Ex 4.6


    EXHIBIT
      4.6

     

    REGISTRATION
      RIGHTS AGREEMENT

     

    This
      Registration Rights Agreement (“Agreement”)
      is
      entered into as of December 22, 2005 by and among Protalex, Inc., a Delaware
      corporation (the “Company”),
      those
      investors who have entered into that certain Purchase Agreement (defined below)
      who are also identified on Schedule I attached hereto (the “Investors”) and
      the Placement Agents (as identified in Schedule 3.9 to the Purchase Agreement)(
      with reference to the following facts:

     

    WHEREAS,
      the Investors and the Company have entered into a Warrant and Common Stock
      Purchase Agreement (the “Purchase
      Agreement”)
      of
      even date with this Agreement; and

     

    WHEREAS,
      to induce the Investors to enter into the Purchase Agreement, the Company has
      agreed to grant certain rights to the Investors as reflected in this
      Agreement.

     

    NOW
      THEREFORE, in consideration of the mutual promises and covenants contained
      herein, and other good and valuable consideration, the receipt of which is
      hereby acknowledged, the parties agree as follows:

     

    1.    Certain
      Definitions.
      As used
      in this Agreement, the following terms shall have the following respective
      meanings. All terms not otherwise defined in this Agreement shall have the
      meaning set forth in the Purchase Agreement.

     

    1.1    “Affiliate”
means,
      with respect to any Person, any other Person that directly, or indirectly
      through one or more intermediaries, controls, is controlled by or is under
      common control with, such specified Person, for so long as such Person remains
      so associated to the specified Person.

     

    1.2    “Commission”
shall
      mean the Securities and Exchange Commission or any other federal agency at
      the
      time administering the Securities Act.

     

    1.3    “Exchange
      Act”
shall
      mean the Securities Exchange Act of 1934, as amended, or any similar federal
      statute and the rules and regulations of the Commission thereunder, all as
      the
      same shall be in effect at the time.

     

    1.4    “Holder”
or
      “Holders”
      shall
      mean the Investors and the Placement Agents holding Registrable Securities
      or
      securities exercisable into Registrable Securities and any Person holding such
      securities to whom rights under this Agreement have been transferred in
      accordance with Section 3.10 hereof.

     

    1.5    “Liquidity
      Date”
shall
      mean the earlier to occur of (i) the closing of a firmly underwritten
      public offering of not less than Twenty-Five Million Dollars ($25,000,000)
      gross
      proceeds to the Company at a public offering price per share of at least Six
      Dollars and Fifty Cents ($6.50) and with respect to which the lead underwriters
      are nationally recognized leaders in the investment banking industry for the
      biotechnology industry (a “Qualified Public Offering”), or (ii) the date on
      which (a) the Company’s common stock is traded on the NASDAQ National
      Market, the NASDAQ Stock Market, or the American Stock Exchange, and
      (b) the average daily trading volume for the common stock for the preceding
      six-month period shall be at least one hundred fifty thousand (150,000) shares
      (adjusted for stock splits, combinations, and the like).

     

    
      
         

      

      
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    1.6    “Person”
means
      any natural person, corporation, limited liability company, trust, joint
      venture, association, company, partnership, governmental authority or other
      legal entity.

     

    1.7    “Registrable
      Securities”
means
      (1) the Shares and the Warrant Shares and (2) any Common Stock of the
      Company issued as (or issuable upon the conversion or exercise of any warrant,
      right or other security which is issued as) a dividend or other distribution
      with respect to, or in exchange for or in replacement of, the Shares or Warrant
      Shares, excluding in all cases, however, (i) any Registrable Securities
      sold by a Person in a transaction in which such Person’s rights under this
      Agreement are not assigned, or (ii) any Registrable Securities sold through
      a broker or dealer or underwriter in a public distribution or a public
      securities transaction pursuant to Rule 144(k).

     

    1.8    The
      terms
“register,”
      “registered”
and
      “registration”
refer
      to a registration effected by preparing and filing a registration statement
      in
      compliance with the Securities Act, and the declaration or ordering of the
      effectiveness of such registration statement. 

     

    1.9    “Registration
      Expenses”
shall
      mean all expenses, except Selling Expenses as defined below, incurred by the
      Company in complying with Sections 3.1, 3.2 and 3.3 hereof, including,
      without limitation, all registration, qualification and filing fees, printing
      expenses, escrow fees, fees and disbursements of counsel for the Company, blue
      sky fees and expenses, the expense of any special audits incident to or required
      by any such registration (but excluding the compensation of regular employees
      of
      the Company which shall be paid in any event by the Company).

     

    1.10    “Restricted
      Securities”
shall
      mean the securities of the Company required to bear the legend set forth in
      Section 2.2 hereof.

     

    1.11    “Registration
      Statement”
shall
      mean a registration statement of the Company, on Form S-3, or if the
      Company is ineligible to use Form S-3, on Form SB-2 (or successor
      forms) filed by the Company with the Commission pursuant to this Agreement
      permitting registration of the Registrable Securities for resale by the
      respective Holders thereof.

     

    1.12    “Rule 144”
shall
      mean Rule 144 adopted by the Commission under the Securities
      Act.

     

    1.13    “Securities
      Act”
shall
      mean the Securities Act of 1933, as amended, or any similar federal statute
      and
      the rules and regulations of the Commission thereunder, all as the same shall
      be
      in effect at the time.

     

    1.14    “Selling
      Expenses”
shall
      mean all underwriting discounts, selling commissions and stock transfer taxes,
      if any, applicable to the securities registered by the Holders.

     

    
      
         

      

      
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    1.15    “Warrant
      Shares”
shall
      mean shares of the Company’s Common Stock issued or issuable upon exercise of
      the Warrants (as defined in the Purchase Agreement).

     

    2.    Transferability.

     

    2.1    Restrictions
      on Transferability.
      The
      Registrable Securities shall not be sold, assigned, transferred or pledged
      except upon the conditions specified in this Section 2, which conditions
      are intended to ensure compliance with the provisions of the Securities Act.
      The
      Investors and Placement Agents will cause any proposed purchaser, assignee,
      transferee, or pledgee of the Registrable Securities held by the Investors
      or
      Placement Agents to agree to take and hold such securities subject to the
      provisions and upon the conditions specified in this
      Section 2.

     

    2.2    Restrictive
      Legend.
      Each
      certificate representing (i) the Registrable Securities and (ii) any
      other securities issued in respect of the Registrable Securities upon any stock
      split, stock dividend, recapitalization, merger, consolidation or similar event,
      shall (unless otherwise permitted by the provisions of Section 2.3 below)
      be stamped or otherwise imprinted with the legend set forth below.

     

    “THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
      TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
      UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION
      OF
      COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS
      EXEMPT FROM SAID ACT.”

     

    “THE
      SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
      TRANSFERABILITY AND RESALE PURSUANT TO A REGISTRATION RIGHTS AGREEMENT, A COPY
      OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.”

