EXHIBIT 10.26
Securities Purchase Agreement
SECURITIES PURCHASE AGREEMENT, dated as of June 27, 2000 (this
"Agreement"), among BRITESMILE, INC., a corporation organized and existing under
the laws of Utah (the "Company"), and the purchasers identified in Exhibit A
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to this Agreement (each individually a "Purchaser," and collectively the
"Purchasers").
Recitals
A. Subject to the terms and conditions set forth in this Agreement, the
Company desires to issue and sell to the Purchasers, and the Purchasers desire
to purchase an aggregate principal amount of Fifteen Million Eight Hundred
Thirty-three Thousand, Three Hundred Thirty-three Dollars ($15,833,333) of the
Company's 5% Convertible Subordinated Notes, due 2005 (the "Convertible Notes"),
which are convertible into shares of the Company's common stock, par value $.001
per share (the "Common Stock"). The Convertible Notes shall be in the form
attached to this Agreement as Exhibit B. Exhibit A sets forth the aggregate
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principal amount of Convertible Notes to be purchased by each of the Purchasers.
No Purchaser shall be responsible for the obligations of any other Purchaser.
B. Simultaneously with their purchase of the Convertible Notes, the
Purchasers desire to purchase, and the Company desires to sell and issue,
warrants to purchase Common Stock (the "Warrants"). The number of shares of
Common Stock issuable upon the exercise of the Warrants issued to the Purchasers
shall be equal to the quotient of (A) the product of the aggregate principal
amount of Convertible Notes purchased by each Purchaser multiplied by 0.50,
divided by (B) the Conversion Price on the Issuance Date (as those terms are
defined in the Convertible Notes) and shall be substantially in the form
attached as Exhibit C. The exercise price of the Warrants shall be 140% of the
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Market Price (as that term is defined in the Warrants) of Common Stock as of the
Pricing Date (as that term is defined in the Warrants).
C. The Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act").
D. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
substantially in the form attached hereto as Exhibit D (the "Registration Rights
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Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the Securities Act, and the rules and regulations
promulgated thereunder, and applicable state securities laws.
IN CONSIDERATION of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF CONVERTIBLE NOTES
1.1 Purchase and Sale. Subject to the terms and conditions set forth
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herein, the Company shall issue and sell to each Purchaser and each Purchaser
severally agrees to purchase the principal amount of Convertible Notes, in
denominations of no lower than $100,000 and integral multiples of $50,000 in
excess thereof, set forth opposite such Purchaser's name on Exhibit A hereto at
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the closing described below. No Purchaser shall be responsible for the
obligations of any other Purchaser.
1.2 The Closing.
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(a) Time and Place. The closing (the "Closing") of the purchase and
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sale of the Convertible Notes shall take place at the offices of Durham Xxxxx &
Xxxxxxx, P.C. ("DJP"), Broadway Centre, Suite 900, 000 Xxxx Xxxxxxxx, Xxxx Xxxx
Xxxx, Xxxx 00000, at 9:00 a.m. local time, on June 30, 2000 or such later date
as the parties shall agree. The date of the Closing is referred to in this
Agreement as the "Closing Date."
(b) Deliveries. At the Closing, (i) the Company shall deliver to DJP,
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as escrow agent for the Company and the Purchasers (the "Escrow Agent") (1) the
Convertible Notes and the Warrants, each registered in the respective names of
the Purchasers, (2) the legal opinion of DJP substantially in the form attached
hereto as Exhibit E, and (3) all other documents, instruments and writings
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required to have been delivered at or prior to the Closing by the Company
pursuant to this Agreement; and (ii) the Purchasers shall deliver to the Escrow
Agent (1) a total of Fifteen Million Eight Hundred Thirty-three Thousand, Three
Hundred Thirty-three Dollars ($15,833,333) (the "Purchase Price"), in United
States dollars in immediately available funds by wire transfer to the account of
the Escrow Agent as designated in an Escrow Agreement, which shall be executed
by all the parties hereto and the Escrow Agent, and delivered to the Escrow
Agent on the date of this Agreement, and shall be in the form attached hereto as
Exhibit G, which Purchase Price shall be payable severally by each of the
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Purchasers in the amount specified opposite their names on Exhibit A hereto, and
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(2) all documents, instruments, and writings required to have been delivered at
or prior to the Closing by the Purchasers pursuant to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
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Company hereby makes the following representations and warranties to the
Purchasers:
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(a) Organization and Qualification. The Company is a corporation,
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duly organized, validly existing, and in good standing under the laws of the
State of Utah, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
The Company has no subsidiaries other than as set forth in Schedule 2.1(a)
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attached hereto (collectively, the "Subsidiaries"). Each of the Subsidiaries is
a corporation, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation 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, (x) adversely affect the legality, validity or enforceability
of this Agreement, the Convertible Notes, the Warrants and the Registration
Rights Agreement (collectively, the "Transaction Documents"), (y) have a
material adverse effect on the results of operations, assets, prospects, or
financial condition of the Company and the Subsidiaries, taken as a whole, or
(z) adversely impair the Company's ability to perform fully on a timely basis
its obligations under the Transaction Documents (collectively or individually,
any of clauses (x) through (z) being referred to in this Agreement as a
"Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
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corporate power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of the Transaction Documents
by the Company and the consummation by it of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the
Convertible Notes and the Warrants and the reservation for issuance and the
issuance of the Underlying Shares (as defined herein) issuable upon conversion
or exercise thereof, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its shareholders (except to the extent that
shareholder approval may be required pursuant to the rules of the Nasdaq
National Market for the issuance of a number of Conversion Shares greater than
19.99% of the number of shares of Common Stock outstanding immediately prior to
the Closing Date). The Transaction Documents have been duly executed and
delivered by the Company. Each of the Transaction Documents constitutes the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective articles or certificate of incorporation, bylaws, or other
charter documents.
