EXHIBIT 10.14
FIRST SCIENTIFIC, INC.
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OPTION TO PURCHASE
SHARES OF COMMON STOCK
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT,
THESE SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF SAID ACT AND UPON OBTAINING AN OPINION OF COUNSEL
(WHICH MAY BE COUNSEL FOR THE COMPANY), SATISFACTORY TO
THE COMPANY, THAT SUCH DISPOSITION MAY BE MADE WITHOUT
REGISTRATION OF THE SECURITIES UNDER SUCH ACT, OR
UNLESS SOLD PURSUANT TO RULE 144. THE HOLDER OF THESE
SECURITIES HAS AGREED AND COVENANTED NOT TO OFFER OR
SELL THESE SECURITIES IN THE UNITED STATES, ITS
TERRITORIES OR POSSESSIONS, OR TO PERSONS KNOWN TO BE
NATIONALS OR RESIDENTS OF THE UNITED STATES, UNTIL THE
EXPIRATION OF 365 DAYS AFTER THE ISSUANCE THEREOF, AND
THEREAFTER ONLY IF THE SHARES ARE REGISTERED UNDER THE
ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREUNDER IS AVAILABLE.
THIS CERTIFIES THAT XXXXXX X. XXXXXX (the "Holder") is
entitled to purchase, on the terms hereof, shares representing
Five Percent (5.0%) of the issued and outstanding common stock of
First Scientific, Inc., a Delaware corporation (the "Company"),
subject to adjustment as provided herein.
1. Exercise of Option. The terms and conditions upon
which this Option may be exercised, and the Common Stock covered
hereby (the "Option Stock") may be purchased, are as follows:
1.1 Term. This Option may be exercised in whole or in
part at any time and from time to time commencing after the date
hereof, but in no case may this Option be exercised later than
the close of business on August 15, 2006 (the "Termination
Date"), after which time this Option shall terminate and shall be
void and of no further force or effect.
1.2 Purchase Price. Except as adjusted pursuant to
Section 2 hereof, the per share purchase price for the shares of
Common Stock to be issued upon exercise of this Option shall be
One-Tenth of One Cent ($0.001) per share of Common Stock
purchased.
1.3 Vesting Schedule. This Option shall vest as
follows:
(a) Immediately upon the execution of this
Option, the Holder shall have the right to
exercise and receive up to forty percent
(40%) of the total shares underlying this
Option;
(b) On August 15, 2002, the first anniversary of
the issuance of this Option, the Holder shall
have the right to exercise and receive up to
an additional thirty percent (30%) of the
total shares underlying this Option; and
(c) On August 15, 2003, the second anniversary of
the issuance of this Option, the Holder shall
have the right to exercise and receive up to
the remaining thirty percent (30%) of the
total shares underlying this Option.
(d) Notwithstanding the foregoing paragraphs
1.3(a), 1.3(b), and 1.3(c), in the event a
Change of Control (defined below) occurs, the
Holder may participate in the Change of
Control transaction as if this Option had
been granted and exercised immediately prior
to the Change in Control.
(e) The term "Change in Control" shall mean a
change in control of beneficial ownership of
First Scientific's voting securities of a
nature that would be required to be reported
pursuant to Item 6(e) of Schedule 14A of
Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")
or any similar item on a successor or revised
form; provided, however, that a Change in
Control shall be deemed to have occurred
when:
(i) Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial
owner" (as defined in Rule 13d?3 under
the Exchange Act), directly or
indirectly, of securities representing
thirty percent (30%) or more of the
combined voting power of First
Scientific's then outstanding voting
securities; or
(ii) During any period of three consecutive
years, the individuals who at the
beginning of such period constituted the
Board, together with any Approved
Directors elected during such period,
cease for any reason to constitute at
least a majority of the Board; or
(iii) The shareholders of First
Scientific approve a plan of complete
liquidation of First Scientific or an
agreement for the sale or disposition by
First Scientific of at least a majority
of First Scientific's assets.
