EXHIBIT 10.3
INVESTOR RIGHTS AGREEMENT
THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into
this 28th day of December, 2001, by and between AspenBio, Inc., a Colorado
corporation (the "Company") and Cambridge Holdings, Ltd., a Colorado corporation
(the "Purchaser").
RECITALS
A. On the date hereof, the Company and the Purchaser entered into a
Securities Purchase Agreement (the "Purchase Agreement"), pursuant to which
Purchaser acquired, and agreed to acquire, certain securities of the Company as
described in the Purchase Agreement. All capitalized terms used in this
Agreement shall have the same meanings as ascribed to such terms in the Purchase
Agreement.
B. Section 2.2 of the Purchase Agreement provides that the Parties
enter into this Agreement to provide rights for the Purchaser .
C. This Agreement is being executed and delivered at the Closing in
connection with provision for payment of the purchase price under the Purchase
Agreement.
STATEMENT OF AGREEMENT
NOW THEREFORE, in consideration of the premises and of the respective
covenants and provisions herein contained, and intending to be legally bound
hereby, the Parties agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the meanings
ascribed to them below:
"Affiliate" means (i) with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) with respect to any
individual, the spouse, child, step-child, grandchild, niece, nephew or parent
of such Person, or the spouse thereof.
"Common Stock" means the Common Stock of the Company and any equity
securities issued or issuable with respect to the Common Stock in connection
with a reclassification, recapitalization, merger, consolidation or other
reorganization.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means any Person owning of record Registrable Securities that
have not been sold to the public.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivisions thereof.
"Registrable Securities" means any (i) of the Shares purchased pursuant
to the Purchase Agreement, (ii) shares of Common Stock issuable or issued upon
exercise of the Warrants and, (iii) any other shares of Common Stock issued or
issuable, directly or indirectly, with respect to the Common Stock referenced in
clauses (i) or (ii) or by way of stock dividend, stock split or combination of
shares. As to any particular Registrable Securities, such securities shall cease
to be Registrable Securities when (a) a registration statement filed pursuant to
a Demand Registration Request (as defined in Section 2.2 herein) or a Form S-3
Registration (as defined in Section 2.4 herein) with respect to such securities
shall have been declared effective under the Securities Act and the Company has
materially complied with Section 2.3(b) herein, or (b) such securities shall
have been disposed of in accordance with a registration described in Section 2.1
herein ("Piggyback Registration"), or (c) such securities shall have been sold
pursuant to Rule 144 (or any successor provision) under the Securities Act, or
(d) such securities are eligible for sale under Rule 144(k) (or any successor
provision) under the Securities Act. Provided, however, that Registrable
Securities which otherwise would cease to be considered Registrable Securities
as a result of item (a) above shall remain Registrable Securities solely for the
purposes of Section 2.1 herein.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
2. Registration Rights.
2.1 Piggyback Registrations.
(a) Piggyback Registrations. If, at any time prior
to June 30, 2007 the Company proposes to register its Common Stock under
the Securities Act in connection with the public offering of Common
Stock (other than a registration relating solely to the sale of Common
Stock to participants in an employee benefit plan or with respect to any
corporate reorganization or other transaction under Rule 145 of the
Securities Act) whether or not for its own account, the Company shall
give prompt written notice of its intention to do so to the Holders.
Upon the written request of any of the Holders made within 15 days
following the receipt of any such written notice (which request shall
specify the Registrable Securities intended to be disposed of by the
Holders and the intended method of distribution thereof), the Company
shall use commercially reasonable efforts to cause all such Registrable
Securities to be registered under the Securities Act (with the
securities which the Company at the time proposes to register) to permit
the sale or other disposition by the Holders (in accordance with the
intended method of distribution thereof) of the Registrable Securities
to be so registered.
(b) Abandonment or Delay. If, at any time after
giving written notice of its intention to register its Common Stock and
prior to the effective date of the
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registration statement filed in connection with such registration, the
Company shall determine for any reason not to register or to delay
registration of its Common Stock, the Company may, at its election, give
written notice of such determination to all Holders and (i) in the case
of a determination not to register, shall be relieved of its obligation
to register any Registrable Securities in connection with such abandoned
registration, without prejudice, however, to the rights of Holders under
Section 2.1(a), and (ii) in the case of a determination to delay such
registration of its Common Stock shall be permitted to delay the
registration of such Registrable Securities for the same period as the
delay in registering its Common Stock.
