SUBSCRIPTION AGREEMENT
BriteSmile, Inc.
000 Xxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
Ladies and Gentlemen:
The undersigned subscriber ("Subscriber") hereby tenders this Subscription
Agreement (this "Agreement") in accordance with and subject to the terms and
conditions set forth herein:
1. Subscription.
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1.1. Subscriber hereby subscribes for and agrees to purchase the number of
shares (the "Shares") of common stock, par value $.001 per share (the "Common
Stock"), of BriteSmile, Inc., 000 Xxxxx Xxxxx Xxxx, Xxxxxx Xxxxx, XX 00000, a
Utah corporation (the "Company"), indicated on the signature page attached
hereto at the purchase price set forth on such signature page (the "Purchase
Price"). Subscriber has made payment by wire transfer of funds in accordance
with instructions from the Company in the full amount of the Purchase Price of
the Common Stock for which Subscriber is subscribing (the "Payment").
1.2. This Agreement is part of an offering of shares of Common Stock being
conducted by Stonegate Securities, Inc. (the "Placement Agent") on behalf of the
Company (the "Offering"). The Company agrees that it shall not undertake any
other financings involving its Equity Common Stock (as defined below) on terms
more favorable than those in the Offering until the later of ninety (90) days
after the Initial Closing Date or 30 days after the filing of the Registration
Statement (as that term is defined in Appendix I hereto) covering all of the
Common Stock, without the prior written approval of the Placement Agent. The
term "Equity Common Stock" as used herein shall mean all capital stock of the
Company, plus all rights, warrants, options, convertible Common Stock or
indebtedness, exchangeable Common Stock or indebtedness, or other rights,
exercisable for or convertible into, directly or indirectly, capital stock of
the Company. Notwithstanding the above, "Equity Common Stock" shall not include
any Common Stock of the Company issued pursuant to any incentive or stock option
plan of the Company approved by the stockholders or the board of directors of
the Company.
1.3. Subscriber understands that it will not earn interest on any funds
held by the Company prior to the date of closing of the Offering. The Placement
Agent and the Company may hold an initial closing of the Offering (the "Initial
Closing") at any mutually agreeable time. The date of the Initial Closing is
hereinafter referred to as the "Initial Closing Date". The Company may hold
additional interim closings after the Initial Closing provided that the terms of
the Offering are the same for each closing. Any such interim closings are each
hereinafter referred to as an "Additional Closing" and shall occur on one or
more dates each hereinafter referred to as an "Additional Closing Date." The
Initial Closing Date and the Additional Closing Dates are each hereinafter
sometimes referred to as a "Closing Date." The last Closing is sometimes
referred to herein as the "Final Closing." The Final Closing shall occur no
later than five (5) business days after the Initial Closing. Upon receipt by the
Company of the requisite payment for all Common Stock to be purchased by the
subscribers whose subscriptions are accepted at the Initial Closing or any
Additional Closing, as applicable, and subject to the satisfaction of certain
conditions, the Common Stock so purchased will be issued in the name of each
such subscriber, and the name of such subscriber will be registered on the stock
transfer books of the Company as the record owner of such Common Stock. The
Company will promptly thereafter issue to each subscriber participating in such
closing a stock certificate for the Common Stock so purchased.
1.4. Subscriber hereby agrees to be bound hereby upon (i) execution and
delivery to the Company, in care of the Placement Agent, of the signature page
to this Agreement and (ii) written acceptance on the Initial
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Closing Date or an Additional Closing Date, as the case may be, by the Company
and the Placement Agent of Subscriber's subscription, which shall be confirmed
by faxing to the Subscriber the signature page to this Agreement that has been
executed by the Company (the "Subscription").
1.5. Prior to acceptance of this Agreement by the Company and the Placement
Agent, Subscriber agrees that the Company and Placement Agent may, as they
mutually agree in their sole and absolute discretion, reduce the Subscription to
any number of shares of Common Stock that in the aggregate do not exceed the
number of shares of Common Stock hereby applied for without any prior notice to
or further consent by Subscriber; provided, however, if any of Subscriber's
Subscription is so reduced, Subscriber may withdraw his entire Subscription.
Subscriber hereby irrevocably constitutes and appoints the Placement Agent and
each officer of the Placement Agent, each of the foregoing acting singularly, in
each case with full power of substitution, the true and lawful agent and
attorney-in-fact of Subscriber, with full power and authority in Subscriber's
name, place and stead to amend this Agreement, including, in each case,
Subscriber's signature page thereto, to effect any of the foregoing provisions
of this Section 1.5.
1.6. Subscriber agrees and understands that the principals of the Placement
Agent may purchase Common Stock in this offering for their own account.
2. Offering Material.
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2.1. Subscriber represents and warrants that it is in receipt of and that
it has carefully read the following items:
(a) The Company's Due Diligence Binder prepared by the Placement
Agent;
(b) The Company's Private Placement Memorandum dated April 20, 2001
(the "Memorandum");
(c) The Company's Form 10-K for the Nine-Month Transition Period ended
December 30, 2000 (the "Form 10-K"); and
(d) All other documents filed by the Company with the Commission
subsequent to the Company's Form 10-K and prior to the Closing Date.
The documents listed in this Section 2.1 shall be referred to herein as the
"Disclosure Documents."
3. Conditions to Subscriber's Obligations.
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3.1. The obligation of Subscriber to close the transaction contemplated by
this Agreement (the "Transaction") is subject to the satisfaction on or prior to
the Closing Date of the following conditions set forth in Sections 3.2 through
3.5 hereof.
3.2. The Company shall have executed this Agreement and delivered the same
to the Placement Agent.
3.3. The Board of Directors of the Company shall have adopted resolutions
consistent with Section 4.1(d) below in a form reasonably acceptable to the
Placement Agent.
3.4. Subscriber shall have received copies of all documents and information
which it may have reasonably requested in connection with the Offering.
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3.5. The Company shall have caused its legal counsel to deliver to
Subscriber a legal opinion in substantially the form attached hereto as Appendix
II.
3.6 No stop order or suspension of trading shall have been imposed by
NASDAQ, the SEC, or any other governmental regulatory body with respect to
public trading in shares of Common Stock of the Company.
4. Representations and Warranties; Covenants; Survival.
---------------------------------------------------
4.1. The Company represents and warrants to Subscriber that, at the date of
this Agreement and at each Closing Date on which Subscriber purchases Shares:
(a) The Company and each of its subsidiaries are corporations duly
organized, validly existing and in good standing under the laws of their states
of incorporation, with all requisite corporate power and authority to carry on
the business in which they are engaged and to own the properties they own, and
the Company has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The Company
and each of its subsidiaries are duly qualified and licensed to do business and
are in good standing in all jurisdictions where the nature of their business
makes such qualification necessary, except where the failure to be qualified or
licensed would not have a material adverse effect on the business of the Company
and its subsidiaries, taken as a whole.
