REGISTRATION RIGHTS AGREEMENT
EXHIBIT
4.6
This
Registration Rights Agreement (“Agreement”)
is
entered into as of December 22, 2005 by and among Protalex, Inc., a Delaware
corporation (the “Company”),
those
investors who have entered into that certain Purchase Agreement (defined below)
who are also identified on Schedule I attached hereto (the “Investors”) and
the Placement Agents (as identified in Schedule 3.9 to the Purchase Agreement)(
with reference to the following facts:
WHEREAS,
the Investors and the Company have entered into a Warrant and Common Stock
Purchase Agreement (the “Purchase
Agreement”)
of
even date with this Agreement; and
WHEREAS,
to induce the Investors to enter into the Purchase Agreement, the Company has
agreed to grant certain rights to the Investors as reflected in this
Agreement.
NOW
THEREFORE, in consideration of the mutual promises and covenants contained
herein, and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Certain
Definitions.
As used
in this Agreement, the following terms shall have the following respective
meanings. All terms not otherwise defined in this Agreement shall have the
meaning set forth in the Purchase Agreement.
1.1 “Affiliate”
means,
with respect to any Person, any other Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with, such specified Person, for so long as such Person remains
so associated to the specified Person.
1.2 “Commission”
shall
mean the Securities and Exchange Commission or any other federal agency at
the
time administering the Securities Act.
1.3 “Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended, or any similar federal
statute and the rules and regulations of the Commission thereunder, all as
the
same shall be in effect at the time.
1.4 “Holder”
or
“Holders”
shall
mean the Investors and the Placement Agents holding Registrable Securities
or
securities exercisable into Registrable Securities and any Person holding such
securities to whom rights under this Agreement have been transferred in
accordance with Section 3.10 hereof.
1.5 “Liquidity
Date”
shall
mean the earlier to occur of (i) the closing of a firmly underwritten
public offering of not less than Twenty-Five Million Dollars ($25,000,000)
gross
proceeds to the Company at a public offering price per share of at least Six
Dollars and Fifty Cents ($6.50) and with respect to which the lead underwriters
are nationally recognized leaders in the investment banking industry for the
biotechnology industry (a “Qualified Public Offering”), or (ii) the date on
which (a) the Company’s common stock is traded on the NASDAQ National
Market, the NASDAQ Stock Market, or the American Stock Exchange, and
(b) the average daily trading volume for the common stock for the preceding
six-month period shall be at least one hundred fifty thousand (150,000) shares
(adjusted for stock splits, combinations, and the like).
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1.6 “Person”
means
any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, governmental authority or other
legal entity.
1.7 “Registrable
Securities”
means
(1) the Shares and the Warrant Shares and (2) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, the Shares or Warrant
Shares, excluding in all cases, however, (i) any Registrable Securities
sold by a Person in a transaction in which such Person’s rights under this
Agreement are not assigned, or (ii) any Registrable Securities sold through
a broker or dealer or underwriter in a public distribution or a public
securities transaction pursuant to Rule 144(k).
1.8 The
terms
“register,”
“registered”
and
“registration”
refer
to a registration effected by preparing and filing a registration statement
in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
1.9 “Registration
Expenses”
shall
mean all expenses, except Selling Expenses as defined below, incurred by the
Company in complying with Sections 3.1, 3.2 and 3.3 hereof, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees
of
the Company which shall be paid in any event by the Company).
1.10 “Restricted
Securities”
shall
mean the securities of the Company required to bear the legend set forth in
Section 2.2 hereof.
1.11 “Registration
Statement”
shall
mean a registration statement of the Company, on Form S-3, or if the
Company is ineligible to use Form S-3, on Form SB-2 (or successor
forms) filed by the Company with the Commission pursuant to this Agreement
permitting registration of the Registrable Securities for resale by the
respective Holders thereof.
1.12 “Rule 144”
shall
mean Rule 144 adopted by the Commission under the Securities
Act.
1.13 “Securities
Act”
shall
mean the Securities Act of 1933, as amended, or any similar federal statute
and
the rules and regulations of the Commission thereunder, all as the same shall
be
in effect at the time.
1.14 “Selling
Expenses”
shall
mean all underwriting discounts, selling commissions and stock transfer taxes,
if any, applicable to the securities registered by the Holders.
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1.15 “Warrant
Shares”
shall
mean shares of the Company’s Common Stock issued or issuable upon exercise of
the Warrants (as defined in the Purchase Agreement).
2. Transferability.
2.1 Restrictions
on Transferability.
The
Registrable Securities shall not be sold, assigned, transferred or pledged
except upon the conditions specified in this Section 2, which conditions
are intended to ensure compliance with the provisions of the Securities Act.
The
Investors and Placement Agents will cause any proposed purchaser, assignee,
transferee, or pledgee of the Registrable Securities held by the Investors
or
Placement Agents to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this
Section 2.
2.2 Restrictive
Legend.
Each
certificate representing (i) the Registrable Securities and (ii) any
other securities issued in respect of the Registrable Securities upon any stock
split, stock dividend, recapitalization, merger, consolidation or similar event,
shall (unless otherwise permitted by the provisions of Section 2.3 below)
be stamped or otherwise imprinted with the legend set forth below.
