<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
BriteSmile, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
BRITESMILE, INC.
490 North Wiget Lane
Walnut Creek, California 94598
(925) 941-6260
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 25, 2000
To the Shareholders:
Notice is hereby given that the Annual Meeting of the Shareholders of
BriteSmile, Inc. ("the Company") will be held at the Company headquarters
located at 490 N. Wiget Lane, Walnut Creek, California 94598, on Friday, August
25, 2000, at 2:00 o'clock p.m., local time, and at any postponement or
adjournment thereof, for the following purposes, which are discussed in the
following pages and which are made part of this Notice:
1. To elect nine directors, each to serve until the next annual
meeting of shareholders and until his successor is elected and
shall qualify;
2. To ratify and approve an amendment to the Company's Revised 1997
Stock Option and Incentive Plan pursuant to which the total
number of shares of common stock issuable under the Plan has been
increased from 4,000,000 to 5,000,000;
3. To ratify and approve a series of transactions pursuant to which
the Company (i) has issued its 5% convertible subordinated notes
in the aggregate principal amount of $15,583,333 to nine
investors, including seven investors presently affiliated with
the Company, which notes are convertible into 2,521,574 shares of
common stock, (ii) has issued warrants to the investors to
purchase a total of 1,260,787 shares of common stock; and (iii)
may issue as part of the same note offering additional
convertible notes in the aggregate principal amount of $4,416,667
(which notes would be convertible into 714,671 shares of common
stock), together with investor warrants to purchase up to an
additional 357,335 shares of common stock. The net effect of the
forgoing transactions may be the issuance of more than 20% of the
total number of shares of the Company's common stock issued and
outstanding prior to the commencement of such transactions;
4. To approve the Board of Directors' selection of Ernst & Young LLP
as the Company's independent auditors; and
5. To consider and act upon any other matters that properly may come
before the meeting or any adjournment thereof.
The Company's Board of Directors has fixed the close of business on
July 21, 2000 as the record date for the determination of shareholders having
the right to notice of, and to vote at, the Annual Meeting of Shareholders and
any adjournment thereof. A list of such shareholders will be available for
examination by a shareholder for any purpose related to the meeting during
ordinary business hours at the offices of the Company at 490 North Wiget Lane,
Walnut Creek, California 94598 during the ten days prior to the meeting.
You are requested to date, sign and return the enclosed Proxy which is
solicited by the Board of Directors of the Company and will be voted as
indicated in the accompanying Proxy Statement and Proxy. Your vote is
important. Please sign and date the enclosed Proxy and return it promptly in
the enclosed return envelope, whether or not you expect to attend the meeting.
The giving of your proxy as requested will not affect your right to vote in
person if you decide to attend the Annual Meeting. The return envelope requires
no postage if mailed in the United States. If mailed elsewhere, foreign postage
must be affixed. Your proxy is revocable at any time before the meeting.
By Order of the Board of Directors,
Paul A. Boyer, Executive Vice President, CFO, and
Secretary
Walnut Creek, California
July 28, 2000
<PAGE>
BRITESMILE, INC.
490 North Wiget Lane
Walnut Creek, California 94598
(925) 941-6260
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
The enclosed Proxy is solicited by the Board of Directors of
BriteSmile, Inc. (the "Company") for use in voting at the Annual Meeting of
Shareholders to be at the Company headquarters located at 490 N. Wiget Lane,
Walnut Creek, California 94598, on August 25, 2000, at 2:00 o'clock p.m., local
time, and at any postponement or adjournment thereof, for the purposes set forth
in the attached notice. When proxies are properly dated, executed and returned,
the shares they represent will be voted at the Annual Meeting in accordance with
the instructions of the shareholder completing the proxy. If no specific
instructions are given, the shares will be voted FOR the election of the
nominees for directors set forth herein, FOR approval of the amendment to the
Company's Revised 1997 Stock Option and Incentive Plan, FOR approval of the
transactions constituting the Company's recent private offering of 5%
convertible subordinated notes and related investor warrants, and FOR
ratification of the appointment of auditors. A shareholder giving a proxy has
the power to revoke it at any time prior to its exercise by voting in person at
the Annual Meeting, by giving written notice to the Company's Secretary prior to
the Annual Meeting, or by giving a later dated proxy.
The presence at the meeting, in person or by proxy, of shareholders
holding in the aggregate a majority of the outstanding shares of the Company's
common stock entitled to vote shall constitute a quorum for the transaction of
business. The Company does not have cumulative voting for directors; a
plurality of the votes properly cast for the election of directors by the
shareholders attending the meeting, in person or by proxy, will elect directors
to office. Action on a matter, other than the election of directors, is
approved if the votes properly cast favoring the action exceed the votes cast
opposing the action. Abstentions and broker non-votes will count for purposes
of establishing a quorum, but will not count as votes cast for the election of
directors or any other questions and accordingly will have no effect. Votes
cast by shareholders who attend and vote in person or by proxy at the Annual
Meeting will be counted by inspectors to be appointed by the Company (it is
anticipated that the inspectors will be employees, attorneys or agents of the
Company).
The close of business on July 21, 2000, has been fixed as the record
date for determining the shareholders entitled to notice of, and to vote at, the
Annual Meeting. Each share shall be entitled to one vote on all matters. As of
the record date there were __________ shares of the Company's common stock
outstanding of record and entitled to vote. For a description of the principal
holders of such stock, see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT" below.
This Proxy Statement and the enclosed Proxy are being furnished to
shareholders on or about July 28, 2000.
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PROPOSAL 1 -- ELECTION OF DIRECTORS
As amended on July 23, 1999, the Company's Bylaws provide that the
number of directors shall range from three to ten, as determined from time to
time by the shareholders or the Board of Directors. Presently the Company's
Board of Directors consists of ten members, all of whom except Jennifer Scott
are nominees for election at the Annual Meeting. Each director elected at the
Annual Meeting will hold office until a successor is elected and qualified, or
until the director resigns, is removed or becomes disqualified. Unless marked
otherwise, proxies received will be voted FOR the election of each of the
nominees named below. If any such person is unable or unwilling to serve as a
nominee for the office of director at the date of the Annual Meeting or any
postponement or adjournment thereof, the proxies may be voted for a substitute
nominee, designated by the proxy holders or by the present Board of Directors to
fill such vacancy, or for the balance of those nominees named without nomination
of a substitute, or the Board may be reduced accordingly. The Board of Directors
has no reason to believe that any of such nominees will be unwilling or unable
to serve if elected as a director.
The following information is furnished with respect to the nominees.
Stock ownership information is shown under the heading "Security Ownership of
Certain Beneficial Owners and Management" and is based upon information
furnished by the respective individuals.
Anthony M. Pilaro
Mr. Pilaro has been a director of the Company since August 1997.
Presently, he serves as Chairman of CAP Advisers Limited which maintains offices
in Dublin, Ireland. He is also founder and Chairman of Excimer Vision Leasing
L.P., a partnership engaged in the business of leasing Excimer laser systems.
Mr. Pilaro has been involved in private international investment banking. He was
a Founding Director and former Chief Executive Officer of DFS and a founder of
the predecessor of VISX, Inc. A graduate of the University of Virginia `57, and
the University of Virginia Law School `60, Mr. Pilaro practiced law in New York
City through 1964.
John L. Reed
Prior to joining the Company as its Chief Executive Officer, Mr. Reed
was Chairman of the Pacific Retailing Division of Duty Free Shoppers Group
Limited ("DFS"), the world's leading specialty retailer catering to
international travelers. At DFS he was responsible for the operations of
multiple retail stores, including the largest single, self-standing retail
operation in the world. During his 21-year career at DFS, prior to being named
Chairman of the Pacific Retail Division in 1997, Mr. Reed was President of DFS
Hawaii. From 1982 to 1988, Mr. Reed was President of the DFS U.S. Mainland
Operation. Mr. Reed has also served as Vice President of Merchandising for both
Federated Departments Stores and John Wanamaker.
Linda S. Oubre
Linda S. Oubre commenced serving as a director of the Company in May
1998. In July 1998, she was named to the position of President, Chief
Administrative Officer of the Company. In August 1998 she has also functioned as
President of the Company's Whitening Center Division. Prior to joining the
Company, Ms. Oubre served for 3 years as President of Tri Com Ventures in Walnut
Creek, California. Tri Com specialized in new venture planning and
implementation consulting. At Tri Com, Ms. Oubre's clients included McGraw
Hill's Business Week Magazine, Prodigy Online Service, and the United Nations
Business Development Project in the Republic of Belarus. Prior to starting Tri
Com Ventures in
2
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1996, Ms. Oubre was General Manager, New Business Development, for the Los
Angeles Times, and also served as Director of Operations for Walt Disney's
Consumer Products Division and Manager of Financial Planning for the Times
Mirror Company. She has also been a visiting instructor at the Wharton Business
School. Ms. Oubre' is a graduate of the University of California, Los Angeles
and received her MBA from the Harvard Business School.
Gerald Poch
Mr. Poch is currently serving as Managing Director of Pequot Capital
Management, Inc. He joined the Pequot family of funds as a Principal in 1998.
Mr. Poch was the former Chairman, President and CEO of GE Capital Information
Technology Solutions ("ITS"), and before ITS, founder, Co-Chairman and Co-
President of AmeriData Technologies, Inc. (NYSE:ADA) until its acquisition by GE
Capital in 1996. From 1979 until 1983 he was Senior Vice President of
TIE/Communications, Inc. and President of Technicom, Inc., two public
telecommunications companies. Mr. Poch graduated Cum Laude from Boston
University School of Law where he was Managing Editor of the Law Review. He is
admitted to practice law in the District of Columbia, New York, and
Massachusetts.