     

    The
      Investors and Holders consent to the Company making a notation on its records
      and giving instructions to any transfer agent of the Registrable Securities
      in
      order to implement the restrictions on transfer established in this
      Section 2.

     

    
      
         

      

      
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    2.3    Notice
      of Proposed Transfers.
      The
      Holder of each certificate representing Restricted Securities, by acceptance
      thereof, agrees to comply in all respects with the provisions of this
      Section 2.3. Prior to any proposed sale, assignment, transfer or pledge of
      any Restricted Securities (other than (i) a transfer not involving a change
      in beneficial ownership, (ii) in transactions involving the distribution
      without consideration of Restricted Securities by an Investor to any of its
      partners, or retired partners, or to the estate of any of its partners or
      retired partners, or the transfer by gift, will or intestate succession of
      any
      partner to his or her spouse or to the siblings, lineal descendants or ancestors
      of such partner or his or her spouse, (iii) a transfer to an affiliated
      fund, partnership or company, which is not a competitor of the Company, subject
      to compliance with applicable securities laws, or (iv) transfers in
      compliance with Rule 144, so long as the Company is furnished with
      satisfactory evidence of compliance with such Rule), unless there is in effect
      a
      registration statement under the Securities Act covering the proposed transfer,
      the Holder thereof shall give written notice to the Company of such Holder’s
      intention to effect such transfer, sale, assignment or pledge. Each such notice
      shall describe the manner and circumstances of the proposed transfer, sale,
      assignment or pledge in sufficient detail, and if reasonably requested by the
      Company, such Holder shall have furnished at such Holder’s expense, either
      (i) a written opinion of legal counsel who shall be, and whose legal
      opinion shall be, reasonably satisfactory to the Company, addressed to the
      Company, to the effect that the proposed transfer of the Restricted Securities
      may be effected without registration under the Securities Act, or (ii) a
“no action” letter from the Commission to the effect that the transfer of such
      securities without registration will not result in a recommendation by the
      staff
      of the Commission that action be taken with respect thereto, whereupon the
      Holder of such Restricted Securities shall be entitled to transfer such
      Restricted Securities in accordance with the terms of the notice delivered
      by
      the Holder to the Company. Each certificate evidencing the Restricted Securities
      transferred as above provided shall bear, except if such transfer is made
      pursuant to Rule 144, the appropriate restrictive legend specified in
      Section 2.2 above, except that such certificate shall not bear such
      restrictive legend if in the opinion of counsel for such Holder and in the
      reasonable opinion of the Company such legend is not required in order to
      establish compliance with any provision of the Securities Act.

     

    3.    Registration
      Rights.

     

    3.1    Required
      Registration.
      The
      Company shall file with the Commission and any applicable state securities
      authorities within thirty (30) days following the Closing Date (the
“Filing
      Date”),
      and
      use its best efforts to cause to be declared effective by the Commission within
      ninety (90) business days following the Closing Date (the “Effective
      Date”),
      a
      Registration Statement in order to register the Registrable Securities for
      resale and distribution under the Securities Act. The Registration Statement
      shall contain substantially the Plan of Distribution attached hereto as
Exhibit A.
      The
      Registration Statement must be declared effective by the Commission not later
      than the Effective Date. The Company shall maintain the effectiveness of the
      Registration Statement with respect to a Holder until such time as all remaining
      Registrable Securities held by such Holder (assuming cashless exercise of the
      Warrant Shares) may be sold without restriction under Rule 144(k) (or
      successor rule) (the “Effectiveness
      Period”).

     

    If
      the
      Registration Statement is not filed with the Commission on or before the Filing
      Date (a “Filing
      Default”),
      the
      Company shall pay liquidated damages to each Holder, from and including the
      day
      that the day following such Filing Default until the date that the Registration
      Statement is filed with the Commission, at a rate per month (or portion thereof)
      equal to 0.50% of the total purchase price of the Shares purchased by such
      Holder pursuant to the Purchase Agreement (the “Default
      Rate”).
      

     

    If
      the
      Registration Statement is not declared effective by the Commission on or before
      one hundred twenty (120) business days following the Closing Date (a
“Registration
      Default”),
      the
      Company shall pay liquidated damages to each Holder, from and including the
      day
      following such Registration Default until the earlier of (i) the time that
      the Registration Statement is declared effective by the Commission, or
      (ii) the time that the Effectiveness Period expires, at the Default
      Rate.

     

    
      
         

      

      
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    In
      the
      event that the Company exercises its right pursuant to Section 3.6 to
      suspend the availability of the Registration Statement for a period exceeding
      the maximum number of days specified therein for the applicable Suspension
      Period (a “Suspension
      Default”),
      the
      Company shall pay liquidated damages to each Holder, from and including the
      day
      following such Suspension Default until such time as the Company delivers the
      Advice (as defined in Section 3.6) to the Holders described in Section 3.6,
      at the Default Rate. 

     

    In
      the
      event that the Registration Statement ceases to be effective or available for
      use by the Holders for a period in excess of sixty (60) days in any single
      instance or ninety (90) days in the aggregate during any 12-month period (an
      “Effectiveness
      Default”),
      the
      Company shall pay liquidated damages to each Holder, from and including the
      day
      following such Effectiveness Default until such time as the Registration
      Statement is again effective and available for use by the Holders, at the
      Default Rate.

     

    The
      Company’s obligation to pay liquidated damages pursuant to this Section 3.1
      shall accrue and be discharged on a monthly basis.

     

    In
      no
      event shall the Company be required to pay liquidated damages in excess of
      the
      applicable maximum amount of 18.0% of the total purchase price of the Shares
      purchased by such Holder pursuant to the Purchase Agreement

     

    3.2    Requested
      Registration.

     

    (a)    If
      the
      Company shall receive at any time after the second anniversary of the Closing
      Date, a written request from the Holders (excluding the Placement Agents) that
      the Company effect any registration with respect to Registrable Securities
      representing at least twenty-five percent (25%) of the Registrable Securities
      (or any lesser percentage if the anticipated aggregate offering price to the
      public, excluding underwriting discounts and commissions, is at least Ten
      Million Dollars ($10,000,000) (the “Initiating Holders”)), the Company
      will:

     

    (i)    within
      thirty (30) days of the receipt by the Company of such notice, give written
      notice of the proposed registration, qualification or compliance to all other
      Holders (which notice shall (i) specify the amount and intended method of
      distribution of such Registrable Securities and (ii) invite such other
      Holders to join in such requested registration by requiring that such other
      holders provide a written request to join in the registration within twenty
      (20)
      days after the receipt of such written notice); and 

     

