Document:

exv10w28

 

EXHIBIT 10.28

CONNETICS CORPORATION

NON-QUALIFIED STOCK OPTION AGREEMENT

          Connetics Corporation, a Delaware corporation (“Connetics” or the “Corporation”), hereby
grants to Luis Pena (the “Optionee”) an option to purchase 30,000 shares of Common Stock (the
“Option”) subject to the following terms and conditions of this Non-Qualified Stock Option
Agreement (the “Option Agreement”):

I.
      NOTICE OF STOCK OPTION GRANT

	 	 	 
	     Luis C. Peña
	 	 
	     3160 Porter Drive
	 	 
	     Palo Alto, California 94304
	 	 
	 
	 	 
	     Date of Grant

	 	August 22, 2005
	 
	 	 
	     Vesting Commencement Date

	 	August 22, 2005
	 
	 	 
	     Exercise Price per Share

	 	$17.78
	 
	 	 
	        Total Number of Shares of Common
Stock Subject to the Option (the “Shares”)

	 	30,000 Shares
	 
	 	 
	     Total Exercise Price

	 	$533,400.00
	 
	 	 
	     Type of Option:

	 	Nonstatutory Stock Option
	 
	 	 
	     Term/Expiration Date:

	 	August 22, 2015
	 
	 	 
	Vesting Schedule:

	 	 

          This Option may be exercised, in whole or in part, in accordance with the following schedule:

          1/8 of the Shares subject to the Option shall vest six months after the Vesting Commencement
Date, and 1/48 of the Shares subject to the Option shall vest each month thereafter, subject to the
Optionee continuing to be a Service Provider on such dates.

     Termination Period:

          This Option may be exercised for (3) three months after the Optionee ceases to be a Service
Provider for any reason other than death or Disability. In the event the Optionee ceases to be a
Service Provider as the result of death or Disability, this Option may be exercised for (12) twelve
months after the Optionee ceases to be a Service Provider. In no event shall this Option be
exercised later than the Term/Expiration Date as provided above.

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II. AGREEMENT

     1. Grant of Option. The Corporation hereby grants to the Optionee named in the Notice
of Stock Option Grant (the “Notice”) attached as Part I of this Option Agreement an option (the
“Option”) to purchase the number of Shares, as set forth in the Notice, at the exercise price per
share set forth in the Notice (the “Exercise Price”), subject to the terms and conditions of the
Notice and this Option Agreement.

          This Option is subject to and conditioned upon Optionee’s acceptance of the Option by
returning to the Corporation an executed original of this Option Agreement. This Option shall be
null and void and of no force and effect, unless the Optionee executes and returns to the
Corporation this Option Agreement.

          This Option is granted as an inducement material to the Optionee’s entering into service with
the Corporation as an Employee. The Grantee has not previously been a Service Provider of the
Company or any Parent or Subsidiary of the Company.

          This Option is not intended to be an incentive stock option under Section 422 of the Code.

     2. Exercise of Option.

          (a) Right to Exercise. This Option is exercisable during its term in accordance with
the Vesting Schedule set out in the Notice and the applicable provisions of this Option Agreement.

          (b) Method of Exercise. This Option is exercisable by delivery of an exercise notice
or by such other procedure as specified from time to time by the Board, which shall state the
election to exercise the Option and the number of Shares in respect of which the Option is being
exercised (the “Exercised Shares”). The exercise notice shall be completed by the Optionee and
delivered to Connetics in person, by certified mail, or by such other method (including electronic
transmission) as determined from time to time by the Board. The exercise notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option
shall be deemed to be exercised upon receipt by Connetics of such fully executed exercise notice
accompanied by such aggregate Exercise Price.

          No Shares shall be issued pursuant to the exercise of this Option unless such issuance and
exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on the date the Option is
exercised with respect to such Exercised Shares.

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     3. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:

          (c) cash; or

          (d) check; or

          (e) consideration received by Connetics under a cashless exercise program implemented by
Connetics in connection with this Option Agreement; or

          (f) surrender of other Shares which (i) in the case of Shares acquired upon exercise of an
option, have been owned by the Optionee for more than six (6) months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.

