UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of
the Securities exchange act of 1934
Date of Report (Date of earliest event reported): January 18, 2000
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BriteSmile, Inc.
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(Exact name of registrant as specified in its charter)
Utah
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(State or other jurisdiction of incorporation or organization)
0-17594 87-0410364
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(Commission file number) (I.R.S. Employer Identification No.)
490 North Wiget Lane
Walnut Creek, CA 94598
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (925) 941-6260
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On January 18, 2000, the Registrant issued and sold in a private
placement 3,333,333 shares (the "New Shares") of its Common Stock, par value
$.001 per share, for aggregate proceeds of $20,000,000 (the "Private
Placement"). The purchase price of the New Shares was $6.00 per share. The New
Shares represent 14.2 percent of the Registrant's total shares of Common Stock
issued and outstanding, after giving effect to the Private Placement.
The New Shares were issued to three private investors, Pequot Private
Equity Fund II, L.P.(1,666,667 shares), Pequot Partners Fund, L.P. (833,333
shares), and Pequot International Fund, Inc. (833,333 shares)(collectively, the
"Pequot Investors").
Funds from the Private Placement will be used for working capital to
further the expansion of the Registrant's retail platform.
Pursuant to a Registration Rights Agreement entered into with the
Registrant, the Pequot Investors acquired certain rights to cause the Registrant
to register their New Shares for offer and sale under the Securities Act of
1933, as amended (the "Registration Rights"). These Registration Rights include
both demand and piggyback registration rights.
Pursuant to a Voting and Co-Sale Agreement entered into between the
Registrant, the Pequot Investors, and LCO Investments Ltd. (the Registrant's
principal shareholder), the Company granted to the Pequot Investors the right to
designate one person to be appointed to the Board of Directors of the
Registrant, and to be nominated for election as a director in any shareholders
meeting at which directors are elected.
The terms of the Private Placement are set forth in full in the forms
of Stock Purchase Agreement, Registration Rights Agreement, and Voting and
Co-Sale Agreement attached as exhibits to this Report.
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Item 7. Exhibits.
Exhibit No. Description
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(10)(a) Stock Purchase Agreement dated as of January 12, 2000, between
the Registrant and the Pequot Investors.
(10)(b) Registration Rights Agreement dated as of January 18, 2000
between the Registrant and the Pequot Investors.
(10)(c) Voting and Co-Sale Agreement dated as of January 18, 2000
between the Registrant, the Pequot Investors, and LCO
Investments Ltd.
(99) Press release dated January 13, 2000 issued by the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BriteSmile, Inc.
By: /s/ Paul A. Boyer
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Paul A. Boyer
Chief Financial Officer
Date: January 25, 2000
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EXHIBIT INDEX
Exhibit No.
Under Reg.
S-K, Item 601 Description
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(10)(a) Stock Purchase Agreement dated
January 12, 2000, between
the Registrant and the Pequot
Investors.
(10)(b) Registration Rights Agreement
dated January 18, 2000,
between the Registrant and the
Pequot Investors.
(10)(c) Voting and Co-Sale Agreement
dated January 18, 2000, between the
Registrant, the Pequot
Investors, and LCO Investments,
Ltd.
(99) Press release dated January 13,
2000 issued by the Registrant.
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EXHIBIT 10(A)
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE, AND WILL BE OFFERED AND SOLD BY THE COMPANY IN
RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF FEDERAL AND STATE
LAW BY VIRTUE OF THE COMPANY'S INTENDED COMPLIANCE WITH THE PROVISIONS OF
SECTION 4(2) UNDER THE ACT. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY ANY REGULATORY AUTHORITY. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
STOCK PURCHASE AGREEMENT
BriteSmile, Inc. January 12, 2000
490 North Wiget Lane
Walnut Creek, CA 94598
Gentlemen:
In connection with the offer and proposed issuance (the "Offering") of
shares of common stock, par value $.001 per share ("Common Stock") of
BriteSmile, Inc., a Utah corporation ("BriteSmile" or the "Company"), in
reliance on exemptions from the registration requirements of the U.S. Securities
Act of 1933, as amended (the "Act"), the purchasers identified on Exhibit A
attached hereto (each, a "Purchaser") and the Company agree as follows:
1. Purchase of Securities. Subject to the terms and conditions of this
Agreement, each Purchaser hereby agrees, severally and not jointly, to purchase
from the Company, and the Company agrees to issue and sell to each Purchaser,
the number of shares of Common Stock (the "Shares") set forth opposite the
Purchaser's name on Exhibit A. The aggregate purchase price for the Shares shall
be Twenty Million Dollars ($20,000,000), allocated as set forth opposite each
Purchaser's name on Exhibit A, the purchase price per Share (the "Purchase
Price") being the lesser of: (i) Six Dollars ($6.00) per Share, or (ii)
Eighty-five Percent (85%) of the average closing sale price per share of the
Common Stock on the American Stock Exchange ("AMEX") during the period of (5)
trading days immediately preceding the Closing. Each Purchaser shall pay the
Purchase Price for all Shares to be acquired by such Purchaser in full prior to
or at Closing, via wire transfer to an account of the Company designated by the
Company. Wire instructions shall be provided prior to Closing.
2. Registration Rights. The Shares shall be entitled to certain
registration rights, as provided in a Registration Rights Agreement in such form
as is mutually acceptable to the parties hereto, be dated as of the Closing Date
(the "Registration Rights Agreement"). The Registration
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Rights Agreement, together with this Agreement and the Voting and Co-Sale
Agreement referred to in Section 8.10 hereof, constitute the "Transaction
Documents").
3. Board Nominee Rights. The Company covenants and agrees that for so
long as the Purchasers, their affiliates and permitted transferees collectively
are the beneficial owners of Fifty Percent (50%) or more of the Shares, (i) the
Purchasers shall have the right, at any time after the Closing Date and upon
delivery of written notice to the Company, to designate one person (the
"Purchasers' Director") to be appointed as a Director of the Company, (ii) the
Purchasers shall have the right to designate the Purchasers' Director for
election to the Board of Directors of the Company at any shareholders meeting at
which Company Directors are elected, (iii) the Purchasers shall have the
exclusive right to remove any Purchasers' Director from the Board of Directors
at any time by written notice to the Board of Directors, and (iv) in the event
of the death, disability, legal incapacity, resignation or removal of a
Purchasers' Director, the Purchasers shall have the exclusive right to designate
a successor nominee for election as a director of the Company (which successor,
upon such election, shall be a Purchasers' Director). In consideration of the
services to be rendered by the Purchasers' Director, and any successor
Purchasers' Director, the Company agrees to grant stock options to such
Purchasers (or to such designee(s)) as may be specified by Purchasers' Director,
at such times and in such amounts customarily granted to the Company's outside
directors.
4. Closing. Payment for the Shares by the Purchasers and delivery of
the Shares by the Company shall be deemed to complete the transactions
contemplated by this Agreement (the "Closing"). The Closing shall occur on or
before January 14, 2000, provided that at such time all of the conditions
precedent set forth in Sections 8 and 9 shall have been satisfied or waived, or
such later date as such conditions precedent shall have been satisfied or waived
(the "Closing Date"). At the Closing, the Company shall deliver to each
Purchaser a certificate or certificates representing the Shares purchased by
such Purchaser.
5. Representations and Warranties of Purchasers. To induce the
Company's acceptance of this Agreement, each Purchaser hereby represents and
warrants, severally and not jointly, to the Company, its agents and attorneys,
as follows:
5.1 Investor Status. It is an "accredited investor"
within the meaning of Section 501(a) of Regulation D promulgated under
the Act.
5.2 Liquidity. It presently has sufficient liquid assets
to pay the Purchase Price for all Shares to be purchased by it
hereunder. It has adequate means of providing for its current needs
and contingencies and has no need for liquidity in its investment in
the Company or for a source of income from the Company. It is capable
of bearing the economic risk and the burden of the investment
contemplated by this Agreement including, but not limited to, the
possibility of the complete loss of the value of the Shares and the
limited transferability of the Shares, which may make the liquidation
of the Shares impossible in the near future.
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5.3 Authorization. It has the requisite power and authority
(corporate, partnership or other) to enter into this Agreement, acquire
the Shares, and execute and deliver any documents or instruments in
connection with this Agreement. The execution and delivery of this
Agreement, and all other documents and instruments executed by such
Purchaser in connection with any of the transactions contemplated by
this Agreement, have been duly authorized by all required action of
such Purchaser and, if applicable, such Purchaser's owners or managers.
The person executing this Agreement and any other documents or
instruments in connection with this Agreement is duly authorized to do
so on behalf of such Purchaser.
5.4 Absence of Conflicts. Neither the execution and delivery
of the Transaction Documents or any other agreement or instrument to be
executed in connection therewith, nor the consummation of the
transactions contemplated thereby and compliance with the requirements
thereof, will violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on it, or the provision of any
indenture, instrument or agreement to which it is a party or is
subject, or by which it or any of its properties is bound, or conflict
with or constitute a material default thereunder, or result in the
creation or imposition of any lien pursuant to the terms of any such
indenture, instrument or agreement, or constitute a breach of any
fiduciary duty owed by or to it to any third party, or require the
approval of any third party pursuant to any material contract,
agreement, instrument, relationship or legal obligation to which it is
subject or to which any of its properties, operations or management may
be subject. If Purchaser is, or is purchasing Shares on behalf of, a
mutual fund, venture capital fund, investment partnership, or other
entity formed for the purpose of group investing on behalf of fund
equity owners (an "Investment Fund"), Purchaser has made its own
determination of the suitability of an investment in Shares for the
Investment Fund and an investment in Shares satisfies all
diversification, liquidity and other requirements applicable to an
investment by such Investment Fund.
5.5 Sole Party in Interest. It is the sole and true party in
interest with respect to the Shares being issued to it, and no other
person or entity has or will have upon such issuance beneficial
ownership (within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) in such Shares
or any portion thereof.
5.6 Investment Purpose. It represents that it is acquiring the
Shares for its own account, for investment purposes, and not for the
account or benefit of any other person or entity or for or with a view
to resale or distribution thereof, and it has no present intention to
effect any distribution of the Shares, provided that the disposition of
the Shares owned by such Purchaser shall at all times be and remain
within its control, subject to the provisions of this Agreement and the
Registration Rights Agreement.
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5.7 Knowledge and Experience. It is experienced in evaluating
and making speculative investments, and has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of its investment in the Company. It
understands that an investment in the Company is speculative and has
concluded that its proposed investment is appropriate in light of its
overall investment objectives and financial situation.
5.8 Disclosure; Access to Information. It has received, read
and understands this Agreement. All documents, records, books and other
information pertaining to its investment in the Company requested by it
have been made available for inspection and copying and there are no
additional materials or documents that have been requested by it that
have not been made available by or on behalf of the Company. It further
acknowledges that the Company is subject to the periodic reporting
requirements of the Exchange Act, and it has reviewed or received
copies of any such reports that have been requested by it. Without
limiting the generality of the foregoing, it acknowledges that it has
received and reviewed copies of the following documents and materials,
all of which are incorporated herein by reference:
(a) Articles of Amendment Adopting Revised
Articles of Incorporation of the Company,
filed on August 11, 1998 with the Utah
Division of Corporations and Commercial
Code;
(b) Bylaws of the Company, as amended;
(c) Annual Report on Form 10-KSB for the fiscal
year ended March 31, 1999 (the "1999
10-KSB");
(d) Quarterly Reports on Form 10-QSB for the
quarters ended June 30 and September 30,
1999 (the "1999 10-QSBs");
(e) Current Report on Form 8-K dated June 4,
1999 (the "June 1999 8-K");
(f) The Company's Proxy Statement, dated August
4, 1999, for the Company's 1999 Annual
Meeting of Shareholders held on August 25,
1999 (the "1999 Proxy Statement"); and
(g) All of the documents (the "Disclosure
Documents") submitted to Purchaser by the
Company in response to the Pequot Private
Equity Due Diligence Checklist delivered to
the Company on November 30, 1999, including
those documents, disclosures, and/or
exceptions relating to the Company's
representations and warranties herein, and
listed or otherwise identified in those
certain
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Schedules to the Disclosure Documents
attached separately to this Agreement as
Exhibit B (the "Disclosure Schedules").
5.9 Exclusive Reliance on this Agreement. In making the
decision to purchase the Shares, it has relied exclusively upon
information, representations, warranties and covenants included in the
Transaction Documents or incorporated therein by reference, and not on
any other representations, promises or information, whether written or
verbal, by any person.
5.10 Accuracy of Representations and Information. All
representations made by it in this Agreement, and all information
provided by it to the Company concerning it are correct and complete in
all material respects as of the date hereof. If there is any material
change in such information before the Closing Date and the issuance of
the Shares, it immediately will provide such information to the
Company.
5.11 Tax Matters. It has reviewed and understands the U.S.
federal and any applicable state income tax aspects of its purchase of
the Shares, and has received such advice in this regard as it deems
necessary from qualified sources such as attorneys, tax advisors or
accountants, and is not relying on any representative or employee of
the Company for such advice.
5.12 No Brokers or Finders. Neither the Purchaser nor any
person acting on its behalf has employed any broker, agent or finder,
or incurred any liability for any brokerage fees, agents' commissions
or finders' fees, in connection with the transactions contemplated
herein.
5.13 Certain Risk Factors. It understands that there are risks
associated with an investment in the Company, including those disclosed
in documents incorporated herein by reference pursuant to Section 5.8
of this Agreement.
5.14 Manner of Sale. At no time was such Purchaser presented
with or solicited by or through any leaflet, public promotional
meeting, television advertisement or any other form of general
solicitation or advertising.
6. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers, except as disclosed in the Disclosure
Schedules and specifically identified in the particular section of this
Agreement to which exception is to be taken, as follows. Except where the
context requires otherwise, references in this Section 6 to "person" shall
include any individual, corporation, or other entity.
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6.1 Organization, Standing, Etc..
(a) The Company is duly organized, validly
existing, and in good standing under the
laws of the State of Utah and, except
as disclosed in Schedule 1A of the
Disclosure Schedule, has the requisite
corporate power and authority to own
operate, lease and encumber its properties
and carry on its business as now conducted,
to enter into and perform the
Transaction Documents, and to execute and
perform its obligations under the
documents, instruments and agreements
related to the Transaction Documents. The
Company is duly qualified to do business
and in good standing in each
jurisdiction in which the ownership of its
properties or the conduct of its
business requires such qualification.
(b) The Company has three wholly-owned
subsidiaries; namely, BriteSmile, Inc., a
Delaware corporation ("BriteSmile
Delaware"), BriteSmile International, Inc.,
a company organized under the laws
of Ireland ("BriteSmile International"), and
BriteSmile Management, Inc., a Utah
corporation ("BriteSmile Management")
(individually, a "Subsidiary" and
collectively, the "Subsidiaries").
BriteSmile Delaware and BriteSmile
Management are inactive shell corporations,
having no assets, liabilities, nor
current business operations. BriteSmile
International is duly organized, validly
existing, and in good standing under the
laws of Ireland. Other than the
Subsidiaries named herein, the Company
has no ownership interests in any other
business entities.
6.2 Authorization. The execution, delivery and performance of
the Transaction Documents and the consummation of the transactions
contemplated therein have been duly authorized by all requisite
corporate action of the Company, and each of the Transaction Documents
and all instruments and agreements to be delivered in connection
therewith constitute its legally, valid and binding obligations,
enforceable against the Company in accordance with their respective
terms, subject to laws of general application relating to the rights of
creditors. The form of Amended and Restated Articles of Incorporation
of the Company (the "New Articles," attached hereto as Exhibit C) to be
presented to shareholders for approval at a Special Meeting of the
shareholders of the Company to be held January 31, 1999 (the "Special
Meeting") referred to in Sections 7.7 and 8.9 herein, the proxy
materials to be delivered to Company shareholders in connection
therewith, and the calling of the Special Meeting, have been duly
authorized by all requisite action by the directors of the Company.