Dr. Gasper Lazzara, Jr.
Dr. Gasper Lazzara, Jr. has served as Chairman of the Board and a director
of the Orthodontic Centers of America, Inc. ("OCA") since its inception in July
1994. He has served as Co-Chief Executive Officer of Orthodontic Centers since
September 1998, and he served as Chief Executive Officer of OCA from July 1994
to September 1998. Dr. Lazzara also served as President of OCA from July 1994 to
June 1997. From 1989 to 1994, Dr. Lazzara served as President or Managing
Partner of certain predecessor entities of OCA. He is a licensed orthodontist
and, prior to founding OCA, maintained a private orthodontic practice for over
25 years. He is a member of the American Association of Orthodontists and is a
Diplomat of the American Board of Orthodontists.
R. Eric Montgomery
Mr. Montgomery has been a director of the Company since May 1998. He is an
experienced consultant, researcher and entrepreneur in the oral care and
cosmetic products industries, and has been granted over 65 US and foreign
patents since 1981. Previously, from November 1997 until May 1998, he served as
an independent consultant to the Company through Applied Dental Sciences, Inc.
(Monterey, MA), the oral care products research and development firm of which he
has been President since 1992. Mr. Montgomery is also the Founding Manager and
President of OraCeutical LLC (Lee, MA), an organization dedicated to the
development of next generation products for use in the professional dental
office. Oraceutical is currently under contract with the Company to provide
technology development services. Mr. Montgomery's organizations have developed
products for companies including The Dial Corporation, Natural White, Virbac SA,
ProHealth Laboratories, OPI Products, American Dental Hygienics, and Boots PLC.
Mr. Montgomery is also President of IDEX Dental Sciences, Inc. (Lee, MA), an
intellectual property-holding firm established by Mr. Montgomery in March 1996.
Brad Peters
Mr. Peters has been a director of the Company since December 1999. He is
the President of Blackfin Capital, a privately held investment company based in
New York. Prior to founding Blackfin Capital, from July 1993 to June 1998, Mr.
Peters was with Morgan Stanley Private Wealth Management Group. Mr. Peters holds
an MBA degree from Duke University.
3
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Harry Thompson
Mr. Thompson has served as a director of the Company since December 1999.
Mr. Thompson is currently the President of The Strategy Group and Managing
Director of Swiss Army Brands, Inc. Prior to founding The Strategy Group, Mr.
Thompson served in senior management of several core units of the Interpublic
Group of Companies, one of the world's leading advertising groups. Mr. Thompson
also has served as either manager or chairman of several telecommunication
companies of The Galesi Group. Mr. Thompson holds an MBA degree from Harvard
Business School. Currently, Mr. Thompson is a director of Schwinn/GT Corp.
Peter Schechter
Mr. Schechter was appointed a director of the Company in July 1999. Mr.
Schechter is a founder of Chlopak, Leonard, Schechter and Associates, an
international communications consulting firm. Previously, Mr. Schechter was
Managing Director in charge of international business at the Sawyer/Miller
Group, specializing in the management of international financial issues,
political campaigns and country image programs. A graduate of the School of
Advanced International Studies at Johns Hopkins University, Mr. Schechter has
lived in Europe and Latin America and has extensive experience in the area of
governmental relations. He is fluent in six languages.
There is no family relationship between any executive officer or director
of the Company and any other executive officer or director.
DIRECTOR COMPENSATION
Outside directors of the Company (non-employees, non-consultants) receive
options to purchase 20,000 shares of common stock per year for each year during
which they serve as a director. The exercise price of such options is 100% of
the fair market price on the date of grant. Actual expenses incurred by outside
directors are reimbursed.
Certain directors of the Company have been granted Units of Company equity
participation by LCO. As of May 11, 1998, LCO adopted an Incentive Compensation
Plan (the "LCO Plan"). Under the LCO Plan, certain key employees, consultants or
directors of the Company may be given the opportunity to benefit from the
appreciation in the value of the LCO's present equity holdings in the Company.
Such appreciation rights are granted by way of incentive compensation units
("Units"), whose value is determined by the increase in value of LCO's present
holdings of Company Common Stock above a prescribed base value of $4.75 per
share. Each Unit represents a percentage interest (determined by the total
number of Units granted under the LCO Plan) in such increase in value of LCO's
holdings. LCO has granted Units to the following directors or former directors
of the Company as incentive compensation: John Reed, Richard Trefz, Brian
Delaney, and Linda Oubre. Rich Trefz interest in the LCO plan has been paid out
and Mr. Trefz has no further interest in the LCO plan or rights thereunder.
Pursuant to an agreement in effect from November, 1997 through May 1998,
Richard Trefz received compensation from a Company affiliate, CAP Advisers
Limited ("CAP"), related to Mr. Trefz' service as a director of the Company.
During the period the agreement was in force, Mr. Trefz received a consulting
fee paid by CAP of $25,000.
4
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BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Company's Board of Directors took action at ____ duly noticed
special meetings of the Board during the fiscal year ended April 1, 2000. Each
nominee for director then serving as a director attended all of the Company's
special meetings of the Board of Directors. The Company has established an
Audit Committee and a Compensation Committee. At present, the Audit Committee
and the Compensation Committee consist of directors Poch, Peters, Thompson and
Reed.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE DIRECTOR.
EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES/CONSULTANTS
The following individuals serve as executive officers or significant
employees or consultants of the Company:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION(S)1
---- --- --------------------
<S> <C> <C>
John Reed 59 Chief Executive Officer and Director
Paul Dawson 44 Chief Executive Officer of BriteSmile International Limited,
a subsidiary of the Company
Linda S. Oubre 41 President, Chief Administrative Officer and Director
Andrew Hofmeister 40 President, Associated Center Division
Michael Whan 35 President Worldwide Marketing
Paul A. Boyer 36 Executive Vice-President, Chief Financial Officer and Secretary
Stephen Miller 52 Executive Vice-President, Real Estate and Construction
Anthony M. Pilaro 64 Chairman of the Board
R. Eric Montgomery 45 Director since May, 1998
Jennifer Scott 36 Director since November, 1998
Peter Schechter 40 Director since June, 1999
Bradford G. Peters 32 Director since December, 1999
Harry Thompson 70 Director since December, 1999
Gerald Poch 53 Director since May, 2000
Dr. Gasper Lazzara, Jr. 58 Director since May 2000
John W. Warner __ Research and Development Director
Salim A. Nathoo __ Consultant
</TABLE>
1. All officers serve at the pleasure of the Board of Directors. There are no
family relationships between any of the officers and directors.
Biogrophical information regarding Messrs. Reed, and Pilaro, and
regarding Ms. Oubre, each of whom currently also serves as a director of the
Company, is included in this Proxy Statement under "Proposal 1-Election of
Directors." Biographical information regarding the other executive officers and
significant consultants of the Company follows:
5
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Paul A. Boyer
Mr. Boyer was named the Company's Executive Vice President and Chief
Financial Officer in October 1999. Prior to joining BriteSmile, Mr. Boyer was
Senior Vice President and Chief Financial Officer of Dynatec International,
Inc., a manufacturer and marketer of consumer products. While at Dynatec, he was
directly responsible for all financing, accounting and operations of that
company, including manufacturing, purchasing, production and information
systems. Mr. Boyer also served as Director of Finance at Mrs. Field's Original
Cookies, Inc., where his responsibilities included that company's merger and
acquisition activity, treasury functions, financial forecasting, budgeting,
planning and analysis. Previously, Mr. Boyer was Chief Financial Officer of
Wasatch Education Systems. During his six and one half tenure at Wasatch, he
handled all accounting and financial activities and steered the company though a
successful public offering. Mr. Boyer received his BS degree and an MBA in
Accountancy from San Diego State University.
Paul Dawson
Mr. Dawson, prior to joining the Company's subsidiary, BriteSmile
International as its Chief Executive Officer, was Chief Executive Officer of
Camus International, a global marketer of luxury goods. During his nine-year
tenure with Camus, he spearheaded an aggressive worldwide market expansion
program of the company's premium cognac market. Prior to Camus, Mr. Dawson held
the position of Engagement Manager at McKinsey & Company, an international
consulting firm. While at McKinsey, he advised a broad range of multinational
consumer companies on international expansion strategies. Mr. Dawson has lived
and worked in the United States, Europe, Asia and the Middle East. He holds
masters degrees from Cambridge University and UC Berkeley, and an MBA from
Stanford University.
Andrew Hofmeister
Mr. Hofmeister joined BriteSmile in August 1998. He currently serves
as President of BriteSmile's Associated Center Division. Prior to joining
BriteSmile, Mr. Hofmeister was Chief Executive Officer of Excimer Vision Leasing
L.P., a partnership engaged in the business of leasing Excimer laser systems,
and a former director of the Company prior to its relocation from Salt Lake City
to Lester, Pennsylvania. From 1989 to 1995 he was a consultant for McKinsey &
Company, specializing in retail and consumer products. Mr. Hofmeister is a
graduate of St. Olaf College and the Stanford Graduate School of Business.
