SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): March 15, 2000
FIRST SCIENTIFIC, INC.
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(Exact name of registrant as specified in this Charter)
Delaware 0-24378 33-0611745
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(State or other jurisdiction (Commission File Number) (IRS Employer
incorporation) Identification No.)
1877 West 2800 South, Suite 200, Ogden, Utah 84401
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Registrant's Telephone Number, Including Area Code: (801) 393-5781
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ITEM 2. Acquisition or Disposition of Assets.
On March 15, 2000, First Scientific, Inc. (the "Company")
signed an agreement to purchase eighty percent of the
outstanding capital interests of PureSoft Solutions, LLC, a
New Hampshire limited liability company ("PureSoft'), in
exchange for cash, deferred cash payments and shares of common
stock of the Company pursuant to a Purchase Agreement dated
March 15, 2000 between the Company and David Wilich, Frank
Wilich, Jr., Gene Dubois and PureSoft, which is filed herewith
as Exhibit 2.2. PureSoft is a manufacturer and supplier of
hard-surface disinfectant, bathing and skin care products,
primarily to the professional health care and health club/spa
markets. PureSoft began marketing the Company's antimicrobial
handwash under the Company's PureCleanse(R) product label at
the beginning of 2000.
The Purchase Agreement also provides for the eventual
acquisition of the remaining capital interests in PureSoft.
In connection with said agreement, the Company entered into an
Employment Agreement with David Wilich, President of PureSoft,
which is filed herewith as Exhibit 10.9, and a Stock Option
Agreement with David Wilich, Frank Wilich and Gene Dubois,
which is filed herewith as Exhibit 10.10.
ITEM 7. Financial Statements and Exhibits.
(a) Pro forma financial information.
The pro forma financial information, if required by this Item
7(a), will be filed by amendment.
(b) Exhibits. The following exhibits are incorporated herein
by this reference:
Exhibit No. Description of Exhibit
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2.2* Purchase Agreement dated as of
March 15, 2000 among the Registrant
and David Wilich, Frank Wilich,
Jr., Gene Dubois and PureSoft
Solutions, LLC, a New Hampshire
limited liability company.
10.9* Employment Agreement with
David Wilich
10.10* Stock Option Agreement with
David Wilich, Frank Wilich
and Gene Dubois.
____________________________
* Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
FIRST SCIENTIFIC, INC.
(Registrant)
Date: March 30, 2000 By: /s/ Randall L. Hales
Randall L. Hales,
President and
Chief Executive Officer
EXHIBIT INDEX
Exhibit No. Description of Exhibit
2.2* Purchase Agreement dated as
of March 15, 2000 among the
Registrant and David Wilich,
Frank Wilich, Jr., Gene
Dubois and PureSoft
Solutions, LLC, a New
Hampshire limited liability
company.
10.9* Employment Agreement with
David Wilich
10.10* Stock Option Agreement with
David Wilich, Frank Wilich
and Gene Dubois.
____________________________
* Filed herewith.
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PURCHASE AGREEMENT
Dated as of March 15, 2000
Among
First Scientific, Inc.
(the "Company')
and
David Wilich
Frank Wilich, Jr.
Gene Dubois
(the "Sellers')
and
PureSoft Solutions, LLC
("PureSoft')
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TABLE OF CONTENTS
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1. AUTHORIZATION AND SALE OF SELLERS' PURESOFT LIMITED LIABILITY
COMPANY MEMBERSHIP INTERESTS 1
1A. AUTHORIZATION 1
1B. CLOSING 1
1C SUBSEQUENT SALES OF REMAINING INTERESTS 1
1D TARGET BUDGET PLAN AND WORKING CAPITAL COMMITMENTS 2
2. THE CLOSING 2
3. REPRESENTATIONS AND WARRANTS OF PURESOFT 2
3A. ORGANIZATION AND STANDING 2
3B. OWNERWSHIP 2
3C. SUBSIDIARIES, ETC 3
3D. MEMBERSHIP LIST AND AGREEMENTS 3
3E. TRANSFER OF MEMBERSHIP INTERESTS 3
3F. AUTHORIZATION 3
3G. GOVERNMENTAL CONSENTS 4
3H. LITIGATION 4
3I. FINANCIAL STATEMENTS 4
3J. ABSENCE OF LIABILITIES 4
3K. TAXES 4
3L. TITLE TO PROPERTY AND ASSETS 5
3M. INTELLECTUAL PROPERTY 5
3N. INSURANCE 6
3O. MATERIAL CONTRACTS AND OBLIGATIONS 6
3P. PERMITS; COMPLIANCE 6
3Q. ABSENCE OF CHANGES 7
3R. EMPLOYEES 8
3S. ERISA 8
3T. TRANSACTIONS WITH RELATED PARTIES 9
3U. BOOKS AND RECORDS 9
3V. BUSINESS PLAN 9
3W. DISCLOSURES 9
4. PRESENTATIONS AND WARRANTIES OF SELLERS 9
4A. CONFLICTING AGREEMENTS 9
4B. LITIGATION 10
4C. STOCKHOLDER AGREEMENTS 10
4D. PURESOFT'S REPRESENTATIONS 10
4E. DISCLOSURE 10
4F. CAPITALIZATION 10
4G. AGREEMENTS 10
4H. TRANSACTIONS WITH RELATED PARTIES 11
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5. AUTHORITY 11
6. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY 11
6A. ACCURACY OF REPRESENTATIONS OF WARRANTIES 11
6B. PERFORMANCE 11
6C. OPINION OF COUNSEL 11
6D. RELATED AGREEMENTS 12
6E. CERTIFICATES AND DOCUMENTS 12
6F. SECURITIES LAW FILINGS 12
6G. NO MATERIAL ADVERSE CHANGES 12
6H. TWENTY-FOUR MONTH BUDGET 12
6I. COMPLIANCE CERTIFICATE 12
6J. OTHER MATTERS 13
7. CONDITION TO THE OBLIGATIONS OF THE SELLER 13
8. DEFINITIONS 13
9. MISCELLANEOUS 14
9A. SUCCESSORS AND ASSIGNS 14
9B. CONFIDENTIALITY 14
9C. SURVIVAL OF REPRESENTATIONS AND WARRANTIES 14
9D. EXPENSES 14
9E. NOTICES 15
9F. BROKERS 15
9G. ENTIRE AGREEMENT 15
9H. AMENDMENTS AND WAIVERS 15
9I. COUNTERPARTS 16
9J. HEADINGS 16
9K. SEVERABILITY 16
9L. GOVERNING LAW 16
9M. FURTHRE ASSURANCES 16
9N. INDEMNIFICATION 16
9O. RIGHTS OF THE COMPANY 17
EXHIBITS:
A. Schedule of Subsequent Sales
B. Target Budget Plan
C. Schedule of Exceptions
D. Form of Opinion Taylor & Keane
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PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement') dated as of March
15, 2000 is entered into by and among FIRST SCIENTIFIC, INC.,
a Delaware corporation (the "Company'), David Wilich, Frank
Wilich, Jr. and Gene Dubois (each individually, a "Seller',
collectively, the "Sellers') and PureSoft Solutions, LLC
(together with affiliates, "PureSoft'). Capitalized terms not
defined elsewhere herein shall have the respective meanings
assigned to the part 9 of this Agreement.
In consideration of the mutual promises and covenants
contained in this Agreement, the parties agree as follows:
1. AUTHORIZATION AND SALE OF SELLERS' PURESOFT LIMITED
LIABILITY COMPANY MEMBERSHIP INTERESTS (THE
"INTERESTS').Authorization and Sale of Shares.
1A AUTHORIZATION. PureSoft and the
Sellers have duly authorized the sale, pursuant to the terms
of this Agreement, of all of the Sellers' limited liability
company Interests to the Company.
1B.CLOSING. Subject to the terms and conditions of this
Agreement, at the Closing the Company will, for and in
consideration of Sellers' agreement to sell to the Company
eighty percent (80%) of the Seller's one hundred percent
(100%) ownership of Interests in PureSoft, the Company will
pay or deliver to Sellers: (i) Fifty Thousand Dollars
($50,000) cash; (ii) the Company's promissory note in the
original principal amount of Four Hundred Fifty Thousand
Dollars ($450,000) and bearing interest at the annual rate of
eight and one-half percent (8.5%), payable in four (4) equal
quarterly payments of principal, together with accrued
interest on the outstanding principal balance, due and payable
on or before the 15th day of June, September and December,
2000, and March, 2001, respectively; provided however, that
there shall be a balloon payment of $250,000 principal
reduction due June 15, 2000, (in addition to the first $50,000
quarterly installment on the aforementioned promissory note);
and (iii) $260,000 worth of stock options in the Company
exercisable at 1 cent per share, options shall be fully vested
upon issuance on March 15, 2000.
The Company, PureSoft and the Seller agree that in the
event the Company fails to pay the aforementioned $250,000
balloon payment and the $50,000 principal plus accrued
interest quarterly payment (together with the $300,000
installment of working capital required by paragraph 1D) on or
before June 15, 2000, then the escrow agent shall deliver the
assignment of the 80% of the Interests in PureSoft back to the
Sellers, and the Sellers and PureSoft, respectively, shall be
entitled to keep the funds paid to them hereunder prior to
June 15, 2000, and all parties shall be discharged and
relieved of any further claim by or against the other(s)
arising under this Purchase Agreement and related documents.
1C. SUBSEQUENT SALES OF REMAINING INTERESTS. Subsequent to
the Closing and subject to the conditions specified in part 6
below, the Company will issue to the Sellers, on each of the
dates (each a "Subsequent Sale Date') indicated on Exhibit A
(the "Schedule of Subsequent Sales'), the number of shares of
common stock set forth opposite each Subsequent Sale Date for
the purchase of additional shares of PureSoft (each such
purchase on a Subsequent Sale Date, a "Subsequent Sale').
1D. TARGET BUDGET PLAN AND WORKING CAPITAL COMMITMENTS. The
Company, PureSoft and the Sellers will finalize the Target
Budget Plan attached hereto as Exhibit B, which Target Budget
Plan shall include the Company's working capital contribution,
to PureSoft, to which the Company hereby commits, in the
aggregate amount of Nine Hundred Thousand Dollars ($900,000),
payable in draws of Three Hundred Thousand Dollars ($300,000),
payable each on March 15, June 15 and August 15, 2000.