(c) Holder's Right to Withdraw. Any Holder shall
have the right to withdraw its request for inclusion of its Registrable
Securities in any registration statement pursuant to this Section 2.1 by
giving written notice to the Company of its request to withdraw.
(d) Underwriting Requirements. In connection with
any offering involving an underwriting of the Common Stock, the Company
shall not be required under Section 2.1 to include any of the
Registrable Securities in such underwriting unless the Holders accept
the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of
the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by persons to be included in
such offering exceeds the amount of securities that the underwriters
determine in their sole discretion is compatible with the success of the
offering, then the Company shall be required to include in the offering
only that number of shares of Common Stock, including Registrable
Securities, which the underwriters determine in their discretion will
not jeopardize the success of the offering (the securities so included
to be apportioned pro rata among the Persons according to the total
amount of securities entitled to be included therein owned by each
Person or in such proportions as shall mutually be agreed to by such
Persons. In the event that the underwriters determine that the total
amount of securities requested to be included in the offering exceeds
the amount that the underwriters determine is compatible with the
success of the offering, then the underwriters shall provide written
notice of such determination to the Holders.
2.2 Demand Registration.
(a) Request for Registration. The Holders shall be
entitled to one Demand Registration Request as defined herein. Subject
to Section 2.2(c), at any time between September 30, 2002 and June 30,
2006 one or more Holders holding at least a majority of the Registrable
Securities then outstanding shall have the right to require the Company
to file a registration statement under the Securities Act covering the
Registrable
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Securities, by delivering a written request therefor to the Company
specifying the Registrable Securities to be included in such
registration by such Holder(s) and the intended method of distribution
thereof. Any such request pursuant to this Section 2.2(a) is referred to
herein as the "Demand Registration Request" and the registration so
requested is referred to herein as the "Demand Registration".
(b) Registration. The Company shall, as
expeditiously as possible following the Demand Registration Request, use
commercially reasonable efforts to effect such registration under the
Securities Act (including, without limitation, by means of a shelf
registration pursuant to Rule 415 under the Securities Act if so
requested and if the Company is then eligible to use such a
registration) of the Registrable Securities which the Company has been
so requested to register, for distribution in accordance with such
intended method of distribution.
(c) Limitations on Requested Registration. The
rights of Holders to request the Demand Registration pursuant to Section
2.2(a) are subject to the following limitations: (i) in no event shall
the Holders be entitled to more than one Demand Registration Request,
(ii) if the request is made prior to June 20, 2003 and the Board of
Directors of the Company makes a reasonable good faith determination
that the payment of the legal and accounting fees and other pertinent
expenses incident to the filing and prosecution of the registration
statement would have a material adverse effect on the financial
condition of the Company, the Company shall not be required to comply
with the Demand Registration Request, or (iii) if any of the Holders
have participated in a Demand Registration or a Form S-3 Registration in
the twelve-month period preceding the request. Provided, however, that
the Company shall be required to comply with the Demand Registration
Request if the Purchaser agrees to pay such expenses.
(d) Company Registration. During the period starting
with the date of filing of, and ending on a date 180 days after the
effective date of, a registration subject to Section 2.1 hereof, the
Company shall not be obligated to effect, or take any action to effect,
any registration pursuant to this Section 2.2; provided that the Company
is actively employing good faith and commercially reasonable efforts to
cause such registration statement to become effective. In the event that
the Company determines not to pursue a registration or to withdraw a
registration that has been filed, notice of such action will be provided
promptly by the Company to the Holders.