Stephen Miller
Prior to joining BriteSmile in May 1999 as it Executive Vice
President, Real Estate and Construction, Mr. Miller was for 11 years Vice
President of Facility Development for DFS. While at DFS, Mr. Miller was
responsible for the development of the flagship retail gallerias, high-end
boutiques, duty free stores and entertainment complexes in the U.S., Oceania and
the Pacific. Prior to DFS, Mr. Miller was Senior Vice President of Commercial
and Industrial Development for Castle and Cooke, Inc. where for 17 years he was
responsible for commercial, industrial and retail development for Hawaii's
second largest private landowner.
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Michael P. Whan
Mr. Whan joined BriteSmile as its President of World Wide Marketing in
May 2000. Prior to joining BriteSmile, Mr. Whan had served as Vice President,
General Manager of Taylor Made Golf from 1996 to 2000. From 1987 to 1995 Mr.
Whan held various posts at Proctor & Gamble Company, including Director of
Marketing, oral care and Brand Manager of Crest toothpaste. Mr. Whan is a
graduate of Miami (Ohio) University.
Dr. John W. Warner
Dr. Warner accepted the position of Research and Development Director
for the Company in May 1998. Mr. Warner is an experienced research and
technology consultant and entrepreneur who was one of the leading contributors
to the development of ophthalmic applications of laser technology. Dr. Warner
leads the Company's assessment of existing products and LATW development efforts
at research and development facilities established by the Company in Evanston,
Illinois. Dr. Warner has served as a consultant to Northwestern University in
the areas of technology development and commercialization. From March 1986 to
December 1990 he was the founder and CEO of Taunton Technologies, Inc., a
predecessor of VISX, Inc., engaged in the business of developing and
manufacturing Excimer laser systems to perform ophthalmic surgery.
Salim A. Nathoo, D.D.S.
Dr. Nathoo was formerly employed by Colgate-Palmolive Co. as a Senior
Researcher from 1990 to 1998 and was a key member in the successful worldwide
launch of the Colgate Whitening program during his tenure there. Dr. Nathoo has
lectured globally on both the clinical and scientific aspects of teeth
whitening, and he is recognized as one of the leading authorities on the
subject. Dr. Nathoo is one of the founders of Oral Health Clinical Services, LLC
("Oral Health"). The Company has entered into a consulting agreement with Oral
Health in order to assist the Company in obtaining an American Dental
Association ("ADA") seal of approval for its LATW system. Dr. Nathoo holds both
a PhD and DDS from New York University, and has published over 40 papers in
major scientific journals.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of July 13, 2000
regarding beneficial stock ownership of (i) all persons known to the Company to
be beneficial owners of more than 5% of the outstanding common stock; (ii) each
director or director nominee, and any other executive officer of the Company
whose compensation is required to be reported in this Proxy Statement, and (iii)
all officers and directors of the Company as a group. Each of the persons in
the table below has sole voting power and sole dispositive power as to all of
the shares shown as beneficially owned by them, except as otherwise indicated.
7
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Number of
Shares
Beneficially Percent of
Name and Address Owned(1) Outstanding Shares(2)
Executive Officers and Directors
Paul Dawson 367,397(3) 1.5%
36 Fitzwilliam Place
Dublin 2, Ireland
Andrew J. Hofmeister 123,397(4) *
490 North Wiget Lane
Walnut Creek, CA 94598
Dr. Gasper Lazzara, Jr. 364,077(16) 1.5%
Orthodontic Centers of America
500 Sawgrass Village Circle
Ponte Verdra Beach, Florida 32082
R. Eric Montgomery 265,957 1.1%
29 Fairview Road
P. O. Box 487
Monterey, MA 01245
Linda S. Oubre 105,331(5) *
490 North Wiget Lane
Walnut Creek, CA 94598
Bradford Peters 1,545,264(6) 6.2%
Blackfin Capital
1633 Broadway, 33rd Floor
New York, New York 1001
Anthony M. Pilaro 13,460,991(7) 53.8%
36 Fitzwilliam Place
Dublin 2, IRELAND
Gerald Poch 3,626,505(8) 15.0%
Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, CT 06880
John L. Reed 1,418,618(9) 5.7%
490 North Wiget Lane
Walnut Creek, CA 94598
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Number of
Shares
Beneficially Percent of
Name and Address Owned(1) Outstanding Shares(2)
Peter Schechter 22,000(10) *
Chlopak Leonard Schechter & Assoc.
1850 M Street, N.W., #550
Washington, D.C. 20036
Jennifer Scott 40,423(11) *
Applied Research & Consulting LLC
295 Lafayette Street, 5th Floor
New York, NY 10012
Harry Thompson 100,000(12) *
169 E. 78th Street
New York, New York 10021
Richard V. Trefz 152,831(13) *
Airport Business Center
200 Diplomat Drive, Bay 204
Lester, PA 19113
All Officers and Directors
as a Group 21,897,587(14) 77.9%
(17 persons)
5% Beneficial Owners
LCO Investments Limited 13,460,991(15) 53.8%
Canada Court
Upland Road
St. Peter Port
Guernsey
Channel Islands
Pequot Capital Management, Inc. 3,626,505(8) 15.0%
500 Nyala Farm Road
Westport, CT 06880
_________________
* Constitutes less than 1%.
1 Includes any options or warrants to purchase share which are presently
exercisable or exercisable within 60 days.
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2 All percentages are calculated based upon a total number of shares
outstanding which includes 23,970,685 shares of the Company issued and
outstanding as of June 19, 2000, plus that number of options presently
exercisable or exercisable within 60 days by the named security holder.
3 Includes 227,397 shares owned beneficially, and 140,000 shares which Mr.
Dawson has the right to acquire upon the exercise of vested options at
$6.00 per share.
4 Includes 37,397 shares owned beneficially, options to purchase 5,000
shares exercisable at $9.00 per share, options to purchase 5,000 shares
exercisable at 6.81 per share, options to purchase 40,000 shares
presently exercisable at $1.75 per share, options to purchase 18,000
shares presently exercisable at $2.75 per share, and options to purchase
18,000 shares presently exercisable at $13.375 per share.
5 Includes 25,331 shares owned beneficially, and options to purchase 80,000
shares presently exercisable at $1.75 per share.
6 Represents the following shares held of record by Andrew J. McKelvey:
533,939 shares held of record, the right to acquire 674,217 shares upon
conversion of Convertible Notes of the Company at a conversion price of
$6.18 per share, and warrants to purchase 337,108 shares exercisable at
$7.21 per share. Mr. Peters has an economic interest in any appreciation
with respect to the shares beneficially owned by Mr. McKelvey, and shares
control over disposition of the shares.
7 Represents 11,429,438 shares owned of record and beneficially by LCO,
1,000,000 shares held indirectly through PdeP Tech Limited, a subsidiary
of LCO Investments Limited, warrants to purchase 343,851 shares
exercisable at $7.21 per share, and the right to acquire 687,702 shares
upon conversion of Convertible Notes of the Company at a conversion price
of $6.18 per share. Mr. Pilaro is Chairman of CAP. CAP is the sole
trustee of the ERSE Trust, of which LCO is a wholly owned subsidiary.
8 Mr. Poch is a managing director of Pequot Capital Management, Inc. and
disclaims beneficial ownership of these shares, except to the extent of
his pecuniary interest. The share amount represents 1,666,667 shares held
of record, the right to acquire 94,391 shares upon conversion of
Convertible Notes of the Company at a conversion price of $6.18 per
share, and warrants to purchase 47,195 shares exercisable at $7.21 per
share, held by Pequot Private Equity Fund II, L.P.; 833,333 shares held
of record, the right to acquire 47,195 shares upon conversion of
Convertible Notes of the Company at a conversion price of $6.18 per
share, and warrants to purchase 23,598 shares exercisable at $7.21 per
share, held by Pequot Partners Fund, L.P., and 833,333 shares held of
record, the right to acquire 47,195 shares upon conversion of Convertible
Notes of the Company at a conversion price of $6.18 per share, and
warrants to purchase 23,598 shares exercisable at $7.21 per share, held
by Pequot International Fund, Inc.; and options to purchase 10,000 shares
exercisable at $___ per share, held by Gerald Poch.
9 Includes 575,900 shares owned beneficially, options to purchase 350,000
shares at $2.50 per share, options to purchase 250,000 shares at $9.25
per share, the right to acquire 161,812 shares upon conversion of
Convertible Notes of the Company at a conversion price of $6.18 per
share, and warrants to purchase 80,906 shares exercisable at $7.21 per
share.
10 Includes 2,000 shares owned beneficially in a Revocable Living Trust, and
options to purchase 20,000 shares presently exercisable at $11.25 per
share.
10
<PAGE>
11 Includes 20,423 shares owned beneficially, and options to purchase 20,000
shares presently exercisable at $1.0625 per share.
12 Options to purchase from LCO 100,000 shares presently exercisable at
$1.50 per share.
13 Includes 47,831 shares owned beneficially, and options to purchase
105,000 shares presently exercisable at $1.75 per share.
14 Includes presently exercisable options, warrants, or rights to acquire
upon conversion 4,108,842 shares.
15 Represents 11,429,438 shares owned of record and beneficially by LCO, and
1,000,000 shares held indirectly through PdeP Tech Limited, a subsidiary
of LCO, warrants to purchase 343,851 shares exercisable at $7.21 per
share, and the right to acquire 687,702 shares upon conversion of
Convertible Notes of the Company at a conversion price of $6.18 per
share. LCO is a wholly owned subsidiary of the ERSE Trust. The sole
trustee of the ERSE Trust is CAP. Mr. Pilaro, a director of the Company,
is Chairman of CAP.