6.3 Absence of Conflicts. Neither the execution and
delivery of the Transaction Documents or any other agreement or
instrument to be delivered to the
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Purchaser in connection therewith, nor the consummation of the
transactions contemplated thereby, by the Company, will (i) conflict
with or result in a breach of or constitute a violation or default
under (A) any provision of the Articles of Incorporation or By-laws,
each as amended to date, of the Company, or of the New Articles, or of
the comparable governing documents of any Subsidiary, or (B) the
provision of any indenture, instrument or agreement to which the
Company or a Subsidiary is a party or by which any of their properties
is bound, or (C) any order, writ, judgment, award, injunction, decree,
law, statute, rule or regulation, license or permit applicable to the
Company; (ii) result in the creation or imposition of any lien pursuant
to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by the Company to any
third party, (iii) require the approval of any third party pursuant to
any material contract, agreement, instrument, relationship or legal
obligation to which the Company or any Subsidiary is subject or to
which it or any of its properties, operations or management may be
subject; (iv) result in a breach or violation of, a default under, or
the triggering of any payment or other obligations pursuant to, or
accelerate vesting under, any employment agreement, any compensation
plan or any grant or award made under any of the foregoing; or (v)
require any consent, approval or authorization of, or declaration,
filing or registration with, any government or state, of or in the
United States, or any agency, authority, commission, department or
similar body or instrumentality thereof, or any government tribunal or
court (each of the foregoing, a "Government Authority"), other than any
filings required under the Act, the Exchange Act, state securities laws
("Blue Sky Laws") or the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") (collectively, the "Regulatory
Filings").
6.4 Capitalization. The authorized capital stock of the
Company consists of 50,000,000 shares of Common Stock par value $.001
per share. As of December 23, 1999, 20,140,925 shares of Common Stock
were issued and outstanding, no shares were held in the Company's
treasury, and, as of December 23, 1999 7,414,517 shares were reserved
for issuance pursuant to any outstanding options or other rights to
acquire or receive Common Stock. All of the outstanding shares of
Common Stock are, and the Shares will be, when paid for, issued and
delivered, duly authorized by all requisite corporate action on the
part of the Company, validly issued, fully paid and non-assessable and
free of any preemptive rights. Exhibit D attached hereto is a
Capitalization Table of the Company immediately prior to and
immediately following the Closing. The information set forth in the
Capitalization Table is true correct and complete. Except as listed in
Schedule 1(G) of the Disclosure Schedules, there are no outstanding
options, warrants, subscription rights, calls or commitments of any
character whatsoever relating to, or securities or rights convertible
into, shares of Common Stock of the Company, or contracts by which the
Company is or may become bound to issue additional shares of its Common
Stock or options, warrants or other rights to purchase or acquire any
shares of its Common Stock.
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6.5 SEC Reports and Financial Statements. The Company's 1999
Form 10-KSB, 1999 10-QSBs, June 1999 8-K, and 1999 Proxy Statement,
copies of which have been filed with or furnished to the Securities and
Exchange Commission ("SEC") (collectively, the "SEC Reports"), were
when filed with the SEC accurate in all material respects and did not
include any untrue statement of material fact or omit to state any
material fact necessary to make the statements therein not misleading.
The Company has not filed with nor furnished to the SEC any other
document since January 1, 1999, except for the preliminary proxy
materials relating to the Special Meeting which were filed with the SEC
on December 30, 1999, and the definitive proxy materials relating to
such meeting which were filed with the SEC and mailed to the Company's
shareholders on January 11, 2000. True and correct copies of the
preliminary and definitive proxy materials have been furnished to
Purchasers. The financial statements included in the SEC Reports (the
"Financial Statements") present fairly the financial position of the
Company at their respective dates and the results of its operations and
cash flows for the periods then ended, in conformity with generally
accepted accounting principles applied on a consistent basis throughout
the periods covered by such statements (subject, in the case of
unaudited financial statements, to the absence of notes and year-end
adjustments which, in the aggregate, will not be material in amount or
effect). The SEC Reports were filed with the SEC in a timely manner and
constitute all forms, reports and documents required to be filed by the
Company under the Act, the Exchange Act, and the rules and regulations
promulgated thereunder. Except (i) as set forth in the Financial
Statements or in the notes attached thereto and (ii) for liabilities
incurred in the normal course of business, or in connection with this
Agreement or the transactions contemplated hereby, the Company has no
liabilities or obligations (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known, whether due or to
become due and regardless of when asserted).
6.6 Litigation, Etc. Except as disclosed in the SEC Reports,
or in Schedules 18B or 18C of the Disclosure Schedules, there are no
(a) suits, actions or legal, administrative, arbitration or other
proceedings or governmental investigations or other controversies
pending, or to the knowledge of the Company threatened, or as to which
the Company or any Subsidiaries has received any notice, claim or
assertion, or (b) obligations or liabilities (other than obligations
and liabilities arising in the ordinary course of business), whether
accrued, contingent or otherwise, which, in either case (a) or (b),
involve a potential cost or liability to the Company or any
Subsidiaries which would, individually or in the aggregate, materially
and adversely affect the financial condition, results of operations,
business or prospects of the Company and its Subsidiaries, or which
challenges the validity or enforcability of the Transaction Documents
or the transactions comtemplated therein. Neither the Company nor any
Subsidiary is in default with respect to any order, writ, injunction or
decree of any court or before any federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting or relating to it which
is material to the financial condition, results of operations or
business of the Company.
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6.7 No Brokers and Finders. Neither the Company, any
Subsidiary, nor any person acting on behalf of the Company or its
Subsidiaries has employed any broker, agent or finder, or incurred any
liability for any brokerage fees, agents' commissions or finders' fees,
in connection with the transactions contemplated herein.
6.8 Regulatory Compliance. To the best knowledge of the
Company, it and its Subsidiaries have operated and are currently
operating in compliance in all material respects with all laws, rules,
regulations, orders, decrees, licenses or permits applicable to it or
to its business. Neither the Company nor any of its Subsidiaries has
received any notice from the U.S. Food and Drug Administration or any
other governmental agency or authority of any noncompliance by the
Company or any Subsidiary with any law, rule, regulation, order,
decree, license or permit applicable to it or its business or
properties.
6.9 Articles of Incorporation and By-laws. The Company has
delivered to each Purchaser copies of its Articles of Incorporation and
all amendments thereto and comparable governing documents of its
Subsidiaries, which copies are complete and correct. Except as
disclosed in Schedule I(A) of the Disclosure Schedules, the Company is
not in default under or in violation of any provisions of its Articles
of Incorporation or comparable governing documents of its Subsidiaries.
The Company's Articles of Incorporation have not been amended since the
date of the Amendments thereof delivered to the Purchasers and except
as disclosed in Schedule I(A) or Section 8.9 herein, no action has been
taken for the purpose of effecting any amendment thereto. The Company
has delivered to the Purchaser copies of its By-laws and all amendments
thereto and comparable governing documents of its Subsidiaries, which
copies are complete and correct. The Company and its Subsidiaries are
not in default under or in violation of any provision of their Bylaws
or comparable governing documents.
6.10 Product Liability. Neither the Company nor any of its
Subsidiaries has received any notice, claim or assertion regarding an
actual or alleged material liability of the Company with respect to any
of its products.
6.11 Manufacturing Relationships. Neither the Company nor any
of its Subsidiaries has received any notice, claim or assertion from or
with respect to any original equipment manufacturer counterparty of the
Company or its Subsidiaries regarding any intention of such party to
either discontinue its relationship with the Company or its
Subsidiaries or develop or market products in competition with the
Company or its Subsidiaries.
6.12 Patents and Proprietary Rights. The Company has no reason
to believe that any of its patents or proprietary rights nor those of
any Subsidiaries infringe upon or otherwise violate the patents or
proprietary rights of any other party. Neither the Company nor any of
its Subsidiaries has received any notice, claim or assertion that its
patents or proprietary rights or products or proposed products infringe
upon or otherwise
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violate the patents or proprietary rights of any other party. For
purposes of this Section 6.12, "Intellectual Property" shall mean,
collectively: (I) all U.S. and foreign registered, unregistered and
pending (i) trade names, trade dress, trademarks, service marks,
assumed names, business names and logos, and all registrations and
applications therefor, together with all goodwill symbolized thereby,
(ii) computer software, data files, source and object codes, user
interfaces, manuals and other specifications and documentation and all
know-how relating thereto (collectively, the "Computer Software"),
(iii) copyrights (including without limitation those in Computer
Software, and all registrations and applications therefor), (iv)
utility and design patents, registered designs and invention
disclosures (including without limitation those relating to Computer
Software), and all grants, registrations and applications therefor
(collectively, the "Patents"), (v) trade secrets, inventions,
processes, formulae, know-how, concepts, ideas, research and
development, designs, business plans, strategies, marketing and other
information and customer lists (collectively, the "Trade Secrets"), and
(vi) other intellectual property, including without limitation adequate
research and development facilities; and (II) all license, assignment,
distribution or other agreements (collectively, the "Contracts")
relating to any of the items set forth in this Section 6.12.
(a) Schedules 17H and 17I of the Disclosure
Schedules includes a complete and accurate
list of (i) all Intellectual Property in
which the Company or any of its Subsidiaries
has an ownership interest,
indicating the owner thereof, and all
applications, registrations and grants with
respect thereto (collectively, the "Owned
Property"), provided that the Schedule need
not identify non-material unregistered
copyrights unless such copyrights relate to
proprietary Computer Software, or Trade
Secrets unless presently being commercially
used by the Company and not disclosed in
Patents, (ii) all Intellectual Property
(other than the Owned Property) which
is used in or relates to the business of the
Company (including the business of any
Subsidiary), indicating the owner or
licensor thereof, and (iii) all Contracts
with respect to the Intellectual Property
Preferred to in clauses (i) and (ii) above.
The Intellectual Property included in
clauses (i) and (ii) above is collectively
referred to herein as the "Company
Intellectual Property".
(b) Except as set forth in Schedules 17H and
17I, the Company or a Subsidiary is the sole
and exclusive owner of the Owned Property,
and is listed in the records of the
appropriate U.S. and/or foreign governmental
agencies as the sole and exclusive owner of
record for each registration, grant and
application listed in such Schedules.
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(c) To the Company's best knowledge, no act has
been done or omitted to be done by the
Company or any Subsidiary, or any licensee
thereof, which has had or could have the
effect of impairing or dedicating to the
public, or entitling any U.S. or foreign
governmental authority or any other person
to cancel, forfeit, modify or consider
abandoned, any Owned Property, or give any
person any rights with respect thereto
(other than pursuant to a Contract
identified in Schedule 17F), and all of the
Company's or a Subsidiary's rights in the
Company Intellectual Property are valid,
enforceable and free of defects. Neither
the Company nor any Subsidiary has any
knowledge of any facts or claims which
cause or would cause any Company
Intellectual Property to be invalid or
unenforceable, and neither the Company nor
any Subsidiary has received any notice that
any person may bring such a claim.
(d) The Company and each of its Subsidiaries
owns or otherwise has the valid right to use
through a Contract listed in Schedule 17F
any and all Intellectual Property that is
used in or is necessary or advisable for the
conduct of the business as currently
conducted and as contemplated to be
conducted, free and clear of any lien,
encumbrance, royalty or other payment
obligations (except for royalties payable in
respect of off-the-shelf Computer Software
at standard commercial rates) and otherwise
on commercially reasonable terms.
(e) To the Company's best knowledge, none of the
Company, any of its Subsidiaries or the
business of the Company as currently
conducted or as contemplated to be
conducted, is in conflict with or in
violation or infringement of, or has
violated or infringed, nor has the Company
or any of its Subsidiaries received any
notice of any conflict with or violation or
infringement of, nor are proceedings or
claims pending, nor have any such
proceedings or claims been instituted or
asserted in writing against the Company
or any of its Subsidiaries, nor are any
proceedings threatened, alleging any
violation, nor is there any valid basis for
any such proceeding or claim, of any rights
or asserted rights of any other person with
respect to any Intellectual Property of such
other person.
(f) No proceedings or claims in which the
Company or any of its Subsidiaries alleges
that any person is infringing upon, or
otherwise violating, any Company
Intellectual Property are
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pending, and none have been served by,
instituted or asserted by the Company or any
such Subsidiary, nor are any proceedings
threatened alleging any such violation or
infringement, nor does the Company or any
such Subsidiary know of any valid basis for
any such proceeding or claim.
(g) To the Company's best knowledge, neither the
Company nor any of its Subsidiaries has,
prior to the date hereof, divulged,
furnished to or made accessible to any
person, any Trade Secrets included in
the Company Intellectual Property without
having obtained an enforceable agreement of
confidentiality from such person, the
form of which confidentiality agreements is
included in Schedule 15(C) or 16(G) of the
Disclosure Schedules. All key personnel
employed by the Company and its Subsidiaries
have signed such an enforceable agreement of
confidentiality.
(h) The Company and each of its Subsidiaries
have obtained from all individuals who
participated in any respect in the invention
or authorship of any Owned Property (as
employees of the Company or one of its
Subsidiaries, as consultants, as employees
of consultants or otherwise) effective
waivers of any and all ownership rights of
such individuals in such Owned Property, and
assignments to the Company or one of its
Subsidiaries of all rights with respect
thereto, other than from such individuals
whose copyrightable works the Company hereby
represent to be "works made for hire" within
the meaning of Section 101 of the Copyright
Act of 1976. No officer or employee of the
Company or any Subsidiary is subject to any
agreement with any other person which
requires such officer or employee to assign
any interest in inventions or other
intellectual property or keep confidential
any trade secrets, proprietary data,
customer lists or other business information
or which restricts such officer or employee
from engaging in competitive activities or
solicitation of customers.
(i) To the Company's best knowledge, the Company
and each of its Subsidiaries has taken all
actions which are necessary or advisable in
order to fully protect the Company
Intellectual Property in a manner consistent
with prudent commercial practice.
6.13 Unincorporated Documents or Materials. With respect
to any document or other materials received by the Purchaser from the
Company or its representatives which are not incorporated herein by
reference, (i) the Company has no reason to believe any of
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such documents and materials or any projections contained therein
contain errors or misstatements or do not adequately describe the
transactions contemplated by this Agreement or the status of the
development of the Company's technology and products, and (ii) such
documents, materials and projections were prepared by the Company and
its management in good faith.
6.14 Information. The information concerning the Company and
its Subsidiaries set forth in or incorporated by reference in this
Agreement or in any certificate or instrument furnished to the
Purchaser in connection with the Transaction Documents, when considered
together, is complete and accurate in all material respects and does
not contain any untrue statement of a material fact or omit to state a
material fact required to make the statements made, in the light of the
circumstances under which they were made, not misleading.
6.15 No Adverse Changes. Since the dates of the Financial
Statements and SEC Reports, the Company and each of its Subsidiaries
has conducted its business only in the ordinary course, and there has
not been:
(a) any change in the assets, liabilities,
financial condition or operations of the
Company from that reflected in the Financial
Statements, except changes in the ordinary
course of business, which have not been,
either in any case or in the aggregate,
materially adverse;
(b) any declaration, setting aside or payment of
any dividend or other distribution with
respect to the Common Stock;
(c) any commitment, contractual obligation,
borrowing, capital expenditure or
transaction (each, a "Commitment") entered
into by the Company or any of its
Subsidiaries outside the ordinary course of
business, or any material change in the
Company's accounting principles, practices
or methods;
(d) any damage, destruction, or loss, whether or
not covered by insurance, materially and
adversely affecting the properties or
business of the Company; or
(e) any other event, change, circumstance or
condition of any character which has
materially and adversely affected the
business, prospects, condition, affairs,
operations, properties or assets of the
Company.