(c) Capitalization. The authorized, issued, and outstanding
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capital stock of the Company is set forth in Schedule 2.1(c). All of such
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outstanding shares have been, or upon
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issuance will be, validly issued and are fully paid and nonassessable. No shares
of Common Stock are entitled to preemptive or similar rights, nor is any holder
of the Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any of the Transaction
Documents. Except as disclosed in Schedule 2.1(c), and except for the
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Convertible Notes and Warrants, (A) no shares of the Company's capital stock are
subject to preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company; (B) there are no outstanding
debt securities issued by the Company; (C) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries; (D) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the Securities Act (except the
Registration Rights Agreement); (E) there are no outstanding securities or
instruments of the Company or any of its Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its Subsidiaries
is or may become bound to redeem a security of the Company or any of its
Subsidiaries; (F) there are no securities or instruments containing anti-
dilution or similar provisions that will be triggered by the issuance of the
Securities as described in this Agreement; and (G) the Company does not have any
stock appreciation rights or "phantom stock" plans or agreements or any similar
plan or agreement. The Company has furnished to each Purchaser true and correct
copies of the Company's Articles of Incorporation, as amended and as in effect
on the date hereof (the "Articles of Incorporation"), and the Company's Bylaws,
as amended and as in effect on the date hereof (the "Bylaws"), and the terms of
all securities convertible into or exercisable or exchangeable for Common Stock
and the material rights of the holders thereof in respect thereto. Except as
specifically disclosed in the SEC Documents (as defined below) or Schedule
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2.1(c), no Person (as defined below) (i) to the knowledge of the Company,
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beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), or (ii) has
the right to acquire, by agreement with or by obligation binding upon the
Company, beneficial ownership of in excess of five percent (5%) of the Common
Stock. A "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.
(d) Issuance of Convertible Notes and Warrants. The Convertible
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Notes and the Warrants are duly authorized, and, when issued and paid for in
accordance with the terms of this Agreement, shall be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issuance thereof. The Company, as at the Closing Date, has and at all times
while the Convertible Notes and the Warrants are outstanding will maintain an
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adequate reserve of duly authorized shares of Common Stock to enable it to
comply with its obligations on the conversion or exercise of the Convertible
Notes or the Warrants, as the case may be. The shares of Common Stock that would
be issuable upon conversion in full of the Convertible Notes and the full
exercise of the Warrants (the "Underlying Shares") have been duly authorized and
when issued in accordance with the terms of the Convertible Notes and of the
Warrants, as the case may be, will be validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issuance thereof, with the holders being entitled to all rights accorded to a
holder of Common Stock. At least 6,500,000 shares of Common Stock (subject to
adjustment pursuant to the Company's covenant set forth in Section 3.15 below)
have been duly authorized and reserved for issuance upon conversion of the
Convertible Notes and upon exercise of the Warrants. The issuance by the Company
of the Securities is exempt from registration under the Securities Act.
(e) No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby on the Closing Date do not and will not (i)
conflict with or violate any provision of its Articles of Incorporation or
bylaws (each as amended through the date hereof), (ii) subject to obtaining the
consents referred to in Section 2.1(f), conflict with, or constitute a default
(or an event which 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 of, any agreement, indenture or instrument to which the Company or
any of its Subsidiaries is a party, 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 any of its
Subsidiaries is subject (including Federal and state securities laws and
regulations), or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected, except in the case of each of clauses (ii)
and (iii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as could not, individually or in the aggregate,
have or result in a Material Adverse Effect. The business of the Company and
its Subsidiaries is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which,
individually or in the aggregate, do not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
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Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
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any consent, waiver, authorization or order of, 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
(i) the filing by the Company of the registration statement contemplated by the
Registration Rights Agreement with the SEC, (ii) the application by the Company
for the listing of the Underlying Shares with The Nasdaq Stock Market (and with
any other national securities exchange or market on which the Common Stock is
then listed), (iii) the filing by the Company of a Form D with the SEC; (iv) the
filing by the Company of any notification required in connection with the
consummation of the transactions contemplated by the Transaction Documents as
required by any state securities laws,
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and (v) in all other cases, where the failure to obtain such consent, waiver,
authorization or order, or to give or make such notice or filing, could not have
or result in, individually or in the aggregate, a Material Adverse Effect (the
consents, waivers, authorizations, orders, notices and filings referred to
clauses (i) through (iv) above and referred to in Schedule 2.1(f) being referred
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to in this Agreement as the "Required Approvals"). Except as disclosed in
Schedule 2.1(f), all consents, authorizations, orders, filings and registrations
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which the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof. The Company and its
Subsidiaries are unaware of any facts or circumstances that might give rise to
any of the foregoing. The Company is not in violation of the listing
requirements of the Nasdaq National Market, including, without limitation, the
requirements set forth in Rule 4310(c)(25)(G)(i) of The Nasdaq Stock Market's
Marketplace Rules, and has no actual knowledge, nor has it received any notice
from the Nasdaq National Market of any facts which would reasonably lead to
delisting or suspension of the Common Stock by the Nasdaq National Market in the
foreseeable future.
(g) Litigation; Proceedings. Except as specifically disclosed in
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the Disclosure Materials (as hereinafter defined) or in Schedule 2.1(g), there
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is no action, suit, notice of violation, proceeding or investigation pending or,
to the best knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries or any of their respective properties before
or by any court, governmental or administrative agency or regulatory authority
(Federal, state, county, local or foreign) which (i) adversely affects or
challenges the legality, validity or enforceability of any of the Transaction
Documents or the Convertible Notes, Warrants, or Underlying Shares (collectively
the "Securities") or (ii) could not, individually or in the aggregate, have or
result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any
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Subsidiary (i) is in default under or 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, (ii) is in violation of any order
of any court, arbitrator or governmental body, or (iii) is in violation of any
statute, rule or regulation of any governmental authority, except as could not
individually or in the aggregate, have or result in, individually or in the
aggregate, Material Adverse Effect.
(i) Private Offering. Neither the Company nor any Person acting on
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its behalf has taken or will take any action which might subject the offering,
issuance or sale of the Securities to the registration requirements of Section 5
of the Securities Act.
(j) SEC Documents. The Company has filed all reports required to
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be filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the three 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 Documents" and,
together with the exhibits and schedules to this Agreement and other documents
and information furnished to the Purchasers by or on behalf of the Company at
any time prior to the Closing, as the "Disclosure Materials") on a timely basis
or has timely filed any
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notification required under Rule 12b-25 under the Exchange Act and has
thereafter filed any such reports within the time period stated in any such
notification under Rule 12b-25. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the SEC promulgated
thereunder, and none of the SEC Documents, 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. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Documents to the
extent required. The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved, 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 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 year-end audit adjustments. Since the
date of the financial statements included in the Company's last filed Annual
Report on Form 10-KSB prior to the date of this Agreement, there has been no
event, occurrence or development that has had or that could have or result in a
Material Adverse Effect which has not been specifically disclosed in writing to
the Purchasers by the Company. The Company last filed audited financial
statements with the SEC on July 7, 1999, and has not received any comments from
the SEC in respect thereof. No other information provided by or on behalf of the
Company to the Purchasers which is not included in the SEC Documents contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they are or were made, not misleading. Neither the
Company nor any of its Subsidiaries nor any of their officers, directors,
employees or agents have provided the Purchasers with any material, nonpublic
information.
