SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement is entered into and dated as of
December 16, 2004 (this "Agreement"), by and among BriteSmile, Inc, a Utah
corporation (the "Company"), and each of the purchasers identified on the
signature pages hereto (each, a "Purchaser" and collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933 (the
"Securities Act"), and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly,
desires to purchase from the Company, certain securities of the Company pursuant
to the terms set forth herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser,
severally and not jointly, agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
the following terms shall have the meanings set forth in this Section 1.1:
"Additional Investment Rights" means, collectively, the
Additional Investment Rights issued and sold under this Agreement, in the form
of Exhibit A.
"Additional Investment Right Warrants" has the meaning set
forth in the Additional Investment Rights.
"Additional Notes" means the Senior Convertible Notes due on
the last day of the 53rd month following the issuance date thereof with an
aggregate principal face amount of $4,000,000 in the form of Exhibit B hereto
issuable to the Purchasers upon exercise of the Additional Investment Rights.
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with a Person, as such terms are used in and construed under Rule
144 under the Securities Act. With respect to a Purchaser, any investment fund
or managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.
"Bankruptcy Event" means any of the following events: (a) the
Company or any Subsidiary commences a case or other proceeding under any
bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
relating to the Company or any Subsidiary thereof; (b) there is commenced
against the Company or any Subsidiary any such case or proceeding that is not
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dismissed within 60 days after commencement; (c) the Company or any Subsidiary
is adjudicated insolvent or bankrupt or any order of relief or other order
approving any such case or proceeding is entered; (d) the Company or any
Subsidiary suffers any appointment of any custodian or the like for it or any
substantial part of its property that is not discharged or stayed within 60
days; (e) the Company or any Subsidiary makes a general assignment for the
benefit of creditors; (f) the Company or any Subsidiary fails to pay, or states
that it is unable to pay or is unable to pay, its debts generally as they become
due; (g) the Company or any Subsidiary calls a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its debts; or
(h) the Company or any Subsidiary, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or
takes any corporate or other action for the purpose of effecting any of the
foregoing.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.
"Change of Control" means the occurrence of any of the
following in one or a series of related transactions: (i) an acquisition after
the date hereof by an individual or legal entity or "group" (as described in
Rule 13d-5(b)(1) under the Exchange Act) of more than one-half of the voting
rights or equity interests in the Company; (ii) a replacement of more than
one-half of the members of the Company's board of directors that is not approved
by those individuals who are members of the board of directors on the date
hereof (or other directors previously approved by such individuals); (iii) a
merger or consolidation of the Company or any Subsidiary or a sale of more than
one-half of the assets of the Company in one or a series of related
transactions, unless following such transaction or series of transactions, the
holders of the Company's securities prior to the first such transaction continue
to hold at least one-half of the voting rights and equity interests in of the
surviving entity or acquirer of such assets; (iv) a recapitalization,
reorganization or other transaction involving the Company or any Subsidiary that
constitutes or results in a transfer of more than one-half of the voting rights
or equity interests in the Company; (v) consummation of a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Exchange Act with respect to the
Company, or (vi) the execution by the Company or its controlling shareholders of
an agreement providing for or reasonably likely to result in any of the
foregoing events.
"Closing" means the closing of the purchase and sale of the
Securities pursuant to Section 2.1.
"Closing Date" means the date of the Closing.
"Closing Price" means, for any date, the price determined by
the first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on an Eligible Market or any other national securities
exchange, the closing bid price per share of the Common Stock for such date (or
the nearest preceding date) on the primary Eligible Market or exchange on which
the Common Stock is then listed or quoted; (b) if prices for the Common Stock
are then quoted on the OTC Bulletin Board, the closing bid price per share of
the Common Stock for such date (or the nearest preceding date) so quoted; (c) if
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prices for the Common Stock are then reported in the "Pink Sheets" published by
the National Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by a majority in interest of the Purchasers.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par
value $0.001 per share, and any securities into which such common stock may
hereafter be reclassified.
"Common Stock Equivalents" means, collectively, Options and
Convertible Securities.
"Company Counsel" means Durham Xxxxx & Xxxxxxx, counsel to
the Company.
"Conversion Price" means $7.61, as may be adjusted in
accordance with the terms of the Notes.
"Convertible Securities" means any stock or securities (other
than Options) convertible into or exercisable or exchangeable for Common Stock.
"Effective Date" means the date that the Registration
Statement is first declared effective by the Commission.
"Eligible Market" means any of the New York Stock Exchange,
the American Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap
Market.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Excluded Stock" means the issuance of Common Stock (A) upon
exercise or conversion of any options or other securities described in Schedule
3.1(g) (provided that such exercise or conversion occurs in accordance with the
terms thereof, without amendment or modification) or ; (B) in connection with
any issuance of shares or grant of options to employees, officers, directors or
consultants of the Company pursuant to a stock option plan or other incentive
stock plan duly or otherwise pursuant to any employee benefit plan described in
Schedule 3.1(g) or hereafter adopted by the Company and approved by its
shareholders or in respect of the issuance of Common Stock upon exercise of any
such options; or (C) in connection with one or more Related Party Transactions,
provided such Related Party Transactions do not exceed $2,000,000 in the
aggregate.
"Filing Date" means the 45th day following the Closing Date
with respect to the initial Registration Statement required to be filed
hereunder, and, with respect to any additional Registration Statements that may
be required pursuant to Section 6.1(f), the 15th day following the date on which
the Company first knows, or reasonably should have known, that such additional
Registration Statement is required under such Section.
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"Initial Notes" means the Senior Convertible Notes due May 31,
2009 with an aggregate principal face amount of $12,000,000 issued by the
Company to the Purchasers hereunder in the form of Exhibit B hereto.
"Initial Warrants" means the Common Stock purchase warrants in
the form of Exhibit D.
"Losses" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including without limitation costs
of preparation of legal action and reasonable attorneys' fees.
"Notes" means the Initial Notes and the Additional Notes.
"Options" means any rights, warrants or options to subscribe,
directly or indirectly for or purchase Common Stock or Convertible Securities
(including all Additional Notes and Additional Investment Right Warrants that
can be issued under the Transaction Documents).
"Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), 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 all other amendments and
supplements to the Prospectus including post effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Purchaser Counsel" means Proskauer Rose LLP, counsel to
Omicron Master Trust.
"Registrable Securities" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction Documents,
together with any securities issued or issuable upon any stock split, dividend
or other distribution, recapitalization or similar event with respect to the
foregoing.
"Registration Statement" means the initial registration
statement required to be filed under Article VI and any additional registration
statements contemplated by Section 6.1(f), including (in each case) the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
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and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Related Party Transaction" means any transaction with a
current officer or director of the Company as set forth in the SEC Reports, or
any entity affiliated with such officer or director.
"Required Effectiveness Date" means (i) with respect to the
initial Registration Statement required to be filed hereunder, the 90th day
following the Closing Date or in the event the Registration Statement shall be
reviewed by the Commission, the 120th day following the Closing Date, and (ii)
with respect to any additional Registration Statements that may be required
pursuant to Section 6.1(f), the 45th day following the date on which the Company
first knows, or reasonably should have known, that such additional Registration
Statement is required under such Section.
"Rule 144," "Rule 415," and "Rule 424" means Rule 144, Rule
415 and Rule 424, respectively, promulgated by the Commission pursuant to the
Securities Act, as such Rules may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities" means the Notes, the Warrants, the Additional
Investment Rights and the Underlying Shares issued or issuable (as applicable)
to the applicable Purchaser pursuant to the Transaction Documents.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means any subsidiary of the Company that is
required to be listed on Schedule 3.1(a).
"Trading Day" means (a) any day on which the Common Stock is
listed or quoted and traded on its primary Trading Market, or (b) if the Common
Stock is not then listed or quoted and traded on any Trading Market, then any
Business Day.
"Trading Market" means Nasdaq SmallCap Market or any other
Eligible Market or any national securities exchange, market or trading or
quotation facility on which the Common Stock is then listed or quoted.
"Transaction Documents" means this Agreement, the Additional
Investment Rights, the Notes, the Warrants, the Transfer Agent Instructions and
any other documents or agreements executed or delivered in connection with the
transactions contemplated hereby.
"Transfer Agent Instructions" means the Company's transfer
agent instructions in the form of Exhibit C.
"Underlying Shares" means the shares of Common Stock issuable
(i) upon conversion of the Initial Notes, (ii) upon exercise of the Initial
Warrants, (iii) upon conversion of the Additional Notes issued upon exercise of
the Additional Investment Rights, (iv) upon exercise of the Additional
Investment Right Warrants issued upon exercise of the Additional Investment
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Rights, and (v) in satisfaction of any other obligation of the Company to issue
shares of Common Stock pursuant to the Transaction Documents, and in each case,
any securities issued or issuable in exchange for or in respect of such
securities.
"VWAP" means on any particular Trading Day or for any
particular period the volume weighted average trading price per share of Common
Stock on such date or for such period on an Eligible Market as reported by
Bloomberg L.P., or any successor performing similar functions; provided,
however, that during any period the VWAP is being determined, the VWAP shall be
subject to adjustment from time to time for stock splits, stock dividends,
combinations and similar events as applicable.
"Warrants" means the Initial Warrants and the Additional
Investment Right Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at
the Closing, the Company shall issue and sell to the Purchasers, and the
Purchasers shall, severally and not jointly, purchase from the Company, the
Initial Notes, the Initial Warrants and the Additional Investment Rights for an
aggregate purchase price of $12,000,000. The Closing shall take place at the
offices of Purchaser Counsel or at such other location or time as the parties
may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered to each
Purchaser the following:
(i) an Initial Note, registered in the name of such Purchaser, in the principal
amount indicated below such Purchaser's name on the signature page of this
Agreement under the heading "Initial Note Principal Amount";
(ii) an Additional Investment Right, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire such principal
amount of Additional Notes and Additional Investment Right Warrants indicated
below such Purchaser's name on the signature page of this Agreement under the
headings "Additional Investment Rights - Additional Notes" and "Additional
Investment Rights - Warrant Shares", respectively, on the terms set forth
therein;
(iii) a Warrant, registered in the name of such Purchaser, pursuant to which
such Purchaser shall have the right to acquire such number of Underlying Shares
indicated below such Purchaser's name on the signature page of this Agreement
under the heading "Warrant Shares".
(iv) the legal opinion of Company Counsel, in the form of Exhibit E, executed by
such counsel and delivered to the Purchasers;
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(v) the Transfer Agent Instructions duly executed by the Company and
acknowledged by the Company's transfer agent; and
(vi) any other document reasonably requested by the Purchasers or Purchaser
Counsel.
(b) At or before the Closing, each Purchaser shall deliver or cause to be
delivered in escrow, for the benefit of the Company and pursuant to the Escrow
Agreement attached hereto as Exhibit H (the "Escrow Agreement") the purchase
price indicated below such Purchaser's name on the signature page of this
Agreement under the heading "Purchase Price", in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose. At the Closing, each Purchaser shall
deliver or cause to be delivered to the Company a completed Selling
Shareholders' Questionnaire in substantially the form attached hereto as Exhibit
G.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby makes the
following representations and warranties to the Purchasers:
(a) Subsidiaries. The Company does not directly or indirectly control or own any
interest in any other corporation, partnership, joint venture or other business
association or entity (a "Subsidiary"), other than those listed in Schedule
3.1(a). Except as disclosed in Schedule 3.1(a), the Company owns, directly or
indirectly, all of the capital stock of each Subsidiary free and clear of any
lien, charge, claim, security interest, encumbrance, right of first refusal or
other restriction (collectively, "Liens"), and all the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully
paid, non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and the Subsidiaries is
an entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
(as applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the Subsidiaries is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, could not, individually or in the aggregate, (i) adversely affect the
legality, validity or enforceability of any Transaction Document, (ii) have or
result in a material adverse effect on the results of operations, assets,
prospects, business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) adversely impair the Company's ability
to perform fully on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a "Material Adverse Effect").
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(c) Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereunder and thereunder have been duly authorized by all necessary
action on the part of the Company and no further consent or action is required
by the Company, its Board of Directors or its stockholders. Each Transaction
Document has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms. Neither the Company nor any Subsidiary is in
violation of any of the provisions of its certificate or articles of
incorporation, by laws or other organizational or charter documents.
(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby do not and will not (i) conflict with or violate any
provision of the Company's or any Subsidiary's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
conflict with, or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except as do not, individually or
in the aggregate, have or are reasonably be expected to result in a Material
Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
the filing with the Commission of the Registration Statement, the application(s)
to each Trading Market for the listing of the Underlying Shares for trading
thereon in the time and manner required thereby, applicable Blue Sky filings,
and the waivers of registration rights identified in Schedule 3.1(e)
(collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities have been duly authorized. The
Initial Notes, the Initial Warrants and the Additional Investment Rights have
been, and the Additional Notes and Additional Investment Right Warrants issuable
upon exercise of the Additional Investment Rights, when issued in accordance
with the terms of the Additional Investment Rights, and the Underlying Shares or
other securities issuable upon conversion of the Notes and upon exercise of the
Warrants, when so issued in accordance with the terms of the Notes or the
Warrants, as the case may be, will be, validly issued. The Initial Notes, the
Initial Warrants and Additional Investment Rights are, and the Additional Notes,
Additional Investment Right Warrants, Underlying Shares or other securities
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issuable upon conversion of the Notes, Warrants or Additional Investment Rights,
when so issued in accordance with the terms of the Notes, Warrants or Additional
Investment Rights, as the case may be, will be, fully paid and nonassessable and
free of preemptive or similar rights. The Initial Notes, the Initial Warrants
and the Additional Investment Rights have been, the Additional Notes and the
Additional Investment Right Warrants shall be, and the Underlying Shares or
other securities issuable upon conversion of the Notes and upon exercise of the
Warrants, when so issued in accordance with the terms of the Notes or the
Warrants, as the case may be, will be, issued in compliance with applicable
securities laws, rules and regulations. The Company has reserved from its duly
authorized capital stock the maximum number of shares of Common Stock to be
issued to the applicable Purchasers upon conversion or exercise of the Notes,
Warrants, Additional Investment Rights or issuable pursuant to the other
Transaction Documents.
(g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 3.1(g). No
securities of the Company are entitled to preemptive or similar rights, and no
Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the
Transaction Documents. Except as a result of the purchase and sale of the
Securities and except as disclosed in Schedule 3.1(g), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. Except as set forth in
Schedule 3.1(g), the issue and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other
than the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under
such securities.
(h) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the "SEC Reports" and, together with the Schedules to this
Agreement and press releases of the Company issued during the 12 months prior to
the Closing Date, the "Disclosure Materials") on a timely basis or has received
a valid extension of such time of filing and has filed any such SEC Reports
prior to the expiration of any such extension. The Company has made available to
and notified the Purchasers of all SEC Reports filed within the 10 days
preceding the date hereof. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
9
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(i) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed on Schedule
3.1(i), (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential treatment of
information.
(j) Litigation. Except as specifically set forth on Schedule 3.1(j), there is no
action, suit, inquiry, notice of violation, proceeding or investigation pending
or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an
unfavorable decision, individually or in the aggregate, have or result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer of
the Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the Company
or any Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of the Company.
(l) Compliance. Except as set forth on Schedule 3.1(l), neither the Company nor
any Subsidiary (i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
10
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as does not, individually or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect ("Material Permits"), and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any Material Permit.
(n) Title to Assets. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material to the
business of the Company and the Subsidiaries and good and marketable title in
all personal property owned by them that is material to the business of the
Company and the Subsidiaries, in each case free and clear of all Liens, except
for Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and the Subsidiaries. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries are
in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Except as set forth on Schedule 3.1(o), neither the Company
nor any Subsidiary has received a written notice that the Intellectual Property
Rights used by the Company or any Subsidiary violates or infringes upon the
rights of any Person. Except as set forth on Schedule 3.1(o), to the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.
(p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which the Company and
the Subsidiaries are engaged. Neither the Company nor any Subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
11
(q) Transactions With Affiliates and Employees. Except as set forth in SEC
Reports, none of the officers or directors of the Company and, to the knowledge
of the Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(r) Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(s) Solvency. Based on the financial condition of the Company as of the Closing
Date, (i) the Company's fair saleable value of its assets exceeds the amount
that will be required to be paid on or in respect of the Company's existing
debts and other liabilities (including known contingent liabilities) as they
mature; (ii) the Company's assets do not constitute unreasonably small capital
to carry on its business for the current fiscal year as now conducted and as
proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and
projected capital requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the proceeds the Company would
receive, were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in
respect of its debt when such amounts are required to be paid. The Company does
not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).
