Document:

Ex 4.5

    EXHIBIT
      4.5

     

    WARRANT
      AND COMMON STOCK PURCHASE AGREEMENT

     

    This
      WARRANT AND COMMON STOCK PURCHASE AGREEMENT is dated effective as of December
      22, 2005 (the “Effective
      Date”)
      by and
      between Protalex, Inc., a Delaware corporation with its principal office at
      145
      Union Square Drive, New Hope, PA 18938 (the “Company”),
      and
      the several purchasers identified from timer to time in the attached
Exhibit A
      (individually, a “Purchaser”
and
      collectively, the “Purchasers”).

     

    NOW,
      THEREFORE, in consideration of the mutual agreements, representations,
      warranties and covenants herein contained, the parties hereto agree as
      follows:

     

    1.    Definitions.
      As used
      in this Agreement, the following terms shall have the following respective
      meanings:

     

    (a)    “Affiliate”
of
      a
      party means any corporation or other business entity controlled by, controlling
      or under common control with such party. For this purpose “control”
shall
      mean direct or indirect beneficial ownership of fifty percent (50%) or more
      of the voting or income interest in such corporation or other business
      entity.

     

    (b)    “Agreement”
means
      this Warrant and Common Stock Purchase Agreement.

     

    (c)    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, and all of the rules and
      regulations promulgated thereunder.

     

    (d)    “Closing
      Date”
means
      the date of the sale and purchase of the Warrants and Common Stock acquired
      hereunder.

     

    (e)    “Majority
      Purchasers”
shall
      mean Purchasers which, at any given time, hold greater than fifty
      percent (50%) of the outstanding Securities (as defined in Section 2.3
      below) that have not been resold pursuant to an effective registration statement
      under the Securities Act or Rule 144 under the Securities Act.

     

    (f)    “Operative
      Agreements”
shall
      mean the Registration Rights Agreement and Warrants together with this
      Agreement.

     

    (g)    “Registration
      Rights Agreement”
shall
      mean that certain Registration Rights Agreement, dated as of the date hereof,
      among the Company and the Purchasers.

     

    (h)    “SEC”
shall
      mean the Securities and Exchange Commission.

     

    (i)    “Securities
      Act”
shall
      mean the Securities Act of 1933, as amended, and all of the rules and
      regulations promulgated thereunder.

     

    
      
         

      

      
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    2.    Purchase
      and Sale of Shares.

     

    2.1    Purchase
      and Sale.
      Subject
      to and upon the terms and conditions set forth in this Agreement, the Company
      agrees to issue and sell to each Purchaser, and each Purchaser, severally,
      hereby agrees to purchase from the Company, at the Closing (as defined below),
      the number of shares of Common Stock set forth opposite the name of such
      Purchaser under the heading “Number
      of Shares to be Purchased”
on
      Exhibit A
      hereto,
      at a purchase price of $2.25 per share. The total purchase price payable by
      each
      Purchaser for the number of shares of Common Stock that such Purchaser is hereby
      agreeing to purchase is set forth opposite the name of such Purchaser under
      the
      heading “Purchase
      Price”
on
      Exhibit A
      hereto.

     

    2.2    In
      addition, subject to the terms and conditions of this Agreement, each Purchaser
      agrees, severally, to purchase and the Company agrees to sell and issue to
      each
      Investor, a five-year cashless exercise Warrant in form and substance attached
      hereto as Exhibit
      B
      to
      acquire one (1) share of the Company’s Common Stock at an exercise price equal
      to the ten (10) trading day volume weighted average closing price of the
      Company’s Common Stock on the OTCBB immediately preceding the Closing Date (the
“Exercise Price”) for each four (4) shares of Common Stock acquired pursuant to
      Section 2.1 above (the “Warrant”). No fractional shares shall be issued under
      the Warrants (any fractional shares shall be rounded down to the nearest whole
      number). 

     

    2.3    The
      shares of Common Stock sold to the Purchasers pursuant to this Agreement are
      hereinafter referred to as the “Shares.”
      The
      Warrants to purchase Common Stock sold hereunder are hereinafter referred to
      as
      the “Warrants.”
      The
      total amount of Common Stock and other securities issuable upon conversion
      of
      the Warrants are hereinafter referred to as the “Conversion
      Stock.”
      The
      Shares, the Warrants and the Conversion Stock are hereinafter collectively
      referred to as the “Securities.”

     

    2.4    Closing.
      The
      initial purchase and sale of the Shares and Warrants shall take place at the
      offices of Reed Smith, LLP Two Embarcadero, 20th
      Floor,
      San Francisco, CA 94111 at 10:00 A.M., effective as of the Effective Date,
      or at
      such other time and place as the Company and the Purchasers acquiring at the
      Closing in the aggregate more than half of such Shares sold pursuant to Section
      2.1 mutually agree upon, but in no event later than December 30, 2005 (which
      time and place are designated as the “Closing”).
      Within
      five (5) business days after the Closing, the Company shall deliver to each
      Purchaser purchasing Shares and Warrants at the Closing a certificate
      representing the Shares and a corresponding Warrant, registered in the name
      of
      such Purchaser, or in such nominee’s or nominees’ name(s) as designated by such
      Purchaser in writing in the form of the Investor Questionnaire attached hereto
      as Appendix
      I,
      which
      such Purchaser is purchasing against delivery to the Company by such Purchaser
      of a cashiers check or wire transfer in the aggregate amount of the Purchase
      Price therefor payable to the Company’s order as identified on Exhibit
      A.

     

    
      
         

      

      
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    3.    Representations
      and Warranties of the Company.
      Except
      as otherwise described in the SEC Documents (as defined below), including any
      documents incorporated by reference therein or exhibits referenced or attached
      thereto, the Company hereby represents and warrants to each of the Purchasers
      as
      follows immediately prior to the Closing:

     

    3.1    Incorporation.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of Delaware and
      is
      qualified to do business and is in good standing in each jurisdiction in which
      the character of its properties or the nature of its business requires such
      qualification, except where the failure to so qualify would not have a material
      adverse effect on the business, condition (financial or otherwise) or prospects
      of the Company (“Material
      Adverse Effect”).
      The
      Company does not have any material subsidiaries other than those identified
      in
      the SEC Documents (as defined below). Except for short-term investments and
      investments that are not material to the Company, the Company does not own
      any
      shares of stock or any other equity or long-term debt securities of any
      corporation or have any equity interest in any firm, partnership, limited
      liability company, joint venture, association or other entity. Complete and
      correct copies of the certificate of incorporation (the “Certificate
      of Incorporation”)
      and
      bylaws (the “Bylaws”)
      of the
      Company as in effect on the Effective Date have been filed by the Company with
      the SEC. The Company has all requisite corporate power and authority to carry
      on
      its business as now conducted.