     4. Non-Transferability of Option. This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of this Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the Optionee.

     5. No Obligation to Exercise Option. The grant and acceptance of this Option imposes
no obligation on the Optionee to exercise it.

     6. No Obligation to Continue Business Relationship. The Corporation and any its’
subsidiaries are not by this Option obligated to continue to maintain a business relationship with
the Optionee.

     7. Term of Option. This Option may be exercised only within the term set out in the
Notice, and may be exercised during such term only in accordance with the terms of this Option
Agreement.

     8. Tax Consequences. Some of the federal tax consequences relating to this Option, as
of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

          (g) Exercising the Option. The Optionee may incur regular federal income tax
liability upon exercise of the Option. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price.
If the Optionee is an Employee or a former Employee, Connetics will be required to withhold from
his or her compensation or collect from Optionee and pay to the applicable taxing authorities an
amount in cash equal to a percentage of this compensation income at the time of exercise, and may
refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

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          (h) Disposition of Shares. The Optionee holds the Shares acquired upon exercise of
the Option for at least one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

     9. No Rights as Stockholder until Exercise. The Optionee shall have no rights as a
stockholder with respect to the Shares until a stock certificate has been issued to the Optionee
and is fully paid for in accordance with paragraph 3. With respect to certain changes in the
capitalization of the Corporation, no adjustment shall be made for dividends or similar rights for
which the record date is prior to the date such stock certificate is issued.

     10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

          (a) Changes in Capitalization. Subject to any required action by the stockholders of
Connetics, the number of shares of Common Stock covered by the Option as well as the Exercise Price
shall be proportionately adjusted for any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by Connetics; provided, however,
that conversion of any convertible securities of Connetics shall not be deemed to have been
“effected without receipt of consideration.” Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive. Except as expressly provided
in this Option Agreement, no issuance by Connetics of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of Connetics, the Board shall notify the Optionee prior to the effective date of such
proposed transaction. The Board in its discretion may permit the Optionee to exercise the Option
prior to such transaction as to all of the Shares, including Shares as to which the Option would
not otherwise be vested and exercisable. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed action.

          (i) Merger or Asset Sale. In the event of a merger of Connetics with or into another
corporation, or the sale of substantially all of the assets of Connetics, the Option shall be
assumed or an equivalent option or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have the right to
exercise the Option as to all of the Shares, including Shares as to which it would not otherwise be
vested and exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall notify the Optionee in
writing or electronically that the Option shall be fully vested and exercisable for a period of
time as determined by the Board, and the Option shall terminate upon the expiration of such period.
For the purposes of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase or receive, for each Share
subject to the Option immediately prior to the merger or sale of assets, the consideration

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(whether stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration chosen by the holders
of a majority of the outstanding shares of Common Stock); provided, however, that if such
consideration received in the merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Board may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each Share subject to the
Option, to be solely common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the merger or sale of
assets.

     11. Entire Agreement; Governing Law. This Option Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and supersedes in its entirety
all prior undertakings and agreements of Connetics and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee’s interest except by means of a writing
signed by Connetics and Optionee. This agreement is governed by the internal substantive laws, but
not the choice of law rules, of California.

     12. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE OF THIS AGREEMENT IS EARNED ONLY BY CONTINUING
AS A SERVICE PROVIDER AT THE WILL OF CONNETICS (AND NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED AN OPTION OR PURCHASING SHARES UNDER THIS AGREEMENT). OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT AND THE VESTING
SCHEDULE SET FORTH IN THIS AGREEMENT DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE’S RIGHT OR CONNETICS’ RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A
SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

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III. DEFINITIONS

          A. “Applicable Laws” means the requirements relating to the administration of stock
options under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable
laws of any foreign country or jurisdiction where the Optionee may be resident.