(e) Underwriting Requirements. If the Holders intend
to distribute the Registrable Securities by means of an underwriting,
they shall so advise the Company as a part of their request made
pursuant to Section 2.2(a). The underwriter will be selected by the
Company and shall be reasonably acceptable to the Holders. In such
event, the right of the Holder to include its Registrable Securities in
such registration shall be conditioned upon the Holder's participation
in such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Common Stock through such
underwriting shall (together with the Company as provided in Section 3)
enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such
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underwriting. Notwithstanding any other provisions of this Section 2.2,
if the underwriter advises the Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then
the number of shares of Registrable Securities and other securities that
may be included in the underwriting shall be allocated among all Holders
and other Persons whose Common Stock of the Company the Company has
agreed may be included in the offering (collectively, the "Selling
Shareholders") in proportion (as nearly practicable) to the amount of
Common Stock of the Company owned by the Holders and the other Selling
Shareholders. In the event that notice is received from the underwriter
that the number of shares to be underwritten should be limited, and the
number of shares of Registrable Securities included in the offering is
less than a majority of the Registrable Securities, then the offering
shall not be deemed to be the Demand Registration Request.
2.3 Registration Procedures. If and whenever the Company is
required by the provisions of this Agreement to use commercially reasonable
efforts to effect or cause the registration of any Registrable Securities under
the Securities Act as provided in this Agreement, the Company shall, as
expeditiously as possible:
(a) prepare and file with the SEC a registration
statement on an appropriate registration form of the SEC for the
disposition of such Registrable Securities in accordance with the
intended method of disposition thereof, which form (i) shall be selected
by the Company and (ii) shall, in the case of a shelf registration, be
available for the sale of the Registrable Securities by the Holders and
such registration statement shall comply as to form in all material
respects with the requirements of the applicable form and include all
financial statements required by the SEC to be filed therewith, and the
Company shall use its best efforts to cause such registration statement
to become effective (provided, however, that before filing a
registration statement or prospectus or any amendments or supplements
thereto, or comparable statements under securities or blue sky laws of
any jurisdiction, the Company will furnish to one counsel for the
Holders participating in the planned offering and the underwriters, if
any, copies of all such documents proposed to be filed (including all
exhibits thereto), which documents will be subject to the reasonable
review and reasonable comment of such counsel, and the Company shall not
file any registration statement or amendment thereto or any prospectus
or supplement thereto to which the underwriters, if any, shall
reasonably object in writing);
(b) prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration
statement effective for such period (which shall not be required to
exceed 180 days in the case of a Demand Registration and shall not
exceed 90 days for all other registrations unless mutually agreed to in
writing by the parties) as any seller of Registrable Securities pursuant
to such registration statement shall request and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of all Registrable Securities covered by such registration
statement in accordance with the intended methods of disposition by the
seller or sellers thereof set forth in such registration statement;
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(c) furnish, without charge, to each seller of such
Registrable Securities and each underwriter, if any, of the securities
covered by such registration statement such number of copies of such
registration statement, each amendment and supplement thereto (in each
case including all exhibits), and the prospectus included in such
registration statement (including each preliminary prospectus) in
conformity with the requirements of the Securities Act, and other
documents, as such seller and underwriter may reasonably request in
order to facilitate the public sale or other disposition of the
Registrable Securities owned by such seller (the Company hereby
consenting to the use in accordance with applicable law of each such
registration statement (or amendment or post-effective amendment
thereto) and each such prospectus (or preliminary prospectus or
supplement thereto) by each such seller of Registrable Securities and
the underwriters, if any, in connection with the offering and sale of
the Registrable Securities covered by such registration statement or
prospectus);
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such
other securities or "blue sky" laws of such jurisdictions as any sellers
of Registrable Securities or any managing underwriter, if any, shall
reasonably request in writing, and do any and all other acts and things
which may be reasonably necessary or advisable to enable such sellers or
underwriter, if any, to consummate the disposition of the Registrable
Securities in such jurisdictions, except that in no event shall the
Company be required to qualify to do business as a foreign corporation
in any jurisdiction where it would not, but for the requirements of this
paragraph (d), be required to be so qualified, to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) promptly notify each Holder selling Registrable
Securities covered by such registration statement and each managing
underwriter, if any: (i) when the registration statement, any
pre-effective amendment, the prospectus or any prospectus supplement