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6.16 Tax Returns and Payments. Except as disclosed in Schedule
22B of the Disclosure Schedules, the Company and its subsidiaries have
timely filed all tax returns and reports as required by Federal, state
and local law; the returns and reports which have been filed are true
and correct in all material respects; and the Company has timely paid
all taxes and other assessments due and payable and has no knowledge of
any liability for any tax to be imposed upon the Company or its
properties or assets as of the date of this Agreement that is not
adequately provided for. The Company has not been advised (i) that any
of its returns, federal, state or other, have been or are being audited
as of the date hereof, or (ii) of any deficiency in assessment or
proposed judgment to its federal, state or other taxes.
6.17 Title to Property and Assets
(a) Schedules 10A and 10D of the Disclosure
Schedules set forth a complete and accurate
list and the address of all real property
leased or owned by the Company or any of its
Subsidiaries or otherwise used by the
Company or its Subsidiaries in the conduct
of their respective businesses or operations
(collectively, and together with the land at
each address referenced in such Schedules
and all buildings, structures and other
improvements and fixtures located on or
under such land and all easements, rights
and other appurtenances to such land, the
"Company Properties" and, individually, a
"Company Property"). Neither the Company nor
any of its Subsidiaries owns, holds or
occupies any real property or
any interest in real property other than
such leasehold interests. All of such leases
are in full force and effect with no default
by the Company or any Subsidiary and, to the
Company's knowledge, no material default by
any other party thereto.
(b) The Company has no knowledge (i) that any
currently required certificate, permit or
license (including building permits and
certificates of occupancy for tenant spaces)
from any Government Authority having
jurisdiction over any Company Property or
any agreement, easement or other right which
is necessary to permit the lawful use,
occupancy or operation of the existing
buildings, structures or other improvements
which constitute a part of any of
the Company Properties or which are
necessary to permit the lawful use and
operation of utility service to any Company
Property or of any existing driveways, roads
or other means of egress and ingress to and
from any of the Company Properties has
not been obtained or is not in full force
and effect, or of any pending modification
or cancellation of any of same, or (ii) of
any violation by any Company Property of any
United States or
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Canadian federal, state or municipal law,
ordinance, order, regulation or requirement,
including any applicable zoning law or
building code, as a result of the use or
occupancy of such Company Property or
otherwise. The Company has no knowledge of
uninsured physical damage to any Company
Property.
(c) The Company has no knowledge that any
condemnation, eminent domain or re-zoning
proceedings are pending or threatened with
respect to any of the Company Properties.
(d) Schedule 3K of the Disclosure Schedule sets
forth the Company's capital expenditure
budget and schedule, which describes the
capital expenditures which the Company has
made or anticipates making from July 1, 1999
through December 31, 2000.
(e) The Company and each of its Subsidiaries
have good and sufficient title to all the
personal and non-real properties and assets
reflected in their books and records as
being owned by them (including those
reflected in the balance sheets of the
Company and its subsidiaries as of September
30, 1999, except as since sold or otherwise
disposed of in the ordinary course of
business), free and clear of all liens,
mortgages, loans and encumbrances, except
such encumbrances and liens which arise in
the ordinary course of business and do not
materially impair the Company's ownership or
use of such property or assets.
(f) All facilities, machinery, equipment,
fixtures, vehicles and other assets owned,
leased or used by the Company or a
Subsidiary, which are reasonably required to
operate the Company's or a Subsidiary's
business as presently conducted, or proposed
to be conducted, are in good operating
condition and repair and are reasonably fit
and usable for the purposes for which they
are being used. With respect to the
respective assets they lease, the Company
and its Subsidiaries are in compliance with
such leases and each holds a valid leasehold
interest free of any liens, claims or
encumbrances.
6.18 Insurance. The Company has in full force and effect
insurance policies, including liability policies, covering all the
assets, business, equipment, properties, operations, employees,
officers and directors of the Company and each of its Subsidiaries
(collectively, the "Insurance Policies") which are of a type and in
amounts customarily carried by persons conducting businesses similar to
those of the Company. There is no material claim by the Company or any
of its Subsidiaries pending under any of the material Insurance
Policies as to which coverage has been questioned, denied or disputed
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<PAGE>
by the underwriters of such policies. The Company maintains directors
and officers liability insurance in the amount of $5,000,000. The
Company will cause such policies to be maintained and renewed. Such
policies shall be owned by the Company and shall name the Company as
beneficiary and loss payee and shall not be subject to cancellation by
the Company without prior approval of the Company's Board of Directors.
6.19 Permits. The Company and each Subsidiary have all
franchises, permits, licenses and any similar authority necessary for
the conduct of its business as now being conducted by it, the lack of
which could materially and adversely affect the business, assets,
properties, prospects or financial condition of the Company and its
Subsidiaries, and each believes that it can obtain, without undue
burden or expense, any similar authority for the conduct of its
business as planned to be conducted. Neither the Company nor any of its
Subsidiaries is in default under any of such franchises, permits,
licenses or other similar authority.
6.20 Confidential Information and Invention Assignment
Agreements. All key employees, consultants and officers of the Company
or a Subsidiary have executed an agreement with the Company or such
Subsidiary, as the case may be, regarding confidentiality and
proprietary information substantially in the form or forms delivered to
the counsel for the Purchasers. The Company is not aware that any
employee, consultant, or officer of the Company or any Subsidiary is in
violation thereof, and the Company will use its best efforts to prevent
any such violation. Except as may be specifically provided in the
employee, consulting, invention assignment or service provider
agreements identified and disclosed to Purchasers pursuant to Schedules
12(A), 15(C), 16(G), or 16(I) of the Disclosure Schedules, no current
employee, consultant or officer of the Company or a Subsidiary has
excluded works or inventions made prior to his or her employment with
the Company or a Subsidiary from his or her confidential information
and invention assignment agreement.
6.21 Environmental and Safety Laws. To its knowledge, neither
the Company nor any Subsidiary is in violation of any applicable
statute, law or regulation relating to the environment or occupational
health and safety, and no material expenditures are or will be required
in order to comply with any such existing statute, law or regulation.
No Hazardous Materials (as defined below) are used or have been used,
stored or disposed of by the Company or a Subsidiary or, to the
Company's or a Subsidiary's knowledge, by any other person on or from
any property owned, leased or used by the Company or a Subsidiary. For
the purposes of the preceding sentence, "Hazardous Material" shall mean
(a) materials which are listed or otherwise defined as "hazardous" or
"toxic" under any applicable local, state, federal and/or foreign laws
and regulations that govern the existence and/or remedy of
contamination on property, the protection of the environment from
contamination, the control of hazardous wastes, or other activities
involving hazardous substances, including building materials or (b) any
petroleum products or nuclear materials.
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6.22 Corporate Documents. The current Amended and Restated
Articles of Incorporation and Bylaws of the Company are in the form set
forth in Schedule 1A of the Disclosure Schedules. The copies of the
minutes and actions by written consent of the Company provided to the
Purchasers' counsel under Tab 1C of the Disclosure Documents contain
minutes of all meetings of directors and shareholders and all actions
by written consent without a meeting by the directors and shareholders
since May 2, 1996, and reflect all actions by the directors (and any
committee of directors) and shareholders with respect to all
transactions referred to in such minutes accurately in all material
respects.
6.23 Employees. Neither the Company nor a Subsidiary has a
collective bargaining agreement with any of its employees. There is no
labor union organizing activity pending or, to the Company's or any
Subsidiary's knowledge, threatened with respect to the Company or a
Subsidiary. Other than employment offer letters and those employment
agreements identified in Schedules 1G, 15C, 15D or 16E of the
Disclosure Schedules, no employee has any agreement or contract,
written or verbal, regarding his employment. Other than the Revised
1997 Stock Option and Incentive Plan of the Company, neither the
Company nor a Subsidiary is a party to or bound by any currently
effective employment contract, deferred compensation arrangement, bonus
plan, incentive plan, profit sharing plan, retirement agreement or
other employee compensation plan or agreement. To the Company's
knowledge, no employee of the Company or a Subsidiary, nor any
consultant with whom the Company or a Subsidiary has contracted, is in
violation of any term of any employment contract, proprietary
information agreement or any other agreement relating to the right of
any such individual to be employed by, or to contract with, the Company
or a Subsidiary; and to the Company's knowledge, the continued
employment by the Company or a Subsidiary of its present employees, and
the performance of the Company's contracts with its independent
contractors, will not result in any such violation. Neither the Company
nor a Subsidiary has received any notice alleging that any such
violation has occurred. Except as may be provided in the employment
agreements to which the Company or a Subsidiary is a party, no employee
of the Company or a Subsidiary has been granted the right to continued
employment by the Company or a Subsidiary or to any material
compensation following termination of employment with the Company or a
Subsidiary. The Company is not aware that any officer or key employee,
or that any group of key employees, intends to terminate his, her or
their employment with the Company or a Subsidiary, nor does the Company
nor a Subsidiary have a present intention to terminate the employment
of any officer, key employee or group of key employees. To the best of
its knowledge, the Company and its Subsidiaries has complied in all
material respects with all applicable state and Federal equal
employment opportunity and other laws related to employment.
6.24 Y2K Compliance. To the Company's knowledge, all
information technology used by the Company or its Subsidiaries,
including without limitation, in all products and services (i) provided
by the Company or Subsidiary, whether to third parties or for internal
use or (ii) used in combination with any information technology of its
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clients, customers, suppliers or vendors, accurately processes or will
process date and time data (including, but not limited to calculating,
comparing and sequencing) from, into and between the years 1999 and
2000 and the twentieth century and the twenty-first century, including
leap years calculations and neither the performance nor functionality
of such technology will be affected by dates prior to, during and after
the year 2000. Neither the Company nor any Subsidiary has any
obligation under the warranty agreements, service agreements or
otherwise to remedy any information technology defect relating to the
year 2000.
6.25 ERISA. Schedules 16E and 16K of the Disclosure Schedule
sets forth, if any, each compensation or benefit plan, agreement,
arrangement or commitment (including, but not limited to, "employee
benefit plans", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), which is maintained
by the Company or a Subsidiary for any present or former employees,
officers or directors of the Company or a Subsidiary ("Company
Personnel") or with respect to which the Company or a Subsidiary has
liability or makes or has an obligation to make contributions
("Employee Plans"). All contributions or payments owed with respect to
any periods prior to the Closing under any Employee Plan have been
made, or appropriately accrued. Each Employee Plan by its terms and
operation is in compliance with all applicable laws (including, but not
limited to, ERISA, the Code and the Age Discrimination in Employment
Act of 1967, as amended), and all filings have been made on a timely
basis. Neither the Company nor any Subsidiary, nor any entity that is
or was at any time treated as a single employer with the Company or any
Subsidiary under Section 414(b), (c), (m) or (o) of the Code (an "ERISA
Affiliate") has at any time maintained, contributed to or been required
to contribute to, or had any liability with respect to, any plan which
is subject to Title IV of ERISA or Section 412 of the Code (an "ERISA
Plan") (including, without limitation, any multiemployer plan (within
the meaning of Section 3(37) of ERISA)). Neither the Company nor any
Subsidiary, nor any other person, including any fiduciary, has engaged
in any "prohibited transaction" (as defined in Section 4975 of the Code
or Section 406 of ERISA), which could subject the Company, or any
person who the Company has an obligation to indemnify, to any tax or
penalty imposed under Section 4975 of the Code or Section 502 of ERISA.
The events contemplated by this Agreement (either alone or together
with any other event) will not (i) entitle any Company Personnel to
severance pay, unemployment compensation, or other similar payments
under any Employee Plan or law, (ii) accelerate the time of payment or
vesting or increase the amount of compensation or benefits due under
any Employee Plan, or (iii) result in any payments (including parachute
payments within the meaning of Section 280G of the Code) under any
Employee Plan.
The Company and each of its Subsidiaries is in compliance with
all laws and orders relating to the employment of labor and
classification of persons as employees, including, without limitation,
all such laws and orders relating to wages, hours,
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discrimination, civil rights, safety and the collection and payment of
withholding and/or Social Security taxes and similar taxes and
provision of employee benefits.
6.26 No Change of Control: Since September 30, 1999 no Change
of Control of the Company has occurred, and to the Company's knowledge,
no event has occurred which is reasonably likely to lead to a Change of
Control, where "Change of Control" shall mean any transaction as the
result of which a person, group or entity (i) shall acquire beneficial
ownership, or the right to acquire beneficial ownership, of 30% or more
of the outstanding shares of Common Stock or (ii) shall have the right
or the ability to elect, or shall have elected, more than one half of
the members of the Company's Board.
6.27 Compliance with Agreements; Material Agreements:
(a) The Company and each of its Subsidiaries have filed
all material reports, registrations and statements,
together with any amendments required to be made
with respect thereto, that they were required
to file with any Government Authority and all other
material reports and statements required to be filed
by, including any report or statement required to
be filed pursuant to the laws, rules or regulations
of the United States, and have paid all fees or
assessments due and payable in connection
therewith (provided that this representation does
not cover tax matters, which are addressed in
Section 6.16 above). No regulatory agency has
asserted that the Company or any Subsidiary is
in violation of any requirement of law.
(b) The Financial Statements, the SEC Reports, and
Schedules 11 and 21B of the Disclosure Schedules set
forth (i) a description of all material indebtedness
of the Company and each of its Subsidiaries, whether
unsecured, or secured or collateralized by mortgages,
deeds of trust or other security interests in any
assets of the Company or of its subsidiaries,
or otherwise and (ii) each Commitment entered into by
the Company or any of its Subsidiaries (including any
guarantees of any third party's debt or any
obligations in respect of letters of credit issued
for the Company's or any Subsidiary's account) which
may result in total payments or liability in excess
of $100,000. True and complete copies of the
documents relating to the foregoing have been
delivered or made available to Purchasers prior to
the date hereof. Neither the Company nor any of its
Subsidiaries is in default, and, to the Company's
knowledge, no event has occurred which, with the
giving of notice or the lapse of time or both,
would constitute a default, under any of the
documents described in clause (i) or (ii) of this
paragraph or in respect of any payment obligations
thereunder. There are no material joint venture or
partnership agreements to which the Company or any of
its Subsidiaries is a party as of the date hereof. To
the Company's knowledge, the other parties to such
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agreements are not in breach of any of their
respective obligations thereunder, except as would
not, individually or in the aggregate, reasonably be
expected to result in a material adverse effect.
There is no condition with respect to the Company's
Subsidiaries (including with respect to the
partnership agreements for the Company's Subsidiaries
that are partnerships) that could, individually or in
the aggregate, result in a material adverse effect.
(c) Schedules 11 and 12A of the Disclosure Schedules set
forth a complete and accurate list of all material
agreements to which the Company or any of its
Subsidiaries is a party relating to (i) the purchase
or lease of products or services from third parties;
(ii) the provision of products or services to
customers; and (iii) any agency agreements relating
to any of the foregoing. True and complete copies of
such agreements have been provided to Purchasers.
(d) Except as set forth in the Disclosure Schedules, each
agreement set forth or referenced in this Section
6.27 is in full force and effect as against the
Company or its Subsidiaries, as applicable, and to
the Company's knowledge, as against the other parties
thereto; no payments, if any, thereunder are
delinquent; the Company is not in default thereunder;
and no notice of default thereunder has been sent or
received by the Company or any of its Subsidiaries.