2. THE CLOSING. The closing of the purchase (the "Closing')
shall take place by escrow at the offices of Mackey Price &
Williams, 170 South Main Street, Suite 900, Salt Lake City,
Utah, no later than March 15, 2000 or at such other place or
such other time as the Company and the Sellers may agree in
writing. At the Closing, the Company shall wire transfer to
the Sellers the cash payment against an assignment to the
Company, delivered into escrow, of the 80% PureSoft Interests.
If at the Closing any of the conditions specified in part 6
shall not have been fulfilled, the Company shall, at its
election, be relieved of all of its obligations under this
Agreement to be performed at such Closing without thereby
waiving any other rights it may have by reason of such failure
or such nonfulfillment.
3. REPRESENTATIONS AND WARRANTIES OF PURESOFT. PureSoft
represents and warrants to the Company that the statements
contained in this part 3 are true and correct, except as set
forth in the Schedule of Exceptions attached as Exhibit C,
which shall be arranged to correspond to the numbered
paragraphs contained in this part 3. A disclosure in any
numbered section of Exhibit C shall qualify only the
representations and warranties in the corresponding numbered
paragraphs of this part 3.
3.A. ORGANIZATION AND STANDING. PureSoft is an limited
liability company duly organized, validly existing and in good
standing under the laws of the State of New Hampshire and has
full organizational power and authority to conduct its
business as presently conducted and as proposed to be
conducted by it and to enter into and perform this Agreement
and to carry out the transactions contemplated by this
Agreement. PureSoft is not doing business in any other
jurisdiction to the extent that it would be required to be
qualified, as a foreign company to do business in such state
or states. PureSoft has furnished to the Company (or the
Company's counsel) true and complete copies of its
organizational and operational documentation, as amended to
date and currently in effect.
3B. OWNERSHIP. All of the outstanding
membership Interests of PureSoft is owned entirely and
exclusively by the Sellers. All of said issued and
outstanding Interests of PureSoft have been duly authorized
and validly issued and are fully paid and nonassessable.
Except (i) as provided in this Agreement, or any Related
Agreement or (ii) as set forth in Exhibit C: (a) no
subscription, option, convertible security or other right
(contingent or otherwise) to purchase or acquire any
membership Interests of PureSoft is authorized or outstanding;
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(b) PureSoft has no obligation (contingent or otherwise) to
issue any subscription, option, convertible security or other
such right or to issue or distribute to Sellers any evidences
of indebtedness or assets of the Company; and (c) PureSoft has
no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its membership Interests or any
interest therein or to pay or make any other distribution in
respect thereof. All of the issued and outstanding Interests
of PureSoft have been offered and sold by PureSoft in
compliance with the registration requirements of applicable
federal and state securities laws or pursuant to valid
exemptions therefrom.
3C. SUBSIDIARIES, ETC. Except as set forth in Exhibit C,
PureSoft has no Subsidiaries and does not own or control,
directly or indirectly, any shares of capital stock of any
other corporation or any interest in any partnership, joint
venture, limited liability company or other business enterprise.
3D. MEMBERSHIP LIST AND AGREEMENTS. Stockholder List and
Agreements. Exhibit C sets forth a true and complete list of
the members and option holders of PureSoft, showing the number
of Interests or other securities of the Company (or rights to
acquire such securities) held by each security holder as of
the date of this Agreement and the date of the Closing and the
consideration paid to PureSoft, if any, therefor. Except (i)
as provided in this Agreement, or any Related Agreement or
(ii) as set forth in Exhibit C, there are no agreements,
written or oral, between PureSoft and any holder of its
membership interests or, to the Company's knowledge, among any
holders of its membership Interests relating to the
acquisition (including without limitation rights of first
refusal or preemptive rights), disposition, registration under
the Securities Act or voting of the membership/capital
Interests of the Company.
3E. TRANSFER OF MEMBERSHIP INTERESTS. At or prior to the
Closing, the transfer of Sellers' membership Interests have
been, or will be at or prior to the Closing, duly authorized
by all necessary action on the part of PureSoft and its
manager(s). The membership Interests, when so sold and
delivered against exchange therefor in accordance with the
provisions of this Agreement, will be duly and validly issued,
fully paid and non-assessable, and will be free of
restrictions on transfer other than restrictions on transfer
under this Agreement, the Related Agreements and under
applicable state and federal securities laws. Based in part
on the representations made by the Sellers, the exchange of
the membership Interests will be in compliance with the
registration requirements of applicable federal and state
securities laws or pursuant to valid exemptions therefrom, and
neither PureSoft nor any authorized agent acting on its behalf
nor any Seller will take any action hereafter that would cause
the loss of such exemptions.
3F. AUTHORIZATION. The execution, delivery and performance by
PureSoft of this Agreement and the Related Agreements, and the
consummation by PureSoft of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary
membership action. This Agreement and each of the Related
Agreements have been duly executed and delivered by PureSoft
and constitute valid and binding obligations of PureSoft
enforceable in accordance with their respective terms, except
as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights
generally. The execution, delivery and performance of the
transactions contemplated by this Agreement and the Related
Agreements and compliance with their provisions by PureSoft
will not violate any provision of law and will not conflict
with or result in any breach of any of the terms, conditions
or provisions of, or constitute a default under, or require a
consent or waiver under any indenture, lease, agreement or
other instrument to which the Company is a party or by which
it or any of its properties is bound, or any decree, judgment,
order, statute, rule or regulation applicable to PureSoft.
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3G. GOVERNMENTSL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any governmental authority is
required on the part of PureSoft in connection with the
execution and delivery of this Agreement or any Related
Agreements, transactions to be consummated at the Closing, as
contemplated by this Agreement, except such filings as shall
have been made prior to and shall be effective on and as of
the Closing.
3H. LITIGATION. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending, or, to
PureSoft's knowledge, any basis therefor or threat thereof,
against or by PureSoft, which questions the validity of this
Agreement or any Related Agreement or the right of PureSoft to
enter into or perform this Agreement or any Related Agreement,
or which could reasonably be expected to have, either
individually or in the aggregate, any material adverse effect
on the business, prospects, assets or condition, financial or
otherwise, or any material change in the current equity
ownership of PureSoft, nor is there any litigation pending,
or, to PureSoft's knowledge, any basis therefor or threat
thereof, against PureSoft by reason of the proposed activities
of PureSoft or negotiations by PureSoft with possible
investors in PureSoft or involving the prior employment of any
of PureSoft's employees, their use in connection with
PureSoft's business of any intellectual property of any of
their former employers or their material obligations under any
agreements with their prior employers.
3I. FINANCIAL STATEMENTS. PureSoft has furnished to the
Company a complete and correct copy of the following financial
statements (collectively, the "Financial Statements'):
PureSoft's unaudited balance sheet (the "Balance Sheet') at
December 31, 1999 (the "Balance Sheet Date') and statements of
operations, changes in equity and cash flows for the period
from inception of PureSoft through the Balance Sheet Date.
The Financial Statements are in accordance with the books and
records of PureSoft and present fairly the financial condition
and results of operations of PureSoft, as at the date and for
the period indicated, and have been prepared in accordance
with generally accepted accounting principles.
3J. ABSENCE OF LIABILITIES. Except as disclosed in Exhibit C,
at the Balance Sheet Date, PureSoft did not, and does not,
have any material liabilities, whether absolute or contingent
that were not fully reflected or provided for on the Balance
Sheet, and, since the Balance Sheet Date, PureSoft has not
incurred or otherwise become subject to any such liabilities
or obligations except liabilities incurred in the ordinary
course of business that could not reasonably be expected to
have a material adverse effect on the business, prospects,
assets or condition, financial or otherwise, of PureSoft.
3K. TAXES. The amount shown on the Financial Statements as
provision for taxes is sufficient in all material respects to
pay all accrued and unpaid federal, state, local and foreign
taxes for the period then ended and all prior periods.
PureSoft has filed all federal, state, county, local and
foreign tax returns which are required to be filed by it on or
prior to the date of the Closing, such returns are true and
correct and all taxes shown thereon to be due have been timely
paid with exceptions not material to PureSoft. Federal income
tax returns of PureSoft have not been audited by the Internal
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Revenue Service, and no controversy with respect to taxes of
any type is pending or, to PureSoft's knowledge, threatened.
PureSoft has withheld or collected from each payment made to
each of its employees the amount of all taxes (including,
without limitation, federal income taxes, Federal Insurance
Contribution Act taxes, Federal Unemployment Tax Act taxes and
Medicare taxes) required to be withheld or collected
therefrom, and has timely paid the same to the proper tax
receiving officers or authorized depositories.
3L. TITLE TO PROPERTY AND ASSETS. Title to Property and Assets
Except (i) as reflected in the Financial Statements, (ii) for
Liens for current taxes not yet due and payable, (iii) for
Liens imposed by law and incurred in the ordinary course of
business for obligations not past due, (iv) for Liens in
respect of pledges or deposits under workers' compensation
laws or similar legislation, and (v) for minor defects in
title, none of which, individually or in the aggregate,
materially interferes with the use of such property, PureSoft
has good title to or a valid leasehold interest in all of its
properties and assets, which comprise all of the properties
and assets reflected in the Balance Sheet and all of the
assets and properties used in the conduct of its business as
currently conducted, and none of such properties or assets is
subject to any Lien of any nature whatsoever other than those
the material terms of which are described in Exhibit C.
3M. INTELLECTUAL PROPERTY. Set forth in Exhibit C is a true
and complete list of all patents, patent applications,
trademarks, service marks, trademark and service mark
applications, trade names, copyright registrations and
licenses currently owned and/or used by PureSoft or necessary
for the conduct of PureSoft's business as currently conducted,
as well as any agreement under which PureSoft has access to
any intellectual property or confidential information used by
PureSoft in its business (the "Intellectual Property Rights').
PureSoft owns, or has the right to use (without additional
license fees or royalties) under the agreements or upon the
terms described in Exhibit C, all of the Intellectual Property
Rights and has taken all actions reasonable in light of its
financial position to protect the Intellectual Property
Rights. To PureSoft's knowledge, the business conducted or
proposed to be conducted by PureSoft as set forth in the
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Target Budget Plan does not and will not cause PureSoft to
infringe or violate any of the patents, trademarks, service
marks, trade names, copyrights, mask-works, licenses, trade
secrets, processes, data, know-how or other intellectual
property rights of any other Person, and that PureSoft has
received no notices of infringement with respect to the
Intellectual Property Rights or the business of PureSoft.