related thereto or post-effective amendment to the registration
statement has been filed and, with respect to the registration statement
or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or state securities authority for
amendments or supplements to the registration statement or the
prospectus related thereto or for additional information; (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of
the registration statement or the initiation of any proceedings for that
purpose; (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation of any proceeding for such purpose; (v)
of the existence of any fact of which the Company becomes aware which
results in the registration statement, the prospectus related thereto or
any document incorporated therein by reference containing an untrue
statement of a material fact or omitting to state a material fact
required to be stated therein or necessary to make any statement therein
not misleading; and (vi) if at any time the representations and
warranties contemplated by Section 3 below cease to be true and correct
in all material respects, and, if the notification relates to an event
described in clause (v), the Company shall promptly prepare and furnish
to each such seller and each underwriter, if any, a reasonable number of
copies of a prospectus supplemented or amended so that, as
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thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein in the light of the
circumstances under which they were made not misleading;
(f) enter into such customary agreements (including,
if applicable, an underwriting agreement) and take such other actions as
the Holders participating in such offering shall reasonably request in
order to expedite or facilitate the disposition of such Registrable
Securities. The Holders of the Registrable Securities which are to be
distributed by such underwriters shall be parties to such underwriting
agreement and may, at their option, require that the Company make to and
for the benefit of such Holders the representations, warranties and
covenants of the Company which are being made to and for the benefit of
such underwriters and which are of the type customarily provided in
secondary offerings;
(g) if an opinion from the Company's counsel is
delivered to any underwriters in the offering, the Company shall furnish
to the Holders of Registrable Securities participating in the offering,
a copy of such opinion and letter addressed to such Holders;
(h) delivery promptly to the Holders of Registrable
Securities participating in the offering and each underwriter, if any,
copies of all correspondence between the Commission and the Company, its
counsel or auditors and any memoranda relating to discussions with the
Commission or its staff with respect to the registration statement,
other than those portions of any such memoranda which contain
information subject to attorney-client privilege with respect to the
Company, and, upon receipt of such confidentiality agreements as the
Company may reasonably request, make reasonably available for inspection
by any seller of such Registrable Securities covered by such
registration statement, by any underwriter, if any, participating in any
disposition to be effected pursuant to such registration statement and
by any attorney, accountant or other agent retained by any such seller
or any such underwriter, all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause
all of the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration
statement provided the recipient of such information seeks such
information in good faith and for a proper purpose;
(i) make reasonably available its employees and
personnel and otherwise provide reasonable assistance to the
underwriters (taking into account the needs to the Company's businesses
and the requirements of the marketing process) in the marketing of
Registrable Securities in any underwritten offering;
(j) cooperate with the Holders of Registrable
Securities and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates not bearing any
restrictive legends representing the Registrable Securities to be sold,
and cause such Registrable Securities to be issued in such denominations
and
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registered in such names in accordance with the underwriting agreement
prior to any sale of Registrable Securities to the underwriters or, if
not an underwritten offering, in accordance with the instructions of the
selling holders of the Registrable Securities at least three business
days prior to any sale of Registrable Securities; and
(k) take all such other commercially reasonable
actions as are necessary or advisable in order to expedite or facilitate
the disposition of such Registrable Securities.
2.4 Form S-3 Registration. At any time between September 30,
2003 and June 30, 2006, in case the Company shall receive from one or more
Holders holding at least a majority of the Registrable Securities then
outstanding a written request that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or part of the
Registrable Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders of Registrable Securities; and
(b) as soon as practicable, effect such registration
and all such qualifications and compliances made as to permit or
facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such
request, together will all such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in
a written request given within 15 days after receipt of such written
notice from the Company; provided, however, that the Company shall not
be obligated to effect any such registration, qualification or
compliance pursuant to this Section 2.4:
(i) if Form S-3 is not available for such offering
by the Holders, or
(ii) if the Holders together with the holders of any
other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of
less than $500,000.
(iii) if any of the Holders have participated in a
Demand Registration, a Form S-3 Registration or a Piggyback
Registration within the twelve-month period preceding the
request.