Except as may be set forth in the Disclosure
Schedules, no event has occurred which, with notice
or lapse of time or both, would constitute a default
by the Company under any agreement set forth or
referenced in this Section 6.27. To the Company's
knowledge, the other parties to such agreements are
not in breach of their respective obligations
thereunder, except as could not, individually or in
the aggregate, result in a material adverse effect.
True and complete copies of each such agreement have
been provided to Purchasers prior to the date
hereof.
(e) Schedules 15C, 15D, 15F and 16E of the Disclosure
Schedules set forth a complete and accurate list of
all agreements of the Company or a Subsidiary in
effect on the date hereof relating to transactions
with affiliates and potential conflicts of interest.
Each such agreement or arrangement is in full force
and effect, and the Company, each of its
Subsidiaries, and, to the Company's knowledge, the
other parties thereto are in compliance with such
agreements. True and complete copies of each such
agreement or arrangement have been provided to
Purchaser.
(f) There are no change of control or similar provisions
in any employment, severance, stock option, stock
incentive, or other agreement or
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arrangement to which the Company or any of its
Subsidiaries is a party which would be triggered by
the transactions contemplated by this Agreement.
There are no Company obligations (including any
payment or other obligation, forgiveness of debt,
other release from obligations, or acceleration of
vesting) which are created, accelerated, triggered,
modified or released by the execution, delivery or
performance of this Agreement or the consummation of
the transactions contemplated hereby or thereby.
7. Covenants.
7.1 Restricted Shares. Each Purchaser understands and
acknowledges that the Shares have not been registered under the Act, or
any state securities laws, and that they will be issued in reliance
upon certain exemptions from the registration requirements of those
laws, and thus cannot be resold unless they are registered under the
Act or unless the Company has first received an opinion of competent
securities counsel reasonably satisfactory in form and substance to the
Company that registration is not required for such resale. Each
Purchaser agrees that it will not resell any Shares unless such resale
transaction is in accordance with Rule 144 under the Act, pursuant to
registration under the Act, or pursuant to another available exemption
from registration. With regard to the restrictions on resales of the
Shares, each Purchaser is aware (i) of the limitations and
applicability of Securities and Exchange Commission Rule 144; (ii) that
the Company will issue stop transfer orders to its stock transfer
agent; and (iii) that a restrictive legend will be placed on
certificates representing the Shares, to the extent such restrictions
apply, which legend will read substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR QUALIFICATION
PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND
STATE SECURITIES LAWS AND THEREFORE HAVE NOT BEEN REGISTERED UNDER THE
ACT OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT
COMPLIANCE WITH THE PROVISIONS OF RULE 144 UNDER THE ACT, COMPLIANCE
WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF THE ACT AND
APPLICABLE STATE LAWS, OR PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS. THE COMPANY WILL INSTRUCT ITS STOCK
TRANSFER AGENT NOT TO RECOGNIZE ANY SALE OF THESE SECURITIES UNLESS
SUCH SALE IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR THE COMPANY HAS FIRST RECEIVED AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE
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COMPANY IN FORM AND SUBSTANCE, THAT SUCH REGISTRATION IS
NOT REQUIRED.
The company will terminate such stock transfer orders and remove such
legend with respect to such of the Shares as to which any of the
foregoing conditions have been satisfied.
7.2 Nondisclosure. Except as required by applicable securities
laws, rules and regulations, prior to the Closing Date no press release
or other announcement concerning the proposed transactions will be
issued (i) by the Company without advance notice to and consultation
with the Purchasers or (ii) by any Purchaser without the consent of the
Company. This Agreement and all negotiations and discussions between
the parties in connection with this Agreement shall be strictly
confidential and will not be disclosed in any manner prior to the
Closing Date, except to employees and agents of the parties on a
need-to-know basis, as required by applicable law or regulations or as
otherwise agreed by the parties. After Closing, disclosure shall be at
the sole discretion of the Company.
7.3 Confidentiality. Subject to the requirements of law,
pending consummation of the transactions herein contemplated, each
Purchaser will keep confidential, and will cause its representatives to
keep confidential, all non-public information and documents obtained
pursuant to Section 5.8 unless such information (i) was already known
to such Purchaser, (ii) becomes available to Purchaser from other
sources not known by Purchaser to be bound by a confidentiality
obligation, (iii) is independently acquired by such Purchaser as a
result of work carried out by any employee or representative of such
Purchaser to whom no disclosure of such information has been made, (iv)
is disclosed with the prior written approval of the Company or (v) is
or becomes readily ascertainable from published information or trade
sources. Upon any termination of this Agreement, each Purchaser will
collect and deliver to the Company all documents obtained by it from
the Company or any of its representatives then in their possession and
any copies thereof. The covenants of this Section shall survive any
termination of this Agreement pursuant to Section 11.6.
7.4 Use of Proceeds. The Company shall use all of the proceeds
from the sale of the Shares for the funding and development of the
Company's organizational infrastructure, to build out the Company's
directly managed whitening centers and associated centers, and for
working capital for the Company's current business.
7.5 Right of First Refusal. The Company shall not, directly or
indirectly, without the prior written consent of Purchaser, offer,
sell, or otherwise dispose of any of its equity or equity-equivalent
securities (a "Subsequent Offering") for a period of eighteen (18)
months after the Closing Date, except (i) the granting of options to
employees, officers, directors, or consultants, and the issuance of
shares upon exercise of options granted, under any stock option plan
heretofore or hereinafter duly adopted by the Company, (ii) shares
issued upon exercise of any currently outstanding options or
22
<PAGE>
warrants, (iii) shares issued in connection with the creation or
capitalization of a joint venture, an acquisition of assets of a person
(excluding an individual), a merger or any public offering, unless (A)
the Company delivers to Purchaser a written notice (the "Subsequent
Offering Notice") of its intention to effect such Subsequent Offering,
which Subsequent Offering Notice shall describe in reasonable detail
the proposed terms of such Subsequent Offering, the amount of proceeds
intended to be raised thereunder, the person with whom such Subsequent
Offering shall be effected, and a term sheet or similar document
relating thereto (which shall be attached to such Subsequent Offering
Notice) and (B) Purchaser shall not have notified the Company by 5:00
p.m. (Walnut Creek, CA time) within ten days after its receipt of the
Subsequent Offering Notice of its willingness to provide (or to cause
its sole designee to provide) financing to the Company on substantially
the terms set forth in the Subsequent Offering Notice subject to
completion of mutually acceptable, customary and appropriate
documentation therefor. If Purchaser does not notify the Company of its
intention to enter into such negotiations within such time period, the
Company may effect the Subsequent Offering substantially upon the terms
and to the persons (or affiliates of such persons) set forth in the
Subsequent Offering Notice, provided that such transaction is effected
within 45 days of the date of the Subsequent Offering Notice, and such
additional time period as reasonably may be required to obtain
necessary regulatory or third party consents, permits or approvals.
7.6 Conduct of Business of the Company. During the period from
the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing, except as expressly
contemplated by this Agreement or the Disclosure Schedules, the Company
shall not do, cause or permit any of the following, or permit any of
its Subsidiaries to cause or permit any of the following, in each case
without the prior written consent of Purchaser:
(a) Material Contracts. Enter into any material contract
or commitment, or violate, amend or otherwise modify
or waive any of the terms of any of its material
contracts, other than in the ordinary course of
business consistent with past practices.
(b) Issuance of Securities. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale
of, or purchase or propose the purchase of, any
shares of its capital stock or securities convertible
into, or subscriptions, rights, warrants or options
to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or
other convertible securities, other than, in the case
of the Company, in the ordinary course of business
consistent with past practices and the Revised 1997
Stock Option and Incentive Plan of the Company.
23
<PAGE>
(c) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted
exclusive marketing or other exclusive rights of any
type or scope with respect to any of its products or
technology;
(d) Dispositions. Sell, lease, license or otherwise
dispose of or encumber any of its properties or
assets which are material individually or in the
aggregate, to its business, except, in the case of
the Company, in the ordinary course of business
consistent with past practice;
(e) Indebtedness. Incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or
sell any debt securities or guarantee any debt
securities of others;
(f) Agreements. Enter into, terminate or amend, in a
manner which will adversely affect the business of
the Company or a Subsidiary: (i) any agreement or
agreements involving, individually or in the
aggregate, an obligation to pay or the right to
receive $100,000 or more, (ii) any agreement relating
to the license, transfer or other disposition or
acquisition of intellectual property rights or rights
to market or sell Company products, or (iii) any
other agreement which is material to the business or
prospects of the Company;
(g) Payment of Obligations. Pay, discharge or satisfy in
an amount or amounts in excess of $200,000 in the
aggregate for the Company and its Subsidiaries, any
claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise)
arising other than in the ordinary course of
business, other than the payment, discharge or
satisfaction of liabilities reflected or reserved
against in the Financial Statements;
(h) Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements except in
the ordinary course of business and consistent with
past practice;
(i) Insurance. Materially reduce the amount of any
material insurance coverage provided by existing
insurance policies;
(j) Termination or Waiver. Terminate or waive any right
of substantial value, other than in the ordinary
course of business;
(k) Employee Benefit Plans; New Hires; Pay Increases.
Adopt or amend any employee benefit or stock purchase
or option plan, or hire any new employee or
employees, pay any special bonus or special
remuneration (except payments made pursuant to
written agreements outstanding on the
24
<PAGE>
date hereof), or increase the salaries or wage rates
of its employees, except in the ordinary course of
business in accordance with past practice;
(l) Severance Arrangements. Grant any severance or
termination pay (i) to any director or officer or
(ii) to any other employee except (A) payments made
pursuant to written agreements outstanding on the
date hereof or (B) grants which are made in the
ordinary course of business in accordance with its
past practice;
(m) Acquisitions or Dispositions. Acquire or dispose of,
or agree to acquire or dispose of, by merging or
consolidating with, by purchasing or selling a
substantial portion of the assets of, or by any other
manner, the Company, any Subsidiary, or any business
or any corporation, partnership, association or other
business organization or division thereof or
otherwise acquire or dispose of or agree to acquire
or dispose of any assets which are material
individually or in the aggregate, to its business;
(n) Taxes. Other than in the ordinary course of business
make or change any material election in respect of
taxes, adopt or change any accounting method in
respect of taxes, file any material tax return or any
amendment to a material tax return, enter into any
closing agreement, settle any material claim or
assessment in respect of taxes, or consent to any
extension or waiver of the limitation period
applicable to any material claim or assessment in
respect of taxes;
(o) Revaluation. Revalue any of its assets, including
without limitation writing down the value of
inventory or writing off notes or accounts receivable
other than in the ordinary course of business; or
(p) Other. Take or agree in writing or otherwise to take,
any of the actions described in Sections 7.6(a)
through (p) above, or any action which would cause a
material breach of its representations or warranties
contained in this Agreement or prevent it from
materially performing or cause it not to materially
perform its covenants hereunder.
7.7 Calling of Special Shareholders Meeting to Adopt the New
Articles. Prior to Closing, the Company shall file with the SEC a
definitive proxy statement, substantially in the form of the
Preliminary Proxy Statement heretofore filed with the SEC, and shall,
as soon as possible under applicable SEC and AMEX rules, mail Notice of
a Special Meeting of Shareholders for the purpose of amending the
Company's Articles of Incorporation in the form of the New Articles.
7.8 Filing New Articles of Incorporation. The Company
shall file the New Articles with the Utah Department of Commerce,
Division of Corporations, immediately
25
<PAGE>
upon adoption of the New Articles by the shareholders of the Company at
the Special Meeting of Shareholders.
7.9 Disclosure Schedule Supplements. From the date of this
Agreement to the Closing Date, the Company shall amend and supplement
the Disclosure Schedule attached hereto as Exhibit B on such date or
dates, if any, as may be necessary to keep the disclosures made therein
and in the representations and warranties contained herein true,
accurate, and complete, as if they were to be made on such date or
dates.
7.10 Copies of SEC Filings. From and after the date of this
Agreement, and for so long as the Purchasers, their affiliates and
permitted transferees collectively are the beneficial owners of Fifty
Percent (50%) or more of the Shares, the Company shall provide to
Purchasers and their permitted transferees copies of all filings made
by the Company with the SEC.
8. Purchaser's Conditions to Closing. Each Purchaser's obligations
under this Agreement shall be subject to satisfaction by the Company, or waiver
by the Purchaser, prior to Closing, of the following conditions precedent:
8.1 Approvals, Waivers, Etc. The Company shall have delivered
to each Purchaser evidence of all approvals, including waivers and
consents, of its board of directors, government or third parties which
may be required for the sale of the Shares, in full force and effect as
of the Closing Date, including but not limited to any required filings
with the Federal Trade Commission.
8.2 Absence of Litigation and Government Orders or
Proceedings. No litigation nor any order or proceeding of any
governmental authority or self-regulatory organization shall have been
entered or threatened or shall be pending challenging the purchase of
the Shares contemplated by the Transaction Agreements or which could
have a material adverse effect on the Company.
8.3 No Bankruptcy. The Company shall not have filed for
bankruptcy protection, the appointment of a trustee or receiver,
assignment for the benefit of creditors, nor have taken any other
action designed to protect the Company, its property or assets from the
rights of creditors; and no other person shall have made any such
filing or taken any such action in respect of the Company.
8.4 Compliance with Covenants. The Company shall have
performed or satisfied in all material respects all covenants to be
performed by the Company prior to Closing under the Transaction
Agreements.
8.5 Representations and Warranties. The representations and
warranties of the Company originally made herein, without giving effect
to the updating contemplated by Section 7.9, shall be true and correct
in all material respects (disregarding, for purposes of
26
<PAGE>
such determination of materiality, all qualifications in such
representations and warranties regarding "material") as of the date of
this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except that representations and warranties originally
made herein that by their terms speak as of the date of this Agreement
or some other date shall be true and correct only as of such date),
disregarding all changes in the representations and warranties made
pursuant to Section 7.9.
8.6 AMEX Additional Listing Application. The Company shall
have made all appropriate filings under the rules of the American Stock
Exchange and shall have received notification from the Nasdaq-Amex
Group that the Shares have been approved for listing, subject to notice
of issuance.
8.7 Opinions. The Company shall have delivered to the
Purchasers an opinion of counsel to the Company, satisfactory in form
and substance to the Purchasers, to the effect that (i) the Company has
been duly incorporated, is validly existing and in good standing in the
jurisdiction of its incorporation, and, except as may be qualified
therein in terms reasonably acceptable to the Purchasers, has full
corporate power and authority to conduct its business as presently
conducted, (ii) the Company's authorized capital consists of 50,000,000
shares of Common Stock, of which, as of the Closing Date, a stated
number of shares are issued and outstanding (subject to adjustment to
reflect the exercise of outstanding options or warrants in the ordinary
course of business), and that the Shares, when paid for and issued,
will be validly issued, fully paid and non-assessable, and that, except
as theretofore disclosed to Purchasers in the Disclosure Schedules,
there are no authorized nor outstanding subscriptions, warrants,
options, convertible securities or other rights (contingent or
otherwise) to purchase or acquire common stock, nor any obligation by
the Company to issue such rights, (iii) the execution, delivery, and
performance of the Transaction Documents has been duly authorized by
all necessary corporate action, (iv) the Transaction Documents have
been duly executed and delivered by the Company and constitute valid
and legally binding obligations of the Company, enforceable in
accordance with their terms, subject to customary qualifications, (v)
the execution, delivery, and performance of the Transaction Documents
do not violate any applicable law, rule, or regulation binding on the
Company, nor any determination, award, writ, decree, injunction,
judgment or order of which counsel has knowledge after due inquiry, nor
any indenture, lease, agreement, or other instrument to which the
Company is a party of which counsel has knowledge after due inquiry,
nor the Articles of Incorporation or Bylaws of the Company, (vi) except
as has been obtained, no consent, approval, authorization or filing
with federal, state or local governmental authorities is required by
the Company for the execution, delivery, and performance by the Company
of the Transaction Documents, and (vi) there is no action, proceeding,
or investigation pending in the federal or state courts of Utah, nor,
except as disclosed in the Disclosure Schedules, any action,
proceeding, or investigation pending or overtly threatened against the
Company of which counsel has knowledge after due inquiry.