(k) Employee Relations. Neither the Company nor any of its
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Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. None of the
Company's or its Subsidiaries' employees is a member of a union and neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relations
with their employees are good. No executive officer (as defined in Rule 501(f)
of the Securities Act) has notified the Company that such officer intends to
leave the Company or otherwise terminate such officer's employment with the
Company and the Company does not expect to terminate any such officer during the
six months following the date hereof.
(l) Intellectual Property Rights. Except as set forth in Schedule
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2.1(l), the Company and its Subsidiaries own or possess adequate rights or
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licenses to use all trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and rights
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necessary to conduct their respective businesses as now conducted. Except as set
forth on Schedule 2.1(l), none of the trademarks, trade names, service marks,
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service xxxx registrations, service names, patents, patent rights, patent
applications, copyrights, inventions, licenses, approvals, government
authorizations, trade secrets or other intellectual property rights
(collectively, the "Intellectual Property") of the Company have expired or
terminated, or are expected to expire or terminate within two years from the
date of this Agreement, except where such expiration or termination would not
result, individually or in the aggregate, in a Material Adverse Effect. Except
as set forth in Schedule 2.1(l), the Company and its Subsidiaries do not have
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any knowledge of any infringement by the Company or its Subsidiaries of the
Intellectual Property of others. Except as set forth on Schedule 2.1(l), no
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administrative or court action or proceeding has been made or brought against,
or to the Company's knowledge, has been threatened against, the Company or its
Subsidiaries regarding the infringement of the Intellectual Property of others.
The Company and its Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of their intellectual properties.
Except as set forth in Schedule 2.1(l), the Company and its Subsidiaries do not
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have any knowledge of any infringement by any third party of any of the
Company's or its Subsidiaries' Intellectual Property.
(m) Environmental Laws. The Company and its Subsidiaries (i) are in
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compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where, in each of the three
foregoing cases, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect.
(o) Title. The Company and its Subsidiaries have good and marketable
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title in fee simple to all real property owned by them and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 2.1(o) or such
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as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(p) Tax Status. The Company and each of its Subsidiaries has made or
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filed all federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
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charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and for which the Company has set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim.
(q) Transactions With Affiliates. Except as set forth on Schedule
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2.1(q) and in the Disclosure Materials and other than the grant of stock options
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disclosed on Schedule 2.1(c), none of the officers, directors, or employees of
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the Company is presently a party to any transaction with the Company or any of
its Subsidiaries (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 corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(r) Foreign Corrupt Practices. Neither the Company, nor any of its
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Subsidiaries, nor, to the Company's knowledge, any director, officer, agent,
employee or other person acting on behalf of the Company or any of its
Subsidiaries has, in the course of its actions for, or on behalf of, the
Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
(s) Investment Company. The Company is not, and is not an
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Affiliate, as that term is defined in Section 3.10, of an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(t) Certain Fees. Except for fees payable to FleetBoston Xxxxxxxxx
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Xxxxxxxx, Inc. as described in Section 5.1 of this Agreement, no fees or
commissions will be payable by the Company to any broker, financial advisor,
finder, investment banker, or bank with respect to the transactions contemplated
by this Agreement.
(u) Solicitation Materials. The Company has not (i) distributed
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any offering materials in connection with the offering and sale of the
Securities other than the Disclosure Materials and any amendments and
supplements thereto or (ii) solicited any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
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(v) Form S-3 Eligibility. The Company is eligible to register
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securities for resale with the SEC under Form S-3 promulgated under the
Securities Act.
(w) Listing and Maintenance Requirements Compliance. Other than as
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specifically listed in the Disclosure Materials, the Company has not in the two
years preceding the date of this Agreement received written notice from any
stock exchange or market on which the Common Stock is or has been listed (or on
which it has been quoted) to the effect that the Company is not in compliance
with the listing or maintenance requirements of such exchange or market.
(x) Acknowledgment Regarding Purchaser's Purchase of Convertible
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Notes. The Company acknowledges and agrees that each of the Purchasers is acting
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solely in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby and thereby. The
Company further acknowledges that each Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated hereby and thereby,
and any advice given by any of the Purchasers or any of their respective
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby 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 the Transaction Documents
has been based solely on the independent evaluation by the Company and its
representatives.
(y) No Integrated Offering. Neither the Company, nor any of its
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affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any securities or solicited any offers
to buy any securities, under circumstances that would require registration of
the issuance by the Company of any of the Securities under the Securities Act or
cause this offering of the Securities to be integrated with prior offerings by
the Company for purposes of the Securities Act or any applicable stockholder
approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated, nor will the Company or any
of its Subsidiaries take any action or steps that would require registration of
the issuance by the Company of any of the Securities under the Securities Act or
cause the offering of the Securities to be integrated with other offerings.
(z) Insurance. The Company and each of its Subsidiaries are insured
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by insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
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
-10-
as may be necessary to continue its business at a cost that would not have a
Material Adverse Effect, taken as a whole.
(aa) Regulatory Permits. Except for the absence of which would not
------------------
result, either individually or in the aggregate, in a Material Adverse Effect,
the Company and its Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
(bb) Internal Accounting Controls. The Company and each of its
----------------------------
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 generally accepted accounting principles 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, and
the Company has not received any indication contrary to clauses (i) through (iv)
above from its auditors or other advisors.
(cc) No Materially Adverse Contracts, Etc. Neither the Company nor
------------------------------------
any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
(dd) Application of Takeover Protections. The Company and its board of
-----------------------------------
directors have taken all necessary action in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar and-takeover provision
under the Company's articles of incorporation or the laws of the state of its
incorporation which is or could become applicable to the Purchasers as a result
of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and the Purchasers'
ownership of the Securities.
(ee) Rights Agreement. The Company has not adopted a shareholder
----------------
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company and does not
intend to do so.