     

    3.2    Capitalization.
      The
      authorized capital stock of the Company consists of (i)  100,000,000 shares
      of Common Stock, of which 19,443,221 shares are outstanding on the date hereof.
      The outstanding shares of capital stock of the Company have been duly and
      validly issued and are fully paid and nonassessable, have been issued in
      material compliance with all federal and state securities laws, and were not
      issued in violation of any preemptive or similar rights to subscribe for or
      purchase securities. Except for (i) options to purchase up to 3,888,805 shares
      of Common Stock or other equity awards issued to employees and consultants
      of
      the Company pursuant to the employee benefits plans disclosed in the SEC
      Documents and (ii) warrants to purchase up to 4,169,716 shares of Common Stock,
      there are no existing options, warrants, calls, preemptive (or similar) rights,
      subscriptions or other rights, agreements, arrangements or commitments of any
      character obligating the Company to issue, transfer or sell, or cause to be
      issued, transferred or sold, any shares of the capital stock of the Company
      or
      other equity interests in the Company or any securities convertible into or
      exchangeable for such shares of capital stock or other equity interests, and
      there are no outstanding contractual obligations of the Company to repurchase,
      redeem or otherwise acquire any shares of its capital stock or other equity
      interests. Except for that certain First Amended and Restated Shareholder
      Agreement dated May 25, 2005, there are no voting agreements or other similar
      arrangements with respect to the Common Stock to which the Company is a party.
      The Company has not adopted a stockholder rights plan or similar arrangement
      relating to accumulations of beneficial ownership of Common Stock or a change
      in
      control of the Company. The Company does not maintain any pension benefit plan,
      or other retirement plan, subject to the Employee Retirement Income Security
      Act.

     

    3.3    Authorization.
      All
      corporate action on the part of the Company, its officers, directors and
      stockholders necessary for the authorization, execution, delivery and
      performance of the Operative Agreements and the consummation of the transactions
      contemplated therein has been taken. When executed and delivered by the Company,
      each of the Operative Agreements shall constitute the legal, valid and binding
      obligation of the Company, enforceable against the Company in accordance with
      its terms, except as such may be limited by bankruptcy, insolvency,
      reorganization or other laws affecting creditors’ rights generally and by
      general equitable principles. The Company has all requisite corporate power
      to
      enter into the Operative Agreements and to carry out and perform its obligations
      under the terms of the Operative Agreements.

     

    
      
         

      

      
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    3.4    Valid
      Issuance of the Shares.
      The
      Shares being purchased by the Purchasers hereunder and the Conversion Stock
      upon
      exercise of the Warrants will, upon issuance pursuant to the terms hereof and
      thereof, be duly authorized and validly issued, fully paid and nonassessable.
      No
      preemptive rights or other rights to subscribe for or purchase the Company’s
      capital stock exist with respect to the issuance and sale of the Securities
      by
      the Company pursuant to this Agreement, except for any such right disclosed
      in
      the SEC Documents. As of the Effective Date, no further approval or authority
      of
      the stockholders or the Board of Directors of the Company shall be required
      for
      the issuance and sale of the Securities by the Company, or the filing of the
      Registration Statement by the Company, as contemplated in the Operative
      Agreements. The Shares, Warrants and Conversion Stock issuable upon exercise
      of
      the Warrants will, upon issuance pursuant to the terms hereof and thereof,
      be
      free and clear from any security interest, pledge, mortgage, lien (statutory
      or
      other), charge, option to purchase, lease or otherwise acquire any interest
      or
      any claim, restriction or covenant, title defect, hypothecation, assignment,
      deposit arrangement or other encumbrance of any kind or any preference, priority
      or other security agreement or preferential arrangement of any kind or nature
      whatsoever (including, without limitation, any conditional sale or other title
      retention agreement).

     

    3.5    Financial
      Statements.
      As of
      their respective dates, the financial statements of the Company included in
      the
      SEC Documents (as defined in Section 3.6 below) complied as to form in all
      material respects with applicable accounting requirements and the published
      rules and regulations of the SEC with respect thereto. Such financial statements
      have been prepared in accordance with generally accepted accounting principles,
      consistently applied, during the periods involved (except (i) as permitted
      pursuant to Regulation G promulgated under the Exchange Act, or (ii) in the
      case
      of unaudited interim financial statements, to the extent they may exclude
      footnotes or may be condensed or summary statements) and fairly present in
      all
      material respects the financial position of the Company as of the dates thereof
      and the results of its operations and cash flows for the periods then ended
      (subject, in the case of unaudited statements, to normal year end audit
      adjustments). Except as set forth in the subset of SEC Documents filed and
      publicly available beginning with the Company’s Annual Report on Form 10-KSB for
      the fiscal year ended May 31, 2005 and prior to the date hereof, since August
      31, 2005, (a) there has been no event, occurrence or development that has had
      or
      could result in a Material Adverse Effect, (b) the Company has not incurred
      any
      liabilities (contingent or otherwise) other than (x) liabilities incurred in
      the
      ordinary course of business consistent with past practice and (y) liabilities
      not required to be reflected in the Company’s financial statements pursuant to
      generally accepted accounting principals or required to be disclosed in filings
      made with the SEC, (c) the Company has not altered its method of accounting
      or
      the identity of its auditors and (d) the Company has not declared or made any
      payment or distribution of cash or other property to its stockholders or
      officers or directors (other than in compliance with existing Company stock
      option plans) with respect to its capital stock, or purchased, redeemed (or
      made
      any agreements to purchase or redeem) any shares of its capital stock. As of
      November 30, 2005 the Company’s cash and cash equivalents was equal to
      approximately $6,761,000.

     

    
      
         

      

      
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    3.6    SEC
      Documents.
      The
      Company has filed all reports, schedules, forms, statements (collectively,
      and
      in each case including all exhibits, financial statements and schedules thereto
      and documents incorporated by reference therein and including all registration
      statements and prospectuses filed with the SEC) required to be filed by it
      with
      the SEC through the Closing Date, and the Company will file, on a timely basis,
      all similar documents with the SEC during the period commencing on the date
      hereof and ending on the Closing Date (all of the foregoing being hereinafter
      referred to as the “SEC Documents”). As of their respective dates, the SEC
      Documents complied or will comply in all material respects with the requirements
      of the Securities Act, the Exchange Act and the rules and regulations of the
      SEC
      promulgated thereunder applicable to the SEC Documents, and none of the SEC
      Documents, contained or will contain any untrue statement of a material fact
      or
      omitted or will omit to state a material fact required to be stated therein
      or
      necessary in order to make the statements made therein, in light of the
      circumstances under which they were made, not misleading, as of their respective
      filing dates.