          B. “Board” means the Board of Directors of Connetics.

          C. “Code” means the Internal Revenue Code of 1986, as amended.

          D. “Common Stock” means the common stock of Connetics.

          E. “Corporation” means Connetics Corporation, a Delaware corporation.

          F. “Consultant” means any person, including an advisor, engaged by Connetics or a
Parent or Subsidiary to render services to such entity.

          G. “Director” means a member of the Board.

          H. “Disability” means total and permanent disability as defined in Section 22(e)(3) of
the Code.

          I. “Employee” means any person, including Officers and Directors, employed by
Connetics or any Parent or Subsidiary of Connetics. A Service Provider shall not cease to be an
Employee in the case of (i) any leave of absence approved by Connetics or (ii) transfers between
locations of Connetics or between Connetics, its Parent, any Subsidiary, or any successor. Neither
service as a Director nor payment of a director’s fee by Connetics shall be sufficient to
constitute “employment” by Connetics.

          J. “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          K. “Fair Market Value” means, as of any date, the value of Common Stock determined as
follows:

(i) If the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq National Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were reported)
as quoted on such exchange or system on the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;

(ii) If the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, the Fair Market Value of a Share of Common

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Stock shall be the mean between the high bid and low asked prices for the Common
Stock on the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable; or

(iii) In the absence of an established market for the Common Stock, the Fair Market
Value shall be determined in good faith by the Board.

          L. “Officer” means a person who is an officer of Connetics within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated under the Exchange Act.

          M. “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

          N. “Service Provider” means an Employee, Director or Consultant.

          O. “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing,
as defined in Section 424(f) of the Code.

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     By your signature and the signature of Connetics’ representative below, you and Connetics
agree that this Option is granted under and governed by the terms and conditions of the this Option
Agreement. Optionee has reviewed this Option Agreement in its’ entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option Agreement and fully understands all
provisions of this Option Agreement. Optionee hereby agrees to accept as binding, conclusive and
final all decisions or interpretations of the Board upon any questions relating to this Option
Agreement. Optionee further agrees to notify Connetics upon any change in the residence address
indicated below.

	 	 	 
	OPTIONEE:

	 	CONNETICS CORPORATION
	 
	 	 
	          /s/
Luis C. Peña

	 	           /s/ Thomas G. Wiggans
	 

	 	 
	Signature

	 	By: Thomas G. Wiggans
	 
	 	 
	          Luis C. Peña

	 	          Chief Executive Officer
	 

	 	 
	Print Name

	 	Title
	 
	 	 
	 

Residence Address

	 	 
	 
	 	 
	 

	 	 

-8-<PAGE>
                                   Exhibit 4.7

                                 ADDENDUM NO. 1
                                       TO
                    SUBSCRIPTION AGREEMENT AND QUESTIONNAIRE

     THIS ADDENDUM NO. 1 (this "ADDENDUM") to the Subscription Agreement and
Investor Questionnaire (the "AGREEMENT") by and between Protalex, Inc., a
Delaware corporation (the "COMPANY") and the undersigned subscriber (the
"SUBSCRIBER") is made and entered into as of May 25, 2005. For purposes of this
Addendum, capitalized terms shall have the same meaning as those terms defined
in the Agreement, unless otherwise provided.

                                    RECITALS

     WHEREAS, the Subscriber has previously executed the Agreement, which,
subject to acceptance by the Company, constitutes a subscription to purchase
shares of the Company's common stock, par value $0.00001 per share ("COMMON
STOCK") and Warrants to purchase Common Stock (the "WARRANTS") in a private
placement (the "FINANCING");

     WHEREAS, in order to induce vSpring SBIC, LP to participate as the lead
investor in the Financing, the Company and the Subscriber desire to amend the
terms of the Financing as set forth below.

