EXHIBIT 10.1
________________________________________________________________________________
COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
for the purchase of Units
Each Unit consisting of One Share of Common Stock
and One Warrant to Purchase One Share of Common Stock
of
ASPENBIO, INC.,
May 12, 2005
________________________________________________________________________________
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS..........................................................1
1.1 Certain Definitions..........................................1
1.2 Accounting Principles........................................4
1.3 Other Definitional Provisions; Construction..................5
ARTICLE 2 ISSUE AND SALE OF COMMON STOCK AND WARRANTS..........................5
2.1 Authorization and Issuance of the Common Stock
and Warrants.................................................5
2.2 Sale and Purchase............................................5
2.3 The Closing..................................................5
ARTICLE 3 CONDITIONS...........................................................6
3.1 Conditions to Purchase of Securities.........................6
3.2 Disclosures Regarding Rights Granted to Certain Investors
in this Offering.............................................6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................7
4.1 Representations and Warranties of the Company................7
4.2 Absolute Reliance on the Representations and Warranties.....13
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER.........................13
5.1 Purchase Entirely for Its Own Account.......................13
5.2 Disclosure of Information...................................13
5.3 Investment Experience.......................................13
5.4 Restricted Securities.......................................15
5.5 Legends.....................................................15
5.6 No Other Representations Affected...........................15
5.7 Survival of Purchaser Representations.......................15
ARTICLE 6 COVENANTS...........................................................15
6.1 Affirmative Covenants.......................................15
6.2 Negative Covenants..........................................16
ARTICLE 7 REGISTRATION RIGHTS.................................................17
7.1 Mandatory Registration......................................17
7.2 Piggyback Registrations.....................................17
7.3 Demand Registration Rights .................................18
7.4 Registration Procedures.....................................19
7.5 Registration Expenses.......................................21
7.6 Indemnification.............................................21
7.7 Participation in Underwritten Registrations.................22
7.8 Termination of Registration Rights..........................22
ARTICLE 8 MISCELLANEOUS.......................................................22
8.1 Successors and Assigns......................................22
8.2 Modifications and Amendments................................22
8.3 No Implied Waivers; Cumulative Remedies; Writing Required...23
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8.4 Fees and Expenses...........................................23
8.5 Reimbursement of Expenses-Enforcement and Collection........23
8.6 Notices.....................................................23
8.7 Survival....................................................24
8.8 Governing Law...............................................24
8.9 Jury Trial Waiver...........................................24
8.10 Remedies....................................................24
8.11 Limitation of Liability.....................................24
8.12 Severability................................................24
8.13 Headings....................................................25
8.14 Counterparts................................................25
8.15 Integration.................................................25
8.16 Independent Nature of Purchaser Obligations and Rights......25
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COMMON STOCK AND WARRANT
PURCHASE AGREEMENT
For the Purchase of up to
778,838 Shares of Common Stock and Warrants to Purchase
778,838 Shares of Common Stock
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement") is by
and between AspenBio, Inc., a Colorado corporation (the "Company"), and the
Purchasers. Capitalized terms used and not defined elsewhere in this Agreement
are defined in Article 1 hereof.
The parties hereto, in consideration of their mutual covenants and
agreements herein set forth and intending to be legally bound hereby, covenant
and agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. In addition to other words and terms defined
elsewhere in this Agreement, the following words and terms have the meanings set
forth below (and such meanings shall be equally applicable to both the singular
and plural form of the terms defined, as the context may require):
"Affiliate" shall mean with respect to any Person, any other Person that is
directly or indirectly controlling, controlled by or under common control with
such Person or entity or any of its Subsidiaries, and the term "control"
(including the terms "controlled by" and "under common control with") shall mean
having, directly or indirectly, the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities or by contract or otherwise. Without limiting the foregoing, the
ownership of ten percent (10%) or more of the voting securities of a Person
shall be deemed to constitute control and notwithstanding anything to the
contrary herein, neither the Purchaser nor any of their respective Affiliates
shall be deemed to be Affiliates of the Company by virtue of the transactions
contemplated in this Agreement.
"Agreement" shall mean this Common Stock and Warrant Purchase Agreement, as
the same may be amended, restated, supplemented or otherwise modified from time
to time.
"Business" shall mean the principal business of the Company as set forth in
Section 4.1(b) hereof and as such shall continue to be conducted following the
purchase and sale of the Securities.
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banking institutions in Denver, Colorado are authorized or required
by law to close.
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"By-laws" shall mean the by-laws or analogous instrument governing the
operations of the Company, including all amendments and supplements thereto.
"Charter Documents" shall mean the articles of incorporation filed with the
appropriate Governmental Authorities of the Company, including all amendments
and supplements thereto.
"Closing" shall mean the closing of the purchase and sale of the Common
Stock and the Warrants pursuant to this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the common stock, no par value, of the Company.
"Company" shall have the meaning assigned to such term in the introductory
paragraph hereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may from time to time be amended, and the rules and regulations of any
governmental agency or authority, as from time to time in effect, promulgated
thereunder.
"Fiscal Year" or "fiscal year" shall mean each 12-month period ending on
December 31 of each year.
"Governmental Authorities" shall mean any federal, state or municipal court
or other governmental department, commission, board, bureau, agency or
instrumentality, governmental or quasi-governmental, domestic or foreign.
"Investment Amount" shall mean the amount paid or agreed to be paid for the
Common Stock and Warrants, as indicated below each Purchaser's signature.
"IRS" shall mean the Internal Revenue Service and any governmental body or
agency succeeding to the functions thereof.
"Laws" shall mean all U.S. and foreign federal, state or local statutes,
laws, rules, regulations, ordinances, codes, policies, rules of common law, and
the like, now or hereafter in effect, including any judicial or administrative
interpretations thereof, and any judicial or administrative orders, consents,
decrees or judgments.
"Lien" shall mean any security interest, pledge, bailment, mortgage,
hypothecation, deed of trust, conditional sales and title retention agreement
(including any lease in the nature thereof), charge, encumbrance or other
similar arrangement or interest in real or personal property, whether such
interest is based on common law, statute or contract.