    (ii)    as
      soon
      as practicable, use its commercially reasonable efforts to effect such
      registration, qualification or compliance (including, without limitation,
      appropriate qualification under applicable blue sky or other state securities
      laws and appropriate compliance with applicable regulations issued under the
      Securities Act and any other governmental requirements or regulations) as may
      be
      so requested and as would permit or facilitate the sale and distribution of
      all
      or such portion of such Registrable Securities as are specified in such request,
      together with all or such portion of the Registrable Securities of any Holder
      or
      Holders joining in such request as are specified in a written request received
      by the Company within twenty (20) days after receipt of such written notice
      from
      the Company;

     

    
      
         

      

      
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    Provided,
      however, that the Company shall not be obligated to take any action to effect
      any such registration, qualification or compliance pursuant to this
      Section 3.2:

     

    (1)    After
      the
      Company has effected three such registrations pursuant to this
      Section 3.2(a), and such registrations have been declared or ordered
      effective; or

     

    (2)    If
      the
      Company shall furnish to such Holders a certificate signed by the President
      of
      the Company stating that the Company has pending or in process a material
      transaction or event, the disclosure of which in the good faith judgment of
      the
      Board of Directors, after consultation with outside securities counsel,
      materially and adversely affect the Company, then the Company may postpone
      the
      filing (but not the preparation) of a Registration Statement required by this
      Section 3.2 for up to ninety (90) days; provided,
      however,
      that
      the Company shall at all times in good faith use its best efforts to cause
      any
      Registration Statement required by this Section 3.2 to be filed as soon as
      possible thereafter; provided,
      however,
      that
      the Company shall not exercise such right more than once in any twelve-month
      period; or 

     

    (3)    With
      respect to any Holder if at the time of such request all of such Holder’s
      Registrable Securities (assuming cashless exercise of the Warrant Shares) may
      be
      sold without restriction under Rule 144(k) (or successor rule). 

     

    (b)    At
      the
      time the Registration Statement required pursuant to this Section 3.2 is
      declared effective, the Holders shall be named as selling securityholders in
      the
      Registration Statement and any related prospectus in such a manner as to permit
      such Holders to deliver such prospectus to purchasers of Registrable Securities
      in accordance with applicable law. None of the Company’s securityholders (other
      than the Holders) shall have the right to include any of the Company’s
      securities in the Registration Statement required pursuant to this
      Section 3.2, if including such other securities in such Registration
      Statement would delay or otherwise interfere with the filing or effectiveness
      of
      such Registration Statement.

     

    (c)    If
      a
      requested registration pursuant to this Section 3.2 involves an
      underwritten offering, the investment banker(s), underwriter(s) and manager(s)
      for such registration shall be selected by the Holders of a majority of the
      Registrable Securities which the Company has been requested to register;
      provided, however, that such investment banker(s), underwriter(s) and manager(s)
      shall be reasonably satisfactory to the Company.

     

    (d)    In
      the
      event that a Registration Statement filed pursuant to Section 3.2 is for a
      registered public offering involving an underwriting, as requested by the
      Initiating Holders, the Company shall so advise the Holders as part of the
      notice given pursuant to this Section 3.2. In such event, the right of any
      Holder to registration pursuant to Section 3.2 shall be conditioned upon
      such Holder’s participation in the underwriting arrangements required by this
      Section 3.2, and the inclusion of such Holder’s Registrable Securities in
      the underwriting to the extent requested shall be limited to the extent provided
      herein.

     

    
      
         

      

      
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    The
      Company shall (together with all Holders proposing to distribute their
      securities through such underwriting) enter into an underwriting agreement
      in
      customary form with the managing underwriter selected for such underwriting
      by
      the Company and reasonably acceptable to a majority in interest of the Holders
      proposing to distribute their securities through such underwriting.
      Notwithstanding any other provision of this Section 3.2, if the requested
      registration statement pursuant to this Section 3.2 involves an
      underwritten public offering and the managing underwriter advises the Initiating
      Holders in writing that marketing factors require a limitation of the number
      of
      shares to be underwritten, then the Company shall so advise all Holders of
      Registrable Securities and the number of shares of Registrable Securities that
      may be included in the registration and underwriting shall be allocated among
      all Holders thereof in proportion, as nearly as practicable, to the respective
      amounts of Registrable Securities held by such Holders at the time of filing
      the
      registration statement or in such other manner as shall be agreed to by the
      Company and Holders of a majority in interest of the Registrable Securities
      proposed to be included in such registration. No Registrable Securities excluded
      from the underwriting by reason of the underwriter’s marketing limitation shall
      be included in such registration. To facilitate the allocation of shares in
      accordance with the above provisions, the Company or the underwriters may round
      the number of shares allocated to any Holder to the nearest one hundred (100)
      shares.

     

    If
      any
      Holder of Registrable Securities disapproves of the terms of the underwriting,
      such Holder may elect to withdraw therefrom by written notice to the Company,
      the managing underwriter and the Initiating Holders. The Registrable Securities
      and/or other securities so withdrawn shall also be withdrawn from
      registration.

     

    3.3    Company
      Registration.

     

    (a)    If
      at any
      time or from time to time the Company shall determine to register any of its
      securities, either for its own account or the account of any stockholder, other
      than (i) a registration relating solely to employee benefit plans,
      (ii) a registration relating solely to a Commission Rule 145
      transaction, (iii) the registration pursuant to Section 3.1 hereof or
      (iv) a demand registration by the Company’s stockholders under that certain
      Investor Rights Agreement dated September 18, 2003 or under that certain
      Registration Rights Agreement dated May 25, 2005 (collectively, the
“Registration Agreements”), the Company will:

     

    (i)    promptly
      give to each Holder written notice thereof and of each such Holder’s rights
      under this Section 3.3; and

     

    (ii)    use
      its
      commercially reasonable efforts to include in such registration (and any related
      qualification under blue sky laws or other compliance), and in any underwriting
      involved therein, all the Registrable Securities specified in a written request
      or requests, made within ten (10) days after receipt of such written notice
      from
      the Company, by any Holder, subject to Section 3.3(b) hereof.