Except as set forth in Exhibit C, the Target Budget Plan does
not and will not require PureSoft to obtain any license or
other agreement to use any patents, trademarks, service marks,
trade names, copyrights, mask-works, licenses, trade secrets,
processes, data, know-how or other intellectual property
rights of others, except for licenses or agreements that can
be obtained in the ordinary course of business without
unreasonable effort, delay, cost or expense. Except as set
forth on Exhibit C, there are no outstanding options, licenses
or agreements of any kind relating to the Intellectual
Property Rights, nor is PureSoft bound by or a party to any
options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names,
copyrights, mask-works, trade secrets, processes, data or
know-how of any other Person. Except as set forth in Exhibit
C, to PureSoft's knowledge, the Persons who are Sellers,
agents, consultants or managers of PureSoft prior to the
Closing do not own any rights in patents, trademarks, service
marks, trade names, copyrights, mask-works, trade secrets,
processes, data or know-how directly or indirectly competitive
with those owned or to be used by PureSoft or derived from or
in connection with the conduct of PureSoft's business. Except
as set forth on Exhibit C, PureSoft warrants that it is not or
will not be, necessary to use any inventions or works of
authorship of its employees or agents of any kind (or Persons
it currently intends to hire) made outside of their employment
by, or other contractual relationship with, PureSoft. Except
as set forth on Exhibit C, PureSoft has obtained from all of
the Sellers and agents of PureSoft assignments to all
inventions developed or conceived during their association
with PureSoft and relating to its business. PureSoft has not
granted rights to manufacture, produce, assemble, license,
market or sell its products to any other Person and is not
bound by any agreement that affects PureSoft's exclusive
rights to develop, manufacture, assemble, distribute, market
or sell its products. Except as set forth on Exhibit C,
PureSoft has never released its source code to any third party.
3N. INSURANCE. PureSoft maintains valid policies of
insurance with respect to its properties and business of the
kinds and in the amounts comparable to insurance customarily
obtained by entities engaged in the same or similar business
and similarly situated, including, without limitation, workers
compensation insurance and insurance against casualty loss,
public liability, libel, slander, defamation, advertising
injury and other risks. Exhibit C sets forth a schedule and
brief description of the policies of insurance currently
maintained by PureSoft. With respect to each such insurance
policy: (i) the policy is in full force and effect; (ii)
PureSoft is not in breach or default (including with respect
to the payment of premiums or the giving of notices), and no
event has occurred which, with notice or the lapse of time,
would constitute such a breach or default or permit
termination, cancellation, modification or denial of coverage
under the policy; and (iii) no party to the policy has
repudiated any of its provisions.
3O. MATERIAL CONTRACTS AND OBLIGATIONS. Exhibit C sets forth
a list of all material agreements or commitments of any nature
to which PureSoft is a party or by which it is bound,
including without limitation (i) each agreement which requires
future expenditures by PureSoft in excess of $25,000 or which
might result in payments to PureSoft in excess of $25,000,
(ii) all management, consulting and similar agreements, (iii)
all employment and consulting agreements, employee benefit,
bonus, pension, profit-sharing, option plans and arrangements,
and distributor and sales representative agreements, (iv) each
agreement with any agent of PureSoft, or any Affiliate of such
Persons (as such terms are defined in the rules and
regulations promulgated under the Securities Act), including
without limitation any agreement or other arrangement
providing for the furnishing of services by, rental of real or
personal property from, or otherwise requiring payments to,
any such Person or entity, and (v) any agreement relating to
the Intellectual Property Rights. PureSoft has delivered to
the Company (or the counsel of the Company) copies of each of
the foregoing agreements. All of such agreements and
contracts are valid, binding and in full force and effect.
3P. PERMITS; COMPLIANCE. PureSoft has complied in all material
respects with all laws, regulations and orders applicable to
its present and proposed business (as set forth in the Target
Budget) and has all material permits and licenses required
thereby. There is no term or provision of any mortgage,
indenture, contract, agreement or instrument to which PureSoft
is a party or by which it is bound or of any provision of any
existing state or federal judgment, decree, order, statute,
rule or regulation applicable to or binding upon PureSoft,
which materially adversely affects or, so far as PureSoft may
now reasonably foresee, in the future is reasonably likely to
materially adversely affect, the business, prospects, assets
or condition, financial or otherwise, of PureSoft. None of
the agents nor any other employee of PureSoft is in violation
of any term of any contract or covenant (either with PureSoft
or with another entity) relating to employment, patents,
proprietary information disclosure, noncompetition or
non-solicitation.
3Q. ABSENCE OF CHANGES. Since the Balance Sheet Date, there
has been no material adverse change in the condition,
financial or otherwise, net worth or results of operations of
PureSoft, other than changes occurring in the ordinary course
of business, which changes have not, individually or in the
aggregate, had a materially adverse effect on the business,
prospects, properties or condition, financial or otherwise, of
PureSoft. Without limiting the foregoing and except as set
forth in Exhibit C, since the Balance Sheet Date:
(i) PureSoft has not sold, leased, transferred or assigned any
of its material assets, tangible or intangible, other than in
the ordinary course of business;
(ii) PureSoft has not entered into any agreement, contract,
commitment, lease or license (or series of related agreements,
contracts, commitments, leases and licenses) either involving
more than $25,000 or outside the ordinary course of business;
(iii) no party (including PureSoft) has accelerated,
terminated, modified or canceled any agreement, contract,
lease or license (or series of related agreements, contracts,
leases and licenses) involving more than $25,000 to which
(iv) PureSoft is a party or by which PureSoft or its assets
are bound;
(iv) PureSoft has not imposed or permitted any other Person to
impose any Lien upon any of its assets, tangible or
intangible, except for (a) Liens imposed by law and incurred
in the ordinary course of business for obligations not past
due, and (b) Liens in respect of pledges or deposits under
workers compensation laws or similar legislation;
(v) PureSoft has not made any capital expenditure (or series
of related capital expenditures) either involving more than
$25,000 or outside the ordinary course of business;
PureSoft has not made any capital investment in, any loan to
or any acquisition of the securities or assets of any other
Person (or series of related capital investments, loans and
acquisitions) either involving more than $25,000 or outside
the ordinary course of business;
(vii) PureSoft has not issued any note, bond or other debt
security or created, incurred, assumed or guaranteed any
indebtedness for borrowed money or capitalized lease
obligation either involving more than $25,000 alone or $50,000
in the aggregate;
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(viii) PureSoft has not delayed or postponed the payment of
accounts payable or any other liabilities outside the ordinary
course of business;
(ix) PureSoft has not canceled, compromised, waived or
released any right or claim (or series of related rights and
claims) either involving more than $25,000 or outside the
ordinary course of business;
(x) PureSoft has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property Rights;
(xi) PureSoft has not declared, set aside or paid any
distribution with respect to its members (whether in cash or
in kind) or redeemed, purchased or otherwise acquired any of
its interests;
(xii) PureSoft has not experienced any material damage,
destruction or loss (whether or not covered by insurance) to
its property;
(xiii) PureSoft has not made any material loan to, or entered
into any other transaction with, any of its members, agents
and employees;
(xiv) PureSoft has not entered into any employment contract or
collective bargaining agreement, written or oral, or
materially modified the terms of any such contract or agreement;
(xv) PureSoft has not adopted, amended, modified or terminated
any bonus, profit-sharing, incentive, severance or other plan,
contract or commitment for the benefit of any of its members,
agents or employees (or taken any such action with respect to
any other benefit plan);
(xvi) PureSofft has not made any material change in
employment terms for any of its members, agents or employees
outside the ordinary course of business;
(xvii) PureSoft has not made or pledged to make any material
charitable or other capital contribution;
there has not been any other material occurrence, event,
incident, action, failure to act or transaction outside the
ordinary course of business involving PureSoft or its assets
or business; and
(xix) PureSoft has not committed to do any of the foregoing.
3R EMPLOYEES. None of the employees of PureSoft is represented
by any labor union, and there is no labor strike or other
labor trouble pending with respect to PureSoft (including,
without limitation, any organizational drive) or, to
PureSoft's knowledge, threatened. Exhibit C sets forth a list
of the persons employed by PureSoft. Exhibit C also sets
forth the names of each former employee of PureSoft whose
employment has been terminated during the past two years.
8
<PAGE>
3S. ERISA. PureSoft does not have or otherwise contribute to or
participate in any employee benefit plan subject to the
Employee Retirement Income Security Act of 1974 (other than a
medical benefit plan with respect to which PureSoft has made
all required contributions and has complied with all
applicable laws).
3T. TRANSACTIONS WITH RELATED PARTIES. Except as set forth in
Exhibit C, no employee, member or agent of PureSoft or member
of his or her immediate family is indebted to PureSoft, nor
is PureSoft indebted (or committed to make loans or extend or
guarantee credit) to any of them, other than (i) for payment
of salary for services rendered, (ii) reimbursement for
reasonable expenses incurred on behalf of PureSoft, and (iii)
for other employee benefits made generally available to all
employees. Except as set forth in Exhibit C, to PureSoft's
knowledge, none of such persons has any direct or indirect
ownership interest in any Person with which PureSoft is
affiliated or with which PureSoft has a business relationship,
or any Person that competes with PureSoft, except that
employees, members or agents of PureSoft and members of their
immediate families may own less than 5% of the outstanding
stock in publicly traded companies that may compete with
PureSoft. Except as set forth in Exhibit C, to PureSoft's
knowledge, no member, agent or employee or any member of their
immediate families is, directly or indirectly, interested in
any material contract with PureSoft Company (other than such
contracts as relate to any such person's ownership of capital
stock or other securities of PureSoft).
3U. BOOKS AND RECORDS. The books of the Company contain
materially complete and accurate records of all meetings and
other actions of its members and its managers and committees
thereof. The ledger of PureSoft is complete and reflects all
issuances, transfers, repurchases and cancellations of
interests of PureSoft.
