been exercised on the date of death or permanent disability. The foregoing
provisions regarding termination of options upon termination of employment,
permanent disability or death may be varied by the Committee.
8
<PAGE>
Annual Automatic Option Grants to Non-Employee Directors
On the date of each annual meeting of stockholders (or special meeting in
lieu of an annual meeting) at which directors are elected, each non-employee
director who was elected at such meeting will automatically be granted an option
to purchase 30,000 shares of Common Stock, which option will vest at the rate of
7,500 shares per quarter beginning three months after the grant date. If no
such meeting is held in any calendar year, the options will be granted on
December 31 of that year. Any non-employee director who is first elected a
director at any time other than at a meeting of stockholders will automatically
be granted an option on the date of his election as a director for a number of
shares determined by multiplying 2,500 times the number of full months remaining
until the next June 1, which option will vest at the rate of 2,500 shares per
month beginning on the last day of the first full month following the grant
date. The exercise price per share will be equal to 100% of the fair market
value of the Common Stock on the date of grant.
The options expire on the first to occur of (1) the tenth anniversary of
the grant date; (2) ninety days after the date the optionee ceases to be a
director for any reason other than death or permanent disability; or (3) one
year after the optionee ceases to be a director due to death or permanent
disability. Non-employee directors may not receive more than one automatic
option grant per year under the Plan, but they are eligible to receive other
Awards under the Plan. George V. d'Arbeloff, William A. Owens and Federico
Pignatelli are currently the only non-employee directors of the Company.
Restricted and Unrestricted Stock Awards
The Committee may grant restricted stock awards which specify the number of
shares of Common Stock to be issued to the participant, the price, if any, to be
paid for such shares by the participant and the restrictions imposed on such
shares. The Committee may grant restricted stock awards subject to the
attainment of specified performance goals, continued employment or such other
limitations or restrictions as the Committee may determine. Shares of
restricted stock may be issued immediately upon grant or upon vesting as
determined by the Committee. If shares which are subject to vesting or other
restrictions or conditions are issued immediately upon grant, the Committee may
require the participant to deliver an executed stock power, endorsed in blank,
relating to such shares. The Committee may also require that the stock
certificates evidencing such shares be held in custody by the Company until the
restrictions on them have lapsed.
The Committee may make Awards of unrestricted Common Stock to participants
in connection with services actually rendered by such persons. Unrestricted
shares issued on a bonus basis may be issued for no cash consideration.
Transferability of Awards
Awards granted under the Plan are not transferable or assignable other than
by will or by the laws of descent and distribution. The Committee may permit
Non-qualified Options to be transferred pursuant to a domestic relations order
or to members of the optionee's immediate family,
9
<PAGE>
charitable institutions, or trusts or other entities whose beneficiaries or
beneficial owners are members of the optionees' immediate family and/or
charitable institutions, pursuant to such conditions and procedures as the
Committee may establish.
Duration and Modification of the Plan and Awards
The Plan will remain in effect until all shares covered by Awards granted
under the Plan have been purchased or all rights to acquire the shares have
lapsed. No Awards may be granted under the Plan after November 17, 2008,
although the Board of Directors may terminate the granting of Awards under the
Plan at an earlier date or may amend or otherwise modify the Plan. No
additional Awards will be granted if the Plan is not approved by the
stockholders at this Annual Meeting. Except for adjustments made necessary by
changes in the Company's Common Stock, the Board of Directors may not, without
stockholder approval, increase the total number of shares to be offered under
the Plan or materially modify the eligible class of participants in the Plan.
The Committee may modify or amend the terms of outstanding Awards,
including to change or accelerate the vesting of an Award or to change the
exercise price of an option, with the consent of the participant.
In the event of the liquidation or dissolution of the Company, or upon any
reorganization, merger or consolidation in which the Company is not the
survivor, or upon the sale (by merger or otherwise) of substantially all of the
assets of the Company or of more than 80% of the then outstanding stock of the
Company to another corporation or entity, each outstanding Award must be assumed
or an equivalent award must be substituted by the surviving or acquiring
company. The Committee may also, in its sole discretion, accelerate the vesting
of outstanding Awards or give the participants advance notice of such event.
Federal Income Tax Consequences
The following discussion is only a summary of certain significant United
States federal income tax consequences of the Plan based on currently applicable
provisions of the Code and the regulations promulgated thereon.
Grant of Stock Options. The grant of an Incentive Option or a Non-
qualified Option under the Plan is not a taxable event to the optionee.
Exercise of Non-Qualified Stock Options. An optionee will recognize
ordinary income for federal income tax purposes on the date a Non-qualified
Option is exercised. The amount of income recognized is equal to the excess of
the fair market value of the shares acquired on the date of exercise over the
purchase price of such shares. The optionee's tax basis in the shares acquired
upon the exercise of a Non-qualified Option is equal to the fair market value of
such shares on the exercise date. The optionee will recognize capital gain or
loss upon a sale or exchange of the option shares to the extent of any
difference between the amount realized and the optionee's tax basis in the
shares.
10
<PAGE>
Exercise of Incentive Stock Options. An optionee will not recognize income
upon the exercise of an Incentive Option. However, the "spread" between the
fair market value of the shares at the time of exercise and the exercise price
is includible in the calculation of alternative minimum taxable income for
purposes of the alternative minimum tax.
If the optionee does not dispose of the shares received upon exercise of
the option within both the two-year period after the Incentive Option was
granted and the one-year period after the exercise of the Incentive Option (the
"ISO holding periods"), the optionee will recognize capital gain or loss when he
disposes of the shares. Such gain or loss will be measured by the difference
between the exercise price and the amount received for the shares at the time of
disposition.
If the shares acquired upon exercise of an Incentive Option are disposed of
before the end of the ISO holding periods, the disposition is a "disqualifying
disposition" which results in the optionee recognizing ordinary income in an
amount generally equal to the lesser of (i) the excess of the value of the
shares on the option exercise date over the exercise price or (ii) the excess of
the amount received upon disposition of the shares over the exercise price. Any
excess of the amount received upon disposition of the shares over the value of
the shares on the exercise date will be taxed to the optionee as capital gain.