16 Represents the right to acquire 242,718 shares upon conversion of
Convertible Notes of the Company at a conversion price of $6.18 per
share, and warrants to purchase 121,359 shares exercisable at $7.21 per
share.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who beneficially own more than 10
percent of a registered class of the Company's equity securities to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than 10 percent shareholders are
required by regulation of the Securities and Exchange Commission to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely upon its review of the copies of such forms furnished to
it during the fiscal year ended April 1, 2000, and representations made by
certain persons subject to this obligation that such filings were not required
to be made, the Company believes that all reports required to be filed by these
individuals and persons under Section 16(a) were filed in a timely manner,
except as follows (all such transactions have since been reported to the SEC on
Form 5 reports filed in May and June, 2000): Form 4 report of A. Hofmeister for
reporting transaction in June 1999; Form 3 report of H. Thompson for reporting
transaction in August 1999; Form 3 and two Form 4 reports of S. Miller for
reporting transactions in February, March, June and October 1999; Form 3 report
of A. Flint for reporting transactions in August and November 1999; Form 3
report of P. Schechter for reporting transactions in April and July 1999; Form 3
report of B. Peters for reporting transactions in June 1999 and January 2000.
Except as disclosed, the Company is not aware of any transactions in
its outstanding securities by or on behalf of any director, executive officer or
10 percent holder, which would require the filing of any report pursuant to
Section 16(a) during the fiscal year ended April 1, 2000, that has not been
filed with the Securities and Exchange Commission.
11
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by
the Company for services rendered during the past three fiscal years to each
person who served as the Company's Chief Executive Officer during the fiscal
year ended April 1, 2000, and to the Company's four most highly compensated
executive officers in fiscal 2000 other than the CEO. The Company appointed
Richard V. Trefz as President and CEO, effective June 1, 1998. Mr. Trefz served
as CEO through December 1998. Effective June 1999, the Company appointed John L.
Reed as its new President and CEO.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
------------
Annual
Compensation Awards
------------
Securities
Underlying
Name and Fiscal Options/
Principal Position Year Salary ($) SARs (#)
------------------ ------ ------------ ------------
John L. Reed 2000 $201,923 250,000 (1)
President and CEO 1999 -0- 750,000 (2)
Paul Dawson 2000 $167,723 200,000 (3)
CEO, BriteSmile 1999 -0- -0- (4)
International, Ltd.
Richard V. Trefz 2000 250,000 20,000 (5)
President, 1999 157,635 225,000 (6)
Manufacturing
Linda S. Oubre 2000 176,058 25,000 (7)
President, Chief 1999 117,883 200,000 (8)
Administrative
Officer
Andrew J. Hofmeister 2000 157,500 75,000 (9)
President, 1999 97,464 150,000 (10)
Associated
Center Division
(1) 83,333 of which are vested, 83,333 of which vest on March 24, 2001, and
83,334 of which vest on March 24, 2002.
(2) Mr. Reed received no cash compensation from the Company in fiscal 1999.
Prior to commencing full-time work for the Company at the Company's offices,
Mr. Reed performed occasional services for the Company beginning January
1999. Mr. Reed's employment contract with the Company provides for an annual
salary of $250,000, commencing June 1999, and options to purchase 750,000
shares granted January 1999, 250,000 of which are vested, the remainder of
which vest 100,000 per year beginning July 22, 2000.
12
<PAGE>
(3) All of which options vest and become exercisable on November 1, 2000.
(4) Mr. Dawson received no compensation from the Company in fiscal 1999. Mr.
Dawson's employment contract with the Company, effective April 19, 1999,
provides for an annual salary of $200,000, and options to purchase 300,000
shares, 140,000 of which are vested, the balance of which vest 40,000 per
year beginning April 19, 2001.
(5) Mr. Trefz' employment with the Company terminated as of May 31, 2000. In
connection therewith the 20,000 options granted to Mr. Trefz in fiscal year
2000 were cancelled.
(6) Mr. Trefz' employment with the Company terminated as of May 31, 2000. Of
the 225,000 options granted in 1999, 105,000 are vested and are exercisable
until May 7, 2008. The balance were cancelled in connection with Mr. Trefz'
termination of employment.
(7) All of which options vest and become exercisable on November 1, 2000.
(8) 80,000 of which are vested, the balance of which vest 30,000 per year
beginning July 1, 2000.
(9) 18,000 of which are vested, 32,000 of which vest 8,000 per year beginning
May 19, 2001, and 25,000 of which vest on November 1, 2000.
(10) 58,000 of which are vested, 60,000 of which vest in increments of 15,000
each year beginning August 1, 2000; 32,000 of which vest in increments of
8,000 each year beginning March 2, 2001.
The following table lists individual grants of stock options made during the
Company's last completed fiscal year as compensation for services rendered as an
officer of the Company:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SAR Employees in Case Price Expiration
Name Granted (#) Fiscal Year(1) ($/Share) Date
----------------------------------------------------------------------------
John L. Reed 250,000(2) 13.2% $ 9.250 03-24-10
Paul Dawson 20,000(3) 1.2% $ 5.875 11-01-09
Richard V. Trefz 20,000(3) 1.2% $ 5.875 11-01-09
Linda S. Oubre 25,000(3) 1.5% $ 5.875 11-01-09
Andrew J. Hofmeister 25,000(3) 1.5% $ 5.875 11-01-09
Andrew J. Hofmeister 50,000(4) 3.0% $13.395 05-19-09
(1) Based upon options to purchase a total of 1,890,500 shares granted by the
Company to employees of the Company during the fiscal year ended April 1,
2000.
13
<PAGE>
(2) 83,333 of which are vested, 83,333 of which vest on March 24, 2001, and
83,334 of which vest on March 24, 2002.
(3) These options vest and become exercisable on November 1, 2000 (after one
year from the date of grant), conditioned on continued employment with the
Company.
(4) 18,000 of which are vested, the balance to vest 8,000 per year beginning 5-
19-01, conditioned on continued employment with the Company.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000
AND APRIL 1, 2000 OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities
Acquired Underlying Unexercised Value of Unexercised
on Value Options at In-the-Money Options at
Exercise Realized April 1, 20001 April 1, 20001
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
-------------------- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
John L. Reed 0 0 350,000/650,000 $2,471,875/$2,903,125
Paul Dawson 0 0 140,000/180,000 $ 498,750/$643,750
Richard V. Trefz 0 0 105,000/120,000(2) $ 820,312/0
Linda S. Oubre 0 0 80,000/145,000 $ 625,000/$1,029,687
Andrew J. Hofmeister 0 0 86,000/149,000 $ 451,699/$788,937
</TABLE>
--------------
1 Potential unrealized value is calculated as the fair market value at
March 31, 2000 ($9.5625 per share), less the option exercise price,
times the number of shares.
2 Mr. Trefz' employment with the Company terminated effective May 31,
2000. In connection with the termination, Mr. Trefz retained options to
purchase 105,000 shares of the Company. All other unvested options held
by Mr. Trefz were canceled.
EMPLOYMENT CONTRACTS AND
TERMINATION OF EMPLOYMENT ARRANGEMENTS
Certain of the Company's executive officers whose compensation is
required to be reported in the Summary Compensation Table are parties to written
employment agreements with the Company as follows:
14
<PAGE>
John Reed
----------
Pursuant to a letter agreement between the Company and John Reed dated
January 20, 1999, Mr. Reed agreed to serve as Chief Executive Officer of the
Company. The agreement provides that the Company will pay Mr. Reed $250,000 a
year for his services. Mr. Reed also received options to purchase 750,000 shares
of the Company's common stock at the closing price on the date of the agreement.
Mr. Reed's employment began full-time and on location on June 2, 1999. On March
24, 2000, Mr. Reed was granted options to purchase 250,000 shares of the
Company's common stock at the closing price on that date.
Linda Oubre
------------
The Company entered into an employment agreement with Linda Oubre on
January 22, 1999. Under the terms of the agreement, Ms. Oubre currently serves
as President, Chief Administrative Officer. The initial term of the agreement is
from January 22, 1999 through June 30, 2000. Her employment with the Company
will continue on an at-will basis thereafter. The Company paid Ms. Oubre
$165,000 per annum from January 22, 1999 through June 30,1999 and $175,000 per
annum from July 1, 1999 through June 30, 2000. On July 1, 2000, Ms. Oubre's
salary will increase to $200,000 per annum. Ms. Oubre is eligible to receive
bonus compensation under such cash bonus plan as the Company may adopt for its
key executives. If no such plan is adopted, Ms. Oubre will be eligible for bonus
compensation based on the attainment of annual profitability and management
objectives relating to the Company's Center Division as agreed upon by Ms. Oubre
and the Company. Ms. Oubre was also granted options to purchase 200,000 shares
of the Company's common stock at $1.75 per share. Options to purchase 80,000 of
the 200,000 shares have vested and are currently exercisable; the right to
purchase an additional 30,000 of such shares will vest each of July 1, 2000,
July 1, 2001, July 1, 2002 and July 1, 2003 if Ms. Oubre has remained in the
employ of the Company from the date of the agreement to such date.
Paul Dawson
------------
BriteSmile International, Ltd. entered into an employment agreement
with Paul Dawson on April 19, 1999. Under the terms of the agreement, Mr. Dawson
has served as Chief Executive Officer of BriteSmile International, a wholly-
owned subsidiary of the Company. The Company pays Mr. Dawson $16,666 per month
for his services. Mr. Dawson is eligible for a bonus based on the number of paid
teeth whitening procedures performed in a designated international area. The
bonus will be paid in cash and Common Stock of the Company. In addition, Mr.