3v. BUSINESS PLAN. PureSoft has furnished to
Sellers a complete and correct copy of each business plan or
private placement memo or similar materials furnished by
PureSoft to investors or potential investors in PureSoft
during the past five years.
3W. DISCLOSURES. Neither this Agreement, any Related
Agreement nor any exhibit hereto or thereto, nor any report,
certificate or instrument furnished to the Company in
connection with the transactions contemplated in this
Agreement or the Related Agreements, when read together,
contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the
statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
PureSoft knows of no information or fact that has or would
have a material adverse effect on the business, prospects,
assets or condition, financial or otherwise, of PureSoft which
has not been disclosed to the Company in this Agreement, the
Related Agreements, the exhibits hereto or thereto or other
written materials furnished to the Company.
4. REPRESENTATIONS AND WARRANTIES OF SELLERS. The Sellers
severally and jointly, represent and warrant to the Company as
follows:
4A. CONFLICTING AGREEMENTS. Such Sellers are not, as a result
of the nature of the business conducted or proposed to be
conducted by the Company or PureSoft or for any other reason,
in violation of (i) any fiduciary or confidential
relationship, (ii) any term of any contract or covenant
(either with the PureSoft or with another entity) relating to
employment, patents, proprietary information disclosure,
non-competition or non-solicitation or (iii) any other
9
<PAGE>
contract or agreement, or any judgment, decree or order of any
court or administrative agency, in each case relating to or
affecting the right of such Seller to be employed by the
Company or PureSoft. No such relationship, term, judgment,
decree or order conflicts with such Sellers' obligations to
use his best efforts to promote the interests of the Company
and PureSoft nor does the execution, delivery and performance
of this Agreement or any Related Agreement by such Sellers or
the activities of such Sellers as an employee, officer or
director of the Company or PureSoft, conflict with any such
relationship, term, judgment, decree or order.
4B. LITIGATION. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending or, to the
knowledge of such Sellers, threatened against or by such
Sellers, and, to the knowledge of such Sellers, there is no
basis for any such action, suit, proceeding or governmental
inquiry or investigation which could reasonably be expected to
have a material adverse effect on the Company or PureSoft or
to result in any change in ownership of the Company or
PureSoft. There is no litigation pending or any basis
therefor or threat thereof, against PureSoft by reason of the
proposed activities of PureSoft or negotiations by PureSoft
with possible investors in PureSoft or involving the prior
employment of any of PureSoft's employees, their use in
connection with PureSoft's business of any intellectual
property of any of their former employers or their obligations
under any agreements with their prior employers.
4C. STOCKHOLDER AGREEMENTS. Except as contemplated by this
Agreement, such Sellers are not a party to and have no
knowledge of any agreements, written or oral, relating to the
acquisition (including, without limitation, rights of first
refusal or preemptive rights), sale, transfer or other
disposition, registration under the Securities Act or voting
of the membership Interests of PureSoft.
4D. PURESOFT'S REPRESENTATIONS. Intellectual Property.To the
knowledge of such Sellers, each of the representations and
warranties of PureSoft contained herein is true and correct.
4E. DISCLOSURE. Neither this Agreement, any Related Agreement
nor any exhibit hereto or thereto, nor any report, certificate
or instrument furnished to the Company in connection with the
transactions contemplated by this Agreement or the Related
Agreements, when read together, contains any untrue statement
of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein,
in light of the circumstances under which they were made, not
misleading. Such Sellers knows of no information or fact that
has or would have a material adverse effect on the business,
prospects, assets or condition, financial or otherwise, of
PureSoft which has not been disclosed to the Company in this
Agreement, the Related Agreements, the exhibits hereto or
thereto or other written materials furnished to the Purchaser.
4F. CAPITALIZATION. All of the issued and outstanding
membership Interests of PureSoft have been offered and sold by
PureSoft in compliance with the registration requirements of
applicable federal and state securities laws or pursuant to
valid exemptions therefrom.
4G. AGREEMENTS. There are no agreements, written or oral,
between PureSoft and any person relating to the acquisition
(including, without limitation, rights of first refusal or
preemptive rights), disposition, registration under the
Securities Act or voting of the capital stock of PureSoft.
10
<PAGE>
4H. TRANSACTIONS WITH RELATED PARTIES. No Seller, employee,
officer, manager or agent of PureSoft or member of its
immediate family is indebted to PureSoft, nor is PureSoft
indebted (or committed to make loans or extend or guarantee
credit) to any of them, other than (i) for payment of salary
for services rendered, (ii) reimbursement for reasonable
expenses incurred on behalf of the Company, and (iii) for
other employee benefits made generally available to all
employees. To such Sellers' knowledge, none of such persons
has any direct or indirect ownership interest in any Person
with which the Company or PureSoft is affiliated or with which
the Company or PureSoft has a business relationship, or any
Person that competes with the Company or PureSoft, except that
employees, stockholders, officers or directors of the Company
and members of their immediate families may own less than 5%
of the outstanding stock in publicly traded companies that may
compete with the Company. To such knowledge, no officer,
director or stockholder or any member of their immediate
families is, directly or indirectly, interested in any
material contract with the Company (other than such contracts
as relate to any such person's ownership of capital stock or
other securities of the Company).
5. AUTHORITY. Sellers and PureSoft have full power and
authority to enter into and to perform this Agreement in
accordance with its terms, and this Agreement, when executed
and delivered, will constitute a valid and legally binding
obligation of Sellers and PureSoft, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of
creditors' rights generally.
6. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligation
of the Company to purchase the Sellers' membership Interests
at the Closing and on each Subsequent Sale Date, as the case
may be, is subject to the fulfillment or the waiver by the
Company of each of the following conditions on or before the
Closing or on each Subsequent Sale Date, as applicable:
6A. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in parts 3 and 4
shall be true in all material respects at and as of the
Closing and each Subsequent Sale Date with the same effect as
though such representations and warranties had been made on
and as of the date of the Closing and each Subsequent Sale Date.
6B. PERFORMANCE. PureSoft and each of the Sellers shall
have performed and complied in all material respects with all
agreements and conditions contained in this Agreement required
to be performed or complied with by PureSoft or such Seller
prior to or at the Closing and each Subsequent Sale Date.
With respect to each Subsequent Sale Date, PureSoft and Seller
shall have performed and complied in all material respects
with all agreements and conditions contained in Exhibit A as
of each Subsequent Sale Date.
6C. OPINION OF COUNSEL. The Company shall have
received an opinion from counsel for the Sellers and PureSoft,
dated the date of the Closing, addressed to the Company, and
satisfactory in form and substance to the Company and its
counsel, substantially in the form attached as Exhibit D.
11
<PAGE>
6D. RELATED AGREEMENTS
(i) Related Agreement attached hereto shall have been executed
and delivered by the Company, the Sellers, PureSoft and the
other parties thereto at or prior to the Closing, and the
Stockholders Agreement shall be in full force and effect,
without amendment or modification.
(ii) The Company or PureSoft shall have entered into
employment agreements with each of the Sellers and such other
option, proprietary information and confidentiality agreements
with each key employee of the Company or PureSoft, in a form
reasonably acceptable to the Company.
6E. CERTIFICATES AND DOCUMENTS. the Sellers shall have delivered
to the Company or counsel to The Company:
(i) certificates, as of the most recent practicable dates, as
to the corporate existence and good standing of the Company
issued by the Department of Commerce, Division of Corporations;
(ii) the Related Agreements and the transactions contemplated
herein and therein;
(iii) such other documents relating to the transactions
contemplated in this Agreement and the Related Agreements as
Purchaser may reasonably request; and
(iv) on each Subsequent Sale Date, the Sellers shall deliver
to The Company a certificate confirming the continued accuracy
of the certificates and documents set forth in this part 6E
and provided by the Sellers to the Company at Closing.
6F. SECURITIES LAW FILINGS. The Sellers and PureSoft
shall have timely obtained such approvals, waivers and
consents as may be required under the Securities Act or under
applicable state securities laws.
6G. NO MATERIAL ADVERSE CHANGES. There shall not have
occurred any material adverse change in the business, assets,
financial condition, results of operations or prospects of
PureSoft.
6H. TWENTY-FOUR MONTH BUDGET. Sellers and the Company shall
have agreed upon a budget attached hereto as Exhibit B (the
"Target Budget Plan') for PureSoft for the 24 month period
following the Closing.
6I. COMPLIANCE CERTIFICATE. PureSoft and the Sellers shall
have delivered to the Company a certificate, dated the date of
the Closing and each Subsequent Sale Date, as the case may be,
certifying to the fulfillment of the conditions specified herein.
12
<PAGE>
6J. OTHER MATTERS. All proceedings in connection with the
transactions contemplated in this Agreement and the Related
Agreements and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and
form to the Company and the Company shall have received all
such counterpart originals or certified or other copies of
such documents as it may reasonably request.
7. CONDITION TO THE OBLIGATIONS OF THE SELLERS. The
obligations of the Sellers to sell the PureSoft interests to
the Company at the Closing and on each Subsequent Sale Date
are subject to fulfillment or the waiver by the Sellers of the
condition that the Company shall have tendered at the Closing
consideration in the amount of $50,000 and the note in the
original principal amount of $450,000 for the purchase of the
80% interest and the Company shall have tendered upon each
Subsequent Sale Date the applicable requirements set forth in
Exhibit A.
8. DEFINITIONS. For the purposes of this Agreement, the
following terms shall have the meanings set forth below:
"AFFILIATE" means with respect to any Person, a Person that
directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with,
such Person, and, in the case of an individual, includes any
relative or spouse of such Person, or any relative of such
spouse, who has the same home as such Person. The term
"control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"AGREEMENT" has the meaning set forth in the preamble.
"BALANCE SHEET" and "Balance Sheet Date " have the meanings
set forth in paragraph 3I.
"CLOSING" has the meaning set forth in paragraph 2.
"COMPANY" has the meaning set forth in the preamble.
"FINANCIAL STATEMENTS " has the meaning set forth in paragraph 3I..
"INFORMATION TECHNOLOGY" has the meaning set forth in
paragraph 3W.
"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in
paragraph 3M.
"LIEN" means any lien, security interest, pledge, mortgage,
deed of trust, charge or encumbrance in real, personal or
mixed property (tangible or intangible, and wherever located).
"LOSSES" has the meaning set forth in paragraph 9N.