Stock Awards. The recipient of a stock award will generally recognize
ordinary income in an amount equal to the excess of the fair market value of the
shares on the date the shares are freely tradeable and no longer subject to a
substantial risk of forfeiture over the amount paid for the shares, if any.
However, the recipient may elect to recognize income based on the fair market
value of the shares on the date the shares are awarded rather than when the
shares are freely tradeable and no longer subject to a substantial risk of
forfeiture. The shares will be deemed to have been acquired on the date
ordinary income is recognized and will have a tax basis equal to their fair
market value on that date. Any gain or loss generated after the shares are
freely tradable and no longer subject to a substantial risk of forfeiture, or
after an election to recognize ordinary income on the date the shares are
awarded, will be taxed to the recipient as capital gain or loss.
Company Deductions. The Company (or its subsidiary) generally is entitled
to a deduction for federal income tax purposes at the same time and in the same
amount that the participant recognizes ordinary income, to the extent that such
income is considered reasonable compensation under the Code. Deductions may be
limited by Section 162(m) of the Code with respect to Awards granted to certain
executive officers if the Awards do not qualify as "performance-based
compensation" under that section. Neither the Company nor any subsidiary is
entitled to a deduction with respect to payments that constitute "excess
parachute payments" pursuant to Section 280G of the Code and that do not qualify
as reasonable compensation pursuant to that section. Such payments also subject
the recipients to a 20% excise tax.
Vote Required
The affirmative vote of a majority of the shares represented in person or
by proxy and entitled to vote on this proposal is necessary for the approval of
the Plan. Abstentions are counted
11
<PAGE>
in the tabulation of votes entitled to be cast and therefore have the effect of
a vote against the proposal, whereas broker non-votes are not counted and have
no effect on the vote.
Approval of the Plan will be deemed to constitute approval of the automatic
annual option grants to non-employee directors for purposes of the exemption
from Section 16 of the Securities Exchange Act of 1934 provided by Rule 16b-3
thereof.
The Board of Directors recommends that the stockholders vote FOR approval
of the Plan.
12
<PAGE>
PROPOSAL THREE - RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's Board of Directors has appointed PricewaterhouseCoopers LLP
to act as the Company's independent public accountants for the fiscal year
ending December 31, 1999 subject to ratification by the stockholders.
PricewaterhouseCoopers LLP has served as the Company's independent public
accountants since 1995.
The Board of Directors recommends a vote "FOR" ratification of this
appointment. Stockholder ratification of the appointment of auditors is not
required under the laws of the State of Delaware, under which the Company is
incorporated, but the Board has determined to ascertain the position of the
stockholders on the appointment. The Board of Directors will reconsider the
appointment of it is not ratified by the stockholders.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting with the opportunity to make a statement if such
representative so desires and to respond to appropriate questions.
13
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company (other than Jeffrey W. Jones, Chief
Executive Officer, whose business background is described under "Election of
Directors") are as follows:
Keith G. Bateman, 46, joined the Company in January 1999 as Vice President
of Global Sales. Mr. Bateman held key executive positions with the
international and domestic divisions of HGM Medical Lasers, a Salt Lake City-
based manufacturer of medical lasers utilized in ophthalmologic, dental and
anesthetic applications, from 1994 through 1998. He previously spent several
years in sales, marketing and management in the computer industry.
Al Diaz, 43, has been Vice President of Operations since March 1998. From
December 1995 through November 1997, Mr. Diaz served as Vice President of
Operations for the Biomedical Division of Sorin Biomedica, an Italian
manufacturer of cardiovascular implants. From June 1995 through December 1995,
Mr. Diaz was a director of manufacturing of the cardiovascular group of Baxter
Health Care, Inc., a manufacturer of medical products. From June 1994 through
June 1995, Mr. Diaz served as Director of Operations of Laerdal Medical, Inc., a
manufacturer of external portable defibrillators. From 1987 through June 1994,
Mr. Diaz was associated with Advanced Interventional Systems, Inc., a
manufacturer of Eximer laser systems, where he served as Director of Operations
from March 1992 through June 1994 and Manufacturing Manager from 1987 through
March 1992.
Andrew Kimmel, 30, has been Vice President of Engineering and Regulatory
Affairs since February 1998. From May 1997 to February 1998, he served as Vice
President of Internal Programs. Mr. Kimmel joined the Company in 1991 as an
electrical engineer and held various key positions within the Company's
engineering and service departments, including Director of Regulatory Affairs,
where he was responsible for the aggregation and submission of data for
applications to the United States Food and Drug Administration regarding the
Company's products.
Ioana Rizoiu, 35, has served as Vice President of Research and Development
since May 1997. Ms. Rizoiu, who joined the Company in 1992 as a physicist,
played a significant role in the development of the Company's prior laser-based
products and its present HydroKinetic(TM) technology. In 1995, she was promoted
to Director of Research and Development, where her responsibilities included the
design and development of the delivery system utilized to transport the
HydroKinetic(TM) technology to the target tissue. She has also served as project
manager for the LaserBrush(TM) toothbrush since 1995.
Stephen R. Tartamella, 45, has been Vice President of
Finance/Administration and Chief Financial Officer since 1995. Mr. Tartamella
joined the Company in 1994 as a consultant and later became Corporate
Controller. Mr. Tartamella served as a financial consultant from October 1992
until joining the Company in 1994. From mid-1990 to October 1992, Mr.
Tartamella served as Vice President of Finance/Administration and Chief
Financial Officer of Taylor Dunn Manufacturing, a manufacturer of electric and
gas powered utility carts.
14
<PAGE>
Officers of the Company serve at the discretion of the Board of Directors,
subject to the terms of any employment agreement with the Company.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides compensation information with respect to each
person who served as the Company's chief executive officer during 1998 (the
"Named Officers") for the periods indicated. No other executive officer of the
Company received total salary and bonus in excess of $100,000 during 1998.
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
---------------------- --------------------------
Name and Fiscal Securities Underlying
Principal Position Year Salary Options (#)
- ------------------ ------ ------ ---------------------
<S> <C> <C> <C>
Donald A. La Point 1998 $145,000 0
Former Chief 1997 145,000 50,000
Executive Officer(1) 1996 104,367 100,000
Jeffrey W. Jones
Chief Executive 1998 20,000 507,000
Officer(2)
- -------
</TABLE>
(1) Mr. La Point served as Chief Executive Officer from 1995 until November
1998.