     

    
      
         

      

      
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    (b)    If
      the
      registration of which the Company gives notice is for a registered public
      offering involving an underwriting, the Company shall so advise the Holders
      as a
      part of the written notice given pursuant to Section 3.3(a)(i). In such
      event the right of any Holder to registration pursuant to Section 3.3 shall
      be conditioned upon such Holder’s participation in such underwriting and the
      inclusion of Registrable Securities in the underwriting to the extent provided
      herein. All Holders proposing to distribute their securities through such
      underwriting shall (together with the Company) enter into an underwriting
      agreement in customary form with the managing underwriter selected for such
      underwriting by the Company. Notwithstanding any other provision of this
      Section 3.3, if the Company registration pursuant to this Section 3.3
      involves an underwritten offering and the managing underwriter advises the
      Company in writing that marketing factors require a limitation of the number
      of
      shares to be underwritten, the managing underwriter may limit the Registrable
      Securities and other securities to be distributed through such underwriting,
      provided, that the Company shall include in such registration
      (a) first,
      one
      hundred percent (100%) of the securities the Company proposes to sell, and
      (b) second,
      the
      amount of Registrable Securities which the Holders have requested to be included
      in such registration, such amount to be allocated pro rata among all requesting
      Holders on the basis of the relative amount of Registrable Securities then
      held
      by each such Holder together with other holders of rights similar to those
      granted in this Section 3.3 on a pari
      passu
      basis;
      provided, further, in no event shall the number of Registrable Securities to
      be
      included in such offering be less than twenty percent (20%) of the total number
      of securities to be included in such offering. The Company shall so advise
      all
      Holders distributing their securities through such underwriting of such
      limitation, and the number of shares of Registrable Securities that may be
      included in the registration and underwriting shall be allocated among all
      Holders in proportion, as nearly as practicable, to the respective amounts
      of
      Registrable Securities held by such Holders at the time of filing the
      registration statement or in such other manner as shall be agreed to by the
      Company and Holders of a majority in interest of the Registrable Securities
      proposed to be included in such registration. To facilitate the allocation
      of
      shares in accordance with the above provisions, the Company may round the number
      of shares allocated to any Holder or other selling stockholder to the nearest
      one hundred (100) shares. If any Holder disapproves of the terms of any such
      underwriting, such Holder or selling stockholder may elect to withdraw therefrom
      by written notice to the Company and the managing underwriter. Further, any
      Holder requesting to be included in such registration may elect, in writing
      prior to the effective date of the registration statement filed in connection
      with such registration to withdraw therefrom. In addition, the registrations
      provided for in this Section 3.3 are in addition to, and not in lieu of the
      registrations made on behalf of the Holders as described elsewhere in this
      Section 3.

     

    (c)    The
      Company shall have the right to terminate or withdraw any registration initiated
      by it under this Section 3.3 prior to the effectiveness of such registration
      whether or not any Holder has elected to include securities in such
      registration. The Registration Expenses of such withdrawn registration shall
      be
      borne by the Company in accordance with Section 3.4 hereof. 

     

    (d)    Notwithstanding
      the above, this Section 3.3 shall not apply to registrations of the Company’s
      securities which are not underwritten public offerings (x) when the Registrable
      Securities are covered by an effective Registration Statement or (y) where
      with
      respect to any Holder all of such Holder’s Registrable Securities (assuming
      cashless exercise of the Warrant Shares) may be sold without restriction under
      Rule 144(k) (or successor rule).

     

    3.4    Expenses
      of Registration.
      All
      Registration Expenses incurred in connection with registrations pursuant to
      Sections 3.1, 3.2 and 3.3 shall be borne by the Company. All Selling
      Expenses relating to securities registered pursuant to Sections 3.1, 3.2
      and 3.3 shall be borne by the Persons holding securities included in such
      registration pro rata on the basis of the number of shares so
      registered.

     

    
      
         

      

      
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    3.5    Registration
      Procedures.
      In the
      case of each registration, qualification or compliance effected by the Company
      pursuant to this Section 3, the Company will keep each Holder advised in
      writing as to the initiation of each registration, qualification and compliance
      and as to the completion thereof. The Company will use its best efforts to:
      

     

    (a)    if
      the
      Company becomes eligible to file a Registration Statement on Form S-3 (the
      date on which the Company becomes so eligible, the “S-3 Eligibility Date”), then
      (A) cause each Registration Statement first filed after the S-3 Eligibility
      Date to be on Form S-3 and (B) with respect to each Registration
      Statement filed on Form SB-2 (or such other form as does not permit
      incorporation by reference, if applicable) prior to the S-3 Eligibility Date
      where the period of obligation to maintain the effectiveness of such
      Registration Statement would in the reasonable judgment of the Company exceed
      three (3) months, cause to be promptly (but in any event not more than 30 days
      after such date) filed a Registration Statement on Form S-3 to replace each
      such Registration Statement on Form SB-2 and cause such Registration
      Statement on Form S-3 to be declared effective by the Commission as soon as
      possible after filing, thereafter to cause to be filed a post-effective
      amendment to each Registration Statement on Form SB-2 to de-register unsold
      shares under such Registration Statement unless this provision 3.5(a) is waived
      in writing by the unanimous written consent of the Board of Directors;
provided,
      however,
      that no
      fewer than three (3) business days before filing a Registration Statement or
      related prospectus or any amendment or supplement thereto in accordance with
      Section 3 hereof, the Company shall furnish to counsel for the Holders
      copies of all documents proposed to be filed, which documents be subject to
      review by such counsel;

     

    (b)    prepare
      and file with the Commission such amendments and supplements to such
      Registration Statement (including any Exchange Act documents incorporated by
      reference into such Registration Statement) and the prospectus used in
      connection with such Registration Statement as may be necessary to keep such
      Registration Statement continuously effective as required herein and to comply
      with the provisions of the Securities Act with respect to the disposition of
      all
      securities covered by such registration statement, including, but not limited
      to, with respect to each Registration Statement on Form SB-2 (or other such
      form that does not permit incorporation by reference, if applicable), cause
      a
      post-effective amendment (or prospectus supplement) to be filed as may be
      necessary with the Commission within twenty (20) days after each date on which
      the Company files its Annual Report on Form 10-KSB (or similar form), and
      in the case of a post-effective amendment, cause such post-effective amendment
      to be declared effective by the Commission as soon as possible after
      filing;

     

    (c)    furnish
      to the Holders participating in such registration and to the underwriters of
      the
      securities being registered, if any, such reasonable number of copies of the
      registration statement, preliminary prospectus, final prospectus, in conformity
      with the requirements of the Securities Act, and such other documents they
      may
      reasonably request in order to facilitate the disposition of Registrable
      Securities by them;

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    (d)    register
      and qualify the securities covered by such registration statement under such
      other securities or Blue Sky laws of such jurisdictions as shall be reasonably
      requested by the Holders and do any and all other acts and things which may
      be
      reasonably necessary or advisable to enable the Holders and each underwriter,
      if
      any, to consummate the disposition of the Registrable Securities in such states;
      

     

    (e)    in
      the
      event of any underwritten public offering, enter into and perform its
      obligations under an underwriting agreement, in usual and customary form, with
      the managing underwriter of such offering;

     

    (f)    cause
      all
      Registrable Securities to be quoted on the Nasdaq Stock Market Over-the-Counter
      Bulletin Board (the “OTCBB”),
      or
      such other securities exchange on which similar securities issued by the Company
      are then listed, and comply with all requirements of the OTCBB or such other
      securities exchange, as applicable, with regards to the issuance of the shares
      and the listing thereof;

     