"Life Insurance" shall have the meaning assigned to such term in Section
3.1(c) hereof.
"Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets, liabilities or condition (financial or otherwise)
of the Company, individually and/or taken as a whole.
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"Options" shall mean options issued pursuant to the Company's 2002 Stock
Incentive Plan, subject to the restriction set forth in Section 6.3(b), and any
options outstanding as of the Closing Date.
"Person" shall mean any individual, partnership, limited partnership,
corporation, limited liability Company, association, joint stock company, trust,
joint venture, unincorporated organization or governmental entity or department,
agency or political subdivision thereof.
"Plan" shall mean any employee benefit plan (within the meaning of Section
3(3) of ERISA), established or maintained by the Company or any member of the
Controlled Group.
"Properties and Facilities" shall have the meaning assigned to such term in
Section 4.1(r) hereof.
"Property" shall mean, as to any Person, all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent balance sheet of such Person and its subsidiaries
under GAAP.
"Proprietary Rights" shall mean all patents, trademarks, trade names,
service marks, copyrights, inventions, production methods, licenses, formulas,
know-how, trade secrets and good will related to any of the foregoing,
regardless of whether such are registered with any Governmental Authorities,
including applications therefor.
"Purchase Documents" shall mean this Agreement, the Warrants and all other
agreements, instruments and documents delivered in connection herewith or
therewith as any or all of the foregoing may be supplemented or amended from
time to time.
"SBA Compliance Agreement" means the SBA Compliance Agreement between the
Company and any Purchaser which is an SBIC.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Subsidiary" of any corporation shall mean any other corporation or limited
liability company of which the outstanding capital stock possessing a majority
of voting power in the election of directors (otherwise than as the result of a
default) is owned or controlled by such corporation directly or indirectly
through Subsidiaries.
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"Trading Day" means (i) a day on which the Common Stock is traded on a
Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock
is not listed on a Trading Market (other than the OTC Bulletin Board), a day on
which the Common Stock is traded in the over-the-counter market, as reported by
the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on any
Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
"Trading Market" means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.
"Transaction Documents" shall have the meaning assigned to such term in
Section 4.1(f) hereof.
"Transactions" shall mean the purchase of the Common Stock and the Warrants
as contemplated by this Agreement, the Warrants, certificates for the Common
Stock and all other agreements contemplated hereby and thereby.
"Underlying Common Stock" shall mean the Common Stock issued or issuable
upon exercise of the Warrants (it being understood that exercise of the Warrant
shall include exercise pursuant to either Section 1(a) of the Warrant or
exercise of the conversion right pursuant to Section 1(b) of the Warrant), and
(c) any equity securities issued or issuable with respect to the securities
referred to in clauses (a) and (b) above by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization.
"Warrants" shall have the meaning assigned to such term in Section 2.1
hereof.
1.2 Accounting Principles. The character or amount of any asset, liability,
capital account or reserve and of any item of income or expense to be
determined, and any consolidation or other accounting computation to be made,
and the construction of any definition containing a financial term, pursuant to
this Agreement shall be determined or made in accordance with generally accepted
accounting principles in the United States of America consistently applied
("GAAP").
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1.3 Other Definitional Provisions; Construction. Whenever the context so
requires, neuter gender includes the masculine and feminine, the singular number
includes the plural and vice versa. The words "hereof" "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not in any particular provision of this agreement, and
references to section, article, annex, schedule, exhibit and like references are
references to this Agreement unless otherwise specified. References in this
Agreement to any Persons shall include such Persons' successors and permitted
assigns.
ARTICLE 2
ISSUE AND SALE OF COMMON STOCK AND WARRANTS
2.1 Authorization and Issuance of the Common Stock and Warrants. The
Company has duly authorized an offering of its securities (the "Offering") of up
to 4,571,429 shares (the "Shares") of Common Stock and Warrants to purchase up
to 4,571,429 shares of Common Stock exercisable at $1.35 per share (the
"Warrants"), to be substantially in the form of the Warrant attached hereto as
Exhibit A. The exclusive placement agent for the Offering is Westminster
Securities Corporation (the "Placement Agent"). Prior to May 12, 2005 investors
had already subscribed for an aggregate amount of $3,322,892 (the "First
Closing"), resulting in the issuance of 3,797,591 Shares and Warrants to
purchase an additional 3,797,591 shares of Common Stock. The Offering may
continue until June 4, 2005 for any remaining unsubscribed portion of the
aggregate $4,000,000 in gross proceeds under the Offering. As of May 12, 2005
the unsubscribed portion was $677,108. In no event will the aggregate gross
proceeds from this Offering exceed $4,000,000 or will the Offering continue
beyond June 4, 2005 (the "Offering Period"). The Shares and Warrants are being
offered at a unit purchase price of $0.875 per unit.
2.2 Sale and Purchase. Subject to the terms and conditions and in reliance
upon the representations, warranties and agreements set forth herein, the
Company shall sell to the Purchasers at a unit price of $0.875 one Share and one
Warrant. The minimum Investment Amount for each Purchaser is $8,750, for 10,000
Shares and 10,000 Warrants.
2.3 The Closing. All proceeds received from Purchasers will be deposited in
the Company's operating account. Within five business days after the later of:
(i) receipt of this Agreement fully executed by the Purchaser; and (ii)
confirmation that funds have cleared or a wire transfer is received and such
funds are immediately available; the Company will deliver the Shares of Common
Stock and Warrants (the "Closing" or "Closings") to the Purchaser. Such Closings
shall be held at the discretion of the Company as funds are received, at
reasonable intervals during the Offering Period, but in no event later that the
conclusion of the Offering Period. The Common Stock and the Warrants shall be
issued in the name of the Purchaser(s).
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ARTICLE 3
CONDITIONS AND DISCLOSURES
3.1 Conditions to Purchase of Securities. The obligation of the Purchaser
to purchase and pay for the Common Stock and Warrants is subject to the
satisfaction, prior to or at the Closing, of the following conditions:
(a) Representations and Warranties True. The representations and
warranties contained in Article 4 hereof shall be true and correct in all
material respects at and as of each Closing as though then made, except to the
extent of changes caused by the transactions expressly contemplated herein.