27
<PAGE>
8.9 Calling of Special Shareholders Meeting to Adopt the New
Articles; No Adverse Change. At least 3 days shall have elapsed since
the Company shall have filed with the SEC a definitive proxy statement,
and shall have mailed Notice of a Special Meeting of Shareholders for
the purpose of amending its Articles of Incorporation in the form of
the New Articles attached hereto as Exhibit C and by this reference
made a part hereof (see Section 6.5), during which 3-day period there
shall have been no event, change, circumstance or condition regarding
or relating to the proposed adoption of the New Articles which has
materially and adversely affected the business, prospects, condition,
affairs, operations, properties or assets of the Company.
8.10 Transaction Documents. The Company shall have executed
and delivered the Transaction Documents, including (i) this Agreement,
and (ii) the Registration Rights Agreement among the parties hereto,
and the Voting and Co-sale Rights Agreement among the parties hereto
and LCO Investments Ltd, such agreements under (ii) herein to be in a
form mutually and reasonably acceptable to the parties hereto.
9. Company's Conditions to Closing. The Company's obligations under
this Agreement shall be subject to satisfaction or waiver, prior to Closing, of
the following conditions precedent:
9.1 Approvals, Waivers, Etc. Purchaser shall have delivered to
the Company evidence of all approvals, including waivers and consents,
of third parties which may be required for the purchase of the Shares,
in full force and effect as of the Closing Date, including but not
limited to any required filings with the Federal Trade Commission.
9.2 Compliance with Covenants. Purchaser shall have performed
or satisfied in all material respects all covenants to be performed by
Purchaser prior to Closing under the Transaction Documents.
9.3 Representations and Warranties. The representations and
warranties of the Purchasers shall be true and correct in all material
respects (disregarding, for purposes of such determination of
materiality, all qualifications in such representations and warranties
regarding "material") as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date (except that
representations and warranties that by their terms speak as of the date
of this Agreement or some other date shall be true and correct only as
of such date).
9.4 Transaction Documents. The Purchasers shall have executed
and delivered the Transaction Documents, including (i) this Agreement,
and (ii) the Registration Rights Agreement among the parties hereto,
and the Voting and Co-sale Rights Agreement among the parties hereto
and LCO Investments Ltd, such agreements under (ii) herein to be in a
form mutually and reasonably acceptable to the parties hereto.
10. Indemnification.
28
<PAGE>
10.1 Indemnification by the Company. The Company agrees to
indemnify each Purchaser, its officers, employees and agents, and any
persons controlling such Purchaser, and hold them harmless from and
against any and all liability, damage, cost or expense, including
attorney's fees, incurred on account or arising out of any inaccuracy
or omission in or breach of the declarations, covenants, agreements,
representations, and warranties by the Company set forth or
incorporated by reference herein. The Company agrees to indemnify each
Purchaser, its directors, officers and controlling persons, against any
claim by any third person for any commission, brokerage fee, finders
fee, or other payment with respect to this Agreement or the
transactions contemplated hereby based upon any alleged agreement or
understanding between such party and such third person, whether
expressed or implied, arising from the actions of such party. The
covenants set forth in this Section shall survive the Closing Date and
any termination of this Agreement.
10.2 Indemnification by Purchasers. Each Purchaser agrees to
indemnify the Company, its officers, affiliates, employees and agents,
and hold them harmless from and against any and all liability, damage,
cost or expense, including attorney's fees, incurred on account or
arising out of any inaccuracy or omission in or breach of the
declarations, covenants, agreements, representations, and warranties by
the Purchasers set forth or incorporated by reference herein. Each
Purchaser agrees to indemnify the Company against any claim by any
third person for any commission, brokerage fee, finders fee, or other
payment with respect to this Agreement or the transactions contemplated
hereby based upon any alleged agreement or understanding between such
party and such third person, whether expressed or implied, arising from
the actions of such party. The covenants set forth in this Section
shall survive the Closing Date and any termination of this Agreement.
11. General Provisions.
11.1 Attorneys' Fees. In the event of a default in the
performance of this Agreement or any document or instrument executed in
connection with this Agreement, the defaulting party, in addition to
all other obligations and liabilities it shall have hereunder or under
applicable laws, shall pay reasonable attorneys' fees and costs
incurred by the non-defaulting party.
11.2 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah applicable
to contracts wholly to be performed in such state.
11.3 Counterparts. This Agreement may be executed in one or
more counterparts, each of which when so signed shall be deemed to be
an original, and such counterparts together shall constitute one and
the same instrument.
29
<PAGE>
11.4 Entire Agreement. The Transaction Documents, the
Disclosure Schedules and the other attachments referred to herein (all
of which are incorporated in this Agreement by reference) collectively
set forth the entire agreement between the parties as to the subject
matter hereof, supersede any and all prior or contemporaneous
agreements or understandings of the parties relating to the subject
matter of this Agreement, and may not be amended except by an
instrument in writing signed by all of the parties to this Agreement.
11.5 Expenses. Each party shall be responsible for and shall
pay its own costs and expenses, including without limitation attorneys'
fees and accountants' fees and expenses, in connection with the conduct
of the due diligence inquiry, negotiation, execution and delivery of
this Agreement and the instruments, documents and agreements executed
in connection with this Agreement; provided, however, that whether or
not the transactions contemplated by this Agreement are consummated,
the Company shall, promptly upon request therefore, reimburse the
Purchasers for their reasonable costs and expenses (including, without
limitation, the fees and expenses of their counsel) in connection with
this transaction, up to an amount not to exceed $50,000 in the
aggregate. The Company shall bear all expenses in connection with the
listing of the Shares on AMEX. Notwithstanding the foregoing, the
Company shall pay any expenses which the Company is obligated to pay
under the Registration Rights Agreement with respect to the Shares.
11.6 Termination. This Agreement may be terminated at any time
prior to the Closing by mutual agreement of the Company and all
Purchasers set forth in writing. This Agreement may also be terminated
by the Company or by the Purchasers by written notice to the other
parties hereto, in the event that the Closing shall not have occurred
on or prior to January 31, 2000. Each provision hereof expressly stated
to survive the termination, shall survive the termination of this
Agreement.
11.7 Headings. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and
do not constitute a part of this Agreement.
11.8 Notices. All notices or other communications provided for
under this Agreement shall be in writing, and mailed, telecopied or
delivered by hand delivery or by overnight courier service, (i) if to
any Purchaser, to its address indicated on Exhibit A, or (ii) if to the
Company, to its address indicated below or, in any case, at such other
address as the parties may designate in writing:
BriteSmile, Inc
Attn. John Reed, CEO
490 North Wiget Lane
Walnut Creek, California
30
<PAGE>
Fax: 925-279-2866
Phone: 925-941-6260
With copies to:
Jeffrey M. Jones, Esq.
Wayne D. Swan, Esq.
DURHAM, JONES & PINEGAR, P.C.
Key Bank Tower, Suite 800
50 South Main Street
Salt Lake City, Utah 84144
Phone: (801) 538-2424
Fax: (801) 538-2425
All notices and communications shall be effective as follows: When
mailed, on the third business day after the day of deposit in the mail
(postage prepaid); when telecopied, upon confirmed transmission of the
telecopied notice; when hand delivered, upon delivery; and when sent by
overnight courier, the next business day after deposit of the notice
with the overnight courier.
11.9 Severability. If any one or more of the provisions of
this Agreement is determined to be illegal or unenforceable, all other
provisions of this Agreement shall be given effect separately from the
provision or provisions determined to be illegal or unenforceable and
shall not be affected thereby.
11.10 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors, but
shall not be assignable by any Purchaser without the prior written
consent of the Company.
11.11 Survival of Representations, Warranties and Covenants
Closing. All warranties, representations, indemnities and agreements
made in this Agreement by a party hereto shall survive the date of this
Agreement, the Closing Date, the consummation of the transactions
contemplated by this Agreement and the issuance by the Company of the
Shares.
31
<PAGE>
IN WITNESS WHEREOF, the parties named below have signed this Agreement
as of the date first above written.
PEQUOT PRIVATE EQUITY FUND II, L.P., a "Purchaser"
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT MANAGER
By: /s/ David J. Malat
-----------------------------------------------------------
David J. Malat, Chief Financial Officer
Date: January 12, 2000
PEQUOT PARTNERS FUND, L.P., a "Purchaser"
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT MANAGER
By: /s/ David J. Malat
-----------------------------------------------------------
David J. Malat, Chief Financial Officer
Date: January 12, 2000
PEQUOT INTERNATIONAL FUND, INC., a "Purchaser"
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT ADVISOR
By: /s/ David J. Malat
-----------------------------------------------------------
David J. Malat, Chief Financial Officer
Date: January 12, 2000
32
<PAGE>
ACCEPTED AND AGREED:
BRITESMILE, INC.
By: /s/ Paul A. Boyer
-----------------------------------------------------------------------------
Paul A. Boyer, Chief Financial Officer
Date: January 12, 2000
33
<PAGE>
EXHIBITS
A. Purchasers
B. Disclosure Schedule
C. Amended and Restated Articles of Incorporation
D. Capitalization Table
34
<PAGE>
Exhibit A
<TABLE>
<CAPTION>
Purchaser and Address Number of Shares Aggregate Purchase Price
<S> <C> <C>
Pequot Private Equity 1,666,667 $10,000,000
Fund II, L.P.
Pequot Partners Fund, 833,333 $ 5,000,000
L.P.
Pequot International 833,333 $ 5,000,000
Fund, Inc.
</TABLE>
Any Pequot Notices to:
[Name of Purchaser]
c/o Pequot Capital Management, Inc.
Attn. David J. Malat, Chief Financial Officer
500 Nyala Farm Road
Westport, CT 06880
Phone: 203-429-2200
Fax: 203-429-2400
Copies to:
Dewey Ballantine LLP
Attn: Ann Gill, Esq. or Richard B. Romney, Esq.
1301 Avenue of the Americas
New York, New York 10019-6092
Tel: 212-259-8000
Fax: 212-259-6333
35
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") between BriteSmile,
Inc., a Utah corporation (the "Company"), and the stockholder signatories hereto
(each, a "Holder" and together the "Holders"), is made and entered into as of
January 18, 2000.
Recitals
A. The Company and Holders have entered into that certain Stock
Purchase Agreement (the "Purchase Agreement") of even date with this Agreement,
pursuant to which Holder has agreed to purchase and the Company has agreed to
sell shares of Company Common Stock, par value $.001 per share (the "Shares"),
which Shares (the "Registrable Securities") are now restricted and not
registered under the Securities Act of 1933, as amended, (the "Act") or under
the provisions of any state securities law.
B. Holder would not have agreed to execute the Purchase Agreement or to
consummate the transactions contemplated by the Purchase Agreement unless the
Company had agreed to enter into this Agreement.
Agreement
In consideration of the promises contained in this Agreement and in the
Purchase Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which the parties acknowledge by their signatures below, the
Company and Holder agree as follows:
1. Piggyback Registrations. If at any time after 180 days from the date
of this Agreement the Company proposes to file a registration statement covering
proposed sales by it or any of its shareholders of shares of its capital stock
in a manner which would permit registration of shares of common stock for sale
to the public (other than a registration statement (i) covering only shares
issuable upon (a) the exercise of employee stock options or pursuant to an
employee stock purchase, dividend reinvestment or similar plan, or (b) the
exercise of a convertible security, or (ii) under a Registration Statement filed
on Form S-4 or S-8 or any similar form under the Act or (iii) pursuant to
Section 2, below), the Company will give prompt notice to Holder of the proposed
registration (which notice shall describe the proposed filing date, the date by
which the registration rights granted pursuant to this Section 1 must be
exercised, and the nature and method of any such sale or disposition of
securities, and shall include a listing of the jurisdictions, if any, in which
the Company proposes to register or qualify the securities under the applicable
state securities or "Blue Sky" laws of such jurisdictions). At the request of
Holder given within thirty (30) calendar days after the receipt of such notice
by Holder (which request shall specify the number of shares Holder requests to
be included in such registration), the Company will use its best efforts to
cause all shares as to which registration has been requested
1
<PAGE>
by Holder to be included in such registration statement for sale or disposition
in accordance with the method described in the initial notice given to Holder
and subject to the same terms and conditions as the other shares of capital
stock being sold, and thereafter shall cause such registration statement to be
filed and become effective; provided, however, that the Company shall be
permitted to (A) withdraw the registration statement for any reason in its sole
and exclusive discretion and upon the written notice of such decision to Holder
shall be relieved of all of its obligations under this Section 1 with respect to
that particular registration; or (B) exclude all or any portion of the shares
sought to be registered by Holder from such registration statement if the
offering of the shares is an underwritten offering and to the extent that, in
the judgment of the managing underwriter of the offering, the inclusion of such
shares would be materially detrimental to the offering of the remaining shares
of capital stock, or such delay is necessary in light of market conditions. Any
shares sought to be registered by Holder so excluded from a registration
statement shall be excluded pro rata based on the total number of shares of
capital stock being sold by all selling security holders (other than the
Company). The Holders of Registrable Securities may withdraw all or any part of
the Registrable Securities from a Piggyback Registration at any time before ten
(10) business days prior to the effective date of the Piggyback Registration. A
registration of Registrable Securities pursuant to this Section 1 shall not be
counted as a Demand Registration as defined under Section 2
2. Demand Registration. If at any time after 180 days from the date of
this Agreement the Company shall be requested in writing by any one or more
Holders (and such Holders then hold any issued and outstanding Registrable
Securities at such time) to effect the registration under the Act of shares of
the Company's Common Stock then owned by Holder (a "Demand Registration") (which
request shall specify the aggregate number of shares intended to be offered and
sold by Holder, shall describe the nature or method of the proposed offer and
sale thereof, and shall contain an undertaking by Holder to cooperate fully with
the Company in order to permit the Company to comply with all applicable
requirements of the Act and the rules and regulations thereunder and to obtain
acceleration of the effective date of the registration statement contemplated
thereby), the Company shall effect the registration of such securities on an
appropriate form under the Act. Within ten (10) days after receipt of a demand,
the Company will notify in writing all Holders of Registrable Securities of the
demand. Any Holder who wants to include his or its Registrable Securities in the
Demand Registration must notify the Company within ten (10) business days of
receiving the notice of the Demand Registration. Except as provided in this
Section 2, the Company will include in all Demand Registrations all Registrable
Securities for which the Company receives the timely written demands for
inclusion, provided that:
2.1 Minimum Value of Shares Registered. Holder's rights under
this Section 2 shall be exercisable only if the shares as to which Holder
requests registration have an aggregate value of at least $500,000 based on the
average of the closing sale price for the Company's common stock as listed on
the American Stock Exchange or any other exchange on which the Company's common
stock then may be traded for the thirty (30) trading-day period immediately
preceding the date of such request for registration;
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2.2 Material Adverse Effect on Company. The independent
members of the Company's Board of Directors, with the advice of such investment
bankers or securities professionals as the Board shall deem necessary, shall
have determined in good faith that the cost of complying with the request for
registration under this Section 2 would not have a materially adverse effect
upon the Company, its operations, or the market for the Company's common stock,
provided, however, that if the independent members of the Company's Board of
Directors determine in good faith that the cost of complying with the request
for registration would have a material adverse effect upon the Company, its
operations or the market for the Company's common stock, the Company may decline
Holder's request to register Holder's Registrable Securities under the Act,
provided further, however, that in such event the Company may not thereafter
again decline Holder's request for registration based upon this Section so long
as such subsequent request is received by the Company more than 120 days after
Holder's request for registration which was declined based upon this Section;
2.3 Two Demand Registrations. Holders collectively shall be
entitled to two (2) demand registrations, provided that registration may be
effected on Form S-3 or its then equivalent form promulgated by the SEC and,
provided further, that any request for registration pursuant to this Section 2
which does not result in the declaration of effectiveness of a registration
statement (which effectiveness is maintained continuously for at least 180 days
or such shorter period ending when all shares to which Holder has requested
registration in accordance herewith have been sold in accordance with such
registration) covering the offer and sale of shares owned by Holder and
requested to be included in such registration statement, whether as a result of
the withdrawal of the registration statement by the Company or through other
action or inaction of the Company, or (in cases where the Demand Registration is
subject to an underwriting agreement) where the number of Registrable Securities
sold by the Holders in such Demand Registration is less than fifty percent (50%)
of the number of Registrable Securities requested to be included in such Demand
Registration by the Holders, or for any other reason except for the voluntary
decision of Holder to terminate the registration after the request for such
registration has been delivered to the Company, shall not be counted in
determining the number of times registration rights have been exercised pursuant
to this Section 2;
2.4 Material Interference with Company Transaction. The
Company shall be entitled to postpone the filing of any registration statement
otherwise required to be prepared and filed by it pursuant to this Section 2, if
at the time it receives a request for such registration, the independent members
of the Company's Board of Directors determine, in good faith, that such
registration and offering would materially interfere with any existing or then
presently contemplated financing, acquisition, corporate reorganization or other
material transaction involving the Company, and the Company promptly gives
Holder written notice of such determination, provided, however, that such
postponement shall not extend beyond the time that such material interference
continues to exist; notwithstanding the foregoing, the Company may not exercise
such right to postpone more than twice in any twelve (12) month period nor for
more than ninety (90) days at a time.