    (g)    give
      notice to each Holder and counsel for the Holders, (i) when any prospectus,
      prospectus supplement, Registration Statement or post-effective amendment to
      the
      Registration Statement has been filed with the Commission and, with respect
      to
      the Registration Statement or any post-effective amendment, when the same has
      been declared effective, (ii) of the receipt of any comments from the SEC,
      (iii) of any request by the Commission or any other federal or state
      governmental authority to amend or supplement the Registration Statement or
      amend or supplement the prospectus or for additional information; (iv) of
      the issuance by the Commission or any other federal or state governmental
      authority of any stop order suspending the effectiveness of the Registration
      Statement or the initiation or written threat of any proceedings for that
      purpose, (v) of the receipt by the Company of any notification with respect
      to
      the suspension of the qualification or exemption from qualification of any
      of
      the Registrable Securities for sale in any jurisdiction or the initiation or
      the
      written threat of any proceeding for such purpose or (vi) the necessity of
      any changes in the Registration Statement or prospectus, or any document
      incorporated or deemed to be incorporated therein by reference, so that, in
      the
      case of the Registration Statement, it will not contain any untrue statement
      of
      a material fact or any omission to state a material fact required to be stated
      therein or necessary to make the statements therein not misleading, and that
      in
      the case of the prospectus, it will not contain any untrue statement of a
      material fact or any omission to state a material fact required to be stated
      therein or necessary to make the statements therein, in the light of the
      circumstances under which they were made, not misleading which notice in the
      case of (iii) through (vi) above (each a “Required
      Notice”)
      may,
      at the discretion of the Company, state that it constitutes a Suspension Notice
      (as defined below) in which case the provisions of Section 3.6 shall
      apply;

     

    (h)    if
      any
      Registration Statement required pursuant to this Section 3 ceases to be
      effective for any reason at any time (other than because all Registrable
      Securities registered thereunder shall have been resold pursuant thereto or
      shall have otherwise ceased to be Registrable Securities), use its best efforts
      to obtain the prompt withdrawal of any order suspending the effectiveness
      thereof, and in any event shall as promptly as reasonably practicable amend
      such
      Registration Statement in a manner reasonably expected to obtain the withdrawal
      of the order suspending the effectiveness thereof;

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    (i)    supplement
      and amend any Registration Statement required pursuant to this Section 3 if
      required by the rules, regulations or instructions applicable to the
      registration form used by the Company for such Registration Statement, if
      required by the Securities Act;

     

    (j)    obtain
      the withdrawal of any order or the lifting of any suspension of the
      qualification (or exemption from qualification) of any of the Registrable
      Securities for sale in any jurisdiction in which they have been qualified for
      sale and provide reasonably prompt notice to each Holder and counsel for the
      Holders of the withdrawal of any such order;

     

    (k)    incorporate
      in a prospectus supplement to the Registration Statement or post-effective
      amendment to the Registration Statement such information as the Holders of
      the
      majority in interest of the Registrable Securities and counsel for the Holders
      shall determine to be required to be included therein by applicable law and
      make
      any required filings of such prospectus supplement or post-effective
      amendment;

     

    (l)    provide
      a
      transfer agent and registrar for all Registrable Securities registered pursuant
      hereunder and a CUSP number for all such Registrable Securities, in each case
      not later than the effective date of such registration;

     

    (m)    cooperate
      with the Holders to facilitate the timely preparation and delivery of
      certificates representing Registrable Securities sold or to be sold pursuant
      to
      the Registration Statement, which certificates shall not bear any restrictive
      legends, and use reasonable efforts to cause such Registrable Securities to
      be
      in such denominations and registered in such names as the applicable Holder
      or
      Holders may request in writing at least one (1) trading day prior to any
      sale of such Registrable Securities;

     

    (n)    upon
      request by a majority-in-interest of the Registrable Securities, make reasonably
      available for inspection during normal business hours by a representative for
      any Holder, and any broker-dealers, counsel for the Holders, accountants or
      underwriter, all relevant financial and other records and pertinent corporate
      documents and properties of the Company and its subsidiaries, and cause the
      appropriate officers, directors and employees of the Company and its
      subsidiaries to make reasonably available for inspection during normal business
      hours on reasonable notice all relevant information reasonably requested by
      such
      representative for a Holder, or any such brokerdealers, counsel for a Holder,
      accountants or underwriter in connection with such disposition, in each case
      as
      is customary for similar “due diligence” examinations; provided, however, that
      each Holder (and its respective agents and representatives) shall hold in
      confidence and shall not make any disclosure (except to another Holder) of
      any
      such information, unless (i) disclosure of such information is necessary to
      comply with federal or state securities laws, (ii) disclosure of such
      information is necessary to avoid or to correct a misstatement or omission
      in
      any Registration Statement, (iii) release of such information is ordered
      pursuant to a subpoena or other order from a court or government body of
      competent jurisdiction, (iv) such information has been made generally
      available to the public other than by disclosure in violation of this or any
      other agreement, or (v) the Company consents to any such disclosure.
      Nothing herein shall be deemed to limit the Holder’s ability to sell Registrable
      Securities in a manner which is otherwise consistent with applicable laws and
      regulations;

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

     

    (o)    notify
      each Holder covered by such registration statement at any time when a prospectus
      relating thereto is required to be delivered under the Securities Act of the
      happening of any event as a result of which the prospectus included in such
      registration statement, as then in effect, includes an untrue statement of
      a
      material fact or omits to state a material fact required to be stated therein
      or
      necessary to make the statements therein not misleading in the light of the
      circumstances then existing and at the request of any such Holder, prepare
      and
      furnish to such Holder a reasonable number copies of an amended or supplemental
      prospectus as may be necessary so that, as thereafter delivered to the
      purchasers of such Registrable Securities such prospectus shall not include
      an
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated therein or necessary to make the statements therein not misleading
      in
      light of the circumstances then existing;

     

    (p)    comply
      with all applicable rules and regulations of the Commission and make generally
      available to its securityholders earning statements (which need not be audited)
      satisfying the provisions of Section 1l(a) of the Securities Act and
      Rule 158 thereunder (or any similar rule promulgated under the Securities
      Act); and 

     

    (q)    furnish,
      at the request of any Holder requesting registration of Registrable Securities
      pursuant to this Section 3, on the closing date of any such underwritten
      public offering, (i) an opinion, dated such date, of the counsel
      representing the Company for the purposes of such registration, in form and
      substance as is customarily given to underwriters in an underwritten public
      offering, addressed to the underwriters and to the Holders requesting
      registration of Registrable Securities and (ii) a letter dated such date,
      from the independent certified public accountants of the Company, in form and
      substance as is customarily given by independent certified public accountants
      to
      underwriters in an underwritten public offering, addressed to the underwriters,
      and to the Holders requesting registration of Registrable
      Securities.