(t) Certain Fees. Except as described in Schedule 3.1(t), no brokerage or
finder's fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Purchasers shall have no obligation with respect to any fees
or with respect to any claims made by or on behalf of other Persons for fees of
a type contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and
hold harmless the Purchasers, their employees, officers, directors, agents, and
partners, and their respective Affiliates, from and against all claims, losses,
damages, costs (including the costs of preparation and attorney's fees) and
expenses suffered in respect of any such claimed or existing fees, as such fees
and expenses are incurred.
(u) Private Placement. Assuming the accuracy of the Purchasers representations
and warranties set forth in Section 3.2(b)-(e), no registration under the
12
Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market and no shareholder approval is required for the Company to
fulfill its obligations under the Transaction Documents.
(v) Form S-3 Eligibility. The Company is eligible to register the resale of its
Common Stock for resale by the Purchasers under Form S-3 promulgated under the
Securities Act.
(w) Listing and Maintenance Requirements. The Company has not, in the two years
preceding the date hereof, received notice (written or oral) from any Eligible
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Eligible Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(x) Registration Rights. The Company has not granted or agreed to grant to any
Person any rights (including "piggy back" registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied or waived.
(y) Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti takeover provision
under the Company's Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become applicable to
the Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company's issuance of the Securities and the
Purchasers' ownership of the Securities.
(z) Disclosure. The Company confirms that neither it nor any other Person acting
on its behalf has provided any of the Purchasers or their agents or counsel with
any information that constitutes or might constitute material, non-public
information. The Company understands and confirms that the Purchasers will rely
on the foregoing representations in effecting transactions in securities of the
Company. All disclosure provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement, furnished by or on behalf of the Company are true and correct
and do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(aa) No Violation. The issuance and sale of the Securities contemplated hereby
does not conflict with or violate any rules or regulations of the Trading
Market; provided however, the Listing Application to NASDAQ with respect to the
Securities was filed on December 9, 2004 and the Closing Date may occur prior to
the fifteen (15) calendar day notice period required by the NASDAQ Notification
Form: Listing of Additional Shares.
13
(bb) Acknowledgment Regarding Purchasers' Purchase of Securities. The Company
acknowledges and agrees that each of the Purchasers is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company or any
other Purchaser (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any Purchaser or
any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Purchaser's purchase of the Securities. The Company further represents to each
Purchaser that the Company's decision to enter into this Agreement has been
based solely on the independent evaluation of the Company and its
representatives. The Company further acknowledges that no Purchaser has made any
promises or commitments other than as set forth in this Agreement, including any
promises or commitments for any additional investment by any such Purchaser in
the Company.
(cc) Investment Company. The Company is not, and is not an Affiliate of, an
investment company within the meaning of the Investment Company Act of 1940, as
amended.
(dd) Ranking. Except as set forth on Schedule 3.1(dd), as of the date of this
Agreement, no indebtedness of the Company is senior to the Notes in right of
payment, whether with respect to interest or upon liquidation or dissolution, or
otherwise.
(ee) Xxxxxxxx-Xxxxx Act. The Company is in compliance with applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002 and applicable rules and
regulations promulgated by the Commission thereunder in effect as of the date of
this Agreement, except where such noncompliance could not be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect.
3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, as
to itself only and for no other Purchaser, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate, limited liability company or
partnership power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution, delivery and performance by
such Purchaser of this Agreement have been duly authorized by all necessary
corporate or limited liability company action on the part of such Purchaser.
This Agreement has been duly executed by such Purchaser and, when delivered by
such Purchaser in accordance with terms hereof, will constitutes the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities for investment
purposes and not with a view to or for distributing such Securities or any part
thereof, without prejudice, however, to such Purchaser's right at all times to
sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws. Nothing contained herein
shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time.
14
(c) Purchaser Status. At the time such Purchaser was offered the Securities, it
was, and at the date hereof it is, and on each date on which it exercises the
Additional Investment Right it will be, an "accredited investor" as defined in
Rule 501(a) under the Securities Act. Such Purchaser is not a registered
broker-dealer under Section 15 of the Exchange Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, including the risks
identified in the SEC Reports, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment in
the Securities and, at the present time, is able to afford a complete loss of
such investment.
(e) General Solicitation. Such Purchaser is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
(f) Advice. Each Purchaser has been furnished with and has carefully read the
SEC Reports as set forth in Section 3.1(h) hereto and is familiar with the terms
of the transactions contemplated by this Agreement. With respect to individual
or partnership tax and other economic considerations involved in this
investment, no Purchaser is relying on the Company (or any agent or
representative thereof). Each Purchaser has carefully considered and has, to the
extent such Purchaser believes such discussion necessary, discussed with such
Purchaser's legal, tax, accounting and financial advisers the suitability of an
investment in the Securities for such Purchaser's particular tax and financial
situation.
(g) Brokers; Finders. Except for Xxxxxxxx Curhan Ford & Co., no person or entity
acting on behalf, or under the authority, of any Purchaser is or will be
entitled to any broker's, finder's or similar fee or commission in connection
with the Closing.
(h) Access to Information. Such Purchaser acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.
15
The Company acknowledges and agrees that each Purchaser does not make
and has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) The Securities may only be disposed of pursuant to an effective registration
statement under the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or to the Company or
pursuant to Rule 144(k), except as otherwise set forth herein, the Company may
require the transferor to provide to the Company an opinion of counsel selected
by the transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act. Notwithstanding the foregoing, the
Company hereby consents to and agrees to register on the books of the Company
and with its transfer agent, without any such legal opinion, any transfer of
Securities by a Purchaser to an Affiliate of such Purchaser, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act, and agrees to the other
representations of the Purchasers set forth in Section 3.2 hereof. As a
condition of transfer, any such transferee shall agree in writing to be bound by
the terms of this Agreement and shall have the rights of a Purchaser under this
Agreement.
(b) The Purchasers agree to the imprinting, except as otherwise permitted by
Section 4.1(c), the following legend on any certificate evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY
LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
16
(c) Certificates evidencing Securities shall not be required to contain the
legend set forth in Section 4.1(b) or any other legend (i) while a Registration
Statement covering the resale of such Securities is effective under the
Securities Act, or (ii) following any sale of such Securities pursuant to Rule
144, or (iii) if such Securities are eligible for sale under Rule 144(k), or
(iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the Staff of the Commission). The Company shall cause its counsel to issue the
legal opinion included in the Transfer Agent Instructions to the Company's
transfer agent on the Effective Date. Following the Effective Date or at such
earlier time as a legend is no longer required for certain Securities, the
Company will no later than three Trading Days following the delivery by a
Purchaser to the Company or the Company's transfer agent of a legended
certificate representing such Securities, deliver or cause to be delivered to
such Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in Section 4.1(b). For so long as any
Purchaser owns Securities, the Company will not effect or publicly announce its
intention to effect any exchange, recapitalization or other transaction that
effectively requires or rewards physical delivery of certificates evidencing the
Common Stock.
(d) The Company acknowledges and agrees that a Purchaser may from time to time
pledge or grant a security interest in some or all of the Securities in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities and, if required under the terms of such
agreement, loan or arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval of the Company and no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate Purchaser's expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of selling stockholders thereunder.
4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance of
the Securities (including the Underlying Shares) will result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including without limitation its obligation to
issue the Securities (including the Underlying Shares) pursuant to the
Transaction Documents, are unconditional and absolute and not subject to any
right of set off, counterclaim, delay or reduction, regardless of the effect of
any such dilution or any claim that the Company may have against any Purchaser.
4.3 Furnishing of Information. As long as any Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. Upon the request of
any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the Company
17
is not required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with
paragraph (c) of Rule 144 such information as is required for the Purchasers to
sell the Securities under Rule 144. The Company further covenants that it will
take such further action as any holder of Securities may reasonably request to
satisfy the provisions of Rule 144 applicable to the issuer of securities
relating to transactions for the sale of securities pursuant to Rule 144.
4.4 Integration. The Company shall not, and shall use its best efforts to ensure
that no Affiliate of the Company shall, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
4.5 Reservation and Listing of Securities.
(a) The Company shall maintain a reserve from its duly authorized shares of
Common Stock for issuance pursuant to the Transaction Documents in such amount
as may be required to fulfill its obligations in full under the Transaction
Documents.
(b) The Company shall (i) prior to the Closing Date, prepare and file with such
Trading Market an additional shares listing application covering all of the
shares of Common Stock issued or issuable under the Transaction Documents, (ii)
take all steps necessary to cause such shares of Common Stock to be approved for
listing on each Trading Market as soon as possible thereafter, (iii) provide to
the Purchasers evidence of such listing, and (iv) maintain the listing of such
Common Stock on each such Trading Market or another Eligible Market.
(c) In the case of a breach by the Company of Section 4.5(a), in addition to the
other remedies available to the Purchasers, the Purchasers shall have the right
to require the Company to either: (i) use its best efforts to obtain the
required shareholder approval necessary to permit the issuance of such shares of
Common Stock as soon as is possible, but in any event not later than the 60th
day after such notice, or (ii) within five Trading Days after delivery of a
written notice, pay cash to such Purchaser, as liquidated damages and not as a
penalty, in an amount equal to the number of shares of Common Stock not issuable
by the Company times 115% of the average Closing Price over the five Trading
Days immediately prior to the date of such notice or, if greater, the five
Trading Days immediately prior to the date of payment (the "Cash Amount"). If
the exercising or converting Purchaser elects the first option under the
preceding sentence and the Company fails to obtain the required shareholder
approval on or prior to the 60th day after such notice, then within three
Trading Days after such 60th day, the Company shall pay the Cash Amount to such
Purchaser, as liquidated damages and not as penalty.
4.6 Subsequent Placements.
(a) From the date hereof until the Effective Date, the Company will not,
directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option
to purchase or other disposition of) any of its or the Subsidiaries'
18
equity or equity equivalent securities, including without limitation
any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into
or exchangeable or exercisable for Common Stock or Common Stock
Equivalents (any such offer, sale, grant, disposition or announcement
being referred to as a "Subsequent Placement").
(b) From the Effective Date until 30 Trading Days after the Effective Date
(the "Blockout Period"), the Company will not, directly or indirectly,
effect any Subsequent Placement except as set forth in Section 4.6(e).
(c) The Blockout Period set forth in Section 4.6(b) above shall be extended
for the number of Trading Days during such period in which (i) trading
in the Common Stock is suspended by any Trading Market, (ii) the
Registration Statement is not effective, or (iii) the prospectus
included in the Registration Statement may not be used by the
Purchasers for the resale of Registrable Securities thereunder.
(d) From the end of the Blockout Period and for so long as the Notes are
outstanding, the Company will not, directly or indirectly, effect any
Subsequent Placement unless the Company shall have first complied with
this Section 4.6(d).
(i) The Company shall deliver to each Purchaser a written notice (the
"Offer") of any proposed or intended issuance or sale or exchange of
the securities being offered (the "Offered Securities") in a
Subsequent Placement, which Offer shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which
they are to be issued, sold or exchanged, and the number or amount of
the Offered Securities to be issued, sold or exchanged, (y) identify
the Persons or entities to which or with which the Offered Securities
are to be offered, issued, sold or exchanged and (z) offer to issue
and sell to or exchange with each Purchaser (A) a pro rata portion of
the Offered Securities based on such Purchaser's pro rata portion of
the aggregate principal amount of the Notes purchased hereunder (the
"Basic Amount"), and (B) with respect to each Purchaser that elects to
purchase its Basic Amount, any additional portion of the Offered
Securities attributable to the Basic Amounts of other Purchasers as
such Purchaser shall indicate it will purchase or acquire should the
other Purchasers subscribe for less than their Basic Amounts (the
"Undersubscription Amount").
(ii) To accept an Offer, in whole or in part, a Purchaser must deliver a
written notice to the Company prior to the end of the 10 Trading Day
period of the Offer, setting forth the portion of the Purchaser's
Basic Amount that such Purchaser elects to purchase and, if such
Purchaser shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Purchaser elects to
purchase (in either case, the "Notice of Acceptance"). If the Basic
Amounts subscribed for by all Purchasers are less than the total of
all of the Basic Amounts, then each Purchaser who has set forth an
Undersubcription Amount in its Notice of Acceptance shall be entitled
to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however,
that if the Undersubscription Amounts subscribed for exceed the
difference between the total of all the Basic Amounts and the Basic
Amounts subscribed for (the "Available Undersubscription Amount"),
19
each Purchaser who has subscribed for any Undersubscription Amount
shall be entitled to purchase on that portion of the Available
Undersubscription Amount as the Basic Amount of such Purchaser bears
to the total Basic Amounts of all Purchasers that have subscribed for
Undersubscription Amounts, subject to rounding by the Board of
Directors to the extent its deems reasonably necessary.
(iii)The Company shall have five (5) Trading Days from the expiration of
the period set forth in Section 4.6(d)(ii) above to issue, sell or
exchange all or any part of such Offered Securities as to which a
Notice of Acceptance has not been given by the Purchasers (the
"Refused Securities"), but only to the offerees described in the Offer
and only upon terms and conditions (including, without limitation,
unit prices and interest rates) that are not more favorable to the
acquiring Person or Persons or less favorable to the Company than
those set forth in the Offer.
(iv) In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms
specified in Section 4.6(d)(iii) above), then each Purchaser may, at
its sole option and in its sole discretion, reduce the number or
amount of the Offered Securities specified in its Notice of Acceptance
to an amount that shall be not less than the number or amount of the
Offered Securities that the Purchaser elected to purchase pursuant to
Section 4.6(d)(ii) above multiplied by a fraction, (i) the numerator
of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including
Offered Securities to be issued or sold to Purchasers pursuant to
Section 4.6(c)(ii) above prior to such reduction) and (ii) the
denominator of which shall be the original amount of the Offered
Securities. In the event that any Purchaser so elects to reduce the
number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the
reduced number or amount of the Offered Securities unless and until
such securities have again been offered to the Purchasers in
accordance with Section 4.6(d)(i) above.
(v) Upon the closing of the issuance, sale or exchange of all or less than
all of the Refused Securities, the Purchasers shall acquire from the
Company, and the Company shall issue to the Purchasers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4.6(d)(iv) above if the Purchasers have so
elected, upon the terms and conditions specified in the Offer. The
purchase by the Purchasers of any Offered Securities is subject in all
cases to the preparation, execution and delivery by the Company and the
Purchasers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Purchasers and
their respective counsel.
(vi) Any Offered Securities not acquired by the Purchasers or other persons
in accordance with Section 4.6(d)(iii) above may not be issued, sold or
exchanged until they are again offered to the Purchasers under the
procedures specified in this Agreement.
(e) The restrictions contained in paragraphs (b) and (d) of this Section
4.6 shall not apply to Excluded Stock.
20
4.7 Conversion and Exercise Procedures. The form of Exercise Notice included in
the Additional Investment Rights, Warrants and Additional Investment Right
Warrants and the form of Holder Conversion Notice included in the Notes set
forth the totality of the procedures required by the Purchasers in order to
exercise the Additional Investment Rights, Warrants or Additional Investment
Right Warrants or convert the Notes. No additional legal opinion or other
information or instructions shall be necessary to enable the Purchasers to
exercise their Additional Investment Rights or convert their Notes. The Company
shall honor exercises of the Additional Investment Rights, Warrants and
Additional Investment Right Warrants and conversions of the Notes and shall
deliver Underlying Shares in accordance with the terms, conditions and time
periods set forth in the Transaction Documents.