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION
OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS
EXEMPT FROM SAID ACT.”
“THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE PURSUANT TO A REGISTRATION RIGHTS AGREEMENT, A COPY
OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.”
The
Investors and Holders consent to the Company making a notation on its records
and giving instructions to any transfer agent of the Registrable Securities
in
order to implement the restrictions on transfer established in this
Section 2.
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2.3 Notice
of Proposed Transfers.
The
Holder of each certificate representing Restricted Securities, by acceptance
thereof, agrees to comply in all respects with the provisions of this
Section 2.3. Prior to any proposed sale, assignment, transfer or pledge of
any Restricted Securities (other than (i) a transfer not involving a change
in beneficial ownership, (ii) in transactions involving the distribution
without consideration of Restricted Securities by an Investor to any of its
partners, or retired partners, or to the estate of any of its partners or
retired partners, or the transfer by gift, will or intestate succession of
any
partner to his or her spouse or to the siblings, lineal descendants or ancestors
of such partner or his or her spouse, (iii) a transfer to an affiliated
fund, partnership or company, which is not a competitor of the Company, subject
to compliance with applicable securities laws, or (iv) transfers in
compliance with Rule 144, so long as the Company is furnished with
satisfactory evidence of compliance with such Rule), unless there is in effect
a
registration statement under the Securities Act covering the proposed transfer,
the Holder thereof shall give written notice to the Company of such Holder’s
intention to effect such transfer, sale, assignment or pledge. Each such notice
shall describe the manner and circumstances of the proposed transfer, sale,
assignment or pledge in sufficient detail, and if reasonably requested by the
Company, such Holder shall have furnished at such Holder’s expense, either
(i) a written opinion of legal counsel who shall be, and whose legal
opinion shall be, reasonably satisfactory to the Company, addressed to the
Company, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, or (ii) a
“no action” letter from the Commission to the effect that the transfer of such
securities without registration will not result in a recommendation by the
staff
of the Commission that action be taken with respect thereto, whereupon the
Holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered
by
the Holder to the Company. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend specified in
Section 2.2 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such Holder and in the
reasonable opinion of the Company such legend is not required in order to
establish compliance with any provision of the Securities Act.
3. Registration
Rights.
3.1 Required
Registration.
The
Company shall file with the Commission and any applicable state securities
authorities within thirty (30) days following the Closing Date (the
“Filing
Date”),
and
use its best efforts to cause to be declared effective by the Commission within
ninety (90) business days following the Closing Date (the “Effective
Date”),
a
Registration Statement in order to register the Registrable Securities for
resale and distribution under the Securities Act. The Registration Statement
shall contain substantially the Plan of Distribution attached hereto as
Exhibit A.
The
Registration Statement must be declared effective by the Commission not later
than the Effective Date. The Company shall maintain the effectiveness of the
Registration Statement with respect to a Holder until such time as all remaining
Registrable Securities held by such Holder (assuming cashless exercise of the
Warrant Shares) may be sold without restriction under Rule 144(k) (or
successor rule) (the “Effectiveness
Period”).
If
the
Registration Statement is not filed with the Commission on or before the Filing
Date (a “Filing
Default”),
the
Company shall pay liquidated damages to each Holder, from and including the
day
that the day following such Filing Default until the date that the Registration
Statement is filed with the Commission, at a rate per month (or portion thereof)
equal to 0.50% of the total purchase price of the Shares purchased by such
Holder pursuant to the Purchase Agreement (the “Default
Rate”).
If
the
Registration Statement is not declared effective by the Commission on or before
one hundred twenty (120) business days following the Closing Date (a
“Registration
Default”),
the
Company shall pay liquidated damages to each Holder, from and including the
day
following such Registration Default until the earlier of (i) the time that
the Registration Statement is declared effective by the Commission, or
(ii) the time that the Effectiveness Period expires, at the Default
Rate.
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In
the
event that the Company exercises its right pursuant to Section 3.6 to
suspend the availability of the Registration Statement for a period exceeding
the maximum number of days specified therein for the applicable Suspension
Period (a “Suspension
Default”),
the
Company shall pay liquidated damages to each Holder, from and including the
day
following such Suspension Default until such time as the Company delivers the
Advice (as defined in Section 3.6) to the Holders described in Section 3.6,
at the Default Rate.
In
the
event that the Registration Statement ceases to be effective or available for
use by the Holders for a period in excess of sixty (60) days in any single
instance or ninety (90) days in the aggregate during any 12-month period (an
“Effectiveness
Default”),
the
Company shall pay liquidated damages to each Holder, from and including the
day
following such Effectiveness Default until such time as the Registration
Statement is again effective and available for use by the Holders, at the
Default Rate.
The
Company’s obligation to pay liquidated damages pursuant to this Section 3.1
shall accrue and be discharged on a monthly basis.
In
no
event shall the Company be required to pay liquidated damages in excess of
the
applicable maximum amount of 18.0% of the total purchase price of the Shares
purchased by such Holder pursuant to the Purchase Agreement
3.2 Requested
Registration.