     

    3.6    Deferral.
      The
      right of the Holders to use the Registration Statement (and the prospectus
      relating thereto) shall be suspended for a period or periods (the “Suspension
      Period”)
      of not
      more than thirty (30) days in any single instance and not more than sixty (60)
      days in the aggregate during any twelve (12) month period after delivery by
      the
      Company to the Holders of (i) a Required Notice; or (ii) a certificate
      signed by the President or Chief Executive Officer of the Company certifying
      that the Board has made the good-faith determination (A) that continued use
      by the Holders of the Registration Statement for purposes of effecting offers
      or
      sales of Registrable Shares pursuant thereto would require, under the Securities
      Act, premature disclosure in the Registration Statement or prospectus of
      material, nonpublic information concerning the Company, its business or
      prospects or any proposed material transaction involving the Company,
      (B) that such premature disclosure would be materially adverse to the
      Company, its business or prospects or any such proposed material transaction
      or
      would make the successful consummation by the Company of any such material
      transaction significantly less likely and (C) that it is therefore
      essential to suspend the use by the Holders of such Registration Statement
      and
      prospectus for purposes of effecting offers or sales of Registrable Shares
      pursuant thereto. A Required Notice and the certificate described in subsection
      (ii) above are each referred to herein as a “Suspension
      Notice.”
Upon
      receipt of a Suspension Notice, each Holder agrees not to sell any Registrable
      Securities pursuant to the Registration Statement until such Holder is advised
      in writing by the Company that the Registration Statement and related prospectus
      may be used, and has received copies of any additional or supplemental filings
      that are incorporated or deemed incorporated by reference in such Registration
      Statement and related prospectus (the “Advice”).
      Each
      Holder shall keep the fact of any Suspension Notice delivered by the Company
      and
      its contents confidential.

     

    
      
         

      

      
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    3.7    Indemnification.

     

    (a)    The
      Company will indemnify each Holder, each of its officers, directors, partners
      and legal counsel, and each Person controlling such Holder within the meaning
      of
      Section 15 of the Securities Act, with respect to which registration,
      qualification or compliance has been effected pursuant to this Section 3,
      and each underwriter, if any, and each Person who controls any underwriter
      within the meaning of Section 15 of the Securities Act, against all
      expenses, claims, losses, damages or liabilities (or actions, proceedings or
      settlements in respect thereof), including any of the foregoing incurred in
      settlement of any litigation, commenced or threatened, arising out of or based
      on any untrue statement (or alleged untrue statement) of a material fact
      contained in any registration statement, prospectus, offering circular or other
      document, or any amendment or supplement thereto, incident to any such
      registration, qualification or compliance, or based on any omission (or alleged
      omission) to state therein a material fact required to be stated therein or
      necessary to make the statements therein, in light of the circumstances in
      which
      they were made, not misleading, or any violation by the Company of the
      Securities Act or other applicable securities laws or any rule or regulation
      promulgated under the Securities Act or such other securities laws applicable
      to
      the Company in connection with any such registration, qualification or
      compliance, and the Company will reimburse each such Holder, each of its
      officers, directors, partners, and legal counsel and each Person controlling
      such Holder, each such underwriter and each Person who controls any such
      underwriter, for any legal and any other expenses reasonably incurred in
      connection with investigating, preparing, defending or settling any such claim,
      loss, damage, liability or action, provided that the Company will not be liable
      in any such case to the extent that any such claim, loss, damage, liability
      or
      expense arises out of or is based on any untrue statement or omission or alleged
      untrue statement or omission, made in reliance upon and in conformity with
      written information furnished to the Company by such Holder, controlling Person
      or underwriter and stated to be specifically for use therein.

     

    (b)    Each
      Holder will, if Registrable Securities held by such Holder are included in
      the
      securities as to which such registration, qualification or compliance is being
      effected, severally (but not jointly) indemnify the Company, each of its
      directors, officers, and legal counsel, each underwriter, if any, of the
      Company’s securities covered by such a registration statement, each Person who
      controls the Company or such underwriter within the meaning of Section 15
      of the Securities Act, and each other Holder, each of its officers, directors,
      partners and legal counsel and each Person controlling such Holder within the
      meaning of Section 15 of the Securities Act, against all claims, losses,
      damages and liabilities (or actions in respect thereof) arising out of or based
      on any untrue statement (or alleged untrue statement) of a material fact
      contained in any such registration statement, prospectus, offering circular
      or
      other document, or any omission (or alleged omission) to state therein a
      material fact required to be stated therein or necessary to make the statements
      therein not misleading, and will reimburse the Company, such Holders, such
      directors, officers, Persons, underwriters or control Persons for any legal
      or
      any other expenses reasonably incurred in connection with investigating or
      defending any such claim, loss, damage, liability or action, in each case to
      the
      extent, but only to the extent, that such untrue statement (or alleged untrue
      statement) or omission (or alleged omission) is made in such registration
      statement, prospectus, offering circular or other document in reliance upon
      and
      in conformity with written information furnished to the Company by such Holder
      and stated to be specifically for use therein; provided, however, that the
      obligations of such Holder hereunder shall not apply to amounts paid in
      settlement of any such claims, losses, damages, or liabilities (or actions
      in
      respect thereof) if such settlement is effected without the consent of such
      Holder (which consent shall not be unreasonably withheld); and provided that
      in
      no event shall any indemnity under this Section 3.7(b) exceed the net
      proceeds from the offering received by such Holder. Except for an underwritten
      public offering where the underwriters request specified indemnification of
      all
      participants, a Holder will not be required to enter into any agreement or
      undertaking in connection with any registration under this Section 3
      providing for any indemnification or contribution on the part of such Holder
      greater than the Holder’s obligations under this
      Section 3.7(b).

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

     

    (c)    Each
      party entitled to indemnification under this Section 3.7 (the “Indemnified
      Party”)
      shall
      give notice to the party required to provide indemnification (the “Indemnifying
      Party”)
      promptly after such Indemnified Party has actual knowledge of any claim as
      to
      which indemnity may be sought, and shall permit the Indemnifying Party to assume
      the defense of any such claim or any litigation resulting therefrom, provided
      that counsel for the Indemnifying Party, who shall conduct the defense of such
      claim or litigation, shall be approved by the Indemnified Party (whose approval
      shall not unreasonably be withheld), and the Indemnified Party may participate
      in such defense at such party’s expense, and provided further that the failure
      of any Indemnified Party to give notice as provided herein shall not relieve
      the
      Indemnifying Party of its obligations under this Section 3 unless the
      failure to give such notice is materially prejudicial to an Indemnifying Party’s
      ability to defend such action and provided further, that the Indemnifying Party
      shall not assume the defense for matters as to which there is a conflict of
      interest or separate and different defenses but shall bear the expense of such
      defense nevertheless. No Indemnifying Party, in the defense of any such claim
      or
      litigation, shall, except with the consent of each Indemnified Party, consent
      to
      entry of any judgment or enter into any settlement which does not include as
      an
      unconditional term thereof the giving by the claimant or plaintiff to such
      Indemnified Party of a release from all liability in respect to such claim
      or
      litigation.