2.5 Registration Expenses.
(a) "Expenses" shall mean any and all fees and
expenses incident to the Company's performance of or compliance with
this Article 2, including, without limitation: (i) SEC, stock exchange
or NASD registration, listing and filing fees and all listing fees and
fees with respect to the including of securities in NASDAQ, (ii) fees
and expenses of compliance with state securities or "blue sky" laws and
in connection with the preparation of a "blue sky" survey, including
without limitation, reasonable fees and expenses of blue sky counsel,
(iii) printing and copying expenses, (iv) messenger and
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delivery expenses, (v) fees and disbursements of counsel for the
Company, (vi) fees and disbursements of all independent public
accountants (including the expenses of any audit and/or "cold comfort"
letter) and fees and expenses of other persons, including special
experts, retained by the Company, and (vii) any other fees and
disbursements of underwriters, if any, customarily paid by issuers or
sellers of securities (collectively, "Expenses").
(b) The Company shall pay all Expenses with respect
to any Demand Registration, whether or not it becomes effective or
remains effective for the period contemplated by Section 2.3(b), and
with respect to any registration effected under Section 2.1 or Section
2.4.
(c) Notwithstanding the foregoing, (x) the
provisions of this Section 2.5 shall be deemed amended to the extent
necessary to cause these expense provisions to comply with "blue sky"
laws of each state in which the offering is made and (y) in connection
with any registration hereunder, each Holder of Registrable Securities
being registered shall pay all underwriting discounts and commissions
and any transfer taxes, if any, attributable to the sale of such
Registrable Securities, pro rata with respect to payments of discounts
and commissions in accordance with the number of shares sold in the
offering by such Holder, and (z) the Company shall, in the case of all
registrations under this Article 2, be responsible for all its internal
expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties).
2.6 Furnish Information. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Section 2
with respect to the Registrable Securities of any Holder that such Holder shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
2.7 Indemnification.
(a) In the event of any registration of any
securities of the Company under the Securities Act pursuant to this
Article 2, the Company will, and hereby does, indemnify and hold
harmless, to the fullest extent permitted by law, each Holder of
Registrable Securities, its directors, officers and representatives, and
each other person, if any, who controls such Holder within the meaning
of the Securities Act, against any and all losses, claims, damages or
liabilities, joint or several, actions or proceedings (whether commenced
or threatened) in respect thereof ("Claims") and expenses (including
reasonable fees of counsel and any amounts paid in any settlement
effected with the Company's consent, which consent shall not be
unreasonably withheld or delayed) to which each such indemnified party
may become subject under the Securities Act or otherwise, insofar as
such Claims or expenses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in
any registration statement under which such securities were registered
under the Securities
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Act, together with the documents incorporated by reference therein, or
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary, final or
summary prospectus or any amendment or supplement thereto, together with
the documents incorporated by reference therein, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that the Company shall not be liable to any such
indemnified party in any such case to the extent such Claim or expense
arises out of or is based upon any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission of a
material fact in such registration statement or amendment thereof or
supplement thereto or in any such prospectus or any preliminary, final
or summary prospectus in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such indemnified
party specifically for use therein. Such indemnity and reimbursement of
expenses shall remain in full force and effect regardless of any
investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such seller.
(b) In the event of any registration of any
securities of the Company under the Securities Act pursuant to this
Article 2, the Holders of Registrable Securities will, and hereby
indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its shareholders, directors, officers, agents and
representatives, and each other person, if any, who controls the Company
within the meaning of the Securities Act, against any and all losses,
claims, damages or liabilities, joint or several, actions or proceedings
(whether commenced or threatened) in respect thereof ("Claims") and
expenses (including reasonable fees of counsel and any amounts paid in
any settlement effected with the Holders' consent, which consent shall
not be unreasonably withheld or delayed) to which each such indemnified
party may become subject under the Securities Act or otherwise, insofar
as such Claims or expenses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in
any registration statement under which such securities were registered
under the Securities Act, together with the documents incorporated by
reference therein, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any untrue statement or
alleged untrue statement of a material fact contained in any
preliminary, final or summary prospectus or any amendment or supplement
thereto, together with the documents incorporated by reference therein,
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Holders shall not
be liable to any such indemnified party in any such case to the extent
such Claim or expense arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact or omission or
alleged omission of a material fact in such registration statement or
amendment thereof or supplement thereto or in any such prospectus or any
preliminary, final or summary
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prospectus unless it is contained in the written information furnished
to the Company by or on behalf of such Holder specifically for use
therein; provided, further, that the obligation to indemnify will be
individual to each Holder and will be limited to the amount of proceeds
received by such Holder from the sale of Registrable Securities pursuant
to such registration statement.. Such indemnity and reimbursement of
expenses shall remain in full force and effect regardless of any
investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such seller.