(b) There are no legal actions or administrative proceedings or
investigations instituted, or to the best knowledge of the Company threatened,
against the Company, that could reasonably be expected to have a material
adverse effect on the Company or any subsidiary, any of the Common Stock, or the
business of the Company and its subsidiaries, or which concerns the transactions
contemplated by this Agreement.
(c) The Company's audited consolidated financial statements as of
December 30, 2000, contained in the Form 10-K, including the notes contained
therein, fairly present the consolidated financial position of the Company at
the respective dates thereof and the results of its consolidated operations for
the periods purported to be covered thereby. Such financial statements have been
prepared in conformity with generally accepted accounting principles
consistently applied with prior periods subject to any comments and notes
contained therein. All liabilities, contingent and other, of the Company and its
subsidiaries, are set forth in the financial statements as of December 30, 2000
contained in the Form 10-K, excepting only liabilities incurred in the ordinary
course of business subsequent to December 30, 2000, and liabilities of the type
not required under generally accepted accounting principles to be reflected in
such financial statements. Since December 30, 2000, there has been no material
adverse change in the financial condition of the Company from the financial
condition stated in such financial statements. Prior to the issuance of shares
contemplated by this Agreement, the Company has 29,843,044 shares of Common
Stock outstanding.
(d) The Company, by appropriate and required corporate action, has, or
will have prior to the Initial Closing, duly authorized the execution of this
Agreement and the issuance and delivery of the Common Stock. The Common Stock is
not subject to preemptive, antidilution or other rights of any stockholders of
the Company and when issued in accordance with the terms of this Agreement and
the Articles of Incorporation of the Company, the Common Stock will be validly
issued, fully paid and nonassessable and free and clear of all pledges, liens
and encumbrances.
(e) Performance of this Agreement and compliance with the provisions
hereof will not violate any provision of any applicable law or of the Articles
of Incorporation or Bylaws of the Company, or of any of its subsidiaries, and,
will not conflict with or result in any breach of any of the terms, conditions
or provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon, any of the properties or
assets of the Company, or of any of its subsidiaries, pursuant to the terms of
any indenture, mortgage, deed of trust or other agreement or instrument binding
upon the Company, or any of its subsidiaries,
Page 3
other than such breaches, defaults or liens which would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(f) The Disclosure Documents, taken together, do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein to make the statements contained therein not misleading.
(g) The Company has provided Subscriber with all material public
information in connection with the business of the Company and the transactions
contemplated by this Agreement, and no representation or warranty made, nor any
document, statement, or financial statement prepared or furnished by the Company
in connection herewith contains any untrue statement of material fact, or omits
to state a material fact necessary to make the statements or facts contained
herein or therein not misleading.
(h) This Agreement, including Appendix I, has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
(i) No registration, authorization, approval, qualification or consent
of any court or governmental authority or agency is necessary in connection with
the execution and delivery of this Agreement or the offering, issuance or sale
of the Shares under this Agreement.
(j) The Company has timely filed with the Securities and Exchange
Commission (the "Commission") all documents required to be filed by the Company
under the Exchange Act of 1934, as amended (the "Exchange Act").
(k) The Company intends to use the proceeds from the sale of the
Shares for the purposes described in the Memorandum. The Company is not now, and
after the sale of the Shares under this Agreement and under all other agreements
and the application of the net proceeds from the sale of the Shares described in
the proceeding sentence will not be, an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(l) Subject to the accuracy of the Subscribers' representations and
warranties in Section 7 of this Agreement, the offer, sale, and issuance of the
Shares in conformity with the terms of this Agreement constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act and
from the registration or qualification requirements of the laws of any
applicable state or United States jurisdiction.
(m) Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf, has directly or indirectly made any offers or
sales in any security or solicited any offers to buy any security under
circumstances that would require registration under the Securities Act of the
issuance of the Shares to the Purchasers. The issuance of the Shares to the
Purchasers will not be integrated with any other issuance of the Company's
securities (past, current or future) for purposes of the Securities Act or any
applicable rules of Nasdaq. The Company will not make any offers or sales of any
security (other than the Shares) that would cause the offering of the Shares to
be integrated with any other offering of securities by the Company for purposes
of any registration requirement under the Securities Act or any applicable rules
of Nasdaq.
(n) The Company is eligible, and will take all action required to
continue to be eligible, to register securities for resale with the SEC under
Form S-3 promulgated under the Securities Act.
(o) The Company shall issue a press release and file a Current Report
on Form 8-K with the SEC regarding the closing of the Offering within three (3)
business days after the Final Closing.
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5. Transfer and Registration Rights
--------------------------------
5.1. Subscriber acknowledges that it is acquiring the Common Stock for its
own account and for the purpose of investment and not with a view to any
distribution or resale thereof within the meaning of the Securities Act of 1933,
as amended (the "Act"), and any applicable state or other securities laws
("State Acts"). Subscriber further agrees that it will not sell, assign,
transfer or otherwise dispose of any of the Common Stock in violation of the Act
or State Acts and acknowledges that, in taking unregistered Common Stock, it
must continue to bear economic risk in regard to its investment for an
indefinite period of time because of the fact that such Common Stock has not
been registered under the Act or State Acts and further realizes that such
Common Stock cannot be sold unless subsequently registered under the Act and
State Acts or an exemption from such registration is available. Subscriber
further recognizes that the Company is not assuming any obligation to register
such Common Stock except as expressly set forth herein. Subscriber also
acknowledges that appropriate legends reflecting the status of the Common Stock
under the Act and State Acts may be placed on the face of the certificates for
such Common Stock at the time of their transfer and delivery to the holder
thereof. This Agreement is made with Subscriber in reliance upon Subscriber's
above representations.
5.2. The Common Stock issued pursuant to this Agreement may not be
transferred except in a transaction which is in compliance with the Act and
State Acts. Except as provided hereafter with respect to registration of the
Common Stock or sale under Rule 144 contemplated in Appendix I, it shall be a
condition to any such transfer that the Company shall be furnished with an
opinion of counsel, which counsel and opinion shall be reasonably satisfactory
to the Company, to the effect that the proposed transfer would be in compliance
with the Act and State Acts. Notwithstanding the foregoing, furnishing such
opinion of counsel shall not be a condition to any transfer of Common Stock to
an affiliate of Subscriber, including for this purpose if Subscriber is an
investment company, any fund or account advised by Subscriber's investment
adviser or any affiliate thereof.
5.3. The Company hereby grants to Subscriber the registration rights set
forth in Appendix I attached hereto. Appendix I is incorporated into, and made a
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part of, this Agreement.