4.8 Securities Laws Disclosure; Publicity. On or before 8:30 a.m., New York
time, on December 17, 2004, the Company shall issue a press release (the "Press
Release") acceptable to the Purchasers disclosing all material terms of the
transactions contemplated hereby. Within one Business Day of the date of this
Agreement, the Company shall file a Current Report on Form 8-K with the
Commission (the "8-K Filing") describing the terms of the transactions
contemplated by the Transaction Documents and including as exhibits to such
Current Report on Form 8-K this Agreement and the form of Notes and Additional
Investment Rights, in the form required by the Exchange Act. Thereafter, the
Company shall timely file any filings and notices required by the Commission or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof to the Purchasers promptly after filing. The Company shall, at
least two Trading Days prior to the filing or dissemination of any disclosure
required by this paragraph (other than with respect to the Current Report on
Form 8-K to be filed within one day of the Closing Date and the Press Release),
provide a copy thereof to the Purchasers for their review. The Company and the
Purchasers shall consult with each other in issuing any press releases or
otherwise making public statements or filings and other communications with the
Commission or any regulatory agency or Trading Market with respect to the
transactions contemplated hereby, and neither party shall issue any such press
release or otherwise make any such public statement, filing or other
communication without the prior consent of the other, except if such disclosure
is required by law, in which case the disclosing party shall promptly provide
the other party with prior notice of such public statement, filing or other
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except to the extent such
disclosure (but not any disclosure as to the controlling Persons thereof) is
required by law or Trading Market regulations, in which case the Company shall
provide the Purchasers with prior notice of such disclosure. The Company shall
not, and shall cause each of its Subsidiaries and its and each of their
respective officers, directors, employees and agents not to, provide any
Purchaser with any material nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the 8-K Filing without the
express written consent of such Purchaser. In the event of a breach of the
foregoing covenant by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to any
other remedy provided herein or in the Transaction Documents, a Purchaser shall
have the right to require the Company to make a public disclosure, in the form
of a press release, public advertisement or otherwise, of such material
nonpublic information. No Purchaser shall have any liability to the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure. Subject to the foregoing,
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neither the Company nor any Purchaser shall issue any press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of any Purchaser, to make any press release or other public disclosure
with respect to such transactions (i) in substantial conformity with the 8-K
Filing and contemporaneously therewith and (ii) as is required by applicable law
and regulations (provided that in the case of clause (i) each Purchaser shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Each press release disseminated during
the 12 months prior to the Closing Date did not at the time of release contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
4.9 Use of Proceeds. The Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes, to settle outstanding
litigation and repayment of existing Company lines of credit or debt facilities,
pursuant to the current payment terms thereof as set forth in Schedule 4.9, and
not to (i) prepay debt existing at the Closing Date, (ii) satisfy any Company
debt incurred subsequent to the Closing Date (other than payment of trade
payables and accrued expenses in the ordinary course of the Company's business
and prior practices) or (iii) except for the redemption obligations referred to
in Schedule 4.9, redeem any Company equity or equity-equivalent securities.
4.10 Indebtedness.
(a) At any time after the date of this Agreement, neither the Company nor any
Subsidiary of the Company shall incur any indebtedness, liability or obligation
that is senior to the Notes in right of payment, whether with respect to
interest or upon liquidation or dissolution, or otherwise; provided, however,
that notwithstanding the foregoing, the Company may, in the ordinary course of
business, incur indebtedness secured by purchase money security interests (which
will be senior only as to the underlying assets covered thereby) and
indebtedness under capital lease obligations (which will be senior only as to
the underlying assets covered thereby). The limitations set forth in this
Section 4.10 shall not restrict or prohibit the Company from making scheduled
payments, when due, on any existing or future Company debt obligations, whether
or not such obligations arise outside the ordinary course of business, and such
payments may be made by the Company in a timely manner and pursuant to the
specific terms thereof; provided, no default or Event of Default under the
Transaction Documents has occurred and is continuing.
(b) The provisions of this Section 4.10 shall terminate and be of no further
force or effect upon the conversion or indefeasible repayment in full of the
Notes and all accrued interest thereon and any and all expenses or liabilities
relating thereto.
4.11 Repayment of Notes. Each of the parties hereto agrees that all repayments
of the Notes (including any accrued interest thereon) by the Company (other than
by conversion of the Notes) will be paid pro rata to the holders thereof based
upon the principal amount then outstanding to each of such holders.
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4.12 No Impairment. At all times after the date hereof, the Company will not
take or permit any action, or cause or permit any subsidiary to take or permit
any action that impairs or adversely affects the rights of the Purchasers under
the Agreement or the Notes.
4.13 Fundamental Changes. In addition to any other rights provided by law or set
forth herein, from and after the date of this Agreement and for so long as any
Notes remain outstanding, the Company shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of a
majority of the outstanding principal face amount of the Notes:
(a) purchase, redeem (other than pursuant to equity incentive agreements with
non-officer employees giving the Company the right to repurchase shares upon the
termination of services) or set aside any sums for the purchase or redemption
of, or declare or pay any dividend (including a dividend payable in stock of the
Company) or make any other distribution with respect to, any shares of capital
stock or any other securities that are convertible into or exercisable for such
stock;
(b) change the nature of the Company's business to any business which is
fundamentally distinct and separate from the business currently conducted by the
Company; or
(c) cause or permit any subsidiary of the Company directly or indirectly to take
any actions described in clauses (a) through (b) above, other than issuing
securities to the Company.
4.14 Indemnification.
(a) If any Purchaser or any of its Affiliates or any officer, director, partner,
controlling person, employee or agent of a Purchaser or any of its Affiliates (a
"Related Person") becomes involved in any capacity in any Proceeding brought by
or against any Person in connection with or as a result of the transactions
contemplated by the Transaction Documents, the Company will indemnify and hold
harmless such Purchaser or Related Person for its reasonable legal and other
expenses (including the costs of any investigation, preparation and travel) and
for any Losses incurred in connection therewith, as such expenses or Losses are
incurred, excluding only Losses that result directly from such Purchaser's or
Related Person's gross negligence or willful misconduct. In addition, the
Company shall indemnify and hold harmless each Purchaser and Related Person from
and against any and all Losses, as incurred, arising out of or relating to any
breach by the Company of any of the representations, warranties or covenants
made by the Company in this Agreement or any other Transaction Document, or any
allegation by a third party that, if true, would constitute such a breach. Each
Purchaser shall indemnify and hold harmless the Company, each other Purchaser
and any Related Person thereof from and against any and all Losses, as incurred,
arising out of or relating to any breach by such Purchaser of any of the
representations and warranties made by such Purchaser in Section 3.2 of this
Agreement. The conduct of any Proceedings for which indemnification is available
under this paragraph shall be governed by Section 6.4(c) below. The
indemnification obligations of the Company under this paragraph shall be in
addition to any liability that the Company may otherwise have and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Purchasers and any such Related Persons. If the
23
Company breaches its obligations under any Transaction Document, then, in
addition to any other liabilities the Company may have under any Transaction
Document or applicable law, the Company shall pay or reimburse the Purchasers on
demand for all costs of collection and enforcement (including reasonable
attorneys fees and expenses). Without limiting the generality of the foregoing,
the Company specifically agrees to reimburse the Purchasers on demand for all
costs of enforcing the indemnification obligations in this paragraph.
4.15 Shareholders Rights Plan. No claim will be made or enforced by the Company
or any other Person that any Purchaser is an "Acquiring Person" under any
shareholders rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving Underlying
Shares under the Transaction Documents or under any other agreement between the
Company and the Purchasers.
4.16 Delivery of Certificates. In addition to any other rights available to a
Purchaser, if the Company fails to deliver to such Purchaser a certificate
representing Common Stock on the date on which delivery of such certificate is
required by any Transaction Document, and if after such date such Purchaser
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Purchaser of the shares that the
Purchaser anticipated receiving from the Company (a "Buy-In"), then the Company
shall, within three Trading Days after such Purchaser's request and in such
Purchaser's discretion, either (i) pay cash to such Purchaser in an amount equal
to such Purchaser's total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the "Buy-In Price"), at which
point the Company's obligation to deliver such certificate (and to issue such
Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver
to such Purchaser a certificate or certificates representing such Common Stock
and pay cash to such Purchaser in an amount equal to the excess (if any) of the
Buy-In Price over the product of (A) such number of shares of Common Stock,
times (B) the Closing Price on the date of the event giving rise to the
Company's obligation to deliver such certificate.
ARTICLE V.
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The obligation of
each Purchaser to acquire Securities at the Closing is subject to the
satisfaction or waiver by such Purchaser, at or before the Closing, of each of
the following conditions:
(a) Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as
of the date when made and as of the Closing as though made on and as of such
date;
(b) Performance. The Company and each other Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by it at or prior to the Closing;
24
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;
(d) Adverse Changes. Since the date of execution of this Agreement, no event or
series of events shall have occurred that reasonably would be expected to have
or result in a Material Adverse Effect; and
(e) No Suspensions of Trading in Common Stock; Listing. Trading in the Common
Stock shall not have been suspended by the Commission or any Trading Market
(except for any suspensions of trading of not more than one Trading Day solely
to permit dissemination of material information regarding the Company) at any
time since the date of execution of this Agreement, and the Common Stock shall
have been at all times since such date listed for trading on an Eligible Market.
5.2 Conditions Precedent to the Obligations of the Company. The obligation of
the Company to sell Securities at the Closing is subject to the satisfaction or
waiver by the Company, at or before the Closing, of each of the following
conditions:
(a) Representations and Warranties. The representations and warranties of the
Purchasers contained herein shall be true and correct in all material respects
as of the date when made and as of the Closing Date as though made on and as of
such date;
(b) Performance. The Purchasers shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Purchasers at or prior to the Closing; and
(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents.
ARTICLE VI.
REGISTRATION RIGHTS
6.1 Shelf Registration.
(a) As promptly as possible, and in any event on or prior to the Filing Date,
the Company shall prepare and file with the Commission a "shelf" Registration
Statement covering the resale of all Registrable Securities for an offering to
be made on a continuous basis pursuant to Rule 415. If for any reason the
Commission does not permit all of the Registrable Securities to be included in
such Registration Statement, then the Company shall prepare and file with the
Commission a separate Registration Statement with respect to any such
Registrable Securities not included with the initial Registration Statements, as
expeditiously as possible, but in no event later than the date which is 30 days
after the date on which the Commission shall indicate as being the first date
such filing may be made. The Registration Statement shall be on Form S-3 and
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shall contain (except if otherwise directed by the Purchasers) the "Plan of
Distribution", substantially as attached hereto as Exhibit F. In the event the
Form S-3 is not available for the registration of the resale of Registrable
Securities hereunder, the Company shall (i) register the resale of the
Registrable Securities on another appropriate form in accordance herewith as the
Purchasers may consent and (ii) attempt to register the Registrable Securities
on Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statements then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the Commission.
(b) The Company shall use its best efforts to cause the Registration Statement
to be declared effective by the Commission as promptly as possible after the
filing thereof, but in any event prior to the Required Effectiveness Date, and
shall use its best efforts to keep the Registration Statement continuously
effective under the Securities Act until the fifth anniversary of the Effective
Date or such earlier date when all Registrable Securities covered by such
Registration Statement have been sold publicly (the "Effectiveness Period").
(c) The Company shall notify each Purchaser in writing promptly (and in any
event within one business day) after receiving notification from the Commission
that the Registration Statement has been declared effective.
(d) If: (i) any Registration Statement is not filed on or prior to the Filing
Date (if the Company files such Registration Statement without affording the
Purchasers the opportunity to review and comment on the same as required by
Section 6.2(a) hereof, the Company shall not be deemed to have satisfied this
clause (i)), or (ii) the Company fails to file with the Commission a request for
acceleration in accordance with Rule 461 promulgated under the Securities Act,
within five Trading Days after the date that the Company is notified (orally or
in writing, whichever is earlier) by the Commission that a Registration
Statement will not be "reviewed," or will not be subject to further review, or
(iii) the Company fails to respond to any comments made by the Commission within
10 Trading Days after the receipt of such comments, or (iv) a Registration
Statement filed hereunder is not declared effective by the Commission by the
Required Effectiveness Date, or (v) after a Registration Statement is filed with
and declared effective by the Commission, such Registration Statement ceases to
be effective as to all Registrable Securities to which it is required to relate
at any time prior to the expiration of the Effectiveness Period without being
succeeded within 10 Trading Days by an amendment to such Registration Statement
or by a subsequent Registration Statement filed with and declared effective by
the Commission, or (vi) an amendment to a Registration Statement is not filed by
the Company with the Commission within ten Trading Days after the Commission's
having notified the Company that such amendment is required in order for such
Registration Statement to be declared effective, or (vii) the Common Stock is
not listed or quoted, or is suspended from trading on the Nasdaq SmallCap Market
for a period of three Trading Days (which need not be consecutive Trading Days),
or (viii) the exercise rights of the Purchasers pursuant to the Additional
Investment Rights are suspended for any reason (any such failure or breach being
referred to as an "Event," and for purposes of clause (i), (iv) or (viii) the
date on which such Event occurs, or for purposes of clause (ii) the date on
which such five Trading Day period is exceeded, or for purposes of clauses
(iii), (v) or (vi) the date which such ten Trading Day-period is exceeded, or
for purposes of clause (vii) the date on which such three Trading Day period is
exceeded, being referred to as "Event Date"), then: (x) on each such Event Date
26
the Company shall pay to each Purchaser an amount in cash, as partial liquidated
damages and not as a penalty, equal to 2% of the aggregate purchase price paid
by such Purchaser pursuant to the Purchase Agreement; and (y) on each monthly
anniversary of each such Event Date thereof (if the applicable Event shall not
have been cured by such date) until the applicable Event is cured, the Company
shall pay to each Purchaser an amount in cash, as partial liquidated damages and
not as a penalty, equal to 2% of the aggregate purchase price paid by such
Purchaser pursuant to the Purchase Agreement. Such payments shall be in partial
compensation to the Purchasers and shall not constitute the Purchaser's
exclusive remedy for such events. If the Company fails to pay any liquidated
damages pursuant to this Section in full within seven days after the date
payable, the Company will pay interest thereon at a rate of 18% per annum (or
such lesser maximum amount that is permitted to be paid by applicable law) to
the Purchaser, accruing daily from the date such liquidated damages are due
until such amounts, plus all such interest thereon, are paid in full.
(e) The Company shall not, prior to the Effective Date of the Registration
Statement, prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities.
(f) If the Company issues to the Purchasers any Common Stock pursuant to the
Transaction Documents that is not included in the initial Registration
Statement, then the Company shall file an additional Registration Statement
covering such number of shares of Common Stock on or prior to the Filing Date
and shall use it best efforts, but in no event later than the Required Filing
Date, to cause such additional Registration Statement to become effective by the
Commission.
6.2 Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference), the Company shall (i) furnish to the Purchasers and
Purchaser Counsel copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Purchasers and Purchaser
Counsel, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file a Registration Statement or any such Prospectus or any amendments or
supplements thereto to which Purchasers holding a majority of the Registrable
Securities shall reasonably object.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective as to the applicable Registrable Securities for
the Effectiveness Period and prepare and file with the Commission such
additional Registration Statements in order to register for resale under the
27
Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Purchasers true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Purchasers thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Purchasers of Registrable Securities to be sold and Purchaser
Counsel as promptly as reasonably possible, and (if requested by any such
Person) confirm such notice in writing no later than one Trading Day thereafter,
of any of the following events: (i) the Commission notifies the Company whether
there will be a "review" of any Registration Statement; (ii) the Commission
comments in writing on any Registration Statement (in which case the Company
shall deliver to each Purchaser a copy of such comments and of all written
responses thereto); (iii) any Registration Statement or any post-effective
amendment is declared effective; (iv) the Commission or any other Federal or
state governmental authority requests any amendment or supplement to any
Registration Statement or Prospectus or requests additional information related
thereto; (v) the Commission issues any stop order suspending the effectiveness
of any Registration Statement or initiates any Proceedings for that purpose;
(vi) the Company receives notice of any suspension of the qualification or
exemption from qualification of any Registrable Securities for sale in any
jurisdiction, or the initiation or threat of any Proceeding for such purpose; or
(vii) the financial statements included or incorporated by reference in any
Registration Statement become ineligible for inclusion or incorporation therein
or any statement made in any Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference is
untrue in any material respect or any revision to a Registration Statement,
Prospectus or other document is required so that it will not contain any untrue
statement of a material fact or omit to state any 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.
(d) Use its best efforts to avoid the issuance of or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of any Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, as soon as possible.
