SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (Date of Earliest Event Reported): August 7, 2000
--------------
VITRO DIAGNOSTICS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 0-17378 84-1012042
---------------- ------------ -------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
8100 Southpark Way, B-1
Littleton, Colorado 80120
---------------------------------------- -------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (303) 794-2000
--------------
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 1. CHANGES IN CONTROL OF REGISTRANT
--------------------------------
Effective August 7, 2000 ("closing"), Vitro Diagnostics, Inc. ("Company,"
"us" or "we") entered into a number of agreements, as a result of which we
experienced a change in control. Roger D. Hurst, former President, Chief
Executive Officer and a director of the Company, resigned from those positions
and James R. Musick succeeded Mr. Hurst as the President and Chief Executive
Officer. Two individuals were added to our Board of Directors, one to fill the
vacancy created by the resignation of Mr. Hurst and one to fill a new position.
In addition, certain of our shareholders agreed to vote common stock of our
Company in favor of the election and retention of certain directors, including
the foregoing individuals. A more detailed description of the transactions
giving rise to this change in control is included in the balance of this report.
You should review copies of the agreements executed in connection with these
transactions, copies of which are attached as exhibits to this report. The
descriptions of those transactions are qualified by reference to those exhibits.
At closing, we sold certain assets formerly used in our business to a
private company controlled by Mr. Hurst. See Item 2 below for a more complete
description of that transaction. At the same time, Mr. Hurst resigned his
position as President, Chief Executive Officer and a director of the Company. In
accordance with the terms of a shareholders' agreement executed on the same
date, remaining members of our Board of Directors voted to increase our Board to
four individuals. Messrs. Henry Schmerler and Ronald Goode were then elected to
fill the vacancy created by the resignation of Mr. Hurst and the vacancy created
by the expansion of our Board. Simultaneously, James R. Musick, formerly our
Vice President and Secretary, was elected as President and Chief Executive
Officer on an interim basis pending further consideration by our Board. Erik Van
Horn was elected Vice President and Secretary.
The Company's Board of Directors now includes Ronald L. Goode, Ph.D. and
Mr. Henry Schmerler as outside directors. Dr. Goode, a former pharmaceutical
executive, operates a consulting business focusing on strategic alliances and
other collaborative relationships within the pharmaceutical industry. Dr. Goode
has held a variety of executive positions with major pharmaceutical firms
including G.D. Searle and Pfizer Pharmaceuticals. He was Corporate Senior Vice
President of Licensing and Business Development of G.D. Searle and Company. He
also served as President of Searle International Operations. In addition, he was
Vice-President of Clinical and Scientific Affairs for Pfizer Pharmaceuticals.
Mr. Schmerler is a former executive with Dun and Bradstreet Corporation,
where he held various positions including Vice President of Business
Development, President of the National Credit Office and President of the Credit
Clearing House. He is presently a financial consultant and serves on the board
of a privately-held company.
2
-2-
<PAGE>
Pursuant to the terms of the shareholders' agreement, World Wide Capital
Investors, LLC ("WWC"), the owner of 2,370,000 shares of our common stock,
Messrs. Musick and Van Horn agreed to vote their shares such that our Board will
be comprised of Messrs. Musick, Schmerler, Goode, Van Horn and William J.
Schmulh. It is anticipated that Mr. Schmulh will be nominated as a director in
connection with an upcoming meeting of shareholders. Also in conjunction with
the shareholders' agreement, Messrs. Hurst and Musick granted a proxy with
regard to 1,4000,000 shares of our common stock to Ronald Goode or Henry
Schmerler to vote as determined by the Board of Directors. The shareholders'
agreement represented a compromise between our existing management and WWC with
regard to the efforts of WWC to nominate and elect certain individuals to our
Board of Directors and otherwise exercise control of the Company, as set forth
in an amendment to a Schedule 13-D filed on its behalf.
As a result of these transactions, our Board is now comprised of Messrs.
Musick, Schmerler, Goode and Van Horn. The newest members of our Board, Messrs.
Schmerler and Goode, own 150,000 and 50,000 shares of our common stock,
respectively.
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
------------------------------------
Also effective August 7, 2000, pursuant to the terms of a purchase
agreement, we sold all of the assets of our antigen division to AspenBio, Inc.,
a private Colorado corporation ("purchaser") controlled by Mr. Hurst. This
transaction was effective for accounting purposes on July 31, 2000. In exchange
for the assets, the purchaser agreed to pay us $700,000 and assume a majority of
our liabilities. At closing, we received $250,000 cash and a promissory note in
the principal amount of $450,000 payable September 7, 2000. This note was
personally guaranteed by Mr. Hurst. In addition, the purchaser assumed all of
our liabilities except for certain excluded liabilities associated with the
business and assets which we retained. As of the date of closing, we estimated
that the assumed liabilities totaled approximately $600,000 on an unaudited
basis. The purchaser agreed to pay all of these liabilities as they become due
and, if not sooner paid, within ninety days of closing, or to obtain a release
of the Company from all of those liabilities.
The assets included in this sale were all of the assets formerly used by us
in our antigen division. These assets include equipment, furniture, fixtures,
inventory, accounts receivable and intangible assets associated with the antigen
division. These assets were formerly used by us to produce and distribute
antigens primarily for diagnostic purposes. Following the sale, we retained
patents and other intellectual property which we use or propose to use in
connection with a therapeutic business. We intend to continue that business in
the future.
The value of the assets transferred in this sale was based on a variety of
factors considered by our Board of Directors. These factors included
negotiations between the parties, historical cash flow of the assets during the
preceding fiscal years, estimated replacement cost of certain assets and
estimates of the assets provided by third parties. We did not find it suitable
to and did not assign relative weights to the individual factors considered in
reaching a conclusion as to the estimated value of the assets. However, we
believe that each of those factors was material to a determination of the sale
price.
In connection with the purchase agreement, we agreed to indemnify Mr. Hurst
and Mr. Hurst has indemnified us as to certain liabilities related to the
transaction. The indemnification includes liabilities of the Company which were
assumed by the purchaser.
Item 5. OTHER EVENTS
------------
3
-3-
<PAGE>
In connection with the compromise with WWC and the sale of assets to the
purchaser, we executed a settlement agreement and mutual release relating to
claims pending between the parties. Parties to the settlement include our
Company, purchaser, Hurst individually, WWC, Kyln Roth, a manager of WWC, Musick
and Van Horn individually. This agreement releases and discharges each party
from any and all claims pending between them except for those set forth in the
shareholders' agreement, purchase agreement or other documents referenced
therein.
In conjunction with the settlement agreement, the Company and WWC executed
a registration rights agreement relating to common stock owned by WWC. This
agreement obligates the Company to register up to 2,370,000 shares of our common
stock with the Securities and Exchange Commission upon the request of WWC and to
keep that registration effective for a period of up to six months. We agreed to
pay all costs and expenses in connection with that registration except
commissions payable upon sale of the common stock by the shareholder.
Item 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION AND EXHIBITS
-----------------------------------------------------------------
(c.) Exhibits.
10.1 Purchase Agreement between Vitro Diagnostics, Inc.,
AspenBio, Inc. and others dated August 7, 2000, without
Exhibits.
10.2 Shareholders' Agreement dated August 7, 2000
10.3 Settlement Agreement and Release dated August 7, 2000
10.4 Registration Rights Agreement dated August 7, 2000
4
-4-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned hereunto duly authorized.
VITRO DIAGNOSTICS, INC.
By: /s/ James R. Musick
Date: August 22, 2000 ----------------------------------
James R. Musick, President and
Chief Executive Officer
5
-5-
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------
10.1. Purchase Agreement between Vitro Diagnostics, Inc.,
AspenBio, Inc. and others dated August 7, 2000, without Exhibits.
10.2 Shareholder's Agreement dated August 7, 2000
10.3 Settlement Agreement and Release dated August 7, 2000
10.4 Registration Rights Agreement dated August 7, 2000
6
-6-
<PAGE>
Exhibit 10.1. Purchase Agreement between Vitro Diagnostics, Inc.,
AspenBio, Inc. and others dated August 7, 2000, without Exhibits.