6. Closing.
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6.1. The closing of the sale of the Common Stock to Subscriber shall take
place at the offices of the Placement Agent at such time as the Company and
Placement Agent shall mutually agree, provided that the Final Closing shall
occur no later than five (5) business days after the Initial Closing.
7. Subscriber Representations. Subscriber hereby represents, warrants and
--------------------------
acknowledges and agrees with the Company and Placement Agent as follows:
7.1. Subscriber has been furnished with and has carefully read the
Disclosure Documents as set forth in Section 2.1 hereto and is familiar with the
terms of the Offering. With respect to individual or partnership tax and other
economic considerations involved in this investment, Subscriber is not relying
on the Company or the Placement Agent (or any agent or representative of any of
them). Subscriber has carefully considered and has, to the extent Subscriber
believes such discussion necessary, discussed with Subscriber's legal, tax,
accounting and financial advisers the suitability of an investment in the Common
Stock for Subscriber's particular tax and financial situation.
7.2. Subscriber has had an opportunity to inspect relevant documents
relating to the organization and operations of the Company. Subscriber
acknowledges that all documents, records and books pertaining to this investment
which Subscriber has requested have been made available for inspection by
Subscriber and Subscriber's attorney, accountant or other adviser(s).
Page 5
7.3. Subscriber and/or Subscriber's advisor(s) has/have had a reasonable
opportunity to ask questions of and receive answers and to request additional
relevant information from a person or persons acting on behalf of the Company
concerning the Offering.
7.4. Subscriber is not subscribing for the Common Stock as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio or presented at any seminar.
7.5. Subscriber is an "accredited investor," within the meaning of Rule
501(a) of Regulation D under the Act ("Regulation D"). Subscriber, by reason of
Subscriber's business or financial experience or the business or financial
experience of Subscriber's professional advisers who are unaffiliated with and
who are not compensated by the Company or the Placement Agent or any affiliate
of either of them, directly or indirectly, can be reasonably assumed to have the
capacity to protect Subscriber's own interests in connection with the
transaction. Subscriber further acknowledges that he has read the written
materials provided by the Company.
7.6. Subscriber has adequate means of providing for Subscriber's current
financial needs and contingencies, is able to bear the substantial economic
risks of an investment in the Common Stock for an indefinite period of time, has
no need for liquidity in such investment and, at the present time, could afford
a complete loss of such investment.
7.7. Subscriber has such knowledge and experience in financial, tax and
business matters so as to enable Subscriber to use the information made
available to Subscriber in connection with the Offering to evaluate the merits
and risks of an investment in the Common Stock and to make an informed
investment decision with respect thereto.
7.8. Subscriber acknowledges that the Common Stock herein subscribed for
has not been registered under the Act or under any State Act. Subscriber
understands further that in absence of an effective Registration Statement, the
Common Stock can only be sold pursuant to some exemption from registration, such
as Rule 144 of the Act, which requires, among other conditions, that the Common
Stock must be held for a minimum of one (1) year.
7.9. Subscriber recognizes that investment in the Common Stock involves
substantial risks. Subscriber further recognizes that no Federal or state
agencies have passed upon this offering of the Common Stock or made any finding
or determination as to the fairness of this investment.
7.10. Subscriber acknowledges that each certificate representing the Common
Stock shall contain a legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR
UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT
BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS REGISTERED UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO
AVAILABLE EXEMPTIONS FROM SUCH REGISTRATION,
PROVIDED THAT THE SELLER DELIVERS TO THE COMPANY AN
OPINION OF COUNSEL (WHICH OPINION AND COUNSEL ARE
SATISFACTORY TO THE COMPANY) CONFIRMING THE
AVAILABILITY OF SUCH EXEMPTION. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
Page 6
FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
7.11. If this Agreement is executed and delivered on behalf of a
partnership, corporation, trust or estate: (i) such partnership, corporation,
trust or estate has the full legal right and power and all authority and
approval required (a) to execute and deliver, or authorize execution and
delivery of, this Agreement and all other instruments executed and delivered by
or on behalf of such partnership, corporation, trust or estate in connection
with the purchase of the Common Stock, (b) to delegate authority pursuant to a
power of attorney and (c) to purchase and hold such Common Stock; (ii) the
signature of the party signing on behalf of such partnership, corporation, trust
or estate is binding upon such partnership, corporation, trust or estate; and
(iii) such partnership, corporation or trust has not been formed for the
specific purpose of acquiring the Common Stock, unless each beneficial owner of
such entity is qualified as an "accredited investor" within the meaning of
Regulation D and has submitted information substantiating such individual
qualification.
7.12. If Subscriber is a retirement plan or is investing on behalf of a
retirement plan, Subscriber acknowledges that investment in the Common Stock
poses risks in addition to those associated with other investments, including
the inability to use losses generated by an investment in the Common Stock to
offset taxable income.
7.13. The information furnished by Subscriber in the Subscriber
Questionnaire signed by Subscriber is true and accurate as of the date thereof.
8. Understandings.
--------------
Subscriber understands, acknowledges and agrees with the Company and the
Placement Agent as follows:
8.1. Subscriber hereby acknowledges and agrees that upon notice of
acceptance from the Company and Placement Agent pursuant to Section 1.3, the
Subscription hereunder is irrevocable by Subscriber, that, except as required by
law, Subscriber is not entitled to cancel, terminate or revoke this Agreement or
any agreements of Subscriber hereunder and that this Subscription Agreement and
such other agreements shall survive the death or disability of Subscriber and
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors, legal representatives
and permitted assigns. If Subscriber is more than one person, the obligations of
Subscriber hereunder shall be joint and several and the agreements,
representations, warranties and acknowledgments herein contained shall be deemed
to be made by and be binding upon each such person and his or her heirs,
executors, administrators, successors, legal representatives and permitted
assigns.
8.2. No federal or state agency has made any findings or determination as
to the fairness of the terms of this Offering for investment nor any
recommendations or endorsement of the Common Stock.
8.3. The Offering is intended to be exempt from registration under the Act
by virtue of Section 4(2) of the Act and the provisions of Rule 506 of
Regulation D thereunder, which is in part dependent upon the truth, completeness
and accuracy of the statements made by Subscriber herein and in Subscriber
Questionnaire.
8.4. It is understood that in order not to jeopardize the Offering's exempt
status under Section 4(2) of the Act and Regulation D, any transferee may, at a
minimum, be required to fulfill the investor suitability requirements
thereunder..
8.5. The Placement Agent will receive compensation from the Company in
connection with the Offering but is not guaranteeing or assuming responsibility
for the operation or possible liability of the Company, including, without
limitation, compliance by the Company with the agreements entered into in
connection with the Offering, and the Placement Agent will not supervise or
participate in the operation or management of the
Page 7
Company. The Company shall indemnify and hold harmless the Subscribers from and
against all fees, commissions or other payments owing by the Company to the
Placement Agent or any other person or firm acting on behalf of the Company
hereunder.