     NOW, THEREFORE, for value received, the receipt of which is hereby
acknowledged by the parties, the parties hereto agree that the Agreement is
amended by this Addendum, and the parties agree as follows:

     Amendment of Plan of Distribution. The proposed "Plan of Distribution" to
be included in the Shelf Registration Statement pursuant to Section 5 of the
Agreement is hereby amended and restated in its entirety to read as set forth on
Exhibit A attached hereto and Subscriber hereby amends such Subscriber's
disclosure set forth in Section 5 of the Agreement by providing the information
called for below:

               "Please review the proposed Plan of Distribution. If you
          anticipate utilizing the prospectus to offer or sell the Common Stock
          in a manner that is not contemplated by the Plan of Distribution,
          state any exceptions here:

               ____________________________________________________

               ____________________________________________________

               ___________________________________________________"

     Amendment of Warrant and Common Stock Purchase Agreement. The Warrant and
Common Stock Purchase Agreement in the form attached to the Agreement as Exhibit
C is hereby amended by the Addendum No. 1 to Warrant and Common Stock Purchase
Agreement in the form attached as Exhibit B hereto.

     Amendment and Restatement of Registration Rights Agreement. The
Registration Rights Agreement in the form attached to the Agreement as Exhibit D
is hereby amended and restated in its entirety to read as set forth on Exhibit C
attached hereto.

     Amendment and Restatement of Form of Warrant. The form of Warrant in the
form attached to the Agreement as Exhibit E is hereby amended and restated in
its entirety to read as set forth on Exhibit D attached hereto.

     Full Force and Effect. Except as amended hereby, the Agreement shall remain
in full force and effect.

     Entire Agreement. This Addendum (with it exhibits) and the Agreement
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.

     Governing Law. This Addendum shall be governed by and construed under the
laws of the State of Delaware, without giving effect to the conflicts of laws
principles thereof.

                                      -40-

<PAGE>

     Severability. In case any provision of this Addendum shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions of this Addendum shall not in any way be affected or
impaired thereby.

     Counterparts. This Addendum may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.

                            [SIGNATURE PAGE FOLLOWS]

                                      -41-

<PAGE>

     IN WITNESS WHEREOF, this Addendum is hereby executed as of the date first
above written.

                                       COMPANY:

                                       PROTALEX, INC.
                                       a Delaware corporation

                                       By:
                                           -------------------------------------
                                           Steven H. Kane
                                           President and Chief Executive Officer

SUBSCRIBER:

-------------------------------------
NAME OF SUBSCRIBER
(PLEASE TYPE OR PRINT)

By:
    ---------------------------------
Name (print)
             ------------------------
Title:
       ------------------------------
Address:
         ----------------------------

-------------------------------------

SUBSCRIBER'S SIGNATURE TO THIS ADDENDUM REAFFIRMS SUCH SUBSCRIBER'S SUBSCRIPTION
PURSUANT TO THE AGREEMENT AND THE ACCURACY AS OF THE DATE HEREOF OF ALL
DISCLOSURES BY SUBSCRIBER IN THE AGREEMENT AND FURTHER REAFFIRMS SUBSCRIBER'S
AUTHORIZATION THAT THE SIGNATURE PAGE TO AGREEMENT CONSTITUTE SUCH SUBSCRIBER'S
SIGNATURE PAGE TO THE WARRANT AND COMMON STOCK PURCHASE AGREEMENT, THE
REGISTRATION RIGHTS AGREEMENT, AND THE WARRANT, EACH AS AMENDED HEREBY, COPIES
OF WHICH ARE ATTACHED HERETO AS EXHIBITS B, C AND D, RESPECTIVELY, AND WHICH ARE
INCORPORATED HEREIN. SUBSCRIBER AUTHORIZES SUCH SIGNATURE PAGE TO BE ATTACHED TO
A COUNTERPART OF SUCH DOCUMENTS EXECUTED BY A DULY AUTHORIZED OFFICER OF THE
COMPANY SUCH THAT, IF ACCEPTED BY THE COMPANY, SUCH SIGNATURE PAGE WILL
CONSTITUTE OBLIGATIONS LEGALLY BINDING ON SUCH SUBSCRIBER; PROVIDED, HOWEVER, IF
THE COMPANY DOES NOT ACCEPT SUBSCRIBER'S SIGNATURE PAGE, THE SIGNATURE PAGE
SHALL BE VOID.