Dawson received options to purchase 300,000 shares of the Company's common stock
at the closing price on the date of the agreement. Options to purchase 100,000
shares vested on the date of the agreement. The remaining 200,000 options vest
in equal installments over the next five years.
Richard V. Trefz
-----------------
The Company entered into an employment agreement with Richard Trefz in
May 1998, initially as President and CEO of the Company. The term of the
agreement was from May 1998 to May 31, 2000. The Company did not renew Mr.
Trefz' employment at May 31, 2000 and the employment agreement terminated. The
employment agreement provided for a salary of $250,000 per year and options to
purchase 225,000 shares of the Company's common stock at $1.75 per share. Mr.
Trefz was entitled to
15
<PAGE>
participate in all employee insurance and other fringe benefit programs.
In connection with his termination of employment as of May 31, 2000, Mr. Trefz
retained the right to exercise 105,000 of the 225,000 options granted in May
1998. The balance of Mr. Trefz' options were cancelled.
Compensation Committee
----------------------
The Compensation Committee of the Board of Directors is currently
comprised of directors Reed, Wainright, and Schechter. The committee meets
periodically to review the compensation of the Company's officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective January 12, 2000, the Company sold 77,318 shares of Common
Stock in a private placement to Andrew J. McKelvey for cash proceeds of
$463,908. Bradford Peters, a director of the Company, shares in the economic
benefits of any appreciation in the shares acquired by Mr. McKelvey. Mr. Peters
also shares with Mr. McKelvey authority to dispose of the shares.
On December 1, 1999 the Company, as lessee, entered into an Agreement
of Sublease with LCO Properties, Inc., a Delaware corporation, as lessor. LCO
Properties, Inc. is affiliated with the Company's principal shareholder, LCO
Investments Limited. The Sublease covers approximately 4,821 square feet of
space located in the building known as 16-18 West 57th Street in the Borough of
Manhattan, New York City. The sublease term is for ten years and calls for
initial lease payments of $401,500 per year, subject to increase in the event of
increases in the rent payable under the parent lease for the property between
LCO and its lessor.
In August 1999 Harry Thompson, a director of the Company, agreed to
provide marketing consulting services to the Company. In consideration for Mr.
Thompson's services to the Company, and pursuant to a letter agreement dated
August 17, 1999, the Company's principal shareholder, LCO granted Mr. Thompson
the right to purchase from LCO up to 100,000 shares of Common Stock of the
Company at a price of $1.50 per share. The option to purchase from LCO expires
on August 31, 2004.
Effective June 4, 1999, the Company sold 1,355,555 shares of Common
Stock in a private placement for of $15,000,000. 1,004,043 of the shares were
sold to nine private investors for $11,120,000, including LCO. The remaining
351,512 shares were sold to a group of up to 18 members of senior management of
the Company, including directors and executive officers, for $3,880,000. The
purchase price was $10.95 per share. However, four of the purchasers, including
three non-employee directors of the Company and LCO, purchased at $11.525 per
share. CAP Advisers Limited, an entity affiliated with LCO, provided financing
for the management purchasers. All purchasers acquired certain registration
rights. See the Company's Current Report on Form 8-K filed June 21, 1999.
On April 7, 1999, the Company entered into a Letter Agreement with
Chlopak, Leonard, Schechter and Associates ("CLS") Washington, D.C. Pursuant to
the agreement, CLS provides public relations advice and serves as communications
counselors to the Company for consideration of $22,500 per month, plus expenses.
The agreement was entered into for a minimum of six months, and remains in
16
<PAGE>
force. Peter Schechter, a director of the Company, is a one-third co-owner and
Secretary of CLS.
On March 24, 1999, the Company entered into a Consulting Agreement
with Oral Health Clinical Services, LLC ("Oral Health"), Salim A. Nathoo and R.
Eric Montgomery. Mr. Montgomery is a director of the Company. Pursuant to the
agreement, Oral Health and Dr. Nathoo will devote their services to obtaining
American Dental Association ("ADA") Certification for the BS2000 procedure. The
term of the contract is for two years or until ADA Certification, whichever is
earlier. In consideration for the services, the Company granted 75,000 stock
options to Dr. Nathoo which are vested. The Company will grant up to 225,000
additional stock options, of which the number and exercise price is dependent
upon obtaining ADA Certification, at the date the Certification is obtained.
On December 7, 1998, the Company sold 9,302,326 shares of Common Stock
to LCO in a private placement for $10,000,000. Under an amendment to a prior
registration agreement, LCO acquired certain registration rights with respect to
these shares.
On May 17, 1998, the Company entered into a Consulting Agreement with
Oraceutical, LLC. R. Eric Montgomery, a director of the Company, is the founding
Manager and President of Oraceutical. Pursuant to the agreement, Oraceutical
provides technology development services to the Company for various light-
activated teeth whitening products and procedures. The Company and Oraceutical
are currently negotiating an extension of their agreement beyond its original
term. In consideration for its services, Oraceutical has been paid $35,000 a
month, plus options to purchase 200,000 shares of Common Stock, subject to
vesting provisions, exercisable at $1.75 per share.
On May 5, 1998, the Company sold 1,860,465 shares of its Common Stock
to LCO, for $5,000,000 pursuant to a Stock Purchase Agreement dated as of May 4,
1998.
Effective June 27, 2000, the Company signed a Securities Purchase
Agreement with nine investors (the "Investors"), pursuant to which the sold
Company sold in a private placement (the "Note Offering") its 5% Subordinated
Convertible Notes due June 29, 2005 in the aggregate principal amount of
$15,583,333 (the "Notes").
The Notes are convertible into shares of the Company's Common Stock,
par value $.001 per share ("Common Stock"), at a per share conversion price of
$6.18, which is 120% of the average of the closing bid price of the Common Stock
during the ten-trading day period immediately prior to June 27, 2000, the date
the transaction documents were signed. The Company also issued to the Investors,
pro rata, warrants (the "Warrants") to purchase a total of 1,260,787 shares of
Common Stock, which have a term of five years and an exercise price of $7.21.
The number of shares underlying the Notes and the exercise price of the Warrants
are subject to reset and penalty provisions as set forth in the transaction
documents.
Two of the Investors purchasing a total of $3,500,000 principal amount
of the Notes are unaffiliated with the Company. These unaffiliated investors are
CapEx, L.P., and Pacific Mezzanine Fund. Seven of the Investors, purchasing an
aggregate amount of $12,083,332 of the Notes, are presently affiliates of the
Company. The affiliated Investors include LCO Investments Limited (shareholder
and affiliated with director Anthony Pilaro), John Reed (shareholder, CEO and
director), Gasper Lazzara, Jr. (director), Andrew McKelvey (shareholder and
affiliated with director Bradford Peters), and Pequot Private Equity Fund II,
L.P., Pequot International Fund, Inc., and Pequot Partners Fund, L.P.
(shareholders and affiliated with director Gerald Poch).
17
<PAGE>
Pursuant to a Registration Rights Agreement between the Investors and
the Company, the Company agreed to register with the SEC, within 120 days from
the closing date, the shares of Common Stock underlying the Notes and Warrants
for offer and sale under the Securities Act of 1933, as amended.
The Company is actively negotiating to sell up to an additional $4.5
million of the Notes to third parties on substantially similar terms. In
addition, the Company has received a commitment from 4 directors and
shareholders to purchase an additional $3.9 million of the Notes on or before
July 31, 2000 if the Company does not sell such amount of Notes to third
parties.
18
<PAGE>
PROPOSAL 2 -- AMENDMENT TO STOCK OPTION PLAN
On June 9, 2000, the Company's Board of Directors adopted an amendment
to the Company's Revised 1997 Stock Option and Incentive Plan (the "Plan").
Pursuant to the amendment, the aggregate number of shares of Common Stock of the
Company available for issuance under the Plan was increased from 4,000,000
shares to 5,000,000 shares.
At the Annual Meeting, the Company's shareholders will be asked to
ratify and approve the amendment to the Plan, and the Board of Directors is
soliciting the enclosed proxy as to that decision. A brief description of the
material provisions of the Plan, as amended, and a table summarizing the
benefits to be conferred under the Plan follows.
The Plan provides for the award of incentive stock options to key
employees, and the award of non-qualified stock options, stock appreciation
rights, cash and stock bonuses, and other incentive grants to key employees,
directors, officers, agents and consultants who have important relationships
with the Company or its subsidiaries. Presently there are over 120 employees
who are eligible to participate in the Plan. The Plan was initially adopted by
the Board of Directors effective as of January 31, 1997. It was amended by the
Board of Directors on May 12, 1998, which amendments were ratified and adopted
by the shareholders of the Company at the Company's Annual Meeting of
Shareholders held in August 1998. The Plan was further amended by the Board of
Directors on January 22, 1999 to increase the number of shares issuable under
the Plan to 4,000,000. The January 22, 1999 amendment was ratified and adopted
by the shareholders of the Company at the Company's Annual Meeting of
Shareholders held in August 1999.
The only amendment to the Plan since the Plan was ratified and
approved by the shareholders at last year's meeting has been the increase by the
Board of Directors, in June 2000, of the number of shares issuable under the
Plan. That most recent increase is now being submitted to shareholders of the
Company for their approval.
The principal provisions of the Plan are summarized below.