8.6. No person or entity acting on behalf, or under the authority, of
Subscriber is or will be entitled to any broker's, finder's or similar fee or
commission in connection with this Subscription.
8.7. Subscriber acknowledges that the information furnished in this
Agreement by the Company or the Placement Agent to Subscriber or its advisers in
connection with the Offering, is confidential and nonpublic and agrees that all
such written information which is material and not yet publicly disseminated by
the Company shall be kept in confidence by Subscriber and neither used by
Subscriber for Subscriber's personal benefit (other than in connection with this
Subscription), nor disclosed to any third party for any reason; provided,
however, that this obligation shall not apply to any such information that (i)
is part of the public knowledge or literature and readily accessible at the date
hereof, (ii) becomes a part of the public knowledge or literature and readily
accessible by publication (except as a result of a breach of this provision) or
(iii) is received from third parties (except third parties who disclose such
information in violation of any confidentiality agreements or obligations,
including, without limitation, any subscription agreement entered into with the
Company). The representations, warranties and agreements of Subscriber and the
Company contained herein and in any other writing delivered in connection with
the Offering shall be true and correct in all material respects on and as of the
Closing Date of such Subscription as if made on and as of the date the Company
executes this Agreement and shall survive the execution and delivery of this
Agreement and the purchase of the Common Stock .
8.8. IN MAKING AN INVESTMENT DECISION, SUBSCRIBER MUST RELY ON ITS OWN
EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED. THE COMMON STOCK HAS NOT BEEN RECOMMENDED BY ANY FEDERAL OR
STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
9. Miscellaneous.
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9.1. Except as set forth elsewhere herein, any notice or demand to be given
or served in connection herewith shall be deemed to be sufficiently given or
served for all purposes by being sent as registered or certified mail, return
receipt requested, postage prepaid, in the case of the Company, addressed to it
at the address set forth below:
BriteSmile, Inc.
000 Xxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxx, Chief Executive Officer
and in the case of Subscriber to the address for correspondence set forth
on the Subscriber Questionnaire.
9.2. This Agreement shall be enforced, governed and construed in all
respects in accordance with the laws of the State of Utah, and shall be binding
upon Subscriber, Subscriber's heirs, estate, legal representatives, successors
and assigns and shall inure to the benefit of the Company, the Placement Agent,
and their respective successors and assigns. If any provision of this Agreement
is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed to be modified to conform with such statute or
rule of law. Any provision hereof that may prove invalid or unenforceable under
any law shall not affect the validity or enforceability of any other provision
hereof.
Page 8
9.3. In any action, proceeding or counterclaim brought to enforce any of
the provisions of this Agreement or to recover damages, costs and expenses in
connection with any breach of the Agreement, the prevailing party shall be
entitled to be reimbursed by the opposing party for all of the prevailing
party's reasonable outside attorneys' fees, costs and other out-of-pocket
expenses incurred in connection with such action, proceeding or counterclaim.
9.4. This Agreement (including Appendix I) and the Subscriber
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Questionnaire constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth herein. The Company
acknowledges that all material facts upon which it has relied in forming its
decision to enter into this Agreement are expressly set forth herein and further
acknowledges that the Subscriber has not made any representations, express or
implied, which are not set expressly set forth herein. This Agreement supercedes
all prior agreements and understandings among the parties hereto with respect to
the subject matter hereof.
9.5. The Company shall indemnify, defend and hold harmless Subscriber and
each of its agents, partners, members, officers, directors, representatives, or
affiliates (collectively, the "Subscriber Indemnities") against any and all
losses, liabilities, claims and expenses, including reasonable attorneys' fees
("Losses"), sustained by Subscriber Indemnities resulting from, arising out of,
or connected with any material inaccuracy in, breach of, or nonfulfillment of
any representation, warranty, covenant or agreement made by or other obligation
of the Company contained in this Agreement (including the Exhibits hereto) or in
any document delivered in connection herewith.
9.6 The Company shall not issue any public statement or press release, or
otherwise disclose in any manner the identity of the Subscriber or that
Subscriber has purchased the Common Stock, without the prior written consent of
the Subscriber; provided, however, that the Company may disclose such
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information in any registration statement filed with the SEC pursuant to the
registration rights provisions set forth in Appendix I hereto.
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10. Signature. The signature page of this Agreement is contained as part of
---------
the applicable Subscription Package, entitled "Signature Page."
Page 9
SUBSCRIPTION AGREEMENT GENERAL INSTRUCTIONS
-------------------------------------------
General Instructions
These Subscription Documents contain all documents necessary to subscribe
for shares ("Shares") of Common Stock, par value $.001 per Share ("Common
Stock"), of BriteSmile, Inc., a Utah corporation (the "Company").
You may subscribe for Shares by completing the Subscription Agreement in
the following manner:
1. On line (a) of the signature page state the number of Shares you wish to
purchase.
2. On line (b) of the signature page state the total cost of the Shares you
wish to purchase. To obtain the cost, multiply the number of Shares you desire
to purchase by the purchase price per Share set forth therein.
3. Please complete the detailed investment and other representations in the
Subscriber Questionnaire to evidence your suitability for an investment in the
Company. All purchasers must complete and sign the Subscription Agreement and
the Subscriber Questionnaire.
4. Sign and state your address, telephone number and social security or
other taxpayer identification number on the lines provided on the signature page
to the Subscription Agreement, have your signature acknowledged by a notary
public and deliver the completed Subscription Agreement and Subscriber
Questionnaire with payment of the entire purchase price of the Shares subscribed
for as set forth below. Payment should be made in United States Dollars by wire
transfer to:
Bank of Texas--Trust Division
ABA# 103 900 036
Credit Acct #: 600024642/Trust Funds
For further credit to: BriteSmile, Inc. Escrow
For further credit Acct #: 754269017
Attn. Xxxxxx Xxxxxx 000-000-0000
The Subscription Agreement Signature Page must be completed and signed by each
investor and all signatures must be acknowledged by a notary public. Send all
documents to:
Stonegate Securities, Inc.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxxx
Telephone No.: 214/000-0000
Facsimile No.: 214/987-1981
THE COMPLETED SUBSCRIPTION AGREEMENT AND SUBSCRIBER QUESTIONNAIRE SHOULD BE
RETURNED IN ITS ENTIRETY TO THE PLACEMENT AGENT DESIGNATED ABOVE.