     

    (d)    If
      the
      indemnification provided for in this Section 3.7 is held by a court of
      competent jurisdiction to be unavailable to an Indemnified Party with respect
      to
      any loss, liability, claim, damage or expense referred to herein, then the
      Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
      shall contribute to the amount paid or payable by such Indemnified Party as
      a
      result of such loss, liability, claim, damage or expense in such proportion
      as
      is appropriate to reflect the relative fault of the indemnifying party on the
      one hand and of the Indemnified Party on the other in connection with the
      statements or omissions that resulted in such loss, liability, claim, damage
      or
      expense, as well as any other relevant equitable considerations. The relative
      fault of the Indemnifying Party and of the Indemnified Party shall be determined
      by reference to, among other things, whether the untrue or alleged untrue
      statement of a material fact or the omission to state a material fact relates
      to
      information supplied by the Indemnifying Party or by the Indemnified Party
      and
      the parties’ relative intent, knowledge, access to information, and opportunity
      to correct or prevent such statement or omission.

     

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

    (e)    Notwithstanding
      the foregoing, to the extent that the provisions on indemnification and
      contribution contained in the underwriting agreement entered into in connection
      with the underwritten public offering are in conflict with the foregoing
      provisions, the provisions in the underwriting agreement shall
      control.

     

    (f)    The
      obligations of the Company and Holders under this Section 3.7 shall survive
      the completion of any offering of Registrable Securities in a registration
      statement under this Section 3, and otherwise.

     

    3.8    Information
      by Holder.
      The
      Holder or Holders of Registrable Securities included in any registration shall
      furnish to the Company such information regarding such Holder or Holders, the
      Registrable Securities held by them, and the distribution proposed by such
      Holder or Holders as the Company may request in writing and as shall be required
      in connection with any registration, qualification or compliance referred to
      in
      this Section 3.

     

    3.9    Rule 144
      Reporting.
      With a
      view to making available the benefits of certain rules and regulations of the
      Commission which may at any time permit the sale of the Restricted Securities
      to
      the public without registration, after such time as a public market exists
      for
      the Common Stock of the Company, the Company agrees to use its best efforts
      to:

     

    (a)    Make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144, at all times after the Effective Date that the Company is subject
      to the reporting requirements of the Securities Act or the Securities Exchange
      Act of 1934, as amended;

     

    (b)    File
      with
      the Commission in a timely manner all reports and other documents required
      of
      the Company under the Securities Act and the Securities Exchange Act of 1934,
      as
      amended (at any time after it has become subject to such reporting
      requirements); and

     

    (c)    So
      long
      as a Holder owns any Restricted Securities to furnish to the Purchaser forthwith
      upon request a written statement by the Company as to its compliance with the
      reporting requirements of Rule 144 (at any time after ninety (90) days
      after the effective date of the first registration statement filed by the
      Company for an offering of its securities to the general public), and of the
      Securities Act and the Securities Exchange Act of 1934 (at any time after it
      has
      become subject to such reporting requirements), a copy of the most recent annual
      or quarterly report of the Company, and such other reports and documents of
      the
      Company and other information in the possession of or reasonably obtainable
      by
      the Company as a Purchaser may reasonably request in availing itself of any
      rule
      or regulation of the Commission allowing a Purchaser to sell any such securities
      without registration.

     

    3.10    Transfer
      of Registration Rights.
      None of
      the rights to cause the Company to register securities granted to Holders under
      Sections 3.1, 3.2 and 3.3 may be transferred or assigned by a Holder
      without the written consent of the Company (which consent may be withheld in
      its
      sole discretion) unless (i) the transferee is an Investor or (ii) such person
      is
      a Qualifying Holder (as defined below), and such person agrees to become a
      party
      to, and bound by, all of the terms and conditions of, this Agreement. For
      purposes of this Section 3.10, the term “Qualifying
      Holder”
shall
      mean, with respect to any Investor who has purchased no less than $250,000
      of
      Shares under the Purchase Agreement, (i) any partner or member thereof, (ii)
      any
      corporation, partnership or limited liability company controlling, controlled
      by, or under common control with, such Investor or any partner or member
      thereof, or (iii) any other direct transferee from such Investor of at least
      15%
      of those Registrable Shares held by such Investor.

     

    
      
         

      

      
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    3.11    No
      Inconsistent Agreements.
      The
      Company represents and warrants that it is not a party to, nor will it enter
      into, any agreements that (individually or in the aggregate) conflict with
      or
      limit or prohibit the exercise of the rights granted to the Holders in this
      Agreement.

     

    3.12    Termination
      of Registration Rights.
      The
      rights granted under Sections 3.2 and 3.3 shall terminate on the Liquidity
      Date
      and shall not apply to a Qualified Public Offering where only the Company’s
      equity is included in the Qualified Public Offering. 

     

    4.    Covenants
      of the Company.

     

    4.1    Form D.
      The
      Company shall file a Form D with respect to the Securities as required
      under Regulation D and shall provide a copy thereof to each Purchaser
      promptly after such filing. The Company shall make all filings and reports
      relating to the offer and sale of the Securities required under applicable
      state
      securities laws.

     

    4.2    Reservation
      of Shares.
      The
      Company shall take all action necessary to at all times have authorized, and
      reserved for the purpose of issuance, no less than one hundred percent (100%)
      of
      the number of shares of Common Stock issuable upon exercise of the
      Warrants.

     

    4.3    Disclosure
      of Transaction.
      Within
      four (4) business days of the date hereof the Company shall file a Current
      Report on Form 8-K describing the terms of the transactions contemplated by
      the Operative Agreements in the form required by the Securities Exchange Act
      of
      1934, as amended.

     

    5.    General
      Provisions.

     

    5.1    Amendment
      and Waiver.
      Any
      term of this Agreement may be amended and the observance of any term of this
      Agreement may be waived (either generally or in a particular instance and either
      retroactively or prospectively), only with the written consent of the Company
      and a majority in interest of the Investors. Any amendment or waiver effected
      in
      accordance with this Section 5.1 shall be binding upon each Holder of any
      Shares or Registrable Securities purchased under the Purchase Agreement at
      the
      time outstanding, each future Holder of all such securities and the
      Company.

     

    5.2    Governing
      Law; Injunctive Relief.

     

    (a)    This
      Agreement shall be governed by and construed in accordance with the internal
      and
      substantive laws of the State of Delaware and without regard to any conflicts
      of
      laws concepts which would apply the substantive law of some other jurisdiction.
      Venue for all purposes hereunder shall be in the applicable state or federal
      court located within the State of Delaware.