--------------------------------------------------------------------------------
PURCHASE AGREEMENT
-7-
<PAGE>
TABLE OF CONTENTS
Section Title Page
-------------------------------------------------------------------------
1. Recitals.........................................................1
2. Assets...........................................................1
3. Assumption of Liabilities........................................1
4. Purchase Price...................................................1
(a) Cash Price...............................................2
(b) Allocation of Price......................................2
5. Effective Date...................................................2
6. Agreement and Cashless Exercise..................................2
(a) Voting Agreement.........................................2
(b) Cashless Exercise........................................2
7. Closing..........................................................2
(a) Certificates.............................................2
(b) Buyer's Legal Opinion....................................2
(c) Seller's Legal Opinion...................................2
(d) Fairness Determination...................................2
(e) Bill of Sale and Assignment..............................2
(f) List of Specific Liabilities.............................2
(g) Assumption of Liabilities................................3
(h) Payment..................................................3
(i) Voting Agreement.........................................3
(j) Release and Settlement Agreement.........................3
(k) Records..................................................3
i
-8-
<PAGE>
(l) Assignments of Contracts.................................3
(m) Insurance Policies.......................................3
(n) Other Acts...............................................3
(o) Resignation of Hurst.....................................3
8. Representations and Warranties by Seller.........................3
(a) Corporate Status.........................................3
(b) Corporate Actions........................................3
9. Representations and Warranties by Seller, Van Horn and Musick....4
(a) Financial Statements.....................................4
(b) Accounts Receivable and Liabilities......................4
(c) Inventory................................................4
(d) Assets...................................................4
(e) Specific Liabilities.....................................4
(f) Absence of Change........................................4
(g) Absence of Liens.........................................5
(h) Material Agreements......................................5
(i) Litigation...............................................5
(j) Insurance................................................5
(k) Employees................................................5
(l) Taxes....................................................5
(m) Complete Disclosure..................................... 5
10. Representations and Warranties by the Buyer and Hurst............6
(a) Corporate Status.........................................6
(b) Corporate Actions........................................6
(c) No Conflicting Agreements................................6
ii
-9-
<PAGE>
(d) Litigation...............................................6
(e) Complete Disclosure......................................6
11. Indemnification..................................................6
(a) Indemnification for Claims...............................6
(b) Procedures...............................................6
(c) Limitation on Indemnification............................7
12. Lease............................................................8
13. Conditions to Closing............................................8
(a) Seller's Conditions..................................... 8
(i) Compliance with Agreement........................8
(ii) Corporate Action.................................8
(iii)Legal Opinion....................................8
(b) Buyer's Conditions...................................... 8
(i) Compliance with Agreement........................8
(ii) No Legal Action .................................8
(iii)Legal Opinion....................................8
(iv) Cashless Exercise................................8
14. Termination......................................................8
(a) Right to Terminate...................................... 8
(b) Rights on Termination................................... 8
15. Finder's Fees....................................................9
16. Assignments and Assumptions......................................9
17. Miscellaneous....................................................9
(a) Survival of Agreement....................................9
(b) Notices..................................................9
iii
-10-
<PAGE>
(c) Successors and Assigns...................................9
(d) Merger..................................................10
(e) Governing Law...........................................10
(f) Modification or Severance...............................10
iv
-11-
<PAGE>
AGREEMENT FOR PURCHASE OF ASSETS AND ASSUMPTION OF LIABILITIES
Vitro Diagnostics, Inc., a Nevada corporation (the "Seller"), Erik D. Van
Horn ("Van Horn") and James R. Musick ("Musick") agree with AspenBio, Inc., a
Colorado corporation (the "Buyer") and Roger D. Hurst ("Hurst") as follows in
consideration of the mutual covenants and agreements contained herein this 7th
day of August, 2000.
1. Recitals. One division of the operating business of the Seller as it now
exists and as it is intended to continue under the ownership of the Buyer is
sometimes referred to as the "Antigen Division." The Seller will sell to the
Buyer, subject to the terms and conditions of this Agreement, all of the assets
associated with the Antigen Division except for certain excluded assets which
are described in Exhibit A attached hereto ("Excluded Assets)". The Buyer will
buy all the assets in consideration of a purchase price as set forth below and
in further consideration of the assumption of all of the liabilities associated
with the Antigen Division except for certain Excluded Liabilities. Hurst joins
in this Agreement as the shareholder of the Buyer.
2. Assets. The Buyer agrees to buy, and the Seller agrees to sell, subject
to the terms and conditions hereof, all of the assets of the Antigen Division
including but not limited to those described in Exhibit B attached hereto but
specifically excluding the Excluded Assets (Exhibit A and Exhibit B together the
"Assets"). In addition to the Assets shown on Exhibit B, the Assets also include
all off-book assets which are used or useable in the Seller's Antigen Division,
including all previously expensed supplies, written-off inventory, records,
trade goodwill, proprietary information, and other intangible assets owned and
used by the Seller in the conduct of the Antigen Division, as well as all assets
of the Antigen Division arising in the ordinary course of its business from and
after the date of the schedule set forth on Exhibit B.
3. Assumption of Liabilities. As partial consideration for the purchase of
the Assets, the Buyer agrees to assume all of the liabilities associated with
the Antigen Division, including those which arise in the ordinary course of the
Seller's business between July 31, 2000 and the Closing Date subject to the
limitations contained in paragraph 9(e), except for those Excluded Liabilities
set forth on Exhibit C (the "Excluded Liabilities"). All of such liabilities
except the Excluded Liabilities are hereinafter referred to as the "Assumed
Liabilities." The Buyer agrees to pay the Assumed Liabilities as they become due
unless Buyer in good faith contests such liabilities with the third party
creditor, in which case Buyer agrees to indemnify the Seller for the Seller's
costs reasonably and actually incurred as a result of such contest with the
third party creditor. Without limitation Buyer and Hurst agree to pay certain
specific liabilities set forth on Exhibit D (the "Specific Liabilities") as they
become due and (2) if the Specific Liabilities are not sooner satisfied, within
ninety (90) days to pay the remaining Specific Liabilities or to cause the
removal of Seller as the obligor of the Specific Liabilities and the removal or
satisfaction of any lien upon Seller's assets as a result of the Specific
Liabilities.
4. Purchase Price. As further consideration for the purchase of the Assets,
including without limitation of Buyer's Specific Liabilities the Buyer will pay
to the Seller the sum of $700,000. Buyer agrees to pay any sales taxes resulting
from this transaction. The purchase price will be paid as follows:
-12-
<PAGE>
(a) Cash Price. The sum of $700,000 in cash or certified funds,
$250,000 of which shall be delivered in cash or certified funds by the
Buyer at Closing, and the rest by a promissory note in the principal amount
of $450,000, at 8% interest with principal and interest payable by
September 7, 2000, which note shall be personally guaranteed by Hurst.
(b) Allocation of Price. All consideration will be allocated among the
Assets and the other obligations of Seller as shown on Exhibit B.
5. Effective Date. The closing will be deemed to be effective as of the
close of Seller's business on July 31, 2000.
6. Agreement and Cashless Exercise.
(a) Voting Agreement. Hurst agrees to subject 400,000 of his shares in
Seller to a Voting Agreement in the form attached hereto as Exhibit E.
(b) Cashless Exercise. Seller agrees to amend the Stock Option Plan
and to permit employees of Sellers who have options to exercise such
options through a cashless exercise provided that such employees agree to
execute the Voting Agreement and a release in form and substance reasonably
acceptable to Seller.
7. Closing. The closing of all transactions provided for herein will occur
at the offices of legal counsel for the Buyer on August 7, 2000. All actions to
be taken at closing will be considered to be taken simultaneously, and no
document, agreement, or instrument will be considered to be delivered until all
items which are to be delivered at the closing have been delivered. At the
closing, the following actions will occur:
(a) Certificates. The Buyer and the Seller each will execute a
certificate stating that all representations and warranties made by them
respectively in this Agreement continue to be true at the time of closing.
(b) Buyer's Legal Opinion. The Buyer will deliver to the Seller an
opinion of Buyer's legal counsel, in the form attached hereto as Exhibit F.
(c) Seller's Legal Opinion. The Seller will deliver to the Buyer an
opinion of Seller's legal counsel, in the form attached hereto as Exhibit
G.
(d) Fairness Determination. Certain stockholders will execute a
Fairness Determination in the form of Exhibit H.
(e) Bill of Sale and Assignment. The Seller will execute and deliver
to the Buyer a bill of sale and assignments, in the form of Exhibits I, J,
and K attached hereto, conveying merchantable title to all of the Assets,
free and clear of all liens, except as permitted by paragraph 9(e).
(f) List of Specific Liabilities. The Seller will deliver to the Buyer
a list of all Specific Liabilities as of the Closing, which list will be
consistent with the representations and warranties of Seller herein.
2
-13-
<PAGE>
(g) Assumption of Liabilities. The Seller and the Buyer will execute
and deliver to one another an assignment and assumption of all Assumed
Liabilities with respect to all of the Assumed Liabilities in the form of
Exhibit L attached hereto.
(h) Payment. Buyer will pay the purchase price provided for herein by
delivering the sum of $250,000 in cash or certified funds and a promissory
note in the principal amount of $450,000 in the form attached hereto as
Exhibit M. Hurst will execute and deliver a Personal Guarantee in the form
of Exhibit N.
(i) Voting Agreement. The Voting Agreement in the form attached hereto
as Exhibit E shall have been executed.
(j) Release and Settlement Agreement. The parties shall have executed
the Release and Settlement Agreement in the form attached hereto as Exhibit
O.
(k) Records. The Seller will deliver to the Buyer all accounting
records, customer lists, contracts, orders, and other documents relating to
the Antigen Division, provided that the Buyer will, however, permit
reasonable access to such documents, including copying thereof, for the
purpose of permitting the Seller to complete tax returns and conduct other
necessary post-closing business.
(l) Assignments of Contracts. Seller will execute appropriate
assignments to Buyer of all material contracts relating to the Antigen
Division, including assignment of the confidentiality and employment
agreements of employees, all of which assignments will be in form and
substance satisfactory to Buyer and which will be accompanied, if necessary
in the judgment of legal counsel for Buyer, with any acknowledgement or
consent required by any other party to such contracts.
(m) Insurance Policies. The Seller will cause to be transferred to the
Buyer all of the Seller's insurance policies, as described on Schedule
9(j), including all deposits and credits associated therewith.
(n) Other Acts. The parties will execute any other documents
reasonably required to carry out the intent of this Agreement, including
specific transfer documents to be executed by the Seller with respect to
any of the Assets which require separate documents of transfer.
(o) Resignation of Hurst. Hurst agrees to execute a resignation
mutually acceptable to the parties.
8. Representations and Warranties by Seller. The Seller represents and
warrants to the Buyer as follows:
(a) Corporate Status. The Seller is duly incorporated and in good
standing under the laws of the state of Nevada.
(b) Corporate Actions. All actions required of Seller hereunder,
including the execution of this Agreement and consummation of all
transactions provided for herein, have been duly authorized by appropriate
actions of its shareholders and directors, and all such agreements and
instruments executed pursuant thereto will be valid and enforceable against
the Seller in accordance with the terms hereof.