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2.5 Restrictions Following Registrations. Holder shall have no
right to demand registration with respect to any shares within ninety (90)
calendar days after the effective date of any registration statement previously
filed by the Company, other than a registration statement on Form S-8 or similar
form.
2.6 Priority on Demand Registrations. Where such Demand
Registration is subject to an underwriting agreement, and the managing
underwriter gives the Company and the Holders of the Registrable Securities
being registered a written opinion that the number of Registrable Securities
requested to be included in the Demand Registration exceeds the number of
securities that can be sold, the Company will include in the registration only
the number of Registrable Securities that the underwriters believe can be sold.
The number of securities registered shall be allocated pro rata to the Holders
requesting the Demand Registration on the basis of the total number of
securities requested to be included in the registration.
3. Registration Procedures. If and whenever this Agreement contemplates
that the Company will effect the registration under the Act of any shares held
by Holder, the Company shall:
3.1 Filing Registration Statements; Holder Approval of
Amendments. Prepare and file with the Securities and Exchange Commission (the
"SEC") a registration statement on the appropriate form with respect to such
shares and use its best efforts to cause such registration statement to become
and remain effective as provided herein, provided that at least ten (10) days
before filing a registration statement or prospectus, the Company will furnish
to the counsel of the Holders of the Registrable Securities being registered
copies of all documents proposed to be filed for that counsels review and
approval, which approval shall not be unreasonably withheld or delayed. Provided
further, that before filing any amendments or supplements to a registration
statement or prospectus, including documents incorporated by reference after the
initial filing of the registration statement, the Company will furnish to Holder
and the underwriters, if any, copies of all such documents proposed to be filed
at least five business days prior thereto, which documents will be subject to
the reasonable review of Holder, its counsel and underwriters, and the Company
will not file an amendment to a registration statement or prospectus or any
supplement thereto (including such documents incorporated by reference) to which
Holder, its counsel or the underwriters, if any, shall reasonably object;
3.2 Period of Effectiveness. Prepare and file with the SEC
such amendments and supplements to such registration statement and the
prospectus used in connection therewith and to take such other action as may be
necessary to keep such registration statement effective until the earlier of (i)
the completion of the distribution of shares so registered, or (ii) expiration
of the 180 day period following immediately the effective date of such
registration statement (at which time unsold shares may be deregistered), and
otherwise comply with applicable provisions of the Act and the rules and
regulations promulgated under the Act in accordance with the Holders' methods of
disposition as set forth in the registration statement;
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3.3 Prospectus Copies. Furnish to Holder and its counsel, and
to each underwriter of the shares to be sold by Holder, without charge, such
number of copies of the registration statement, each amendment and supplement
thereto (in each case including all exhibits), one or more preliminary
prospectuses, any supplements thereto and a final prospectus and any supplements
thereto in conformity with the requirements of the Act, and such other documents
as Holder or such underwriter may reasonably request, in order to facilitate the
public sale or other disposition of such shares;
3.4 Amendments or Supplements. If, during any period in which,
in the opinion of the Company's counsel, a prospectus relating to the shares is
required to be delivered under the Act in connection with any offer or sale
contemplated by any registration statement, any event known to the Company
occurs as a result of which the prospectus would include an untrue statement of
material fact or omit to state any material fact necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend or supplement
the related prospectus to comply with the Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or the respective rules and regulations
thereunder, to notify Holder promptly and to prepare and file with the SEC an
amendment or supplement, whether by filing such documents pursuant to the Act or
the Exchange Act as may be necessary to correct such untrue statement or
omission or to make any registration statement or the related prospectus comply
with such requirements and to furnish to Holder and its counsel such amendment
or supplement to such registration statement or prospectus;
3.5 Timely Filings. Timely to file with the SEC (i) any
amendment or supplement to any registration statement or to any related
prospectus that is required by the Act or the Exchange Act or requested by the
SEC, and (ii) all documents (and any amendments to previously filed documents)
required to be filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act;
3.6 Holder's Copies. Within five days of filing with the SEC
of (i) any amendment or supplement to any registration statement, (ii) any
amendment or supplement to the related prospectus, or (iii) any document
incorporated by reference in any of the foregoing or any amendment of or
supplement to any such incorporated document, to furnish a copy thereof to
Holder;
3.7 Notifications to Holder. To advise Holder and its counsel
promptly (i) when any post-effective amendment to any registration statement
becomes effective and when any further amendment of or supplement to the
prospectus shall be filed with the SEC, (ii) of any request or proposed request
by the SEC for an amendment or supplement to any registration statement, to the
related prospectus, to any document incorporated by reference in any of the
foregoing or for any additional information, (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of any registration statement or any
order directed to the related prospectus or any document incorporated therein by
reference or the initiation or threat of any stop order proceeding or of any
challenge to the accuracy or adequacy of any document
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incorporated by reference in such prospectus, (iv) of receipt by the Company of
any notification with respect to the suspension of the qualification of the
shares for sale in any jurisdiction or the initiation or threat of any
proceeding for such purpose, and (v) of the happening of any event which makes
untrue any statement of a material fact made in any registration statement or
the related prospectus as amended or supplemented or which requires the making
of a change in such registration statement or such prospectus as amended or
supplemented in order to make any material statement therein not misleading;
3.8 Blue Sky Laws. On or before the date a registration
statement is declared effective, use its best efforts to register or qualify the
shares covered by such registration statement under the securities or blue sky
laws of such jurisdictions as Holder shall reasonably request, considering the
nature and size of the offering, and do such other acts and things as may be
reasonably necessary to enable Holder to consummate the public sale or other
disposition in each such jurisdiction of such shares; provided, however, that
the Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it has not been qualified,
or to file any general consent to service of process;
3.9 Exchange Listing. To cause all shares sold pursuant
to any registration statement, if not already listed, to be listed on each
national securities exchange, if any, on which such shares are then listed;
3.10 Facilitate Disposition. Enter into customary agreements
(including, if applicable, an underwriting agreement in customary form) and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities;
3.11 Inspection of Company Records. Make reasonably available
for inspection by Holder, any underwriter participating in any disposition
pursuant to the registration statement, and any attorney, accountant or other
agent retained by Holder or underwriter (collectively, the "Inspectors"), all
pertinent financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records") as shall be reasonably
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such Inspector in connection with such registration
statement. Records and other information which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i) the disclosure of such
Records, in the opinion of counsel reasonably acceptable to the Company, is
necessary to avoid or correct a misstatement or omission in the registration
statement, or (ii) the release of such records is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction. Holder agrees that it
will, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent disclosure of the
Records deemed confidential;
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3.12 Cold Comfort Letters. To obtain a "cold comfort" letter
from the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by "cold comfort" letters as
Holder, or the managing underwriter, reasonably requests (and, if the Company is
able after using commercially reasonable efforts, the letter shall be addressed
to the Holders of the Registrable Securities, the Company and the underwriters);
3.13 Company Opinions. To obtain an opinion or opinions from
counsel for the Company in customary form, and reasonably satisfactory to
counsel representing the Holders of Registrable Securities being registered, and
the underwriters of the offering, addressed to the underwriters and the Holders
of the Registrable Securities being registered;
3.14 Suspension Orders. Make every reasonable effort to
obtain the withdrawal of any order suspending the effectiveness of the
registration statement at the earliest possible moment; and
3.15 Stock Certificates. Cooperate with Holder and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive legends)
representing securities to be sold under the registration statement, and enable
such securities to be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or Holder may request.
3.16 Transfer Agent: To provide an institutional transfer
agent and registrar and a CUSIP number for all Registrable Securities on or
before the effective date of the registration statement.
3.17 Compliance: To use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement complying with
the provisions of Section 11(a) of the Securities Act and covering the period of
at least twelve (12) months, but not more than eighteen (18) months, beginning
with the first month after the effective date of the Registration Statement.
3.18 NASD Filings: To cooperate with each seller of
Registrable Securities and each underwriter participating in the disposition of
such Registrable Securities and their respective counsel in connection with any
filings required to be made with the National Association of Securities Dealers,
Inc. ("NASD").
3.19 Co-operation: To take all other steps reasonably
necessary to effect registration of the Registrable Securities contemplated
hereby.
4. Agreements of Holder. Holder (i) upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Subsection 3.4
shall forthwith discontinue Holder's disposition of securities included in the
registration statement until Holder receives
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copies of the supplemented or amended prospectus, and (ii) if so directed by the
Company, shall deliver to the Company, at the Company's expense, all copies
(other than permanent file copies) then in Holder's possession of the prospectus
covering such securities that was in effect at the time of receipt of such
notice. If the Company gives such notice, the time period mentioned in
subsection 3.2 shall be extended by the number of days elapsing between the date
of notice and the date that each Holder receives the copies of the supplemented
or amended prospectus contemplated in subsection 3.4.
5. Withdrawal. If Holder disapproves of the terms of any offering, the
sole remedy of Holder shall be to withdraw Holder's securities therefrom by
giving written notice to the Company and any managing underwriter. Holder's
securities of the Company so withdrawn from the offering also shall be withdrawn
from registration.
6. Participation in Underwritten Registrations. In the case of any
registration under Section 2, if Holder or the Company determines to enter into
an underwriting agreement in connection therewith, or in the case of a
registration under Section 1, if the Company determines to enter into an
underwriting agreement in connection therewith, (i) all shares of Holder's
securities to be included in such registration shall be subject to an
underwriting agreement, which shall be in customary form and contain such terms
as are customarily contained in such agreements, and (ii) no person may
participate in any such registration unless such person (A) agrees to sell such
person's securities on the basis provided in such underwriting arrangement, and
(B) completes and executes all questionnaires, powers-of-attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
7. Registration Expenses. With respect to each registration effected
pursuant to Sections 1 or 2 of this Agreement, the Company shall pay the
following fees, disbursements and expenses: all registration and filing fees,
printing expenses and general disbursements, auditors' fees including reasonable
fees and disbursements of all independent certified public accountants
(including any audit or "comment" letters required by or incident to perform any
of the obligations contemplated by this Agreement), listing fees, registrar and
transfer agent's fees, fees and disbursements of counsel to the Company,
reasonable fees and disbursements of not more than one counsel to Holder in the
case of each registration under Section 2 of this Agreement, expenses (including
reasonable fees and disbursements of counsel) of complying with applicable
securities or "Blue Sky" laws, and the fees of any securities exchange in
connection with the review of such offering. The underwriting discounts and
commissions allocable to the shares included in any offering shall be borne by
each Holder, in proportion to the number of securities each registers.
8. Indemnification.
8.1 In each case of a registration of shares under the
Securities Act pursuant to this Agreement, the Company will indemnify and hold
harmless each Holder, its officers, directors, trustees, partners, employees,
advisors, and agents, and each other person, if any, who
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controls Holder within the meaning of the Act or the Exchange Act, from and
against any and all losses, claims, damages and liabilities (including the fees
and expenses of counsel in connection therewith), arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which such shares were registered under the Act,
any prospectus or preliminary prospectus contained therein, or any amendment or
supplement thereto (including, in each case, documents incorporated by reference
therein), or arising out of any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
made therein not misleading, except insofar as such losses, claims, damages or
liabilities arise out of any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to Holder, and furnished
to the Company in writing by Holder expressly for use in the registration
statement; provided that the foregoing indemnification with respect to a
preliminary prospectus shall not inure to the benefit of any underwriter (or the
benefit of any person controlling such underwriter) from whom the person
asserting any such losses, claims, damages or liabilities purchased shares to
the extent such losses, claims, damages or liabilities result from the fact that
a copy of the final prospectus had not been sent or given to such person at or
prior to written confirmation of the sale of such shares to such person. In
connection with a firm or best efforts underwritten offering, to the extent
customarily required by the managing underwriter, the Company will indemnify the
underwriters, their officers and directors and each person who controls the
underwriters (within the meaning of the Securities Act and the Exchange Act), to
the extent customary in such agreements.
8.2 In each case of a registration of shares under the Act
pursuant to this Agreement, Holder will indemnify and hold harmless the Company,
its directors, its officers who sign the registration statement, its attorneys,
and each person, if any, who controls the Company within the meaning of the Act
or the Exchange Act, to the same extent as the foregoing indemnity from the
Company to Holder, but only with reference to information provided to the
Company in writing by Holder and furnished to the Company by Holder expressly
for use in the registration statement, any publicly available report of Holder
published within the time frame of the registration statement, any prospectus or
preliminary prospectus contained therein, or any amendment or supplement thereto
and only in an amount not exceeding the net proceeds received by the Holder with
respect to securities sold by it pursuant to such registration statement. In
connection with a firm or best efforts underwritten offering, to the extent
customarily required by the managing underwriter, each participating Holder of
Registrable Securities will indemnify the underwriters, their officers and
directors and each person who controls the underwriters (within the meaning of
the Securities Act and the Exchange Act), to the extent customary in such
agreements but in no event shall such indemnity, plus the indemnity referred to
in the preceding sentence, exceed the net proceeds from the offering received by
such Holder.
8.3 In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"Indemnified Party") shall promptly notify the person against whom such
indemnity may be sought (the "Indemnifying Party") in writing and the
Indemnifying Party, upon request of the Indemnified Party, shall retain counsel
reasonably satisfactory to the
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Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemni fied Party unless (i) the Indemnifying Party has agreed to the
retention of such counsel at its expense, or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnifying Party
and the Indemnified Party, the Indemnifying Party proposes that the same counsel
represent both the Indemnified Party and the Indemnifying Party and
representation of both parties by the counsel would be inappropriate due to
actual or potential differing interests between them. It is understood, where
the expense of separate counsel shall be borne by the Indemnifying Party
pursuant to the foregoing sentence, that the Indemnifying Party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm qualified in
such jurisdiction to act as counsel for such Indemnified Party. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Party agrees to indemnify the
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party will consent to entry of any
judgment or will enter into any settlement that does not include as an
unconditional term thereof the claimant's or plaintiff's release of the
indemnified party from all liability concerning the claim or litigation.