-11-
(ff) No Other Agreements. The Company has not, directly or
-------------------
indirectly, made any agreements with any Purchasers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
(gg) Absence of Certain Changes. Except as disclosed in Schedule
-------------------------- --------
2.1(gg), since March 31, 2000, there has been no material adverse change and no
-------
material adverse development in the business, properties, assets, operations,
results of operations, financial conditions or prospects of the Company or its
Subsidiaries. The Company has not taken any steps, and does not currently expect
to take any steps, to seek protection pursuant to any bankruptcy law nor does
the Company or any of its Subsidiaries have any knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy proceedings or any
actual knowledge of any fact which would reasonably lead a creditor to do so.
Except as disclosed in Schedule 2.1(gg), since April 1, 2000, the Company has
----------------
not declared or paid any dividends, sold any assets, individually or in the
aggregate, in excess of $100,000 outside of the ordinary course of business or
had capital expenditures, individually or in the aggregate, in excess of
$100,000.
(hh) Senior Indebtedness. Except as set forth on Schedule 2.1(hh),
------------------- ----------------
the Company has no Senior Indebtedness (as defined in the Convertible Notes).
2.2 Representations and Warranties of the Purchasers. Each Purchaser
------------------------------------------------
severally and not jointly, and only with respect to itself, makes the following
representations and warranties to the Company:
(a) Organization; Authority. Such Purchaser, if an entity, is a
-----------------------
corporation or other entity duly incorporated or organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization with the requisite corporate or other power and authority to enter
into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The purchase by
such Purchaser of the Convertible Notes and the Warrants hereunder has been duly
authorized by all necessary action on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against such Purchaser, in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity.
(b) Investment Intent. Such Purchaser is acquiring the Convertible
-----------------
Notes and the Warrants, and upon conversion of the Convertible Notes or exercise
of the Warrants, will acquire the Underlying Shares, for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations contained in this Section 2(b), such Purchaser does not agree to
hold any of the Securities for any minimum or other specific term and reserves
the right to dispose of the
-12-
Securities at any time in accordance with or to the extent allowed by this
Agreement, the Registration Rights Agreement, and the Securities Act.
(c) Accredited Status. At the time such Purchaser was offered the
-----------------
Convertible Notes and the Warrants, it was, and at the date hereof, it is, and
at the Closing Date and each of its conversion dates as to the Convertible Notes
or exercise dates as to the Warrants, it will be, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) Experience of 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, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Such
-----------------------------------------------
Purchaser acknowledges that the Securities are speculative investments and may
involve a high degree of risk and 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.
(f) Access to Information. Such Purchaser acknowledges receipt of
---------------------
the Disclosure Materials and further acknowledges that it 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 Convertible Notes and the Warrants, and the
merits and risks of investing in the Convertible Notes and the Warrants; (ii)
access to information about the Company and the Company's 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 which 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 and to verify the accuracy and
completeness of the information contained in the Disclosure Materials.
(g) Affiliate Status. Except as previously disclosed to the Company,
----------------
on the date prior to this Agreement, such Purchaser was not an Affiliate of the
Company.
(h) Reliance. Such Purchaser understands and acknowledges that (i)
--------
the Convertible Notes and the Warrants are being offered and sold to such
Purchaser without registration under the Securities Act in a private placement
that is exempt from the registration provisions of the Securities Act and (ii)
the availability of such exemption, depends in part on, and the Company will
rely upon the accuracy and truthfulness of, the foregoing representations and
the Purchaser hereby consents to such reliance.
(i) Professional Advice. Such Purchaser has sought such accounting,
-------------------
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
-13-
(j) Transfer or Resale. Such Purchaser understands that except as
------------------
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the Securities Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered under the Securities Act and applicable state securities
laws, (B) such Purchaser shall have delivered to the Company an opinion of
counsel, in a generally acceptable form, to the effect that such Securities to
be sold, assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration, (C) such Purchaser provides the Company
with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the Securities Act (or a
successor rule thereto) ("Rule 144") or (D) transferred in accordance with Rule
144A under the Securities Act (or any successor rule thereto) ("Rule 144A") to a
qualified institutional buyer (as such term is defined in Rule 144A); (ii) any
sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the Securities Act) may require compliance with some
other exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder. Notwithstanding the foregoing, the Securities may be pledged in
connection with a bona fide margin account or other loan secured by the
Securities.
(k) Legends. Such Purchaser understands that the certificates or
-------
other instruments representing the Notes and the Warrants and, until such time
as the sale of the Underlying Shares has been registered under the Securities
Act as contemplated by the Registration Rights Agreement, the stock certificates
representing the Underlying Shares, except as set forth below, shall bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO EITHER RULE 144A
UNDER SAID ACT TO A QUALIFIED INSTITUTIONAL BUYER OR RULE 144 UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
-14-
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY THE SECURITIES.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (i) such Securities are registered for sale under the Securities
Act, (ii) in connection with a sale transaction, such holder provides the
Company with an opinion of counsel, in a generally acceptable form to the
Company, to the effect that a public sale, assignment or transfer of such
Securities may be made without registration under the Securities Act, or (iii)
such holder provides the Company with reasonable assurances that the Securities
can be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold.
Such Purchaser acknowledges, covenants and agrees to sell the Securities
represented by a certificate(s) from which the legend has been removed, only
pursuant to (i) a registration statement effective under the Securities Act and
upon compliance with the prospectus delivery requirements of the Securities Act,
or (ii) advice of counsel that such sale is exempt from registration required by
Section 5 of the Securities Act.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Best Efforts. The Company shall use its best efforts to timely satisfy
------------
each of the conditions to be satisfied by it as provided in Article IV of this
Agreement.
3.2 Form D and Blue Sky. The Company agrees to file a Form D with respect
-------------------
to the Securities as required under Regulation D under the Securities Act within
the time specified in Regulation D and to provide a copy thereof to each
Purchaser promptly after such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Purchasers at the Closing pursuant to this Agreement under
applicable state securities laws, and shall provide evidence of any such action
so taken to the Purchasers on or prior to the Closing Date. The Company shall
make all filings and reports relating to the offer and sale of the Securities
required under applicable state securities laws following the Closing Date.
3.3 Reporting Status. Until the earlier of (i) the date which is one year
----------------
after the date on which the holders thereof may sell all of the Underlying
Shares without restriction pursuant to Rule 144(k) under the Securities Act (or
successor thereto) and (ii) the date on which (A) the holders thereof shall
have sold all the Underlying Shares and (B) none of the Convertible Notes or the
Warrants is outstanding (the "Reporting Period"), the Company shall file all
reports required to be filed with the SEC pursuant to the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination.