3
-14-
<PAGE>
9. Representations and Warranties by Seller, Van Horn and Musick. To the
best of their knowledge, the Seller, Van Horn, and Musick represent and warrant
to the Buyer as follows (the Seller's best knowledge for the purpose of Section
9 is the best knowledge of Van Horn and Musick):
(a) Financial Statements. The financial statements of the Seller as of
the end of its most recently completed fiscal year attached hereto as
Schedule 9(a) (the "Audited Statements") have been prepared in accordance
with generally accepted accounting principles consistently applied and are
true and correct in all material respects as of the dates thereof. The
Audited Statements are collectively referred to as the "Seller's Financial
Statements." There has not been and will be no material adverse change in
the Seller's financial condition or its business or operations from the
date of April 30, 2000 through the date of Closing, except those incurred
in the ordinary course of business.
(b) Accounts Receivable and Liabilities. The accounts receivable shown
on the Seller's Financial Statements and all other accounts receivable
arising from and after the date of the Financial Statements have arisen in
the ordinary course of Seller's business. The amounts of such accounts
receivable, as of the dates on Seller's Financial Statements, are
substantially true and correct. All liabilities have arisen or will arise
in the ordinary course of the Antigen Division, and all of such liabilities
can be satisfied by payment in full of the amounts thereof in a manner and
on a schedule consistent with Seller's past practices as previously
disclosed to Buyer. Seller agrees not to interfere in the Buyer's
collection of the accounts receivable.
(c) Inventory. All of the inventory of the Seller shown on the
Seller's Financial Statements as of the dates thereof was in the possession
of Seller and has been valued and will be valued at the lower of cost or
fair market value.
(d) Assets. The Assets constitute all of the property, including for
example, intangible technology and know-how, which are now used in the
Antigen Division. The Assets are adequate and appropriate for the conduct
of the Antigen Division as now conducted. The Seller has good and
merchantable title to all the Assets, subject only to liens and
encumbrances shown in Schedule 9(e), all of which are to be assumed and
paid when and as due by the Buyer. All Assets are sold "as is" after due
inspection and examination by the Buyer, and the warranties made in this
Agreement are in lieu of all other warranties, including any warranty
implied by law, all of which are expressly excluded.
(e) Specific Liabilities. The Specific Liabilities include only the
liabilities shown in Exhibit D. Seller has not incurred any liability other
than the Assumed Liabilities and the Excluded Liabilities.
(f) Absence of Change. There has been and will be no material adverse
change in the nature of the Seller's operations or the value of the Assets
from and after the date of the Interim Financial Statements through August
7, 2000.
4
-15-
<PAGE>
(g) Absence of Liens. The Assets will be transferred free and clear of
any lien or claim of any nature including liens for taxes, except for (i)
sales or use taxes arising from the sale hereunder, which the Buyer agrees
to pay and (ii) the Assumed Liabilities.
(h) Material Agreements. Schedule 9(h) is a true and correct list of
all material contracts, leases, and other agreements to which the Seller is
a party, all of which will be assigned at Closing to Buyer. The Seller is
not in violation of any such agreement, nor will the execution and
consummation of this Agreement, including the assignment of the agreements
listed in Schedule 9(h) to the Buyer, cause any breach of any contract or
acceleration or material change in any obligation of the Seller which will
affect the Antigen Division or the Assets except with respect to the
Specific Liabilities.
(i) Litigation. The Seller is not a party to any litigation, nor to
the best knowledge of Seller, is any litigation threatened or pending,
except as shown in Schedule 9(i) attached hereto. The Seller is not aware
of any set of facts or circumstances which would give rise to any claim
materially affecting the Antigen Division or the authority of the Buyer to
consummate the transactions provided for herein.
(j) Insurance. The Seller has maintained full and adequate insurance
with respect to the operation of the Antigen Division. All of the Seller's
insurance policies, including the name of the carrier and the amount of
coverage, are accurately and completely shown on Schedule 9(j) attached
hereto. All such insurance will remain in effect through August 15, 2000,
and all of such insurance may be assumed by the Buyer at the election of
the Buyer.
(k) Employees. Schedule 9(k) attached hereto sets forth a complete
list of the employees of the Seller, the rate of compensation of each, and
all benefits applicable to each such employee. The Seller has previously
delivered to the Buyer a copy of the Seller's standard employee manual,
setting forth other employee policies, all of which remain in effect
without change or addition and will continue to remain in effect through
Closing. The Seller has no agreements with any employee or any other
obligation to any employee except as set forth in Schedule 9(k). The Seller
is not subject to any pending or threatened labor disputes. None of the
Seller's employees are represented by a labor union or other collective
bargaining unit, nor is the Seller aware of any effort to organize the
employees of the Seller.
(l) Taxes. The Seller has timely and correctly prepared and filed all
tax returns, including federal and state income tax returns and sales tax
returns, and the Seller has paid all taxes due pursuant to such tax returns
as well as any other taxes, including real and personal property taxes for
which the Seller is liable, except for certain property taxes which are
accrued but not yet due, as shown in detail on Schedule 9(l) attached
hereto. The Seller has not filed for and is not now subject to any
extension of time with respect to the filing of any tax return. The Seller
has provided to the Buyer true and correct copies of all federal and state
income tax returns filed by the Seller for the past three fiscal years. The
Seller is not aware of any actual or threatened tax audit nor of any set of
facts which would give rise to any tax audit. The financial statements
reflect an adequate reserve, as of the date thereof, for income taxes now
due for the present tax year. The Seller maintains all required payroll tax
accounts, and the Seller has timely deposited all employee and employer
withholding taxes into such trust accounts.
5
-16-
<PAGE>
(m) Complete Disclosure. This Agreement and the exhibits and schedules
thereto do not contain any untrue statement of a material fact by the
Seller; this Agreement and such related agreements and instruments do not
omit to state any material fact necessary in order to make the statements
made herein or therein, in the light of the circumstances under which they
are made, not misleading.
10. Representations and Warranties by the Buyer and Hurst. The Buyer and
Hurst represent and warrant as follows:
(a) Corporate Status. The Buyer is a corporation duly incorporated and
existing in good standing under the laws of the state of Colorado.
(b) Corporate Actions. All transactions provided for herein and all
obligations of the Buyer related hereto have been duly authorized by all
requisite corporate action, and all agreements entered into, including the
execution and consummation of this Agreement and all exhibits hereto, will
be valid and fully enforceable against the Buyer in accordance with the
terms thereof.
(c) No Conflicting Agreements. The Buyer is not a party to any
contract, agreement, or other obligation which is in default or which will
become in default or subject to any acceleration or penalty by reason of
the execution and consummation of this Agreement.
(d) Litigation. The Buyer is not subject to any litigation or other
claim, including any governmental investigation, actual, pending, or
threatened, to the best of their respective knowledge.
(e) Complete Disclosure. This Agreement and the exhibits and schedules
thereto do not contain any untrue statement of a material fact by the
Buyer; this Agreement and such related agreements and instruments do not
omit to state any material fact necessary in order to make the statements
made herein or therein by the Buyer, in light of the circumstances under
which they are made, not misleading.
11. Indemnification. The parties hereto agree to indemnify one another as
follows:
(a) Indemnification for Claims. As used herein, the term "Claims"
refers to any losses, damages, liabilities, or claims including costs or
expenses (including but not limited to attorneys' fees and other expenses
of investigation in defense of any such claims) which arise as a result of
any breach or violation of the covenants, agreements, warrants, or
representations contained in this Agreement or to which Roger Hurst is
subject as a result of his service as an officer and director of Seller to
the extent permitted by law. Any party who must indemnify for a Claim shall
be referred to as an "Indemnifying Party" and any party who has suffered or
is threatened with suffering losses in connection with such a Claim shall
be referred to as an "Indemnified Party." The Indemnifying Party will be
obligated to indemnify the Indemnified party with respect to any Claim
occasioned by a breach or violation of this Agreement or any ancillary
agreement on the part of the Indemnifying Party.
6
-17-
<PAGE>
(b) Procedures.
(i) Promptly after an Indemnified Party has received notice of or
has knowledge of any claim by a person not a party to this Agreement
(a "Third Person") or the commencement of any action or proceeding by
a Third Person, the Indemnified Party shall, as a condition precedent
to a claim with respect thereto being made against an Indemnifying
Party, give the Indemnifying Party written notice of such claim or the
commencement of such action or proceeding (the "Notice of Claim"). The
Notice of Claim shall state the nature and the basis of such claim and
a reasonable estimate of the amount thereof.
(ii) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and
diligently. If the Indemnifying Party undertakes to defend or settle,
it shall notify the Indemnified Party of its intention to do so within
seven (7) calendar days of receiving the Notice of Claim, and the
Indemnified Party shall cooperate with the Indemnifying Party and its
counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified
Party's possession or control. Notwithstanding the foregoing, the
Indemnified Party shall have the right to participate in any matter
through counsel of its own choosing at its own expense; provided that
the Indemnifying Party's counsel shall always be lead counsel and
shall determine all litigation and settlement steps, strategy and the
like. After the Indemnifying Party has notified the Indemnified Party
of its intention to undertake to defend or settle any such asserted
liability, and for so long as the Indemnifying Party diligently
pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in
connection with any defense or settlement of such asserted liability,
except as provided below and except to the extent such participation
is requested by the Indemnifying Party, in which event the Indemnified
Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses, out-of-pocket expenses.