(b) Material Adverse Change. Except as described in the SEC Reports,
there will have been no material adverse change in the business of the Company
since December 31, 2004.
(c) Life Insurance. By June 16, 2005 the Company shall use its
reasonable best efforts to have issued and in effect a paid life insurance
policy insuring the life of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ in the amount of $2,000,000
naming the Company as the beneficiary has been issued and is in effect (the
"Life Insurance"). The Company will use its reasonable best efforts to increase
the face amount of the policy from $2,000,000 to $4,000,000 by August 3, 2005.
(d) Closing Documents. The Company shall have delivered or caused to
be delivered to the Purchaser the following documents:
(i) one or more certificates representing the aggregate number of
shares of the Common Stock purchased by each Purchaser, such certificates to
bear a restrictive legend in compliance with the Securities Act; and
(ii) one or more Warrants to purchase the aggregate number of
shares purchased by each Purchaser, duly completed and executed by the Company;
and
(iii) if the Purchaser is an SBIC and requests the SBA Compliance
Agreement, a duly completed and executed SBA Compliance Agreement by the
Company.
3.2 Disclosures Regarding Rights Granted to Certain Investors in this
Offering. Certain investors in this Offering who invested at least $1,000,000
were afforded the right, but not the obligation, for three years, to designate
one observer to attend the meetings of the Company's Board of Directors. In
addition, certain investors in this offering were granted a right of first offer
to participate in future sales by the Company of its securities.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Representations and Warranties of the Company. As a material inducement
to the Purchaser to enter into this Agreement and purchase the Common Stock and
the Warrants the Company hereby represents and warrants to the Purchaser as
follows:
(a) Organization and Power. The Company is duly organized, validly
existing and in good standing under the laws of its state of organization. The
Company has all requisite corporate or other organizational power and authority
and all material licenses, permits, approvals and authorizations necessary to
own and operate its properties, to carry on its businesses as now conducted and
presently proposed to be conducted and to carry out the Transactions, and is
qualified to do business in every jurisdiction where the failure to so qualify
might reasonably be expected to have a Material Adverse Effect. The Company has
its principal place of business in Castle Rock, Colorado. The copies of the
Charter Documents and By-Laws of the Company that have been furnished to the
Purchaser reflect all amendments made thereto at any time prior to the date of
this Agreement and are correct and complete.
(b) Principal Business. The Company is primarily engaged in the
discovery, development, manufacture and marketing of products for animal
healthcare (the "Business").
(c) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof reports filed on Form
10-KSB, Form 10-QSB, and Form 8-K, for the twelve months preceding the date
hereof (or such shorter period as the Company was required by law to file such
reports) (the foregoing materials being collectively referred to herein as the
"SEC Reports" and, together with the Schedules to this Agreement (if any), the
"Disclosure Materials") on a timely basis or has timely filed a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. Attached as Schedule 4.1(c) is a list of all
filings made by the Company with the SEC since the Company's inception. These
filings can be accessed through the Company's website at ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇.▇▇▇. As
of their respective dates, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the SEC promulgated thereunder, and none of the SEC Reports,
when filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position of
the Company and its consolidated Subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments. The Company's Common Stock is registered pursuant to Section
12(g) of the Exchange Act, and the Company has taken no action designed to, or
which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration.
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(d) Capitalization and Related Matters. As of May 12, 2005, the
authorized capital stock of the Company and the shares of stock that are issued,
outstanding and reserved for issuance upon exercise of warrants and Options and
exercise of the Warrants issued hereunder (after giving effect to anti-dilution
adjustments) are as set forth on the Capitalization Schedule and Addendum
attached hereto. As of May 12, 2005, the Company does not have outstanding any
capital stock or securities convertible or exchangeable for any shares of its
capital stock except as set forth in the Capitalization Schedule, and will not
have outstanding any rights or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable for
its capital stock, except as set forth in the Capitalization Schedule and except
as may be issued from time to time pursuant to Closings under this Agreement. As
of May 12, 2005, the Company is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock, except as set forth herein and the Charter Documents,
respectively, as in effect on the date hereof. As of the Closing, all of the
outstanding shares of the Company's capital stock will be validly issued, fully
paid and nonassessable. There are no statutory or contractual stockholders'
preemptive rights or notices with respect to the issuance of the Common Stock
and Warrants hereunder. Subject to and based on the accuracy of all
representations made by all Purchasers in this Offering, the Company has not
violated any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer, sale and
issuance of the Common Stock and Warrants hereunder do not require registration
under the Securities Act or any applicable state securities laws.
(e) Subsidiaries. The Company does not own, or hold any rights to
acquire, any shares of stock or any other security or interest in any other
Person, and the Company has no Subsidiaries.
(f) Authorization; No Breach. The execution, delivery and performance
of this Agreement, the other Purchase Documents and all other agreements,
instruments, certificates and documents contemplated hereby and thereby to which
the Company is a party (collectively, the "Transaction Documents"), and the
consummation of the Transactions have been duly authorized by the Company.
Except as set forth on Schedule 4.1(f), the execution and delivery by the
Company of the Transaction Documents and the consummation of the Transactions do
not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any Lien upon any of the Company's capital stock or assets
pursuant to, (iv) give any third party the right to accelerate any obligation
under, (v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice to any Governmental Authority
or Person pursuant to, the Charter Documents of the Company, or any law,
statute, rule or regulation to which the Company is subject, or any agreement,
instrument, order, judgment or decree to which the Company is a party or to
which it or its assets are subject.
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(g) Governmental Approvals. Except as specifically provided by the
Transaction Documents, no registration with or consent or approval of, or other
action by, any Governmental Authority is or will be required in connection with
the consummation of the Transactions by the Company.
(h) Enforceability. This Agreement constitutes, and each of the other
Transaction Documents when duly executed and delivered by the Company will
constitute, legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms.
(i) No Material Adverse Change. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that has had or that could reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables, accrued expenses and
other liabilities incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the SEC any request for
confidential treatment of information.
(j) Litigation. Except as described in the SEC Reports, there are no
actions, suits or proceedings at law or in equity or by or before any arbitrator
or any Governmental Authority now pending or, to the best knowledge of the
Company's management after due inquiry, threatened against or filed by or
affecting the Company or any of its directors or officers or the businesses,
assets or rights of the Company.