1.4 Method of Exercise. The exercise of the purchase
rights evidenced by this Option shall be effected by (a) the
surrender of the Option, together with a duly executed copy of
the form of subscription attached hereto, to the Company at its
principal offices and (b) the delivery of the purchase price by
xxxxxxx's check payable to the Company's order for the number of
shares for which the purchase rights hereunder are being
exercised. Subject to the approval of the Company, in its sole
discretion, and after confirmation with its legal and or
accounting advisers that an exercise under this Section 1 will
not result in adverse accounting treatment for the Company, and
all or any part of the Purchase Price and any withholding taxes
may be paid by surrendering Shares then issuable upon exercise of
the Option having a fair market value on the date of the Option
exercise equal to the aggregate exercise price of the Option or
exercised portion. In the event this Option is exercised in part
at any time and not in whole, the Company shall promptly issue
and deliver to the Holder a replacement Option Agreement
reflecting the number of shares of Common Stock of the Company
subject to such Option after giving effect to such partial
exercise.
1.5 Issuance of Shares. Upon the exercise of the
purchase rights evidenced by this Option, a certificate or
certificates for the purchased shares shall be issued to the
Holder as soon as practicable (and in any event within three
business days after exercise).
2. Certain Adjustments; Anti-Dilution Rights.
2.1 Anti-Dilution Rights; Calculation of Issued and
Outstanding Shares. The Holder shall be entitled to receive
under this Option shares of the Company's common stock equaling
up to Five Percent (5.0%) of the diluted issued and outstanding
common stock of the Company (the "Diluted Outstanding Stock"),
calculated as follows:
(a) To determine the Diluted Outstanding Stock,
the Company shall use as its base, the number
of shares issued and outstanding as of the
date of this Option, which was 33,571,951
shares (the "Undiluted Outstanding Stock").
To the Undiluted Outstanding Stock, the
Company shall add shares of common stock
equaling an additional Twenty-five Percent
(25%). The sum of the Undiluted Outstanding
Stock and the additional 25% shall be the
Diluted Outstanding Stock.
(i) For example, if the number of shares
issued and outstanding is 10,000,000,
the Company would add an additional 25%,
or 2,500,000, for a Diluted Outstanding
Stock total of 12,500,000. [This example
may be unnecessary if the actual 8/15
number is used as the base.]
(b) Subject to the vesting schedule set forth in
Paragraph 1.3 above, the Holder shall have
the right to exercise and receive under this
Option shares equaling up to 5.0% of the
Diluted Outstanding Stock.
2.2 Adjustment to the Undiluted Outstanding Stock;
Series B Preferred Stock; Exercise of Anti-Dilution Rights;
Reverse Split. In the event that the Company issues additional
shares of its common stock in connection with any of the
following transactions, the number of shares representing the
Undiluted Outstanding Stock shall be adjusted to include those
shares issued in connection with the following transactions:
(a) the conversion of all of the issued and
outstanding shares of the Company's Series
2000-B Convertible Preferred Stock;
(b) the effects of exercise of anti-dilution
rights granted by the Company to Xxxx Xxxxxx
and/or Aspen Capital Resources, LLC; or
(c) the effects of a reverse split of the
Company's common stock.
3. Fractional Shares. No fractional shares shall be
issued in connection with any exercise of this Option.
4. Reservation of Common Stock. The Company shall at all
times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of
effecting the exercise of this Option, such number of its shares
of Common Stock as shall from time to time be sufficient to
effect the exercise of this Option; and if at any time the number
of authorized but unissued shares of Common Stock shall not be
sufficient to effect the exercise of the entire Option, in
addition to such other remedies as shall be available to the
Holder of this Option, the Company will use its reasonable best
efforts to 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 purposes.
5. Privilege of Stock Ownership. Prior to the exercise of
this Option, the Holder shall not be entitled, by virtue of hold
ing this Option, to any rights of a stockholder of the Company.
