REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”)
is
entered into as of June 30, 2006 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 “Effectiveness
Date”
means,
with respect to the initial Registration Statement required to be filed
hereunder, the 120th
calendar
day following the date hereof and, with respect to any additional Registration
Statements which may be required pursuant to Section 2.3, the 90th
calendar
day following the date on which the Company first knows, or reasonably should
have known, that such additional Registration Statement is required hereunder;
provided,
however,
in the
event the Company is notified by the Securities and Exchange Commission (“SEC”)
that one of the above Registration Statements will not be reviewed or is no
longer subject to further review and comments, the Effectiveness Date as to
such
Registration Statement shall be the fifth Trading Day following the date on
which the Company is so notified if such date precedes the dates required
above.
1.2 “Filing
Date”
means,
with respect to the initial Registration Statement required hereunder, the
30th
calendar
day following the date hereof and, with respect to any additional Registration
Statements which may be required pursuant to Section 2.3, the 30th
day
following the date on which the Company first knows, or reasonably should have
known that such additional Registration Statement is required
hereunder.
1.3 “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 2.10 hereof.
1.4 “Prospectus”
means
the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
1.5 “Registrable
Securities”
means
(1) the Shares and the Warrant Shares (including any additional shares
issuable in connection with any anti-dilution provisions in the Warrants)
(without giving effect to any limitations on exercise set forth in the Warrant)
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 pursuant to a Registration Statement or Rule 144
or
(iii) any Registrable Securities that may be sold without restriction under
Rule
144(k)(or successor rule).
1.6 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.
1.7 “Registration
Expenses”
shall
mean all expenses, except Selling Expenses as defined below, incurred by the
Company in complying with the registration obligations under this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees, trading market 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).
1.8 “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 SEC pursuant to this Agreement permitting
registration of the Registrable Securities for resale by the respective Holders
thereof and any additional registration statements contemplated by Section
2.3,
including (in each case) the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference
or
deemed to be incorporated by reference in such registration
statement.
1.9 “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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1.10 “Rule
424”
means
Rule 424 promulgated by the SEC pursuant to the Securities Act, as such Rule
may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC having substantially the same purpose and effect as such
Rule.
2. Registration
Rights.
2.1 Required
Registration.
The
Company shall file with the SEC and any applicable state securities authorities
on or before the Filing Date, and use its best efforts to cause to be declared
effective by the SEC on or before the Effectiveness 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
Company shall use its best efforts to cause a Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event prior to the applicable Effectiveness 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”).
The
Company shall telephonically request effectiveness of a Registration Statement
as of 5:00 pm Eastern Time on a Trading Day. The Company shall immediately
notify the Holders via facsimile or e-mail of the effectiveness of a
Registration Statement on the same Trading Day that the Company telephonically
confirms effectiveness with the SEC, which shall be the date requested for
effectiveness of a Registration Statement. The Company shall, by 9:30 am Eastern
Time on the Trading Day after the Effective Date (as defined in the Purchase
Agreement), file a final Prospectus with the SEC as required by Rule
424.
2.2 Partial
liquidated damages.
(a) If
the
Registration Statement is not filed with the SEC on or before the Filing Date
(a
“Filing
Default”),
the
Company shall pay partial 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 SEC, 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”).
(b) If
prior
to its Effectiveness Date, the Company fails to file a pre-effective amendment
and otherwise respond in writing to comments made by the SEC in respect of
such
Registration Statement within 30 calendar days after the receipt of comments
by
or notice from the SEC that such amendment is required in order for a
Registration Statement to be declared effective (“Prefiling
Default”),
the
Company shall pay partial liquidated damages to each Holder, from and including
the day following such Prefiling Default until such filing is made with the
SEC.
(c) If
the
Registration Statement is not declared effective by the SEC on or before the
Effectiveness Date (a “Registration
Default”),
the
Company shall pay partial 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 SEC, or
(ii) the time that the Effectiveness Period expires, at the Default Rate.
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(d) In
the
event that the Company exercises its right pursuant to Section 2.7 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 partial 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 2.7) to the Holders described in
Section 2.7, at the Default Rate.
(e) 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 partial 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.
(f) The
Company’s obligation to pay partial liquidated damages pursuant to this
Section 2.2 shall accrue and be discharged on a monthly basis on the last
Trading of each such month. If the Company fails to pay any partial liquidated
damages pursuant to this Section in full within seven days after the date
payable, the Company will pay interest thereon at a rate of 18% per annum (or
such lesser maximum amount that is permitted to be paid by applicable law)
to
the Holder, accruing daily from the date such partial liquidated damages are
due
until such amounts, plus all such interest thereon, are paid in full. The
partial liquidated damages pursuant to the terms hereof shall apply on a daily
pro-rata basis for any portion of a month prior to the cure of a
default.