(k) Compliance with Laws. The Company is not in violation of any
applicable Law in any material respect. The Company is not in default with
respect to any judgment, order, writ, injunction, decree, rule or regulation of
any Governmental Authority. The Company is not in, and the consummation of the
Transactions will not cause any, default concerning any judgment, order, writ,
injunction or decree of any Governmental Authority, and there is no
investigation, enforcement action or regulatory action pending or threatened
against or affecting the Company by any Governmental Authority. There is no
remedial or other corrective action that the Company is required to take to
remain in compliance with any judgment, order, writ, injunction or decree of any
Governmental Authority or to maintain any material permits, approvals or
licenses granted by any Governmental Authority in full force and effect. During
the past ten (10) years, none of the officers, directors or management of the
Company have been arrested or convicted of any material crime nor have any of
them been bankrupt or an officer or director of a bankrupt company.
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(l) Transactions With Affiliates and Employees. Except as set forth in
the SEC Reports, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(m) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act rules 13a-15 and 15d-15) for
the Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its Subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company's Form 10-KSB or 10-QSB, as
the case may be, is being prepared. The Company's certifying officers have
evaluated the effectiveness of the Company's controls and procedures in
accordance with Item 307 of Regulation S-B under the Exchange Act for the
Company's most recently ended fiscal quarter or fiscal year-end (such date, the
"Evaluation Date"). The Company presented in its most recently filed Form 10-KSB
or Form 10-QSB the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.
(n) Certain Fees. The Company entered into a Placement Agent Agreement
(the "PAA") dated as of May 12, 2005 with Westminster Securities Corporation.
Under the PAA, Westminster will receive a maximum cash commission of 11% of the
gross proceeds raised in the offering, and maximum additional compensation in
the form of Placement Agent Warrants to purchase 10% of the number of units sold
in the Offering. A lesser cash and warrant commission has been negotiated with
respect to certain investors in the Offering. Except for any payments that may
be due to Westminster Securities pursuant to the PAA, no brokerage or finder's
fees or commissions are or will be payable by the Company to any broker,
financial advisor or consultant, finder, placement agent, investment banker,
bank or other Person with respect to the transactions contemplated by this
Agreement. The Purchasers shall have no obligation with respect to any fees or
with respect to any claims (other than such fees or commissions owed by a
Purchaser pursuant to written agreements executed by a Purchaser which fees or
commissions shall be the sole responsibility of such Purchaser) made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement.
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(o) Application of Takeover Protections. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Charter Documents, or the laws of its state of incorporation that is or could
become applicable to the Purchaser as a result of the Purchaser and the Company
fulfilling their obligations or exercising their rights under the Transaction
Documents, including without limitation the Company's issuance of the Common
Stock, the Warrants and the Underlying Common Stock and the Purchaser's
ownership of the Common Stock, the Warrants, and the Underlying Common Stock.
(p) Taxes. Except as set forth on Schedule 4.1(p), the Company has
filed or caused to be filed all Federal, state and local tax returns that are
required to be filed by it, and has paid or caused to be paid all taxes shown to
be due and payable on such returns or on any assessments received by it,
including payroll taxes.
(q) Labor and Employment. The Company is and each of its Plans are in
compliance in all material respects with those provisions of ERISA, the Code,
the Age Discrimination in Employment Act, and the regulations and published
interpretations thereunder which are applicable to the Company or any such Plan.
The Company is in compliance in all material respects with all labor and
employment laws, rules, regulations and requirements of all applicable domestic
and foreign jurisdictions. There are no pending or threatened labor disputes,
work stoppages or strikes.
(r) Properties; Security Interests. Except as set forth in the SEC
Reports, the Company has good and marketable title to, or valid leasehold
interests in, all of the material assets and properties used or useful by the
Company in the Business (collectively, the "Properties and Facilities"). All of
the Properties and Facilities are in good repair, working order and condition
and all such assets and properties are, except as set forth in the SEC Reports,
owned by the Company free and clear of all Liens. The Properties and Facilities
constitute all of the material assets, properties and rights of any type used in
or necessary for the conduct of the Business.
(s) Intellectual Property. The Company has good title and ownership
of, or has sufficient rights to, all trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes and patents, including without limitation the Proprietary Rights
(collectively, the "Intellectual Property") used in or necessary for its
business as now conducted or as proposed to be conducted. The Intellectual
Property Schedule attached hereto contains a complete and accurate list of all
outstanding options, licenses, or agreements of any kind relating to the
Intellectual Property owned by the Company ("Out-Licenses"), and any options,
licenses or agreements of any kind with respect to the Intellectual Property of
any other person or entity that the Company is bound by or a party to, excluding
standard, off-the-shelf commercial software licensing agreements
("In-Licenses"). None of the Intellectual Property used in or necessary for the
Company's business as now conducted conflicts with or infringes, nor has the
Company received any written or oral communications alleging that the Company
has violated or, by conducting its business, would violate, any Intellectual
Property of any other person or entity. The transactions contemplated under this
Agreement will not alter, impair or otherwise affect any rights of the Company
in the Intellectual Property. The Company has taken commercially reasonable
measures to protect the proprietary nature of the Intellectual Property and to
maintain in confidence all trade secrets and confidential information owned or
used by the Company.
-11-
There are no legal or governmental proceedings, including interference,
re-examination, reissue, opposition, nullity, or cancellation proceedings
pending that relate to any of the Intellectual Property, other than review of
pending patent applications, and the Company is not aware of any information
indicating that such proceedings are threatened or contemplated by any
governmental entity or any other Person.