8.4 Contribution. If the indemnification provided for in
Subsections 8.1 and 8.2 are unavailable to an indemnified party in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each indemnifying party thereunder shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the Company and the participating Holders of Registrable
Securities in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company and the
participating Holders of Registrable Securities shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the participating Holders
of Registrable Securities and the parties' relative intent and knowledge.
The parties hereto agree that it would not be just and equitable if
contribution pursuant this Subsection 8.4 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding anything herein to the contrary, no participating Holder of
Registrable Securities shall be required to contribute any amount in excess of
the net proceeds of the offering (before deducting expenses, if any) received by
such participating Holder net of the amount of any damages that such
participating Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act)
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shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
9. Holdback Agreement.
9.1 Restrictions on Public Sale by Holders. Holder agrees not
to effect any public sale or distribution of the Company's shares of capital
stock during the seven (7) calendar days prior to and the ninety (90) calendar
day period beginning on the effective date of any underwritten registration
statement effected pursuant to this Agreement (except as part of such
underwritten registration) unless the managing underwriter or underwriters with
respect to such offering otherwise agree; provided, however, that all officers
and directors of the Company, all holders of at least 1% of the Company's equity
securities purchased from the Company (other than securities purchased from the
Company at any time on or after the date of this Agreement in a registered
public offering), and all other persons with registration rights (whether or not
pursuant to this Agreement) are bound by and have entered into a similar
agreement and the restrictions on transfer have not been waived with respect to
any shares owned by any such persons.
9.2 Restrictions on Sale by the Company and Others. The
Company agrees not to effect any public sale or distribution of its equity
securities, including a sale under Regulation D under the Securities Act or
other exemption of or under the Securities Act, or any securities convertible
into or exchangeable or exercisable for its equity securities, (except as part
of the underwritten registration or pursuant to registrations on Forms S-8 or
S-4 or any successor form), during the seven (7) days prior to and the ninety
(90) calendar day period beginning on the effective date of any underwritten
registration statement effected pursuant to this Agreement (except as part of
such underwritten registration) unless the managing underwriter or underwriters
with respect to such offering otherwise agree, and the parties hereto agree that
the Company will not be required to effect any such registration or sale
notwithstanding the other provisions of this Agreement. The Company also agrees
to use reasonable efforts to cause each holder of at least 1% (on a
fully-diluted basis) of its equity securities (other than Registrable
Securities) or any securities convertible into or exchangeable or exercisable
for its equity securities (other than Registrable Securities), purchased from
the Company at any time on or after the date of this Agreement (other than in a
registered public offering), to agree not to make any public sale or
distribution of those securities, including a sale pursuant to Rule 144 (except
as part of the underwritten registration, if permitted), during the seven (7)
days prior to and the 90 days after the effective date of the registration
unless the managing underwriter or underwriters otherwise agree.
10. Selection of Underwriters. The Company will have the right to
select the investment banking firm(s) acting as managing underwriter in
connection with any underwritten public offering; provided, that in the event
the offering is pursuant to a demand registration hereunder, Holder shall have
the sole right to select such managing underwriter.
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11. Survival. The indemnification provisions of Section 8 shall not
terminate and shall survive forever.
12. Rule 144. The Company covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder, and it will take such
further action as any Holder of Registrable Securities reasonably may request,
all to the extent required from time to time, to enable such Holder to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the
request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with Rule 144's or
any successor rule's requirements. The Company also covenants that in such event
it will provide all such information and it will take such further action as any
Holder of Registrable Securities reasonably may request to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of Rule 144 under the Securities Act or any successor rule
requirements.
13. General.
13.1 Assignment. Holder's rights under this Agreement shall
not be transferable without the written consent of the Company. Any attempted
assignment or other transfer of this Agreement in contravention of this Section
13.1 shall be null and void. All of the terms and provisions of this Agreement
shall be binding on and inure to the benefit of the parties and their respective
successors and assigns, including without limitation all subsequent holders of
securities entitled to the benefits of this Agreement who agree in writing to
become bound by the terms of this Agreement. Without limiting the generality of
the foregoing, this Agreement and the rights and obligations of a Holder of
Registrable Securities hereunder may be assigned, in whole or in part, upon
notice to the Company, to a person who owns, or simultaneously with the
assignment of the rights under this Agreement to such person, will own, at least
500,000 shares of capital stock of the Company. Notwithstanding the foregoing,
this Agreement and the rights and obligations of each Holder hereunder may be
assigned, in whole or in part, upon notice to the Company, to (i) any partner or
stockholder of such Holder or (ii) any venture capital fund, investment entity
or investment account for which Pequot Capital Management, Inc. or its
successors or assigns is the investment manager or investment advisor, and such
assignee shall become subject to all of the rights and obligations of such
Holder hereunder.
13.2 Recapitalizations, Exchanges, etc. The provisions of this
Agreement shall apply to the full extent set forth herein with respect to (i)
the shares of Common Stock held by the Holders, (ii) any and all shares of
voting common stock of the Company into which the shares of such Common Stock
are converted, exchanged or substituted in any recapitalization or other capital
reorganization by the Company and (iii) any and all equity securities of the
Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in conversion of, in exchange for or in substitution of, such shares of Common
Stock and shall be appropriately adjusted for any stock
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dividends, splits, reverse splits, combinations, recapitalizations and the like
occurring after the date hereof. The Company shall use its best efforts to cause
any successor or assign (whether by sale, merger or otherwise) to enter into a
new registration rights agreement with the Holders of Registrable Securities on
terms substantially the same as this Agreement as a condition of any such
transaction.
13.3 Attorneys' Fees. In any legal action or proceeding
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover all reasonable expenses, charges, court costs and
attorneys' fees in addition to any other available remedy at law or in equity.
13.4 Cooperation. The parties agree that after execution of
this Agreement they will from time to time, upon the request of any other party
and without further consideration, execute, acknowledge and deliver in proper
form any further instruments and take such other action as any other party may
reasonably require to carry out effectively the intent of this Agreement.
13.5 No Inconsistent Agreements. Except as disclosed in
Exhibit A to this Agreement, the Company represents and warrants that it has not
granted to any person the right to request or require the Company to register
any securities issued by the Company other than the rights contained herein.
Except with the prior written consent of the Holders of Registrable Securities,
the Company will not enter into any agreement with respect to its securities
that shall grant to any person registration rights that in any way conflict with
or are prior in right to the rights provided under this Agreement.
13.6 Validity of Provisions. Should any part of this Agreement
for any reason be declared by any court of competent jurisdiction to be invalid,
that decision shall not affect the validity of the remaining portion, which
shall continue in full force and effect as if this Agreement had been executed
with the invalid portion eliminated, it being the intent of the parties that
they would have executed the remaining portion of the Agreement without
including any part or portion that may for any reason be declared invalid.
13.7 Counterparts. This Agreement may be executed in one or
more counterparts, each of which when so signed shall be deemed to be an
original, and such counterparts together shall constitute one and the same
instrument. Facsimile execution and delivery of this Agreement shall be legal,
valid and binding execution and delivery for all purposes.
13.8 Entire Agreement. This Agreement sets forth the entire
agreement between the parties as to the subject matter hereof, supersedes any
and all prior or contemporaneous agreements or understandings of the parties
relating to the subject matter of this Agreement, and may not be amended except
by an instrument in writing signed by all of the parties to this Agreement.
13
<PAGE>
13.9 Governing Law. The laws of the State of New York (without
giving effect to the choice of law provisions thereof) shall govern the
interpretation and enforcement of this Agreement.
13.10 Headings. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
13.11 Notices. All notices or other communications provided
for under this Agreement shall be in writing, and mailed, telecopied or
delivered by hand delivery or by overnight courier service, to the parties at
their respective addresses as indicated below or at such other address as the
parties may designate in writing:
If to Holder:
[Name of Purchaser]
c /o Pequot Capital Management, Inc.
Attn. David J. Malat, Chief Financial Officer
500 Nyala Farm Road
Westport, CT 06880
Phone: 203-429-2200
Fax: 203-429-2400
With a copy to:
Dewey Ballantine LLP
Attn: Ann Gill, Esq. or Richard Romney, Esq.
1301 Avenue of the Americas
New York, New York 10019-6092
If to the Company:
BriteSmile, Inc.
Attn: Paul A. Boyer, CFO
490 North Wiget Lane
Walnut Creek, California 94598
With a copy to:
Durham Jones & Pinegar
50 South Main, Suite 800
Salt Lake City, Utah 84144
Attn: Jeffrey M. Jones, Esq.
Wayne D. Swan, Esq.
14
<PAGE>
All notices and communications shall be effective as follows:
Upon receipt if mailed by first class mail, return receipt requested, postage
prepaid, or by courier; when telecopied, upon confirmed transmission of the
telecopied notice; when hand delivered, upon delivery.
13.12 Remedies. Any person having rights under any provision
of this Agreement will be entitled to enforce such rights specifically, to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
PEQUOT PRIVATE EQUITY FUND II, L.P., a "Purchaser"
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT MANAGER
By: /s/ David J. Malat
-----------------------------------------------------------
David J. Malat, CFO
Date: January 18, 2000
PEQUOT PARTNERS FUND, L.P., a "Purchaser"
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT MANAGER
By: /s/ David J. Malat
-----------------------------------------------------------
David J. Malat, CFO
Date: January 18, 2000
PEQUOT INTERNATIONAL FUND, INC., a "Purchaser"
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT ADVISOR
By: /s/ David J.Malat
-----------------------------------------------------------
David J. Malat, CFO
Date: January 18, 2000
15
<PAGE>
BRITESMILE, INC., the "Company"
By: /s/ Paul A. Boyer
----------------------------------------------------------
Paul A. Boyer, CFO
Date: January 18, 2000
16
<PAGE>
BRITESMILE, INC.
VOTING AND RIGHT OF CO-SALE AGREEMENT
This Voting and Right of Co-Sale Agreement (this "Agreement") is made
as of the 18th day of January, 2000, by and among BriteSmile, Inc., a Utah
corporation ("the Company"), LCO Investments Limited, a Guernsey, Channel
Islands corporation (together with any of its affiliates who currently own
shares of Common Stock of the Company, "LCO") and Pequot Private Equity Fund II,
L.P. ("PPEII"), Pequot Partners Fund, L.P. ("PPF"), and Pequot International
Fund, Inc. ("PIF")(PPEII, PPF, and PIF are referred to collectively herein as
the "Purchasers").
WITNESSETH
WHEREAS, the Purchasers have entered into a Stock Purchase Agreement
(the "Stock Purchase Agreement") with the Company dated January 12, 2000,
pursuant to which each Purchaser is making a significant equity contribution to
the Company.
WHEREAS, the Stock Purchase Agreement grants the right to the
Purchasers to collectively nominate one person for election to the Board of
Directors of the Company, and the Purchasers seek reasonable assurance that such
nominee will be appointed and elected to the Board of Directors after nomination
by the Purchasers.
WHEREAS, LCO owns and has voting power over a substantial number of
shares of voting Common Stock, par value $.001 per share, of the Company (the
"Stock").
WHEREAS, the Purchasers wish to enter into this Agreement in connection
with the Stock Purchase Agreement for the purpose of setting forth the terms and
conditions pursuant to which the Company shall propose a certain designee for
election to the Company's Board of Directors at each annual general meeting, and
LCO shall vote its shares of the Company's Stock in favor of such designee.
WHEREAS, the Purchasers and LCO also wish to agree to certain co-sale
rights with respect to transfers of their shares of Stock of the Company, as
provided in Section 10 below.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and undertakings of the parties, and intending to be legally bound
hereby, the parties hereby agree as follows:
1. Election of Directors and Board Representation. As provided in the
Stock Purchase Agreement, following the closing referred to therein and upon
delivery of written request by the Purchasers to the Company, the Board of
Directors of the Company will appoint a nominee designated by the Purchasers to
fill a vacancy on the Board of Directors. At each annual meeting of the
stockholders of the Company, or at any meeting of the stockholders of the
Company at which members of the Board of Directors of the Company are to be
elected, or whenever members of the Board of Directors are to be elected by
written
1
<PAGE>
consent of the stockholders (i) upon request of the Purchasers, the Company
agrees to nominate for election to the Board of Directors and (ii) LCO agrees to
vote and act with respect to all of its shares of voting securities of the
Company owned beneficially as of the record date in respect of any such meeting
(the "LCO Shares") so as to elect one (1) member as shall be designated, from
time to time, by the Purchasers and their Permitted Transferees (as defined in
this Section 1) pursuant to the Stock Purchase Agreement, and to remove such
member upon the written request of the Purchasers. The rights to designate a
director in this Section 1 and Section 3 shall continue so long as the
Purchasers and their Permitted Transferees collectively are the beneficial
owners of at least Fifty Percent (50%) of the original shares of Stock purchased
under the Stock Purchase Agreement (the "Shares"). For clarification, LCO shall
not be required by this Section 1 or Section 3 to vote the LCO Shares in a
manner that results in two or more designees of the Purchasers serving as
members of the Company's Board at the same time. For purposes of this Agreement,
"Permitted Transferees" shall mean any Affiliate (as defined in Section 10(f)
below) of a Purchaser who receives Shares by way of purchase, transfer or
assignment from a Purchaser.
2. Certain Resignations or Removals. Any party or parties having the
right to nominate a director pursuant to Section 1, shall also have the right to
request the resignation or removal of the director so nominated and elected.
Likewise, in the event that any director does not continue to be entitled to be
nominated to be a director pursuant to Section 1 (for example, because the
Purchasers no longer wish to nominate such person), the party or parties
entitled to nominate a director pursuant to Section 1, shall have the right to
request the resignation or removal of the director no longer entitled to be
nominated. In either case, if such director shall fail to resign, to the extent
a meeting of stockholders is called for the purpose of removing such director,
or the stockholders act by written consent, LCO shall vote all of the LCO Shares
entitled to vote at such meeting or pursuant to such consents, as the case may
be, in favor of removal.
3. Filling Vacancies. In the event of the death, disability, legal
incapacity, resignation or removal of any director, to the extent a special
meeting is called for the purpose of electing a replacement director, or the
stockholders act by written consent, to fill the vacancy created by such death,
disability, legal incapacity, resignation or removal, LCO shall, provided that
such director was designated in accordance with Section 1, vote all of the LCO
Shares entitled to vote in favor of the election of the replacement director
designated in accordance with Section 1.
4. Covenant to Vote. LCO shall appear in person or by proxy at any
annual or special meeting of stockholders for the purpose of obtaining a quorum
and shall vote the LCO Shares, either in person or by proxy, at any annual or
special meeting of stockholders of the Company called for the purpose of voting
on the election of directors or by consensual action of stockholders with
respect to the election of directors, in favor of the election of the director
nominated in accordance with Sections 1 and 3 hereof. In addition, LCO shall
appear in person or proxy at any annual or special meeting of stockholders for
the purpose of obtaining a quorum and shall vote the LCO Shares entitled to vote
upon any other matter submitted to a vote of the stockholders of the Company in
a manner so as to be consistent
2
<PAGE>
and not in conflict with, and to implement, the terms of this Agreement;
provided, however, that nothing herein shall obligate LCO to vote the LCO Shares
in favor of any proposal, resolution or other proposed shareholder action
endorsed by the director designated by the Purchasers.
5. No Conflicting Agreements. LCO shall not enter into any agreements
or arrangements of any kind with any person with respect to the LCO Shares which
would prohibit it from voting the LCO Shares it may own from time to time as
provided herein (whether or not such agreements and arrangements are with other
stockholders of the Company that are not parties to this Agreement).