(c) Any person entitled to indemnification under
this Agreement shall notify promptly the indemnifying party in writing
of the commencement of any action or proceeding with respect to which a
claim for indemnification may be made pursuant to this Section 2.7, but
the failure of any indemnified party to provide such notice shall not
relieve the indemnifying party of its obligations under the preceding
paragraphs of this Section 2.7, except to the extent the indemnifying
party is materially prejudiced thereby and shall not relieve the
indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Section 2. In case any
action or proceeding is brought against an indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, unless
in the reasonable opinion of outside counsel to the indemnified party a
conflict of interest between such indemnified and indemnifying parties
may exist in respect of such claim, to assume the defense thereof
jointly with any other indemnifying party similarly noticed, to the
extent that it chooses, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party that it so chooses, the indemnifying party shall not
be liable to such indemnified party for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that (i) if the indemnifying party fails to take reasonable
steps necessary to defend diligently the action or proceeding within 20
days after receiving notice from such indemnified party that the
indemnified party believes it has failed to do so; or (ii) if such
indemnified party who is a defendant in any action or proceeding which
is also brought against the indemnifying party reasonably shall have
concluded that there may be one or more legal defenses available to such
indemnified party which are not available to the indemnifying party; or
(iii) if representation of both parties by the same counsel is otherwise
inappropriate under applicable standards of professional conduct, then,
in any such case, the indemnified party shall have the right to assume
or continue its own defense as set forth above, and the indemnifying
party shall be liable for any expenses therefor. No indemnifying party
shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of
which indemnification or contribution may be sought hereunder (whether
or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (A)
includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (B) does not include a
statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
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(d) If for any reason the foregoing indemnity is
unavailable or is insufficient to hold harmless an indemnified party
under Section 2.7 or each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any
Claim in such proportion as is appropriate to reflect the relative fault
of the indemnifying party, on the one hand, and the indemnified party,
on the other hand, with respect to such offering of securities. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. If,
however, the allocation provided in the second preceding sentence is not
permitted by applicable law, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party in
such proportion as is appropriate to reflect not only such relative
faults but also the relative benefits of the indemnifying party and the
indemnified party as well as any other relevant equitable
considerations. The parties hereto agree that it would not be just and
equitable if contributions pursuant to this Section 2.7(d) were to be
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred
to in the preceding sentences of this Section 2.7(d). The amount paid or
payable in respect of any Claim shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such Claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(t) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
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2.8 Underwritten Offerings. If requested by the underwriters for any
underwritten offering by the Holders of Registrable Securities pursuant to a
registration requested under Section 2, the Company shall enter into a customary
underwriting agreement with the underwriters. Such underwriting agreement shall
be reasonably satisfactory in form and substance to the Holders and shall
contain such representations and warranties by, and such other agreements on the
part of, the Company and such other terms as are generally included in the
underwriting agreement of such underwriters, including, without limitations,
indemnities and contribution agreements.
3. Rule 144 Reporting. With a view of making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
(a) Make a keep public information available, as
those terms are understood and defined in SEC Rule 144 or any successor
rule promulgated under the Securities Act, at all times after the
effective date of the first registration filed by the Company for an
offering of its securities to the general public;
(b) File with the SEC, in a timely manner, all
reports and other documents required of the Company under the Exchange
Act; and
(c) So long as Holder owns any Registrable
Securities, furnish to such Holder forthwith upon request a written
statement by the Company as to its compliance with the reporting
requirements of Rule 144 and of the Exchange Act at any time after it
has become subject to such reporting requirements.