(2) Mr. Jones was elected Chief Executive Officer in November 1998. See
"Employment Agreement" below.
Fiscal Year 1998 Option Grants
Shown below is information regarding stock options granted to the Named
Officers during 1998.
<TABLE>
<CAPTION> Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price Appreciation
Underlying Granted to Exercise for
Options Employees in Price Per Option Term (1)
Name Granted Fiscal Year Share Expiration ---------------------------
- ------------------- ------------- --------------- --------- Date 5% 10%
---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Donald La Point 0 -- -- -- -- --
Jeffrey W. Jones 507,000 (2) 70% $2.125 12/17/08 $678,746 $1,713,026
- -----------
</TABLE>
15
<PAGE>
(1) These values were determined in accordance with rules suggested by the SEC
and are not intended to forecast the prices at which the Company's Common
Stock could trade in the future. The actual realized value will depend on
the amount by which the sales price of the shares exceeds the exercise
price.
(2) The exercise price equaled the fair market value on the grant date. The
terms of these options are described under "Employment Agreement" below.
In addition, the Compensation Committee has the authority to modify the
terms of outstanding options, including the exercise price and vesting
schedule.
1998 Option Exercises and Fiscal Year-End Option Values
Shown below is information regarding unexercised stock options held by the
Named Officers at December 31, 1998. No stock options were exercised by the
Named Officers during 1998.
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options at Value of Unexercised In-the-Money
Fiscal Year-End Options at Fiscal Year-End (1)
--------------------------------- -------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------- --------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Donald La Point (2) 400,000 0 $175,750 $ 0
Jeffrey W. Jones 11,000 496,000 858 38,688
- -----------
</TABLE>
(1) Represents the difference between the aggregate market value on December
31, 1998 ($2.203 per share) and the aggregate exercise price of options
that had an exercise price less than such market value.
(2) In connection with his termination in February 1999, 25% of Mr. La Point's
options were cancelled and the expiration date of his remaining options was
extended from ninety days to two years after the date of his termination.
Employment Agreement
The Company employs Jeffrey W. Jones as President and Chief Executive
Officer pursuant to the terms of an Amended and Restated Employment Agreement
dated December 18, 1998. Under the agreement, Mr. Jones is paid (a) a base
annual salary of $220,000, (b) a bonus for the period ending December 31, 1999
equal to 10% of his base salary paid through such period if the Company's
consolidated revenues for the year ending December 31, 1999 are at least
$12,000,000, and (c) incentive compensation for each subsequent year equal to 4%
of pre-tax net income up to $1,000,000 and 2% of pre-tax net income in excess of
$1,000,000, with pre-tax net income computed before provision for such incentive
compensation. Mr. Jones was also granted ten-year options to purchase 507,000
shares of the Company's Common Stock at an exercise price of $2.125 per share
(fair market value on the grant date), of which 407,000 shares vest at the rate
of 11,000 shares per month. An additional 50,000 shares will vest if the
Company's audited financial statements for the year ending December 31, 1999
reflect consolidated revenues of at least $12,000,000 and an additional 50,000
shares will vest on any date through May 31, 2000 that the closing price of the
Company's Common Stock equals or exceeds $8.00 per share for 20 consecutive
trading days. If Mr. Jones' employment is terminated by the Company other than
for cause, the options will continue
16
<PAGE>
to vest for the longer of the balance of the calendar year in which the
termination occurs or six months following termination. The Company has agreed
to reimburse Mr. Jones his reasonable relocation costs up to $40,000 and, until
further notice by the Company, to reimburse his and his family's reasonable
travel and temporary living expenses pending his relocation.
The initial term of the agreement ends on December 31, 2001, but Mr. Jones'
employment will continue on the terms existing at that time until terminated on
at least 90 days prior notice by either party. The Company may immediately
terminate the agreement at any time for cause, which generally includes
conviction for a crime involving moral turpitude or a felony, repeated failure
to perform in accordance with the Board of Directors' instructions, willful and
material breach of the agreement which is not cured within 15 business days of
notice thereof, or the commission of an act of fraud or dishonesty in connection
with his employment. If the Company terminates Mr. Jones' employment prior to
December 31, 2001 other than for cause, Mr. Jones will be entitled to severance
pay in lieu of other salary and bonus payments in an amount equal to up to 12
times his base monthly salary, depending on the term remaining under the
agreement. The Company has also agreed to indemnify Mr. Jones to the maximum
extent permitted by Delaware law.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PacVest Associates, Inc., an affiliate of Advisor's Capital Investments,
Inc., a holder of more than 5% of the Company's Common Stock, served as
placement agent in a private placement of the Company's securities in May 1998.
For its services, PacVest Associates, Inc. received commissions and fees of
$118,000 and warrants expiring on April 30, 2000, to purchase an aggregate of
22,500 shares of the Company's Common Stock at an exercise price of $3.75 per
share. Pac Capital Strategies L.P., in which Advisor's Capital Investments,
Inc. has an interest, purchased five units in the May 1998 private placement at
a price of $30,000 per unit. Each unit consists of 10,000 shares of Common
Stock and warrants to purchase 5,000 shares, expiring April 30, 2000, at an
exercise price of $3.75 per share. Such securities are included in the shares
beneficially owned by Advisor's Capital Investments set forth in the section
"Ownership of Common Stock."
17
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee sets and administers the policies governing the
Company's compensation program, including stock option plans. The Committee
discusses and considers executive compensation matters and makes its decisions,
subject to review by the Company's Board of Directors.
The goals of the Company's executive compensation program are to attract
and retain executive officers who will strive for excellence and to motivate
those individuals to achieve superior performance by providing them with rewards
for assisting the Company in meeting targets regarding technology development,
revenues and profitability. Overall compensation is intended to be set a level
competitive with the amounts paid to management of companies with similar
business structure, size, location and stage of development as the Company.
Compensation for the Company's executive officers consists of base salary,
discretionary bonus and stock options granted under the Company's stock option
plans.
Donald A. La Point served as the Company's Chief Executive Officer from
1995 until November 1998. Mr. La Point's 1998 compensation was not changed from
his 1997 compensation.