Acceptance of Delivery
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of the completed Subscription Agreement will be
determined by the Company, which determination will be final and binding. The
Company reserves the absolute right to reject any completed Subscription
Agreement, in its sole and absolute discretion. The Company also reserves the
right to waive any irregularities in, or conditions of, the submission of
completed Subscription Agreements, and the Company's interpretation of the terms
and conditions for the purchase of Shares (including these instructions) shall
be final and binding. The Company shall be under no duty to give any
notification of irregularities in connection with any attempted subscription for
Shares or incur any liability for failure to give such notification. Until such
irregularities have been cured or waived, no subscription for Shares shall be
deemed to have been made. Any Subscription Agreement that is not properly
completed and as to
Page 10
which defects have not been cured or waived will be returned
by the Company to the subscriber as soon as practicable.
Page 11
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
The undersigned investor hereby certifies that he or she (i) has received
and relied solely upon information provided by the Company, (ii) agrees to all
the terms and conditions of this Subscription Agreement, (iii) meets the
suitability standards set forth in this Subscription Agreement and (iv) is a
resident of the state or foreign jurisdiction indicated below.
(a) The undersigned subscribes for __________ shares of Common Stock.
(b) The total cost of the Shares subscribed for, at $______ per share, is
$__________ (the "Purchase Price").
----------------------------------------------------------
Name of Subscriber (Print) If other than Individual check one and indicate capacity of
signatory under the signature:
[ ] Trust
----------------------------------------------------------- [ ] Estate
Name of Joint Subscriber (if any) (Print) [ ] Uniform Gifts to Minors Act of State of
[ ] Attorney-in-fact
----------------------------------------------------------- [ ] Corporation
Signature of Subscriber [ ] Other
-----------------------------------------------------
----------------------------------------------------------- If Joint Ownership, check one:
Signature of Joint Subscriber (if any) [ ] Joint Tenants with Right of Survivorship
[ ] Tenants in Common
----------------------------------------------------------- [ ] Tenants by Entirety
Capacity of Signatory (if applicable) [ ] Community Property
----------------------------------------------------------- Backup Withholding Statement:
Social Security or Taxpayer Identification Number Please check this box only if the investor is subject to:
[ ] backup withholding.
-----------------------------------------------------------
Residence Address Foreign Person:
Please check this box only if the investor is a:
-----------------------------------------------------------
City State Zip Code [ ] nonresident alien, foreign corporation, foreign partnership,
foreign trust or foreign estate.
Telephone ( )
-------------------------------
Telecopy No.
----------------------------------
The investor agrees to the terms of this Subscription Agreement and, as required
by the Regulations pursuant to the Internal Revenue Code, certifies under
penalty of perjury that (1) the Social Security Number or Taxpayer
Identification Number and address provided above is correct, (2) the investor is
not subject to backup withholding (unless the Backup Withholding Statement box
is checked) either because he has not been notified that he is subject to backup
withholding as a result of a failure to report all interest or dividends or
because the Internal Revenue Service has notified him that he is no longer
subject to backup withholding and (3) the investor (unless the Foreign Person
box above is checked) is not a nonresident alien, foreign partnership, foreign
trust or foreign estate.
THE SUBSCRIPTION FOR _____________ SHARES OF COMMON STOCK OF BRITESMILE,
INC. BY THE ABOVE NAMED SUBSCRIBER(S) IS ACCEPTED THIS _____ DAY OF
________________, 2001.
BRITESMILE, INC.
By:
-------------------------------------------
Title:
-------------------------------------------
Page 12
Appendix I
Registration Rights
1. Definitions.
-----------
(a) As used in this Appendix I, the following terms shall have the
meanings:
(i) "Affiliate," of any specified Person means any other Person
who directly, or indirectly through one or more intermediaries, is in
control of, is controlled by, or is under common control with, such
specified Person. For purposes of this definition, control of a Person
means the power, directly or indirectly, to direct or cause the direction
of the management and policies of such Person whether by contract,
securities ownership or otherwise; and the terms "controlling" and
"controlled" have the respective meanings correlative to the foregoing.
(ii) "Commission" means the Securities and Exchange Commission.
(iii) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder, or any similar
successor statute.
(iv) "Investors" means the Investors and any permitted transferee
or assignee of Registrable Securities who agrees to become bound by all of
the terms and provisions of this Appendix I and the Subscription
----------
Agreements.
(v) "Person" means any individual, partnership, corporation,
limited liability company, joint stock company, association, trust,
unincorporated organization, or a government agency or political
subdivision thereof.
(vi) "Prospectus" means the prospectus (including any preliminary
prospectus and/or any final prospectus filed pursuant to Rule 424(b) under
the Securities Act and any prospectus that discloses information previously
omitted from a prospectus filed as part of an effective registration
statement in reliance on Rule 430A under the Securities Act) included in
the Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement and by all
other amendments and supplements to such prospectus, including all material
incorporated by reference in such prospectus and all documents filed after
the date of such prospectus by the Company under the Exchange Act and
incorporated by reference therein.
(vii) "Public Offering" means an offer registered with the
Commission and the appropriate state securities commissions by the Company
of its Common Stock and made pursuant to the Securities Act.
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(viii) "Registrable Securities" means the shares of Common Stock
purchased pursuant to the Subscription Agreements; provided, however, a
share of Common Stock shall cease to be a Registrable Security for purposes
of this Appendix I when it no longer is a Restricted Security.
(ix) "Registration Statement" means a registration statement of
the Company filed on Form S-3 under the Securities Act providing for the
registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities pursuant to Rule 415 under
the Securities Act, including the Prospectus contained therein and forming
a part thereof, any amendments to such registration statement and
supplements to such Prospectus, and all exhibits and other material
incorporated by reference in such registration statement and Prospectus. In
the event that Form S-3 is unavailable for such a registration, the Company
shall use such other form as is available for such a registration.
(x) "Restricted Security" means any share of Common Stock except
any that (i) have been registered pursuant to an effective registration
statement under the Securities Act and sold in a manner contemplated by the
prospectus included in such registration statement, (ii) have been
transferred in compliance with the resale provisions of Rule 144 under the
Securities Act (or any successor provision thereto) or is transferable
pursuant to paragraph (k) of Rule 144 under the Securities Act (or any
successor provision thereto), or (iii) otherwise has been transferred and a
new share of Common Stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Company.
(xi) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder, or any similar
successor statute.
(b) All capitalized terms used and not defined herein have the respective
meaning assigned to them in the Subscription Agreement.