(a) If
the
Company shall receive at any time after the second anniversary of the Closing
Date, a written request from the Holders (excluding the Placement Agents) that
the Company effect any registration with respect to Registrable Securities
representing at least twenty-five percent (25%) of the Registrable Securities
(or any lesser percentage if the anticipated aggregate offering price to the
public, excluding underwriting discounts and commissions, is at least Ten
Million Dollars ($10,000,000) (the “Initiating Holders”)), the Company
will:
(i) within
thirty (30) days of the receipt by the Company of such notice, give written
notice of the proposed registration, qualification or compliance to all other
Holders (which notice shall (i) specify the amount and intended method of
distribution of such Registrable Securities and (ii) invite such other
Holders to join in such requested registration by requiring that such other
holders provide a written request to join in the registration within twenty
(20)
days after the receipt of such written notice); and
(ii) as
soon
as practicable, use its commercially reasonable efforts to effect such
registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act 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 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 received
by the Company within twenty (20) days after receipt of such written notice
from
the Company;
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Provided,
however, that the Company shall not be obligated to take any action to effect
any such registration, qualification or compliance pursuant to this
Section 3.2:
(1) After
the
Company has effected three such registrations pursuant to this
Section 3.2(a), and such registrations have been declared or ordered
effective; or
(2) If
the
Company shall furnish to such Holders a certificate signed by the President
of
the Company stating that the Company has pending or in process a material
transaction or event, the disclosure of which in the good faith judgment of
the
Board of Directors, after consultation with outside securities counsel,
materially and adversely affect the Company, then the Company may postpone
the
filing (but not the preparation) of a Registration Statement required by this
Section 3.2 for up to ninety (90) days; provided,
however,
that
the Company shall at all times in good faith use its best efforts to cause
any
Registration Statement required by this Section 3.2 to be filed as soon as
possible thereafter; provided,
however,
that
the Company shall not exercise such right more than once in any twelve-month
period; or
(3) With
respect to any Holder if at the time of such request all of such Holder’s
Registrable Securities (assuming cashless exercise of the Warrant Shares) may
be
sold without restriction under Rule 144(k) (or successor rule).
(b) At
the
time the Registration Statement required pursuant to this Section 3.2 is
declared effective, the Holders shall be named as selling securityholders in
the
Registration Statement and any related prospectus in such a manner as to permit
such Holders to deliver such prospectus to purchasers of Registrable Securities
in accordance with applicable law. None of the Company’s securityholders (other
than the Holders) shall have the right to include any of the Company’s
securities in the Registration Statement required pursuant to this
Section 3.2, if including such other securities in such Registration
Statement would delay or otherwise interfere with the filing or effectiveness
of
such Registration Statement.
(c) If
a
requested registration pursuant to this Section 3.2 involves an
underwritten offering, the investment banker(s), underwriter(s) and manager(s)
for such registration shall be selected by the Holders of a majority of the
Registrable Securities which the Company has been requested to register;
provided, however, that such investment banker(s), underwriter(s) and manager(s)
shall be reasonably satisfactory to the Company.
(d) In
the
event that a Registration Statement filed pursuant to Section 3.2 is for a
registered public offering involving an underwriting, as requested by the
Initiating Holders, the Company shall so advise the Holders as part of the
notice given pursuant to this Section 3.2. In such event, the right of any
Holder to registration pursuant to Section 3.2 shall be conditioned upon
such Holder’s participation in the underwriting arrangements required by this
Section 3.2, and the inclusion of such Holder’s Registrable Securities in
the underwriting to the extent requested shall be limited to the extent provided
herein.
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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 managing underwriter selected for such underwriting
by
the Company and reasonably acceptable to a majority in interest of the Holders
proposing to distribute their securities through such underwriting.
Notwithstanding any other provision of this Section 3.2, if the requested
registration statement pursuant to this Section 3.2 involves an
underwritten public offering and the managing underwriter advises the Initiating
Holders in writing that marketing factors require a limitation of the number
of
shares to be underwritten, then the Company 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 allocated among
all Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of filing
the
registration statement or in such other manner as shall be agreed to by the
Company and Holders of a majority in interest of the Registrable Securities
proposed to be included in such registration. No Registrable Securities excluded
from the underwriting by reason of the underwriter’s marketing limitation shall
be included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest one hundred (100)
shares.
If
any
Holder of Registrable Securities disapproves of the terms of the underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company,
the managing underwriter and the Initiating Holders. The Registrable Securities
and/or other securities so withdrawn shall also be withdrawn from
registration.
3.3 Company
Registration.
(a) If
at any
time or from time to time the Company shall determine to register any of its
securities, either for its own account or the account of any stockholder, other
than (i) a registration relating solely to employee benefit plans,
(ii) a registration relating solely to a Commission Rule 145
transaction, (iii) the registration pursuant to Section 3.1 hereof or
(iv) a demand registration by the Company’s stockholders under that certain
Investor Rights Agreement dated September 18, 2003 or under that certain
Registration Rights Agreement dated May 25, 2005 (collectively, the
“Registration Agreements”), the Company will:
(i) promptly
give to each Holder written notice thereof and of each such Holder’s rights
under this Section 3.3; and
(ii) use
its
commercially reasonable efforts to 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 ten (10) days after receipt of such written notice
from
the Company, by any Holder, subject to Section 3.3(b) hereof.