In November 1998, the Company elected Jeffrey W. Jones, formerly president
and chief executive officer of Salt Lake City-based HGM Medical Lasers, its
President and Chief Executive Officer. The Company entered into an employment
agreement with Mr. Jones as an inducement for him to relocate and join the
Company. The terms of the agreement, which are summarized under "Executive
Compensation - Employment Agreements," were arrived at on the basis of arms'-
length negotiations. In addition to base salary, Mr. Jones may earn a bonus and
incentive compensation if the Company achieves certain revenue and net income
targets. The vesting of a portion of Mr. Jones' stock options is dependent upon
achieving revenue and stock price targets. As a result, the Committee believes
that a significant portion of Mr. Jones' compensation is tied to Company
performance and that his stock options align his interests with those of the
Company's stockholders. The Committee believes that the compensation package
provided to Mr. Jones was necessary to attract Mr. Jones in a competitive
environment for executive personnel with experience in the medical/dental laser
industry.
Base salaries of executive officers other than the Chief Executive Officer
are based upon (1) the officer's position, experience and tenure with the
Company; (2) industry and comparable company compensation surveys (which
companies differ from the companies in the peer group used in the stock
performance graph); (3) an evaluation of the executive officer's performance;
and (4) judgements as to the expected future contributions of the executive
officer.
The Compensation Committee may award discretionary bonuses based on the
Company's results of operations and financial position and an evaluation of the
performance of each executive officer in such officer's areas of responsibility
and each executive officer's respective contribution to the Company's operating
performance. The Company's annual operating plan is the principal point of
reference utilized by the Compensation Committee to determine whether any
particular
18
<PAGE>
officer's contribution to achieving or exceeding the operating plan merits a
bonus award. No bonuses were awarded for 1998.
During each fiscal year, the Compensation Committee considers the
desirability of option grants to the Company's executive officers under the
Company's stock option plans. The Compensation Committee believes that stock
options encourage the attainment of strategic goals over time and align employee
and stockholder interests. In determining the grants of stock options to
executive officers in 1998, the Compensation Committee reviewed the
recommendations of the Board of Directors and the Chief Executive Officer
regarding individual awards for officers other than the Chief Executive Officer,
and considered the past and anticipated responsibilities, specific assignments,
strategic and operational goals, performance and contributions of each such
executive officer, as well as the number of options previously granted to such
officer and the number of shares subject to options that had vested and would
vest in the future.
Section 162(m) of the Internal Revenue Code generally limits the corporate
tax deduction to $1,000,000 for compensation paid to certain executive officers
of publicly-held companies unless the compensation qualifies as "performance-
based compensation" under that section. Stock options and stock awards under
the Company's option plans do not qualify as performance-based compensation.
Accordingly, if in any year the exercise of options causes an executive
officer's total compensation to exceed $1,000,000 in that year, the amount of
the excess will not be deductible by the Company. The Committee does not have
any plans at this time to qualify the Company's compensation plans so that they
are exempt from the deductibility limits of Section 162.
The Compensation Committee
Federico Pignatelli
George V. d'Arbeloff
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
Section 16 of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and 10% or more stockholders to file reports of
ownership (Form 3) and changes in ownership (Forms 4 and 5) with the SEC and to
furnish the Company with copies of all such forms which they file with the SEC.
During 1998 each of George V. d'Arbeloff, Jeffrey W. Jones, Andrew Kimmel,
William A. Owens, Federico Pignatelli, Ioana Rizoiu and Stephen R. Tartamella
did not timely report one exempt option grant. Jeffrey W. Jones, Keith G.
Bateman and William A. Owens each did not timely file a Form 3 upon becoming
subject to the reporting requirements of Section 16. In making the foregoing
disclosures, the Company has relied solely on its review of copies of forms
filed by such persons with the SEC.
19
<PAGE>
STOCK PERFORMANCE
The following graph presents a comparison of cumulative total stockholder
returns for the five years ended December 31, 1998 for (1) the Company's Common
Stock, (2) The Nasdaq SmallCap Market, (3) The Nasdaq Medical Devices,
Instruments and Supplies, Manufacturers and Distributors Index ("Nasdaq MDIS
Index") and (4) a peer group composed of 126 publicly-traded companies involved
in the Company's line of business, the manufacture and sale of electromedical
and electrotherapeutic devices. The Company decided to change from the peer
group to the Nasdaq MDIS Index because it believes that the Nasdaq MDIS Index
provides a better basis for comparing the Company's stock performance than does
the peer group. The following graph assumes the investment of $100 on January
1, 1994 and the reinvestment of all dividends, if any. The total return
performance shown on the graph is not necessarily indicative of future total
return performance of the Company's Common Stock.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG BIOLASE TECHNOLOGY INC, S&P SMALL CAP 600 INDEX,
NASDAQ MED DEVICES, INSTRUMENTS & SUPPLIES AND PEER GROUP
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
NASDAQ MED
BIOLASE DEVICES,
Measurement Period TECHNOLOGY S&P SMALL CAP INSTRUMENTS,
(Fiscal Year Covered) INC 600 INDEX & SUPPLIES PEER GROUP
- ------------------- ---------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
Measurement Pt- 12/93 $100 $100 $100 $100
FYE 12/94 $ 32.01 $ 95.23 $106.36 $115.41
FYE 12/95 $112.04 $123.76 $161.41 $225.23
FYE 12/96 $128.04 $150.14 $151.19 $245.67
FYE 12/97 $106.02 $188.56 $173.21 $334.60
FYE 12/98 $ 68.02 $186.10 $195.83 $433.31
</TABLE>
20
<PAGE>
STOCKHOLDER PROPOSALS
Any stockholder intending to submit to the Company a proposal for inclusion
in the Company's Proxy Statement and proxy for the 2000 Annual Meeting must
submit such proposal so that it is received by the Company no later than
December 23, 1999, and such proposal must otherwise comply with Rule 14a-8 under
the Securities Exchange Act of 1934.
If a stockholder submits a proposal at the Company's Annual Meeting of
Stockholders to be held in 2000 other than in accordance with Rule 14a-8 and
that stockholder does not provide notice of his proposal to the Company by March
9, 2000, the holders of any proxy solicited by the Company's Board of Directors
for use at that meeting will have discretionary authority to vote on that
proposal.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Stockholders calls for the
transaction of such other business as may properly come before the meeting, the
Board of Directors has no knowledge of any matters to be presented for action by
the stockholders other than as set forth above. The enclosed proxy gives
discretionary authority, however, in the event any additional matters should be
presented.