"PERSON" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint
venture, a limited liability company, an unincorporated
organization or a governmental entity or any department,
agency or political subdivision thereof.
13
<PAGE>
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"SUBSEQUENT SALE DATE" has the meaning set forth in paragraph
1C.
"SUBSIDIARY" means any corporation more than 50% of the
outstanding voting securities of which are owned by PureSoft
or any Subsidiary, directly or indirectly, or a partnership or
limited liability company in which PureSoft or any Subsidiary
is a general partner or manager or holds interests entitling
it to receive more than 50% of the profits or losses of the
partnership or limited liability company.
"TARGET BUDGET PLAN" has the meaning set forth in paragraph 6I.
9. MISCELLANEOUS.
9A. SUCCESSORS AND ASSIGNS. The rights and obligations of
the Company under this Agreement may be assigned to any Person
or entity the Company. deemed a "Purchaser" for purposes of
this Agreement.
9B. CONFIDENTIALITY. Except as required by law, Sellers
agree that they will keep confidential and will not disclose
or divulge any confidential, proprietary or secret information
which Sellers may obtain from the Company, unless such
information is known, or until such information becomes known,
to the public.
9C. SURVIVAL OF REPRESENTATIONS AND WARRANTIES . All
agreements, representations and warranties contained herein
shall survive the execution and delivery of this Agreement and
the closing of the transactions contemplated herein,
regardless of any investigation by the Company or on behalf of
the Company.
9D. EXPENSES. Sellers agree to pay and hold the Company
and holders of its Shares harmless from liability for the
payment of:
(i) the fees and expenses of the Sellers, including the fees
and expenses of counsel to the Sellers, arising in connection
with the negotiation and execution of this Agreement and
consummation of the transactions contemplated herein;
(ii) the reasonable fees and expenses incurred in connection
with any requested waiver of the right of the Company or the
consent of the Company to contemplated acts of the Sellers not
otherwise permissible by the terms of this Agreement;
(iii) the reasonable fees and expenses incurred by the Company
in respect of the enforcement of the rights granted under this
Agreement if they are successful;
(iv) all reasonable costs, fees and expenses incurred by the
Sellers in its performance of and compliance with this
Agreement, it being understood and agreed that such costs,
fees and expenses shall be borne solely by the Sellers; and
14
<PAGE>
(v) reasonable fees and expenses incurred by the Company in
any filing with any governmental with respect to its
investment in the Company or in any other filing with any
governmental agency with respect to the Company which mentions
such Person.
9E. NOTICES. All notices, requests, consents and other
communications under this Agreement shall be in writing and
shall be delivered personally or by facsimile transmission or
by overnight delivery service or by first class certified or
registered mail, return receipt requested, postage prepaid:
If to the Company, at First Scientific, Inc., Attn: Mr.
Randall L. Hales, President and Chief Executive Officer, 1877
West 2800 South, Suite 200, Ogden, Utah 84401, or at such
other address or addresses as may have been furnished in
writing by the Company with a copy (which shall not constitute
notice) to Mackey Price & Williams, 170 South Main Street,
Suite 900, Salt Lake City, Utah 84101-1655, Attention: Dwight
B. Williams, Esq. (fax: (801)575-5006).
If to the Sellers at P.O. Box 261, New Castle, New Hampshire
03854, Attn: Mr. David M. Wilich, President, or at such other
address or addresses as may have been furnished to the Company
in writing by Sellers with a copy (which shall not constitute
notice) to Taylor & Keane, P.L.L.C., 1000 Market Street, Suite
202, Portsmouth, New Hampshire 03801, Attn: Alvin E. Taylor,
Esq. (fax: (603) 431-4643.
Notices provided in accordance with this paragraph 9E shall be
deemed delivered upon personal delivery or three business days
after deposit in the mail.
9F. BROKERS. The Company, the Sellers and PureSoft each
represent and warrant to the other parties hereto that he or
it has not retained or engaged any finder or broker in
connection with the transactions contemplated in this
Agreement. The Company, the Sellers and PureSoft will
indemnify and save the other parties harmless from and against
any and all claims, liabilities or obligations with respect to
brokerage or finders, fees or commissions, or consulting fees
in connection with the transactions contemplated in this
Agreement asserted by any Person on the basis of any statement
or representation alleged to have been made by such
indemnifying party.
9G. ENTIRE AGREEMENT. THis Agreement and the exhibits hereto
embody the entire agreement and understanding between the
parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings relating to
such subject matter, including any letters of intent or
amendments thereof between the parties.
9H. AMENDMENTS AND WAIVERS. Except as otherwise expressly
set forth in this Agreement, any term of this Agreement may be
amended and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and
either retroactively or prospectively), with the written
consent of the Company, and, prior to Closing, the Sellers.
No waivers of or exceptions to any term, condition or
provision of this Agreement, in any one or more instances,
shall be deemed to be, or construed as, a further or
continuing waiver of any such term, condition or provision.
15
<PAGE>
9I.COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original,
but all of which shall be one and the same document.
9J. HEADINGS. The headings of this Agreement are for
convenience only and do not constitute a part of this Agreement.
9K. SERERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
9L. GOVERNING LAW. THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF UTAH WITHOUT GIVING EFFECT TO
ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF UTAH, OR ANY OTHER JURISDICTION) THAT
WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF UTAH.
9M. FURTHER ASSURANCES. Each party to this Agreement hereby
covenants and agrees, without the necessity of any further
consideration, to execute and deliver any and all such further
documents and take any and all such other actions as may be
necessary or appropriate to carry out the intent and purposes
of this Agreement and to consummate the transactions
contemplated herein.
9N. INDEMNIFICATION. The Sellers, without limitation as to
time, will indemnify the Company and its officers, directors,
members, agents and representatives against, and hold the
Company and its officers, directors, members, agents and
representatives harmless from, all losses, claims, damages,
liabilities, costs (including the costs of preparation and
attorneys' fees and expenses) (collectively, the "Losses")
incurred by such Persons (i) as a result of the breach or
inaccuracy of any representation, warranty, covenant or
agreement in this Agreement, any Related Agreement (or any
other document or instrument executed pursuant hereto or
thereto) by the Sellers or PureSoft, and (ii) pursuant to any
investigation, claim, suit or proceeding against the Sellers,
PureSoft or any of their agents and representatives arising
out of or in connection with this Agreement, any Related
Agreement (or any other document or instrument executed
pursuant hereto or thereto), which investigation, claim, suit
or proceeding requires the participation of, or is commenced
or filed against, the Company and any of its agents because of
this Agreement and the transactions contemplated herein and
therein. Sellers agree to reimburse the Company and its
officers, directors, members, agents and representatives
promptly for all such Losses as they are incurred by such
Persons. Sellers agree to reimburse the Company for any
payments made by the Company pursuant to this paragraph 9N for
Losses which are finally determined in such proceeding to
primarily and directly result from the gross negligence or
willful misconduct of Sellers. The obligations of Sellers to
the Company and its officers, directors, members, agents and
representatives under this paragraph 9N will be separate
obligations and will be in addition to any rights such Persons
may have at common law or otherwise, including pursuant to
indemnification agreements with the Company or pursuant to the
Company's Certificate of Incorporation or Bylaws. The
obligations of the Sellers under this paragraph 9N will
survive the termination of this Agreement or any Related
16
<PAGE>
Agreement. THE COMPANY AND THE SELLERS INTEND THAT THE
COMPANY, ITS AGENTS AND REPRESENTATIVES BE INDEMNIFIED FROM
LIABILITY FOR THEIR OWN NEGLIGENCE PURSUANT TO THIS PARAGRAPH.
9O. RIGHTS OF THE COMPANY. The Company shall have the
absolute right to exercise or refrain from exercising any
right or rights that it may have by reason of this Agreement,
the Related Agreements, or at law or in equity, including
without limitation the right to consent to the waiver of any
obligation of Sellers and to enter into an agreement with
Sellers for the purpose of modifying this Agreement, and the
Company shall not incur any liability to any Seller with
respect to exercising or refraining from exercising any such
rights or rights.
17
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by
the parties hereto as of the date first written above.
COMPANY:
FIRST SCIENTIFIC, INC.
By: /s/ Randall L. Hales
------------------------
Name Title: President
SELLERS:
By: /s/ David Wilich
------------------------
David Wilich
By: /s/ Frank Wilich, Jr.
-------------------------
Frank Wilich, Jr.
By: /s/ Gene Dubois
-------------------------
Gene Dubois
PURESOFT SOLUTIONS, LLC
By: /s/ David Wilich
--------------------------
Name: David Wilich
Title: President
18
<PAGE>
EXHIBIT A
SCHEDULE OF SUBSEQUENT SALES
Subsequent Shares of Purchase Cumulative
Sale Date Common Stock(1) Percentage Total
-------------- --------------- ---------- ----------
No Later Than:
April 1, 2001 46,297 7% 87%
April 1, 2002 504,045 13% 100%
Year 2000 2001
------------- ---------- ----------
Net Income(2) $1,190,504 $9,693,218
The above referenced number of shares of the Company's Common
Stock in proportion to said milestones are protected by the
standard non-dilution provisions specified hereinafter in this
Exhibit A, as Adjustment of Number of Shares, which is
attached hereto and incorporated herein by reference. It is
further understood that the respective markets to be served by
the limited liability company and the Company may be
coordinated in the future, and the Company shall make the
final determination of any equitable adjustment to the
foregoing performance milestones that it considers necessary
to preserve the Sellers' sales price incentives outlined above.
See attached: Adjustment of Number of Shares.
-------------------------------
(1) The issuance of shares is conditoned upon the event that the
respective net contributions from the operations of the limited liability
company tothe Company's pre-tax net operating profits meet the following
performance milestones (the respective numbers of the Company's shares which
Sellers shall ultimately receive for a givien year in exchange for their
remaining Interests shall vary in proportion to any over or under
achievements of these respective milestones as shown in the attched:
Performance Milestone Variations.
(2) To be defined by the parties within two weeks recognizing
that there will be no deviations from the prior years accounting methods.