     

    3.7    Consents.
      All
      consents, approvals, orders and authorizations required on the part of the
      Company in connection with the execution, delivery or performance of the
      Operative Agreements and the consummation of the transactions contemplated
      therein have been obtained and will be effective as of the Closing
      Date.

     

    3.8    No
      Conflict.
      The
      execution and delivery the Operative Agreements by the Company and the
      consummation of the transactions contemplated thereby will not conflict with
      or
      result in any violation of or default (with or without notice or lapse of time,
      or both) under, or give rise to a right of termination, cancellation or
      acceleration of any obligation or to a loss of a material benefit under
      (i) any provision of the Certificate of Incorporation or Bylaws of the
      Company, (ii) any material bond, debenture, note or other evidence of
      indebtedness, or any material lease, contract, indenture, mortgage, deed of
      trust, loan agreement, joint venture, franchise, license or other agreement
      or
      instrument to which the Company is a party or by which it or its property is
      bound or (iii) any judgment, order, statute, law, ordinance, rule or
      regulations, applicable to the Company or its respective properties or
      assets.

     

    3.9    Brokers
      or Finders.
      Except
      as disclosed on Schedule 3.9 attached hereto, the Company has not dealt with
      any
      broker or finder in connection with the transactions contemplated by this
      Agreement or incurred any liability for any brokerage or finders’ fees or agents
      commissions or any similar charges in connection with this Agreement or any
      transaction contemplated hereby.

     

    3.10    Nasdaq
      Stock Market.
      The
      Common Stock is registered pursuant to Section 12(g) of the Exchange Act and
      is
      quoted on the Nasdaq Stock Market Over-the-Counter Bulletin Board (“OTCBB”)
      under
      the ticker symbol “PRTX.OB.” The Company has taken no action designed to remove,
      or which, to the Company’s knowledge, is likely to have the effect of,
      suspending or terminating the quotation of the Common Stock on the OTCBB. The
      Company shall comply with all requirements, if any, of the National Association
      of Securities Dealers, Inc. (the “NASD”)
      with
      respect to the issuance of the Shares and Conversion Stock and the quoting
      of
      the Shares and Conversion Stock (when issued) on the OTCBB.

     

    
      
         

      

      
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    3.11    Absence
      of Litigation.
      There
      is no action, suit or proceeding or, to the Company’s knowledge, any
      investigation, pending, or to the Company’s knowledge, threatened by or before
      any court, governmental body or regulatory agency against the Company that
      is
      required to be disclosed in the SEC Documents and is not so disclosed. The
      Company has not received any written or oral notification of, or request for
      information in connection with, any formal or informal inquiry, investigation
      or
      proceeding from the SEC or the NASD. The foregoing includes, without limitation,
      any such action, suit, proceeding or investigation that questions this Agreement
      or the Registration Rights Agreement or the right of the Company to execute,
      deliver and perform under same.

     

    3.12    Intellectual
      Property.
      

     

    (a)    To
      the
      knowledge of the Company, the Company has ownership of or license or legal
      right
      to use all patents, copyrights, trade secrets, trademarks, domain names,
      customer lists, designs, manufacturing or other processes, computer software,
      systems, data compilations, research results and other intellectual property
      or
      proprietary rights (collectively, “Intellectual
      Property”)
      used
      in the business of the Company and material to the Company. The Company knows
      of
      no reason why its patent applications do not or would not comply with any
      statutory or legal requirements or would not issue into valid and enforceable
      patents.

     

    (b)    To
      the
      Company’s knowledge, there is no material default by the Company under any
      material licenses or other material agreements under which (i) the Company
      is
      granted rights in Intellectual Property or (ii) the Company has granted rights
      to others in Intellectual Property owned or licensed by the Company. There
      are
      no outstanding or threatened claims, disputes or disagreements with respect
      to
      any such licenses or agreements.

     

    (c)    To
      the
      knowledge of the Company, the present business, activities and products of
      the
      Company do not infringe or misappropriate any Intellectual Property of any
      third
      party. The Company has not been notified that any proceeding charging the
      Company with infringement or misappropriation of any Intellectual Property
      held
      by any third party has been filed. To the Company’s knowledge, there exists no
      patent held by any third party which includes claims that would be infringed
      by
      the Company in the conduct of its business as currently conducted where such
      infringement would have a Material Adverse Effect. To the knowledge of the
      Company, the Company is not making unauthorized use of any confidential
      information or trade secrets of any third party. Neither the Company nor, to
      the
      knowledge of the Company, any of its employees have any agreements or
      arrangements with any persons other than the Company restricting the Company’s
      or any such employee’s engagement in business activities that are material
      aspects of the Company’s business as currently conducted.

     

    (d)    None
      of
      the Intellectual Property owned or, to the Company’s knowledge, licensed by the
      Company that is used in the business of the Company and material to the Company,
      is subject to any outstanding judgment or order, and no action, suit,
      proceeding, hearing, investigation, charge, complaint, claim or demand is
      pending or, to the knowledge of the Company, threatened, which challenges the
      validity, enforceability, scope, use, or ownership of, or otherwise relates
      to,
      any such Intellectual Property anywhere in the world. No Patent has been or
      is
      now involved in any interference, reissue, reexamination, opposition, or other
      proceeding.

     

    
      
         

      

      
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    (e)    Each
      employee of the Company has executed a confidential information and invention
      assignment agreement in the form made available to Purchasers. No such employee
      has excluded works or inventions made prior to his or her employment with the
      Company from his or her assignment of inventions pursuant to such employee’s
      confidential information and invention assignment agreement, which works or
      inventions are necessary to the business of the Company as it is proposed to
      be
      conducted. Each consultant to the Company has entered into an agreement
      containing appropriate confidentiality and invention assignment provisions,
      in
      the form acceptable to Purchasers. The Company does not believe it is or will
      be
      necessary to utilize any inventions, trade secrets or proprietary information
      of
      any of its employees made prior to their employment by the Company, except
      for
      inventions, trade secrets or proprietary information that have been assigned
      to
      the Company. 