(e) Furnish to each Purchaser and Purchaser Counsel, without charge, at least
one conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, all documents incorporated or
deemed to be incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
28
(f) Promptly deliver to each Purchaser and Purchaser Counsel, without charge, as
many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
(g) (i) In the time and manner required by each Trading Market, prepare and file
with such Trading Market an additional shares listing application covering all
of the Registrable Securities; (ii) take all steps necessary to cause such
Registrable Securities to be approved for listing on each Trading Market as soon
as possible thereafter; (iii) provide to the Purchasers evidence of such
listing; and (iv) maintain the listing of such Registrable Securities on each
such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Securities, use its best efforts
to register or qualify or cooperate with the selling Purchasers and Purchaser
Counsel in connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any Purchaser requests in writing, to keep each such
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement.
(i) Cooperate with the Purchasers to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be delivered to
a transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by this Agreement, of all restrictive legends, and
to enable such Registrable Securities to be in such denominations and registered
in such names as any such Purchasers may request.
(j) Upon the occurrence of any event described in Section 6.2(c)(vii), as
promptly as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will 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,
in the light of the circumstances under which they were made, not misleading.
(k) Cooperate with any due diligence investigation undertaken by the Purchasers
in connection with the sale of Registrable Securities, including, without
limitation, by making available any documents and information; provided that the
Company will not deliver or make available to any Purchaser material, nonpublic
information unless such Purchaser specifically requests in advance to receive
material, nonpublic information in writing.
(l) Comply with all applicable rules and regulations of the Commission.
29
6.3 Registration Expenses. The Company shall pay (or reimburse the Purchasers
for) all fees and expenses incident to the performance of or compliance with
this Agreement by the Company, including without limitation (a) all registration
and filing fees and expenses, including without limitation those related to
filings with the Commission, any Trading Market and in connection with
applicable state securities or Blue Sky laws, (b) printing expenses (including
without limitation expenses of printing certificates for Registrable Securities
and of printing prospectuses requested by the Purchasers), (c) messenger,
telephone and delivery expenses, (d) fees and disbursements of counsel for the
Company, (e) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement, and (f) all listing fees to be paid by the Company to the Trading
Market.
6.4 Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Purchaser, the
officers, directors, partners, members, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Purchaser
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the officers, directors, partners, members, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out of
or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount by which the net proceeds received by such
Purchaser upon the sale of the Registrable Securities giving rise to such
indemnification obligation exceeds the amount paid, directly or indirectly, by
such Purchaser for such Registrable Securities.
(b) Indemnification by Purchasers. Each Purchaser shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
30
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount of the net proceeds received by such Purchaser
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought
or asserted against any Person entitled to indemnity hereunder (an "Indemnified
Party"), such Indemnified Party shall promptly notify the Person from whom
indemnity is sought (the "Indemnifying Party") in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all fees and
expenses incurred in connection with defense thereof; provided, that the failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except (and
only) to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
31
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 6.4(a) or (b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses 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 any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 6.4(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6.4(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 6.4(d), no Purchaser
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Purchaser from the sale
of the Registrable Securities subject to the Proceeding exceeds the amount of
any damages that such Purchaser has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
32
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to the Registration Statement.
Each Purchaser further agrees that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Sections 6.2(c)(v), (vi) or
(vii), such Purchaser will discontinue disposition of such Registrable
Securities under the Registration Statement until such Purchaser's receipt of
the copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 6.2(j), or until it is advised in writing (the "Advice")
by the Company that the use of the applicable Prospectus may be resumed, and, in
either case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Purchasers in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII.
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Trading Day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, the Company shall pay to Omicron Master
Trust an aggregate of $40,000 for their legal fees and expenses incurred in
connection with the preparation and negotiation of this Agreement, of which
amount $15,000 has been previously paid by the Company. In lieu of the foregoing
remaining payment, Omicron Master Trust may retain such amount at the Closing.
33
Except as expressly set forth in the Transaction Documents to the contrary, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the issuance of any Securities.
7.3 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
7.4 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (ii) the Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Agreement later than 6:30 p.m. (New York City time) on any date and earlier
than 11:59 p.m. (New York City time) on such date, (iii) the Trading Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
34
If to the Company:
000 Xxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, President
Fax No.: 000-000-0000
With a copy to: With a copy to:
Durham, Xxxxx and Xxxxxxx P.C.
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxxx X. Xxxxx
Fax No.: 000-000-0000
If to the Purchasers:
To the address set
forth under such
Purchaser's name on
the signature pages
attached hereto.
or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Purchasers under Article VI and
that does not directly or indirectly affect the rights of other Purchasers may
be given by Purchasers holding at least a majority of the Registrable Securities
to which such waiver or consent relates.
7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
7.7 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers." Notwithstanding anything to the contrary herein,
Securities may be assigned to any Person in connection with a bona fide margin
account or other loan or financing arrangement secured by such Securities.
35
7.8 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except that each Related Person is an intended third party beneficiary
of Section 4.14 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 Governing Law; Venue; Waiver of Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by and construed and enforced in accordance with the internal laws
of the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by any
of the Transaction Documents (whether brought against a party hereto or its
respective Affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York, Borough of Manhattan. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City of New York, Borough of Manhattan for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of any of this
Agreement), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or any
of the Transaction Documents or the transactions contemplated hereby or thereby.
If either party shall commence an action or proceeding to enforce any provisions
of this Agreement or any Transaction Document, then the prevailing party in such
action or proceeding shall be reimbursed by the other party for its reasonable
attorneys fees and other reasonable costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
7.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise and/or
conversion of the Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
36
7.12 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
7.14 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
7.15 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
7.16 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser hereunder or pursuant to the Additional Investment
Rights or any Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
7.17 Usury. To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will resist any
and all efforts to be compelled to take the benefit or advantage of, usury laws
wherever enacted, now or at any time hereafter in force, in connection with any
claim, action or proceeding that may be brought by any Purchaser in order to
37
enforce any right or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it is expressly
agreed and provided that the total liability of the Company under the
Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the "Maximum Rate"),
and, without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate of interest applicable to the
Transaction Documents from the effective date forward, unless such application
is precluded by applicable law. If under any circumstances whatsoever, interest
in excess of the Maximum Rate is paid by the Company to any Purchaser with
respect to indebtedness evidenced by the Transaction Documents, such excess
shall be applied by such Purchaser to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at such Purchaser's election.
7.18 Independent Nature of Purchasers' Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document. The decision of each Purchaser to purchase Notes pursuant
to this Agreement has been made by such Purchaser independently of any other
Purchaser and independently of any information, materials, statements or
opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or of the Subsidiary which may have been made or given
by any other Purchaser or by any agent or employee of any other Purchaser, and
no Purchaser or any of its agents or employees shall have any liability to any
other Purchaser (or any other person) relating to or arising from any such
information, materials, statements or opinions. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. The
Company hereby confirms that it understands and agrees that the Purchasers are
not acting as a "group" as that term is used in Section 13(d) of the Exchange
Act. Each Purchaser acknowledges that no other Purchaser has acted as agent for
such Purchaser in connection with making its investment hereunder and that no
other Purchaser will be acting as agent of such Purchaser in connection with
monitoring its investment hereunder. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. Each Purchaser represents
that it has been represented by its own separate legal counsel in its review and
negotiations of this Agreement and the Transaction Documents and each party
represents and confirms that Proskauer Rose LLP represents only Omicron Master
Trust in connection with this Agreement and the Transaction Documents.
38
7.19 Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in this Agreement to a number of shares or a price per share shall be
amended to appropriately account for such event.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
39
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
BRITESMILE, INC.
By:
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF PURCHASERS FOLLOW.]
[PURCHASERS]
By:
Name:
Title:
Purchase Price: $[ ]
Initial Notes Principal Amount: $[ ]
Warrant Shares:
Additional Investment Right -
Additional Notes:
Additional Investment Right -
Warrant Shares:
Address for Notice:
Exhibits:
A. Form of Additional Investment Right
B. Form of Note
C. Form of Transfer Agent Instructions
D. Form of Warrant
E. Form of Opinion of Company Counsel
F. Plan of Distribution
G. Form of Selling Shareholder Questionnaire
H. Form of Escrow Agreement
Schedules:
3.1(a) Subsidiaries
3.1(g) Capitalization
3.1(i) Material Changes
3.1(j) Litigation
3.1(l) Compliance
3.1(o) Patents and Trademarks
3.1(t) Certain Fees
3.1(dd) Ranking
4.9 Use of Proceeds
Exhibit A
Form of Additional Investment Right
NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
SECURITIES.
BRITESMILE, INC.
ADDITIONAL INVESTMENT RIGHT
Additional Investment Right No. [ ] Dated: December 16, 2004
BriteSmile, Inc., a Utah corporation (the "Company"), hereby certifies
that, for value received, [Name of Holder] or its registered assigns (the
"Holder"), is entitled to purchase from the Company (a) up to a total of
[$_________]in principal amount of Senior Convertible Notes due May __, 2009 of
the Company in the form attached as Exhibit A hereto (each such note, an
"Additional Note" and all such notes, the "Additional Notes") and (b) only as
part of and in connection with the purchase of the Additional Notes, warrants in
the form attached hereto as Exhibit B to acquire up to an aggregate of
[_________] shares of Common Stock (the "Additional Investment Right Warrants"),
at any time or from time to time from and after the Closing Date and through and
including the date occurring on the 180th Trading Day following the Closing Date
(the "Expiration Date"), and subject to the following terms and conditions. This
Additional Investment Right (this "Additional Investment Right") is one of a
series of similar Additional Investment Rights issued pursuant to that certain
Securities Purchase Agreement, dated as of the date hereof, by and among the
Company and the Purchasers identified therein (the "Purchase Agreement"). All
such Additional Investment Rights are referred to herein, collectively, as the
"Additional Investment Rights."
1. Definitions. Capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Purchase Agreement.
2. Recording of Additional Investment Right. The Company shall record this
Additional Investment Right, upon records to be maintained by the Company for
that purpose (the "Additional Investment Right Register"), in the name of the
record Holder hereof from time to time. The Company may deem and treat the
registered Holder of this Additional Investment Right as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the contrary.
3. Recording of Transfers. The Company shall record the assignment and transfer
of any portion of this Additional Investment Right in the Additional Investment
Right Register, upon surrender of this Additional Investment Right, with the
Form of Assignment attached hereto on Annex B duly completed and signed, to the
Company at its address specified herein. Upon any such registration or transfer,
a new additional investment right to purchase Additional Notes, in substantially
the form of this Additional Investment Right (any such new additional investment
right, a "New Additional Investment Right"), evidencing the portion of this
Additional Investment Right so transferred shall be issued to the transferee and
a New Additional Investment Right evidencing the remaining portion of this
Additional Investment Right not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Additional Investment Right by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a holder of an Additional Investment Right.
4. Exercise and Duration of Additional Investment Right.
(a) This Additional Investment Right shall be exercisable by the registered
Holder at any time or from time to time on or after the Closing Date to and
including the Expiration Date. At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Additional Investment Right not exercised
prior thereto shall be void and of no further force and effect.
(b) The Holder may exercise this Additional Investment Right by delivering to
the Company (i) an exercise notice, in the form attached hereto on Annex A (the
"Exercise Notice"), appropriately completed and duly signed and (ii) payment of
the principal amount of the Additional Notes as to which this Additional
Investment Right is being exercised (the "Exercise Price"). The date such items
are delivered to the Company (as determined in accordance with the notice
provisions hereof) is an "Exercise Date." The Holder shall not be required to
deliver the original Additional Investment Right in order to effect an exercise
hereunder. Execution and delivery of the Exercise Notice shall have the same
effect as cancellation of the original Additional Investment Right and issuance
of a New Additional Investment Right evidencing the right to purchase the
remaining number of Additional Notes and Additional Investment Right Warrants.
5. Delivery of Additional Notes and Additional Investment Right Warrants.
(a) Upon exercise of this Additional Investment Right, the Company shall
promptly (but in no event later than three (3) Trading Days after the Exercise
Date) issue or cause to be issued and cause to be delivered to or upon the
written order of the Holder and in such name or names as the Holder may
designate, (i) Additional Notes and Additional Investment Right Warrants
issuable upon such exercise, (ii) the legal opinions of Company Counsel,
substantially in the form of Exhibit F to the Purchase Agreement, executed by
such counsel and delivered to the Holders relating to the Additional Notes and
Additional Investment Right Warrants, and (iii) a certificate from an officer of
the Company that each of the representations and warranties of the Company set
forth in Section 3.1 of the Purchase Agreement is true and correct as of the
2
date when made, except for such representations and warranties that speak as of
a certain date, and in such case shall have been true and correct as of such
date, and as of the Exercise Date as though made on and as of such date, and
each of the other conditions set forth in Section 5.1 of the Purchase Agreement
have been satisfied as of the Exercise Date. The Holder, or any Person so
designated by the Holder to receive Additional Notes or Additional Investment
Right Warrants, shall be deemed to have become holder of record of such
Additional Notes or Additional Investment Right Warrants as of the Exercise
Date.
(b) This Additional Investment Right is exercisable, either in its entirety or,
from time to time, for a portion of the number of Additional Notes and
Additional Investment Right Warrants. Upon surrender of this Additional
Investment Right following one or more partial exercises, the Company shall
issue or cause to be issued, at its expense, a New Additional Investment Right
evidencing the right to purchase the remaining number of Additional Notes and
Additional Investment Right Warrants.
(c) In addition to any other rights available to a Holder, if the Company fails
to deliver to the Holder Additional Notes and Additional Investment Right
Warrants or the shares of Common Stock issuable upon conversion of the
Additional Notes or the exercise of the Additional Investment Right Warrants on
the date on which delivery of such document is required by this Additional
Investment Right, an Additional Note or any Additional Investment Right Warrant,
and if after such date the Holder purchases (in an open market transaction or
otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Holder of the Common Stock that the Holder anticipated receiving from the
Company (a "Buy-In"), then the Company shall, within three (3) Trading Days
after the Holder's request and in the Holder's discretion, either (i) pay cash
to the Holder in an amount equal to the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased (the
"Buy-In Price"), at which point the Company's obligation to deliver such
certificate (and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such Common Stock and pay cash to the Holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Price on the date of the event
giving rise to the Company's obligation to deliver such certificate.
(d) The Company's obligations to issue and deliver Additional Notes and
Additional Investment Right Warrants in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment unrelated to the obligations hereunder against any
Person or any action to enforce the same, or any set-off, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company unrelated to the
obligations hereunder or any violation or alleged violation of law by the Holder
or any other Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in connection with
the issuance of Additional Notes and Additional Investment Right Warrants.
Nothing herein shall limit a Holder's right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the
3
Company's failure to timely deliver certificates representing Additional Notes
upon exercise of the Additional Investment Right as required pursuant to the
terms hereof.
6. Charges, Taxes and Expenses. Issuance and delivery of certificates for
Additional Notes and Additional Investment Right Warrants upon exercise of this
Additional Investment Right shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such documents, all of which taxes
and expenses shall be paid by the Company. The Holder shall be responsible for
all other tax liability that may arise as a result of holding or transferring
this Additional Investment Right or receiving Additional Notes and Additional
Investment Right Warrants upon exercise hereof.
7. Replacement of Additional Investment Right. If this Additional Investment
Right is mutilated, lost, stolen or destroyed, the Company shall issue or cause
to be issued in exchange and substitution for and upon cancellation hereof, or
in lieu of and substitution for this Additional Investment Right, a New
Additional Investment Right, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested.
8. Reservation of Common Stock. The Company covenants that it will at all times
reserve and keep available out of its authorized but unissued and otherwise
unreserved Common Stock, solely for the purpose of enabling it to issue Common
Stock issuable upon conversion of Additional Notes and Additional Investment
Right Warrants as therein provided. The Company covenants that all Additional
Notes and Additional Investment Right Warrants so issuable and deliverable
shall, upon issuance and the payment of the applicable Exercise Price in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable. The Company will take all such action as may be
necessary to assure that any shares of Common Stock issuable upon conversion of
the Additional Notes and exercise of the Additional Investment Right Warrants
may be issued as provided therein without violation of any applicable law or
regulation, or of any requirements of any securities exchange or automated
quotation system upon which the Common Stock may be listed.
9. Certain Adjustments. The Conversion Price and other terms of the Additional
Notes issuable upon exercise of this Additional Investment Right shall be
subject to adjustment from time to time as set forth in the Additional Notes.