6. Transfers and Exchanges.
6.1 Subject to the limitations set forth below and
subject to compliance with applicable federal and state
securities laws, all or any part of this Option and all rights
hereunder are transferable in whole or in part by Xxxxxx,
provided such transfer is made in accordance with the provisions
of that certain Securities Purchase Agreement of even date
herewith entered into by the Holder, certain other Purchasers
signatory thereto and the Company (the "Securities Purchase
Agreement"). The terms and conditions of such Securities
Purchase Agreement are hereby incorporated in and made a part of
this Option Agreement. The transfer shall be recorded on the
books of the Company upon the surrender of this Option, properly
endorsed, to the Company at its principal offices and the payment
to the Company of all transfer taxes and other governmental
charges imposed on such transfer. In addition, the transferee
shall at the same time submit its written consent and
acknowledgment, by which the transferee shall covenant and agree
to be bound by and comply with the Securities Purchase Agreement.
In the event of a partial transfer, the Company shall issue to
the several holders one or more appropriate new Options. The
Company may deem and treat the registered Holder as the absolute
owner of the Option (notwithstanding any notice of ownership or
writing thereon made by anyone other than the Company) for all
purposes, and the Company will not be affected by any notice to
the contrary. No rights under and by virtue of this Option shall
pass and be transferred separately and apart from this Option.
6.2 All new Options issued in connection with
transfers, exchanges or partial exercises shall be identical in
form and provision to this Option except as to the number of
shares issuable upon exercise thereof.
7. Successors and Assigns. The terms and provisions of
this Option Agreement shall be binding upon the Company and the
Holder and their respective successors and assigns, subject at
all times to the restrictions set forth in this Option Agreement
and the Securities Purchase Agreement.
8. Loss, Theft, Destruction or Mutilation of Option. Upon
receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Option
Agreement, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to the Company, and
upon reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this
Option Agreement, if mutilated, the Company will make and deliver
a new Option Agreement of like tenor and dated as of such
cancellation, in lieu of this Option Agreement.
9. Amendment. This Option Agreement and the terms of the
Options may be amended only with the written consent of the
Holder and the Company set forth in a writing specifying such
amendment.
10. Saturdays, Sundays, Holidays, etc. If the last or
appointed day for the taking of any action or the expiration of
any right required or granted herein shall be a Saturday or
Sunday or shall be a legal holiday, then such action may be taken
or such right may be exercised, except as to the purchase price,
on the next succeeding day not a Saturday, Sunday or legal
holiday.
11. Notices. Any notice or demand authorized by this
Option shall be sufficiently given or made, if in writing and
personally served, sent by telecopy followed by written
confirmation of receipt, or deposited in the United States mail,
registered or certified, return receipt requested, postage
prepaid, at or to the address or telecopy number as the receiving
party shall have specified most recently by written notice to the
other party. Notice shall be deemed given on the date of service
if personally served or if sent by telecopy. Notice mailed as
provided herein shall be deemed given on the next business day
following the date sent by Federal Express or comparable next-day-
delivery courier service, or on the third business day following
the date mailed.
If to First Scientific: FIRST SCIENTIFIC, INC.
1877 West 0000 Xxxxx, Xxxxx 000
Xxxxx, XX 00000
With a copy to: Durham Xxxxx & Xxxxxxx
Attn: Xxxxxxx X. Xxxxx, Esq.
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
If to the Holder: Xxxxxx X. Xxxxxx
0000 X. Xxxxx Xxxx Xxxxx
Xxxxx Xxxxx, XX 00000
12. Investment Representation. The Holder, by accepting
this Option, represents that the Holder is acquiring the Option
for his own account for investment purposes and not with a view
to any offer or distribution thereof and that the Holder will not
sell or otherwise dispose of the Option or the underlying Option
Stock in violation of applicable securities laws.
DATED AS OF August 15, 2001
FIRST SCIENTIFIC, INC.
By:
Name: Xxxxxxx X. Xxxxx, CEO
and President