6. Ownership. LCO is the beneficial owner of approximately 12,429,438
LCO Shares with the right to vote each of the LCO Shares. LCO represents and
warrants to the Purchasers that (a) it owns the LCO Shares and has not, prior to
or on the date of this Agreement, executed or delivered any proxy or entered
into any other agreement which would prevent it from voting the LCO Shares as
provided herein, and (b) it has full power and capacity to execute and deliver
and perform this Agreement on its own behalf, which has been duly executed and
delivered by, and evidences the valid and binding obligation of LCO enforceable
in accordance with its terms.
7. Termination. This Agreement shall terminate (i) on the termination
of the Purchasers' right to designate a nominee to the Board of Directors of the
Company; (ii) by mutual agreement in writing signed by each of the parties
hereto; or (iii) on written notice of termination by the Purchasers to the
Company and LCO.
8. Certain Transferees Subject to Agreement. In the event of any
transfer of LCO Shares to an affiliate of LCO, the transferee shall hold such
LCO Shares so acquired with all the rights conferred by, and subject to all of
the restrictions imposed by, this Agreement applicable to the transferor of such
LCO Shares. Any transferee of any LCO Shares who is an affiliate of LCO shall,
as a condition of the consummation of such transfer, agree to be subject to the
terms of this Agreement. Except as provided otherwise in Sections 8 and 10 of
this Agreement, nothing in this Agreement shall prevent LCO at any time from
selling, transferring or assigning LCO Shares to any person.
9. Notice of Purchasers' Nominee. Purchasers and their Permitted
Transferees, acting collectively and not individually, shall have the rights to
elect a director in accordance with Sections 1 and 3 hereof. Any notice to the
Company of the Purchasers' and their Permitted Transferees' nominee shall be
submitted for and on behalf of all of them. Should the Company receive (i) a
nominee notice from one or more but not all Purchasers and their Permitted
Transferees; (ii) more than one nominee notices specifying more than one
nominee; or (iii) any objection from one or more Purchasers and their Permitted
Transferees to any nominee submitted to the Company on behalf of all Purchasers
and their Permitted Transferees, then the Company shall promptly notify all
Purchasers and their Permitted Transferees of the nature of the
nominations/objections received and the Company shall not be obligated to take
further action regarding the Purchasers' and their Permitted Transferees'
3
<PAGE>
rights to elect a director until the Company shall receive a notice signed by
all Purchasers and their Permitted Transferees specifying their nominee.
10. Right of Co-Sale.
a. If any Significant Shareholder, as defined in Section 10(h)
herein (the "Transferring Shareholder"), proposes to transfer, sell or assign in
a Covered Transaction, as defined in Section 10(e) herein, (collectively, a
"Transfer") shares of Stock of the Company (the "Offered Stock") to any person
or persons (other than to an Affiliate, as defined in Section 10(f) herein),
such Transferring Shareholder shall notify each of the other Significant
Shareholders in writing (the "Transfer Notice") of such proposed Transfer and
its terms and conditions at least 20 days prior to such transfer. Upon receipt
of a Transfer Notice, such other Significant Shareholders may elect to
participate in the proposed Transfer by delivering written notice to the
Transferring Shareholder within 15 days of the date of receipt of such Transfer
Notice stating the number of shares of Stock that such Significant Shareholder
desires to sell.
b. Each such Significant Shareholder who has elected to
participate in the proposed transfer shall have the right (the "Right of
Co-Sale") to sell to the proposed transferee(s), as a condition to such Transfer
by the Transferring Shareholder, at the same price per share of Stock and on the
same terms and conditions as are specified in the Transfer Notice, up to a
number of shares of Stock of the Company equal to (its "Pro Rata Share") the
product of (x) the number of shares of Offered Stock times (y) the quotient
obtained by dividing (i) the number of shares of Stock (on a fully-diluted
basis) owned by such Significant Shareholder, by (ii) the number of shares of
Stock (on a fully-diluted basis) of the Company owned by all Significant
Shareholders, including the Transferring Shareholder, who have elected to
participate in the proposed Transfer, immediately prior to the Transfer of the
Offered Stock to the proposed transferee(s). The Transferring Shareholder will
be entitled to sell in the proposed Transfer the balance of the Offered Stock
proposed to be so sold. If such other Significant Shareholders elect to
participate in such Transfer, the Transferring Shareholder shall use his, her or
its best efforts to obtain the agreement of the prospective transferee(s) to the
participation of such Significant Shareholders in any proposed Transfer and
shall not Transfer any shares of the capital stock of the Company to such
prospective transferee(s) unless such prospective transferee(s) allow(s) the
participation of such Significant Shareholders on the terms specified in the
Transfer Notice. Any Significant Shareholder electing to participate in such
proposed Transfer shall execute and deliver a definitive purchase agreement with
the proposed transferee in substantially the form executed by the Transferring
Shareholder. Subject to the foregoing, the Transferring Shareholder may, within
45 days after the expiration of the 15-day period referred to above (provided
that such time period may be extended by the number of days required to obtain
any necessary regulatory approvals for the Transfer, but not to exceed 135 days
in total), transfer the Offered Stock (reduced by the number of shares of Stock
with respect to which the other Significant Shareholders have elected to
participate, if any) to the transferee(s) identified in the Transfer Notice at a
price and on the terms no more favorable to the Transferring Shareholder than
specified in the Transfer Notice. However, if such Transfer
4
<PAGE>
is not consummated within such 45-day, or extended period, the Transferring
Shareholder shall not Transfer any shares of the Offered Stock as have not been
purchased within such period without again complying with all of the provisions
of this Section 10. Notwithstanding the foregoing and irrespective of whether a
Transfer Notice has been delivered to other Significant Shareholders, a
Transferring Shareholder shall have no obligation to consummate a proposed
Transfer, it being understood that any such decision shall be made by the
Transferring Shareholder in its sole discretion, subject to the other
Significant Shareholders' right to participate in any Transfer the Transferring
Shareholder elects to consummate, to the extent provided herein.
c. Any attempt by a Transferring Shareholder to transfer
shares of Stock in violation of this Section 10 shall be void and the Company
agrees that it will (a) not effect such a Transfer nor will it treat any alleged
transferee as the holder of such shares of Stock, or (b) treat as owner of such
Stock, or accord the right to vote or pay dividends to any such transferee to
whom Stock may have been so transferred, without the unanimous consent of the
other Significant Shareholders.
d. If a Transferring Shareholder transfers any Stock in
contravention of this Section 10 (a "Prohibited Transfer"), or if the Company
has effected such Transfer and is treating the transferee as a Shareholder, the
relevant Significant Shareholder may, if it delivers a Put Notice as provided
below, require such Transferring Shareholder to purchase from such Significant
Shareholder, for cash or such other consideration as the Transferring
Shareholder received in the Prohibited Transfer, that number of shares of Stock
having a purchase price equal to the aggregate purchase price such Significant
Shareholder would have received in the closing of such Prohibited Transfer if
such Significant Shareholder had exercised and been able to consummate such
Significant Shareholder's Right of Co-Sale with respect thereto (the Significant
Shareholder's "Put Right"). A Significant Shareholder may exercise such
Significant Shareholder's Put Right by delivery of written notice to the
Transferring Shareholder and the Company (a "Put Notice") within the earlier of
(i) ten days after such Significant Shareholder becomes aware of the Prohibited
Transfer or (ii) 24 months after the Prohibited Transfer. The closing of such
sale to the Transferring Shareholder under such Significant Shareholder's Put
Right will occur within seven days after the date of such Significant
Shareholder's Put Notice.
e. "Covered Transaction" means a sale or series of sales
constituting an integrated transaction by a Significant Shareholder of 10% or
more of the number of shares of Stock of the Company on a fully-diluted basis
owned by such Significant Shareholder on the date hereof; provided, however,
that a Covered Transaction shall not include (i) any sale effected pursuant to
an effective registration statement under the Securities Act of 1933, as amended
(the "Act") or pursuant to Rule 144 under the Act, (ii) any transfer by merger
or consolidation in a transaction approved by the Company's shareholders at a
duly convened shareholders meeting of which all Significant Shareholders were
given proper notice, or (iii) any transfer by way of foreclosure or assignment
in lieu of foreclosure in connection with any bona fide security interest,
provided neither such foreclosure, assignment in lieu thereof or the applicable
underlying obligation was incurred or consummated as a device to
5
<PAGE>
avoid the application of this Agreement.
f. An "Affiliate" shall mean, with respect to any person, any
person that, directly or indirectly, controls, is controlled by or is under
common control with such person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities or by contract or otherwise. Without limiting the
foregoing, the ownership by any person of 50% or more of the outstanding voting
securities of any other person shall be deemed to be "control" for the purposes
of this Agreement.
g. Any transfer by a Significant Shareholder of shares of
Stock to an Affiliate who is not a party to this Agreement shall be made only
pursuant to the terms of this Agreement and on the condition that such person
shall become a party to this Agreement, agreeing in writing to be bound by all
of its terms. Any Significant Shareholder making a transfer shall promptly
notify the Company, and the Company shall promptly notify the other Significant
Shareholders, if any, of the name of each transferee and the date of such
transfer.
h. A "Significant Shareholder" shall mean LCO, PPEII, PPF, or
PIF, but only for so long as such person and its Affiliates owns a number of
shares of Stock equal to or in excess of 50% of the number of shares of Stock of
the Company held by such person and its Affiliates on the date of closing of the
Stock Purchase Agreement.
11. Miscellaneous.
a. No Inconsistent Agreements. This Agreement, with regard to
the subjects hereof, constitutes the full and entire understanding and agreement
between the parties and supersedes any agreement between the parties.
b. Successors and Assigns. Except as specifically provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the Affiliate transferees of LCO and the Purchasers and
their Permitted Transferees. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
c. Amendments and Waivers. Any term hereof may be amended or
waived only with the written consent of each of the parties.
d. Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient on the date of receipt, when
delivered personally or by overnight courier or sent by telegram or fax, or sent
as certified or registered mail, with
6
<PAGE>
postage prepaid, and addressed to the party to be notified at such party's
address or fax number as set forth on the signature page, or as subsequently
modified by written notice.
e. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(i) such provision shall be excluded from this Agreement, (ii) the balance of
the Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.
f. Governing Law. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Utah, without giving effect to principles of conflicts of law.
g. Counterparts. This Agreement may be executed in any number
of counterparts (and by facsimile), each of which shall be deemed an original
and all of which together shall constitute one instrument.
h. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
[The remainder of the page is intentionally left blank.]
7
<PAGE>
IN WITNESS WHEREOF, the parties named below have signed this Agreement
as of the date first above written.
PEQUOT PRIVATE EQUITY FUND II, L.P., a "Purchaser"
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT MANAGER
By: /S/ David J. Malat
----------------------------------------------------------
David J. Malat, CFO
Date: January 18, 2000
PEQUOT PARTNERS FUND, L.P., a "Purchaser"
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT MANAGER
By: /s/ David J. Malat
----------------------------------------------------------
David J. Malat, CFO
Date: January 18, 2000
PEQUOT INTERNATIONAL FUND, INC., a "Purchaser"
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT ADVISOR
By: /s/ David J. Malat
----------------------------------------------------------
David J. Malat, CFO
Date: January 18, 2000
8
<PAGE>
BRITESMILE, INC., the "Company"
By: /s/ Paul A. Boyer
----------------------------------------------------------
Paul A. Boyer, CFO
Date: January 18, 2000
LCO INVESTMENTS LIMITED
By: /s/ Anthony M. Pilaro
----------------------------------------------------------
Name: Anthony M. Pilaro
Title: Chairman
Date: January 18, 2000
9
<PAGE>
NEWS RELEASE
BriteSmile, Inc.
490 North Wiget Lane
Walnut Creek, CA 94598
Contact: Investors: Media:
Paul A. Boyer Heather Reeves/Tracy Williams
Chief Financial Officer Sard Verbinnen & co.
925-941-6260 212-687-8080
BRITESMILE, INC. ANNOUNCES $20 MILLION INVESTMENT BY PEQUOT
CAPITAL MANAGEMENT
Walnut Creek, CA--January 12, 2000 - BriteSmile, Inc. (AMEX: BWT), the leading
national provider of advanced teeth whitening solutions, today announced that it
has entered into an agreement for the Pequot Funds to invest $20 million in
equity financing, subject to certain closing conditions. In consideration for
this investment, the company will issue 3,333,333 shares of common stock. The
investment is scheduled to close during the month of January.
BriteSmile utilizes an innovative tooth whitening process that is safe,
effective, and convenient. The company's patent pending light-activated
procedure produces dramatic teeth whitening results after a one-hour treatment.
BriteSmile has quickly become the leading solution for teeth whitening,
significantly reducing treatment time while yielding substantially improved
results over other whitening techniques. Since the BriteSmile procedure was
introduced in the spring of 1999, BriteSmile has opened ten company-owned,
dentist supervised centers in Beverly Hills, Irvine, Pasadena, Walnut Creek,
Palo Alto, La Jolla, Honolulu, Atlanta, Boston and Houston. BriteSmile intends
to open an additional ten company-owned centers in seven nationwide markets
within the next twelve months, including new centers in Denver, Miami (3),
Seattle, Phoenix, Dallas and New York. The BriteSmile whitening process is also
offered through a growing base of more than 200 BriteSmile affiliated dentists
and the company intends to rapidly expand this affiliated dentist base. The
company has recently introduced the BriteSmile process into Japan and Argentina,
and has plans for further international expansion. The $20 million investment
will be used for general working capital purposes, including funding for the
company's expansion plans.
"This substantial capital investment in BriteSmile illustrates the
tremendous confidence that Pequot has in our strategic business plan," said John
Reed, Chief Executive Officer of
<PAGE>
BriteSmile. "BriteSmile continues to build on its successful launch of
BriteSmile Teeth Whitening Centers by expanding into new domestic and
international markets, and providing customers with a leading-edge teeth
whitening process that is faster and more effective than other available
procedures."
About Pequot Capital Management, Inc.
The Pequot Capital Management Funds are research-intensive and focus on
the information technology, telecommunications and healthcare industries. The
Pequot Private Equity Funds are the private placement/direct investment arm of
Pequot Capital Management and invest in public and late stage private technology
and healthcare companies. Pequot Capital, which is 100 percent employee-owned,
is headquartered in Westport, Connecticut, with offices in New York City and
California.
About BriteSmile
BriteSmile, Inc. has developed and manufactures the most advanced
teeth-whitening technology in the United States, as well as manages
state-of-the-art BriteSmile Professional Teeth Whitening Centers. BriteSmile
Centers are currently operating in Beverly Hills, Irvine, Pasadena, Walnut
Creek, Palo Alto and La Jolla, CA; Honolulu, HI; Atlanta, GA; Boston, MA; and
Houston, TX, with sixty-six BriteSmile Teeth Whitening Systems located within
existing dentist offices in cities including: Los Angeles, San Diego, and San
Francisco, CA; Honolulu, HI; Tucson, AZ; Denver, CO; Louisville, KY; Boston, MA;
Raleigh, NC; New York, NY; Toronto, ON; and Houston, TX. For more information
about BriteSmile and its whitening centers, call 1-800-BRITESMILE or visit the
Company's Website at www.britesmile.com.
This release, other than historical information, consists of forward-looking
statements that involve risks and uncertainties such as the development and
introduction of new products, acceptance of those new products in the
marketplace and development of new strategic and marketing relationships in the
United States and internationally. Readers are referred to the documents filed
by BriteSmile with the Securities and Exchange Commission, specifically the
Company's most recent reports on Forms 10-KSB and 10-QSB, that identify
important risk factors which could cause actual results to differ from those
contained in the forward-looking statements. BriteSmile and its affiliates
disclaim any intent or obligation to update these forward-looking statements.