-15-
3.4 Shareholder Information. The Company agrees to send to each Purchaser
-----------------------
during the Reporting Period copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders. During the Reporting Period, the Company shall include each
Purchaser on the Company's distribution list for press releases and shall
provide each Purchaser with any such press releases in the same manner and at
the same time as others on such distribution list.
3.5 Right of First Refusal. Subject to the exceptions described below,
----------------------
during the period beginning on the date hereof and ending on, and including, the
date which is twelve (12) months after the Closing Date, neither the Company nor
its Subsidiaries shall negotiate or contract with any party for any equity
financing (including any debt financing with an equity component) or issue any
equity securities of the Company or any Subsidiary or securities convertible
into or exchangeable or exercisable for equity securities of the Company or any
Subsidiary (including debt securities with an equity component) in any form
("Future Offerings"), unless it shall have first delivered to each Purchaser, or
a designee appointed by such Purchaser, a written notice (the "Future Offering
Notice") describing the proposed Future Offering, including the size, material
terms and conditions thereof, and providing each Purchaser an option to purchase
up to its Aggregate Percentage (as defined below) of the securities to be issued
in such Future Offering, as of the date of delivery of the Future Offering
Notice, in the Future Offering on the same terms and conditions set forth in the
Future Offering Notice. The rights granted to the Purchasers in this Section 3.5
are collectively referred to as the "First Right of Refusal." For purposes of
this Section 3.5, "Aggregate Percentage" at any time with respect to any
Purchaser shall mean the percentage obtained by calculating the quotient of (i)
the aggregate principal amount of the Convertible Notes issued to such Purchaser
on the Closing Date by (ii) the aggregate principal amount of the Convertible
Notes issued to all of the Purchasers on the Closing Date. A Purchaser can
exercise its option to participate in a Future Offering by delivering written
notice of its election to participate to the Company within ten (10) Business
Days after receipt of a Future Offering Notice, which notice shall state the
quantity of securities being offered in the Future Offering that such Purchaser
will purchase, up to its Aggregate Percentage, and that number of securities it
is willing to purchase in excess of its Aggregate Percentage. In the event that
one or more Purchasers fail to elect to purchase up to each such Purchaser's
Aggregate Percentage of the Future Offering, then each Purchaser that has
indicated its willingness to purchase a number of securities in such Future
Offering in excess of its Aggregate Percentage shall be entitled to purchase up
to its pro rata portion of the securities in the Future Offering which one or
more of the other Purchasers have not elected to purchase. If the Purchasers
fail to elect to fully participate in the Future Offering within the periods
described in this Section 3.5, the Company shall have sixty (60) calendar days
thereafter to sell the securities of the Future Offering that the Purchasers did
not elect to purchase, upon terms and conditions no more favorable to the
purchasers thereof than specified in the Future Offering Notice. If the Company
has not sold such securities of the Future Offering within such sixty (60) day
period, the Company shall not thereafter issue or sell such securities without
first offering
-16-
such securities to the Purchasers in the manner provided in this Section 3.5.
The First Right of Refusal shall not apply to (i) any loan from a commercial
bank which does not have an equity issuance feature or component, (ii) the
Company's issuances of securities (A) as consideration in a merger or
consolidation, or (B) in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity) with any entity
whose primary business is not investing in or advising other entities, (iii) the
issuance of Common Stock in a firm commitment, underwritten public offering,
(iv) the issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of the date
hereof provided the terms of such securities are not amended after the date
hereof, and (v) the grant of additional options or warrants, or the issuance of
additional securities, under any Company stock option plan, restricted stock
plan or stock purchase plan for the benefit of the Company's employees, officers
or directors for services provided to the Company. The Purchasers shall not be
required to participate in or exercise their right of first refusal with respect
to a particular Future Offering in order to preserve their First Right of
Refusal with respect to later Future Offerings.
3.6 Listing. The Company shall promptly secure the listing of all of the
-------
Registrable Securities (as defined in the Registration Rights Agreement) upon
each national securities exchange and automated quotation system (including the
Nasdaq National Market ("NNM")), if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents. During the Reporting Period, the Company shall maintain
the Common Stock's listing on either the NNM or the New York Stock Exchange
("NYSE"). Neither the Company nor any of its Subsidiaries shall take any action
which may result in the delisting or suspension of the Common Stock on the NNM
or NYSE (other than to switch listings from the NNM to NYSE). The Company shall
promptly, and in no event later than the following Business Day, offer to
provide to the Purchasers copies of any notices it receives from the NNM or NYSE
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange, provided that such notices
shall not contain any material non-public information. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section 3.6.
3.7 Expenses. The Company shall pay after Closing an expense allowance of
--------
up to Twenty-five Thousand Dollars ($25,000), to counsel for the Purchasers,
provided that the Purchasers shall promptly remit an invoice for such amount on
or before the thirtieth (30/th/) day following the Closing Date. The Purchasers
agree to engage a single firm as counsel to represent them jointly.
3.8 Corporate Existence. So long as any Purchaser beneficially owns any
-------------------
Convertible Notes or Warrants, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the Company's assets,
except in the event of a merger or consolidation or sale of all or substantially
all of the Company's assets where the surviving or successor entity in such
-17-
transaction (A) assumes the Company's obligations under the Transaction
Documents and (B) is a publicly traded corporation whose common stock is listed
for trading on the NNM or NYSE.
3.9 Trading Restrictions. Each Purchaser agrees that during the ten (10)
--------------------
trading days immediately preceding the date of this Agreement, it shall not sell
any shares of Common Stock including by way of any "short sales" of the Common
Stock (as defined in Rule 3b-3 of the Exchange Act).
3.10 Integration. The Company shall not and shall use its best efforts
-----------
to ensure that no Person controlling, controlled by or under common control with
the Company (an "Affiliate") 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
Convertible Notes, the Warrants, or the Underlying Shares in a manner that would
require the registration under the Securities Act of the issue or sale of the
Convertible Notes, the Warrants, or the Underlying Shares to the Purchasers.
3.11 Subsequent Registrations. Other than Underlying Shares and other
------------------------
"Registrable Securities" (as such term is defined in the Registration Rights
Agreement) to be registered in accordance with the Registration Rights Agreement
and except as set forth in Schedule 11 to the Registration Rights Agreement
-----------
(which securities may not be registered prior to the time the Registrable
Securities are registered), the Company shall not, for a period of not less than
ninety (90) trading days after the date that the Underlying Shares Registration
Statement relating is declared effective by the SEC, without the prior written
consent of the Purchasers, register for resale any securities of the Company.