(iii) The Indemnifying Party shall not, in the defense of such
asserted liability, consent to the entry of any judgment or award, or
enter into any settlement, except in either event with the prior
consent of the Indemnified Party, which shall not be unreasonably
withheld or delayed. If the Indemnifying Party desires to accept a
final and complete settlement of any such Third Person claim in which
no admission of material wrongdoing is required of the Indemnified
Party and the Indemnified Party refuses to consent to such settlement,
then the Indemnifying Party's liability under this Section 11 with
respect to such Third Person claim shall be limited to the amount so
offered in settlement by said Third Person, and the Indemnified Party
shall reimburse the Indemnifying Party for any additional costs of
defense which it subsequently incurs with respect to such claim. If
the Indemnifying Party does not undertake to defend such matter to
which the Indemnified Party is entitled to indemnification hereunder,
or fails diligently to pursue such defense, the Indemnified Party may
undertake such defense through counsel of its choice, at the cost and
expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall reimburse the
Indemnified Party for the amount paid in such settlement and any other
liabilities or expenses incurred by the Indemnified Party in
connection therewith.
(c) Limitation on Indemnification. No claim for indemnification shall
be made hereunder until the aggregate amount of actual or probable losses
of any Indemnified Party subject to indemnification from the Indemnifying
Party equals or exceeds the sum of $25,000. Nonetheless, an Indemnified
Party may provide an Indemnifying Party with notice of Claims of less than
$25,000 as provided for in Section 11(a) and may permit the Indemnifying
Party to defend, settle, or otherwise resolve such claims in order to avoid
having the aggregate amount for which such Indemnifying Party may be liable
exceed $25,000.
7
-18-
<PAGE>
12. Lease. The Antigen Division is presently conducted on the premises
subject to a lease with First Industrial LP (the "Lease"). The Lease shall be
assigned to, and assumed by, the Buyer.
13. Conditions to Closing. The obligations of the parties to close the
transactions provided for herein are subject to the following conditions as well
as to any other conditions express or implied in this Agreement:
(a) Seller's Conditions. The obligations of the Seller are subject to
the following conditions:
(i) Compliance with Agreement. All representations, warranties,
covenants, and other agreements contained herein on the part of the
Buyer will be true and correct at the time of Closing.
(ii) Corporate Action. The sale will have been approved by all
requisite corporate action by the Seller.
(iii) Legal Opinion. The Seller will have received a favorable
opinion of Buyer's legal counsel in the form required by Section 7(b).
(b) Buyer's Conditions. The obligations of the Buyer to complete the
transactions provided for herein are subject to the following conditions:
(i) Compliance with Agreement. All representations, warranties,
covenants and other agreements contained herein on the part of the
Seller will be true and correct at closing.
(ii) No Legal Action. No investigation or action by any
governmental regulatory agency having jurisdiction over the Seller or
the Assets will have been commenced which will interfere with or
jeopardize the ability of the Buyer to acquire the Assets and continue
conducting the Antigen Division.
(iii) Legal Opinion. The Buyer will have received a favorable
opinion of Seller's legal counsel in the form required by Section
7(c).
(iv) Cashless Exercise. The Seller shall amend the 1992 Stock
Option Plan to permit a cashless exercise.
14. Termination.
(a) Right to Terminate. This Agreement may be terminated at any time
by mutual agreement of the parties or it may be terminated by the party in
whose favor a condition runs upon a failure of such condition as set forth
in Section 13 to be satisfied in full.
8
-19-
<PAGE>
(b) Rights on Termination. If this Agreement terminates pursuant to
Section 14(a) for any reason other than a willful failure to satisfy the
conditions set forth in Section 13, this Agreement will terminate without
liability to either party and each party will, upon such termination, be
responsible for its own expenses incurred in connection herewith.
15. Finder's Fees. Each of the parties represents and warrants to each of
the other parties that it has not incurred any obligation for any sales
commission, brokerage fee, finder's fee, or other similar obligation in
connection with the transactions provided for herein.
16. Assignments and Assumptions. Seller and Buyer shall cooperate to obtain
the assignment and assumption agreement of the material agreements listed in
Schedule 9(h) and the Specific Liabilities.
17. Miscellaneous.
(a) Survival of Agreement. This Agreement and all terms, warranties,
and provisions hereof will be true and correct as of the time of closing
and will survive the closing. All representations and warranties and other
obligations of the parties hereunder will continue in effect for a period
of two (2) years.
(b) Notices. All notices required or permitted hereunder or under any
related agreement or instrument will be deemed delivered when delivered
personally or mailed, by certified mail, return receipt requested, or
registered mail, to the parties at the following addresses or to such
addresses as the respective parties may in writing hereafter direct:
(i) To Seller:
8100 Southpark Way, B-1
Littleton, CO 80120
with a copy to:
Overton Babiarz & Associates, PC
7720 E. Belleview Avenue, Suite 200
Englewood, CO 80111
Attention: David J. Babiarz, Esq.
(ii) To Buyer:
8100 Southpark Way, B-1
Littleton, CO 80120
with a copy to:
Krendl Krendl Sachnoff & Way
370 Seventeenth Street, Suite 5350
Denver, CO 80202
Attention: Cathy S. Krendl, Esq.
9
-20-
<PAGE>
(c) Successors and Assigns. This Agreement will be binding upon the
parties hereto and their respective successors, personal representatives,
heirs and assigns; however, no party hereto will have any right to assign
any of its obligations pursuant to this Agreement except with the prior
written consent of all of the other parties.
(d) Merger. This Agreement and the Exhibits and other documents
related hereto set forth the entire agreement of the parties with respect
to the subject matter hereof and may not be amended or modified except in
writing subscribed to by all of such parties.
(e) Governing Law. This Agreement is entered into in the city and
county of Denver, state of Colorado, it will be performed in part within
the city and county of Denver, and it will be governed in all respects by
the laws of Colorado.
(f) Modification or Severance. In the event that any provision of this
Agreement is found by any court or other authority of competent
jurisdiction to be illegal or unenforceable, such provision will be severed
or modified to the extent necessary to render it enforceable, and as so
severed or modified, this Agreement will continue in full force and effect.
Dated the day and year first above set forth.
VITRO DIAGNOSTICS, INC. ASPENBIO, INC.
By: /s/ James R. Musick By: /s/ Roger D. Hurst
---------------------------------- ---------------------------------
James R. Musick, Vice President Roger D. Hurst, President
/s/ James R. Musick /s/ Roger D. Hurst
---------------------------------- ----------------------------------
James R. Musick Roger D. Hurst
/s/ Erik D. Van Horn
----------------------------------
Erik D. Van Horn
10
-21-
<PAGE>
VITRO DIAGNOSTICS/ASPEN BIO LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
A. Excluded Assets
B. Assets and Allocation of Price
C. Excluded Liabilities
D. Specific Liabilities
E. Voting Agreement
F. Buyer's Legal Opinion Letter
G. Seller's Legal Opinion Letter
H. Fairness Determination
I. Assignment and Bill of Sale
J. Assignment and Assumption of Lease Agreement
K. Intellectual Property Assignment Agreement
L. Assumption Agreement
M. Promissory Note
N. Personal Guarantee
O. Release and Settlement Agreement
SCHEDULES
9(a) Audited Statements
9(a) (i) Interim Financial Statements
9(e) List of Liens
9(h) List of Material Contracts
9(i) Litigation
9(j) List of Insurance Policies
9(k) Employees and Benefits
-22-
<PAGE>
Exhibit 10.2 Shareholder's Agreement dated August 7, 2000
--------------------------------------------------------------------------------
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (the "Agreement"), is entered into by and
between the undersigned directors and shareholders of Vitro Diagnostics, Inc.
(the "Company"), (collectively "Shareholders" and individually a "Shareholder"),
effective as of August 7, 2000. The Shareholders are more particularly described
in Schedule A attached hereto and incorporated by reference herein.
RECITALS
WHEREAS, the Shareholders are the registered and beneficial owners of the
number of shares of common stock set forth opposite their respective names on
Schedule A, except that Erik Van Horn ("Van Horn") is not currently a
Shareholder of the Company, but is a party to this Agreement because he
exercises control as a Director and is a beneficial owner as the holder of
significant stock options of the Company; and
WHEREAS, the Shareholders desire to cooperate to further the business of
the Company by electing an expanded Board of Directors, by adding additional
experience and expertise to the Board, and by taking such other action as is in
the best interest of all of the Shareholders of the Company; and
WHEREAS, the Shareholders are entering into this Agreement in connection
with the sale of certain assets of the business to AspenBio, Inc. ("Buyer"),
(the "Asset Sale"), the resignation from the Board of Directors by Roger Hurst
("Hurst"), the modification of the number of Directors on the Board by the
Company, and the appointment to the Board of the Company of Henry C. Schmerler
and Ronald L. Goode.
NOW THEREFORE, in consideration of the Recitals, which shall be deemed to
be a substantive part of this Agreement, and the covenants, promises,
agreements, representations and warranties contained in this Agreement, the
Shareholders hereby covenant, promise, agree, represent and warrant as follows:
1. Resignation of Hurst and Election of New Directors.
---------------------------------------------------
1.1 Hurst has agreed to resign as a director and officer of the Company
simultaneously with and effective upon closing of the Asset Sale
("Closing"), and the Board of Directors of the Company immediately
following Closing shall be comprised of James R. Musick ("Musick") and
Van Horn.
1.2 Also effective upon the Closing, Musick and Van Horn, as the sole
remaining members of the Board, have executed the Unanimous Written
Consent Resolution in Lieu of Meeting attached hereto as Schedule B,
whereby the Board of the Company, in accordance with its Bylaws, has:
(a) increased to four (4) the number of directors to serve on the
Board; and (b) elected Henry Schmerler and Ronald Goode to serve as
members of the Board for a term of office continuing until the next
annual meeting by the Shareholders; and (c) approved Musick as
President of the Company.
-23-
<PAGE>
1.3 As soon as practical after Closing, but in no event later than 30 days
after Closing, Musick shall call a special meeting of the Board for
the purpose of: (a) calling or rescheduling a special meeting or
annual meeting of Shareholders to elect a slate of directors
consisting of: Musick, Van Horn, William J. Schmulh, Jr., Henry
Schmerler and Ronald Goode; provided, however, that this slate of
directors shall at all times be willing and able to serve on the Board
of Directors; and (b) completing the Company's application for
Director and Officer liability insurance for Henry Schmerler and
Ronald Goode.