Administration
The Plan is administered by the Board of Directors of the Company, or
a Committee appointed by the Board consisting solely of two or more non-employee
directors (the "Plan Committee"). The Plan Committee will determine and
designate the individuals and classes of individuals to whom awards under the
Plan should be made and the amount, terms and conditions of the awards. The
Plan Committee may adopt and amend rules relating to the administration of the
Plan. Upon election of the director nominees identified in Proposal 1 herein,
the Plan Committee will be comprised of all directors of the Company. The Plan
is intended to comply with, and will be administered in accordance with, Rule
16b-3 adopted under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereto.
Eligibility
Awards under the Plan may be made to directors, officers, or key
employees of the Company and its subsidiaries, and to nonemployee agents,
consultants, advisors, and other persons whom
19
<PAGE>
the Plan Committee believes have made or will make an important contribution to
the Company or any subsidiary thereof, subject to Section 422 of the Code, which
limits the grant of "Incentive Stock Options" to executive officers and other
senior managerial and professional employees.
Shares Available
Subject to adjustment as provided in the Plan, a maximum of
5,000,000 shares of the Company's common stock is reserved for issuance
thereunder. If an option or stock appreciation right granted under the Plan
expires or is terminated or canceled, the unissued shares subject to such option
or stock appreciation right are again available under the Plan. In addition, if
shares sold or awarded as a bonus under the Plan are forfeited to the Company or
repurchased by the Company, the number of shares forfeited or repurchased are
again available under the Plan. In the absence of an effective registration
statement under the Securities Act of 1933, as amended (the "Act"), all shares
granted under the Plan will be restricted as to subsequent resales or transfer,
pursuant to Rule 144 under the Act.
Term
Unless earlier terminated by the Plan Committee, the Plan will continue in
effect until the earlier of: (i) January 31, 2007, and (ii) the date on which
all shares available for issuance under the Plan have been issued and all
restrictions on such shares have lapsed. The Plan Committee may suspend or
terminate the Plan at any time except with respect to options, and shares
subject to restrictions, then outstanding under the Plan.
Stock Option Grants
The Plan Committee may grant Incentive Stock Options ("ISOs") and Non-
Statutory Stock Options ("NSOs") under the Plan. With respect to each option
grant, the Plan Committee will determine the number of shares subject to the
option, the option price, the period of the option, the time or times at which
the option may be exercised (including whether the option will be subject to any
vesting requirements and whether there will be any conditions precedent to
exercise of the option), and the other terms and conditions of the option. The
Plan specifies, however, that 6 months must elapse from the date of grant of the
options to the date of disposition by the option holder of the shares of common
stock underlying the option. Options granted under the plan expire six months
after the termination of the option holder's employment for reasons other than
permanent disability, retirement, death, or termination for cause. To date,
options to purchase __________ shares of Common Stock have been granted pursuant
to the Plan.
ISOs are subject to special terms and conditions. The aggregate fair
market value, on the date of the grant, of the common stock for which an ISO is
exercisable for the first time by the optionee during any calendar year may not
exceed $100,000. An ISO may not be granted to an employee who possesses more
than 10% of the total voting power of the Company's stock unless the option
price is at least 110% of the fair market value of the common stock subject to
the option on the date it is granted, and the option is not exercisable for 5
years after the date of grant. No ISO may be exercisable after 10 years from
the date of grant. The option price may not be less than 100% of the fair
market value of the common stock covered by the option at the date of grant.
In connection with the grant of NSOs or ISOs, the Plan Committee may
issue "Reload Options", which allow employees to receive options to purchase
that number of shares that shall equal (i) the number of shares of common stock
used to exercise underlying NSOs or ISOs, and (ii) the number of
20
<PAGE>
shares of common stock used to satisfy any tax withholding requirement incident
to the exercise of the underlying NSOs or ISOs.
Unless provided otherwise by the Plan Committee in connection with a
particular option grant, no vested option may be exercised unless at the time of
such exercise the holder of such option is employed by or in the service of the
Company or any subsidiary thereof, within three (3) years following termination
of employment by reason of death, retirement, or disability, and within six (6)
months following termination for any other reason, except for cause, in which
case all unexercised options shall terminate forthwith. No shares may be issued
pursuant to the exercise of an option until full payment therefor has been made.
Upon the exercise of an option, the number of shares reserved for issuance under
the Plan will be reduced by the number of shares issued upon exercise of the
option.
Stock Appreciation Rights
Two types of Stock Appreciation Rights ("SARs") may be granted under
the Plan: "Alternate SARs" and "Limited Rights." Alternate SARs are granted
concurrently with or subsequent to stock options, and permit the option holder
to be paid, in common stock, the excess of the fair market value of each share
of common stock underlying the stock option at the date of exercise of the
Alternate SARs over the fair market value of each share of common stock
underlying the option at the grant date. The exercise of Alternate SARs shall
be in lieu of the exercise of the stock option underlying the SARs, and upon
such exercise a corresponding number of stock options shall be canceled.
Alternate SARs are exercisable upon the same terms and conditions as are
applicable to the options underlying them. Upon the exercise of an Alternate
SAR, the number of shares reserved for issuance under the Plan will be reduced
by the number of shares issued.
Limited Rights may be issued concurrently with or subsequent to the
award of any stock option or Alternate SAR under the Plan. Limited Rights allow
the holder thereof to be paid appreciation on the stock option or the amount of
appreciation receivable upon exercise of an Alternate SAR in cash and in lieu of
exercising such options or rights. Limited Rights are exercisable only to the
same extent and subject to the same conditions and within the same time periods
as the stock options or Alternate SARs underlying such Limited Rights; provided,
however, that Limited Rights may not be exercised under any circumstances until
the expiration of 6 months following the date of grant. Limited Rights are
exercisable in full for a period of seven months following a change in control
of the Company. Upon the exercise of Limited Rights, the stock options or
Alternate SARs underlying such Limited Rights shall terminate. Cash payments
upon the exercise of Limited Rights will not reduce the number of shares of
common stock reserved for issuance under the Plan. No SARs have been granted
under the Plan.
Stock Bonus Awards
The Plan Committee may award shares of common stock as a stock bonus
under the Plan. The Plan Committee may determine the recipients of the awards,
the number of shares to be awarded, and the time of the award. Stock received
as a stock bonus is subject to the terms, conditions, and restrictions
determined by the Plan Committee at the time the stock is awarded. No stock
bonus awards have been granted under the Plan.
Cash Bonus Rights
The Plan Committee may grant cash bonus rights under the Plan either
outright or in connection with (i) options granted or previously granted, (ii)
SARs granted or previously granted, (iii)
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stock bonuses awarded or previously awarded, and (iv) shares issued under the
Plan. Bonus rights granted in connection with options entitle the optionee to a
cash bonus if and when the related option is exercised. The amount of the bonus
is determined by multiplying the excess of the total fair market value of the
shares acquired upon the exercise over the total option price for the shares by
the applicable bonus percentage. Bonus rights granted in connection with an SAR
entitle the holder to a cash bonus when the SAR is exercised, that is determined
by multiplying the amount received upon exercise of the SAR by the applicable
bonus percentage. Bonus rights granted in connection with stock bonuses entitle
the recipient to a cash bonus, in an amount determined by the Plan Committee,
either at the time the stock bonus is awarded or upon the lapse of any
restrictions to which the stock is subject. No bonus rights have been granted
under the Plan.
Non-Assignability of Plan Awards
No award under the Plan shall be assignable or transferable by the
recipient thereof, except by will or the laws of descent or pursuant to a
qualified domestic relations order as defined in the Code.
Changes in Capital Structure
The Plan provides that if the outstanding common stock of the Company
is increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation by
reason of any recapitalization, stock split or certain other transactions,
appropriate adjustment will be made by the Plan Committee in the number and kind
of shares available for grants under the Plan. In addition, the Plan Committee
will make appropriate adjustments in the number and kind of shares as to which
outstanding options will be exercisable. In the event of a merger,
consolidation or other fundamental corporate transformation, the Board may, in
its sole discretion, permit outstanding options to remain in effect in
accordance with their terms; to be converted into options to purchase stock in
the surviving or acquiring corporation in the transaction; or to be exercised,
to the extent then exercisable, during a period prior to the consummation of the
transaction established by the Plan Committee or as may otherwise be provided in
the Plan.
Tax Consequences
The following description addresses the federal income tax
consequences of the Plan. Although the Company believes the following
statements are correct based on existing provisions of the Code and legislative
history and administrative and judicial interpretations thereof, no assurance
can be given that changes will not occur which would modify such statements.
Also, such statements are intended only to provide basic information. Each Plan
participant should consult his or her own tax advisor concerning the tax
consequences of participation in the Plan because individual financial and
federal tax situations may vary, and state and local tax considerations may be
significant.
Certain options authorized to be granted under the Plan are intended
to qualify as ISOs for federal income tax purposes. Under federal income tax
law currently in effect, the optionee will recognize no income upon grant or
exercise of the ISO. If an employee exercises an ISO and does not dispose of
any of the option shares within two years following the date of grant and within
one year following the date of exercise, then any gain realized upon subsequent
disposition of the shares will be treated as income from the sale or exchange of
a capital asset held for more than one year. If an employee disposes of shares
acquired upon exercise of an ISO before the expiration of either the one-year
holding period or the two-year waiting period, any amount realized will be
taxable as ordinary compensation
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income in the year of such disqualifying disposition to the extent that the
lesser of the fair market value of the shares on the exercise date or the fair
market value on the date of disposition exceeds the exercise price. The Company
will not be allowed any deduction for federal income tax purposes at either the
time of the grant or the exercise of an ISO. Upon any disqualifying disposition
by an employee, the Company will generally be entitled to a deduction to the
extent the employee realized ordinary income.