2. Registration.
------------
(a) Filing and Effectiveness of Registration Statement. The Company shall
--------------------------------------------------
prepare and file with the Commission not later than twenty business days
following the Final Closing (as that term is defined in the accompanying
Subscription Agreement) (the "Filing Deadline") a Registration Statement
relating to the offer and sale of the Registrable Securities and shall use its
best efforts to cause the Commission to declare such Registration Statement
effective under the Securities Act as promptly as practicable, but not later
than 120 days after the Final Closing (the "Effectiveness Deadline"). The shares
of Common Stock issued in the Offering, and the shares of Common Stock
underlying warrants issued to Stonegate Securities, Inc., shall be included in
such Registration Statement. The Company shall notify the Investors in writing
by telecopy or e-mail notice that such Registration Statement has been declared
effective by the Commission on the date of such declaration by the Commission.
The Company agrees to keep such Registration Statement effective until the
earlier of: (i) the passage of two years from the effective date of such
Registration Statement; or (ii) the date on which all Registrable Securities may
be resold by
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the Investors by reason of Rule 144(k) under the Securities Act or any other
rule of similar effect.
(b) Registration Default. If the Registration Statement covering the
--------------------
Registrable Securities required to be filed by the Company pursuant to Section
2(a) is not (i) filed with the Commission by the Filing Deadline, or (ii)
declared effective by the Commission by the Effectiveness Deadline (either of
which, without duplication, an "Initial Date"), then the Company shall make the
payments to the Investors as provided in the next sentence as liquidated damages
and not as a penalty. The amount to be paid by the Company to the Investors
shall be determined as of each Computation Date (as defined below), and such
amount shall be equal to 2.5% (the "Liquidated Damage Rate") of the Purchase
Price (as defined in the Subscription Agreement) for the period from the Initial
Date to the first Computation Date, and for each 30-day period of any subsequent
Computation Dates thereafter, calculated on a pro rata basis to the date on
which the Registration Statement is filed with (in the event of an Initial Date
pursuant to clause (i) above) or declared effective by (in the event of an
Initial Date pursuant to clause (ii) above) the Commission (the "Periodic
Amount") provided, however, that in no event shall the liquidated damages be
less than $25,000. The full Periodic Amount shall be paid by the Company to the
Investors, pro rata, by wire transfer of immediately available funds within
three days after each Computation Date.
As used in this Section 2(b), "Computation Date" means the date which is 30
days after the Initial Date and, if the Registration Statement to be filed by
the Company pursuant to Section 2(a) has not theretofore been declared effective
by the Commission, each date which is 30 days after the previous Computation
Date until such Registration Statement is so declared effective.
Notwithstanding the above, if the Registration Statement covering the
Registrable Securities required to be filed by the Company pursuant to Section
2(a) hereof is not filed with the Commission by the Filing Deadline, the Company
shall be in default of the terms of this Appendix I, and the Investors shall be
entitled to damages as set forth above and any other damages permitted by law.
(c) Piggyback Registration Rights. (i) Until such date as the
-----------------------------
Registration Statement to be filed in accordance with Section 2(a) is declared
effective by the Commission, if the Company proposes to register any of its
Common Stock or any other shares of common stock of the Company under the
Securities Act (other than a registration (A) on Form S-8 or S-4 or any
successor or similar forms, (B) relating to Common Stock or any other shares of
common stock of the Company issuable upon exercise of employee or consultant
share options or in connection with any employee benefit or similar plan of the
Company or (C) in connection with a direct or indirect acquisition by the
Company of another Person or any transaction with respect to which Rule 145 (or
any successor provision) under the Securities Act applies), whether or not for
sale for its own account, it will each such time, give prompt written notice at
least 20 days prior to the anticipated filing date of the registration statement
relating to such registration to the Investors, which notice shall set forth
such Investors' rights under this Section 2(c) and shall offer the Investors the
opportunity to include in such registration statement such number of Registrable
Securities as the Investors may request. Upon the written request of an Investor
made within 10 days after the receipt of notice from the Company (which request
shall specify the number of Registrable Securities intended to be disposed of by
such Investors), the Company will use its
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best efforts to effect the registration under the Securities Act of all
Registrable Securities that the Company has been so requested to register by the
Investors, to the extent requisite to permit the disposition of the Registrable
Securities to be so registered; provided, however, that (A) if such registration
involves a Public Offering, the Investors must sell their Registrable Securities
to the underwriters on the same terms and conditions as apply to the Company and
(B) if, at any time after giving written notice of its intention to register any
Registrable Securities pursuant to this Section 2(c) and prior to the effective
date of the registration statement filed in connection with such registration,
the Company shall determine for any reason not to register such Registrable
Securities, the Company shall give written notice to the Investors and,
thereupon, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration. The Company's obligations under
this Section 2(c) shall terminate on the date that the registration statement to
be filed in accordance with Section 2(a) is declared effective by the
Commission. (ii) If a registration pursuant to this Section 2(c) involves a
Public Offering and the managing underwriter thereof advises the Company that,
in its view, the number of shares of Common Stock, if any, or other shares of
Common Stock that the Company and the Investors intend to include in such
registration exceeds the largest number of shares of Common Stock (including any
other shares of Common Stock or warrants of the Company) that can be sold
without having an adverse effect on such Public Offering (the "Maximum Offering
Size"), the Company will include in such registration only that number of shares
of Common Stock which does not exceed the Maximum Offering Size, in the
following order of priorities: (1) first, all securities the Company proposes to
sell for its own account, (2) second, up to the full number of securities
proposed to be registered for the account of the holders of securities entitled
to inclusion of their securities in the Registration Statement by reason of
demand registration rights, and (3) third, the securities requested to be
registered by other holders of securities entitled to participate in the
registration, drawn from them pro-rata based on the number of shares each has
requested to be included in such registration and the Investors pursuant to this
Appendix I.
If as a result of the proration provisions of this Section 2(c)(ii), the
Investors are not entitled to include all such Registrable Securities in such
registration, such Investors may elect to withdraw their request to include any
Registrable Securities in such registration.
Notwithstanding the foregoing, the Company shall have no obligations under
this Section 2(c) hereof at any time that such Registrable Securities are the
subject of an effective registration statement.