1.4 Musick and VanHorn further agree that they shall call a meeting of the
Board for the purpose of causing the Company to take such additional
action as may be necessary to: (a) expand the Board to five (5)
directors, and (b) elect William J. Schmulh to fill the additional
vacancy created thereby; provided, however, that: (a) World Wide
Capital Investors, LLC ("WWC") shall have provided written notice to
the Board of its request for the Board meeting described herein, and
(b) that WWC shall agree to pay the expenses of any SEC or other
regulatory notice required in connection with such action of the
Board, and (c) such action shall not cause Musick or Van Horn to be in
violation of any legal requirement or duty.
2. Voting Agreement - Shareholders
-------------------------------
Beginning with execution of this Agreement, and for a period of three
years thereafter, the Shareholders, with the exception of Hurst, agree and
shall vote all shares they own now or may acquire in the future at any
meeting of Shareholders or consent in lieu of any meeting, as follows:
2.1 To elect Musick, Van Horn, William J. Schmulh, Jr., Henry Schmerler
and Ronald Goode, as and for the Directors of the Company, comprising
the Board of Directors;
2.2 Not to increase the members of the Board of Directors without the
unanimous consent of the Shareholders;
2.3 Following the election of Musick, Van Horn, William J. Schmulh, Jr.,
Henry Schmerler and Ronald Goode, the Shareholders shall take no
action to remove any of the Directors from the Board during the term
of this Agreement, except that a Director may be removed for fraud or
breach of fiduciary duty, which determination shall be made by
majority vote of the remaining directors following consultation with
independent counsel to the Company;
2.4 Should a Director resign or be removed or a vacancy otherwise occur,
the Shareholders agree to vote their shares in favor of the candidate
nominated by the remaining Board to fill the vacancy; and
2.5 Subject to review and approval by the Board elected pursuant to
paragraph 1 hereof, to approve the Equity Incentive Plan for
employees, officers, directors, consultants and others providing
service to the Company in the form proposed by Musick and Van Horn,
with such amendments as may be deemed appropriate by the Board of
Directors with the approval of counsel to the Company.
2
-24-
<PAGE>
3. Grant of Proxy - Certain Shareholders
--------------------------------------
3.1 Simultaneous with Closing of the Asset Sale, each of Hurst and Musick
shall deliver to Ronald L. Goode or Henry C. Schmerler (the "Proxy
Holder") a duly executed irrevocable proxy (each, a "Proxy") in the
form attached hereto as Schedule C, with respect to voting stock of
the Company owned or controlled by each Hurst and Musick in a
cumulative amount not to exceed 1.4 million shares (the "Proxy
Shares"). The Proxy Shares shall initially consist of 1,000,000 shares
owned by Musick and 400,000 shares owned by Hurst. The term of the
Proxy shall be for eleven months from the date of this Agreement,
through July 7, 2001. If the Proxy Holder becomes incapacitated or
dies during the term of the Proxy, Hurst and Musick agree to execute
an additional proxy in the form of Exhibit C and deliver to William J.
Schmulh which shall remain in effect for the balance of the term of
the Proxy.
3.2 If at any time during the term of the Proxy, any employee of the
Company, including Musick or Van Horn, shall exercise (additional)
stock options for common stock of the Company and such employee shall
agree to grant a Proxy in the form of Schedule C for said shares, then
the Proxy granted by Musick shall abate one for one with each share
for which a Proxy is granted by an employee. Van Horn agrees that he
shall grant a Proxy pursuant to this section upon the exercise of up
to 250,000 options held by him.
3.3 Hurst, Musick and Van Horn, as applicable, agree not to revoke the
grant of the Proxy for the term thereof.
4. Endorsement on Stock Certificates
---------------------------------
Upon the execution of this Agreement, the Shareholders shall
temporarily surrender their stock certificates representing Company stock
to the Company and the Company shall cause the following endorsement to be
placed thereupon before returning such certificates:
THE RIGHT OF SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE, PLEDGE, OR ANY
OTHER DISPOSITION OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY, AND SUBJECT TO, THE TERMS AND PROVISIONS
OF AN AGREEMENT DATED AUGUST 7, 2000.
A COPY OF THIS AGREEMENT IS ON FILE WITH THE SECRETARY OF THE
CORPORATION AND AVAILABLE FOR INSPECTION UPON REQUEST.
THE VOTING OF THE SHARES REPRESENTED HEREBY IS SUBJECT TO THE TERMS OF
THE SAME AGREEMENT.
The following endorsement shall be placed upon the certificates of Hurst and
Musick:
3
-25-
<PAGE>
THE VOTING POWER OF THE SHARES EVIDENCED HEREBY HAS BEEN PREVIOUSLY
GRANTED TO RONALD L. GOODE OR WILLIAM J. SCHMULH, PURSUANT TO A
WRITTEN PROXY EFFECTIVE AUGUST 7, 2000, WHICH PROXY IS IRREVOCABLE.
All certificates representing shares of Stock issued to or acquired by any other
Shareholder, whether party to this Agreement or not, subsequent to the date
hereof shall, if the recipient thereof agrees to or is required to grant a Proxy
pursuant to the terms hereof, bear the above legends. The legends shall be
removed upon request of the Shareholder after the term of the Agreement expires.
5. Term.
-----
This Agreement shall extend for the terms set forth herein, unless
sooner terminated by the unanimous agreement of all Shareholders or unless
51% of the stock of the Company is acquired by a third party in a merger or
tender offer or the Company sells all or substantially all of its assets.
6. Remedies.
---------
The Shareholders agree that they will not have an adequate remedy at
law for the breach of this Agreement. Accordingly, the Shareholders shall
have available for any breach of this Agreement the remedies of specific
performance and injunctive relief, together with all other remedies at law
and in equity. No waiver of or forbearance to enforce any right or
provision hereto shall be binding unless in writing and signed by the
Shareholder to be bound, and no such waiver or forbearance in any instance
shall apply to any other instance or any other right or provision. The
prevailing Shareholder in any litigation or dispute shall be entitled to an
award of reasonable attorneys fees, costs and expenses.
7. General Provisions.
-------------------
7.1 Entire Agreement.
-----------------
This Agreement and the Exhibits incorporated herein or
incorporated by reference in any exhibit constitute the entire
understanding of the Shareholders with regard to this Agreement which
includes that certain Purchase Agreement by and among the Company,
Musick, Van Horn, AspenBio and Hurst of even date hereof, under which
the Company has agreed to sell to AspenBio, Inc. all of the "Assets"
of the Antigen Division of the Company_(as defined in the Purchase
Agreement). There are no representations, promises, warranties,
covenants or undertakings other than those expressly set forth herein.
No modification or amendment of this Agreement shall be binding unless
executed in writing by all Shareholders.
7.2 Assignment, Successor and Assigns.
----------------------------------
This Agreement shall inure to the benefit of and be binding upon
the Shareholders and their respective successors and permitted
assigns.
7.3 Authority.
----------
The individuals whose signatures appear below on behalf of the
respective parties to this Agreement warrant and represent that they
have full authority to execute this Agreement on behalf of the
respective parties and to bind the parties to the terms and provisions
of this Agreement.
4
-26-
<PAGE>
7.4 Notices.
--------
Notices required or authorized hereunder shall be deemed given
sufficiently if in writing and delivered in person, sent by registered
or certified mail, return receipt requested and postage prepaid, or by
facsimile to the addresses on record with the Company unless and until
the Company is notified of any change of address.
7.5 Severability.
-------------
In the event that one or more of the provisions of this Agreement
shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
7.6 Waivers.
--------
No waiver of any provision of this Agreement shall be deemed a
waiver of any other provision, nor shall any single waiver constitute
a continuing waiver. The failure of any Shareholder as to seek redress
for violation of, or as to insist upon the strict performance of any
covenant or condition of this Agreement, shall not prevent a
subsequent act which would have originally constituted a violation,
from having the effect of an original violation.
7.7 Time of Essence.
----------------
Time is of the essence of each provision of the Agreement.
7.8 Governing Law.
--------------
This Agreement shall be governed by and interpreted and enforced
in accordance with the laws in force in the State of Colorado. Venue
for any action shall lie in the Courts of Colorado.
7.9 Counterparts and Facsimiles.
----------------------------
This Agreement may be executed in several counterparts, and as so
executed shall constitute one Agreement, binding on all Shareholders
hereto, notwithstanding that all Shareholders are not signatory as to
one original or the same counterpart. Facsimile signatures are
acceptable.
IN WITNESS WHEREOF, the Shareholders hereto have executed and delivered
this Agreement, on the date first above written.
SHAREHOLDERS:
/s/ Roger D. Hurst
---------------------------------
Roger D. Hurst
/s/ James R. Musick
---------------------------------
James R. Musick
/s/ Erik Van Horn
---------------------------------
Erik Van Horn
5
-27-
<PAGE>
/s/ Kilyn Roth
---------------------------------
Kilyn Roth, Manager
World Wide Capital Investors, LLC
6
-28-
<PAGE>
Schedule A to the Shareholders' Agreement
Name and Address
of Shareholder or Number of Shares
Beneficial Owner (including Option Shares)
Roger D. Hurst 1,116,793
James R. Musick 1,332,198
Erik Van Horn 530,516
World Wide Capital Investors, LLC 2,370,000
7
-29-
<PAGE>
Schedule B to the Shareholders' Agreement
-----------------------------------------
IRREVOCABLE PROXY COUPLED WITH AN INTEREST
1. The undersigned shareholder (the "Shareholder"), holder of the number of
shares of common stock, par value $.001 per share ("Common Stock"), of
Vitro Diagnostics, Inc., a Nevada corporation, set forth opposite the
Shareholder's signature (the "Proxy Shares"), hereby irrevocably appoints
and constitutes Henry Schmerler or Ronald Goode as his attorney and proxy
("Proxy") to attend meetings, vote, give consents and in all other ways to
act in the Shareholder's place and stead as to all of the Proxy Shares as
long as this Irrevocable Proxy is in effect. Proxy shall have full power of
substitution and revocation and any proxies heretofore given are hereby
revoked.
