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.
 

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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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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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(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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(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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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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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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IN WITNESS WHEREOF, this Investor Rights Agreement has been executed as of the
date first above written.
 
COMPANY:
 
PROTALEX, INC., a Delaware corporation
145 Union Square Drive
New Hope, PA 18938
 

By: _________________________________
 

Steven H. Kane,
President and Chief Executive Officer

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SCHEDULE A
 
Investors
 
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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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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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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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