                       SIGNATURE PAGE TO ADDENDUM NO. 1 TO
                    SUBSCRIPTION AGREEMENT AND QUESTIONNAIRE

<PAGE>

                                    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:

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

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

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

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

     -    privately negotiated transactions;

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

     -    a combination of any such methods of sale; and

     -    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, including fees and disbursements of counsel to the selling stockholders,
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.

                                       -2-

<PAGE>

                                    EXHIBIT B

                                ADDENDUM NO. 1 TO
                   WARRANT AND COMMON STOCK PURCHASE AGREEMENT

The Warrant and Common Stock Purchase Agreement, in the form attached hereto as
Schedule A (the "PURCHASE AGREEMENT"), is hereby amended as follows:

     Amendment to Section 2.2 of the Purchase Agreement. The "Exercise Price" of
the Warrants as established and defined in Section 2.2 of the Purchase Agreement
is hereby amended and set at $2.25 per share notwithstanding anything else to
the contrary set forth in Section 2.2.

     Amendment of Section 2.3 of the Purchase Agreement. Section 2.3 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

          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
          issued or 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."

     Amendment of Preamble to Section 3 of the Purchase Agreement. The preamble
to Section 3 of the Purchase Agreement is hereby amended and restated in its
entirety to read as follows:

          3. Representations and Warranties of the Company. Except as disclosed
          in writing in the disclosure schedule delivered by the Company to the
          Purchasers dated as of the date hereof and certified by a duly
          authorized officer of the Company (referencing the appropriate section
          and paragraph numbers of the representations and warranties in this
          Agreement) (the "Company Disclosure Schedule"), which exceptions shall
          be deemed to be representations and warranties as if made hereunder,
          the Company represents and warrants to each Purchaser as follows
          (references to the knowledge of the Company shall mean the knowledge
          of the Company's executive officers after reasonable inquiry).

     Amendment of Section 3.4 of the Purchase Agreement. Section 3.4 of the
Purchase Agreement is hereby amended to include the following additional
provision: "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)."

     Amendment of Section 3.5 of the Purchase Agreement. Section 3.5 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

          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, 2004
          and prior to the date hereof,

<PAGE>

          since May 31, 2004, (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.

     Amendment of Section 3.6 of the Purchase Agreement. Section 3.6 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

          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 Initial 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
          Final 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.

     Amendment of Section 3.14 of the Purchase Agreement. Section 3.14 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

          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.

     Additions to Section 3 of the Purchase Agreement. Section 3 of the Purchase
Agreement is hereby amended to include the following additional representations
and warranties of the Company as follows:

          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 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

                                      -2-

<PAGE>

          compared with the existing assets at reasonable intervals and
          appropriate action is taken with respect to any differences.

          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. 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.

     Amendment of Section 4.3 of the Purchase Agreement. Section 4.3 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

          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.

     Amendment of Section 4.4 of the Purchase Agreement. Section 4.4 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

          4.4 Confidential Information. Each Purchaser acknowledges that the
          information received by them pursuant to this Agreement may be
          confidential and for its use only, and it will not use such
          confidential information in violation of the Exchange Act or
          reproduce, disclose or disseminate such information to any other
          person (other than its employees or agents having a need to know the
          contents

                                      -3-

<PAGE>

          of such information, and its attorneys), except in connection with the
          exercise of rights under this Agreement, unless the Company has made
          such information available to the public generally or such Purchaser
          is required to disclose such information by a governmental authority.

     Amendment of Section 4.9 of the Purchase Agreement. Section 4.9 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

          4.9 No Intent to Effect a Change of Control. Each Purchaser, other
          than vSpring, hereby represents and warrants to the Company that 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.

     Amendment of Section 6 of the Purchase Agreement. Section 6 of the Purchase
Agreement is hereby amended and restated in its entirety to read as follows:

          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.