     

    3.13    Offering.
      The
      Company has not in the past nor will it hereafter take any action to sell,
      offer
      for sale or solicit offers to buy any securities of the Company which would
      require the offer, issuance or sale of the Securities, as contemplated by this
      Agreement, to be registered under Section 5 of the Securities Act.

     

    3.14    Investment
      Company.
      The
      Company is not and, after giving effect to the offering and sale of the Shares
      and the Warrants, will not be required to register as, an “investment company”
as such term is defined in the Investment Company Act of 1940, as
      amended.

     

    3.15    No
      Manipulation of Stock.
      The
      Company has not taken and will not, in violation of applicable law, take, any
      action designed to or that might reasonably be expected to cause or result
      in
      unlawful manipulation of the price of the Common Stock.

     

    3.16    No
      Violations.
      The
      Company is not in violation of its Certificate of Incorporation, Bylaws or
      other
      organizational documents, or in violation of any law, administrative regulation,
      ordinance or order of any court or governmental agency, arbitration panel or
      authority applicable to the Company, which violation, individually or in the
      aggregate, would be reasonably expected to have a Material Adverse Effect,
      or is
      not in default (and there exists no condition which, with the passage of time
      or
      otherwise, would constitute a default) in the performance of any material bond,
      debenture, note or any other evidence of indebtedness in any indenture,
      mortgage, deed of trust or any other material agreement or instrument to which
      the Company is a party or by which the Company is bound or by which the property
      of the Company is bound, which would be reasonably expected to have a Material
      Adverse Effect.

     

    3.17    Accountants.
      Grant
      Thornton, LLP, who issued their report with respect to the financial statements
      to be incorporated by reference from the Company’s Annual Report on Form 10-KSB
      for the year ended May 31, 2005 into the Registration Statement and the
      prospectus which forms a part thereof, are an independent registered public
      accounting firm as required by the Securities Act.

     

    
      
         

      

      
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    3.18    Taxes.
      The
      Company has filed all necessary federal, state and foreign income and franchise
      tax returns and has paid or accrued all taxes shown as due thereon, and the
      Company has no knowledge of a tax deficiency which has been or might be asserted
      or threatened against it which would have a Material Adverse
      Effect.

     

    3.19    Title.
      The
      Company has good and marketable title to all real property and good and
      marketable title to all personal property owned by it which is material to
      the
      business of the Company, in each case free and clear of all encumbrances and
      defects, except such as do not have a Material Adverse Effect. Any facilities
      and items of equipment held under lease by the Company are held by it under
      valid, subsisting and enforceable leases with such exceptions as are not
      material and do not interfere with the use made and proposed to be made of
      such
      facilities and items of equipment by the Company. The Company is in compliance
      with all material terms of each lease to which it is a party or is otherwise
      bound. 

     

    3.20    Foreign
      Corrupt Practices.
      To the
      knowledge of the Company, neither the Company, nor any director, officer, agent,
      employee or other person acting on behalf of the Company, has in the course
      of
      its actions for, or on behalf of, the Company, used any corporate funds for
      any
      unlawful contribution, gift, entertainment or other unlawful expenses relating
      to political activity; made any direct or indirect unlawful payment to any
      foreign or domestic government official or employee from corporate funds;
      violated or is in violation of any provision of the U.S. Foreign Corrupt
      Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
      influence payment, kickback or other unlawful payment to any foreign or domestic
      government official or employee. 

     

    3.21    Employee
      Relations.
      The
      Company is not involved in any union labor dispute, nor, to the knowledge of
      the
      Company, is any such dispute threatened. The Company is not a party to a
      collective bargaining agreement, and the Company believes that its relations
      with its employees are good. No executive officer (as defined in Rule 501(1)
      of
      the Securities Act) of the Company has notified the Company that such officer
      intends to leave the employ of the Company or otherwise terminate such officer’s
      employment with the Company. To the knowledge of the Company, no employee of
      the
      Company, as a consequence of his employment by the Company is, or is now
      expected to be, in violation of any material term of any agreement, covenant
      or
      contract (including any employment contract, confidentiality, disclosure or
      proprietary information agreement, non-competition agreement, or any other
      contract or agreement or any restrictive covenant with any previous employer),
      and the continued employment of each such employee by the Company will not
      subject the Company to any liability with respect to any of the foregoing
      matters.

     

    3.22    Internal
      Accounting Controls.
      The
      Company maintains a system of internal accounting controls (as such term is
      defined in Rule 13a-14 and 15d-14 under the Exchange Act) sufficient to provide
      reasonable assurance that (i) transactions are executed in accordance with
      management’s general or specific authorizations, (ii) transactions are recorded
      as necessary to permit preparation of financial statements in conformity with
      generally accepted accounting principles and to maintain asset accountability,
      (iii) access to assets is permitted only in accordance with management’s general
      or specific authorization and (iv) the recorded accountability for assets is
      compared with the existing assets at reasonable intervals and appropriate action
      is taken with respect to any differences.

     

    
      
         

      

      
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    3.23    Disclosure
      Controls.
      The
      Company has established and maintains disclosure controls and procedures (as
      such term is defined in Rule 13a-14 and 15d-14 under the Exchange Act); such
      disclosure controls and procedures are designed to ensure that material
      information relating to the Company, including its consolidated subsidiaries,
      if
      any, is made known to the Company’s Chief Executive Officer and its Chief
      Financial Officer by others within those entities, and such disclosure controls
      and procedures are effective to perform the functions for which they were
      established; the Company’s auditors and the Audit Committee of the Board of
      Directors have been advised of: (i) any significant deficiencies in the design
      or operation of internal controls which could adversely affect the Company’s
      ability to record, process, summarize, and report financial data; and (ii)
      any
      fraud, whether or not material, that involves management or other employees
      who
      have a role in the Company’s internal controls; any material weaknesses in
      internal controls have been identified for the Company’s auditors; since the
      date of the most recent evaluation of such disclosure controls and procedures,
      there have been no significant changes in internal controls or in other factors
      that could significantly affect internal controls, including any corrective
      actions with regard to significant deficiencies and material weaknesses; the
      principal executive officers (or their equivalents) and principal financial
      officers (or their equivalents) of the Company have made all certifications
      required by the Sarbanes Oxley Act of 2002 (the “Sarbanes Oxley Act”) and any
      related rules and regulations promulgated by the Commission, and the statements
      contained in any such certification are complete and correct; and the Company
      is
      otherwise in compliance in all material respects with all applicable effective
      provisions of the Sarbanes Oxley Act.