4. Covenants of the Company. The Company covenants as follows:
4.1 Board of Directors. The Company shall use its best efforts to
have the Board hold a minimum of three meetings per year. During the period from
the date thereof through June 30, 2003, so long as Purchaser owns a minimum of
250,000 Shares, the Company shall use its best efforts to insure that the
Purchaser shall be entitled to appoint one director to the Board. Unless
instructed otherwise by the Purchaser, the person so entitled to be appointed to
the Board shall be Xxxxxxx Xxxxx.
4.2 Committees. The Company shall establish and maintain a
Compensation and Audit Committee, each of which shall have no more than three
members. Until at least June 20, 2003, Xxxx Xxxxx shall serve as a member of the
Compensation Committee.
4.3 Expenses of Directors. The Company shall promptly reimburse, in
full, the director of the Company who has been designated by the Purchaser for
all of such director's reasonable out-of-pocket expenses incurred in attending
each meeting of the Board or any Committee thereof and any other reasonable
expenses incurred by such director while acting on the Company's behalf at the
request of the Company.
4.4 Non-Disclosure and Invention Agreements. The Company shall
require all officers, employees, consultants and advisors now or hereafter
employed or engaged by the
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Company who have or shall have access to proprietary information relating to the
Company to enter into nondisclosure and development agreements in form and
substance satisfactory to the Company's Board.
4.5 Insurance. The Company shall at all times maintain in full force
and effect from a financially sound and reputable insurer a director's and
officer's liability insurance policy in the amount of not less $1 million
covering any representative of the Purchaser who is a director of the Company.
4.6 Size of the Board of Directors. From the date hereof to December
20, 2002, the size of the Company's Board shall not be increased to more than
five members without the Purchaser's approval.
4.7 Stock Options. From the date hereof until December 20, 2002, the
Company shall restrict stock option or stock award grants to its employees and
consultants to a limit of 900,000 shares at an exercise price of $1.00 or
greater (exclusive of directors) and will not increase the limit without the
Purchaser's approval. It is understood that the Company has recently granted
options purchase up to 200,000 shares of Common Stock at $1.00 per share to its
directors and prior to December 20, 2002, which shall not reduce the 900,000
available options or awards.
5. General.
5.1 Amendments and Waivers. This Agreement may be amended, modified,
supplemented or waived only upon the written agreement of the party against whom
enforcement of such amendment, modification, supplement or waiver is sought.
5.2 Notices. All notices, elections, request, demands or other
communications hereunder shall be in writing and shall be deemed given at the
time delivered personally or by fax or upon receipt if deposited in the United
States mail, certified or registered, return receipt requested, postage prepaid
addressed to the parties as follows (or to such other person or place, written
notice of which any party hereto shall have given to the other):
(a) If to the Purchaser: Cambridge Holdings, Ltd.
000 X. Xxxxxxxxxx Xxxxxxxxx #00
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a Copy to: Xxxxxx Xxxxx LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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(b) If to Company: AspenBio, Inc.
0000 Xxxxxxxxx Xxx, Xxxxxxxx X-0
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a Copy to: Krendl Krendl Xxxxxxxx & Way PC
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile : (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
5.3 Miscellaneous.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and the respective
successors, personal representatives and assigns. No Person other than a Holder
shall be entitled to any benefits under this Agreement, except as otherwise
expressly provided herein.
(b) This Agreement as well as the Securities Purchase
Agreement (and the Related Agreements referred to therein) between the parties
of even date (with the documents referred to herein or delivered pursuant
hereto) embodies the entire agreement and understanding between the parties
hereto and supersedes all prior agreements and understanding relating to the
subject matter hereof.
(c) This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Colorado without giving
effect to the conflicts of law principles thereof.
(d) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
section references are to this Agreement unless otherwise expressly provided.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
(f) Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
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(g) The parties hereto acknowledge that there would be no
adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to
injunctive relief, including specific performance, to enforce such obligations
without the posting of any bond, and, if any action should be brought in equity
to enforce any of the provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.
(h) Each party hereto shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned have executed this Inventory
Rights Agreement as of the date set forth above.
ASPENBIO, INC.
By:
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Name:
--------------------------------------
Title:
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CAMBRIDGE HOLDINGS, LTD.
By:
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Name:
---------------------------------------------
Title:
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