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(b) 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 a
part of the written notice given pursuant to Section 3.3(a)(i). In such
event the right of any Holder to registration pursuant to Section 3.3 shall
be conditioned upon such Holder’s participation in such underwriting and the
inclusion of Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company) enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting by the Company. Notwithstanding any other provision of this
Section 3.3, if the Company registration pursuant to this Section 3.3
involves an underwritten offering and the managing underwriter advises the
Company in writing that marketing factors require a limitation of the number
of
shares to be underwritten, the managing underwriter may limit the Registrable
Securities and other securities to be distributed through such underwriting,
provided, that the Company shall include in such registration
(a) first,
one
hundred percent (100%) of the securities the Company proposes to sell, and
(b) second,
the
amount of Registrable Securities which the Holders have requested to be included
in such registration, such amount to be allocated pro rata among all requesting
Holders on the basis of the relative amount of Registrable Securities then
held
by each such Holder together with other holders of rights similar to those
granted in this Section 3.3 on a pari
passu
basis;
provided, further, in no event shall the number of Registrable Securities to
be
included in such offering be less than twenty percent (20%) of the total number
of securities to be included in such offering. The Company shall so advise
all
Holders distributing their securities through such underwriting of such
limitation, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders in proportion, as nearly as practicable, to the respective amounts
of
Registrable Securities held by such Holders at the time of filing the
registration statement or in such other manner as shall be agreed to by the
Company and Holders of a majority in interest of the Registrable Securities
proposed to be included in such registration. To facilitate the allocation
of
shares in accordance with the above provisions, the Company may round the number
of shares allocated to any Holder or other selling stockholder to the nearest
one hundred (100) shares. If any Holder disapproves of the terms of any such
underwriting, such Holder or selling stockholder may elect to withdraw therefrom
by written notice to the Company and the managing underwriter. Further, any
Holder requesting to be included in such registration may elect, in writing
prior to the effective date of the registration statement filed in connection
with such registration to withdraw therefrom. In addition, the registrations
provided for in this Section 3.3 are in addition to, and not in lieu of the
registrations made on behalf of the Holders as described elsewhere in this
Section 3.
(c) The
Company shall have the right to terminate or withdraw any registration initiated
by it under this Section 3.3 prior to the effectiveness of such registration
whether or not any Holder has elected to include securities in such
registration. The Registration Expenses of such withdrawn registration shall
be
borne by the Company in accordance with Section 3.4 hereof.
(d) Notwithstanding
the above, this Section 3.3 shall not apply to registrations of the Company’s
securities which are not underwritten public offerings (x) when the Registrable
Securities are covered by an effective Registration Statement or (y) where
with
respect to any Holder all of such Holder’s Registrable Securities (assuming
cashless exercise of the Warrant Shares) may be sold without restriction under
Rule 144(k) (or successor rule).
3.4 Expenses
of Registration.
All
Registration Expenses incurred in connection with registrations pursuant to
Sections 3.1, 3.2 and 3.3 shall be borne by the Company. All Selling
Expenses relating to securities registered pursuant to Sections 3.1, 3.2
and 3.3 shall be borne by the Persons holding securities included in such
registration pro rata on the basis of the number of shares so
registered.
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3.5 Registration
Procedures.
In the
case of each registration, qualification or compliance effected by the Company
pursuant to this Section 3, the Company will keep each Holder advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. The Company will use its best efforts to:
(a) if
the
Company becomes eligible to file a Registration Statement on Form S-3 (the
date on which the Company becomes so eligible, the “S-3 Eligibility Date”), then
(A) cause each Registration Statement first filed after the S-3 Eligibility
Date to be on Form S-3 and (B) with respect to each Registration
Statement filed on Form SB-2 (or such other form as does not permit
incorporation by reference, if applicable) prior to the S-3 Eligibility Date
where the period of obligation to maintain the effectiveness of such
Registration Statement would in the reasonable judgment of the Company exceed
three (3) months, cause to be promptly (but in any event not more than 30 days
after such date) filed a Registration Statement on Form S-3 to replace each
such Registration Statement on Form SB-2 and cause such Registration
Statement on Form S-3 to be declared effective by the Commission as soon as
possible after filing, thereafter to cause to be filed a post-effective
amendment to each Registration Statement on Form SB-2 to de-register unsold
shares under such Registration Statement unless this provision 3.5(a) is waived
in writing by the unanimous written consent of the Board of Directors;
provided,
however,
that no
fewer than three (3) business days before filing a Registration Statement or
related prospectus or any amendment or supplement thereto in accordance with
Section 3 hereof, the Company shall furnish to counsel for the Holders
copies of all documents proposed to be filed, which documents be subject to
review by such counsel;
(b) prepare
and file with the Commission such amendments and supplements to such
Registration Statement (including any Exchange Act documents incorporated by
reference into such Registration Statement) and the prospectus used in
connection with such Registration Statement as may be necessary to keep such
Registration Statement continuously effective as required herein and to comply
with the provisions of the Securities Act with respect to the disposition of
all
securities covered by such registration statement, including, but not limited
to, with respect to each Registration Statement on Form SB-2 (or other such
form that does not permit incorporation by reference, if applicable), cause
a
post-effective amendment (or prospectus supplement) to be filed as may be
necessary with the Commission within twenty (20) days after each date on which