The exercise price and other terms of the Additional Investment Right Warrants
issuable upon exercise of this Additional Investment Right shall be subject to
adjustment from time to time as set forth in the Additional Investment Right
Warrants. At least 30 days prior to any such event or transaction involving a
Fundamental Change (as defined in the Additional Note) or otherwise potentially
giving rise to an adjustment or modification of the terms and provisions of the
Additional Note, the Company will give the Holder notice thereof of the date of
the transaction and the effect thereof on the terms of the Additional Notes. The
Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Additional Investment
Right prior to the time of such event or transaction so as to participate in or
vote with respect to such event or transaction.
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10. Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds to the Company in the manner specified by the
Company in the Purchase Agreement.
11. Notices. Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and shall
be deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on a
Trading Day, (ii) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (iii) the Trading Day following
the date of deposit with a nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be
given. The address and facsimile numbers for such notices or communications
shall be as set forth in the Purchase Agreement.
12. Miscellaneous.
(a) Subject to the restrictions on transfer set forth on the first page hereof,
this Additional Investment Right may be assigned by the Holder. This Additional
Investment Right may not be assigned by the Company except to a successor in the
event of a Fundamental Change (as defined in the Additional Note). This
Additional Investment Right shall be binding on and inure to the benefit of the
parties hereto and their respective successors and assigns. Subject to the
preceding sentence, nothing in this Additional Investment Right shall be
construed to give to any Person other than the Company and the Holder any legal
or equitable right, remedy or cause of action under this Additional Investment
Right. This Additional Investment Right may be amended only in writing signed by
the Company and the Holder, their respective successors or permitted assigns.
(b) The Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Additional Investment
Right, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
(C) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS ADDITIONAL
INVESTMENT RIGHT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
5
TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT
IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.
(d) The headings herein are for convenience only, do not constitute a part of
this Additional Investment Right and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Additional Investment
Right shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Additional
Investment Right shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and upon
so agreeing, shall incorporate such substitute provision in this Additional
Investment Right.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Additional Investment
Right to be duly executed by its authorized officer as of the date first
indicated above.
BRITESMILE, INC.
By:
Name: Xxxxxxx X. Xxxxxx
Title: Acting C.E.O.
7
Annex A
FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase $______________
principal amount of Additional Notes under the foregoing Additional Investment
Right)
To: BriteSmile, Inc.
The undersigned is the Holder of Additional Investment Right No. _______ (the
"Additional Investment Right") issued by BriteSmile, Inc., a Utah corporation
(the "Company"). Capitalized terms used herein and not otherwise defined have
the respective meanings set forth in the Additional Investment Right.
1. The Additional Investment Right is currently exercisable to purchase a
total of $______________ principal amount of Additional Notes.
2. The undersigned Holder hereby exercises its right to purchase
_________________ $______________ principal amount of Additional Notes
pursuant to the Additional Investment Right.
3. The Holder shall pay simultaneously with the delivery herof, the sum of
$____________ to the Company in accordance with the terms of the Additional
Investment Right.
4. Pursuant to this exercise, the Company shall deliver to the Holder
$______________ principal amount of Additional Notes and Additional
Investment Right Warrants exercisable for __________ shares of Common Stock
in accordance with the terms of the Additional Investment Right.
5. Following this exercise, the Additional Investment Right shall be
exercisable to purchase a total of $______________ principal amount of
Additional Notes and Additional Investment Right Warrants exercisable for
____________ shares of Common Stock.
Dated: , Name of Holder:
Contact Information of Holder: (Print)
____________________________
____________________________ By:
____________________________ Name:
Facsimile: ____________________ Title:
Attention: ____________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Additional Investment Right)
Annex B
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Additional Investment Right]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Additional Investment Right to purchase $______________ principal amount of
Additional Notes and Additional Investment Right Warrants exercisable for
__________ shares of Common Stock of BriteSmile, Inc. to which the within
Additional Investment Right relates and appoints ________________ attorney to
transfer said right on the books of BriteSmile, Inc. with full power of
substitution in the premises.
Dated: ,
(Signature must conform in all respects to name of holder as
specified on the face of the Additional Investment Right)
Address of Transferor
In the presence of:
Exhibit B
Form of Note
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING, THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
No. [ ] $[ ] Date: December __, 2004
BRITESMILE, INC.
SENIOR CONVERTIBLE NOTE DUE
________ __, 2009
THIS NOTE is one of a series of duly authorized and issued Notes of
BriteSmile, Inc., a Utah corporation (the "Company"), designated as its Senior
Convertible Notes due ________ __, 2009, in the aggregate principal amount of
$12,000,000 (the "Notes")1, subject to increase pursuant to the terms of a
certain Additional Investment Right of even date herewith.
FOR VALUE RECEIVED, the Company promises to pay to the order of
[Holder] or its registered assigns (the "Holder"), the principal sum of
[__________] $(__________), on _______ __, 2009 (the "Maturity Date"), or such
earlier date as the Notes are required or permitted to be repaid as provided
hereunder, and to pay interest to the Holder on the unconverted and then
outstanding principal amount of this Note in accordance with the provisions
hereof. The principal amount of this Note may be increased as set forth in
Section 2(d) below. Notwithstanding the foregoing, the Company hereby
unconditionally promises to pay to the order of the Holder interest on any
principal or interest payable hereunder that shall not be paid in full when due,
whether at the time of any stated interest payment date or maturity or by
prepayment, acceleration or declaration or otherwise, for the period from and
including the due date of such payment to but excluding the date the same is
paid in full, at a rate of 12% per annum (but in no event in excess of the
maximum rate permitted under applicable law).
Interest payable under this Note shall be computed on the basis of a
year of 360 days and actual days elapsed (including the first day but excluding
the last day) occurring in the period for which interest is payable.
1
Payments of principal and interest shall be made in lawful money of the
United States of America to the Holder at its address as provided in Section 14
or by wire transfer to such account specified from time to time by the Holder
hereof for such purpose as provided in Section 14.
1. Definitions. In addition to the terms defined elsewhere in this Note, (a)
capitalized terms that are not otherwise defined herein have the meanings given
to such terms in the Securities Purchase Agreement, dated as of December 16,
2004, among the Company and the Purchasers identified therein (the "Purchase
Agreement"), and (b) the following terms have the meanings indicated:
"Conversion Date" means the date a Conversion Notice is
delivered to the Company together with the Conversion Schedule pursuant
to Section 6(a).
"Conversion Notice" means a written notice in the form
attached hereto as Schedule 1.
"Conversion Price" means $7.61, subject to adjustment from
time to time pursuant to Section 10.
"Equity Conditions" means, with respect to a specified
issuance of Common Stock, that each of the following conditions is
satisfied: (i) the number of authorized but unissued and otherwise
unreserved shares of Common Stock is sufficient for such issuance; (ii)
such shares of Common Stock are registered for resale by the Holder and
may be sold by the Holder pursuant to an effective Registration
Statement covering the Underlying Shares or all such shares may be sold
without volume restrictions pursuant to Rule 144(k) under the
Securities Act; (iii) the Common Stock is listed or quoted (and is not
suspended from trading) on an Eligible Market and such shares of Common
Stock are approved for listing upon issuance; (iv) such issuance would
be permitted in full without violating Section 6(b) hereof or the rules
or regulations of any Trading Market; (v) no Bankruptcy Event has
occurred; (vi) the Company is not in default with respect to any
material obligation hereunder or under any other Transaction Document;
and (vii) no public announcement of a pending or proposed Change of
Control transaction has occurred that has not been consummated.
"Event Equity Value" means 115% of the average of the Closing
Price for the five (5) Trading Days preceding the date of delivery of
the notice requiring payment of the Event Equity Value, provided that
if the Company does not make such required payment (together with any
other payments, expenses and liquidated damages then due and payable
under the Transaction Documents) when due or, in the event the Company
disputes in good faith the occurrence of the Triggering Event pursuant
to which such notice relates, does not instead deposit such required
payment (together with such other payments, expenses and liquidated
damages then due) in escrow with an independent third-party escrow
agent within five (5) Trading Days of the date such required payment is
due, then the Event Equity Value shall be 115% of the greater of (a)
the average of the Closing Prices for the five (5) Trading Days
preceding the date of delivery of the notice requiring payment of the
Event Equity Value and (b) the average of the Closing Prices for the
five (5) Trading Days preceding the date on which such required payment
2
(together with such other payments, expenses and liquidated damages) is
paid in full.
"Initial Interest Period" means the period beginning on the
Closing Date and ending on March 31, 2005.
"Interest Period" means a period of six months for the
calculation of the interest on the Note, provided that any such period
(i) shall start on the last day of the preceding period (other than the
Initial Interest Period); (ii) which would otherwise end on a day which
is not a Trading Day shall be extended to the next succeeding day which
is a Trading Day and the following interest period shall then end on
the day on which it would have ended if the preceding interest period
had not been so extended; and (iii) which would otherwise overrun the
Maturity Date shall be shortened to end on the Maturity Date.
"Interest Rate" has the meaning set forth in Section 2(a)
herein.
"LIBOR" means, in respect of a six-month Interest Period (i)
the rate of interest per annum (expressed with a maximum of 4
decimals) offered for deposits in the relevant currency and amount
which
appears on Telerate page 3750 or on any other relevant Telerate,
Bloomberg or Reuter page as of 11:00 a.m. London time two (2) Business
Days prior to the commencement of the relevant Interest Period; or (ii)
should such quotation not be published on the relevant day and time
such interest rate per annum according to such other widely published
LIBOR quotation as the Company may select for the relevant Interest
Period as of 11:00 a.m. London time two (2) Business Days prior to the
commencement of the Interest Period.
"Original Issue Date" means the date of the first issuance of
any Notes, regardless of the number of transfers of any particular
Note.
"Principal Payment Date" means any date on which payment of a
principal amount of this Note shall be due and payable by the Company
in accordance with Section 9.
"Triggering Event" means any of the following events: (a) the
Common Stock is not listed or quoted, or is suspended from trading, on
an Eligible Market for a period of five (5) or more Trading Days (which
need not be consecutive Trading Days); (b) the Company fails for any
reason to deliver a certificate evidencing any Securities to a
Purchaser within five (5) Trading Days after delivery of such
certificate is required pursuant to any Transaction Document or the
exercise or conversion rights of the Holders pursuant to any
Transaction Document are otherwise suspended for any reason; (c) the
Company fails to have available a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock available to
issue Underlying Shares upon any exercise of the Note; (d) at any time
after the Closing Date, any Common Stock issuable pursuant to the
Transaction Documents is not listed on an Eligible Market; (e) the
Company effects or publicly announces its intention to effect any
exchange, recapitalization or other transaction that effectively
3
requires or rewards physical delivery of certificates evidencing the
Common Stock; (f) the effectiveness of the Registration Statement
lapses for any reason or the Holder shall not be permitted to resell
any Underlying Shares under the Registration Statement, in either case,
for five (5) or more Trading Days (which need not be consecutive
Trading Days); (g) the Company fails to make any cash payment required
under the Transaction Documents and such failure is not cured within
five (5) days after notice of such default is first given to the
Company by a Purchaser; or (h) the Company defaults in the timely
performance of any other obligation under the Transaction Documents and
such default continues uncured for a period of 20 days after the date
on which notice of such default is first given to the Company by a
Purchaser (it being understood that no prior notice need be given in
the case of a default that cannot reasonably be cured within 20 days).
2. Principal and Interest.
(a) The Company shall pay interest to the Holder on the aggregate unconverted
and then outstanding principal amount of this Note for each Interest Period at a
rate (the "Interest Rate") which is the greater of (i) 5% per annum or (ii)
LIBOR plus 300 basis points per annum; provided at no time shall the Interest
Rate exceed 8% per annum. Each Interest Period, other than the Initial Interest
Period shall begin on either March 31 or September 30 of each year occuring
prior to the Maturity Date. Interest shall be payable quarterly in arrears on
each March 31, June 30, September 30 and December 31, except if such date is not
a Trading Day, in which case such interest shall be payable on the next
succeeding Trading Day (each, an "Interest Payment Date"). The first Interest
Payment Date shall be March 31, 2005.
(b) The Company shall pay the principal balance of this Note to the Holder in 36
equal monthly installments (each, a "Monthly Installment") commencing on the
date eighteen (18) months following the Closing Date and to continue for each of
the 35 months thereafter, except if such date is not a Trading Day, in which
case such principal shall be payable on the next succeeding Trading Day (each, a
"Principal Payment Date"), until the outstanding principal balance of this Note
has been paid in full. On the final Principal Payment Date, the Company shall
pay all then accrued and unpaid interest on this Note together with the final
payment of principal hereunder.
(c) Subject to the conditions and limitations set forth below, the Company may
pay interest or principal on this Note in (i) cash or (ii) shares of Common
Stock. The Company must deliver written notice to the Holder indicating the
manner in which it intends to pay interest and principal at least 30 days prior
to each Interest Payment Date or Principal Payment Date, as applicable, but the
Company may indicate in any such notice that the election contained therein
shall continue for subsequent Interest Payment Dates or Principal Payment Dates
until revised. Failure to timely provide such written notice shall be deemed an
election by the Company to pay the amount of any interest or principal in cash.
(d) Notwithstanding the foregoing, the Company may not pay interest or principal
by issuing shares of Common Stock unless (i) all of the Equity Conditions are
then satisfied with respect to all shares of Common Stock then issuable upon
conversion of all outstanding Notes and (ii) the number of shares of Common
Stock offered for payment on any Interest Payment Date or Principal Payment Date
shall not exceed the cumulative share volume for the twenty (20) Trading Days
prior to the later of (x) the date the Company has elected to pay interest or
4
principal in shares of Common Stock and (y) thirty (30) days prior to the
applicable Interest Payment Date or Principal Payment Date. If the Company is
required to pay interest in cash on any Interest Payment Date but fails to do
so, the Holder may (but shall not be required to) treat such interest as if it
had been added to the principal amount of this Note as of such Interest Payment
Date or accept any number of shares of Common Stock in lieu of such interest
payment.
(e) In the event that the Company elects to pay interest or principal on any
Interest Payment Date or Principal Payment Date, as applicable, in shares of
Common Stock, the number of shares of Common Stock to be issued to each Holder
as such interest or principal shall be (i) with respect to interest, determined
by dividing the aggregate amount of interest then payable to such Holder by the
Market Price (as defined below) as of the applicable Interest Payment Date, and
rounding up to the nearest whole share, (ii) with respect to principal,
determined by dividing the total principal then payable to such Holder by the
Market Price as of the applicable Principal Payment Date, and rounding up to the
nearest whole share, and (iii) paid to such Holder in accordance with Section
2(f) below. The term "Market Price" shall mean 93% of the arithmetic average of
the VWAP for the 20 Trading Days prior to the applicable Interest Payment Date
or Principal Payment Date, as the case may be (not including such date).
(f) In the event that any interest or principal is paid in Common Stock, the
Company shall on such Interest Payment Date or Principal Payment Date (i) issue
and deliver to such Holder a certificate, free of restrictive legends,
registered in the name of the Holder or its designee, for the number of shares
of Common Stock to which the Holder shall be entitled, or (ii) at all times
after the Holder has notified the Company that this clause (ii) shall apply,
credit the number of shares of Common Stock to which the Holder shall be
entitled to the Holder's or its designee's balance account with The Depository
Trust Company through its Deposit Withdrawal Agent Commission System.
(g) The Notes may not be repaid in whole or part absent written consent from the
Holder.
3. Ranking and Covenants.
(a) Except as set forth in Schedule 3.1(dd) or as otherwise permitted in Section
4.10(a) of the Purchase Agreement (the "Existing Indebtedness"), no indebtedness
of the Company is senior to this Note in right of payment, whether with respect
to interest, damages or upon liquidation or dissolution or otherwise. Other than
the Existing Indebtedness and any renewal, refinancing or replacement thereof
that does not exceed the aggregate amount of the Existing Indebtedness and the
borrowing availability under the related credit or loan agreements on the date
hereof, the Company will not, and will not permit any Subsidiary to, directly or
indirectly, enter into, create, incur, assume or suffer to exist any
indebtedness of any kind, that is senior in any respect to the Company's
obligations under the Notes, other than indebtedness secured by purchase money
security interests (which will be senior only as to the underlying assets
covered thereby) and indebtedness under capital lease obligations (which will be
senior only as to the assets covered thereby); and the Company will not, and
will not permit any subsidiary to, directly or indirectly, incur any Lien on or
5
with respect to any of its property or assets now owned or hereafter acquired or
any interest therein or any income or profits therefrom. The limitations set
forth in this Section 3(a) and Section 4.10 of the Purchase Agreement shall not
restrict or prohibit the Company from making scheduled payments, when due, on
any existing or future Company debt obligations, whether or not such obligations
arise outside the ordinary course of business, and such payments may be made by
the Company in a timely manner and pursuant to the specific terms thereof;
provided, no default or Event of Default under the Transaction Documents has
occurred and is continuing.