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1998 (WITHOUT EXHIBITS) ACCOMPANIES THIS PROXY STATEMENT.
<PAGE>
BIOLASE TECHNOLOGY, INC.
1998 STOCK OPTION PLAN
1. PURPOSE
-------
The BioLase Technology, Inc. 1998 Stock Option Plan (the "Plan") has been
established by BioLase Technology, Inc. (the "Company") to (i) attract, retain
and motivate persons eligible to participate in the Plan; (ii) provide incentive
compensation opportunities that are competitive with those of other similar
companies; and (iii) further identify Participants' interests with those of the
Company's other shareholders through compensation that is based on the Company's
Common Stock; and thereby promote the long-term financial interest of the
Company and its Subsidiaries.
2. DEFINITIONS
-----------
Whenever used herein the following terms shall have the following meanings,
respectively:
(a) "Award" means any form of Option or Stock Award granted under the Plan.
An Award shall be subject to such terms and conditions, not inconsistent with
the Plan, as the Committee shall, in its sole discretion, prescribe. The terms
and conditions of any Award, except an Unrestricted Stock Award, shall be
reflected in such form of written document as is determined by the Committee. A
copy of such document shall be provided to the Participant and, except as
provided in Section 16(c) hereof, the Committee may, but need not, require that
the Participant sign a copy of such document. Such document is referred to in
the Plan as an "agreement" regardless of whether the Participant's signature is
required or obtained.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean a Committee of at least two directors appointed
by the Board to administer the Plan, or if no such committee has been appointed
or the Board is exercising the powers of the Committee, reference to "Committee"
shall be deemed to refer to the Board.
(e) "Common Stock" shall mean the Company's Common Stock, as described in
the Company's Certificate of Incorporation, as amended from time to time.
(f) "Company" shall mean BioLase Technology, Inc., a Delaware corporation.
<PAGE>
(g) "Eligible Person" shall mean, in connection with the grant of Non-
Qualified Options or Stock Awards, any officer, employee, consultant or advisor
of the Company or any Subsidiary or Parent Corporation of the Company, and any
director of the Company who is not an employee of the Company or any Subsidiary
or Parent Corporation of the Company, it being understood that the Committee may
in its discretion also grant Non-Qualified Options or Stock Awards to induce an
individual to become and remain an Eligible Person prior to the date such person
first performs services for the Company or any Subsidiary or Parent Corporation
of the Company provided that any such Awards shall not be exercisable or become
vested prior to the date such person first performs services for the Company or
any Subsidiary or Parent Corporation of the Company. In connection with the
grant of Incentive Options, the term "Eligible Person" shall mean any individual
who is employed, within the meaning of Section 3401 of the Code, by the Company
or any Subsidiary or Parent Corporation of the Company.
(h) "Fair Market Value Per Share" of the Company's Common Stock shall mean
if the Company's Common Stock is publicly traded the mean between the highest
and lowest reported sale prices of the Common Stock on the applicable date or,
if not available, the average between the highest bid and lowest asked prices of
the Common Stock on the applicable date. In any situation not covered above or
if there were no sales on the applicable date, the Fair Market Value Per Share
shall be determined by the Committee in good faith based on uniform principles
consistently applied.
(i) "Incentive Option" shall mean an Option granted under the Plan which is
designated as and qualifies as an incentive stock option within the meaning of
Section 422 of the Code. In no event shall the aggregate fair market value
(determined as of the time an Incentive Option is granted) of shares subject to
Incentive Options held by a Participant (granted under the Plan or under any
other plan of the Company) that first become exercisable in any calendar year
exceed $100,000. The portion of any purported Incentive Option which exceeds
such limitation shall be deemed to be a Non-Qualified Option.
(j) "Non-Qualified Option" shall mean an Option granted under the Plan
which is designated as a non-qualified stock option or which does not qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(k) "Option" shall mean an Incentive Option or a Non-Qualified Option.
(l) "Parent Corporation" shall have the meaning set forth in Section 424(e)
of the Code.
(m) "Participant" shall mean any Eligible Person who has been granted an
Award under the Plan.
(n) "Permanent Disability" shall mean termination of employment with the
Company or any Subsidiary or Parent Corporation of the Company with the consent
of the Company or such Subsidiary or Parent Corporation
<PAGE>
by reason of permanent and total disability within the meaning of Section
22(e)(3) of the Code.
(o) "Plan" shall mean the BioLase Technology, Inc. 1998 Stock Option Plan,
as from time to time amended.
(p) "Restricted Stock" shall mean shares of Common Stock issued pursuant to
a Restricted Stock Award which are subject to the restrictions or conditions set
forth in the agreement which evidences such Award.
(q) "Restricted Stock Award" shall mean an Award granted pursuant to
Section 9(a) of the Plan.
(r) "Stock Award" shall mean a Restricted Stock Award or an Unrestricted
Stock Award.
(s) "Subsidiary", in the case of Incentive Options shall have the meaning
set forth in Section 424(f) of the Code (generally, 50% or more owned
subsidiaries), and in the case of any other Award shall have the meaning of
"subsidiary" in Rule 405 of Regulation C under the Securities Act of 1933, as
amended (generally, a controlled affiliate).
(t) "Unrestricted Stock Award" shall mean an Award granted pursuant to
Section 9(b) of the Plan.
3. ADMINISTRATION
--------------
(a) The Plan shall be administered either by the Board or, in the
discretion of the Board, by a Committee; provided, however, that if a Committee
has been appointed by the Board, the Board may, in its discretion, take any
action permitted to be taken by the Committee with respect to grants or other
actions affecting Awards. The Board may from time to time appoint members of the
Committee in substitution for or in addition to members previously appointed and
may fill vacancies.
(b) Any action of the Committee with respect to the administration of the
Plan shall be taken by majority vote or by unanimous written consent of its
members.
(c) Subject to the provisions of the Plan and except as provided in Section
5 hereof, the Committee shall have the authority to construe and interpret the
Plan; to define the terms used herein; to grant Awards to such Eligible Persons
as they select; to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Award; to modify or waive any restrictions,
contingencies or limitations contained in any outstanding Awards not
inconsistent with the terms of the Plan; to prescribe, amend and rescind rules
and regulations relating to the Plan; to approve and determine the duration of
leaves of absence which may be granted to Participants without constituting a
termination of employment for purposes of the Plan; and to make all other
determinations necessary or advisable for the administration
3
<PAGE>
of the Plan. The Committee's authority shall include, without limitation, the
right, in its discretion, to accelerate the vesting of Awards or to reprice or
exchange Awards with the consent of the Participant. All determinations and
interpretations made by the Committee shall be conclusive and binding on all
Participants and on their guardians, legal representatives, beneficiaries and
transferees.
(d) The Company will indemnify and hold harmless the members of the Board
and the Committee from and against any and all liabilities, costs and expenses
incurred by such persons as a result of any act, or omission to act, in
connection with the performance of such persons' duties, responsibilities and
obligations under the Plan, other than such liabilities, costs and expenses as
may result from the gross negligence, bad faith, willful misconduct and/or
criminal acts of such persons.
4. SHARES SUBJECT TO PLAN
----------------------
(a) The stock to be offered under the Plan shall consist of up to 1,000,000
shares of the Company's Common Stock, subject to adjustment pursuant to
Subsection (b) hereof. If any Award granted hereunder shall expire, terminate
or be forfeited for any reason, the unpurchased or forfeited shares subject
thereto shall again be available for purposes of this Plan.
(b) If the number of outstanding shares of Common Stock of the Company are
increased or decreased, or if such shares are exchanged for a different number
or kind of shares or securities of the Company through reorganization, merger,
recapitalization, reclassification, stock dividend, stock split, combination of
shares, or other similar transaction, the aggregate number of shares of Common
Stock subject to the Plan as provided in Subsection (a) hereof and the shares of
Common Stock subject to outstanding Awards under the Plan shall be appropriately
and proportionately adjusted by the Committee. Any such adjustment in
outstanding Awards shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the Award but with an appropriate
adjustment in the price for each share or other unit of any security covered by
the Award.
(c) Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. No fractional shares of stock shall be
issued under the Plan or in connection with any such adjustment.
5. FORMULA OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
-----------------------------------------------
On the date of each annual meeting of stockholders (or special meeting in
lieu of an annual meeting at which directors are elected) each non-employee
director of the Company who was elected at such meeting shall automatically be
granted a Non-Qualified Option to purchase 30,000 shares of Common Stock;
provided however, that if no such meeting is held in any calendar year, then
- -------- -------
each non-employee director shall automatically be granted a Non-Qualified Option
to purchase 30,000 shares of Common Stock on December 31 of such year. Each such
Option shall vest at the rate of 7,500 shares per quarter, beginning three
months after the grant date. Any non-employee director who is first elected a
director at any time other than at an annual meeting of stockholders (or special
meeting in lieu of an annual meeting at which all directors are elected) shall
automatically be granted a Non-
4
<PAGE>
Qualified Option on the date of his election as a director for a number of
shares determined by multiplying 2,500 times the number of full calendar months
from the grant date until the next June 1, which Option shall vest at a rate of
2,500 shares per month beginning on the last day of the first full calendar
month following the grant date. The purchase price of each share covered by each
Option granted pursuant to this Section 5 shall be an amount equal to 100% of
the Fair Market Value Per Share of the Common Stock on the date of grant. Each
such Option may be exercised until the earliest to occur of:
(i) the tenth anniversary of the grant date;
(ii) ninety days after the date the Participant ceases to be a
director of the Company for any reason other than death or Permanent Disability,
but only to the extent that shares are vested on the date the Participant ceases
to be a director; and
(iii) the first anniversary of the Participant's death while a
director or the date the Participant ceases to be a director due to Permanent
Disability, but only to the extent that shares are vested on the date the
Participant dies or ceases to be a director due to Permanent Disability.
Anything to the contrary notwithstanding, no non-employee director shall
receive more than one Option grant pursuant to this Section 5 in any calendar
year. Options granted pursuant to this Section 5 shall be subject to all other
terms and conditions of the Plan.
6. PURCHASE PRICE OF OPTIONS
-------------------------
The purchase price of each share covered by an Option shall be determined
by the Committee on the date of grant subject to the following limitations:
(a) the purchase price of each share covered by each Incentive Option shall
not be less than 100% of the Fair Market Value Per Share of the Common Stock of
the Company on the date the Incentive Option is granted;
(b) if at the time an Incentive Option is granted the Participant owns or
would be considered to own by reason of Section 424(d) of the Code more than 10%
of the total combined voting power of all classes of stock of the Company or any
Subsidiary or Parent Corporation of the Company, the purchase price of the
shares covered by such Incentive Option shall not be less than 110% of the Fair
Market Value Per Share of the Common Stock on the date the Incentive Option is
granted;
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(c) the purchase price of each share covered by a Non-Qualified Option
shall be not less than 85% of the Fair Market value per share of the Common
Stock on the date the Non-Qualified Option is granted; and
(d) in no event shall the purchase price per share be less than the par
value per share of the Common Stock, if any.
7. DURATION OF OPTIONS
-------------------
The expiration date of an Option shall not exceed 10 years from the date on
which the Option was granted, and shall be subject to earlier termination as
provided herein; provided, however, that if at the time an Incentive Option is
granted the Participant owns or would be considered to own by reason of Section
424(d) of the Code more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or Parent Corporation of the
Company, such Incentive Option shall expire not more than five years from the
date the Incentive Option is granted.
8. EXERCISE OF OPTIONS
-------------------
(a) Method of Exercise. An Option shall be exercisable in installments or
------------------
otherwise upon such terms as the Committee shall in its discretion determine. A
Participant may purchase less than the total number of shares for which the
Option is exercisable, provided that the exercise of an Option shall not include
any fractional shares. To the extent that the right to purchase shares has
accrued, Options may be exercised from time to time by giving written notice to
the Company stating the number of shares with respect to which the Option is
being exercised, accompanied by payment in full of the purchase price for the
number of shares being purchased and, if applicable, any federal, state or local
taxes required to be paid in accordance with the provisions of Section 11
hereof.