1
<PAGE>
ATTACHMENT 1 TO EXHIBIT A, SCHEDULE OF SUBSEQUENT SALES
PERFORMANCE MILESTONE VARIATIONS
<TABLE>
<CAPTION>
1st 12 Months - 7% 2nd 12 Months - 13%
--------------------------------------- ----------------------------------------
Number of Number of
Net Income Shares(1) Net Income Shares
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
10% less than $119,050 4,630 less than $ 969,322 50,405
20% less than $238,101 9,259 less than $1,938,644 100,809
30% less than $357,151 13,889 less than $2,907,965 151,214
40% less than $476,202 18,519 less than $3,877,287 201,619
50% less than $595,252 23,149 less than $4,846,609 252,024
60% less than $714,302 27,778 less than $5,815,931 302,428
70% less than $833,353 32,408 less than $6,785,253 352,833
80% less than $952,403 37,038 less than $7,754,574 403,238
90% less than $1,071,454 41,667 less than $8,723,896 453,642
100% less than $1,190,504 46,297 less than $9,693,218 504,047
110% less than $1,309,554 50,927 less than $10,662,540 554,452
120% less than $1,428,605 55,556 less than $11,631,862 604,856
130% less than $1,547,655 60,186 less than $12,601,183 655,261
140% less than $1,666,706 64,816 less than $13,570,505 705,666
150% less than $1,785,756 69,446 less than $14,539,827 756,071
160% less than $1,904,806 74,075 less than $15,509,149 806,475
170% less than $2,023,857 78,705 less than $16,478,471 856,880
180% less than $2,142,907 83,335 less than $17,447,792 907,285
190% less than $2,261,958 87,964 less than $18,417,114 957,689
200% less than $2,381,008 92,594 less than $19,386,436 1,008,094
</TABLE>
____________________
1 Provided, however, that for the remaining
twenty percent (20%) of the Sellers' LLC membership
Interests, Sellers shall receive at least an aggregate
of One Hundred Ninety Thousand Dollars ($190,000) worth
of shares of the Company, as valued on the Subsequent
Sale Dates specified above at agreed values of $4.50
per share at the end of the twelve months, and $6.00
per share at the end of the second twelve months.
2
<PAGE>
ATTACHMENT 2 TO EXHIBIT A, SCHEDULE OF SUBSEQUENT SALES
ADJUSTMENT OF NUMBER OF SHARES
The respective numbers of the Company's shares shall be
subject to adjustment from time to time as follows:
(a) If the number of shares of Common Stock outstanding at
any time after the date hereof is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, on the date such
payment is made or such change is effective, the number of
shares shall be appropriately increased so that the number of
shares of Common Stock issuable shall be increased in
proportion to such increase of outstanding shares.
(b) If the number of shares of Common Stock outstanding at
any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then, on the effective
date of such combination, the number of shares shall be
appropriately decreased so that the number of shares of Common
Stock issuable shall be decreased in proportion to such
decrease in outstanding shares.
(c) In case, at any time after the date hereof, of any
capital reorganization, or any reclassification of the stock
of the Company (other than as a result of a stock dividend or
subdivision, split-up or combination of shares), or the
consolidation or merger of the Company with or into another
person (other than a consolidation or merger in which the
Company is the continuing entity and which does not result in
any change in the Common Stock), or of the sale or other
disposition of all or substantially all the properties and
assets of the Company, the shares shall, after such
reorganization, reclassification, consolidation, merger, sale
or other disposition, be convertible into the kind and number
of shares of stock or other securities or property of the
Company or otherwise.
(d) All calculations under this attachment to Exhibit A
shall be made to the nearest one hundredth (1/100) of a share, as
the case may be.
(e) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment pursuant to this attachment to
Exhibit A, the Company at its expense shall promptly compute
such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each Seller a certificate
setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is
based.
(f) Reservation of Stock Issuable Upon Exercise. The
Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the
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<PAGE>
purpose of effecting the Subsequent Sales, such number of its
shares of Common Stock as shall from time to time be
sufficient to effect the Subsequent Sales; and if at any time
the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the Subsequent Sales, the
Company will take such corporate action as may, in the opinion
of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(g) Reclassification, Reorganization or Merger. In case
of any reclassification, capital reorganization or other change
of outstanding shares of Common Stock of the Company (other
than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of an
issuance of Common Stock by way of dividend or other
distribution or of a subdivision or combination), or in case
of any consolidation or merger of the Company with or into
another corporation (other than a merger with a subsidiary in
which merger the Company is the continuing corporation and
which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common
Stock of the class issuable upon exercise of this Warrant) or
in case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as
an entirety, the Company shall cause effective provision to be
made so that the Sellers shall have the right thereafter, to
acquire the kind and amount of shares of stock and other
securities and property receivable upon such reclassification,
capital reorganization or other change, consolidation, merger,
sale or conveyance. Any such provision shall include
provision for adjustments which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this
Schedule of Subsequent Sales and shall expressly provide that
the issuer of securities to be thereafter received assumes
obligations substantially in accordance with Exhibit A. The
foregoing provisions of this Section shall similarly apply to
successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
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<PAGE>
EXHIBIT B
TARGET BUDGET PLAN
See attached.
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<PAGE>
EXHIBIT C
SCHEDULE OF EXCEPTIONS
See attached 3 demand notes.
<PAGE>
EXHIBIT D
FORM OF OPINION
OF
TAYLOR & KEANE
<PAGE>
EMPLOYMENT AGREEMENT
This agreement is made effective as of March 15, 2000
by and between First Scientific Inc., A Delaware corporation
with a principle place of business at 1877 West 2800 South,
Suite 200, Ogden, UT 84401 (the "Corporation") and David M.
Wilich, residing 41 Bald Hill Road, Newfields, NH (the
"Executive").
In consideration of the covenants and conditions set
forth below, the parties agree as follows:
1. Employment. The Corporation agrees to employ the Executive,
and the Executive agrees to perform the duties assigned to him by the
Corporation, upon the terms and conditions provided in this Agreement.
2. Position and Responsibilities. The Executive shall serve as
President/Manager of the PureSoft affiliate of the Corporation.
The Executive agrees to perform such services as shall be assigned to
him by the President or Chief Executive Officer of the Corporation.
3. Term of Agreement and Duties.
(a) Employment. The Executive's employment under
this Agreement shall be deemed to have commenced as of March 15,
2000 and shall continue for thirty (30) months or until terminated
by either party in accordance with Section 7.
(b) Duties. During the period of his employment
under this Agreement, except for illness, vacation periods,
and any leaves of absence approved by the President of the
Corporation, the Executive shall devote all of his business
time, attention, skill and efforts to the faithful performance
of his duties under this Agreement.
4. Compensation. For all services to be rendered by the
Executive in any capacity during the period of his employment under
this Agreement, including, without limitation, services as an employee,
officer, director, or member of any committee of the Corporation's Board
of Directors, the Corporation will pay to the Executive and provide to
the Executive the following:
(a) Salary. The Executive shall be
paid an initial base salary in year one of
$12,500 per month. The Executive's
performance and base salary shall be reviewed
annually by the President of the Corporation,
with salary increases to be based on
Employee's performance. The Executive's base
salary shall be payable in equal
installments, no less frequently than monthly.
(b) Incentive Compensation. The
Executive shall be entitled to participate in
any existing or future incentive
compensation, employee profit-sharing plans,
stock option, stock purchase or other bonus
plans covering all other senior executives of
the Corporation.
<PAGE>
(c) Vacations. The Executive shall be
entitled to three (3) weeks of paid vacation
per year, beginning in year one, which shall
be scheduled after consultation with the
Corporation's President.
5. Expenses. The Corporation shall reimburse the
Executive, from the PureSoft budget, for all reasonable
expenses, including travel, and other disbursements reasonably
incurred by him for or on the behalf of the Corporation in the
performance of his duties hereunder consistent with the then
current reimbursement policies of the Corporation.
6. Participation in Benefit and Incentive Plans. The
Executive shall be entitled to participate in any retirement,
pension, group life, health or accident insurance, stock
option, stock purchase, restricted stock, bonus or any other
employment benefit or incentive plans generally available to
the senior executives of the Corporation, whether now in force
or hereafter adopted, in accordance with the terms of such
plans. The Corporation shall pay 75% of the cost of a family
plan for the Executive under the Corporation's health
insurance plan or equivalent.
7. Termination of Employment.
(a) Discharge for Cause. Notwithstanding any
other provision of this Agreement and without in any way
limiting the Corporation's or the Executive's rights to
terminate this Agreement at will and without cause, this
Agreement may be terminated by the Corporation for the
following reasons, each of which shall be deemed to be a
termination "for cause":
(i) indictment for or conviction of a felony or
crime involving an act of moral turpitude,
dishonesty, fraud or misfeasance which interferes
in any way with the orderly business of the
Corporation;
(ii) gross negligence that directly causes the Corporation
to suffer loss or damage;
(iii) refusal to follow or material neglect of reasonable
and documented requests of the Corporation made
pursuant to this Agreement; or
(iv) conduct that substantially interferes with or damages
the standing or reputation of the Corporation or the
Executive's ability to perform his obligations
hereunder.
In the event of termination of employment for cause,
this Agreement and all of the rights and obligations
of the parties hereto, including but not limited to
all rights pursuant to Section 8, shall forwith
terminate, except where this Agreement expressly
provides that an obligation survives the termination
of this Agreement.
(b) Termination. This Agreement may be terminated as follows:
(i) Without cause, by either party, upon (30) days
written notice:
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<PAGE>
(ii) Upon the death of the Executive;
(iii) With cause, by the Corporation upon the giving of
written notice setting forth the cause; or
(iv) By written agreement of the parties.
(c) Notice of Termination. Any termination of the
Agreement shall be communicated by Notice of
Termination to the other party hereto given in
accordance with Section 15. For purposes of this
Agreement, a "Notice of Termination" means a
written notice that:
(i) indicates the specific termination provision
in this Agreement relied upon,
(ii) if and to the extent applicable, sets
forth in reasonable detail the facts and
circumstances claimed to provide a basis
for termination of the employment under
the provision so indicated, and
(iii) if the date of termination is other than the
date of the receipt of such notice, specifies
the termination date.
(d) Severance Pay. Should the Executive be
terminated without cause by the Company, the
Executive shall be entitled to compensation
equal to his base salary multiplied by the
number of months remaining in the initial
thirty (30) month term hereunder, beginning
with date of first employment. Termination
"for cause" will render this clause (7d) null
and void and provide no such severance
benefit or compensation.