the Company files its Annual Report on Form 10-KSB (or similar form), and
in the case of a post-effective amendment, cause such post-effective amendment
to be declared effective by the Commission as soon as possible after
filing;
(c) furnish
to the Holders participating in such registration and to the underwriters of
the
securities being registered, if any, such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus, in conformity
with the requirements of the Securities Act, and such other documents they
may
reasonably request in order to facilitate the disposition of Registrable
Securities by them;
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(d) register
and qualify the securities covered by such registration statement under such
other securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders and do any and all other acts and things which may
be
reasonably necessary or advisable to enable the Holders and each underwriter,
if
any, to consummate the disposition of the Registrable Securities in such states;
(e) in
the
event of any underwritten public offering, enter into and perform its
obligations under an underwriting agreement, in usual and customary form, with
the managing underwriter of such offering;
(f) cause
all
Registrable Securities to be quoted on the Nasdaq Stock Market Over-the-Counter
Bulletin Board (the “OTCBB”),
or
such other securities exchange on which similar securities issued by the Company
are then listed, and comply with all requirements of the OTCBB or such other
securities exchange, as applicable, with regards to the issuance of the shares
and the listing thereof;
(g) give
notice to each Holder and counsel for the Holders, (i) when any prospectus,
prospectus supplement, Registration Statement or post-effective amendment to
the
Registration Statement has been filed with the Commission and, with respect
to
the Registration Statement or any post-effective amendment, when the same has
been declared effective, (ii) of the receipt of any comments from the SEC,
(iii) of any request by the Commission or any other federal or state
governmental authority to amend or supplement the Registration Statement or
amend or supplement the prospectus or for additional information; (iv) of
the issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration
Statement or the initiation or written threat of any proceedings for that
purpose, (v) of the receipt by the Company of any notification with respect
to
the suspension of the qualification or exemption from qualification of any
of
the Registrable Securities for sale in any jurisdiction or the initiation or
the
written threat of any proceeding for such purpose or (vi) the necessity of
any changes in the Registration Statement or prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in
the
case of the Registration Statement, it will not contain any untrue statement
of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that
in
the case of the prospectus, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading which notice in the
case of (iii) through (vi) above (each a “Required
Notice”)
may,
at the discretion of the Company, state that it constitutes a Suspension Notice
(as defined below) in which case the provisions of Section 3.6 shall
apply;
(h) if
any
Registration Statement required pursuant to this Section 3 ceases to be
effective for any reason at any time (other than because all Registrable
Securities registered thereunder shall have been resold pursuant thereto or
shall have otherwise ceased to be Registrable Securities), use its best efforts
to obtain the prompt withdrawal of any order suspending the effectiveness
thereof, and in any event shall as promptly as reasonably practicable amend
such
Registration Statement in a manner reasonably expected to obtain the withdrawal
of the order suspending the effectiveness thereof;
-10-
(i) supplement
and amend any Registration Statement required pursuant to this Section 3 if
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Registration Statement, if
required by the Securities Act;
(j) obtain
the withdrawal of any order or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction in which they have been qualified for
sale and provide reasonably prompt notice to each Holder and counsel for the
Holders of the withdrawal of any such order;
(k) incorporate
in a prospectus supplement to the Registration Statement or post-effective
amendment to the Registration Statement such information as the Holders of
the
majority in interest of the Registrable Securities and counsel for the Holders
shall determine to be required to be included therein by applicable law and
make
any required filings of such prospectus supplement or post-effective
amendment;
(l) provide
a
transfer agent and registrar for all Registrable Securities registered pursuant
hereunder and a CUSP number for all such Registrable Securities, in each case
not later than the effective date of such registration;
(m) cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing Registrable Securities sold or to be sold pursuant
to
the Registration Statement, which certificates shall not bear any restrictive
legends, and use reasonable efforts to cause such Registrable Securities to
be
in such denominations and registered in such names as the applicable Holder
or
Holders may request in writing at least one (1) trading day prior to any
sale of such Registrable Securities;
(n) upon
request by a majority-in-interest of the Registrable Securities, make reasonably
available for inspection during normal business hours by a representative for
any Holder, and any broker-dealers, counsel for the Holders, accountants or
underwriter, all relevant financial and other records and pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
appropriate officers, directors and employees of the Company and its
subsidiaries to make reasonably available for inspection during normal business
hours on reasonable notice all relevant information reasonably requested by
such
representative for a Holder, or any such brokerdealers, counsel for a Holder,
accountants or underwriter in connection with such disposition, in each case
as
is customary for similar “due diligence” examinations; provided, however, that
each Holder (and its respective agents and representatives) shall hold in
confidence and shall not make any disclosure (except to another Holder) of
any
such information, unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) disclosure of such
information is necessary to avoid or to correct a misstatement or omission
in
any Registration Statement, (iii) release of such information is ordered
pursuant to a subpoena or other order from a court or government body of
competent jurisdiction, (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement, or (v) the Company consents to any such disclosure.