Certain options authorized to be granted under the Plan will be
treated as NSOs for federal income tax purposes. Under federal income tax law
presently in effect, no income is realized by the grantee of an NSO until the
option is exercised. When the NSO is exercised, the optionee will realize
ordinary compensation income, and the Company will generally be entitled to a
deduction, in the amount by which the market value of the shares subject to the
option at the time of exercise exceeds the exercise price. Upon the sale of
shares acquired upon exercise of an NSO, the excess of the amount realized from
the sale over the market value of the shares on the date of exercise will be
taxable.
An employee who receives stock in connection with the performance of
services will generally realize income at the time of receipt unless the shares
are not substantially vested for purposes of Section 83 of the Code and no
election under Section 83(b) of the Code is filed within 30 days after the
original transfer. The Company generally will be entitled to a tax deduction in
the amount includable as income by the employee at the same time or times as the
employee recognizes income with respect to the shares. The Company is required
to withhold employment taxes on the amount of the income the employee
recognizes. A participant who receives a cash bonus right under the Plan
generally will recognize income equal to the amount of any cash bonus paid at
the time of receipt of the bonus, and the Company generally will be entitled to
a deduction equal to the income recognized by the participant.
Section 162(m) of the Code limits to $1 million per person the amount
the Company may deduct for compensation paid to any of its most highly
compensated officers in any year after 1993. Under proposed regulations,
compensation received through the exercise of an option or SAR will not be
subject to the $1 million limit if the option or SAR and the plan pursuant to
which it is granted meet certain requirements. The currently applicable
requirements are that the option or SAR be granted by a committee of at least
two disinterested directors and that the exercise price of the option or the SAR
be not less than fair market value of the Common Stock on the date of grant.
Accordingly, the Company believes compensation received on exercise of options
and SARs granted under the Plan in compliance with the above requirements will
not be subject to the $1 million deduction limit.
Amendments to Plan
The Plan Committee may at any time and from time to time terminate or
modify or amend the Plan in any respect, including in response to changes in
securities, tax or other laws or rules, regulations or regulatory
interpretations thereof applicable to the Plan or to comply with stock exchange
rules or requirements.
Subject to the Plan, the following options have been awarded:
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PLAN BENEFITS
Revised 1997 Stock Option
and Incentive Plan
NO. OF OPTIONS
TO PURCHASE
NAME AND POSITION DOLLAR VALUE ($) COMMON STOCK2
------------------------------------------ ---------------- --------------
John L. Reed $1,031,250 750,000(3)
CEO and director
Paul Dawson $ 0 300,000(4)
CEO, BriteSmile International Ltd.
Linda S. Oubre $ 425,000 225,000(5)
President, Chief Administrative Officer
and director
Andrew J. Hofmeister $ 268,750 235,000(6)
President Associated Center Division
Michael Whan $ 0 200,000(7)
President Worldwide Marketing
Paul A. Boyer $ 0 150,000(8)
Executive Vice President, Chief
Financial
Officer and Secretary
Stephen Miller $ 225,000 200,000(9)
Executive Vice President, Real Estate
And Construction
Jennifer A. Scott, director $ 56,250 20,000(10)
Peter Schechter, director $ 0 20,000(11)
Current Executive Officers $2,006,250 2,100,000
As a Group (7 persons)
Current Directors Who are Not $ 56,250 40,000
Executive Officers, as a Group
All Current or Former Employees $ _______ 1,626,100
Who are Not Executive Officers, as a Group
(1) As of July 14, 2000, the market value of the shares of Common Stock
underlying the options was $3.875, as quoted on Nasdaq.
(2) Exercise prices of options granted pursuant to the Plan range from $1.00 per
share to $13.375 per share.
(3) Exercisable at $2.50 per share, 350,000 of which are vested, the remainder
of which vest 100,000 per year beginning January 22, 2001.
(4) Exercisable at $6.00 per share, 140,000 of which are vested, the remainder
of which vest 40,000 per year beginning April 19, 2001.
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(5) Exercisable at $1.75 per share 80,000 of which are vested, the balance of
which vest 30,000 per year beginning July 15, 2001, and 25,000 shares,
exercisable at $5.875 per share beginning November 1, 2000.
(6) Represents 5,000 shares exercisable at $9.00 per share, 5,000 shares
exercisable at $6.81 per share, 100,000 shares exercisable at $1.75 per
share (40,000 of which are vested, 60,000 of which vest 15,000 each year
beginning August 1, 2000), 50,000 shares exercisable at $2.75 per year
(18,000 of which are vested, 32,000 of which vest 8,000 per year beginning
March 2, 2001), 50,000 shares exercisable at $13.375 per share (18,000of
which are vested, 32,000 of which vest 8,000 each year beginning May 19,
2001), and 25,000 shares exercisable at 5.875 per share beginning November
1, 2000.
(7) 200,000 shares exercisable at $7.39 per share, 100,000 of which are vested,
the balance of which vest 20,000 each year beginning April 24, 2001.
(8) 150,000 shares exercisable at $7.75 per share, 50,000 of which are vested,
the balance of which vest 20,000 each year beginning December 1, 2000.
(9) 200,000 shares exercisable at $2.75 per share, 80,000 of which are vested,
the balance of which vest 30,000 per year beginning March 2, 2001.
(10) Presently exercisable at $1.0625 per share.
(11) Presently exercisable at $11.25 per share.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF PROPOSAL 2
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PROPOSAL 3
TO APPROVE A SERIES OF TRANSACTIONS PURSUANT TO WHICH THE COMPANY (I) HAS ISSUED
CONVERTIBLE NOTES IN THE AGGREGATE PRINCIPAL AMOUNT OF $15,583,333 TO NINE
INVESTORS, INCLUDING SEVEN INVESTORS PRESENTLY AFFILIATED WITH THE COMPANY,
WHICH NOTES ARE CONVERTIBLE INTO 2,521,574 SHARES OF COMMON STOCK, (II) HAS
ISSUED WARRANTS TO THE INVESTORS TO PURCHASE A TOTAL OF 1,260,787 SHARES OF
COMMON STOCK, AND (III) MAY ISSUE AS PART OF THE SAME OFFERING ADDITIONAL
CONVERTIBLE NOTES IN THE AGGREGATE PRINCIPAL AMOUNT OF AN ADDITIONAL $4,416,667
(WHICH NOTES WOULD BE CONVERTIBLE INTO 714,671 SHARES OF COMMON STOCK), TOGETHER
WITH WARRANTS TO PURCHASE UP TO AN ADDITIONAL 357,335 SHARES OF COMMON STOCK.
THE NET EFFECT OF THE FORGOING TRANSACTIONS MAY BE THE ISSUANCE OF MORE THAN
20% OF THE TOTAL NUMBER OF SHARES OF THE COMPANY'S COMMON STOCK ISSUED AND
OUTSTANDING PRIOR TO THE COMMENCEMENT OF SUCH TRANSACTIONS.
Introduction
On June 29, 2000, the Company closed a Securities Purchase Agreement
("Purchase Agreement") with nine investors (the "Investors"), seven of whom had
previously been affiliated with the Company, its executive officers and
directors. Pursuant to the Purchase Agreement, the Investors purchased the
Company's 5% Subordinated Convertible Notes due June 29, 2005 (the "Notes") in
the aggregate principal amount of $15,583,333.
The Notes are convertible into shares of the Company's Common Stock at a
per share conversion price of $6.18, which is 120% of the average of the closing
bid price of the Common Stock during the ten trading day period immediately
prior to June 27, 2000, the date the transaction documents were signed.
The Company also issued to the Investors, pro rata, warrants (the
"Warrants") to purchase a total of 1,260,787 shares of Common Stock, which have
a term of five years and an exercise price of $7.21 per share.
The conversion price of the Notes and the exercise price of the Warrants
are subject to a one-time adjustment downward in nine months from closing to as
low as $3.8625 per share in the event that _______________.
The Company is actively negotiating to sell up to an additional $4.5
million of the Notes to third parties on substantially similar terms. In
addition, the Company has received a commitment from 4 directors and
shareholders to purchase an additional $3.9 million of the Notes and
accompanying Warrants on or before July 31, 2000 if the Company does not sell
such amount of Notes to third parties. As of date of this Proxy Statement, no
additional Notes have been purchased in the offering.
As of the date hereof, none of the Notes has been converted into shares of
Common Stock, and none of the Warrants have been exercised.
Two of the Investors purchasing a total of $3,500,000 principal amount of
the Notes are unaffiliated with the Company. These unaffiliated investors
include CapEx, L.P., and Pacific Mezzanine Fund. Seven of the Investors,
purchasing an aggregate amount of $12,083,332 of the Notes, are presently
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<PAGE>
affiliates of the Company. The affiliated Investors include LCO Investments
Limited (shareholder and affiliated with director Anthony Pilaro), John Reed
(shareholder, CEO and director), Gasper Lazzara, Jr. (director), Andrew McKelvey
(shareholder and affiliated with director Bradford Peters), and Pequot Private
Equity Fund II, L.P., Pequot International Fund, Inc., and Pequot Partners Fund,
L.P. (shareholders and affiliated with director Gerald Poch).