8. Financial Stock Rights. See Exhibit A attached hereto and
incorporated herein by reference.
9. Executive's Obligations.
(a) Non-Disclosure. Executive recognizes the interests
of the Corporation in maintaining the confidential nature
of its proprietary and other business and commercial
information. In consideration thereof, Executive shall
not, during the period if this Agreement or any time
thereafter, directly or indirectly, publish, disclose or
use, or authorize anyone else to publish, disclose or use,
any secret or confidential matter, or other information of
the Corporation or any of its subsidiaries or affiliates
not in the public domain whether such information relates
to the Corporation's operations, activities, research,
investigations or obligations or any other aspect of the
Corporation's business or affairs, including without
limitation information pertaining to the Corporation's
business plan, customers, suppliers, trade practices,
trade secrets, technology, know how or intellectual
property; provided, however, that for purposes of this
Agreement, information generally known throughout the
industries in which the Corporation conducts business
shall be considered to be information in the public domain.
All records, files, data, documents, computer files
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<PAGE>
(whether stored on a computer owned by the Corporation or
the Executive) and the like relating to suppliers,
customers, costs, fees, systems, methods, personnel,
equipment or other matters relating to the Corporation
and developed by the Executive or provided to the Executive
by the Corporation or during the performance of the
Executive's duties for the Corporation (including, but
not limited to, materials described in this Section)
shall be and remain the sole property of the corporation.
Upon termination of Executive's employment hereunder,
Executive shall not remove from the corporations premises
or retain any materials described in this Section 9(a)
except with the prior written consent of the Corporation,
and all such materials in Executive's possession
shall be delivered promptly to the Corporation.
(b) Solicitation for Employment. During the term of this
Agreement and for a period of One (1) year thereafter, if
terminated prior to the end of the contract, the Executive
will not, directly or indirectly, employ, solicit for
employment, or advise or recommend to any other person that
they employ or solicit for employment, for the purpose of
competing with the Corporation in any manner, any person
employed at the time by the Corporation, unless otherwise
agreed in writing by the parties.
(c) Solicitation of Clients. During the term of this
Agreement and for a period of One (1) year thereafter, if
terminated prior to the end of the contract, the Executive
will not, directly or indirectly, on behalf of himself or
another, solicit any business of the type provided by the
Corporation from any person or entity that, during the
Executive's employment with the Corporation, either was a
client of the Corporation or any of its subsidiaries or
affiliates or was identified by the Corporation or any of
its subsidiaries or affiliates as a prospective client and
was actively being solicited for business by the Corporation
or any of its subsidiaries or affiliates or which the
Corporation or any of its subsidiaries or affiliates had
actual plans to solicit business, unless otherwise agreed
to in writing by the parties.
10. Entire Agreement. This Agreement contains the understanding of
the Corporation and the Executive with respect to the subject matter hereof
and supercedes all prior written and oral agreements, statements,
understandings, and representations of the parties.
11. Remedies.
(a) Injunctions. Inasmuch as any breach of, or failure
by the Executive to comply with Section 9 of this Agreement
will cause serious and substantial damage to the Corporation,
the Corporation shall be entitled to an injunction restraining
the Executive from such breach or failure.
(b) Cumulative Remedies. All remedies expressly provided for
in this Agreement are cumulative of any and all other
remedies existing at law or in
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<PAGE>
equity. Either party shall, in addition to the remedies
provided herein, be entitled to avail itself of all such
other remedies as may exist in law or in equity for
compensation, and for the specific enforcement of the
covenants contained herein. Resort to any remedy provided
for in this Agreement or provided for by law shall not
prevent the concurrent or subsequent recourse to ant
other appropriate remedy, or preclude the recovery
by either party of monetary damages.
12. Binding Effect -- Non-Assignability. This Agreement
is binding on and is for the benefit of the parties hereto and
their respective successors, heirs, executors, administrators,
and other legal representatives. Neither this agreement nor
any right, obligation or liability of the Executive or the
Corporation, respectively, hereunder may be assigned without
the prior consent of the other, except that the provisions of
Section 9 of this Agreement may be enforced by any successor
in interest of the Corporation.
13. Witholding. The Corporation may withhold from any
amounts payable under this Agreement such Federal, state or
local taxes and other amounts as shall be permitted to be
withheld pursuant to any applicable law or regulation.
14. Amendment; Waiver. Only an instrument in writing
signed by the parties hereto may amend this Agreement, and any
provision hereof may be waived only by an instrument in
writing signed by the party or parties against whom or which
enforcement of such waiver is sought. The failure of either
party hereto at any time to require the performance by the
other party hereto of any provision hereof shall in no way
affect the full right to require such performance at any time
thereafter, nor shall the waiver by either party hereto of a
breach of any provision hereof be taken or held to be a waiver
of any such succeeding breach of such provision or a waiver of
any other provision of this Agreement.
15. Notices. All notices and other communications
hereunder shall be in writing and shall be given by hand
delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed to
the party receiving such notice at the address set forth above
or to such other address as either party shall have furnished
to the other in writing in accordance herewith.
16. Validity. The invalidity or unenforceability of any
provision or provisions of the Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect, nor
shall the invalidity or unenforceability of a portion of any
provision of this Agreement affect the validity or
enforceability of the balance of such provision. If any
provision of this Agreement, or portion thereof is so broad,
in scope or duration, as to be unenforceable, such provision
or portion thereof shall be interpreted to be only so broad as
is enforceable.
17. Applicable Law. This Agreement shall be governed by
and construed in accordance with the substantive internal laws
of the State of Utah.
18. Headings. The headings of this Agreement are solely
for convenience of reference and shall not be given any effect
in the construction or interpretation of this Agreement.
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<PAGE>
19. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, and all of which together will constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the first date mentioned above.
Employer: FIRST SCIENTIFIC, INC.
By: /s/ Randy L. Hales
----------------------
Randy L. Hales
President and CEO
Executive:
/s/ David M. Wilich
-----------------------
David M. Wilich
EA-303W.FSI
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<PAGE>
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is
made by and between FIRST SCIENTIFIC, INC., a Delaware
corporation (the "Company"), and DAVID WILICH, FRANK WILICH
and GENE DUBOIS, the optionees whose names appear on the Grant
and Signature Page attached hereto (collectively, the
"Optionee"), and is effective as of the date set forth on
said Grant and Signature Page.
W I T N E S S E T H:
WHEREAS, The Board of Directors of the Company (the
"Board") has established the 1998 Stock Option Plan of the
Company (the "Plan"), for the purpose of providing to key
Company employees, directors and consultants an opportunity to
acquire shares of Company common stock ($.001 par value) (the
"Shares"); and
WHEREAS, the Board of Directors or its
Compensation Committee (the "Committee") appointed to
administer the Plan has determined that it would be to the
advantage and best interest of the Company and its
shareholders to grant the non-qualified stock option,
incentive stock option or restricted stock grant provided for
herein (the "Option") to the Optionee as an inducement to
remain in the service of the Company and as an incentive for
increased efforts during such service, and has advised the
Company thereof and instructed its officers to issue the Option.
NOW, THEREFORE, in consideration of the premises,
and for other good and valuable consideration, receipt and
sufficiency whereof are hereby acknowledged, the parties
hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this
Agreement, they shall have the meaning specified below
unless the context clearly indicates to the contrary.
Capitalized terms used herein and not otherwise defined shall
have the meaning set forth in the Plan. The masculine pronoun
shall Include the feminine and neuter, and the singular the
plural, where the context so indicates.
Section 1.1 - Change of Control
"Change of Control" shall mean the occurrence of any one of
the following events:
(a) The Company enters into an agreement of reorganization, merger
or consolidation whereby the Company is not the surviving entity;
(b) The Company sells substantially all of its assets to a
purchaser other than a subsidiary of the Company; or
(c) Shares of stock of the Company representing 40% or more of the
total combined voting power of all outstanding classes of
stock of the Company (or its corporate
<PAGE>
parent) are acquired by a single purchaser or group of
related purchasers in one or more cumulative series of
transactions.
Section 1.2 - Code
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.3 - Committee
"Committee" shall mean the compensation committee of the board of
directors of the Company.
Section 1.4 - Company
"Company" shall mean First Scientific, Inc. In addition, "Company"
shall mean any corporation assuming or issuing new stock options in
substitution for the Options outstanding under the Plan, in a
transaction to which Section 425(a) of the Code applies.
Section 1.5- Fair Market Value
"Fair Market Value" shall mean, for purposes of the
Plan, the average of the high and low sales prices per share
of common stock as reported on the principal national security
exchange on which the stock is listed or admitted for trading
or, if not listed or traded on such an exchange, the NASDAQ
system, or if such sales prices are not then currently
available, the average of the most recent bid and sales prices
per share prices reported on the NASDAQ, or if such are not
available, the fair market value as determined by the board of
directors of the Company reflecting the most recent sales of
common stock plus influencing corporate events.
Section 1.6 - Incentive Stock Option
"Incentive Stock Option" ("ISO") shall mean an option
granted hereunder which qualifies as an "incentive stock
option" under Section 422A(b) of the Internal Revenue Code of
1986, as amended (the "Code").
Section 1.7 - Non-Qualified Stock Option
"Non-Qualified Stock Option" shall mean an option
granted hereunder which does not qualify as an ISO under
Section 422A(b) of the Code.
Section 1.8 - Option
"Option" shall mean the option to purchase common
stock of the Company ($.001 par value) granted under this
Agreement.
Section 1.9 - Plan
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<PAGE>
"Plan" shall mean the First Scientific, Inc. 1998
Stock Option Plan.
Section 1.10 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.11 - Securities Act
"Securities Act" shall mean the Securities Act of
1933, as amended.
ARTICLE II
GRANT OF OPTION
Section 2.1 - Grant of Option
In consideration of the Optionee's agreement to
render faithful and efficient services to the Company and for
other good and valuable consideration, on the date set forth
on the Grant and Signature Page hereof (the "Date of Grant"),
the Company irrevocably grants to the Optionee the option
to purchase any part or all of an aggregate of the number
of Shares set forth on the Grant and Signature Page hereof
and upon the terms and conditions set forth in this Agreement.