Nothing herein shall be deemed to limit the Holder’s ability to sell Registrable
Securities in a manner which is otherwise consistent with applicable laws and
regulations;
-11-
(o) notify
each Holder covered by such registration statement at any time when a prospectus
relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a
material fact or omits to state a material fact required to be stated therein
or
necessary to make the statements therein not misleading in the light of the
circumstances then existing and at the request of any such Holder, prepare
and
furnish to such Holder a reasonable number copies of an amended or supplemental
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities such prospectus shall not include
an
untrue statement of a material fact or omit to state a material fact required
to
be stated therein or necessary to make the statements therein not misleading
in
light of the circumstances then existing;
(p) comply
with all applicable rules and regulations of the Commission and make generally
available to its securityholders earning statements (which need not be audited)
satisfying the provisions of Section 1l(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the Securities
Act); and
(q) furnish,
at the request of any Holder requesting registration of Registrable Securities
pursuant to this Section 3, on the closing date of any such underwritten
public offering, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to
underwriters in an underwritten public offering, addressed to the underwriters,
and to the Holders requesting registration of Registrable
Securities.
3.6 Deferral.
The
right of the Holders to use the Registration Statement (and the prospectus
relating thereto) shall be suspended for a period or periods (the “Suspension
Period”)
of not
more than thirty (30) days in any single instance and not more than sixty (60)
days in the aggregate during any twelve (12) month period after delivery by
the
Company to the Holders of (i) a Required Notice; or (ii) a certificate
signed by the President or Chief Executive Officer of the Company certifying
that the Board has made the good-faith determination (A) that continued use
by the Holders of the Registration Statement for purposes of effecting offers
or
sales of Registrable Shares pursuant thereto would require, under the Securities
Act, premature disclosure in the Registration Statement or prospectus of
material, nonpublic information concerning the Company, its business or
prospects or any proposed material transaction involving the Company,
(B) that such premature disclosure would be materially adverse to the
Company, its business or prospects or any such proposed material transaction
or
would make the successful consummation by the Company of any such material
transaction significantly less likely and (C) that it is therefore
essential to suspend the use by the Holders of such Registration Statement
and
prospectus for purposes of effecting offers or sales of Registrable Shares
pursuant thereto. A Required Notice and the certificate described in subsection
(ii) above are each referred to herein as a “Suspension
Notice.”
Upon
receipt of a Suspension Notice, each Holder agrees not to sell any Registrable
Securities pursuant to the Registration Statement until such Holder is advised
in writing by the Company that the Registration Statement and related prospectus
may be used, and has received copies of any additional or supplemental filings
that are incorporated or deemed incorporated by reference in such Registration
Statement and related prospectus (the “Advice”).
Each
Holder shall keep the fact of any Suspension Notice delivered by the Company
and
its contents confidential.
-12-
3.7 Indemnification.
(a) The
Company will indemnify each Holder, each of its officers, directors, partners
and legal counsel, and each Person controlling such Holder within the meaning
of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 3,
and each underwriter, if any, and each Person who controls any underwriter
within the meaning of Section 15 of the Securities Act, against all
expenses, claims, losses, damages or liabilities (or actions, proceedings or
settlements in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, 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, in light of the circumstances in
which
they were made, not misleading, or any violation by the Company of the
Securities Act or other applicable securities laws or any rule or regulation
promulgated under the Securities Act or such other securities laws applicable
to
the Company in connection with any such registration, qualification or
compliance, and the Company will reimburse each such Holder, each of its
officers, directors, partners, and legal counsel and each Person controlling
such Holder, each such underwriter and each Person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing, defending or settling any such claim,
loss, damage, liability or action, provided that the Company will not be liable
in any such case to the extent that any such claim, loss, damage, liability
or
expense arises out of or is based on any untrue statement or omission or alleged
untrue statement or omission, made in reliance upon and in conformity with
written information furnished to the Company by such Holder, controlling Person
or underwriter and stated to be specifically for use therein.
(b) Each
Holder will, if Registrable Securities held by such Holder are included in
the
securities as to which such registration, qualification or compliance is being
effected, severally (but not jointly) indemnify the Company, each of its
directors, officers, and legal counsel, each underwriter, if any, of the
Company’s securities covered by such a registration statement, each Person who
controls the Company or such underwriter within the meaning of Section 15
of the Securities Act, and each other Holder, each of its officers, directors,
partners and legal counsel and each Person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses,
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, Persons, underwriters or control Persons for any legal
or
any other expenses reasonably incurred in connection with investigating or
defending 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
and stated to be specifically for use therein; provided, however, that the
obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions
in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld); and provided that
in
no event shall any indemnity under this Section 3.7(b) exceed the net
proceeds from the offering received by such Holder. Except for an underwritten
public offering where the underwriters request specified indemnification of
all
participants, a Holder will not be required to enter into any agreement or
undertaking in connection with any registration under this Section 3
providing for any indemnification or contribution on the part of such Holder
greater than the Holder’s obligations under this
Section 3.7(b).