(g) In
no
event, however, shall the Company be required to pay partial liquidated damages
in the aggregate under this Section 2 in excess of 10.0% of the total purchase
price of the Shares purchased by such Holder pursuant to the Purchase
Agreement.
2.3 Additional
Registration Rights.
If
during the Effectiveness Period, the number of Registrable Securities at any
time exceeds 95% of the number of shares of Common Stock then registered in
a
Registration Statement, then the Company shall file as soon as reasonably
practicable but in any case prior to the applicable Filing Date, an additional
Registration Statement covering the resale by the Holders of not less than
110%
of the number of such Registrable Securities. The Default Rates set forth in
Section 2.2 shall apply to any Registration Statement required to be filed
hereunder. Notwithstanding the foregoing, the Company shall have no obligation
to file a Registration Statement pursuant to this Section 2.3 if the SEC advises
the Company, orally or in writing, that filing the Registration Statement
pursuant to this Section 2.3 is not permitted by law or the rules and
regulations of the SEC, provided that the Company shall have used, and shall
continue to use, commercially reasonable efforts to overcome the SEC’s
position.
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2.4 Piggyback
Registration Rights.
(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 SEC Rule 145 transaction,
(iii) the registration pursuant to Section 2.1 hereof or (iv) a demand
registration by the Company’s stockholders pursuant to (A) that certain Investor
Rights Agreement dated September 18, 2003 or (B) that certain Registration
Rights Agreement dated May 25, 2005 or (C) that certain December 22, 2005
Registration Rights Agreement (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 2.4; 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 2.4(b) hereof.
(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 2.4(a)(i). In such
event the right of any Holder to registration pursuant to Section 2.4 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 2.4, if the Company registration pursuant to this Section 2.4
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 2.4 on a pari
passu
basis;
provided, further, in the case of Clause (b), 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 2.4 are in addition to, and
not in lieu of the registrations made on behalf of the Holders as described
elsewhere in this Section 2.
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(c) The
Company shall have the right to terminate or withdraw any registration initiated
by it under this Section 2.4 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 2.5 hereof.
(d) Notwithstanding
the above, this Section 2.4 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).
2.5 Expenses
of Registration.
All
Registration Expenses incurred in connection with registrations pursuant to
this
Agreement shall be borne by the Company. All Selling Expenses shall be borne
by
the Persons holding securities included in such registration pro rata on the
basis of the number of shares so registered.
2.6 Registration
Procedures.
In the
case of each registration, qualification or compliance effected by the Company
pursuant to this Section 2, 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) Not
less
than three Trading Days prior to the filing of each Registration Statement
and
not less than 1 Trading Day prior to the filing of any related Prospectus or
any
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall, (i) furnish to each Holder copies of all such documents proposed to
be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, and
(ii) cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to each Holder to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file a Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith, provided that, the Company
is
notified of such objection in writing no later than 3 Trading Days after the
Holders have been so furnished copies of a Registration Statement or 1 Trading
Day after the Holders have been so furnished copies of any related Prospectus
or
amendment or supplement thereto and so long as the Filing Date or Effectiveness
Date, as the case may be, shall be extended for the period of time that such
Holders object to the Company’s filing of the applicable document, provided that
the Company shall use commercially reasonable efforts to remedy the Purchasers’
objection and file the Registration Statement as soon as reasonably possible
thereafter.
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(b) 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 SEC 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 2.5(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 2 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;
(c) prepare
and file with the SEC 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
SEC 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 SEC as soon as possible after filing;
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(d) 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;
(e) prior
to
the Effectiveness Date, 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;
(f) 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;
(g) 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;
(h) as
promptly as possible, but in no event later than 1 Trading Day thereafter,
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 SEC 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 SEC 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 SEC 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 2.7 shall
apply;
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(i) if
any
Registration Statement required pursuant to this Section 2 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;
(j) supplement
and amend any Registration Statement required pursuant to this Section 2 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;
(k) 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;
(l) 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 (other than information
specific to a Holder which shall be at the discretion of the Holder provided
that the Holder and its Registrable Securities may be excluded if such
information is not provided by the Holder provided further that upon receipt
of
such information by the Company, the Company shall use commercially reasonable
efforts to include such Holders Registrable Securities on the Registration
Statement, or, if not then possible, on any subsequent registration statements)
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;
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(m) 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;
(n) 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;
(o) 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 broker-dealers, 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;
(p) as
promptly as possible 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;
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(q) comply
with all applicable rules and regulations of the SEC 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
(r) furnish,
at the request of any Holder requesting registration of Registrable Securities
pursuant to this Section 2, 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.