(b) So long as any Notes are outstanding, neither the Company nor any Subsidiary
shall, directly or indirectly, redeem, purchase or otherwise acquire any capital
stock of the Company or any such Subsidiary or set aside any monies for such a
redemption, purchase or other acquisition (other than pursuant to Section 7 of
the Certificate of Designation of Rights and Preferences of Series A Preferred
Stock of Britesmile Development Inc. and other than acquisitions of stock
granted to employees of the Company or any Subsidiary pursuant to the terms of
benefit plans or other compensation arrangements of the Company or such
Subsidiary and in conjunction with the termination of such employees'
employment).
(c) The Company covenants that it will at all times reserve and keep available
out of its authorized but unissued and otherwise unreserved Common Stock, solely
for the purpose of enabling it to issue Underlying Shares as required hereunder,
the number of Underlying Shares which are then issuable and deliverable upon the
conversion of (and otherwise in respect of) this entire Note (taking into
account the adjustments set forth in Section 10 and disregarding any limitations
set forth in Section 6(b)), free from preemptive rights or any other contingent
purchase rights of Persons other than the Holder. The Company covenants that all
Underlying Shares so issuable and deliverable shall, upon issuance in accordance
with the terms hereof, be duly and validly authorized and issued and fully paid
and nonassessable.
4. Registration of Notes. The Company shall register the Notes upon records to
be maintained by the Company for that purpose (the "Note Register") in the name
of each record holder thereof from time to time. The Company may deem and treat
the registered Holder of this Note as the absolute owner hereof for the purpose
of any conversion hereof or any payment of interest or principal hereon, and for
all other purposes, absent actual notice to the contrary.
5. Registration of Transfers and Exchanges. The Company shall register the
transfer of any portion of this Note in the Note Register upon surrender of this
Note to the Company at its address for notice set forth herein. Upon any such
registration or transfer, a new Note, in substantially the form of this Note
(any such new Note, a "New Note"), evidencing the portion of this Note so
transferred shall be issued to the transferee and a New Note evidencing the
remaining portion of this Note not so transferred, if any, shall be issued to
the transferring Holder. The acceptance of the New Note by the transferee
thereof shall be deemed the acceptance by such transferee of all of the rights
and obligations of a holder of a Note. This Note is exchangeable for an equal
aggregate principal amount of Notes of different authorized denominations, as
requested by the Holder surrendering the same. No service charge or other fee
will be imposed in connection with any such registration of transfer or
exchange.
6
6. Conversion.
(a) At the Option of the Holder. All or any portion of this Note shall be
convertible into shares of Common Stock (subject to the limitations set forth in
Section 6(b)), at the option of the Holder, at any time and from time to time
from and after the Original Issue Date. The number of Underlying Shares issuable
upon any conversion hereunder shall equal the outstanding principal amount of
this Note to be converted, plus the amount of any accrued but unpaid interest on
this Note through the Conversion Date, divided by the Conversion Price on the
Conversion Date. The Holder shall effect conversions under this Section 6(a) by
delivering to the Company a Conversion Notice together with a schedule in the
form of Schedule 2 attached hereto (the "Conversion Schedule"). If the Holder is
converting less than all of the principal amount of this Note, or if a
conversion hereunder may not be effected in full due to the application of
Section 6(b), the Company shall honor such conversion to the extent permissible
hereunder and shall promptly deliver to the Holder a Conversion Schedule
indicating the principal amount (and accrued interest) which has not been
converted.
(b) Certain Conversion Restrictions.
(A) Subject to Section 6(b)(i)(B), the number of shares of
Common Stock that may be acquired by a Holder upon any conversion of
Notes (or otherwise in respect hereof) shall be limited to the extent
necessary to insure that, following such conversion (or other
issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be aggregated with such
Holder's for purposes of Section 13(d) of the Exchange Act, does not
exceed 4.999% (the "Threshold Percentage") or 9.999% (the "Maximum
Percentage") of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock
issuable upon such conversion). For such purposes, beneficial ownership
shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery
of a Conversion Notice hereunder will constitute a representation by
the applicable Holder that it has evaluated the limitations set forth
in this Section 6(b)(i)(A) and has determined that issuance of the full
number of Underlying Shares issuable in respect of such Conversion
Notice does not violate the restrictions contained in this Section
6(b)(i)(A).
(B) Notwithstanding the provisions of Section 6(b)(i)(A), by
written notice to the Company, the Holder shall have the right (x) at
any time and from time to time to reduce its Maximum Percentage
immediately upon notice to the Company in the event and only to the
extent that Section 16 of the Exchange Act or the rules promulgated
thereunder (or any successor statute or rules) is changed to reduce the
beneficial ownership percentage threshold thereunder to a percentage
less than 9.999% and (y) at any time and from time to time, to waive
the provisions of this Section insofar as they relate to the Threshold
Percentage or to increase its Threshold Percentage (but not in excess
of the Maximum Percentage) unless the Holder shall have, by written
instrument delivered to the Company, irrevocably waived its rights to
so increase its Threshold Percentage, but (i) any such waiver or
increase will not be effective until the 61st day after such notice is
delivered to the Company, and (ii) any such waiver or increase or
decrease will apply only to the Holder and not to any other holder of
Notes.
7
(C) Notwithstanding anything to the contrary contained herein,
if the Trading Market is the NASDAQ SmallCap Market or any other market
or exchange with similar applicable rules, then the maximum number of
shares of Common Stock that the Company may issue pursuant to the
Transaction Documents at an effective purchase price less than the
Closing Price on the Trading Day immediately preceding the Closing Date
equals 19.99% of the outstanding shares of Common Stock immediately
preceding the Closing Date (the "Issuable Maximum"), unless the Company
obtains stockholder approval in accordance with the rules and
regulations of such Trading Market. If, at the time any Holder requests
a conversion of any part of a Note, the Actual Minimum (excluding any
shares issued or issuable at an effective purchase price in excess of
the Closing Price on the Trading Day immediately preceding the Closing
Date) exceeds the Issuable Maximum (and if the Company has not
previously obtained the required stockholder approval), then the
Company shall issue to the Holder requesting such exercise a number of
shares of Common Stock not exceeding such Holder's pro-rata portion of
the Issuable Maximum (based on such Holder's share (vis-a-vis other
Holders) of the aggregate purchase price paid under the Purchase
Agreement and taking into account any Warrant Shares previously issued
to such Holder). For the purposes hereof, "Actual Minimum" shall mean,
as of any date, the maximum aggregate number of shares of Common Stock
then issued or potentially issuable in the future pursuant to the
Transaction Documents, including any Underlying Shares issuable upon
conversion in full of all Notes, without giving effect to (x) any
limits on the number of shares of Common Stock that may be owned by a
Holder at any one time, or (y) any additional Underlying Shares that
could be issuable as a result of any future possible adjustments made
under Section 10(d).
7. Mechanics of Conversion.
(a) Upon conversion of this Note, the Company shall promptly (but in no
event later than three (3) Trading Days after the Conversion Date)
issue or cause to be issued and cause to be delivered to or upon the
written order of the Holder and in such name or names as the Holder may
designate a certificate for the Underlying Shares issuable upon such
conversion, free of restrictive legends unless a registration statement
covering the resale of the Underlying Shares and naming the Holder as a
selling stockholder thereunder is not then effective and such
Underlying Shares are not then freely transferable without volume
restrictions pursuant to Rule 144 under the Securities Act. The Holder,
or any Person so designated by the Holder to receive Underlying Shares,
shall be deemed to have become holder of record of such Underlying
Shares as of the Conversion Date. The Company shall, upon request of
the Holder, use its best efforts to deliver Underlying Shares hereunder
electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions.
(b) The Holder shall not be required to deliver the original Note in order
to effect a conversion hereunder. Execution and delivery of the
Conversion Notice shall have the same effect as cancellation of the
original Note and issuance of a New Note representing the remaining
outstanding principal amount. Upon surrender of this Note following one
or more partial conversions, the Company shall promptly deliver to the
Holder a New Note representing the remaining outstanding principal
amount.
8
(c) The Company's obligations to issue and deliver Underlying Shares upon
conversion of this Note in accordance with the terms hereof are
absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to
any provision hereof, the recovery of any judgment unrelated to the
obligations hereunder against any Person or any action to enforce the
same, or any set-off, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company unrelated to the obligations
hereunder or any violation or alleged violation of law by the Holder or
any other Person, and irrespective of any other circumstance which
might otherwise limit such obligation of the Company to the Holder in
connection with the issuance of such Underlying Shares.
(d) If after the end of the third Trading Day after a Conversion Date the
Company fails to deliver to the Holder such Underlying Shares in such
amounts and in the manner required pursuant to Section 7(a), then the
Holder will have the right to rescind such conversion.
(e) If after the end of the third Trading Day after a Conversion Date the
Company fails to deliver to the Holder such Underlying Shares in such
amounts and in the manner required pursuant to Section 7(a), and if
after such third Trading Day and after notice to the Company, the
Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Holder of the
Underlying Shares which the Holder anticipated receiving upon such
conversion (a "Buy-In"), then the Company shall either (i) pay cash to
such Purchaser in an amount equal to such Purchaser's total purchase
price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "Buy-In Price"), at which point the
Company's obligation to deliver such certificate (and to issue such
Common Stock) shall terminate, or (ii) promptly honor its obligation to
deliver to such Purchaser a certificate or certificates representing
such Common Stock and pay cash to such Purchaser in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock, times (B) the Closing Price on the
date of the event giving rise to the Company's obligation to deliver
such certificate.
8. Events of Default.
(a) "Event of Default" means any one of the following events (whatever the
reason and whether it shall be voluntary or involuntary or effected by
operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or
governmental body):
(i) any default in the payment (free of any claim of subordination) of
principal, interest or liquidated damages in respect of any Notes, as
and when the same becomes due and payable (whether on a date specified
for the payment of interest or the date on which the obligations under
the Note mature or by acceleration, redemption, prepayment or
otherwise);
(ii) the Company or any Subsidiary defaults in any of its obligations under
any other note or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under
9
which there may be issued, or by which there may be secured or
evidenced, any indebtedness for borrowed money or money due under any
long term leasing or factoring arrangement of the Company or any
Subsidiary in an amount exceeding $1,000,000, whether such indebtedness
now exists or is hereafter created, and such default results in such
indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable;
(iii) the occurrence of a Triggering Event; or
(iv) the occurrence of a Bankruptcy Event.
(b) At any time or times following the occurrence of an Event of Default,
the Holder shall have the option to elect, by notice to the Company (an
"Event Notice"), to require the Company to repurchase all or any
portion of (i) the outstanding principal amount of this Note, at a
repurchase price equal to the greater of (A) 105% of such outstanding
principal amount, plus all accrued but unpaid interest thereon through
the date of payment, or (B) the Event Equity Value of the Underlying
Shares issuable upon conversion of such principal amount and all such
accrued but unpaid interest thereon, and (ii) any Underlying Shares
issued to such Holder upon conversion of Notes and then owned by the
Holder, at a price per share equal to the Event Equity Value of such
Underlying Shares. The aggregate amount payable pursuant to the
preceding sentence is referred to as the "Event Price." The Company
shall pay the Event Price to the Holder no later than the third Trading
Day following the date of delivery of the Event Notice, and upon
receipt thereof the Holder shall deliver this Note and certificates
evidencing any Underlying Shares so repurchased to the Company (to the
extent such certificates have been delivered to the Holder).
(c) Upon the occurrence of any Bankruptcy Event, all amounts pursuant to
Section 10(b) shall immediately become due and payable in full in cash,
without any further action by the Holder.
(d) In connection with any Event of Default, the Holder need not provide
and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and
remedies hereunder and all other remedies available to it under
applicable law. Any such declaration may be rescinded and annulled by
the Holder at any time prior to payment hereunder. No such rescission
or annulment shall affect any subsequent Event of Default or impair any
right consequent thereto.
9. Charges, Taxes and Expenses. Issuance of certificates for Underlying
Shares upon conversion of (or otherwise in respect of) this Note shall
be made without charge to the Holder for any issue or transfer tax,
withholding tax, transfer agent fee or other incidental tax or expense
in respect of the issuance of such certificate, all of which taxes and
expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any
certificates for Underlying Shares or Notes in a name other than that
of the Holder. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this
Note or receiving Underlying Shares in respect hereof.
10
10. Certain Adjustments. The Conversion Price is subject to adjustment from
time to time as set forth in this Section 10.
(a) Stock Dividends and Splits. If the Company, at any time while this Note
is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is
payable in shares of Common Stock, (ii) subdivides outstanding shares
of Common Stock into a larger number of shares, or (iii) combines
outstanding shares of Common Stock into a smaller number of shares,
then in each such case the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause
(i) of this Section 10(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clause
(ii) or (iii) of this Section 10(a) shall become effective immediately
after the effective date of such subdivision or combination.
(b) Pro Rata Distributions. If the Company, at any time while this Note is
outstanding, distributes to all holders of Common Stock (i) evidences
of its indebtedness, (ii) any security (other than a distribution of
Common Stock described in Section 10(c)), (iii) rights or warrants to
subscribe for or purchase any security, or (iv) cash or any other asset
(in each case, "Distributed Property"), then in each such case the
Conversion Price in effect immediately prior to the record date fixed
for determination of stockholders entitled to receive such distribution
shall be adjusted (effective on such record date) to equal the product
of such Conversion Price times a fraction of which the denominator
shall be the average of the Closing Prices for the five (5) Trading
Days immediately prior to (but not including) such record date and of
which the numerator shall be such average less the then fair market
value of the Distributed Property distributed in respect of one
outstanding share of Common Stock, as determined by the Company's
independent certified public accountants that regularly examine the
financial statements of the Company, (an "Appraiser"). In such event,
the Holder, after receipt of the determination by the Appraiser, shall
have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case such fair market
value shall be deemed to equal the average of the values determined by
each of the Appraiser and such appraiser. As an alternative to the
foregoing adjustment to the Conversion Price, at the request of the
Holder delivered before the 90th day after such record date, the
Company will deliver to the Holder, within five Trading Days after such
request (or, if later, on the effective date of such distribution), the
Distributed Property that such Holder would have been entitled to
receive in respect of the Underlying Shares for which this Note could
have been converted immediately prior to such record date. If such
Distributed Property is not delivered to the Holder pursuant to the
preceding sentence, upon any conversion of this Note that occurs after
such record date, the Holder shall be entitled to receive, in addition
to the Underlying Shares otherwise issuable upon such conversion, the
Distributed Property that the Holder would have been entitled to
receive in respect of such number of Underlying Shares had the Holder
been the record holder of such Underlying Shares immediately prior to
such record date.
(c) Fundamental Changes. If, at any time while this Note is outstanding,
(i) the Company effects any merger or consolidation of the Company with
or into another Person, (ii) the Company effects any sale of all or
11
substantially all of its assets in one or more transactions, (iii) any
tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are
permitted to tender or exchange their shares for other securities, cash
or property, or (iv) the Company effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the
Common Stock is effectively converted into or exchanged for other
securities, cash or property (other than as a result of a subdivision
or combination of shares of Common Stock described in Section 10(a))
(in any such case, a "Fundamental Change"), then upon any subsequent
conversion of this Note, the Holder shall have the right to receive,
for each Underlying Share that would have been issuable upon such
conversion absent such Fundamental Change, the same kind and amount of
securities, cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental Change if it had been,
immediately prior to such Fundamental Change, the holder of one share
of Common Stock (the "Alternate Consideration"). If holders of Common
Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Change, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any
conversion of this Note following such Fundamental Change. In the event
of a Fundamental Change, the Company or the successor or purchasing
Person, as the case may be, shall execute with the Holder a written
agreement providing that:
(x) this Note shall thereafter entitle the Holder to purchase
the Alternate Consideration,
(y) in the case of any such successor or purchasing Person,
upon such consolidation, merger, statutory exchange, combination, sale
or conveyance such successor or purchasing Person shall be jointly and
severally liable with the Company for the performance of all of the
Company's obligations under this Note and the Purchase Agreement, and
(z) if registration or qualification is required under the
Exchange Act or applicable state law for the public resale by the
Holder of shares of stock and other securities so issuable upon
conversion of this Note, such registration or qualification shall be
completed prior to such reclassification, change, consolidation,
merger, statutory exchange, combination or sale.