     

    3.24    Disclosure.
      Neither
      the Operative Agreements, any of the schedules or exhibits hereto or thereto,
      nor any other document or certificate provided by the Company to the Purchasers
      in connection herewith or therewith contains any untrue statement of a material
      fact or, when considered as a whole, omits a material fact necessary to make
      the
      statements contained herein or therein, in light of the circumstances in which
      they were made, not misleading.

     

    3.25    Real
      Property Holding Corporation.
      The
      Company is not a real property holding corporation within the meaning of Section
      897(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”) and any
      regulations promulgated thereunder.

     

    4.    Representations
      and Warranties of the Purchasers.
      Each
      Purchaser severally for itself, and not jointly with the other Purchasers,
      represents and warrants to the Company as follows:

     

    4.1    Authorization.
      All
      action on the part of such Purchaser and, if applicable, its officers, directors
      and shareholders necessary for the authorization, execution, delivery and
      performance of the Operative Agreements and the consummation of the transactions
      contemplated therein has been taken. When executed and delivered by the Company
      and such Purchaser, each of the Operative Agreements will constitute the legal,
      valid and binding obligation of such Purchaser, enforceable against such
      Purchaser in accordance with its terms, except as such may be limited by
      bankruptcy, insolvency, reorganization or other laws affecting creditors’ rights
      generally and by general equitable principles. Such Purchaser has all requisite
      power to enter into each of the Operative Agreements and to carry out and
      perform its obligations under the terms of the Operative Agreements. Such
      Purchaser has the knowledge and experience in financial and business matters
      as
      to be capable of evaluating the merits and risks of an investment in the
      Securities and has the ability to bear the economic risks of an investment
      in
      the Securities for an indefinite period of time. Furthermore, the Purchaser
      acknowledges that the Company has made no representations or warranties except
      as set for in this Agreement or the Registration Rights Agreement.

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    4.2    Purchase
      Entirely for Own Account.
      Except
      for permitted transfers pursuant to Section 8.13, such Purchaser is acquiring
      the Securities being purchased by it hereunder for investment, for its own
      account, and not for resale or with a view to distribution thereof in violation
      of the Securities Act. Such Purchaser has not entered into an agreement or
      understanding with any other party to resell or distribute such Securities.
      

     

    4.3    Investor
      Status; Etc.
      Such
      Purchaser certifies and represents to the Company that it is an “Accredited
      Investor” as defined in Rule 501 of Regulation D promulgated under the
      Securities Act and was not organized for the purpose of acquiring the
      Securities. Such Purchaser’s financial condition is such that it is able to bear
      the risk of holding the Securities for an indefinite period of time and the
      risk
      of loss of its entire investment. Subject to the truth and accuracy of the
      representations and warranties of the Company set forth in Section 3 of this
      Agreement (as modified by the Company Disclosure Schedule), such Purchaser
      has
      received, reviewed and considered all information it deems necessary in making
      an informed decision to make an investment in the Securities and has been
      afforded the opportunity to ask questions of and receive answers from the
      management of the Company concerning this investment and has sufficient
      knowledge and experience in investing in companies similar to the Company in
      terms of the Company’s stage of development so as to be able to evaluate the
      risks and merits of its investment in the Company.

     

    4.4    Confidential
      Information.
      Each
      Purchaser understands that any information, other than the SEC Documents,
      provided to such Purchaser by the Company, including, without limitation, the
      existence and nature of all discussions and presentations, if any, regarding
      this offering and the Operative Agreements, is strictly confidential and
      proprietary to the Company and is being submitted to the Purchaser solely for
      such Purchaser’s confidential use in connection with its investment decision
      regarding the Securities. Such Purchaser agrees to use such information for
      the
      sole purpose of evaluating a possible investment in the Securities and such
      Purchaser hereby acknowledges that it is prohibited from reproducing or
      distributing such information, the Operative Agreements, or any other offering
      materials, in whole or in part, or divulging or discussing any of their contents
      except for use internally and by its legal counsel and except as required by
      law
      or legal process. Such Purchaser understands that the federal securities laws
      prohibit any person who possesses material nonpublic information about a company
      from trading in securities of such company. 

     

    4.5    Securities
      Not Registered.
      Such
      Purchaser understands that the Securities have not been registered under the
      Securities Act, by reason of their issuance by the Company in a transaction
      exempt from the registration requirements of the Securities Act, and that the
      Securities must continue to be held by such Purchaser unless a subsequent
      disposition thereof is registered under the Securities Act or is exempt from
      such registration. The Purchaser understands that the exemptions from
      registration afforded by Rule 144 (the provisions of which are known to it)
      promulgated under the Securities Act depend on the satisfaction of various
      conditions, and that, if applicable, Rule 144 may afford the basis for sales
      only in limited amounts.

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    4.6    No
      Conflict.
      The
      execution and delivery of the Operative Agreements by such Purchaser and the
      consummation of the transactions contemplated thereby will not conflict with
      or
      result in any violation of or default by such Purchaser (with or without notice
      or lapse of time, or both) under, or give rise to a right of termination,
      cancellation or acceleration of any obligation or to a loss of a material
      benefit under (i) any provision of the organizational documents of such
      Purchaser, (ii) any material agreement or instrument, permit, franchise, or
      license or (iii) any judgment, order, statute, law, ordinance, rule or
      regulations, applicable to such Purchaser or its respective properties or
      assets.

     

    4.7    Brokers.
      Such
      Purchaser has not retained, utilized or been represented by any broker or finder
      in connection with the transactions contemplated by this Agreement.

     

    4.8    Consents.
      All
      consents, approvals, orders and authorizations required on the part of such
      Purchaser in connection with the execution, delivery or performance of this
      Agreement and the consummation of the transactions contemplated herein have
      been
      obtained and are effective as of the Closing Date.

     

    4.9    No
      Intent to Effect a Change of Control.
      Such
      Purchaser has no present intent to change or influence the control of the
      Company within the meaning of Rule 13d-1 of the Exchange Act.