-13-
(c) Each
party entitled to indemnification under this Section 3.7 (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 unreasonably be 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 under this Section 3 unless the
failure to give such notice is materially prejudicial to an Indemnifying Party’s
ability to defend such action and provided further, that the Indemnifying Party
shall not assume the defense for matters as to which there is a conflict of
interest or separate and different defenses but shall bear the expense of such
defense nevertheless. 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.
(d) If
the
indemnification provided for in this Section 3.7 is held by a court of
competent jurisdiction to be unavailable to an Indemnified Party with respect
to
any loss, liability, claim, damage or expense referred to herein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as
a
result of such loss, liability, claim, damage or expense in such proportion
as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage
or
expense, as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to
information supplied by the Indemnifying Party or by the Indemnified Party
and
the parties’ relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
-14-
(e) Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall
control.
(f) The
obligations of the Company and Holders under this Section 3.7 shall survive
the completion of any offering of Registrable Securities in a registration
statement under this Section 3, and otherwise.
3.8 Information
by Holder.
The
Holder or Holders of Registrable Securities included in any registration shall
furnish to the Company such information regarding such Holder or Holders, the
Registrable Securities held by them, and the distribution proposed by such
Holder or Holders as the Company may request in writing and as shall be required
in connection with any registration, qualification or compliance referred to
in
this Section 3.
3.9 Rule 144
Reporting.
With a
view to making available the benefits of certain rules and regulations of the
Commission which may at any time permit the sale of the Restricted Securities
to
the public without registration, after such time as a public market exists
for
the Common Stock of the Company, the Company agrees to use its best efforts
to:
(a) Make
and
keep public information available, as those terms are understood and defined
in
Rule 144, at all times after the Effective Date that the Company is subject
to the reporting requirements of the Securities Act or the Securities Exchange
Act of 1934, as amended;
(b) File
with
the Commission in a timely manner all reports and other documents required
of
the Company under the Securities Act and the Securities Exchange Act of 1934,
as
amended (at any time after it has become subject to such reporting
requirements); and
(c) So
long
as a Holder owns any Restricted Securities to furnish to the Purchaser forthwith
upon request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time after ninety (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 of 1934 (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 of
the
Company and other information in the possession of or reasonably obtainable
by
the Company as a Purchaser may reasonably request in availing itself of any
rule
or regulation of the Commission allowing a Purchaser to sell any such securities
without registration.
3.10 Transfer
of Registration Rights.
None of
the rights to cause the Company to register securities granted to Holders under
Sections 3.1, 3.2 and 3.3 may be transferred or assigned by a Holder
without the written consent of the Company (which consent may be withheld in
its
sole discretion) unless (i) the transferee is an Investor or (ii) such person
is
a Qualifying Holder (as defined below), and such person agrees to become a
party
to, and bound by, all of the terms and conditions of, this Agreement. For
purposes of this Section 3.10, the term “Qualifying
Holder”
shall
mean, with respect to any Investor who has purchased no less than $250,000
of
Shares under the Purchase Agreement, (i) any partner or member thereof, (ii)
any
corporation, partnership or limited liability company controlling, controlled
by, or under common control with, such Investor or any partner or member
thereof, or (iii) any other direct transferee from such Investor of at least
15%
of those Registrable Shares held by such Investor.
-15-
3.11 No
Inconsistent Agreements.
The
Company represents and warrants that it is not a party to, nor will it enter
into, any agreements that (individually or in the aggregate) conflict with
or
limit or prohibit the exercise of the rights granted to the Holders in this
Agreement.
3.12 Termination
of Registration Rights.
The
rights granted under Sections 3.2 and 3.3 shall terminate on the Liquidity
Date
and shall not apply to a Qualified Public Offering where only the Company’s
equity is included in the Qualified Public Offering.
4. Covenants
of the Company.
4.1 Form D.
The
Company shall file a Form D with respect to the Securities as required
under Regulation D and shall provide a copy thereof to each Purchaser
promptly after such filing. The Company shall make all filings and reports
relating to the offer and sale of the Securities required under applicable
state
securities laws.
4.2 Reservation
of Shares.
The
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than one hundred percent (100%)
of
the number of shares of Common Stock issuable upon exercise of the
Warrants.
4.3 Disclosure
of Transaction.
Within
four (4) business days of the date hereof the Company shall file a Current
Report on Form 8-K describing the terms of the transactions contemplated by
the Operative Agreements in the form required by the Securities Exchange Act
of
1934, as amended.
5. General
Provisions.
5.1 Amendment
and Waiver.
Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and a majority in interest of the Investors. Any amendment or waiver effected
in
accordance with this Section 5.1 shall be binding upon each Holder of any
Shares or Registrable Securities purchased under the Purchase Agreement at
the
time outstanding, each future Holder of all such securities and the
Company.
5.2 Governing
Law; Injunctive Relief.
(a) This
Agreement shall be governed by and construed in accordance with the internal
and
substantive laws of the State of Delaware and without regard to any conflicts
of
laws concepts which would apply the substantive law of some other jurisdiction.