The Company is not aware that any of its employees or independent contractors is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of such
employee's or independent contractor's best efforts to promote the interest of
the Company or that would conflict with the Company's business as now conducted
or as proposed to be conducted. Neither the execution or delivery of this
Agreement, nor the carrying on of the Company's business by the employees and
independent contractors of the Company, nor the conduct of the Company's
business as now conducted, or as currently proposed to be conducted, will, to
the Company's knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such employee or independent contractor
is now obligated. It is not and will not be necessary to use any inventions of
any of the Company's employees (or persons the Company currently intends to
hire) made prior to their employment by the Company. All of the Company's
significant employees have executed Confidential Information and Invention
Assignment Agreements with the Company. To the knowledge of the Company, no key
employee of the Company is in violation of any term of any employment contract,
patent disclosure agreement, proprietary information agreement, noncompetition
agreement, or any other contract or agreement or any restrictive covenant
relating to the right of any such key employee to be employed by the Company
because of the nature of the business conducted or to be conducted by the
Company or relating to the use of trade secrets or proprietary information of
others, and the continued employment of the key employees does not subject the
Company or any Purchaser to any liability to third parties.
To the knowledge of the Company, no key employee of the Company whose
termination, either individually or in the aggregate, would have a Material
Adverse Effect, has expressed any present intention of terminating his
employment with the Company.
(t) Complete Disclosure. All factual information furnished by or on
behalf of the Company to the Purchaser for purposes of or in connection with
this Agreement or the Transactions is, and all other such factual information
hereafter furnished by or on behalf of the Company will be, true and accurate in
all material respects on the date as of which such information is furnished and
not incomplete by omitting to state any fact necessary to make such information
not misleading at such time in light of the circumstances under which such
information was provided.
(u) Product Liabilities. There are no product recalls, trade disputes,
product liabilities or product tampering claims now pending, threatened against
or made by or affecting the Company or any of its directors, officers or
employees or the businesses, assets or rights of the Company.
-12-
4.2 Absolute Reliance on the Representations and Warranties. All
representations and warranties contained in this Agreement and any financial
statements, instruments, certificates, schedules or other documents delivered in
connection herewith, shall survive the execution and delivery of this Agreement
for a period of two years.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
5.1 Purchase Entirely for Its Own Account. This Agreement is made with the
Purchaser in reliance upon the Purchaser's representation to the Company that
the Common Stock and the Warrants will be acquired for investment for the
Purchaser's own account, not as a nominee or agent, and not with any intent or
agreement for the resale or distribution of any part thereof.
5.2 Disclosure of Information, The Purchaser has had the opportunity to ask
questions of, and receive answers from officers and directors of the Company, to
review the SEC Reports, and to obtain additional information regarding the
Company and this Offering. The Purchaser has been given access to information
regarding the Company and has utilized such access to the Purchaser's
satisfaction for the purpose of obtaining such information regarding the Company
as the Purchaser has reasonably requested. Such information includes the terms
and conditions of the offering of the Common Stock and Warrants to the
Purchaser, and the plan of operations of the Company's business and financial
condition of the Company. Neither such inquiries nor any other investigation
conducted by or on behalf of the Purchaser or its representatives or counsel
shall modify, amend or affect the Purchaser's right to rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Purchase Documents.
5.3 Accredited and Sophisticated Investor; Investment Experience. Purchaser
represents that it is a sophisticated investor and an "accredited investor" as
defined in Rule 501 under the Securities Act, for the reason(s) indicated below:
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__________________________________________________________________________________________________________________
------- An employee benefit plan within the meaning ------- A trust with total assets in excess of $5,000,000
of Title I of the Employee Retirement not formed for the specific purpose of acquiring
Income Security Act of 1974, if the the Shares, whose purchase is directed by a
investment decision is made by a plan person who has such knowledge and experience in
fiduciary, as defined in Section 3(21) of financial and business matters that he or she is
such Employee Retirement Income Security capable of evaluating the merits and risks of an
Act, which is either a bank, savings and investment in the Shares.
loan association, insurance company or A bank as defined in Section 3(a)(2) of the Act,
registered investment advisor, or if the or a savings and loan association or other
employee benefit plan has total assets in institution as defined in Section 3(a)(5)(A) of
excess of $5,000,000 or, if a self directed ------- the Act, whether acting in its individual or
plan, with investment decisions made solely fiduciary capacity.
by persons that are otherwise accredited
investors.
__________________________________________________________________________________________________________________
--------- A private business development company as ------- A broker or dealer registered pursuant to Section
defined in Section 202(a)(22) of the 15 of the Securities Exchange Act of 1934.
Investment Advisors Act of 1940.
__________________________________________________________________________________________________________________
------- An organization described in Section ------- An insurance company as defined in Section 2(13)
501(c)(3) of the Internal Revenue Code, or of the Act.
a corporation, Massachusetts or similar An investment company registered under the
business trust, or a partnership (in each Investment Company Act of 1940 or a business
case not formed for the specific purpose of ------- development company as defined in Section
acquiring the Shares) with total assets in 2(a)(48) of the Investment Company Act of 1940.
excess of $5,000,000.
__________________________________________________________________________________________________________________
------- A natural person whose net worth, ------- A Small Business Investment Company licensed by
individually or jointly with spouse, the U.S. Small Business Administration under
exceeds $1,000,000 at this time (including Section 301(c) or (d) of the Small Business
the value of that person's principal Investment Act of 1958.
residence valued at either (x) cost, A plan established and maintained by a state, its
including cost of improvements, net of political subdivisions, or any agency or
current encumbrances on the property, or ------- instrumentality of a state or its political
(y) the appraised value of the property as subdivisions, for the benefit of its employees,
determined by a written appraisal used by if such plan has total assets in excess of
an institution lender making a loan to that $5,000,000.
person secured by the property, including
subsequent improvements, net of current
encumbrances on the property).
__________________________________________________________________________________________________________________
The Purchaser represents that it is an investor in restricted securities and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Common Stock and Warrants and can bear the economic risk of loss of the
entire investment in the securities being purchased.
-14-
5.4 No Purchaser Representative. The Purchaser has not authorized any
person or institution to act as his purchaser representative (as that term is
defined in Regulation D of the General Rules and Regulations under the Act) in
connection with this transaction. The Purchaser has such knowledge and
experience in financial, investment and business matters that he is capable of
evaluating the merits and risks of the prospective investment in the securities.
The Purchaser has consulted with such independent legal counsel or other
advisers as he has deemed appropriate to assist the undersigned in evaluating
his proposed investment in the securities.