Any days that Purchasers are unable (either because the Company has notified the
Purchasers that the Purchasers may not utilize such Underlying Shares
Registration Statement, or because any securities exchange or market has
suspended trading in the Common Stock or because any governmental authority has
suspended the use of such Underlying Shares Registration Statement) to sell
Underlying Shares under the Underlying Shares Registration Statement shall be
added to such ninety (90) trading day period for the purposes of this Section
3.11.
3.12 Transfer Agent Instructions. The Company shall issue irrevocable
---------------------------
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates, registered in the name of each Purchaser or its nominee(s), for
the Underlying Shares in such amounts as specified from time to time by each
Purchaser to the Company upon conversion of the Convertible Notes or exercise of
the Warrants (in the form attached hereto as Exhibit F, the "Irrevocable
---------
Transfer Agent Instructions"). Prior to the effectiveness of registration of the
Underlying Shares under the Securities Act, all such certificates shall bear the
restrictive legend specified in Section 2.2(k) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 3.12, and stop transfer instructions to
give effect to Section 2.2(j) hereof (in the case of the Underlying Shares,
prior to registration of the Underlying Shares under the Securities Act) will be
given by the Company to its transfer agent with respect to the Underlying Shares
and that the Underlying Shares shall otherwise be freely transferable on
-18-
the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section 3.12
shall affect in any way each Purchaser's obligations under the Securities Act
and agreements set forth in Section 2.2(k) to comply with all applicable
prospectus delivery requirements, if any, upon resale of the Securities. If a
Purchaser provides the Company with an opinion of counsel, in a generally
acceptable form to the Company, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the Securities
Act, the Company shall permit the transfer, and, in the case of the Underlying
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by such Purchaser and
without any restrictive legends. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Purchasers.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 3.12 will be inadequate and agrees, in the event
of a breach or threatened breach by the Company of the provisions of this
Section 3.12, that the Purchasers shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
3.13 Limitation on Senior Indebtedness. Notwithstanding anything to the
---------------------------------
contrary herein or any of the instruments or documents executed in connection
with this Agreement, the Company covenants that it will not issue any Senior
Indebtedness, as that term is defined in the Convertible Notes, after the date
of this Agreement and while any of the Convertible Notes are outstanding,
without first obtaining the written consent of the Holders of at least three
fourths (3/4) of the aggregate principal amount of the Convertible Notes then
outstanding; provided, however, that the foregoing written consent limitation
will have no effect after such time as the Company has achieved positive cash
flow from operations of at least Three Million Dollars ($3,000,000) for any
fiscal quarter completed after the date of this Agreement, which determination
shall be made by reference to financial information filed as part of any
Quarterly Report on Form 10-QSB or Annual Report on Form 10-KSB of the Company
filed at any time while the Convertible Notes are outstanding, and further
provided that the Purchasers hereby agree and consent to the issuance by the
Company of up to Three Million Dollars ($3,000,000) of additional convertible
debt financing on terms no more favorable than the Convertible Notes, which
shall be in pari passu with the Convertible Notes, and which may be issued after
the date hereof to any party selected by the Company, including the directors,
officers or existing shareholders of the Company.
3.14 Use of Proceeds. The Company covenants to use all of the proceeds
---------------
from the placement of the Securities for working capital purposes and not for
the satisfaction of any portion of Company debt or to redeem or repurchase
Company equity or equity-equivalent securities. Pending application of the
proceeds of this placement in the manner permitted hereby the Company will
invest such proceeds in interest bearing accounts and/or short-term, investment
grade interest bearing securities.
-19-
3.15 Reservation of Shares. The Company shall take all action necessary
---------------------
to at all times have authorized, and reserved for the purpose of issuance, no
less than 200% of the number of shares of Common Stock needed to provide for the
issuance of the shares of Common Stock upon conversion of all outstanding
Convertible Notes (without regard to any limitations on conversions) and 100% of
the number of shares of Common Stock needed to provide for the issuance of the
shares of Common Stock upon exercise of all outstanding Warrants (without regard
to any limitations on exercises).
3.16 Filing of Current Report on Form 8-K. On or before the second (2/nd/)
------------------------------------
Business Day following the Closing Date, the Company shall file a Current Report
on Form 8-K with the SEC 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, the form of the Convertible Notes, the Registration
Rights Agreement and the form of Warrants.
3.17 Proxy Statement. The Company shall provide each shareholder entitled
---------------
to vote at the next meeting of shareholders of the Company, which meeting shall
occur on or before August 31, 2000 (the "Shareholder Meeting Deadline"), a proxy
statement, which has been previously reviewed by the Purchasers and a counsel of
their choice, soliciting each such shareholder's affirmative vote at such annual
shareholder meeting for (i) approval of the Company's issuance of all of the
Securities as described in this Agreement in accordance with applicable law and
the rules and regulations of The Nasdaq Stock Market, Inc.; and (ii) approval
for the increase in the number of authorized shares of Common Stock to
100,000,000 (such affirmative approval in respect of both clauses (i) and (ii)
above being referred to herein collectively as the "Shareholder Approval"), and
the Company shall use its best efforts to solicit its shareholder's approval of
such issuance of the Securities and to cause the Board of Directors of the
Company to recommend to the shareholders that they approve such proposal. If the
Company fails to hold a meeting of its shareholders by the Shareholder Meeting
Deadline, then, as partial relief (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to each
holder of Convertible Notes an amount in cash equal to the product of (i) the
Purchase Price multiplied by (ii) 0.015; multiplied by (iii) the quotient of (x)
the number of days after the Shareholder Meeting Deadline and prior to the date
that a meeting of the Company's shareholders seeking Shareholder Approval is
held, divided by (y) 30. The Company shall make the payments referred to in the
immediately preceding sentence within five (5) days of the earlier of (I) the
holding of the meeting of the Company's shareholders, the failure of which
resulted in the requirement to make such payments, and (II) the last day of each
30-day period beginning on the Shareholder Meeting Deadline. In the event the
Company fails to make, such payments in a timely manner, such payments shall
bear interest at the rate of 1.5% per month (pro rated for partial months) until
paid in full.
3.18 Indemnification. In consideration of each Purchaser's execution and
---------------
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Purchaser and each other holder of the Securities and
-20-
all of their stockholders, officers, directors, partners, members, employees and
direct or indirect investors and any of the foregoing persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "Indemnified Liabilities"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (d) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Securities, or (e) the status of such Purchaser or holder of the
Securities as an investor in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law to the
settlement of claims and the Company's rights to assume the defense of claims.