Venue for all purposes hereunder shall be in the applicable state or federal
court located within the State of Delaware.
-16-
(b) Each
of
the parties hereto acknowledges and agrees that damages will not be an adequate
remedy for any material breach or violation of this Agreement if such material
breach or violation would cause immediate and irreparable harm (an “Irreparable
Breach”).
Accordingly, in the event of a threatened or ongoing Irreparable Breach, each
party hereto shall be entitled to seek, equitable relief of a kind appropriate
in light of the nature of the ongoing or threatened Irreparable Breach, which
relief may include, without limitation, specific performance or injunctive
relief; provided, however, that if the party bringing such action is
unsuccessful in obtaining the relief sought, the moving party shall pay the
non-moving party’s reasonable costs, including attorney’s fees, incurred in
connection with defending such action. Such remedies shall not be the parties’
exclusive remedies, but shall be in addition to all other remedies provided
in
this Agreement.
5.3 Successors
and Assigns.
Except
as otherwise expressly provided, the provisions of this Agreement shall inure
to
the benefit of, and be binding upon, the successors, assigns, heirs, executors,
and administrators of the parties.
5.4 Severability.
Should
any part or provision of this Agreement be held unenforceable or in conflict
with the applicable laws or regulations of any jurisdiction, the invalid or
unenforceable part or provisions shall be replaced with a provision which
accomplishes, to the extent possible, the original business purpose of such
part
or provision in a valid and enforceable manner, and the remainder of this
Agreement shall remain binding upon the parties hereto.
5.5 Notices.
Any
notices, reports or other correspondence (hereinafter collectively referred
to
as “correspondence”) required or permitted to be given hereunder shall be in
writing and shall be sent by postage prepaid first class mail, courier or
telecopy or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder, and shall be deemed sufficient
upon
receipt when delivered personally or by courier, overnight delivery service
or
confirmed facsimile, or three (3) business days after being deposited in the
regular mail as certified or registered mail (airmail if sent internationally)
with postage prepaid, if such notice is addressed to the party to be notified
at
such party’s address or facsimile number as set forth below:
-17-
(a) All
correspondence to the Company shall be addressed as follows:
Protalex,
Inc.
000
Xxxxx
Xxxxxx Xxxxx,
Xxx
Xxxx,
XX 00000
Attention:
Xxxx
X.
Xxxx
Facsimile: (215) 862-6614-
with
a
copy to:
Xxxx
Xxxxx LLP
Xxx
Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxxxxxxx, XX 00000
Attention:
Xxxxxx
X.
Xxxxxx, Esq.
Facsimile: (000) 000.0000
(b) All
correspondence to any Holder shall be sent to such Holder at the address set
forth in Schedule A.
5.6 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and all of which together shall constitute one instrument;
provided that a facsimile signature shall be considered due execution and shall
be binding upon the signatory thereto with the same force and effect as if
the
signature were an original, not a facsimile signature.
5.7 Titles
and Subtitles.
The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this
Agreement.
5.8 Expenses.
If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement, the prevailing party shall be entitled to reasonable attorneys’
fees, costs and necessary disbursements in addition to any other relief to
which
such party may be entitled.
5.9 Material
Non-Public Information.
Except
in connection with any Investor’s designee’s role as a representative of the
Company’s board of directors, the Company will not provide to any Investor
material non-public information other than information related to the
transactions contemplated by the Operative Agreements without the prior written
consent of such Investor.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE
PAGE TO FOLLOW]
-18-
IN
WITNESS WHEREOF, this Investor Rights Agreement has been executed as of the
date
first above written.
COMPANY:
PROTALEX,
INC., a Delaware corporation
000
Xxxxx
Xxxxxx Xxxxx
Xxx
Xxxx,
XX 00000
By:
/s/
Xxxxxx X. Xxxx
Xxxxxx
X.
Xxxx,
President
and Chief Executive Officer
INVESTORS/HOLDERS:
[Signature]
[Print
Name]
[Title
(if shareholder not individual)]
-19-
SCHEDULE A
Investors
-1-
EXHIBIT
A
PLAN
OF DISTRIBUTION
The
selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which
the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
| o |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits the purchaser;
|
| o |
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| o |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
| o |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
| o |
privately
negotiated transactions;
|
| o |
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
| o |
a
combination of any such methods of sale; and
|
| o |
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
The
selling stockholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling stockholder defaults on a margin
loan, the broker may, from time to time, offer and sell the pledged
shares.
The
selling stockholders may pledge their shares of common stock to their brokers
under the margin provisions of customer agreements. If a selling stockholder
defaults on a margin loan, the broker may, from time to time, offer and sell
the
pledged shares.
Broker-dealers
engaged by the selling stockholders may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
Each
selling stockholder may be deemed to be an “underwriter” within the meaning of
the Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
We
are
required to pay all fees and expenses incident to the registration of the
shares, but excluding brokerage commissions or underwriter discounts. We and
the
selling stockholders have agreed to indemnify each other against certain losses,
claims, damages and liabilities, including liabilities under the Securities
Act.
|
-1-
|
|||