5.5 Legends. The Purchaser hereby agrees that the Company may insert the
following or similar legend on the face of the certificates evidencing the
Shares and the Warrants Shares, if required in compliance with Federal and state
securities laws:
"These securities have not been registered under the Securities Act of
1933, as amended (the "Act") or under the securities laws of any state.
They may not be sold, offered for sale, pledged or hypothecated in the
absence of a registration statement in effect with respect to the
securities under such act or an opinion of counsel reasonably
satisfactory to the company that such registration is not required
pursuant to a valid exemption therefrom under the Act.
5.6 Placement Agent and Affiliates May Subscribe. Purchaser hereby
acknowledges that the Placement Agent, its affiliates and/or its beneficial
owners may subscribe for the securities.
5.7 Survival of Purchaser Representations. All representations and
warranties contained in this Agreement by Purchaser and any financial
statements, instruments, certificates, schedules or other documents delivered in
connection herewith, shall survive the execution and delivery of this Agreement,
regardless of any investigation made by the Company or on the Company's behalf.
ARTICLE 6
COVENANTS
6.1 Affirmative Covenants. The Company covenants that, so long as the
Purchaser owns any Common Stock or Underlying Common Stock or Warrants the
Company shall:
(a) Existence. Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence.
(b) Furnishing of Information. Timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company pursuant to the Exchange Act, and if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Purchaser and make publicly available in accordance with Rule
144(c) such information as is required for the Purchaser to sell the Common
Stock and Underlying Common Stock under Rule 144. The Company further covenants
that it will take such further action as any holder of Common Stock, Warrants
and or the Underlying Common Stock may reasonably request, all to the extent
required from time to time to enable such Person to sell the Shares and
Underlying Common Stock without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
-15-
(c) Indemnification of Investors. In addition to the indemnity
provided in Article 7, indemnify and hold the Purchaser and their directors,
officers, partners, representatives, employees and agents (each, an "Investor
Party") harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys' fees and costs of
investigation (collectively, "Losses") that any such Investor Party may suffer
or incur as a result of or relating to any misrepresentation, breach or
inaccuracy of any representation, warranty, covenant or agreement made by the
Company in any Transaction Document. In addition to the indemnity contained
herein, the Company will reimburse each Investor Party for its reasonable legal
and other expenses (including the cost of any investigation, preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred.
(d) Common Stock Reserve. Maintain in reserve, at all times that the
Warrants are unexercised, authorized, but unissued and unreserved, shares of
Common Stock for issuance upon exercise of the Warrants.
(e) Use of Proceeds. Use the funds received from the Purchasers in
connection with the Transactions substantially in accordance with the "Use of
Proceeds Schedule" attached hereto.
(f) Further Assurances. With reasonable promptness, execute and
deliver to the Purchaser, from time to time, upon the reasonable request of the
Purchaser, such supplemental agreements, statements, assignments and transfers,
or instructions on documents as the Purchaser may request in order that the full
intent of this Agreement and the other Purchase Documents may be carried into
effect.
6.2 Negative Covenants. The Company covenants to the Purchaser that, for a
period of two years beginning with the Closing Date and ending two years after
the Closing Date, the Company shall not:
(a) Dividends and Stock Purchases. Except as permitted by agreements
with ▇▇▇▇▇ ▇▇▇▇▇ in effect as of Closing (as described in the Company's SEC
Reports), directly or indirectly, declare or pay any dividends or make any
distribution of any kind on its outstanding capital stock or any other payment
of any kind to any of its stockholders or its Affiliates without first obtaining
the consent of the then holders of a majority of the Registrable Securities.
(b) Issuances to Optionees. Issue to employees or consultants shares
of Common Stock (except pursuant to exercises of options granted prior to the
Closing Date) or Options in excess of 1,000,000 shares, without first obtaining
the consent of the then holders of a majority of the Registrable Securities.
Such consent will not be necessary if: (i) the Common Stock trades on Nasdaq at
a price above $3.00 for a period of 20 consecutive Trading Days and the average
daily per share volume of the Common Stock on Nasdaq for the 20 Trading Days is
in excess of 100,000 shares; and (ii) a current registration statement is then
in effect for the resale of the Purchaser's Common Stock and the Underlying
Common Stock.
-16-
ARTICLE 7
REGISTRATION RIGHTS
7.1 Mandatory Registration. The Company shall prepare and file a
registration statement with the SEC on or before August 13, 2005 (the "Filing
Date") covering the resale of all of the Registrable Securities. The Company
shall use its best efforts to obtain effectiveness of the registration statement
as soon as practicable. If the registration statement is not filed by the Filing
Date or the registration statement is not declared effective by the SEC on or
before October 2, 2005, or after the registration statement has been declared
effective, sales of all of the Registrable Securities cannot be made pursuant to
the registration statement ( any such failure or breach being referred to as an
"Event," and the date on which such Event occurs being referred to as the "Event
Date"), then in addition to any other rights the Purchaser may have hereunder or
under applicable law, the Company will make a payment to the Purchaser as
liquidated damages and not as a penalty, (a) an amount equal to 2% of the
Investment Amount paid by the Purchaser for the shares of Common Stock that are
still owned by the Purchaser on the Event Date; and (b) on each monthly
anniversary of each such Event Date (if the applicable Event shall not have been
cured by such date) until the applicable Event is cured, the Company shall pay
to the Purchaser an amount equal to 2% of the Investment Amount paid by the
Purchaser for the shares of Common Stock that are still owned by the Purchaser
on each such monthly anniversary of the Event Date. If the Company fails to pay
any liquidated damages pursuant to this Section 7.1 in full within five business
days after the end of the month of the date payable, the Company will pay
interest at the rate of 10% per annum to the Holder. At the option of the
Company, any amounts payable to the Purchaser pursuant to this Section 7.1 may
be paid in cash or in shares of the Common Stock. If paid in Common Stock , the
shares shall be valued at the average of the closing prices of the Common Stock
for the ten Trading Days prior to (but not including) the date such liquidated
damages are due. The liquidated damages shall apply on a pro-rata basis for any
portion of a month prior to the cure of an Event, except in the case of the
first Event Date. Notwithstanding the foregoing, in no event shall the payments
to which a Purchaser is entitled pursuant to this Section 7.1 exceed 20% of the
Investment Amount paid by such Purchaser.