3.19 Transactions With Affiliates. So long as (i) any Convertible Notes
----------------------------
or Warrants are outstanding or (ii) any Purchaser owns Underlying Shares with a
market value of at least $500,000, the Company shall not, and shall cause each
of its Subsidiaries not to, enter into, amend, modify or supplement, or permit
any Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two years, shareholders who beneficially own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each, a "Related Party"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement
which is approved by a majority of the disinterested directors of the Company or
(c) any agreement, transaction, commitment or arrangement on an arms-length
basis on terms no less favorable than terms which would have been obtainable
from a person other than such Related Party. For purposes hereof, any director
who is also an officer of the Company or any Subsidiary of the Company shall not
be a disinterested director with respect to any such agreement, transaction,
commitment or arrangement.
ARTICLE IV
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CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to Purchase
--------------------------------------------------------------------
the Convertible Notes. The obligation of each Purchaser hereunder to purchase
---------------------
the Convertible Notes and the Warrants from the Company at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Purchaser's
sole benefit and may be waived by such Purchaser at any time in its sole
discretion by providing the Company with prior written notice thereof:
(a) The Company shall have executed each of the Transaction Documents
and delivered the same to such Purchaser.
(b) The Common Stock (i) shall be designated for quotation or listed
on the Nasdaq National Market and (ii) shall not have been suspended by the SEC
or the Nasdaq National Market from trading on the Nasdaq National Market nor
shall suspension by the SEC or the Nasdaq National Market have been threatened
either (A) in writing by the SEC or the Nasdaq National Market or (B) by falling
below the minimum listing maintenance requirements of the Nasdaq National
Market; and the Underlying Shares issuable upon conversion or exercise of the
Notes and the related Warrants, as the case may be, shall be listed upon the
Nasdaq National Market.
(c) The representations and warranties of the Company shall be true
and correct , and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date. Such Purchaser shall have received a certificate, executed by the
Chief Executive Officer of the Company, dated as of the Closing Date, to the
foregoing effect and as to such other matters as may be reasonably requested by
such Purchaser.
(d) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 2.1(b) above and in a form reasonably
acceptable to such Purchaser (the "Resolutions").
(e) As of the Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Convertible Notes and the exercise of the Warrants, at least
6,500,000 shares of Common Stock.
(f) The Irrevocable Transfer Agent Instructions in the form attached
hereto as Exhibit F shall have been delivered to and acknowledged in writing by
---------
the Company's transfer agent.
(g) The Company shall have delivered to such Purchaser a certificate
evidencing the incorporation and good standing of the Company in such entity's
state of
-22-
incorporation or organization issued by the Secretary of State or comparable
officer of such state of incorporation or organization as of a date within ten
(10) days of the Closing Date, or such other date as shall be acceptable to the
Purchasers.
(h) The Company shall have delivered to such Purchaser a certified
copy of the Articles of Incorporation as certified by the Utah Department of
Commerce, Division of Corporations and Commercial Code, as of a date within ten
(10) days of the Closing Date.
(i) The Company shall have delivered to such Purchaser a secretary's
certificate, dated as of the Closing Date, certifying as to (A) the Resolutions,
(B) the Articles of Incorporation and (C) the Bylaws, each as in effect at the
Closing.
(j) The Company shall have made all filings under all applicable
federal and state securities laws necessary to consummate the issuance of the
Securities pursuant to this Agreement in compliance with such laws.
(k) The Company shall have a letter from the Company's transfer agent
certifying the number of shares of Common Stock outstanding as of a date within
five days of the Closing Date, copies of which shall be made available to
Purchasers so requesting.
(l) The Company shall have delivered to the Purchasers such other
documents relating to the transactions contemplated by the Transaction Documents
as the Purchasers or their counsel may reasonably request.
(m) 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 which prohibits the
consummation of any of the transactions contemplated by this Agreement or the
Registration Rights Agreement relating to the issuance or conversion of any
portion of the principal amount of the Convertible Notes or exercise of the
Warrants;
(n) Since the date of the financial statements included in the
Company's last filed Quarterly Report on Form 10-QSB or Annual Report on Form
10-KSB, whichever is more recent, last filed prior to the date of this
Agreement, no event which has or can reasonably be expected to have a Material
Adverse Effect which has not specifically been disclosed in the Disclosure
Materials prior to the date of this Agreement shall have occurred, nor shall
there have occurred a material adverse change in the financial condition or
prospects of the Company, which is not disclosed in the Disclosure Materials;
(o) The Company shall have delivered to each Purchaser an opinion of
outside legal counsel to the Company in substantially the form attached hereto
as Exhibit E and dated as of the Closing Date;
---------
-23-
(p) All Required Approvals and consents shall have been obtained;
(q) The Company shall have delivered to such Purchaser or its designee
the Convertible Notes and the Warrants being purchased at Closing, registered in
the name of such Purchaser, each in form satisfactory to the Purchasers; and
(r) No event resulting in a Material Adverse Effect shall have
occurred between the date of this Agreement and the Closing Date.
ARTICLE V
MISCELLANEOUS
5.1 Placement Fees and Expenses. Except to the extent set forth in
---------------------------
Section 3.7, and except as otherwise may be provided in the Registration Rights
Agreement, each of the parties shall pay its own fees and expenses (including
the fees of any attorneys, accountants, appraisers or others engaged by such
party) in connection with this Agreement and the transactions contemplated
hereby, except that the Company shall pay on the Closing Date out of the
Purchase Price up to six percent (6%) of the total Purchase Price to FleetBoston
Xxxxxxxxx Xxxxxxxx, Inc., as placement agent (the "Placement Agent") and shall
issue to the Placement Agent a warrant (the "Placement Agent Warrant") to
purchase up to that number of shares of Common Stock as shall be equal to ten
percent (10%) of the number of shares of Common Stock underlying the Warrants
issued to the Purchasers. The Placement Agent Warrant, if any, shall have an
exercise period of five years from the Closing Date. Except for the number of
shares of Common Stock issuable upon its exercise, the Placement Agent Warrant
shall be identical to the Warrants and shall be in the form attached to this
Agreement as Exhibit C. The shares of Common Stock issuable upon the exercise
---------
of the Placement Agent Warrant shall be included within the definition of
Registrable Securities under the Registration Rights Agreement, and the
Placement Agent shall be a party to the Registration Rights Agreement. The
Company shall pay all stamp and other taxes and duties levied in connection with
the issuance of the Securities pursuant to this Agreement.