2. This Irrevocable Proxy is made irrevocable, is subject to and executed in
connection with a voting agreement with the Shareholder embodied in that
certain Shareholders' Agreement, dated as of August 7, 2000 (the
"Shareholders' Agreement"), among the Shareholder and certain other
shareholders of the Company.
3. Proxy shall vote the Proxy Shares under this Irrevocable Proxy only in
accordance with a resolution of the Board of Directors of the Company
pursuant to a vote of the Board on any matter requiring a vote of
shareholders of the Company.
4. This Irrevocable Proxy shall terminate eleven months from the date hereof,
unless earlier terminated by agreement of the Shareholders party to the
Shareholders' Agreement or unless 51% of the stock of the Company is
acquired by a third party in a merger or tender offer or the Company sells
all or substantially all of its assets.
Dated:
-------------------------
------------------------------- --------------------------------
Shareholder Number of Shares of Common Stock
Subject to this Irrevocable Proxy
ACCEPTED AND AGREED TO:
-------------------------------
Proxy Holder
8
-30-
<PAGE>
Exhibit 10.3 Settlement Agreement and Release dated August 7, 2000
--------------------------------------------------------------------------------
EXHIBIT O
SETTLEMENT AGREEMENT
AND MUTUAL RELEASE
THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE ("Agreement") is entered into
effective this 7th day of August, 2000, between Vitro Diagnostics, Inc., a
Nevada corporation ("Company"), AspenBio, Inc., a Colorado corporation, James R.
Musick (an individual), Erik VanHorn (an individual), Roger Hurst (an
individual) ("Hurst"), and World Wide Capital Investors, LLC, a Colorado limited
liability company ("WWC"), and Kilyn Roth, an individual and manager of WWC,
collectively referred to as "Parties."
1. Recitals.
--------
(a) Commencing in May, 2000, WWC threatened a lawsuit against the Company,
alleging various claims against the Company and certain of its
officers and directors. The Company and its officers and directors
deny any liability on such claims.
(b) On or about May 26, 2000, WWC delivered to the Company a shareholder
proposal by which WWC proposed to expand the Company's Board of
Directors to five (5) and proposed a slate of Directors for nomination
and election at the Company's next annual meeting of shareholders.
(c) On June 8, 2000, WWC filed a Schedule 13D/A with the U.S. Securities
and Exchange Commission in which WWC expressed an intent to use its
shareholder position to maximize shareholder value, to help the
Company grow, to seek licensing or sales of Company technology, and
possibly to achieve a sale of the Company at some undetermined future
date.
(d) WWC is the owner of 2,370,000 shares of the Company's outstanding
common stock. Kilyn Roth is the owner of 56,250 shares of the
Company's outstanding stock. (e) The Parties now desire to enter into
this Agreement to resolve all possible disputes and controversies
between them and because they believe this Agreement is in the best
interests of the Company, WWC, Kilyn Roth and the Company's
shareholders.
-31-
<PAGE>
(e) The Parties now desire to enter into this Agreement to resolve all
possible disputes and controversies between them and because they
believe this Agreement is in the best interests of the Company, WWC,
Kilyn Roth and the Company's shareholders.
(f) In consideration of the foregoing recitals, which shall be deemed a
substantive part of this Agreement, and in consideration of the
covenants, promises, agreements, representations and warranties
contained in this Agreement, and without admitting any liability or
wrongdoing, the Parties agree as follows.
2. Shareholder's Agreement.
------------------------
Contemporaneously herewith, the existing directors of the Company and WWC
have entered into a Shareholders' Agreement in the form and content
attached hereto as Exhibit A and incorporated herein by reference.
3. Sale of Certain Assets.
-----------------------
Contemporaneously herewith, the Company has entered into a Purchase
Agreement in the form and content attached hereto as Exhibit B and
incorporated herein by reference, and WWC has executed a "Fairness
Determination" in connection therewith.
4. Settlement Payment.
-------------------
Upon execution of this Agreement, the Company shall pay to Kilyn Roth or
her designee the sum of $20,000 to facilitate settlement of a lawsuit
brought by Jon Richardson against WWC, Kilyn Roth and others, namely Case
No. 00-CV-760, Jefferson County District Court. In exchange for such
payment, WWC and Kilyn Roth agree to indemnify and hold the Company, its
officers, directors, employees, agents and Hurst harmless from any claim
arising out of Case No. 00-CV-760 or otherwise asserted against the Company
by Richardson, provided that WWC's liability hereunder shall not exceed
$20,000.
2
-32-
<PAGE>
5. Registration of Stock.
----------------------
Contemporaneously herewith, the Parties have executed a Registration Rights
Agreement in the form and content attached hereto as Exhibit C and
incorporated herein by reference.
6. No Solicitation.
----------------
WWC, Kilyn Roth and Hurst agree that they shall not directly or indirectly
contact any other Company shareholder for purposes of directly or
indirectly soliciting or encouraging such shareholder to sue or otherwise
assert claims or causes of action against the Company or any of its
officers, directors, employees, shareholders, agents, and independent
contractors for any of the Company released claims or the WWC released
claims. This paragraph shall not be deemed to prohibit any party from
complying with any subpoena, legal process or other legal requirement.
7. Release by WWC.
---------------
Except for the obligations created by and set forth in this Agreement or in
the Exhibits hereto, including the exhibits thereto, WWC and Kilyn Roth
(acting for themselves and their agents, shareholders, employees, members,
managers, attorneys, successors, assigns, associates and consultants),
including, but not limited to Kilyn Roth, J.W. Roth, Kristine Brubaker,
Brett Brubaker, and World Wide Capital Co. hereby forever completely
release and discharge the Company and any of its agents, attorneys,
employees, shareholders, officers, directors, successors, and assigns,
including but not limited to Roger D. Hurst, AspenBio, Inc., James Musick
and Erik Van Horn, from any and all claims, causes of action, obligations,
liabilities, demands, agreements, injuries, damages, interest, costs and
expenses (including without limitation, attorney fees), and any other legal
or equitable remedies of whatever kind or nature, whether known or unknown,
suspected or unsuspected, contingent or fixed, which arise out of or are in
any way related to any incident, act, failure to act, event, or any other
matter occurring prior to execution of this Agreement ("WWC Released
Claims").
3
-33-
<PAGE>
8. Rule 144 Transaction.
---------------------
As additional consideration hereunder, the Company agrees to cooperate with
and approve the removal of any restrictive legend existing upon any
certificate(s) held by WWC or World Wide Capital Co. or their respective
transferees and representing 142,000 shares of the Company's stock conveyed
to World Wide Capital Co. by agreement dated November 3, 1998 and to
further consent to the further sale or exchange of such stock; provided,
however, that:(a) the transfer by which WWC or World Wide Capital Co.
requests removal of such restrictive legends shall be in the reasonable
opinion of the Company's counsel in compliance with SEC Rule 144 and
otherwise permitted by law; (b) WWC or World Wide Capital Co. shall submit
to the Company in advance such certificate(s) together with a true copy of
the agreement dated November 3, 1998, and (c) the Company will not contest
or challenge the date and validity of said agreement.
As additional consideration hereunder, the Company agrees to cooperate with
and approve the removal of any restrictive legend existing upon any
certificate(s) held by Roger Hurst and to further consent to the further
sale or exchange of such stock; provided, however, that the transfer by
which Hurst requests removal of such restrictive legends shall be in the
reasonable opinion of the Company's counsel in compliance with SEC Rule 144
and otherwise permitted by law.
4
-34-
<PAGE>
9. Release by Company.
-------------------
Except for the obligations created by and set forth in this Agreement or in
the Exhibits hereto, including the Exhibits thereto, the Company, Roger
Hurst, James Musick and Erik VanHorn, and AspenBio, Inc., acting for
themselves and their respective agents, attorneys, employees, officers,
directors, successors, and assigns, hereby forever completely release and
discharge WWC and all of its affiliates, agents, attorneys, employees,
including without limitation Kilyn Roth, J.W. Roth, Kristine Brubaker,
Brett Brubaker and World Wide Capital Co. and their members, managers,
successors, associates, consultants and assigns ("World Wide Group") and
Hurst and AspenBio, Inc., from any and all claims, causes of action,
obligations, liabilities, demands, agreements, injuries, damages, interest,
costs and expenses (including without limitation, attorney fees), and any
other legal or equitable remedies of whatever kind or nature, whether known
or unknown, suspected or unsuspected, contingent or fixed, which arise out
of or are in any way related to any incident, act, failure to act, event,
or any other matter occurring prior to execution of this Agreement
("Company Released Claims").
10. Voting Rights.
--------------
Each of the parties hereto covenants and agrees not to contest, or to
solicit any other person to contest, the right or authority of any other
party hereto to vote any shares held by such party in the Company, except
to the extent that such votes are cast in violation of Exhibit A hereto and
except to the extent that the failure of a party to contest another party's
voting rights would expose or subject such party to any legal or regulatory
liability.
5
-35-
<PAGE>
11. Taxes.
------
WWC shall be solely responsible for the payment of taxes, if any are ever
due, as a result of the payment set forth in paragraph 5 above. The Company
makes no warranties as to the effect of any tax law or regulation upon the
payment set forth in paragraph 5 above.
