EXHIBIT 10.2
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:_________________________________
Name:_______________________________
Title:______________________________
CAMBRIDGE HOLDINGS, LTD.
By:_________________________________
Name:_______________________________
Title:______________________________
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