     

    5.    Conditions
      Precedent.

     

    5.1    Conditions
      to the Obligation of the Purchasers to Consummate the Closing.
      The
      obligation of each Purchaser to consummate the Closing and to purchase and
      pay
      for the Securities being purchased by it pursuant to this Agreement is subject
      to the satisfaction of the following conditions precedent:

     

    (a)    The
      representations and warranties of the Company contained herein shall be true
      and
      correct on and as of the Closing Date with the same force and effect as though
      made on and as of the Closing Date (it being understood and agreed by each
      Purchaser that, in the case of any representation and warranty of the Company
      contained herein which is not hereinabove qualified by application thereto
      of a
      materiality standard, such representation and warranty need be true and correct
      only in all material respects in order to satisfy as to such representation
      or
      warranty the condition precedent set forth in the foregoing provisions of this
      Section 5.1(a)).

     

    (b)    The
      Registration Rights Agreement and respective Warrant shall have been executed
      and delivered by the Company.

     

    (c)    The
      Company shall not have been adversely affected in any material way prior to
      the
      Closing Date; and the Company shall have performed all obligations and
      conditions herein required to be performed or observed by the Company on or
      prior to the Closing Date.

     

    (d)    No
      proceeding challenging this Agreement or the transactions contemplated hereby,
      or seeking to prohibit, alter, prevent or materially delay the Closing, shall
      have been instituted before any court, arbitrator or governmental body, agency
      or official and shall be pending.

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

     

    (e)    The
      purchase of and payment for the Securities by the Purchasers shall not be
      prohibited by any law or governmental order or regulation. All necessary
      consents, approvals, licenses, permits, orders and authorizations of, or
      registrations, declarations and filings with, any governmental or administrative
      agency or of any other person with respect to any of the transactions
      contemplated hereby shall have been duly obtained or made and shall be in full
      force and effect.

     

    (f)    All
      instruments and corporate proceedings in connection with the transactions
      contemplated by this Agreement to be consummated at the Closing shall be
      satisfactory in form and substance to such Purchaser. Such Purchaser shall
      have
      received such certificates of the Company’s officers as such Purchaser may have
      reasonably requested in connection with such transactions.

     

    (g)    The
      Company has received executed Subscription Agreements representing an aggregate
      Purchase Price of at least $5,000,000, provided that the Purchasers may waive
      this condition 5.1(g) by unanimous written consent.

     

    5.2    Conditions
      to the Obligation of the Company to Consummate the Closing.
      The
      obligation of the Company to consummate the Closing and to issue and sell to
      each of the Purchasers the Securities to be purchased by it at the Closing
      is
      subject to the satisfaction of the following conditions precedent:

     

    (a)    The
      representations and warranties contained herein of such Purchaser shall be
      true
      and correct on and as of the Closing Date with the same force and effect as
      though made on and as of the Closing Date (it being understood and agreed by
      the
      Company that, in the case of any representation and warranty of each Purchaser
      contained herein which is not hereinabove qualified by application thereto
      of a
      materiality standard, such representation and warranty need be true and correct
      only in all material respects in order to satisfy as to such representation
      or
      warranty the condition precedent set forth in the foregoing provisions of this
      Section 5.2(a)).

     

    (b)    The
      Registration Rights Agreement and respective Warrant shall have been executed
      and delivered by each Purchaser.

     

    (c)    Each
      Purchaser shall have performed all obligations and conditions herein required
      to
      be performed or observed by such Purchaser on or prior to the Closing
      Date.

     

    (d)    No
      proceeding challenging this Agreement or the transactions contemplated hereby,
      or seeking to prohibit, alter, prevent or materially delay the Closing, shall
      have been instituted before any court, arbitrator or governmental body, agency
      or official and shall be pending.

     

    (e)    The
      sale
      of the Securities by the Company shall not be prohibited by any law or
      governmental order or regulation. All necessary consents, approvals, licenses,
      permits, orders and authorizations of, or registrations, declarations and
      filings with, any governmental or administrative agency or of any other person
      with respect to any of the transactions contemplated hereby shall have been
      duly
      obtained or made and shall be in full force and effect.

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    (f)    Each
      such
      Purchaser shall have executed and delivered to the Company an Investor
      Questionnaire, in the form attached hereto as Appendix
      I,
      pursuant to which such Purchaser shall provide information necessary to confirm
      each such Purchaser’s status as an “accredited investor” (as such term is
      defined in Rule 501 promulgated under the Securities Act) and to enable the
      Company to comply with the Registration Rights Agreement.

     

    (g)    All
      instruments and corporate proceedings in connection with the transactions
      contemplated by this Agreement to be consummated at the Closing shall be
      satisfactory in form and substance to the Company, and the Company shall have
      received counterpart originals, or certified or other copies of all documents,
      including without limitation records of corporate or other proceedings, which
      it
      may have reasonably requested in connection therewith.

     

    6.    Transfer,
      Legends.

     

    6.1    Securities
      Law Transfer Restrictions.
      

     

    (a)    Each
      Purchaser acknowledges that the Securities are subject to the transfer
      restrictions set forth in Section 2 of the Registration Rights Agreement and
      that the certificates or instruments representing such securities shall bear
      such legends as are set forth in Section 2.2 of the Registration Rights
      Agreement. 

     

    (b)    Each
      Purchaser understands that the Securities have not been registered under the
      Securities Act or any state securities laws. In that connection, such Purchaser
      is aware of Rule 144 under the Securities Act and the restrictions imposed
      thereby. Such Purchaser will not engage in hedging or other similar transactions
      which would include, without limitation, effecting any short sale or having
      in
      effect any short position (whether or not such sale or position is against
      the
      box and regardless of when such position was entered into) or any purchase,
      sale
      or grant of any right (including, without limitation, any put or call option)
      with respect to the Securities or with respect to any security (other than
      a
      broad-based market basket or index) that includes, relates to or derives any
      significant part of its value from the Common Stock of the Company.

     

    (c)    Each
      Purchaser acknowledges that no action has been or will be taken in any
      jurisdiction outside the United States by the Company that would permit an
      offering of the Securities, or possession or distribution of offering materials
      in connection with the issue of Securities, in any jurisdiction outside of
      the
      United States where action for that purpose is required. Each Purchaser outside
      the United States will comply with all applicable laws and regulations in each
      foreign jurisdiction in which it purchases, offers, sells or delivers Securities
      or has in its possession or distributes any offering material, in all cases
      at
      its own expense.