3. Obligations of the Company. In connection with the registration of the
--------------------------
Registrable Securities, the Company shall use its reasonable best efforts to:
(a) Subject to the provisions of Section 3(r) hereof, promptly (i) prepare
and file with the Commission such amendments (including post-effective
amendments) to the Registration Statement and supplements to the Prospectus as
may be necessary to keep the Registration Statement continuously effective and
in compliance with the provisions of the Securities Act applicable thereto so as
to permit the Prospectus forming part thereof to be current and useable by
Investors for resales of the Registrable Securities for a period of two years
from the date the Registration Statement is first declared effective by the
Commission (the "Effective Time") or such shorter period that will terminate
when all the Registrable Securities covered by the
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Registration Statement have been sold pursuant thereto in accordance with the
plan of distribution provided in the Prospectus, transferred pursuant to Rule
144 under the Securities Act or otherwise transferred in a manner that results
in the delivery of new securities not subject to transfer restrictions under the
Securities Act (the "Registration Period") and (ii) take all lawful action such
that each of (A) the Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, not misleading and (B) the Prospectus forming part of
the Registration Statement, and any amendment or supplement thereto, does not at
any time during the Registration Period include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Notwithstanding the foregoing, the
Company's obligations hereunder shall terminate as to any investor at such time
as that Investor's Registrable Securities can be sold under Rule 144(k);
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide draft copies thereof
(including a copy of the accountant's consent letter to be included in the
filing) to Stonegate Securities, Inc. ("Stonegate") and reflect in such
documents all such comments as Stonegate reasonably may propose; and (ii)
furnish to Stonegate for delivery to each Investor whose Registrable Securities
are included in the Registration Statement, (A) promptly after the same is
prepared and publicly distributed, filed with the Commission, or received by the
Company, one copy of the Registration Statement, each Prospectus, and each
amendment or supplement thereto, and (B) such number of copies of the Prospectus
and all amendments and supplements thereto and such other documents, as such
Investor may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of all
jurisdictions requiring blue sky registration or qualification, (ii) prepare and
file in such jurisdictions such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (A) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (B) subject itself to general
A-5
taxation in any such jurisdiction or (C) file a general consent to service of
process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such event, notify
each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) Notify each Investor who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement on the date of receipt of any such
stop order or other suspension, and take all lawful action to effect the
withdrawal, recession or removal of such stop order or other suspension;
(g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single entity,
for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to expedite and
facilitate the disposition by the Investors of their Registrable Securities in
accordance with the intended methods therefor provided in the Prospectus which
are customary under the circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules
A-6
and regulations of the Commission thereunder (including, at the option of the
Company, Rule 158);
(l) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) In connection with any underwritten offering, make such representations
and warranties to the Investors participating in such underwritten offering and
to the managers, in form, substance and scope as are customarily made by the
Company to underwriters in secondary underwritten offerings;
(n) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the date the Registration Statement is first declared
effective or most recent post- effective amendment thereto, as the case may be,
the absence from the Registration Statement and the Prospectus, including any
documents incorporated by reference therein, of an untrue statement of a
material fact or the omission of a material fact required to be stated therein
or necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, subject
to customary limitations);
(o) In connection with any underwritten offering, obtain "cold comfort"
letters and updates thereof from the independent public accountants of the
Company (and, if necessary, from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(p) In connection with any underwritten offering, deliver such documents
and certificates as may be reasonably required by the managers, if any; and
(q) In the event that any broker-dealer registered under the Exchange Act
shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any
A-7
Registrable Securities covered by the Registration Statement, whether as a
holder of such Registrable Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise, the Company shall
assist such broker-dealer in complying with the requirements of the NASD Rules,
including, without limitation, by (A) engaging a "qualified independent
underwriter" (as defined in Rule 2720(b)(15) of the NASD Rules (or any successor
provision thereto)) to participate in the preparation of the Registration
Statement relating to such Registrable Securities, to exercise usual standards
of due diligence in respect thereof and to recommend the public offering price
of such Registrable Securities, (B) indemnifying such qualified independent
underwriter to the extent of the indemnification of underwriters provided in
Section 5 hereof, and (C) providing such information to such broker-dealer as
may be required in order for such broker-dealer to comply with the requirements
of the NASD Rules.
(r) Notwithstanding anything to the contrary in Section 3, at any time
after the Registration Statement has been declared effective, the Company may
delay the disclosure of material non-public information concerning the Company,
the disclosure of which at the time is not, in the good faith opinion of the
Company and its counsel, in the best interest of the Company (a "Grace Period");
provided, that the Company shall promptly (i) notify the Investors in writing of
the existence of material non-public information giving rise to a Grace Period
and the date on which the Grace Period will begin, and (ii) notify the Investors
in writing in advance of, or on the same date on which, the Grace Period ends;
and, provided further, that during any consecutive 365 day period, there shall
be only two Grace Periods, such Grace Periods in total not to exceed 30 days.
For purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the holders receive the notice referred to
in clause (i) and shall end on and include the date specified as the Grace
Period ending date in the notice referred to in clause (ii). If at any time
after the Registration Statement has been declared effective, the Company delays
disclosure of material non-public information concerning the Company, other than
during a permitted Grace Period as described above, the Company shall make
payments to the Investors as provided in the next sentence as liquidated damages
intended by the parties to compensate the Investors in part for the incremental
costs and investment risks associated with holding the Registrable Securities as
restricted securities and not as a penalty. The amount of payments shall be
calculated at the Liquidated Damage Rate of the Purchase Price in accordance
with the provisions of Section 2(b) (including its provision of a minimum amount
of $25,000), and the timing of payments shall also be determined in accordance
with Section 2(b). For the purposes of such calculations and determinations of
the amount and timing of payments: (i) the Initial Date shall mean the first
date that the Company delays disclosure of material non-public information
concerning the Company other than during a permitted Grace Period and (ii) the
Computation Date shall mean the date that is 30 days after the Initial Date and
each date that is 30 days after the previous Computation Date until such period
of delay has ceased and the Company has provided notice to the Investors of the
end of such period in accordance with the provisions of this section above.
Nothing herein shall limit the rights of any Investor to pursue actual damages
for the Investor's inability to sell any of the Registrable Securities into the
public market for any reason described in this section.
Notwithstanding the foregoing, the Company shall have no obligations under
Section 3(l) through (q) unless it is effecting an underwritten offering
pursuant to Section 2(c).
A-8
4. Obligations of the Investors. In connection with the registration of the
----------------------------
Registrable Securities, the Investors shall have the following obligations,
which obligations shall be several and not joint:
(a) It shall be a condition precedent to the obligations of the Company to
complete the registration pursuant to this Appendix I with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least ten business days
prior to the first anticipated filing date of the Registration Statement, the
Company shall notify each Investor and its counsel, whether in-house or
otherwise ("Counsel") of the information the Company requires from each such
Investor (the "Requested Information") if such Investor elects to have any of
its Registrable Securities included in the Registration Statement. If at least
four business days prior to the anticipated filing date the Company has not
received the Requested Information from an Investor (a "Non-Responsive
Investor") or its Counsel, then the Company shall send such Non-Responsive
Investor and its Counsel a reminder of such information request. If at least two
business days prior to the anticipated filing date the Company still has not
received the Requested Information from such Non-Responsive Investor or its
Counsel, then the Company may file the Registration Statement without including
Registrable Securities of such Non-Responsive Investor. However, promptly upon
receipt of the Requested Information, and at the expense of the Non-Responsive
Investor, the Company shall file such amendment(s) to the Registration Statement
as may be necessary to include therein the Registrable Securities of the Non-
Responsive Investor.
(b) Each Investor by its acceptance of the Registrable Securities agrees
to cooperate with the Company in connection with the preparation and filing of
the Registration Statement hereunder, unless such Investor has notified the
Company in writing of its election to exclude all of its Registrable Securities
from the Registration Statement; the Company shall, on its part, ensure that
Item 507 of Regulation S-K of the Securities Act (regarding information on the
selling security holders) be complied with in connection with its preparation
and filing of the Registration Statement hereunder;
(c) As promptly as practicable after becoming aware of such event, notify
the Company of the occurrence of any event, as a result of which the Prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and
(d) Each Investor agrees that, upon receipt of any notice from the Company
of the occurrence of any event of the kind described in Section 3(e) or 3(f), it
shall immediately discontinue its disposition of Registrable Securities pursuant
to the Registration Statement covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(e) and, if so directed by the Company, such Investor
shall deliver to the Company (at the expense of the Company) or
A-9
destroy (and deliver to the Company a certificate of destruction) all copies in
such Investor's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice.
5. Expenses of Registration. All expenses, other than underwriting discounts
------------------------
and commissions, incurred in connection with registrations, filings or
qualifications pursuant to Section 3, but including, without limitation, all
registration, listing, and qualifications fees, printing and engraving fees,
accounting fees, and the fees and disbursements of counsel for the Company, and
the reasonable fees, not to exceed $5,000.00, of one firm of counsel to the
holders of a majority in interest of the Registrable Securities shall be borne
by the Company.
6. Indemnification and Contribution.
--------------------------------
(a) The Company shall indemnify and hold harmless each Investor and each
underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective officers and directors and each person
who controls such Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Person") from and against
any losses, claims, damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person expressly for use therein or (ii) in the case
of the occurrence of an event of the type specified in Section 3(e), the use by
the Indemnified Person of an outdated or defective Prospectus after the Company
has provided to such Indemnified Person written notice that such Prospectus is
outdated or defective.
(b) Indemnification by the Investors and Underwriters. Each Investor
-------------------------------------------------
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers and each person,
if any, who controls the Company within the meaning of
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either Section 15 of the Securities Act or Section 20 of the Exchange Act,
against any losses, claims, damages or liabilities to which the Company or such
other persons may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in such Registration Statement or Prospectus or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein (in light of the circumstances under which they were made, in
the case of the Prospectus), not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such holder or underwriter
expressly for use therein; provided, however, that no Investor or underwriter
shall be liable under this Section 6(b) for any amount in excess of the gross
proceeds paid to such Investor or underwriter in respect of shares sold by it,
and (ii) reimburse the Company for any legal or other expenses incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred.
(c) Notice of Claims, etc. Promptly after receipt by a party seeking
---------------------
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel and to participate in the defense of such Claim,
and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs
and expenses of such separate legal counsel to the Indemnified Party if (and
only if): (x) the Indemnifying Party shall have agreed to pay such fees, costs
and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnified Party shall not, without the prior written consent of
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the Indemnifying Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnifying Party from all
liabilities with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this Section 6
------------
is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in this
Section 6(d) to contribute shall be several in proportion to the percentage of
Registrable Securities registered or underwritten, as the case may be, by them
and not joint.
(e) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the gross
proceeds to be received by such Investor from the sale of such Investor's
Registrable Securities pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
7. Rule 144. With a view to making available to the Investors the benefits of
--------
Rule 144 under the Securities Act or any other similar rule or regulation of the
Commission that may at
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any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Investor, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
8. Assignment. The rights to have the Company register Registrable
-----------
Securities pursuant to this Appendix I may be assigned or transferred only with
the prior written consent of the Company, and any such assignment or transfer
without such consent shall be void and of no effect. Notwithstanding the
foregoing, such consent of the Company shall not be required with respect to any
assignment or transfer of Registrable Securities to an affiliate of Subscriber,
including for this purpose if Subscriber is an investment company, any fund or
account advised by Subscriber's investment adviser or any affiliate thereof. In
the event of any such permitted assignment or transfer by the Investors to any
permitted transferee of all or any portion of such Registrable Securities such
transfer will be allowed only if: (a) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment, (b) the
Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment, the securities so transferred or assigned to the transferee or
assignee constitute Restricted Securities, and (d) at or before the time the
Company received the written notice contemplated by clause (b) of this sentence
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein.
9. Amendment and Waiver. Any provision of this Appendix I may be amended
---------------------
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and Investors who hold a 66 2/3% interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
10. Miscellaneous.
--------------
(a) A person or entity shall be deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) If after the date hereof and prior to the Commission declaring the
Registration Statement to be filed pursuant to Section 2(a) effective under the
Securities Act, the Company
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grants to any Person any registration rights with respect to any Company
securities which are more favorable to such other Person than those provided in
this Appendix I, then the Company forthwith shall grant (by means of an
amendment to this Appendix I or otherwise) identical registration rights to all
Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service as follows, and shall be
deemed given when actually received.
if to the Company, to: BriteSmile, Inc.
000 Xxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
Attention: Mr. Xxxx Xxxx, CEO
With a copy to: Xxxxxxx X. Xxxxx
Xxxxx X. Xxxx
Durham Xxxxx & Xxxxxxx
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
if to the Investors, to: Each individual or entity identified on
Schedule 10(c) attached hereto
The Company or any Investor may change the foregoing address by notice
given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or remedy under this
Appendix I or otherwise, or delay by a party in exercising such right or remedy,
----------
shall not operate as a waiver thereof.
(e) This Appendix I shall be governed by and interpreted in accordance with
the laws of the State of Utah.
(f) The remedies provided in this Appendix I are cumulative and not
-----------
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Appendix I is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
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(g) The Company shall not enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Appendix I or otherwise conflicts with the
----------
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a 66 2/3% interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are pari pasu to the prior rights of the holders of Registrable
Securities set forth herein, and are not otherwise in conflict or inconsistent
with the provisions of this Appendix I. The restrictions on the Company's
----------
rights to grant registration rights under this paragraph shall terminate on the
date all Registerable Securities have been registered pursuant to a Registration
Statement that has been declared effective by the Commission.
(h) This Appendix I and the Subscription Agreements constitute the entire
----------
agreement among the parties hereto with respect to the subject matter hereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein. This Appendix I and the Subscription
Agreements supersede all prior agreements and undertakings among the parties
hereto with respect to the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Appendix I shall
----------
inure to the benefit of and be binding upon the successors and assigns of each
of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Appendix I are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(l) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3, or any delay in such performance could result in
damages to the Investors and the Company agrees that, in addition to any other
liability the Company may have by reason of any such failure or delay, the
Company may be liable for all damages caused by such failure or delay.
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