7.2 Piggyback Registrations.
(a) Whenever the Company proposes to register any of its securities
under the Securities Act and the registration form to be used may be used for
the registration of Registrable Securities (a "Piggyback Registration"), the
Company will give prompt written notice (in any event within three (3) Business
Days after its receipt of notice of any exercise of demand registration rights
other than under this Agreement) to all holders of Registrable Securities with
respect of the proposed offering at least 15 days before the initial filing with
the SEC of such registration statement, and offer to include in such filing such
Registrable Securities as any such holder may request. Each such holder of
Registrable Securities desiring to have Registrable Securities registered under
this Section 7.2 shall advise the Company in writing within 15 days after the
date of receipt of such notice from the Company, setting forth the amount of
such Registrable Securities for which registration is requested. The Company
shall thereupon include in such filing the number of Registrable Securities for
which registration is so requested, and shall use its best efforts to effect
registration under the Securities Act of such Registrable Securities.
-17-
(b) The registration expenses of the holders of Registrable Securities
will be paid by the Company in all Piggyback Registrations to the extent
provided in Section 7.5 hereof.
(c) If a Piggyback Registration is an underwritten primary
registration on behalf of holders of the Company's securities, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the Company, the Company will include in such registration: (i)
first, the securities the Company proposes to sell, and (ii) second, the
Registrable Securities requested to be included in such registration, pro rata
among the holders of the securities requested to be included in such
registration.
(d) If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company's securities, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number that
can be sold in an orderly manner in such offering within a price range
acceptable to the holders initially requesting such registration, the Company
will include in such registration, the Registrable Securities requested to be
included in such registration, pro rata among the holders of other securities
requested to be included in such registration.
7.3 Demand Registration Rights.
(a) If, at any time prior to December 31, 2007, the Company receives a
written request by the holders of a majority of the Registrable Securities to
effect the registration under the Securities Act of the Registrable Securities,
the Company shall follow the procedures described in this Section 7.3. Within
five (5) days of its receipt of such request, the Company shall give written
notice of such proposed registration (a "Demand Registration") to all holders of
Registrable Securities, and thereupon, the Company shall, as expeditiously as
possible, use its best efforts to effect the registration on a form of general
use under the Securities Act of the shares it has been requested to register in
such initial request and in any response to such notice given to the Company
within 20 days after the Company's giving of such notice; provided, however,
that the Company shall not be required to effect more than one Demand
Registration pursuant to this Section 7.3.
(b) The Company may not be required to effect a registration pursuant
to this Section 7.3 during the first 180 days after the effective date of any
registration statement filed by the Company under Sections 7.1 or 7.2 hereof if
the holders of Registrable Securities requesting registration have been afforded
the opportunity to register in such registration all or a majority of their
Registrable Securities.
-18-
(c) The Company may include in any registration under this Section 7.3
any other shares of Common Stock (including issued and outstanding shares of
stock as to which the holders thereof have contracted with the Company for
"piggyback" registration rights) so long as the inclusion in such registration
of such shares will not, in the opinion of the managing underwriter of the
shares of the stockholder or stockholders first demanding registration (if the
offering is underwritten), interfere with the successful marketing in accordance
with the intended method of sale or other disposition of all the stock sought to
be registered by such demanding stockholder or stockholders pursuant to this
Section 7.3.
7.4 Registration Procedures. Whenever the holders of Registrable Securities
have requested that any Registrable Securities be registered pursuant to this
Agreement, the Company will use reasonable efforts to effect the registration
and the sale of such Registrable Securities in accordance with the intended
method of disposition thereof, and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use reasonable efforts to cause such
registration statement to become effective;
(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 reasonably necessary to keep such registration statement effective for a
period equal to the shorter of (i) one year and (ii) the time by which all
securities covered by such registration statement have been sold;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use reasonable efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller of Registrable Securities reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided that the Company will not
be required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdictions, (iii) consent to general
service of process in each such jurisdiction, (iv) undertake such actions in any
jurisdiction other than the states of the United States of America and the
District of Columbia, or (v) register or qualify such Registrable Securities in
any state where the cost to do would be prohibitively expensive);
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the Purchaser of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
-19-
(f) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(g) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(h) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(i) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as soon
as reasonably practicable, an earnings statement covering the period of at least
twelve months beginning with the first day of the Company's first full calendar
quarter after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder;
(j) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included; and
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included in such registration statement for sale in any
jurisdiction, the Company will use its best efforts promptly to obtain the
withdrawal of such order. If any such registration or comparable statement
refers to any holder by name or otherwise as the holder of any securities of the
Company and if in its sole and exclusive judgment such holder is or might be
deemed to be a controlling person of the Company, such holder shall have the
right to require (i) the insertion therein of language, in form and substance
satisfactory to such holder and presented to the Company in writing, to the
effect that the holding by such holder of such securities is not to be construed
as a recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, (ii) in
the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such holder; provided that with respect to this
clause (ii) such holder shall furnish to the Company an opinion of counsel to
such effect, which opinion and counsel shall be reasonably satisfactory to the
Company.
-20-
7.5 Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Article 7, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Company and all independent
certified public accountants, and other Persons retained by the Company (all
such expenses, other than discounts and commissions related to sales by the
Purchaser, being herein called "Registration Expenses"), will be borne by the
Company.
7.6 Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its partners, officers and directors and
each Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company will indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder;
-21-
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities. The Company also
agrees to make such provisions, as are reasonably requested by any indemnified
party, for contribution to such party in the event the Company's indemnification
is unavailable for any reason.
7.7 Participation in Underwritten Registrations. No Person may participate
in any registration hereunder which is underwritten unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding such holder and
such holder's intended method of distribution.
7.8 Termination of Registration Rights. All registration rights granted
under this Article 7 will expire if the Company is subject to the provisions of
the Securities Exchange Act and all of the holder's Registrable Securities may
be sold under SEC Rule 144 during any ninety-day period.
ARTICLE 8
MISCELLANEOUS
8.1 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that (a) the Company may not assign or transfer its rights
hereunder or any interest herein or delegate its duties hereunder.