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

     

    Notwithstanding
      the foregoing, following the effective date of the Registration Statement,
      the
      legend referenced above and below in Section 6.2 may, at the request of the
      Purchaser, be removed from the certificates evidencing such Shares and the
      Conversion Stock prior to the resale thereof and the Company will rescind any
      stop transfer orders with respect to such shares given to the Company’s transfer
      agent, provided that such Purchaser represents and covenants to the Company
      in
      writing (in a form reasonably acceptable to the Company and its counsel) that
      (1) the Purchaser will sell such shares only pursuant to and in the manner
      contemplated by the Registration Statement, including the Plan of Distribution
      section contained therein (in substantially the form attached hereto as Exhibit
      C), and otherwise in compliance with the Securities Act, including the
      prospectus delivery requirements of such act, (2) the Purchaser will indemnify
      the Company for any damages or losses resulting to the Company for the
      Purchaser’s breach of its representation and covenant described in the foregoing
      clause (1), and (3) such other agreements or covenants as the Company or its
      counsel may reasonably request. Subject to the foregoing, at such time and
      to
      the extent a legend is no longer required for the Shares or Conversion Stock,
      the Company will use its best efforts to no later than three (3) trading days
      following the delivery by a Purchaser to the Company or the Company’s transfer
      agent of a legended certificate representing such Shares or Warrant Shares
      (together with such accompanying documentation or representations as reasonably
      required by counsel to the Company), deliver or cause to be delivered a
      certificate representing such Shares or Conversion Stock that is free from
      the
      legend described above and below in Section 6.2.

     

    6.2    Legends.
      Each
      certificate requesting any of the Securities shall be endorsed with the legends
      set forth below, and each Purchaser covenants that, except to the extent such
      restrictions are waived by the Company, it shall not transfer the securities
      represented by any such certificate without complying with the restrictions
      on
      transfer described in this Agreement and the legends endorsed on such
      certificate: 

     

    “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.”. 

     

    7.    Termination;
      Liabilities Consequent Thereon.
      This
      Agreement may be terminated and the transactions contemplated hereunder
      abandoned at any time prior to the Closing only as follows:

     

    (a)    at
      any
      time by mutual agreement of the Company and the Majority Purchasers;
      or

     

    (b)    by
      the
      Majority Purchasers, if there has been any breach of any representation or
      warranty or any material breach of any covenant of the Company contained herein
      and the same has not been cured within 15 days after notice thereof (it being
      understood and agreed by each Purchaser that, in the case of any representation
      or warranty of the Company contained herein which is not hereinabove qualified
      by application thereto of a materiality standard, such representation or
      warranty will be deemed to have been breached for purposes of this Section
      7.1(b) only if such representation or warranty was not true and correct in
      all
      material respects at the time such representation or warranty was made by the
      Company); or

     

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

    (c)    by
      the
      Company with respect to a certain purchaser, if there has been any breach of
      any
      representation, warranty or any material breach of any covenant of such
      Purchaser contained herein and the same has not been cured within 15 days after
      notice thereof (it being understood and agreed by the Company that, in the
      case
      of any representation and warranty of such Purchaser contained herein which
      is
      not hereinabove qualified by application thereto of a materiality standard,
      such
      representation or warranty will be deemed to have been breached for purposes
      of
      this Section 7.1(c) only if such representation or warranty was not true and
      correct in all material respects at the time such representation or warranty
      was
      made by such Purchaser).

     

    Any
      termination pursuant to this Section 7 shall be without liability on the part
      of
      any party, unless such termination is the result of a material breach of this
      Agreement by a party to this Agreement in which case such breaching party shall
      remain liable for such breach notwithstanding any termination of this
      Agreement.

     

    8.    Miscellaneous
      Provisions.

     

    8.1    Public
      Statements or Releases.
      None of
      the Purchasers to this Agreement shall make, issue, or release any announcement,
      whether to the public generally, or to any of its suppliers or customers, with
      respect to this Agreement or the transactions provided for herein, or make
      any
      statement or acknowledgment of the existence of, or reveal the status of, this
      Agreement or the transactions provided for herein, without the prior consent
      of
      the Majority Purchasers, which shall not be unreasonably withheld or delayed,
      provided,
      that
      nothing in this Section 8.1 shall prevent any of the Purchasers hereto from
      making such public announcements as it may consider necessary in order to
      satisfy its legal obligations, but to the extent not inconsistent with such
      obligations, it shall provide the other Purchasers and the Company with an
      opportunity to review and comment on any proposed public announcement before
      it
      is made.

     

    8.2    Further
      Assurances.
      Each
      party agrees to cooperate fully with the other party and to execute such further
      instruments, documents and agreements and to give such further written
      assurances, as may be reasonably requested by the other party to better evidence
      and reflect the transactions described herein and contemplated hereby, and
      to
      carry into effect the intents and purposes of this Agreement.

     

    8.3    Rights
      Cumulative.
      Each
      and all of the various rights, powers and remedies of the parties shall be
      considered to be cumulative with and in addition to any other rights, powers
      and
      remedies which such parties may have at law or in equity in the event of the
      breach of any of the terms of this Agreement. The exercise or partial exercise
      of any right, power or remedy shall neither constitute the exclusive election
      thereof nor the waiver of any other right, power or remedy available to such
      party.

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

     

    8.4    Pronouns.
      All
      pronouns or any variation thereof shall be deemed to refer to the masculine,
      feminine or neuter, singular or plural, as the identity of the person, persons,
      entity or entities may require.

     

    8.5    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:

     

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

     

    Protalex,
      Inc.

    145
      Union
      Square Drive, 

    New
      Hope,
      PA 18938

    Attention:
      __________________

    __________________________

    Facsimile: (___) _____________

     

    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 Purchaser shall be sent to such Purchaser at the address
      set forth in Exhibit A.

     

    (c)    Any
      entity may change the address to which correspondence to it is to be addressed
      by written notification as provided for herein.

     

    8.6    Captions.
      The
      captions and paragraph headings of this Agreement are solely for the convenience
      of reference and shall not affect its interpretation.

     

    8.7    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.

     

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

     

    8.8    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.

     

    (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.

     

    8.9    Amendments.
      This
      Agreement may be amended or modified only pursuant to an instrument in writing
      signed by the Company and the Majority Purchasers. 