     

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

     

    (b)    Each
      of
      the parties hereto acknowledges and agrees that damages will not be an adequate
      remedy for any material breach or violation of this Agreement if such material
      breach or violation would cause immediate and irreparable harm (an “Irreparable
      Breach”).
      Accordingly, in the event of a threatened or ongoing Irreparable Breach, each
      party hereto shall be entitled to seek, equitable relief of a kind appropriate
      in light of the nature of the ongoing or threatened Irreparable Breach, which
      relief may include, without limitation, specific performance or injunctive
      relief; provided, however, that if the party bringing such action is
      unsuccessful in obtaining the relief sought, the moving party shall pay the
      non-moving party’s reasonable costs, including attorney’s fees, incurred in
      connection with defending such action. Such remedies shall not be the parties’
exclusive remedies, but shall be in addition to all other remedies provided
      in
      this Agreement.

     

    5.3    Successors
      and Assigns.
      Except
      as otherwise expressly provided, the provisions of this Agreement shall inure
      to
      the benefit of, and be binding upon, the successors, assigns, heirs, executors,
      and administrators of the parties.

     

    5.4    Severability.
      Should
      any part or provision of this Agreement be held unenforceable or in conflict
      with the applicable laws or regulations of any jurisdiction, the invalid or
      unenforceable part or provisions shall be replaced with a provision which
      accomplishes, to the extent possible, the original business purpose of such
      part
      or provision in a valid and enforceable manner, and the remainder of this
      Agreement shall remain binding upon the parties hereto.

     

    5.5    Notices.
      Any
      notices, reports or other correspondence (hereinafter collectively referred
      to
      as “correspondence”) required or permitted to be given hereunder shall be in
      writing and shall be sent by postage prepaid first class mail, courier or
      telecopy or delivered by hand to the party to whom such correspondence is
      required or permitted to be given hereunder, and shall be deemed sufficient
      upon
      receipt when delivered personally or by courier, overnight delivery service
      or
      confirmed facsimile, or three (3) business days after being deposited in the
      regular mail as certified or registered mail (airmail if sent internationally)
      with postage prepaid, if such notice is addressed to the party to be notified
      at
      such party’s address or facsimile number as set forth below:

     

    
      
         

      

      
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    (a)    All
      correspondence to the Company shall be addressed as follows:

     

    Protalex,
      Inc.

    145
      Union
      Square Drive, 

    New
      Hope,
      PA 18938

    Attention:
       Marc
      L.
      Rose

    Facsimile: (215) 862-6614-

     

    with
      a
      copy to:

     

    Reed
      Smith LLP

    Two
      Embarcadero Center, Suite 2000

    San
      Francisco, CA 94111

    Attention:
       Donald
      C.
      Reinke, Esq.

    Facsimile: (415) 391.8269

     

    (b)    All
      correspondence to any Holder shall be sent to such Holder at the address set
      forth in Schedule A.

     

    5.6    Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original and all of which together shall constitute one instrument;
      provided that a facsimile signature shall be considered due execution and shall
      be binding upon the signatory thereto with the same force and effect as if
      the
      signature were an original, not a facsimile signature.

     

    5.7    Titles
      and Subtitles.
      The
      titles and subtitles used in this Agreement are used for convenience only and
      are not to be considered in construing or interpreting this
      Agreement.

     

    5.8    Expenses.
      If any
      action at law or in equity is necessary to enforce or interpret the terms of
      this Agreement, the prevailing party shall be entitled to reasonable attorneys’
fees, costs and necessary disbursements in addition to any other relief to
      which
      such party may be entitled.

     

    5.9    Material
      Non-Public Information.
      Except
      in connection with any Investor’s designee’s role as a representative of the
      Company’s board of directors, the Company will not provide to any Investor
      material non-public information other than information related to the
      transactions contemplated by the Operative Agreements without the prior written
      consent of such Investor. 

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE
      PAGE TO FOLLOW]

     

    


    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

     

    IN
      WITNESS WHEREOF, this Investor Rights Agreement has been executed as of the
      date
      first above written.

     

    COMPANY:

     

    PROTALEX,
      INC., a Delaware corporation

    145
      Union
      Square Drive

    New
      Hope,
      PA 18938

     

    By:  
      /s/
      Steven H. Kane

      
        

      

    

    Steven
      H.
      Kane,

    President
      and Chief Executive Officer

     

    INVESTORS/HOLDERS:

     

     

      
        

      

    

    [Signature]

     

     

      
        

      

    

    [Print
      Name]

     

     

      
        

      

    

    [Title
      (if shareholder not individual)]

    


     

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

    


    SCHEDULE A

     

    Investors

     

    


     

    


    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

     

    EXHIBIT
      A

     

    PLAN
      OF DISTRIBUTION

     

    The
      selling stockholders and any of their pledgees, assignees and
      successors-in-interest may, from time to time, sell any or all of their shares
      of common stock on any stock exchange, market or trading facility on which
      the
      shares are traded or in private transactions. These sales may be at fixed or
      negotiated prices. The selling stockholders may use any one or more of the
      following methods when selling shares:

     

    
      	
            	o	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits the purchaser;

            


    

     

    
      	
            	o	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            


    

     

    
      	
            	o	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            


    

     

    
      	
            	o	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            


    

     

    
      	
            	o	
              privately
                negotiated transactions;

            


    

     

    
      	
            	o	
              broker-dealers
                may agree with the selling stockholders to sell a specified number
                of such
                shares at a stipulated price per
                share;

            


    

     

    
      	
            	o	
              a
                combination of any such methods of sale; and


            


    

     

    
      	
            	o	
              any
                other method permitted pursuant to applicable
                law.

            


    

     

    The
      selling stockholders may also sell shares under Rule 144 under the Securities
      Act, if available, rather than under this prospectus.

     

    The
      selling stockholders may pledge their shares to their brokers under the margin
      provisions of customer agreements. If a selling stockholder defaults on a margin
      loan, the broker may, from time to time, offer and sell the pledged
      shares.

     

    The
      selling stockholders may pledge their shares of common stock to their brokers
      under the margin provisions of customer agreements. If a selling stockholder
      defaults on a margin loan, the broker may, from time to time, offer and sell
      the
      pledged shares.

     

    Broker-dealers
      engaged by the selling stockholders may arrange for other broker-dealers to
      participate in sales. Broker-dealers may receive commissions or discounts from
      the selling stockholders (or, if any broker-dealer acts as agent for the
      purchaser of shares, from the purchaser) in amounts to be negotiated. The
      selling stockholders do not expect these commissions and discounts to exceed
      what is customary in the types of transactions involved.

     

    Each
      selling stockholder may be deemed to be an “underwriter” within the meaning of
      the Securities Act in connection with such sales. In such event, any commissions
      received by such broker-dealers or agents and any profit on the resale of the
      shares purchased by them may be deemed to be underwriting commissions or
      discounts under the Securities Act.

     

    We
      are
      required to pay all fees and expenses incident to the registration of the
      shares, but excluding brokerage commissions or underwriter discounts. We and
      the
      selling stockholders have agreed to indemnify each other against certain losses,
      claims, damages and liabilities, including liabilities under the Securities
      Act.

    
      	 	 	 	 
	 	 	 	 
	
              -1-