(s) If
NASDR
Rule 2710 requires any broker-dealer to make a filing prior to executing a
sale
by a Holder, the Company shall (i) make an Issuer Filing with the NASDR, Inc.
Corporate Financing Department pursuant to proposed NASDR Rule
2710(b)(10)(A)(i), (ii) use its best efforts to respond within five Trading
Days
to any comments received from NASDR in connection therewith, and (iii) pay
the
filing fee required in connection therewith.
2.7 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. The
Company agrees and acknowledges that any periods during which the Holder is
required to discontinue the disposition of the Registrable Securities hereunder
beyond the Suspension Period shall be subject to the provisions of Section
2.2.
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11 -
2.8 Indemnification.
(a) The
Company will indemnify each Holder, each of its officers, directors, members,
partners, agents, brokers, investment advisors, employees and legal counsel
(and
any other Persons with a functionally equivalent role of a Person holding such
titles, notwithstanding a lack of such title or any other title) and each Person
controlling such Holder within the meaning of Section 15 of the Securities
Act and the officers, directors, members, shareholders, partners, agents and
employees (and any other Persons with a functionally equivalent role of a Person
holding such titles, notwithstanding a lack of such title or any other title)
of
each such controlling Person (collectively, “Holder
Party”),
with
respect to which registration, qualification or compliance has been effected
pursuant to this Section 2, 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 (i) 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 (ii)
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 Party, 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.
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(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, against all claims, losses, damages and liabilities
(or
actions in respect thereof), including reasonable attorneys fees, arising out
of
or based on (i) 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 (ii) such Holder’s failure to sell the Registrable
Securities only pursuant to and in the manner contemplated by the Registration
Statement, including the Plan of Distribution section contained therein, and
otherwise in compliance with the prospectus delivery requirements of such Act
or
(iii) violations of the Securities Act arising solely from the Holder’s request
to remove the legends from the Registrable Securities prior to a sale of the
Registrable Securities pursuant to a Registration Statement, Rule 144 of the
Securities Act, or any other exemption from registration under the Securities
Act, and will reimburse the Company, 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 the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving
rise
to such indemnification obligation. 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 2 providing for any
indemnification or contribution on the part of such Holder greater than the
Holder’s obligations under this Section 2.8(b).
(c) Each
party entitled to indemnification under this Section 2.8 (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 2.8 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.
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13 -
(d) If
the
indemnification provided for in this Section 2.8 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. Notwithstanding the provisions
of this Section 2.8(d), no Holder shall be required to contribute, in the
aggregate, any amount in excess of the amount by which the net proceeds actually
received by such Holder from the sale of the Registrable Securities subject
to
the Proceeding exceeds the amount of any damages that such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.
(e) Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement as to any underwriters
only
and not the Holders 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 2.8 shall survive
the completion of any offering of Registrable Securities in a registration
statement under this Section 2, and otherwise.
2.9 Rule 144
Reporting.
With a
view to making available the benefits of certain rules and regulations of the
SEC which may at any time permit the sale of the Shares and Warrant Shares
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:
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14 -
(a) Make
and
keep public information available, as those terms are understood and defined
in
Rule 144, at all times 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 SEC 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 Shares or Warrant Shares 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 SEC allowing a Purchaser to sell any such securities
without registration. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the requirements of the exemption
provided by Rule 144.
2.10 Transfer
of Registration Rights.
None of
the rights to cause the Company to register securities granted to Holders under
this Agreement 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 an Affiliate of 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 2.10, 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
$250,000 of Registrable Securities (based on their original purchase price)
or
all Registrable Securities originally purchased by such Investor under the
Purchase Agreement, whichever is less.
2.11 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.
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15 -
3. General
Provisions.
3.1 Amendment
and Waiver.
Any
term of this Agreement may be amended or terminated 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 the Holders of a majority in interest of the
Registrable Securities then outstanding, so long as such consenting Holders
include each Holder that originally purchased no less than $2 million of Shares
under the Purchase Agreement and at the time of such consent continues to hold
no less than $250,000 of Shares originally purchased under the Purchase
Agreement or exercisable under such Holder’s Warrant (or any combination
thereof) (collectively, the “Holders
Consent”).