If, in the case of any Fundamental Change, the Alternate Consideration includes
shares of stock, other securities, other property or assets of a Person other
than the Company or any such successor or purchasing Person, as the case may be,
in such Fundamental Change, then such written agreement shall also be executed
by such other Person and shall contain such additional provisions to protect the
interests of the Holder as the Board of Directors of the Company shall
reasonably consider necessary by reason of the foregoing. At the Holder's
request, any successor to the Company or surviving Person in such Fundamental
Change shall issue to the Holder a new Note consistent with the foregoing
provisions and evidencing the Holder's right to convert such Note into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental Change
is effected shall include terms requiring any such successor or surviving Person
to comply with the provisions of this Section 10(c) and insuring that this Note
(or any such replacement security) will be similarly adjusted upon any
subsequent transaction analogous to a Fundamental Change. If any Fundamental
Change constitutes or results in a Change of Control, then at the request of the
12
Holder delivered before the 90th day after such Fundamental Change, the Company
(or any such successor or surviving entity) will purchase this Note from the
Holder for a purchase price, payable in cash within five Trading Days after such
request (or, if later, on the effective date of the Fundamental Transaction),
equal to the Black Scholes value of the remaining unconverted portion of this
Note on the date of such request.
(d) Subsequent Equity Sales.
(i) If, at any time while this Note is outstanding, the Company or any
Subsidiary issues additional shares of Common Stock or rights,
warrants, options or other securities or debt convertible, exercisable
or exchangeable for shares of Common Stock or otherwise entitling any
Person to acquire shares of Common Stock (collectively, "Common Stock
Equivalents") at an effective net price to the Company per share of
Common Stock (the "Effective Price") less than the Conversion Price
(as adjusted hereunder to such date), then the Conversion Price shall
be reduced to equal the Effective Price. For purposes of this
paragraph, in connection with any issuance of any Common Stock
Equivalents, (A) the maximum number of shares of Common Stock
potentially issuable at any time upon conversion, exercise or exchange
of such Common Stock Equivalents (the "Deemed Number") shall be deemed
to be outstanding upon issuance of such Common Stock Equivalents, (B)
the Effective Price applicable to such Common Stock shall equal the
minimum dollar value of consideration payable to the Company to
purchase such Common Stock Equivalents and to convert, exercise or
exchange them into Common Stock (net of any discounts, fees,
commissions and other expenses), divided by the Deemed Number, and (C)
no further adjustment shall be made to the Conversion Price upon the
actual issuance of Common Stock upon conversion, exercise or exchange
of such Common Stock Equivalents.
(ii) If, at any time while this Note is outstanding, the Company or any
Subsidiary issues Common Stock Equivalents with an Effective Price or
a number of underlying shares that floats or resets or otherwise
varies or is subject to adjustment based (directly or indirectly) on
market prices of the Common Stock (a "Floating Price Security"), then
for purposes of applying the preceding paragraph in connection with
any subsequent conversion, the Effective Price will be determined
separately on each Conversion Date and will be deemed to equal the
lowest Effective Price at which any holder of such Floating Price
Security is entitled to acquire Common Stock on such Conversion Date
(regardless of whether any such holder actually acquires any shares on
such date).
(iii)Notwithstanding the foregoing, no adjustment will be made under this
paragraph (d) in respect of (A) the issuance of Common Stock upon
exercise or conversion of any Common Stock Equivalents described in
Schedule 3.1(g) to the Purchase Agreement (provided that such exercise
or conversion occurs in accordance with the terms thereof, without
amendment or modification); (B) to officers, directors or employees
of, or advisers, consultants or independent contractors acting in a
similar capacity to, the Company pursuant to restricted stock
issuances, stock grants, stock options or similar employee stock
incentives, in each case approved by the Board of Directors of the
Company; (C) the issuance of securities in connection with a bona fide
13
acquisition, joint venture or development agreement or strategic
partnership or similar agreement approved by the Company's board of
directors, the primary purpose of which is not to raise equity capital
or (D) the issuance of Common Stock upon conversion of the Notes or
exercise of the Warrants.
(e) Calculations. All calculations under this Section 10 shall be made to
the nearest cent or the nearest 1/100th of a share, as applicable. The
number of shares of Common Stock outstanding at any given time shall
not include shares owned or held by or for the account of the Company,
and the disposition of any such shares shall be considered an issue or
sale of Common Stock.
(f) Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 10, the Company at its expense will promptly compute
such adjustment in accordance with the terms hereof and prepare and
deliver to the Holder a certificate describing in reasonable detail
such adjustment and the transactions giving rise thereto, including all
facts upon which such adjustment is based.
(g) Notice of Corporate Events. If the Company (i) declares a dividend or
any other distribution of cash, securities or other property in respect
of its Common Stock, including without limitation any granting of
rights or warrants to subscribe for or purchase any capital stock of
the Company or any Subsidiary, (ii) authorizes or approves, enters into
any agreement contemplating or solicits stockholder approval for any
Fundamental Change or (iii) authorizes the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then the
Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least 15 Trading Days
prior to the applicable record or effective date on which a Person
would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps
reasonably necessary in order to insure that the Holder is given the
practical opportunity to convert this Note prior to such time so as to
participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein
shall not affect the validity of the corporate action required to be
described in such notice.
11. No Fractional Shares. The Company shall not issue or cause to be issued
fractional Underlying Shares on conversion of this Note. If any
fraction of an Underlying Share would, except for the provisions of
this Section 11, be issuable upon conversion of this Note, the number
of Underlying Shares to be issued will be rounded up to the nearest
whole share.
12. Notices. Any and all notices or other communications or deliveries
hereunder (including any Conversion Notice) shall be in writing and
shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section 12 prior to
6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading
Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this
Section 10 on a day that is not a Trading Day or later than 6:30 p.m.
(New York City time) on any Trading Day, (iii) the Trading Day
following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to
whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company, to , 000 Xxxxx Xxxxx
00
Xxxx, Xxxxxx Xxxxx, Xxxxxxxxxx 00000, facsimile: (000) 000-0000,
attention: Chief Executive Officer, with a copy to Durham, Xxxxx &
Xxxxxxx, attention: Xxxxxxx X. Xxxxx, 000 Xxxx Xxxxxxxx, Xxxxx 000,
Xxxx Xxxx Xxxx, Xxxx 00000, facsimile: (000) 000-0000, or (ii) if to
the Holder, to the address or facsimile number appearing on the
Company's Noteholder records or such other address or facsimile number
as the Holder may provide to the Company in accordance with this
Section 12.
13. Miscellaneous.
(a) This Note shall be binding on and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. The
Company shall not be permitted to assign this Note.
(b) Subject to Section 13(a), nothing in this Note shall be construed to
give to any person or corporation other than the Company and the Holder
any legal or equitable right, remedy or cause under this Note.
(C) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS NOTE
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH
ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH
RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND
HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION
OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED
MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT
THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES
THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF
PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO
LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY
LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.
(d) The headings herein are for convenience only, do not constitute a part
of this Note and shall not be deemed to limit or affect any of the
provisions hereof.
(e) In case any one or more of the provisions of this Note shall be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Note shall not in any way be
affected or impaired thereby and the parties will attempt in good faith
to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing,
shall incorporate such substitute provision in this Note.
15
(f) In the event of any stock split, subdivision, dividend or distribution
payable in shares of Common Stock (or other securities or rights
convertible into, or entitling the holder thereof to receive directly
or indirectly shares of Common Stock), combination or other similar
recapitalization or event occurring after the date hereof, each
reference in this Note to a price shall be amended to appropriately
account for such event.
(g) No provision of this Note may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and the
Holder or, or, in the case of a waiver, by the Holder. No waiver of any
default with respect to any provision, condition or requirement of this
Note shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the
exercise of any such right.
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SIGNATURE PAGE FOLLOWS]
16
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed by a duly authorized officer as of the date first above indicated.
BRITESMILE, INC.
By
Name: Xxxxxxx X. Xxxxxx
Title: Acting C.E.O.
17
Schedule 1
FORM OF CONVERSION NOTICE
(To be executed by the registered Holder
in order to convert Note)
The undersigned hereby elects to convert the specified principal amount of
Senior Convertible Notes (the "Notes") into shares of common stock, no par value
(the "Common Stock"), of BriteSmile, Inc., a Utah corporation, according to the
conditions hereof, as of the date written below.
Date to Effect Conversion
Principal amount of Notes owned prior to conversion
Principal amount of Notes to be converted
(including accrued but unpaid interest thereon)
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Principal amount of Notes owned subsequent to Conversion
Name of Holder
By
Name:
Title:
Schedule 2
CONVERSION SCHEDULE
This Conversion Schedule reflects conversions of the Senior Convertible Notes
issued by BriteSmile, Inc..
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Aggregate Principal Amount Remaining
Date of Conversion Amount of Conversion Subsequent to Conversion
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Exhibit D
Form of Warrant
NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
BRITESMILE, INC.
WARRANT
Warrant No. [ ] Dated: December 16, 2004
BriteSmile, Inc., a Utah corporation (the "Company"), hereby certifies
that, for value received, [Name of Holder] or its registered assigns (the
"Holder"), is entitled to purchase from the Company up to a total of [ ] shares
of common stock, $0.001 par value per share (the "Common Stock"), of the Company
(each such share, a "Warrant Share" and all such shares, the "Warrant Shares")
at an exercise price equal to $7.61 per share (as adjusted from time to time as
provided in Section 9, the "Exercise Price"), at any time and from time to time
from and after the date hereof and through and including the date that is five
(5) years from the date of issuance hereof (the "Expiration Date"), and subject
to the following terms and conditions. This Warrant (this "Warrant") is one of a
series of similar Warrants issued pursuant to that certain Securities Purchase
Agreement, dated as of December 16, 2004, by and among the Company and the
Purchasers identified therein (the "Purchase Agreement"). All such Warrants are
referred to herein, collectively, as the "Warrants."
1. Definitions. In addition to the terms defined elsewhere in this Warrant,
capitalized terms that are not otherwise defined herein have the meanings given
to such terms in the Purchase Agreement.
2. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.
1
3. Registration of Transfers. The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Transfer Agent or to the Company at its address specified herein. Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant.
4. Exercise and Duration of Warrants.
(a) This Warrant shall be exercisable by the registered Holder at any time and
from time to time on or after the date hereof to and including the Expiration
Date. At 6:30 P.M., New York City time on the Expiration Date, the portion of
this Warrant not exercised prior thereto shall be and become void and of no
value; provided that, if the average of the Closing Prices for the five (5)
Trading Days immediately prior to (but not including) the Expiration Date
exceeds the Exercise Price on the Expiration Date, then this Warrant shall be
deemed to have been exercised in full (to the extent not previously exercised)
on a "cashless exercise" basis at 6:30 P.M. New York City time on the Expiration
Date if a "cashless exercise" may occur at such time pursuant to Section 10
below. Notwithstanding anything to the contrary herein, the Expiration Date
shall be extended for each day following the Effective Date that the
Registration Statement is not effective.
(b) A Holder may exercise this Warrant by delivering to the Company (i) an
exercise notice, in the form attached hereto (the "Exercise Notice"),
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares as to which this Warrant is being exercised
(which may take the form of a "cashless exercise" if so indicated in the
Exercise Notice and if a "cashless exercise" may occur at such time pursuant to
this Section 10 below), and the date such items are delivered to the Company (as
determined in accordance with the notice provisions hereof) is an "Exercise
Date." The Holder shall not be required to deliver the original Warrant in order
to effect an exercise hereunder. Execution and delivery of the Exercise Notice
shall have the same effect as cancellation of the original Warrant and issuance
of a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares.
5. Delivery of Warrant Shares.
(a) Upon exercise of this Warrant and payment of the Exercise Price for the
number of Warrant Shares as to which this Warrant is being exercised (which may
take the form of a "cashless exercises" if so indicated in the Exercise Notice
and if a "cashless exercise" may occur at such time prusuant to Section 10
below), the Company shall promptly (but in no event later than three Trading
Days after the Exercise Date) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends unless a registration statement
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covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder is not then effective and the Warrant Shares are not
freely transferable without volume restrictions pursuant to Rule 144 under the
Securities Act. The Holder, or any Person so designated by the Holder to receive
Warrant Shares, shall be deemed to have become holder of record of such Warrant
Shares as of the Exercise Date. The Company shall, upon request of the Holder,
use its reasonable commercial efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions.
(b) This Warrant is exercisable, either in its entirety or, from time to time,
for a portion of the number of Warrant Shares. Upon surrender of this Warrant
following one or more partial exercises, the Company shall issue or cause to be
issued, at its expense, a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares.
(c) In addition to any other rights available to a Holder, if the Company fails
to deliver to the Holder a certificate representing Warrant Shares by the third
Trading Day after the date on which delivery of such certificate is required by
this Warrant, and if after such third Trading Day and after notice to the
Company, the Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares that the Holder anticipated receiving from the Company (a
"Buy-In"), then the Company shall, within three (3) Trading Days after the
Holder's request and in the Holder's discretion, either (i) pay cash to the
Holder in an amount equal to the Holder's total purchase price (including
brokerage commissions, if any) for the shares of Common Stock so purchased (the
"Buy-In Price"), at which point the Company's obligation to deliver such
certificate (and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such Common Stock and pay cash to the Holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Price on the date of the event
giving rise to the Company's obligation to deliver such certificate.
(d) The Company's obligations to issue and deliver Warrant Shares in accordance
with the terms hereof are absolute and unconditional, irrespective of any action
or inaction by the Holder to enforce the same, any waiver or consent with
respect to any provision hereof, the recovery of any judgment unrelated to the
obligations hereunder against any Person or any action to enforce the same, or
any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Holder or any other Person of any obligation to the
Company unrelated to the obligations hereunder or any violation or alleged
violation of law by the Holder or any other Person, and irrespective of any
other circumstance which might otherwise limit such obligation of the Company to
the Holder in connection with the issuance of Warrant Shares. Nothing herein
shall limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company's
failure to timely deliver certificates representing shares of Common Stock upon
exercise of the Warrant as required pursuant to the terms hereof.
6. Charges, Taxes and Expenses. Issuance and delivery of certificates for shares
of Common Stock upon exercise of this Warrant shall be made without charge to
the Holder for any issue or transfer tax, withholding tax, transfer agent fee or
3
other incidental tax or expense in respect of the issuance of such certificates,
all of which taxes and expenses shall be paid by the Company; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the registration of any certificates for
Warrant Shares or Warrants in a name other than that of the Holder or an
Affiliate thereof. The Holder shall be responsible for all other tax liability
that may arise as a result of holding or transferring this Warrant or receiving
Warrant Shares upon exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe.
8. Reservation of Warrant Shares. The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (taking into
account the adjustments and restrictions of Section 9). The Company covenants
that all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable. The
Company will take all such action as may be necessary to assure that such shares
of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any securities exchange
or automated quotation system upon which the Common Stock may be listed.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable
upon exercise of this Warrant are subject to adjustment from time to time as set
forth in this Section 9.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant
is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes
a distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of this paragraph shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.