The Company is obligated to file a Registration Statement with the
Securities and Exchange Commission as required by the Purchase Agreement to
register the shares of Common Stock underlying the Notes, the Investor Warrants,
and the Placement Agent Warrants by no later than August ___, 2000. The
Registration Statement has not been filed and is not effective as of the date of
this Proxy Statement.
The following table identifies the total number of shares of Common Stock
that would be issued assuming the hypothetical conversion, exercise or issuance
of all of the Notes and Warrants (i) granted in the Note offering to date, and
(ii) assuming aggregate sales of Notes and related Investor Warrants in the Note
offering in the principal amount of $20,000,000. There can be no guarantee that
the Company will be successful in selling an additional $4,416,667 principal
amount of Notes to bring the total principal amount sold to $20,000,000. For
purposes of this hypothetical conversion, it is assumed that the conversion
price of the Notes and the exercise price of the Warrants will not be reset as
provided in the reset provisions described above. However, there can be no
guarantee that such conversion and exercise prices will not be reset. If the
conversion price is reset to the lowest possible per share price of $3.8625, the
aggregate number of shares to be issued to Investors upon conversion of $20
million of Notes and related Warrants would be _________________________.
Shares of Shares of
Common Common
Stock Stock
Issuable Issuable
Upon Full Upon Full
Note Warrant
Conversion Exercise at
Note at $6.18 per $7.21 per
Convertible Security Principal Share Share
----------------------------------- ----------- ------------ -----------
Convertible Notes Granted to Date $15,583,333 2,521,574 1,260,787
Convertible Notes to be Issued if
Full $25 Million of Notes are Sold $ 4,416,667 714,671 357,335
----------- ------------ -----------
Total $20,000,000 3,236,245 1,618,122
=========== ============ ===========
Nasdaq National Market Shareholder Approval Requirement
The Common Stock is quoted on the Nasdaq National Market. Because of that
listing, the Company is contractually obligated to comply with applicable rules
of the Nasdaq Stock Market. Nasdaq Stock Market Rule 4310(c)(25)(H) requires
shareholder approval for the issuance of shares of common stock in a transaction
or series of transactions involving, among other types of transactions, the sale
or issuance by the issuer of common stock (or securities convertible into or
exercisable for common stock) equal to 20% or more of the common stock or 20% or
more of the voting power obtained before the issuance for less than the
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<PAGE>
greater of book or market value of the stock. As is described in the table
above, the conversion of all or substantially of the total aggregate amount of
the Notes, together with the issuance of the shares of Common Stock issuable
upon exercise of the Warrants, could result in the issuance by the Company of
more than 20% of the Common Stock outstanding before the Note Purchase
Agreements were executed.
In addition, Nasdaq National Market rule 4460(i)(1)(A) requires shareholder
approval for the issuance of shares of common stock under an arrangement
pursuant to which stock may be acquired by officers or directors. As discussed
above, seven of the Investors who have purchased an aggregate of $12,083,332 of
the Notes are presently affiliates of the Company. These Investors collectively
own 16,872,610, or ____ %, of the _______________ shares of Common Stock
outstanding as of the record date and entitled to vote at the Annual Meeting.
In addition, the Company has received a commitment from 4 directors and
shareholders to purchase an additional $3.9 million of the Notes and
accompanying Warrants on or before July 31, 2000 if the Company does not sell
such amount of Notes to third parties.
In recognition of the forgoing requirements of the Nasdaq Stock Market, the
Company agreed under the Note Purchase Agreements that the Board of Directors
would recommend that the shareholders approve the sale of the Notes and the
related transactions to the extent such transactions have been entered into with
officers and directors of the Company or their affiliates, and to the extent
that such transactions could result in the issuance of more than 20% of the
Common Stock outstanding immediately prior to such series of transactions.
The Company's Board of Directors now solicits your proxy to be voted to
approve such transactions by approving this Proposal No. 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 3
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PROPOSAL 4 -- APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors of the Company has selected Ernst & Young LLP
as the independent auditors for the Company for the transition fiscal year of
the Company ending December 31, 2000. Ernst & Young LLP served as the Company's
independent auditors for the fiscal year ended April 1, 2000.
At the Annual Meeting, shareholders will be asked to ratify the
selection by the Board of Directors of Ernst & Young LLP as the Company's
independent auditors.
Representatives of Ernst & Young LLP may attend the 2000 Annual
Meeting. If they attend, they will have an opportunity to make a statement if
they desire to do so, and they will be available to answer appropriate questions
from shareholders.
THE BOARD RECOMMENDS SHAREHOLDER APPROVAL OF THE SELECTION OF AUDITORS.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not intend to present, and has not been informed that any other
person intends to present, a matter for action at the 2000 Annual Meeting other
than as set forth herein and in the Notice of Annual Meeting. If any other
matter properly comes before the meeting, it is intended that the holders of
proxies will act in accordance with their best judgment.
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. In addition to the solicitation of proxies by mail,
certain of the officers and employees of the Company, without extra
compensation, may solicit proxies personally or by telephone, and, if deemed
necessary, third party solicitation agents may be engaged by the Company to
solicit proxies by means of telephone, facsimile or telegram, although no such
third party has been engaged by the Company as of the date hereof. The Company
will also request brokerage houses, nominees, custodians and fiduciaries to
forward soliciting materials to the beneficial owners of common stock held of
record and will reimburse such persons for forwarding such material. The cost
of this solicitation of proxies will be borne by the Company.
ANNUAL REPORT
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB (INCLUDING
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES) FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO
THE COMPANY - ATTENTION: PAUL A. BOYER, SECRETARY, 490 North Wiget Lane, Walnut
Creek, California 94598. A request for a copy of the Company's Annual Report on
Form 10-KSB must set forth a good-faith representation that the requesting party
was either a holder of record or a beneficial owner of Common Stock of the
Company on July 21, 2000. Exhibits to the Form 10-KSB, if any, will be mailed
upon similar request and payment of specified fees to cover the costs of copying
and mailing such materials.
A copy of the Company's 2000 Annual Report to Shareholders is being
mailed with this Proxy Statement, but is not deemed a part of the proxy
soliciting material.
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<PAGE>
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be considered for inclusion in
the proxy statement for presentation in connection with the 2001 Annual Meeting
of Shareholders must be received by the Company by December 15, 2000. The
proposal must be in accordance with the provisions of Rule 14a-8 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934. The Company suggests that any such request be submitted by certified
mail, return receipt requested. The Board of Directors will review any proposal
which is timely received, and determine whether it is a proper proposal to
present to the 2001 Annual Meeting.
The enclosed Proxy is furnished for you to specify your choices with
respect to the matters referred to in the accompanying notice and described in
this Proxy Statement. If you wish to vote in accordance with the Board's
recommendations, merely sign, date and return the Proxy in the enclosed envelope
which requires no postage if mailed in the United States. A prompt return of
your Proxy will be appreciated.
By Order of the Board of Directors
Paul A. Boyer, Executive Vice President, CFO,
and Secretary
Walnut Creek, California
July 28, 2000
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APPENDICES
1. FORM OF PROXY
31
<PAGE>
PROXY
BriteSmile, Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John Reed and Paul Boyer and each of them as
Proxies, with full power of substitution, and hereby authorizes them to
represent and vote, as designated below, all shares of Common Stock of the
Company held of record by the undersigned on July 21, 2000 at the Annual
Meeting of Shareholders to be held at 490 North Wiget Lane, Walnut Creek,
California 94598 on Friday, August 25, 2000, at 2:00 o'clock p.m., local time,
or at any adjournment thereof.
1. Election of Directors.
[_] FOR [_] WITHHOLD AS TO ALL [_] FOR ALL EXCEPT
(INSTRUCTIONS: IF YOU MARK THE "FOR ALL EXCEPT" CATEGORY ABOVE, INDICATE THE
NOMINEE(S) AS TO WHICH YOU DESIRE TO WITHHOLD AUTHORITY BY STRIKING A LINE
THROUGH SUCH NOMINEE(S) NAME IN THE LIST BELOW:)
John L. Reed Anthony M. Pilaro Gerald Poch Bradford G. Peters
R. Eric Montgomery Linda S. Oubre Peter Schechter Harry Thompson Dr. Gaspar
Lazzara, Jr.
2. To approve and ratify an amendment to the Company's 1997 Stock Option and
Incentive Plan, increasing the number of shares subject to issuance under
the Plan from 4,000,000 to 5,000,000.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To ratify and approve a series of transactions pursuant to which the Company
(i) has issued its 5% convertible subordinated notes in the aggregate
principal amount of $15,583,333 to nine investors, including seven investors
presently affiliated with the Company, which notes are convertible into
2,521,574 shares of common stock, (ii) has issued warrants to the investors
to purchase a total of 1,260,787 shares of common stock; and (iii) may issue
as part of the same note offering additional convertible notes in the
aggregate principal amount of $4,416,667 (which notes would be convertible
into 714,671 shares of common stock), together with investor warrants to
purchase up to an additional 357,335 shares of common stock. The net effect
of the forgoing transactions may be the issuance of more than 20% of the
total number of shares of the Company's common stock issued and outstanding
prior to the commencement of such transactions
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
4. To approve and ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the Company's transition fiscal year ending
December 31, 2000.
[_] FOR [_] AGAINST [_] ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, and 4.
Date: ____________________________
__________________________________
Signature
__________________________________
Signature of joint holder, if any
PLEASE SIGN EXACTLY AS THE SHARES ARE ISSUED. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
PLEASE DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