5.2 Entire Agreement. This Agreement, together with the exhibits
----------------
and schedules hereto, the Registration Rights Agreement, the Convertible Notes
and the Warrants 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.
5.3 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 telephone number specified in this Section prior to 4:30 p.m. (Pacific
time) on a Business Day, (ii) the Business Day after the date of transmission,
if
-24-
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 4:30 p.m.
(Pacific time) on any date and earlier than 11:59 p.m. (Pacific time) on such
date, (iii) the Business 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:
If to the Company: BRITESMILE, INC.
000 Xxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx, Chief Financial Officer
With copies to: DURHAM XXXXX & XXXXXXX, P.C.
Broadway Centre, Suite 900
000 Xxxx Xxxxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
If to a Purchaser, to it at the address and facsimile number set forth on
Exhibit A, with copies to such Purchaser's representatives as set forth on
---------
Exhibit A, or at such other address and/or facsimile number and/or to the
---------
attention of such other person as the recipient party has specified by written
notice given to each other party five days prior to the effectiveness of such
change.
5.4 Amendments; Waivers. No provision of this Agreement may be
-------------------
amended other than by an instrument in writing signed by the Company and the
holders of at least two-thirds (2/3) of the principal amount of the Convertible
Notes on the Closing Date, and no provision hereof may be waived other than by
an instrument in writing signed by the party against whom enforcement is sought.
No such amendment shall be effective to the extent that it applies to less than
all of the holders of the Convertible Notes or Warrants then outstanding. No
consideration shall be offered or paid to any person to amend or consent to a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration also is offered to all of the parties to the
Transaction Documents or holders of Convertible Notes, as the case may be.
5.5 Headings. 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.
5.6 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 shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at
least two-thirds (2/3) of the principal amount of the Convertible Notes then
-25-
outstanding. A Purchaser may assign some or all of its rights hereunder without
the consent of the Company; provided, however, that any such assignment shall
not release such Purchaser from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption, which consent shall not be unreasonably withheld.
Notwithstanding anything to the contrary contained in the Transaction Documents,
the Purchasers shall be entitled to pledge the Securities in connection with a
bona fide margin account or other loan secured by the Securities.
5.7 No Third-Party Beneficiaries. This Agreement is intended for
----------------------------
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
5.8 Governing Law. All questions concerning the construction,
-------------
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting in New York City, Borough of Manhattan, State of New York, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, 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 brought in an inconvenient forum or that the
venue of 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 to such
party at the address for such 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 hereby irrevocably
waives any right it may have, and agrees not to request, a jury trial for the
adjudication of any dispute hereunder or in connection herewith or arising out
of this Agreement or any transaction contemplated hereby.
5.9 Survival. The agreements and covenants contained in Article IV
-------- ----------
and this Article V shall survive the delivery and conversion of the Convertible
---------
Notes pursuant to this Agreement, and the representations and warranties of the
Company and the Purchasers contained in Article II shall survive until a date
----------
that is two years after the Closing Date. Each Purchaser shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
5.10 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.
-26-
5.11 Publicity. The Company, the Purchasers and the Placement
---------
Agent shall consult with each other in issuing any press releases or otherwise
making public statements with respect to the transactions contemplated hereby
and neither party shall issue any such press release or otherwise make any such
public statement without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law, in which case the
disclosing party shall provide the other party with prior notice of such public
statement. Notwithstanding the generality of the foregoing, the parties agree
that the Company will issue a press release at or immediately after the Closing,
the contents of which will be filed with the SEC as a current report of the
Company on Form 8-K, the form of which will be agreed to by the parties at or
before the Closing.
5.12 Severability. In case any one or more of the provisions of
------------
this Agreement shall 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 which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.13 No Strict Construction. The language used in this Agreement will
----------------------
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of construction will be applied against any party.
5.14 Termination. In the event that the Closing shall not have
-----------
occurred with respect to a Purchaser on or before five (5) Business Days from
the date hereof due to the Company's failure to satisfy the conditions set forth
in Article IV above (and such Purchaser's failure to waive such unsatisfied
condition(s)), such Purchaser shall have the option to terminate this Agreement
with respect to the Company at the close of business on such date without
liability of such Purchaser to the Company.
5.15 Remedies. Each Purchaser and each holder of the Securities shall
--------
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights granted by law.
5.16 Payment Set Aside. To the extent that the Company makes a
-----------------
payment or payments to any Purchaser hereunder or pursuant to the Registration
Rights Agreement, the Convertible Notes or the Warrants, or the Purchasers
enforce or exercise their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or
-27-
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, 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
-28-
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
The Company:
BRITESMILE, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------
Name: Xxxx X. Xxxxx
------------------------
Title: Chief Financial Officer
-----------------------
Purchasers:
LCO INVESTMENTS LIMITED
By: /s/ Xxxxxxx X.X. Xxxx
--------------------------
Its: Director
---------------------
/s/ Xxxxxx XxXxxxxx
------------------------------
XXXXXX XxXXXXXX
PEQUOT PRIVATE EQUITY FUND II, L.P.
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT MANAGER
By: /s/ Xxxxx X. X'Xxxxx
--------------------------
Xxxxx X. X'Xxxxx, General Counsel
PEQUOT PARTNERS FUND, L.P.
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT MANAGER
By: /s/ Xxxxx X. X'Xxxxx
--------------------------
Xxxxx X. X'Xxxxx, General Counsel
PEQUOT INTERNATIONAL FUND, INC.
BY: PEQUOT CAPITAL MANAGEMENT, INC.
ITS: INVESTMENT ADVISOR
By: /s/ Xxxxx X. X'Xxxxx
------------------------------------
Xxxxx X. X'Xxxxx, General Counsel
/s/ Xxxx Xxxx
----------------------------------------
XXXX XXXX
/s/ Xxxxxx Xxxxxxx, Xx., D.D.S.
----------------------------------------
XXXXXX XXXXXXX, XX., D.D.S.
CAPEX, L.P.
By RBP, LLC
Its General Partner
By: /s/ Xxxx Xxxxxx
------------------------------------
Xxxx Xxxxxx
Managing Partner
PACIFIC MEZZANINE FUND
By PACIFIC PRIVATE CAPITAL
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx, Managing Partner