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(b) Pro Rata Distributions. If the Company, at any time while this Warrant is
outstanding, distributes to holders of Common Stock (i) evidences of its
indebtedness, (ii) any security (other than a distribution of Common Stock
covered by the preceding paragraph), (iii) rights or warrants to subscribe for
or purchase any security, or (iv) any other asset (in each case, "Distributed
Property"), then in each such case the Exercise Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution shall be adjusted (effective on such record date) to
equal the product of such Exercise Price times a fraction of which the
denominator shall be the average of the Closing Prices for the five (5) Trading
Days immediately prior to (but not including) such record date and of which the
numerator shall be such average less the then fair market value of the
Distributed Property distributed in respect of one outstanding share of Common
Stock, as determined by the Company's independent certified public accountants
that regularly examine the financial statements of the Company, (an
"Appraiser"). In such event, the Holder, after receipt of the determination by
the Appraiser, shall have the right to select an additional appraiser (which
shall be a nationally recognized accounting firm), in which case such fair
market value shall be deemed to equal the average of the values determined by
each of the Appraiser and such appraiser. As an alternative to the foregoing
adjustment to the Exercise Price, at the request of the Holder delivered before
the 90th day after such record date, the Company will deliver to such Holder,
within five Trading Days after such request (or, if later, on the effective date
of such distribution), the Distributed Property that such Holder would have been
entitled to receive in respect of the Warrant Shares for which this Warrant
could have been exercised immediately prior to such record date. If such
Distributed Property is not delivered to a Holder pursuant to the preceding
sentence, then upon expiration of or any exercise of the Warrant that occurs
after such record date, such Holder shall remain entitled to receive, in
addition to the Warrant Shares otherwise issuable upon such exercise (if
applicable), such Distributed Property.
(c) Fundamental Transactions. If, at any time while this Warrant is outstanding,
(i) the Company effects any merger or consolidation of the Company with or into
another Person, (ii) the Company effects any sale of all or substantially all of
its assets in one or a series of related transactions, (iii) any tender offer or
exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their
shares for other securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property (other than as a result of a subdivision or
combination of shares of Common Stock covered by Section 9(a) above) (in any
such case, a "Fundamental Transaction"), then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind
of securities, cash or property as it would have been entitled to receive upon
the occurrence of such Fundamental Transaction if it had been, immediately prior
to such Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the "Alternate Consideration").
The aggregate Exercise Price for this Warrant will not be affected by any such
Fundamental Transaction, but the Company shall apportion such aggregate Exercise
Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
5
exercise of this Warrant following such Fundamental Transaction. In the event of
a Fundamental Transaction, the Company or the successor or purchasing Person, as
the case may be, shall execute with the Holder a written agreement providing
that:
(x) this Warrant shall thereafter entitle the Holder to
purchase the Alternate Consideration in accordance with this section
9(c),
(y) in the case of any such successor or purchasing Person,
upon such consolidation, merger, statutory exchange, combination, sale
or conveyance such successor or purchasing Person shall be jointly and
severally liable with the Company for the performance of all of the
Company's obligations under this Warrant and the Purchase Agreement,
and
(z) if registration or qualification is required under the
Exchange Act or applicable state law for the public resale by the
Holder of shares of stock and other securities so issuable upon
exercise of this Warrant, such registration or qualification shall be
completed prior to such reclassification, change, consolidation,
merger, statutory exchange, combination or sale.
If, in the case of any Fundamental Transaction, the Alternate Consideration
includes shares of stock, other securities, other property or assets of a Person
other than the Company or any such successor or purchasing Person, as the case
may be, in such Fundamental Transaction, then such written agreement shall also
be executed by such other Person and shall contain such additional provisions to
protect the interests of the Holder as the Board of Directors of the Company
shall reasonably consider necessary by reason of the foregoing. At the Holder's
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder's right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof. The terms
of any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with
the provisions of this paragraph (c) and insuring that the Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction. If any Fundamental Transaction
constitutes or results in a Change of Control, then at the request of the Holder
delivered before the 90th day after such Fundamental Transaction, the Company
(or any such successor or surviving entity) will purchase the Warrant from the
Holder for a purchase price, payable in cash within five Trading Days after such
request (or, if later, on the effective date of the Fundamental Transaction),
equal to the Black-Scholes value of the remaining unexercised portion of this
Warrant on the date of such request.
(d) Subsequent Equity Sales.
(i) If, at any time while this Warrant is outstanding, the Company or any
Subsidiary issues additional shares of Common Stock or rights,
warrants, options or other securities or debt convertible, exercisable
or exchangeable for shares of Common Stock or otherwise entitling any
Person to acquire shares of Common Stock (collectively, "Common Stock
Equivalents") at an effective net price to the Company per share of
6
Common Stock (the "Effective Price") less than the Exercise Price (as
adjusted hereunder to such date), then the Exercise Price shall be
reduced to equal the Effective Price. For purposes of this paragraph,
in connection with any issuance of any Common Stock Equivalents, (A)
the maximum number of shares of Common Stock potentially issuable at
any time upon conversion, exercise or exchange of such Common Stock
Equivalents (the "Deemed Number") shall be deemed to be outstanding
upon issuance of such Common Stock Equivalents, (B) the Effective
Price applicable to such Common Stock shall equal the minimum dollar
value of consideration payable to the Company to purchase such Common
Stock Equivalents and to convert, exercise or exchange them into
Common Stock (net of any discounts, fees, commissions and other
expenses), divided by the Deemed Number, and (C) no further adjustment
shall be made to the Exercise Price upon the actual issuance of Common
Stock upon conversion, exercise or exchange of such Common Stock
Equivalents.
(ii) If, at any time while this Warrant is outstanding, the Company or any
Subsidiary issues Common Stock Equivalents with an Effective Price or
a number of underlying shares that floats or resets or otherwise
varies or is subject to adjustment based (directly or indirectly) on
market prices of the Common Stock (a "Floating Price Security"), then
for purposes of applying the preceding paragraph in connection with
any subsequent exercise, the Effective Price will be determined
separately on each Exercise Date and will be deemed to equal the
lowest Effective Price at which any holder of such Floating Price
Security is entitled to acquire Common Stock on such Exercise Date
(regardless of whether any such holder actually acquires any shares on
such date).
(iii)Notwithstanding the foregoing, no adjustment will be made under this
paragraph (d) in respect of any shares of Common Stock issued or
issuable (A) upon exercise, conversion or exchange of any Common Stock
Equivalents described in Schedule 3.1(g) of the Purchase Agreement
(provided that such exercise of conversion occurs in accordance with
the terms thereof, without amendment or modification); (B) to
officers, directors or employees of, or advisers, consultants or
independent contractors acting in a similar capacity to, the Company
pursuant to restricted stock issuances, stock grants, stock options or
similar employee stock incentives, in each case approved by the Board
of Directors of the Company; (C) the issuance of securities in
connection with a bona fide acquisition, joint venture or development
agreement or strategic partnership or similar agreement approved by
the Company's board of directors, the primary purpose of which is not
to raise equity capital or (D) shares of Common Stock issued to any
Purchaser upon conversion of the Notes or exercise of Warrants.
(e) Number of Warrant Shares. Simultaneously with and subject to any
adjustment to the Exercise Price pursuant to paragraphs (a), (b) or (d)
of this Section, the number of Warrant Shares that may be purchased
upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise
Price payable hereunder for the increased or decreased number of
Warrant Shares shall be the same as the aggregate Exercise Price in
effect immediately prior to such adjustment.
(f) Calculations. All calculations under this Section 9 shall be made to
the nearest cent or the nearest 1/100th of a share, as applicable. The
7
number of shares of Common Stock outstanding at any given time shall
not include shares owned or held by or for the account of the Company,
and the disposition of any such shares shall be considered an issue or
sale of Common Stock.
(g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 9, the Company at its expense will promptly compute
such adjustment in accordance with the terms of this Warrant and
prepare a certificate setting forth such adjustment, including a
statement of the adjusted Exercise Price and adjusted number or type of
Warrant Shares or other securities issuable upon exercise of this
Warrant (as applicable), describing the transactions giving rise to
such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly
deliver a copy of each such certificate to the Holder and to the
Company's Transfer Agent.
(h) Notice of Corporate Events. If the Company (i) declares a dividend or
any other distribution of cash, securities or other property in respect
of its Common Stock, including without limitation any granting of
rights or warrants to subscribe for or purchase any capital stock of
the Company or any Subsidiary, (ii) authorizes or approves, enters into
any agreement contemplating or solicits stockholder approval for any
Fundamental Transaction or (iii) authorizes the voluntary dissolution,
liquidation or winding up of the affairs of the Company, then the
Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least 15 calendar days
prior to the applicable record or effective date on which a Person
would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps
reasonably necessary in order to insure that the Holder is given the
practical opportunity to exercise this Warrant prior to such time so as
to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein
shall not affect the validity of the corporate action required to be
described in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds; provided, however, that if the shares of
Common Stock to be issued upon exercise of this Warrant are not
registered and available for resale pursuant to Article VI of the
Purchase Agreement, the Holder may satisfy its obligation to pay the
Exercise Price through a "cashless exercise," in which event the
Company shall issue to the Holder the number of Warrant Shares
determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with
respect to which this Warrant is
being exercised.
A = the average of the Closing Prices
for the five Trading Days immediately
prior to (but not including) the
Exercise Date.
B = the Exercise Price.
8
For purposes of Rule 144 promulgated under the Securities Act
as interpreted on the date of hereof, it is intended, understood and
acknowledged that the Warrant Shares issued in a cashless exercise transaction
shall be deemed to have been acquired by the Holder, and the holding period for
the Warrant Shares shall be deemed to have commenced, on the date this Warrant
was originally issued pursuant to the Purchase Agreement.
11. Limitation on Exercise. (a) Notwithstanding anything to the contrary
contained herein, the number of shares of Common Stock that may be acquired by
the Holder upon any exercise of this Warrant (or otherwise in respect hereof)
shall be limited to the extent necessary to insure that, following such exercise
(or other issuance), the total number of shares of Common Stock then
beneficially owned by such Holder and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be aggregated with the Holder's for
purposes of Section 13(d) of the Exchange Act, does not exceed 4.99% (the
"Maximum Percentage") of the total number of issued and outstanding shares of
Common Stock (including for such purpose the shares of Common Stock issuable
upon such exercise). For such purposes, beneficial ownership shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. Each delivery of an Exercise Notice
hereunder will constitute a representation by the Holder that it has evaluated
the limitation set forth in this paragraph and determined that issuance of the
full number of Warrant Shares requested in such Exercise Notice is permitted
under this paragraph. The Company's obligation to issue shares of Common Stock
in excess of the limitation referred to in this Section shall be suspended (and
shall not terminate or expire notwithstanding any contrary provisions hereof)
until such time, if any, as such shares of Common Stock may be issued in
compliance with such limitation. The Holder shall have the right at any time and
from time to time, to waive the provisions of this Section and to increase the
Maximum Percentage (but not in excess of 9.9%) unless the Holder shall have, by
written instrument delivered to the Company, irrevocably waived its rights to so
increase its Maximum Percentage, but (i) any such waiver or increase will not be
effective until the 61st day after such notice is delivered to the Company, and
(ii) any such waiver or increase will apply only to the Holder and not to any
other holder of Warrants.
(b) Notwithstanding anything to the contrary contained herein,
if the Trading Market is the NASDAQ SmallCap Market or any other market or
exchange with similar applicable rules, then the maximum number of shares of
Common Stock that the Company may issue pursuant to the Transaction Documents at
an effective purchase price less than the Closing Price on the Trading Day
immediately preceding the Closing Date equals 19.99% of the outstanding shares
of Common Stock immediately preceding the Closing Date (the "Issuable Maximum"),
unless the Company obtains stockholder approval in accordance with the rules and
regulations of such Trading Market. If, at the time any Holder requests an
exercise of any of the Warrants, the Actual Minimum (excluding any shares issued
or issuable at an effective purchase price in excess of the Closing Price on the
Trading Day immediately preceding the Closing Date) exceeds the Issuable Maximum
(and if the Company has not previously obtained the required stockholder
approval), then the Company shall issue to the Holder requesting such exercise a
number of shares of Common Stock not exceeding such Holder's pro-rata portion of
the Issuable Maximum (based on such Holder's share (vis-a-vis other Holders) of
the aggregate purchase price paid under the Purchase Agreement and taking into
account any Warrant Shares previously issued to such Holder). For the purposes
hereof, "Actual Minimum" shall mean, as of any date, the maximum aggregate
9
number of shares of Common Stock then issued or potentially issuable in the
future pursuant to the Transaction Documents, including any Underlying Shares
issuable upon exercise in full of all Warrants, without giving effect to (x) any
limits on the number of shares of Common Stock that may be owned by a Holder at
any one time, or (y) any additional Underlying Shares that could be issuable as
a result of any future possible adjustments made under Section 9(d).
12. Fractional Shares. The Company shall not be required to issue or cause to be
issued fractional Warrant Shares on the exercise of this Warrant. If any
fraction of a Warrant Share would, except for the provisions of this Section, be
issuable upon exercise of this Warrant, the number of Warrant Shares to be
issued will be rounded up to the nearest whole share.
13. Notices. Any and all notices or other communications or deliveries hereunder
(including without limitation any Exercise Notice) shall be in writing and shall
be deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on a
Trading Day, (ii) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 6:30
p.m. (New York City time) on any Trading Day, (iii) the Trading Day following
the date of mailing, if sent by nationally recognized overnight courier service,
or (iv) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices or communications shall be as set forth in
the Purchase Agreement.
14. Warrant Agent. The Company shall serve as warrant agent under this Warrant.
Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent.
Any corporation into which the Company or any new warrant agent may be merged or
any corporation resulting from any consolidation to which the Company or any new
warrant agent shall be a party or any corporation to which the Company or any
new warrant agent transfers substantially all of its corporate trust or
stockholders services business shall be a successor warrant agent under this
Warrant without any further act. Any such successor warrant agent shall promptly
cause notice of its succession as warrant agent to be mailed (by first class
mail, postage prepaid) to the Holder at the Holder's last address as shown on
the Warrant Register.
15. Miscellaneous.
(a) Subject to the restrictions on transfer set forth on the first page hereof,
this Warrant may be assigned by the Holder. This Warrant may not be assigned by
the Company except to a successor in the event of a Fundamental Transaction.
This Warrant shall be binding on and inure to the benefit of the parties hereto
and their respective successors and assigns. Subject to the preceding sentence,
nothing in this Warrant shall be construed to give to any Person other than the
Company and the Holder any legal or equitable right, remedy or cause of action
under this Warrant. This Warrant may be amended only in writing signed by the
Company and the Holder and their successors and assigns.
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(b) The Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times use reasonable commercial efforts to assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
Without limiting the generality of the foregoing, the Company (i) will not
increase the par value of any Warrant Shares above the amount payable therefor
on such exercise, (ii) will take all such action as may be reasonably necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable Warrant Shares on the exercise of this Warrant, and (iii)
will not close its stockholder books or records in any manner which
intentionally interferes with the timely exercise of this Warrant.
(C) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION
OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF
MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN
(INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS),
AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR
PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY
HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS
BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF
VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF
DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS
AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT
SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED
TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.
THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.
(d) The headings herein are for convenience only, do not constitute a part of
this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(e) In case any one or more of the provisions of this Warrant shall be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
BRITESMILE, INC.
By:
Name: Xxxxxxx X. Xxxxxx
Title: Acting C.E.O.
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FORM OF EXERCISE NOTICE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To: BRITESMILE, INC.
The undersigned is the Holder of Warrant No. _______ (the "Warrant") issued by
BriteSmile, Inc., a Utah corporation (the "Company"). Capitalized terms used
herein and not otherwise defined have the respective meanings set forth in the
Warrant.
1. The Warrant is currently exercisable to purchase a total of
______________ Warrant Shares.
2. The undersigned Holder hereby exercises its right to purchase
_________________ Warrant Shares pursuant to the Warrant.
3. The Holder intends that payment of the Exercise Price shall be made as
(check one):
____ "Cash Exercise" under Section 10
____ "Cashless Exercise" under Section 10 (if permitted)
4. If the holder has elected a Cash Exercise, the holder shall pay the sum
of $____________ to the Company in accordance with the terms of the
Warrant.
5. Pursuant to this exercise, the Company shall deliver to the holder
_______________ Warrant Shares in accordance with the terms of the
Warrant.
6. Following this exercise, the Warrant shall be exercisable to purchase
a total of ______________ Warrant Shares.
Dated: , Name of Holder:
(Print)
By:
Name:
Title:
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of BriteSmile, Inc. to
which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of BriteSmile, Inc. with full power of
substitution in the premises.
Dated: ,
(Signature must conform in all respects to name of
holder asspecified on the face of the Warrant)
Address of Transferee
In the presence of:
