Item 13.
|
Certain Relationships and Related Transactions, and Director Independence.
|
Certain Relationships and Related Transactions
The
following is a description of transactions since January 1, 2018 to which we have been a party, in which the amount involved exceeds $120,000, and in which any of our directors, executive officers or beneficial owners of more than 5% of our
capital stock, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.
Director and Executive
Officer Compensation
See Executive Compensation and Director Compensation for information regarding compensation of
directors and executive officers.
Employment Agreements
We have entered into employment agreements with our executive officers. For more information regarding these agreements, see Executive
CompensationNarrative to 2018 Summary Compensation Table and Outstanding Equity Awards at 2018 Fiscal Year End.
Investors Rights
Agreement
We entered into an amended and restated investors rights agreement with the purchasers of our outstanding preferred stock and
certain of our other stockholders, including entities with which certain of our directors are affiliated. As of March 31, 2019, the holders of approximately 20.7 million shares of our common stock are entitled to rights with respect to the
registration of their shares under the Securities Act.
Indemnification Agreements and Directors and Officers Liability Insurance
We have entered into indemnification agreements with each of our directors and executive officers. These agreements require us to, among other
things, indemnify each director and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys fees, judgments, penalties fines and settlement amounts incurred by the director or
executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the persons services as a director or executive officer. We have obtained an insurance policy that insures our directors and
officers against certain liabilities, including liabilities arising under applicable securities laws.
Issuance of Convertible Promissory Notes
On February 28, 2019, we entered into a Note Purchase Agreement (the Note Purchase Agreement) pursuant to which we raised $5.0 million
through the issuance of two unsecured subordinated convertible promissory notes (the Notes) to Frederic Moll, M.D., one of our directors, and Interwest Partners IX, LP, one of our stockholders affiliated with Gil Kliman, M.D., one of our
directors (together, the Investors).
The maturity date of the Notes is August 28, 2020 (the Maturity Date). The Notes bear
interest on the unpaid principal amount at a rate of eight percent (8.0%) per annum from the date of issuance. The Notes are unsecured and subordinate in priority to our existing obligations to Solar Capital, Ltd. under its amended loan and security
agreement.
All of the outstanding principal and unpaid accrued interest on the Notes will automatically be converted into shares of the same class and
series of our capital stock issued to other investors in any Qualified Financing to occur after the date of the Notes, at a conversion price equal to the price per share of any of our securities sold in such Qualified Financing. A Qualified
Financing means the first issuance or series of related issuances of our capital stock after the date of the Notes with gross proceeds of at least $20 million.
Upon the occurrence of certain events of default or the Maturity Date, the Notes require us to repay the principal amount of the Notes and any unpaid accrued
interest.
Equity Commitment Letter
On March
15, 2019, in connection with the Agreement and Plan of Merger and Reorganization (the Merger Agreement) we executed with Venus Concept Ltd. (Venus), we received from certain shareholders of Venus and Frederic Moll, M.D., one
of our directors, an Equity Commitment Letter (the Commitment Letter), pursuant to which, immediately following the effective time of the merger contemplated by the Merger Agreement (the Merger), the investors named in the
Commitment Letter (the Investors) will purchase $21.0 million in shares of our common stock and have an option to purchase an additional $20.0 million in shares of our common stock. Dr. Moll, pursuant to the Commitment Letter has agreed
to purchase $1.0 million in shares of our common stock and has an option to purchase an additional $1.0 million in shares of our common stock. The purchase price of our shares to be purchased by the Investors is $0.825 per share, calculated at a 5%
discount to the trailing 30-day volume weighted average price of our common stock listed Nasdaq ending on March 14, 2019. The Investors investment is subject to certain conditions, including the consummation of the Merger and the execution of
the equity purchase documents as contemplated in the Commitment Letter. The financing contemplated by the Commitment Letter will be accomplished in a private placement exempt from registration under Section 4(a)(2) and Regulation D under the
Securities Act and the rules promulgated thereunder. The securities to be sold in the financing have not been registered under the Securities Act, or any state securities laws, and may not be offered or sold in the United States except pursuant to
an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.
Policies and Procedures for Related Party Transactions
Our board of directors has adopted a written related person transaction policy setting forth the policies and procedures for the review and approval or
ratification of related person transactions. This policy covers, with certain exceptions set forth in Item 404 of
Regulation S-K
under the Securities Act, any transaction, arrangement or
relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, where the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest,
including without limitation purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In
reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including but not limited to whether the transaction is on terms comparable to those that could be obtained in an
arms length transaction with an unrelated third party and the extent of the related persons interest in the transaction. All of the transactions described in this section occurred prior to the adoption of this policy.
13