12. Costs and Attorney Fees.
------------------------
Each party shall bear his or its own costs and attorney fees and no request
of any kind shall be made to any court or person by any party to this
Agreement, or any agent or attorney acting on behalf of any party, for
payment of any costs or attorney fees.
13. Miscellaneous Provisions.
-------------------------
(a) Conditions Precedent. This Agreement is contingent upon the full and
complete execution, contemporaneously herewith, of this Agreement and
all Exhibits hereto, including all exhibits thereto.
(b) This Agreement shall be binding upon and inure to the benefit of the
parties and their respective agents, attorneys, employees,
representatives, officers, directors, members, managers, successors
and assigns. However, no party shall have any right to assign any of
its rights or obligations pursuant to this Agreement except with the
prior written consent of all other parties.
(c) This Agreement and the exhibits and other documents related hereto
constitutes the entire agreement among all the parties with respect to
the subject matter hereof. No other covenants, promises,
representations or warranties of any kind have been made except as
explicitly set forth herein.
6
-36-
<PAGE>
(d) No provision of this Agreement may be waived, modified or altered
except in writing executed by the parties hereto.
(e) Each party has cooperated in the drafting and preparation of this
Agreement. In any construction to be made of this Agreement, no
presumption shall arise against any party by virtue of its
participation in the drafting or preparation hereof.
(f) This Agreement may be executed in counterparts or by facsimile, each
of which, when all parties have executed at least one such counterpart
or facsimile, shall be deemed an original, with the same force and
effect as if all signatures were appended to one instrument, but all
of which together shall constitute one and the same agreement.
(g) This Agreement shall be construed and governed in accordance with the
laws of the State of Colorado and any action brought to enforce and
interpret this Agreement shall be filed in the District Court for
Arapahoe County, Colorado, or the United States District Court for the
District of Colorado.
Dated the day and year first above set forth.
VITRO DIAGNOSTICS, INC. WORLD WIDE CAPITAL INVESTORS, LLC
By: /s/ James Musick By: /s/ Kilyn Roth
-------------------------------- ----------------------------------
Title: James Musick, Vice President Title: Kilyn Roth, Manager
----------------------------- --------------------------------
ASPENBIO, INC. /s/ Kilyn Roth
----------------------------------
Kilyn Roth, Individually
By: /s/ Roger Hurst
--------------------------------
Title: Roger Hurst, President
-----------------------------
/s/ Roger Hurst
-------------------------------------
Roger Hurst, Individually
/s/ James R. Musick
-------------------------------------
James R. Musick, Individually
/s/ Erik VanHorn
-------------------------------------
Erik VanHorn, Individually
7
-37-
<PAGE>
Exhibit 10.4 - Registration Rights Agreement dated August 7, 2000
--------------------------------------------------------------------------------
Registration Rights Agreement
This Registration Rights Agreement ("Agreement") is entered into this 7th
day of August, 2000, between Vitro Diagnostics, Inc., a Nevada corporation
("Company") and World Wide Capital Investors, LLC ("WWC"; WWC may also be
referred to as "Holder").
Recitals:
Holder is the record and beneficial owners of common stock, $.001 par
value, of the Company owning 2,370,000 shares.
Holder wishes to have the right to require the Company to register all or
part of their shares under the Securities Act to facilitate resale in the
future.
Execution and delivery of this Agreement is a condition to a release and
settlement between the parties.
NOW, THEREFORE, in consideration of the foregoing recitals, which shall be
considered an integral part of this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. Definitions. As used herein:
1.1 The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement
in compliance with the federal Securities Act of 1933, as amended (the
"Act") and the declaration or ordering of the effectiveness of such
registration statement.
1.2 For the purposes hereof the term "Registrable Securities" means shares
of (i) common stock of the Company owned by the Holders (the
"Securities"), (ii) stock issued in lieu of the Securities in any
reorganization which have not been sold to the public and (iii) stock
issued in respect of the stock referred in (i) and (ii) as a result of
a stock split, stock distribution, recapitalization or combination,
which have not been sold to the public.
1.3 The terms "Holder" or "Holders" mean WWC and qualifying transferees
under Section 8 hereof who hold Registrable Securities.
1.4 The term "Initiating Holders" means any Holder or Holders of at least
1,185,001 shares, cumulatively, of Registrable Securities or
Securities (such number to be adjusted after the original issuance
thereof for stock splits, stock distributions, recapitalization or
combination).
2. Requested Registration.
2.1 Request for Registration. In case the Company shall receive from the
Initiating Holders a written request that the Company effect any
registration with respect to all or a part of the Registrable
Securities, the Company will on one time only:
-38-
<PAGE>
(a) promptly give written notice of the proposed registration to all
other Holders; and
(b) as soon as practicable, use its best efforts to effect such
registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate
qualifications under the applicable blue sky or other state
securities laws limited to 5 states designated by the Holders and
any other governmental requirements or regulations) as may be so
requested and as would 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
with all or such portion of the Registrable Securities of any
Holder or Holders joining in such request as are specified in a
written request given within 30 days after receipt of such
written notice from the Company provided that the Company shall
not be obligated to take any action to effect such registration
pursuant to this Section 2.1:
(i) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process
in effecting such registration; or
(ii) if the Company represents its intention to effect a
registration on its own behalf within 90 days of receipt of
the written request and employs a good faith effort to do
so.
Subject to the foregoing Subsections (i) and (ii), the Company shall file a
registration statement covering the Registrable Securities so requested to
be registered as soon as practical, but in any event within 90 days after
receipt of the request or requests of the Initiating Holders; provided,
however, that if the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good faith
judgment of the Board of Directors it would be seriously detrimental to the
Company and its stockholders for such registration statement to be filed at
the date filing would be required and it is therefore essential to defer
the filing of such registration statement, the Company shall have an
additional period of not more than 90 days after the expiration of the
initial 90 day period within which to file such registration statement.
2.2 The Corporation shall use its best efforts to keep such registration
continuously effective, and for a period of six months from the date
on which the SEC declares the registration effective or such shorter
period which will terminate when all the Registrable Securities
covered by the registration have been sold pursuant to such
registration or under Rule 144.
2.3 The Initiating Holders shall advise the Company in such written
request of the proposed method of distribution and the Holders who
desire to sell their Registrable Securities pursuant to the
Registration Statement.
2.4 The Company shall also:
2
-39-
<PAGE>
(a) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable
period; cause the Prospectus used in connection therewith to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the
Securities Act;
(b) notify the selling Holders of Registrable Securities and the
managing underwriters, if any, promptly, and (if requested by any
such Person) confirm such advice in writing, (1) when the
Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to the Registration
Statement or any post-effective amendment, when the same has
become effective, (2) of any request by the SEC for amendments or
supplements to the Registration Statement or the Prospectus or
for additional information, (3) 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,
(4) of the receipt by the Corporation of any notification with
respect to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation or
threatening of any proceedings for such purpose, and (5) of the
happening of any event which makes any statement made in the
Registration Statement, the Prospectus, any amendment or
supplement thereto, or any document incorporated therein by
reference untrue or which requires the making of any changes in
the Registration Statement, the Prospectus or any document
incorporated therein by reference in order to make the statements
therein not misleading;
(c) upon the occurrence of any event contemplated by paragraph (b)(5)
above, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of
the Registrable Securities, the Prospectus will not contain any
untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading; and
(d) deliver to each selling holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) and any
amendment or supplement thereto as such persons may reasonably
request; consent to the use of the Prospectus or any amendment or
supplement thereto by each of the selling holders of Registrable
Securities and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto.
3
-40-
<PAGE>
2.5 Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their
request made pursuant to Section 2.1 and the Company shall include
such information in the written notice referred to in Subsection
2.1(a). In such event, if so requested in writing by the Company, the
Initiating Holders shall negotiate with an underwriter selected by the
Company with regard to the underwriting of such requested
registration; provided, however, that if a majority in interest of the
Initiating Holders have not agreed with such underwriter as to the
terms and conditions of such underwriting within 20 days following
commencement of such negotiations, a majority in interest of the
Initiating Holders may select an underwriter of their choice with the
consent of the Company, which consent shall not be unreasonably
withheld, but if consent of the Company cannot be obtained, then a
majority in interest of the Initiating Holders may elect to withdraw
their request. The right of any Holder to registration pursuant to
Section 2.1 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting (unless otherwise mutually agreed by a
majority in interest of the Initiating Holders and such Holder) to the
extent provided herein. The Company shall (together with all Holders
proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a
majority in interest of the Initiating Holders. Notwithstanding any
other provision of this Section 2.5, if the underwriter advises the
Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, the Initiating
Holders shall so advise all holders of Registrable Securities, and the
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be limited to the number advised
by the underwriters and shall be allocated among all Holders thereof
in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders. If any Holder of
Registrable Securities disapproves of the terms of the underwriting,
he may elect to withdraw therefrom by written notice to the Company,
the underwriter and the Initiating Holders. Any Registrable Securities
which are excluded from the underwriting by reason of the
underwriter's marketing limitation or withdrawn from such
underwritings shall be withdrawn from such registration.
3. Company Registration.
3.1 If at any time or from time to time, the Company shall determine to
register any of its securities, for its own account or the account of
any of its stockholders, other than a registration on Form S-1 or S-8
relating solely to employee stock option or purchase plans or a
registration on Form S-4 relating solely to an SEC Rule 145
transaction, the Company will:
(a) promptly give to each Holder a written notice thereof (which
shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the
applicable blue sky or other state securities laws); and
(b) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a
written request or requests, made within 30 days after receipt of
such written notice from the Company, by any holder or holders,
except as set forth in Section 3.2 below.