Section 2.2 - Purchase Price
The purchase price of the Shares covered by the
Option shall be the Fair Market Value as of the date of this
Agreement set forth on the Grant and Signature Page hereof,
which price shall be without commission or other charge (the
"Purchase Price").
Section 2.3 - Reservation of Rights
Nothing in the Plan or in this or any Stock Option
Agreement shall confer upon the Optionee any right to
continue in the employ of the Company or any Subsidiary or
shall interfere with or restrict in any way the rights of the
Company and its Subsidiaries, which are hereby expressly
reserved, to discharge the Optionee at any time for any reason
whatsoever, with or without cause.
Section 2.4 - Adjustments in Option
In the event that the outstanding Shares subject
to the Option are changed into or exchanged for a
different number or kind of shares of the Company or other
securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split up,
stock dividend, or combination of shares, the Committee
shall make an appropriate and equitable
4
<PAGE>
adjustment in the number and kind of shares as to which the Option,
or portions thereof then unexercised, shall be exercisable, to the
end that after such event the Optionee's proportionate interest
shall be maintained as before the occurrence of such
event. Such adjustment in the Option shall be made without
change in the total price applicable to the unexercised
portion of the Option (except for any change in the aggregate
price resulting from rounding-off of share quantities or
prices) and with any necessary corresponding adjustment in
the purchase price. Any such adjustment made by the Committee
shall be final and binding upon the Optionee, the
Company, the Subsidiaries and all other interested persons.
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
(a) The Option shall become exercisable in
cumulative installments as set forth on the Grant and
Signature Page hereto.
(b) Excluding Saturdays, Sundays, and nationally
recognized holidays, if the Optionee is absent from employment
for any reason other than vacation for an aggregate period
exceeding sixty (60) days during the annual period between the
Date of Grant and the First Anniversary Date or any
successive Anniversary Date and the following Anniversary
Date, then the latter Anniversary Date shall be postponed by
the number of all such days of absence. This paragraph (b)
shall not apply to Optionees who are directors or consultants
but not employees of the Company.
Section 3.2 - Duration of Exercisability
The installments provided for in Section 3.1 are
cumulative. Each such installment which becomes
exercisable pursuant to Section 3.1 shall remain
exercisable until the expiration date set forth on the
signature page of this Agreement or until it becomes
unexercisable under the Plan, whichever is sooner.
Notwithstanding the foregoing, the Committee may waive
provisions relating to installment or waiting periods in whole
or in part at the sole discretion of the Committee, based on
such factors as said Committee shall deem appropriate.
Section 3.3 - Assumption of Option; Acceleration of Exercisability
In the event of a Change of Control, this Option
shall be exercisable at some time prior to the effective
date of such Change of Control, with respect to all of the
Shares covered hereby, whether or not this Option may have
otherwise become fully exercisable under Section 3.1.
Notwithstanding the foregoing, if the Optionee hereunder
agrees, he/she may accept a substitution of other options
issued by the successor-in-interest to the Company or its
business.
Section 3.4 - Option Not Transferable
4
<PAGE>
Neither the Option nor any interest or right
therein or part thereof shall be liable for the debts,
contracts, or engagements of the Optionee or his successors
in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance,
assignment, or any other means whether such disposition be
voluntary or involuntary or by operation of law, by judgment,
levy, attachment, garnishment or any other legal or
equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no
effect; provided, however, that this Section 3.4 shall
not prevent transfers by will or by the applicable laws of
descent and distribution.
ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he or
she may exercise the Option or any portion thereof. After the
death of the Optionee, any exercisable portion of the
Option may, prior to the time when the Option becomes
unexercisable, be exercised by his or her personal
representative or by any person empowered to do so under the
Optionee's will or under the then applicable laws of descent
and distribution.
Section 4.2 - Partial Exercise
Any exercisable portion of the Option or the entire
Option, if then wholly exercisable, may be exercised in
whole or in part at any time prior to the time when the
Option or portion thereof becomes unexercisable under the
Plan; provided, however, that each partial exercise shall be
for not less than one hundred (100) Shares (or minimum
installment set forth in Section 3.1, if a smaller number of
Shares) and shall be for whole Shares only.
Section 4.3 - Manner of Exercise
The Option, or any exercisable portion thereof, may
be exercised solely by delivery to the Secretary or the
Secretary's office of all of the following prior to the time
when the Option or such portion becomes unexercisable under
the Plan:
(a) Notice in writing signed by the Optionee or the
other person then entitled to exercise the Option or portion
thereof, stating that the Option or portion thereof is
thereby exercised, such notice complying with all applicable
rules established by the Committee; and
(b) (i) Full payment (in cash or by check) for the
Shares with respect to which such Option or portion is
exercised; or
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<PAGE>
(ii) Shares of any class of the Company's
stock owned by the Optionee duly endorsed for transfer to
the Company with a fair market value on the date of delivery
equal to the aggregate Option price of the Shares with
respect to which such Option or portion is thereby
exercised; or
(iii) With the consent of the Committee, a full
recourse promissory note bearing interest (at least such
rate as shall then preclude the imputation of interest under
the Code or any successor provision) and payable upon such
terms as may be prescribed by the Committee. The Committee
may also prescribe the form of such note and the security to
be given for such note. No Option may, however, be
exercised by delivery of a promissory note or by a loan
from the Company when or where such loan or other extension
of credit is prohibited by law; or
(iv) Any combination of the consideration
provided in the foregoing subsections (i), (ii), and (iii); and
(c) Full payment to the Company of all amounts
which, under federal, state or local law, it is required to
withhold upon exercise of the Option; and
(d) In the event the Option or portion thereof
shall be exercised pursuant to Section 4.1 by any person
or persons other than the Optionee, appropriate proof of
the right of such person or persons to exercise the Option.
Section 4.4 - Conditions to Issuance of Stock Certificates
The Shares deliverable upon the exercise of the
Option, or any portion thereof, may be either previously
authorized but unissued Shares or issued Shares which have
then been reacquired by the Company. Such Shares shall be
fully paid, non-assessable and free-trading. The Company
shall promptly deliver any certificate or certificates for
Shares purchased upon the exercise
of the Option or portion thereof upon fulfillment of the
following conditions:
(a) The completion of any registration or other
qualification of such Shares under any state or federal law
or under rulings or regulations of the Securities and
Exchange Commission or of any other governmental regulatory
body, which the Committee, based on advice of Company
counsel, shall deem necessary or advisable;
(b) The obtaining of any approval or other clearance
from any state or federal governmental agency which the
Committee shall, based on advice of the Company counsel,
determine to be necessary or advisable;
(c) The lapse of such reasonable period of time (not
to exceed thirty days) following the exercise of the Option as
the Committee may from time to time establish for reasons
of administrative convenience.
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(d) The Optionee shall pay to the Company an
amount equal to the aggregate of all sums required to be
withheld under federal, state, or local law with respect to
the exercise of the Option; and
It is understood that the Shares deliverable upon exercise
of the Option have been registered under the Securities
Act, and the Company shall use its best efforts to keep such
registration current.
Section 4.5 - Rights as Stockholder
The holder of the Option shall not be, nor have
any of the rights or privileges of, a stockholder of the
Company in respect of any Shares purchasable upon the
exercise of any part of the Option unless and until
certificates representing such Shares shall have been issued
by the Company to such holder.
ARTICLE V
OTHER PROVISIONS
Section 5.1 - Administration
The Committee shall have the power to interpret
the Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan
as are consistent therewith and to interpret or revoke any
such rules. All actions taken and all interpretations and
determinations made by the Committee or the Special Committee
in good faith shall be final and binding upon the Optionee,
the Company, the Subsidiaries and all other interested
persons. No member of the Committee or the Special Committee
shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or
the Option. In its absolute discretion, the Board may at
any time and from time to time exercise any and all rights
and duties of the Committee under the Plan and this Agreement.
Section 5.2 - Shares to Be Reserved
The Company shall at all times during the term of
the Option reserve and keep available such number of Shares
as will be sufficient to satisfy the requirements of this
Agreement.
Section 5.3 - Notices
Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in
care of its Secretary, and any notice to be given to the
Optionee shall be addressed to him or her at the address set
forth on the Signature Page hereof. By a notice given
pursuant to this Section 5.3, either party may hereafter
designate a different address for delivery of notices.
Any notice which is required to be given to the Optionee
shall, if the Optionee is then deceased, be given to the
Optionee's personal representative if such representative
has previously informed the Company of his status and
address by written notice under this Section 5.3. Any
notice shall be deemed duly given when enclosed in a properly
sealed envelope or wrapper addressed as aforesaid and
deposited (with postage prepaid) in a post office or branch
post office regularly maintained by the United States Postal
Service.
Section 5.4 - Titles
Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction
of this Agreement.
Section 5.5 - Construction
This Agreement shall be administered, interpreted,
and enforced under the laws of the State of Delaware.
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GRANT AND SIGNATURE PAGE
FIRST SCIENTIFIC, INC. 1998 STOCK OPTION PLAN
(Check below)
(a) Incentive Stock Option
In tandem with stock appreciation rig
No stock appreciation right
X (b) Non-Qualified Option
X In tandem with stock
appreciation right.
No stock appreciation right
X In tandem with Restricted Stock
(c) Restricted stock grant without
accompanying option
Purchase Price per share: $0.01 (one cent) Number of Shares: 87,534
Vesting: Fully Vested Expiration: N/A
We have read the Stock Option Agreement
indicated above which was adopted for use in connection
with the First Scientific, Inc. 1998 Stock Option Plan. As
Optionees, each of us hereby agrees to all of the terms of the
Agreement.
Date of Grant: March 15, 2000
Optionee's Signature: /s/ David Wilich
--------------------
David Wilich
Address: ___________________________________________
___________________________________________
Social Security Number or Taxpayer Identification Number: ___________
Optionee's Signature: /s/ Frank Wilich
-------------------
Frank Wilich
Address: ___________________________________________
___________________________________________
Social Security Number or Taxpayer Identification Number: ___________
Optionee's Signature: /s/ Gene Dubois
-------------------
Gene Dubois
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Address: ___________________________________________
___________________________________________
Social Security Number or Taxpayer Identification Number: ___________
The Company hereby agrees to all of the terms of the above
Agreement.
FIRST SCIENTIFIC, INC.
By: /s/ Randall L. Hales
-------------------------
President and CEO
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