     

    8.10    Exculpation.
      Each
      Purchaser acknowledges that it is not relying upon any person, entity or
      corporation, other than the Company and its officers and directors, in making
      its investment or decision to invest in the Company. The obligations of each
      Purchaser hereunder are several and not joint with the obligations of any other
      Purchaser, and no Purchaser shall be responsible in any way for the performance
      of the obligations of any other Purchaser hereunder. Nothing contained herein,
      and no action taken by any Purchaser pursuant hereto, shall be deemed to
      constitute the Purchasers as a partnership, an association, a joint venture
      or
      any other kind of entity, or create a presumption that the Purchasers are in
      any
      way acting in concert or as a group with respect to such obligations or the
      transactions contemplated hereunder. Each Purchaser shall be entitled to
      independently protect and enforce its rights hereunder, and it shall not be
      necessary for any other Purchaser to be joined as an additional party in any
      proceeding for such purpose. Each Purchaser has been represented by its own
      separate legal counsel in their review and negotiation of this Agreement. The
      Company has elected to provide all Purchasers with the same terms and forms
      of
      Operative Agreements for the convenience of the Company and not because it
      was
      required or requested to do so by the Purchasers. Each Purchaser agrees that
      no
      Purchaser nor the respective controlling persons, officers, directors, partners,
      agents, or employees of any Purchaser shall be liable to any other Purchaser
      for
      any action heretofore or hereafter taken or omitted to be taken by any of them
      in connection with the Securities or the Operative Agreements.

     

    8.11    Waiver.
      No
      waiver of any term, provision or condition of this Agreement, whether by conduct
      or otherwise, in any one or more instances, shall be deemed to be, or be
      construed as, a further or continuing waiver of any such term, provision or
      condition or as a waiver of any other term, provision or condition of this
      Agreement.

     

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

     

    8.12    Expenses.
      Each
      party will bear its own costs and expenses in connection with this Agreement.
      

     

    8.13    Assignment.
      The
      rights and obligations of the parties hereto shall inure to the benefit of
      and
      shall be binding upon the authorized successors and permitted assigns of each
      party. Neither party may assign its rights or obligations under this Agreement
      or designate another person (i) to perform all or part of its obligations under
      this Agreement or (ii) to have all or part of its rights and benefits under
      this
      Agreement, in each case without the prior written consent of the other party,
      provided, however, that a Purchaser may assign its rights hereunder with respect
      to any Securities transferred in accordance with Section 2.3 of the Registration
      Rights Agreement. In the event of any assignment in accordance with the terms
      of
      this Agreement, the assignee shall specifically assume and be bound by the
      provisions of the Agreement by executing and agreeing to an assumption agreement
      reasonably acceptable to the other party.

     

    8.14    Survival.
      The
      respective representations and warranties given by the parties hereto, and
      the
      other covenants and agreements contained herein, shall survive the Closing
      Date
      and the consummation of the transactions contemplated herein for a period of
      two
      years, without regard to any investigation made by any party. 

     

    8.15    Counterpart.
      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.

     

    8.16    Entire
      Agreement.
      This
      Agreement, the Warrants and the Registration Rights Agreement constitute the
      entire agreement between the parties hereto respecting the subject matter hereof
      and supersede all prior agreements, negotiations, understandings,
      representations and statements respecting the subject matter hereof, whether
      written or oral. No modification, alteration, waiver or change in any of the
      terms of this Agreement shall be valid or binding upon the parties hereto unless
      made in writing and duly executed by the Company and the Majority Purchasers.
      

     

    [Signature
      Page to Follow]

     

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Warrant and Common Stock
      Purchase Agreement as of the day and year first above written.

     

    PROTALEX,
      INC.

     

    By: 
      /s/
      Steven H. Kane

      
        

      

    

    Name:
      Steven H. Kane

    Title:
      President and Chief Executive Officer

     

    THE
      PURCHASER’S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED AS OF THE CLOSING
      SHALL CONSTITUTE THE PURCHASER’S SIGNATURE TO THIS WARRANT AND COMMON STOCK
      PURCHASE AGREEMENT.

     

    

     

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

    Exhibit
      A

     

    SCHEDULE
      OF PURCHASERS

     

    
      	
              Purchaser
                Name and Address

            	
              Number
                of Shares to be Purchased

            	
              Aggregate
                Purchase Price

            
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

    

    

     

    

     

    
      
         

      

      
        -20-

        
          

        

      

      
         

      

    

    Exhibit
      B

     

    FORM
      OF
      WARRANT

     

    
      
         

      

      
        -21-

        
          

        

      

      
         

      

    

    Exhibit
      C

     

    PROPOSED
      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.

     

    
      
         

      

      
        -22-

        
          

        

      

      
         

      

    

    Appendix
      I

    

    INVESTOR
      QUESTIONNAIRE

    

    
      
         

      

      
        -23-

        
          

        

      

      
         

      

    

    SCHEDULE
      3.9

    

    Griffin
      Securities, Inc. and Mufson Howe Hunter & Partners LLC (collectively, the
“Placement Agents”) have been engaged by the Company to act as its placement
      agents in connection with the sale of the Securities. The Company may pay the
      Placements Agents collectively up to 6.0% of the aggregate offering proceeds
      received by the Company from the Securities sold to the Purchasers hereunder.
      In
      addition, the Company may collectively issue to the Placement Agents warrants
      to
      purchase that number of shares of the Company’s Common Stock equal to 7% of the
      number of common share equivalents of the Securities sold hereunder. The
      warrants and shares issuable upon exercise of the warrants issued to the
      Placement Agents will be in form and substance substantially identical to the
      Warrants and Conversion Stock issued to the Purchasers hereunder. The Placement
      Agents may transfer all or part of the warrants issued to the Placement Agents
      to their officers, employees or principals provided that (1) the transfers
      are
      in compliance with applicable state and federal securities laws and (2) upon
      request by the Company, the Placement Agents will deliver a legal opinion in
      form and substance satisfactory to the Company, addressed to the Company, to
      the
      effect that the proposed transfer of warrants may be effected without
      registration under the Securities Act.

    

    The
      Company is also obligated to include the warrants and shares issuable upon
      exercise of the warrants issued to the Placement Agents in the Registration
      Statement to be filed with the SEC covering the Securities.

    
      	 	 	 	 
	 	 	 	 
	
              -24-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).

     

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

     

    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.

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    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.

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    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.

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

     

    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;

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    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.

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

     

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

     

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

     

    3.3    Company
      Registration.

     

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

     

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

     

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

     

    
      
         

      

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

     

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

     

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

     

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

     

    
      
         

      

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

     

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

     

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

     

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

     

    
      
         

      

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
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    (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).

     

    
      
         

      

      
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    (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.

     

    
      
         

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

     

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

     

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

     

    4.    Covenants
      of the Company.

     

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

     

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

     

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

     

    5.    General
      Provisions.

     

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

     

    5.2    Governing
      Law; Injunctive Relief.

     

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

     

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

     

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

     

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

     

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

     

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

     

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

     

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

     

    Protalex,
      Inc.

    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-

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