4
-41-
<PAGE>
3.2 Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the written notice
given pursuant to Section 3.1(a). In such event the right of any
Holder to registration pursuant to Section 3.1 shall be conditioned
upon such 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 securities through such underwriting must enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 3.1, if the
underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the underwriter may limit the
amount of securities to be included in the registration and
underwriting by the Company's stockholders. The Company shall so
advise all Holders of Registrable Securities which would otherwise be
registered and underwritten pursuant hereto, and the number of shares
of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all of the Company's
stockholders (including Holders) who are not exercising demand
registration rights, in proportion, as nearly as practicable to the
respective amounts of securities requested to be included in such
registration held by such stockholder at the time of filing the
registration statement. If any Holder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written
notice to the Company and the underwriter. Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
4. Registration On Form S-3.
4.1 Form S-3. The Company shall use its best efforts to qualify for
registration on Form S-3 or its successor form. After the Company has
qualified for the use of Form S-3, Holders of Registrable Securities
shall have the right to request up to three registrations on Form S-3
(such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended
method of disposition of shares by such Holders), subject only to the
following:
(a) The Company shall not be required to effect a registration
pursuant to this Section 4.1 within 90 days of the effective date
of any registration referred to in Sections 2.1 and 3.1 above.
(b) The Company shall not be required to effect a registration
pursuant to this Section 4.1 unless the Holder or Holders
requesting registration propose to dispose of shares of
Registrable Securities having an aggregate disposition price
(before deduction of underwriting discounts and expenses of sale)
of at least Five Hundred Thousand Dollars ($500,000).
(c) The Company shall not be required to effect a registration
pursuant to this Section 4.1 within 90 days of the effective date
of the last such registration pursuant to this Section 4.1.
The Company shall give written notice to all Holders of Registrable
Securities of the receipt of a request for registration pursuant to this
Section 1.4 and shall provide a reasonable opportunity for other Holders to
participate in the registration, provided that if the registration is for
an underwritten offering, the terms of Section 3.2(b) shall apply to all
participants in such offering. Subject to the foregoing, the Company will
use its best efforts to effect promptly the registration of all shares of
Registrable Securities on Form S-3 to the extent requested by the Holder or
Holders thereof for purposes of disposition.
5. Expenses of Registration. All expenses incurred in connection with any
registration pursuant to this Agreement, including, without limitation, all
registration, filing and qualification fees, printing expenses, fees and
disbursements of counsel for the Company and expenses of any special audits
of the Company's financial statements incidental to or required by such
registration, shall be borne by the Company except as follows:
5
-42-
<PAGE>
5.1 If the Company is not registering any shares for its own account
pursuant to any registration effected under Section 2.1, then the
selling Holders shall bear all expenses incurred in connection with
any special audits of the Company's financial statements incidental to
or required by such registration.
5.2 The Company shall not be required to pay for expenses of any
registration proceeding begun pursuant to Section 2.1, the request for
which has been subsequently withdrawn by the Initiating Holders, in
which latter case, such expenses shall be borne by the Holders
requesting such withdrawal.
5.3 The Company shall not be required to pay fees of legal counsel of a
Holder except for a single counsel whose fees shall not exceed Two
Thousand Five Hundred Dollars ($2,500.00) acting on behalf of all
selling Holders, or underwriters fees, discounts or commissions
relating to Registrable Securities.
6. Indemnification.
6.1 To the extent permitted by law, the Company will indemnify each Holder
of Registrable Securities, each of its officers, directors, partners
and members, and each person controlling such Holder, with respect to
which such registration has been effected pursuant to this Section 1,
and each underwriter, if any, and each person who controls any
underwriter of the Registrable Securities held by or issuable to such
Holder, against all claims, losses, expenses, damages and liabilities
(or actions in respect thereto) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to
any such registration, or based on any 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 any
violation by the Company of any rule or regulation promulgated under
the Securities Act or any state securities law applicable to the
Company in connection with any such registration, and will reimburse
each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each
person who controls any such underwriter, for any reasonable legal and
any other expenses incurred in connection with investigating,
defending or settling any such claim, loss, damage, liability or
action, provided that the indemnity contained in this Section shall
not apply to amounts paid in settlement of any such claim, loss,
damage, liability or action if such settlement is effected without the
consent of the Company (which consent will not be unreasonably
withheld) and provided further that the Company will not be liable in
any such case to the extent that any such claim, loss, damage or
liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by
such Holder or underwriter specifically for use therein.
6
-43-
<PAGE>
6.2 Each Holder will, if Registrable Securities held by or issuable to
such Holder are included in the securities as to which such
registration is being effected, indemnify the Company, each of its
directors and officers, each legal counsel and independent accountant
of the Company, each underwriter, if any, of the Company's securities
covered by such a registration statement, each person who controls the
Company within the meaning of the Securities Act, and each other such
Holder, each of its officers, directors and partners and each person
controlling such Holder, against all claims, losses, expenses, damages
and liabilities (or actions in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such Holders, such
directors, officers, partners, persons or underwriters for any
reasonable investigating, defending, or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to
the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance
upon and in conformity with written information furnished to the
Company by such Holder specifically for use therein; and provided
further that the indemnity contained in the paragraph shall not apply
to amounts paid in settlement of any such claim, loss, damage,
liability or action if such settlement is effected without the consent
of the Holder (which consent will not be unreasonably withheld).
6.3 Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense
at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations hereunder, unless such
failure resulted in actual detriment to the Indemnifying Party. No
Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation.
7. Rule 144 Reporting. With a view to making available to Holders of
Registrable Securities 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 at all time to:
7.1 make and keep public information available, as those terms are
understood and defined in SEC Rule 144;
7.2 use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act;
7
-44-
<PAGE>
7.3 so long as a Holder owns any Registrable Securities, to furnish to
each such holder forthwith upon such Holder's request a written
statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the
Company for an offering of its securities to the general public), and
of the Securities Act and the Securities Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such
other reports and documents so filed by the Company as each such
Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing such Holder to sell any such securities
without registration.
8. Transfer of Registration Rights. The rights to cause the Company to
register Registrable Securities of a Holder and keep information available,
granted to a Holder by the Company under Sections 2.1, 3.1, 4.1 and 7 may
be assigned by a Holder to a transferee or assignee of at least 100,000
shares of the Registrable Securities provided that the Company is given
written notice by the Holder, stating the name and address of said
transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned.
9. Rights Granted to Subsequent Investors. Within the limitations prescribed
by this Section, but not otherwise, the Company may grant to subsequent
investors in the Company rights of incidental registration. Such rights may
only pertain to shares of Common Stock, including shares of Common Stock
into which any other securities of the Company may be converted. Such
rights may be granted with respect to registrations initiated by the
Company, but only in respect to that portion of such registration as is
available to the Holders of Registrable Securities (together with holders
of securities heretofore granted rights to participate in the available
portion of such registration) under the limitations set forth herein. Such
rights shall be limited in all cases to sharing pro rata in the available
portion of the registration in question with all other holders of
securities having rights to participate therein (including Holders of
Registrable Securities), such sharing to be based on the number of shares
of Common Stock held by the respective Holders, plus the number of shares
of Common Stock into which other securities held by such Holders are
convertible, which are entitled to registration rights.
The Company may not grant to subsequent investors in the Company
rights of registration upon request unless (i) such rights are limited to
shares of Common Stock, and (ii) all Holders of Registrable Securities are
given enforceable contractual rights to participate in registrations
requested by such subsequent investors, such participation to be on a pro
rata basis with all Holders of Securities entitled to such rights.
10. No-Action Letter or Opinion of Counsel in Lieu of Registration.
Notwithstanding anything else in this Agreement, if the Company shall have
obtained from the SEC a "no-action" letter in which the SEC has indicated
that it will take no action if, without registration under the Securities
Act, any Holder disposes of Registrable Securities covered by any request
for registration made under Section 2.1, 3.1 or 4.1 in the manner in which
such Holder proposes to dispose of the Registrable Securities included in
such request or if in the opinion of counsel for the Company concurred in
by counsel for such Holder, no registration under the Securities Act is
required in connection with such disposition, the Registrable Securities
included in such request shall not be eligible for registration under this
Agreement.
11. "Market Standoff" Agreement. Each of WWC and Hansen agrees, if requested by
the Company and an underwriter of Common Stock (or other securities) of the
Company, not to sell or otherwise transfer or dispose of any Common Stock
(or other securities) of the Company held by WWC and Hansen during the
120-day period following the effective date of a registration statement of
the Company filed under the Act, provided that:
8
-45-
<PAGE>
11.1 such agreement shall only apply to the first registration statement of
the Company including shares (or securities) to be sold on its behalf
to the public in an underwritten offering and filed after the date
hereof; and
11.2 all officers and directors of the Company enter into similar
agreements.
Such agreement shall be in writing in the form satisfactory to the
Company and such underwriter. The Company may impose stop transfer
instructions with respect to the shares (or securities) subject to the
foregoing restriction until the end of said 120-day period.
12. Termination of Registration Rights. The registration rights granted
pursuant to this Agreement shall terminate as to each Holder at such time
as all Registrable Securities of the Holder can, in the opinion of counsel
to the Company (which opinion shall be concurred in by counsel to the
Holders) be sold within a given three-month period pursuant to Rule 144 or
other applicable exemption.
13. Delay of Registration. No Holder shall have any right to take any action to
restrain, enjoin or otherwise delay any registration as the result of any
controversy that may arise with respect to the interpretation or
implementation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective on the day and year first written above.
THE COMPANY:
Vitro Diagnostics, Inc.
By: /s/ James R. Musick
---------------------------------------
James R. Musick, Vice President
WORLD WIDE CAPITAL, LLC
By: /s/ Kilyn Roth
--------------------------------------
Its: Kilyn Roth, Manager
--------------------------------------
9
-46-