(b) Payment of Purchase Price. Payment of the purchase price for any
-------------------------
shares pursuant to the exercise of an Option may be made in cash or by check or,
in connection with subparagraphs (i) through (iv) where, and to the extent,
expressly approved by the Committee in advance, in its discretion, and where
permitted by law:
(i) by cancellation of indebtedness of the Company to the
Participant;
(ii) by surrender of shares of Common Stock that have been owned by
the Participant for at least six months;
(iii) by tender of a full recourse promissory note, which note shall
be secured by the shares being purchased, contain such terms as may be
approved by the Committee and bear interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of the Code;
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(iv) by waiver of compensation due or accrued to the Participant for
services rendered;
7
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(v) provided that a public market for the Company's Common Stock
exists:
(1) through a "same day sale" commitment from the Participant and
a broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby the Participant
irrevocably elects to exercise the Option and to sell a portion of the
shares so purchased to pay for the purchase price, and whereby the
NASD Dealer irrevocably commits to forward the purchase price directly
to the Company; or
(2) through a "margin" commitment from the Participant and an
NASD Dealer whereby the Participant irrevocably elects to exercise the
Option and to pledge the shares so purchased to the NASD Dealer in a
margin account as security for a loan from the NASD Dealer in the
amount of the purchase price, and whereby the NASD Dealer irrevocably
commits to forward the purchase price directly to the Company; or
(vi) by any combination of the foregoing.
If payment is made with shares of Common Stock, the Participant, or other
person entitled to exercise the Option, shall deliver to the Company
certificates representing the number of shares of Common Stock in payment for
the shares being purchased, duly endorsed for transfer to the Company and, if
requested by the Committee, a representation and warranty in writing that he has
good and marketable title to the shares represented by the certificate(s), free
and clear of all liens and encumbrances. The value of the shares of Common
Stock tendered in payment for the shares being purchased shall be their Fair
Market Value Per Share on the date of the Participant's exercise.
(c) Notwithstanding the foregoing, the Company shall have the right to
postpone the time of delivery of the shares for such period as may be required
for it to comply, with reasonable diligence, with any applicable listing
requirements of any national securities exchange or any federal, state or local
law. If an Participant, or other person entitled to exercise an Option, fails
to accept delivery of or fails to pay for all or any portion of the shares
requested in the notice of exercise, upon tender of delivery thereof, the
Committee shall have the right to terminate his Option with respect to such
shares.
9. RESTRICTED AND UNRESTRICTED STOCK AWARDS
----------------------------------------
(a) Restricted Stock Awards. The Committee may, in its discretion, grant
-----------------------
one or more Restricted Stock Awards to any Eligible Person. Each Restricted
Stock Award shall specify the number of shares of Common Stock to be issued to
the Participant, the date of such issuance, the price, if any, to be paid for
such shares by the Participant and the restrictions imposed on such shares. The
Committee may grant Restricted Stock Awards subject to the attainment of
specified performance goals, continued employment
8
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or such other limitations or restrictions as the Committee may determine. Shares
of Restricted Stock may be issued immediately upon grant or upon vesting as
determined by the Committee. If shares which are subject to vesting or other
restrictions or conditions are issued immediately upon grant, the Committee may
require the Participant to deliver a duly signed stock power, endorsed in blank,
relating to such shares. The Committee may also require that the stock
certificates evidencing such shares be held in custody by the Company until the
restrictions on them shall have lapsed.
(b) Unrestricted Stock Awards. The Committee may make Awards of
-------------------------
unrestricted Common Stock to Eligible Persons in connection with services
actually rendered by such persons. Unrestricted shares issued on a bonus basis
may be issued for no cash consideration. Each certificate for unrestricted
Common Stock shall be registered in the name of the Participant and delivered
immediately to the Participant.
10. TERMINATION OF AWARDS
---------------------
Except as expressly approved by the Committee with respect to an Award
granted hereunder and set forth in the agreement evidencing such Award, Awards
shall terminate as follows:
(a) Termination by Death or Disability. Each Award shall terminate on the
----------------------------------
first to occur of (i) the stated expiration date of the Award or (ii) one year
after the date of the Participant's death while an Eligible Person or within
three months of termination as an Eligible Person, or termination as an Eligible
Person due to Permanent Disability. Until the termination of the Award, the
Award may be exercised only to the extent that it was exercisable on the date of
the Participant's death or termination due to Permanent Disability. In the case
of death, the Award may be exercised by the person or persons to whom the
Participant's rights under the Award shall pass by will or by the laws of
descent and distribution.
(b) Other Termination. Each Award shall terminate on the earlier to occur
-----------------
of (i) the stated expiration date of the Award or (ii) 90 days from the date on
which the Participant ceases to be an Eligible Person for any reason other than
death or Permanent Disability unless such Participant has been rehired by the
Company or any Subsidiary of the Company and is an Eligible Person on such date.
Until the termination of the Award, the Award may be exercised only to the
extent such Award was exercisable on the date the Participant ceased to be an
Eligible Person. A leave of absence approved in writing by the Committee shall
not be deemed a termination for purposes of this Section, but no Award may be
exercised during any such leave of absence, except during the first 90 days
thereof. The fact that the Participant may receive payment from the Company or
any Subsidiary of the Company after termination as an Eligible Person for
vacation pay, for services rendered prior to termination, for salary in lieu of
notice, or any other benefits shall not affect the termination date.
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11. WITHHOLDING OF TAXES
--------------------
Prior to the issuance or delivery of any shares of Common Stock in
connection with the exercise or vesting of any Award hereunder, or upon a
Participant's disposition of any shares of Common Stock acquired upon exercise
of an Incentive Option prior to the expiration of either of the holding periods
specified in Section 422(a)(1) of the Code, the Committee may in its sole
discretion require the Participant to pay an amount equal to any federal, state
and local taxes that the Committee reasonably believes are required to be
withheld in order to enable the Company to claim a deduction or otherwise. The
Company may withhold from any future earnings, bonus or any other payment due to
a Participant the amount necessary to satisfy any outstanding tax obligations
related to any Award under the Plan.