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of a
Holder and that does not directly or indirectly affect the rights of other
Holders may be given by such Holder to which such waiver or consent relates
without the consent of the Holders of a majority in interest of the Registrable
Securities and the Holders Consent; provided,
however,
that
the provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding
sentence.
3.2 Remedies.
In the
event of a breach by the Company or by a Holder, of any of their respective
obligations under this Agreement, each Holder or the Company, as the case may
be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation
for
any losses incurred by reason of a breach by it of any of the provisions of
this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall not assert or shall
waive the defense that a remedy at law would be adequate.
3.3 No
Piggyback on Registrations.
Except
as set forth on Schedule
3.3
attached hereto, neither the Company nor any of its security holders (other
than
the Holders in such capacity pursuant hereto) may include securities of the
Company in the initial Registration Statement other than the Registrable
Securities. The Company shall not file any other registration statements until
the initial Registration Statement required hereunder is declared effective
by
the Commission, provided that this Section 3.3 shall not prohibit the Company
from filing amendments to registration statements already filed.
3.4 No
Inconsistent Agreements.
The
Company has not entered, as of the date hereof, nor shall the Company, on or
after the date of this Agreement, enter into any agreement with respect to
its
securities, that would have the effect of impairing the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions
hereof.
3.5 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be determined in accordance with the provisions of
the
Purchase Agreement.
3.6 Successors
and Assigns.
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.
The Company may not assign its rights (except by merger) or obligations
hereunder without the Holders Consent.
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16 -
3.7 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.
3.8 Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be delivered as set forth in the Purchase
Agreement.
3.9 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 or by e-mail delivery of a “.pdf” format
data file 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.
3.10 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.
3.11 Cumulative
Remedies.
The
remedies provided herein are cumulative and not exclusive of any other remedies
provided by law.
3.12 Independent
Nature of Holders’ Obligations and Rights.
The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be responsible
in
any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at
any
closing, and no action taken by any Holder pursuant hereto or thereto, shall
be
deemed to constitute the Holders as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled
to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement, and it shall not be necessary for any other Holder to
be
joined as an additional party in any proceeding for such purpose.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE
PAGE TO FOLLOW]
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17 -
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: | _________________________________ |
|
Xxxxxx
X.
Xxxx,
President
and Chief Executive Officer
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SCHEDULE A
Investors
-
1
-
EXHIBIT
A
Plan
of Distribution
Each
Selling Stockholder (the “Selling
Stockholders”)
of the
common stock 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
the
[principal Trading Market] or any other 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. A Selling Stockholder may use any one
or
more of the following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
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;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
|
·
|
broker-dealers
may agree with the Selling Stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
|
|
·
|
a
combination of any such methods of sale;
or
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities
Act”),
if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-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, but,
except as set forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in compliance
with
NASDR Rule 2440; and in the case of a principal transaction a markup or markdown
in compliance with NASDR IM-2440.
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1 -
In
connection with the sale of the common stock or interests therein, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the Common
Stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” 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. Each Selling Stockholder has informed the
Company that it does not have any written or oral agreement or understanding,
directly or indirectly, with any person to distribute the Common Stock. In
no
event shall any broker-dealer receive fees, commissions and markups which,
in
the aggregate, would exceed eight percent (8%).
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to indemnify
the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because
Selling Stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act including Rule 172 thereunder. In addition, any securities
covered by this prospectus which qualify for sale pursuant to Rule 144 under
the
Securities Act may be sold under Rule 144 rather than under this prospectus.
There is no underwriter or coordinating broker acting in connection with the
proposed sale of the resale shares by the Selling Stockholders.
We
agreed
to keep this prospectus effective until the earlier of (i) the date on which
the
shares may be resold by the Selling Stockholders without registration and
without regard to any volume limitations by reason of Rule 144(k) under the
Securities Act or any other rule of similar effect (assuming cashless exercise
of any Warrants issued the Selling Stockholders) or (ii) all of the shares
have
been sold pursuant to this prospectus or Rule 144 under the Securities Act
or
any other rule of similar effect. The resale shares will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale shares may not
be
sold unless they have been registered or qualified for sale in the applicable
state or an exemption from the registration or qualification requirement is
available and is complied with.
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2 -
Under
applicable rules and regulations under the Exchange Act, any person engaged
in
the distribution of the resale shares may not simultaneously engage in market
making activities with respect to the common stock for the applicable restricted
period, as defined in Regulation M, prior to the commencement of the
distribution. In addition, the Selling Stockholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of purchases
and
sales of shares of the common stock by the Selling Stockholders or any other
person. We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.
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3 -