8.2 Modifications and Amendments. The provisions of this Agreement may be
modified, waived or amended, but only by a written instrument signed by the
Company and the Purchaser.
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8.3 No Implied Waivers; Cumulative Remedies; Writing Required. No delay or
failure in exercising any right, power or remedy hereunder shall affect or
operate as a waiver thereof; nor shall any single or partial exercise thereof or
any abandonment or discontinuance of steps to enforce such a right, power or
remedy preclude any further exercise thereof or of any other right, power or
remedy. The rights and remedies hereunder are cumulative and not exclusive of
any rights or remedies that the Purchaser or any holder of Warrants or
Underlying Common Stock would otherwise have. Any waiver, permit, consent or
approval of any kind or character of any breach or default under this Agreement
or any such waiver of any provision or condition of this Agreement must be in
writing, and shall be effective only to the extent in such writing specifically
set forth.
8.4 Fees and Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of the Purchase Documents.
8.5 Reimbursement of Expenses-Enforcement and Collection. The Company upon
demand shall pay or reimburse the Purchaser for all fees and expenses incurred
or payable by the Purchaser (including, without limitation, reasonable fees and
expenses of counsel for the Purchaser), from time to time arising in connection
with the enforcement of this Agreement.
8.6 Notices. All notices and other communications given to or made upon any
party hereto in connection with this Agreement shall, except as otherwise
expressly herein provided, be in writing (including telecopy, but in such case,
a confirming copy will be sent by another permitted means) and mailed via
certified mail, telecopied or delivered by guaranteed overnight parcel express
service or courier to the respective parties, as follows:
to the Company:
---------------
AspenBio, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ Figa & Will, P.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
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To the Purchaser, at the address set forth below such
Purchaser's signature;
or in accordance with any subsequent written direction from the recipient party
to the sending party. All such notices and other communications shall, except as
otherwise expressly herein provided, be effective upon delivery if delivered by
courier or overnight parcel express service; in the case of certified mail,
three (3) Business Days after the date sent; or in the case of telecopy, when
received.
8.7 Survival. All representations, warranties, covenants and agreements of
the Company contained herein or made in writing in connection herewith shall
survive the execution and delivery of this Agreement, the Closing and the
purchase and delivery of the Common Stock and Warrants.
8.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD TO CONFLICT
OF LAWS PRINCIPLES.
8.9 Jury Trial Waiver. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR (II) ARISING FROM ANY DISPUTE OR
CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS AGREEMENT AND AGREES THAT ANY
SUCH ACTION OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
8.10 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchaser
will be entitled to specific performance under the Purchase Documents. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
8.11 Limitation of Liability. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of the
Purchaser arising directly or indirectly, under any Transaction Document of any
and every nature whatsoever shall be satisfied solely out of the assets of such
Purchaser, and that no trustee, officer, other investment vehicle or any other
Affiliate of such Purchaser or any investor, partner, shareholder or holder of
shares of beneficial interest of such Purchaser shall be personally liable for
any liabilities of such Purchaser.
8.12 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law in any jurisdiction, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating any other provision of this Agreement.
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8.13 Headings. Article, section and subsection headings in this Agreement
are included for convenience of reference only and shall not constitute a part
of this Agreement for any other purpose.
8.14 Counterparts. This Agreement may be executed in any number of
counterparts and by any party hereto on separate counterparts, each of which,
when so executed and delivered, shall be an original, but all such counterparts
shall together constitute one and the same instrument.
8.15 Integration. This Agreement and the other Purchase Documents set forth
the entire understanding of the parties hereto with respect to all matters
contemplated hereby and supersede all previous agreements and understandings
among them concerning such matters. No statements or agreements, oral or
written, made prior to or at the signing hereof, shall vary, waive or modify the
written terms hereof.
8.16 Independent Nature of Purchaser Obligations and Rights. Each Purchaser
acknowledges that it has sole responsibility for its own due diligence
investigation and its own investment decision and that in connection with its
investigation and its investment decision (i) such Purchaser has not relied on
any representation by or on behalf of the Company not set forth in the SEC
Reports or in this Agreement, and (ii) such Purchaser has not relied on the fact
that any other Person has decided to invest in the Offering.
[remainder of page intentionally left blank; signature page follows]
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SIGNATURE PAGE TO
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
The undersigned investor signs this Agreement on _______, 2005 and
hereby certifies that he (i) has received and relied solely upon this Agreement
and its respective exhibits and schedules, (ii) agrees to all the terms and
conditions of this Agreement, (iii) meets the suitability standards set forth
herein and (iv) is a resident of the state or foreign jurisdiction indicated
below.
PURCHASER NAME (Please Print)
------------------------------------------
------------------------------------------
Purchaser Signature
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Tax ID#
------------------------------------
Investment Amount: $
------------
Address for Notices:
------------------------------------------
------------------------------------------
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e-mail:
------------------------------------
The Purchaser agrees to the terms of this Agreement and, as required by the
Regulations pursuant to the Internal Revenue Code, certifies under penalty of
perjury that (1) the Social Security Number or Taxpayer Identification Number
and address provided above is correct, (2) Purchaser is not subject to backup
withholding (unless the Backup Withholding Statement box is checked) either
because he has not been notified that he is subject to backup withholding as a
result of a failure to report all interest or dividends or because the Internal
Revenue Service has notified him that he is no longer subject to backup
withholding and (3) the Purchaser is not a nonresident alien, foreign
partnership, foreign trust or foreign estate.
This Common Stock and Warrant Purchase Agreement for the purchase of
securities in AspenBio, Inc. by the above-named Purchaser is accepted this ___
day of ____________, 2005.
ASPENBIO, INC.
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
SCHEDULES
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4.1(c) Schedule 4.1(c) - SEC Filings
4.1(d) Capitalization Schedule and Addendum
4.1(f) Schedule 4.1(f) - Bank Consent
4.1(p) Schedule 4.1(p) - Unpaid Taxes
4.1(s) Intellectual Property Schedule -1&2
6.1(f) Use of Proceeds Schedule
EXHIBITS
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EXHIBIT A Form of Warrant