12. NON-TRANSFERABILITY OF AWARDS
-----------------------------
(a) Except as otherwise expressly provided in Section 12(b) and in the
agreement which evidences the Award, as the same may be amended, no Award
granted under the Plan may be assigned, transferred, pledged, encumbered or
otherwise disposed of by the Participant, either voluntarily or by operation of
law, except by will or the laws of descent and distribution, and Options shall
be exercisable during the Participant's lifetime only by the Participant.
(b) The Committee may permit Non-Qualified Options to be transferred
pursuant to a domestic relations order or to members of the Participant's
immediate family, charitable institutions, or trusts or other entities whose
beneficiaries or beneficial owners are members of the Participant's immediate
family and/or charitable institutions, pursuant to such conditions and
procedures as the Committee may establish. Any permitted transfer shall be
subject to the condition that the Committee receive evidence satisfactory to it
that the transfer is being made pursuant to a domestic relations order, or for
estate and/or tax planning purposes on a gratuitous or donative basis and
without consideration (other than nominal consideration). The term "immediate
family" shall mean the Participant's spouse, parents, children, stepchildren,
siblings and grandchildren, including any such relationship which occurs by
reason of adoption. Notwithstanding the foregoing, Incentive Options shall be
subject to any and all transfer restrictions under the Code.
13. CONTINUANCE OF EMPLOYMENT
-------------------------
Nothing contained in the Plan or in any Award granted under the Plan shall
confer upon any Participant any rights with respect to the continuation of his
status as an Eligible Person or interfere in any way with the right of the
Company or any Subsidiary or Parent Corporation of the Company at any time to
terminate such relationship or to increase or decrease the compensation of such
person from the rate in existence at the time of the grant of the Award.
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14. PRIVILEGES OF STOCK OWNERSHIP
-----------------------------
No Participant or any other person shall have any of the rights or
privileges of a shareholder of the Company with respect to any shares of Common
Stock subject to any Award until such person has become the holder of record of
such shares. No adjustment shall be made for dividends or distributions of
rights in respect of such shares if the record date is prior to the date on
which such person becomes the holder of record. No Participant shall be
entitled to vote any shares of Restricted Stock or to receive dividends payable
with respect to Restricted Stock with respect to record dates which occur after
the date, if any, on which the Participant has forfeited such Restricted Stock.
Any stock dividends issued with respect to Restricted Stock shall be treated as
additional Restricted Stock that is subject to the same restrictions, vesting
and other terms and conditions that apply to the Restricted Stock with respect
to which such dividends are paid.
15. DISSOLUTION; MERGER; REORGANIZATION
-----------------------------------
In the event of the dissolution or liquidation of the Company or any
reorganization, merger or consolidation with one or more corporations or
entities as a result of which the Company is not the surviving corporation, or
any sale of all or substantially all the assets of the Company, or the sale (by
merger or otherwise) of more than 80% of the then outstanding Common Stock, each
Award shall be assumed or an equivalent award shall be substituted by the
surviving or acquiring corporation or other entity; provided that the Committee
may, in its sole discretion, accelerate the vesting of outstanding Awards or
give notice of such event to Participants prior to the effective date of such
event.
16. AMENDMENT AND TERMINATION OF PLAN; SUCCESSORS
---------------------------------------------
(a) The Board of Directors of the Company may from time to time, with
respect to any shares at the time not subject to Awards, suspend or terminate
the Plan or amend or revise the terms of the Plan; provided that any amendment
of the Plan shall be approved by the shareholders of the Company if the
amendment would (i) increase the number of shares of Common Stock which may be
issued under the Plan, except as permitted under the provisions of Section 4(b)
hereof, or (ii) materially modify the requirements as to eligibility for
participation in the Plan.
(b) No amendment, suspension or termination of the Plan shall, without the
consent of the Participant, alter or impair any rights or obligations under any
Award theretofore granted to such Participant under the Plan.
(c) The terms and conditions of any Award granted under the Plan may be
modified or amended only by a written agreement executed by the Participant and
the Company.
(d) All obligations of the Company under the Plan shall be binding upon and
inure to the benefit of any successor to the Company, whether such successor
exists by reason of merger,
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consolidation, direct or indirect purchase of all or substantially all of the
business, stock or assets of the Company or otherwise.
17. EFFECTIVE DATE OF PLAN
----------------------
This Plan shall become effective upon adoption by the Board; provided,
however, that in order for Options to qualify as Incentive Options, the Plan
must be approved by the Company's shareholders no later than 12 months after the
date of adoption of the Plan by the Board and any Incentive Option granted prior
to the date of such shareholder approval shall be granted subject to obtaining
such approval.
18. TERM OF PLAN
------------
No Award shall be granted pursuant to the Plan after 10 years from the
earlier of the date of adoption of the Plan by the Board or the date of approval
of the Plan by the Company's shareholders, if any.
The Plan was adopted by the Board on November 17, 1998. The Plan was
approved by the shareholders on __________________.
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BIOLASE TECHNOLOGY, INC. [PROXY]
981 Calle Amanecer
San Clemente, California 92673
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Federico Pignatelli and Stephen R.
Tartamella, and each of them, each with the power to appoint his substitute,
and hereby authorizes each of them to represent and vote as designated below,
all the shares of Common Stock of BioLase Technology, Inc. (the "Company") held
of record by the undersigned on April 13, 1999, at the Annual Meeting of
Stockholders to be held on May 25, 1999, or any adjournments thereof.
1. Election of Directors
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed below
contrary below)
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name below.)
FEDERICO PIGNATELLI WILLIAM A. OWENS
GEORGE V. D'ARBELOFF JEFFREY W. JONES
2. To approve the Company's 1998 Stock Option Plan
[_] FOR [_] AGAINST [_] ABSTAIN
3. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent public accountants for the year ending December 31, 1999.
[_] FOR [_] AGAINST [_] ABSTAIN
4. In their discretion, the Proxies are each authorized to vote upon such other
business as may properly come before the meeting.
This Proxy is solicited on behalf of the Company's Board of Directors. When
properly executed, this Proxy will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this Proxy will be voted
FOR all proposals.
Dated: __________________, 1999
_______________________________
(Signature)
_______________________________
(Signature if held jointly)
Please sign exactly as name
appears below. When shares are
held by joint tenants, both
should sign. When signing as
an attorney, as executor,
administrator, trustee or
guardian, please give full
title to such. If a
corporation, please sign in
full corporate name, by
President or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