     Amendment of Section 8.1 of the Purchase Agreement. Section 8.1 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

          8.1 Public Statements or Releases. The Company and vSpring Capital
          ("vSpring") shall have the right to approve before issuance any press
          releases or any other public statements with respect to the
          transactions contemplated hereby; provided, however, that the Company
          shall be entitled, without the prior approval of vSpring, to make any
          press release or other public disclosure with respect to such
          transactions as is required by applicable law and regulations
          (although vSpring shall be consulted by the Company in connection with
          any such press release or other public disclosure prior to its release
          and shall be provided with a copy thereof).

     Amendment of Section 8.9 of the Purchase Agreement. Section 8.9 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

                                      -4-

<PAGE>

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

     Amendment of Section 8.10 of the Purchase Agreement. Section 8.10 of the
Purchase Agreement is hereby amended to include the following additional
provision: "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."

     Amendment of Section 8.12 of the Purchase Agreement. Section 8.12 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

          8.12 Expenses. Each party will bear its own costs and expenses in
          connection with this Agreement; provided, however, that immediately
          upon the Initial Closing, the Company shall reimburse vSpring for its
          expenses (including reasonable attorneys' fees and expenses in an
          amount not to exceed $30,000) in connection with negotiating the
          Operative Agreements and consummating the transactions contemplated
          thereby.

     Amendment of Section 8.13 of the Purchase Agreement. Section 8.13 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

          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.

     Amendment of Section 8.16 of the Purchase Agreement. Section 8.16 of the
Purchase Agreement is hereby amended and restated in its entirety to read as
follows:

          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,
          vSpring and the Majority Purchasers.

     Waivers and Consents. Purchasers that are also listed on Schedule I to that
certain First Amended and Restated Shareholder Agreement attached as Exhibit B
to the Registration Rights Agreement, including but not limited to vSpring (the
"2003 Investors"), hereby consent to, approve and/or waive (as provided herein)
the following matters as indicated below:

          (a) 2003 Warrants. In consideration of the 2003 Investors' purchase of
the Common Stock and Warrants hereunder, the Company and the 2003 Investors
hereby agree to amend each of those certain September 2003 Protalex, Inc. Common
Stock Purchase Warrants (the "2003 Warrants") as follows pursuant to Section 9.7
of the 2003 Warrants:

               (x) The "Exercise Price" of $2.40 per share as set forth in the
first preamble of the 2003 Warrants is hereby reduced and amended to $2.25 per
share;

               (y) In consideration of such Exercise Price reduction, "Excluded
Stock" as defined in Section 3.4 of the 2003 Warrants shall also include (i) all
Shares, Warrants and Conversion Stock as defined and

                                      -5-

<PAGE>

purchased under the Purchase Agreement, and (ii) those warrants and common stock
shares issuable upon conversion of such Warrants as disclosed under Sections 3.2
and 3.9 of the Company Disclosure Schedule to the Purchase Agreement
(collectively, the securities identified in subclauses (i) and (ii) above, the
"Additional Excluded Stock").

          (b) Investor Rights Agreement. The 2003 Investors and the Company
hereby amend and/or waive (as provided herein) the following provisions of that
certain September 18, 2003 Investor Rights Agreement by and among the Company
and the 2003 Investors (as well as other investors) (the "Investor Rights
Agreement") pursuant to Section 6.1 of the Investor Rights Agreement as follows:

               (x) The definition of "New Securities" set forth in Section
4.1(b) of the Investor Rights Agreement shall also exclude the Additional
Excluded Stock and, in any event, the 2003 Investors on behalf of all
"Investors" identified in the Investor Rights Agreement hereby waive their
rights of first refusal set forth in Section 4 of the Investor Rights Agreement
with respect to such Additional Excluded Stock.

               (y) Section 5.3(a) of the Investor Rights Agreement is hereby
amended to provide the following sentence at the end of Section 5.3(a):
"Notwithstanding the foregoing limitations on the size of Company's Board of
Directors set forth above, the authorized number of the Company's Board of
Directors may be comprised of less or more than seven (7) Directors upon the
written consent of vSpring and the Company." In furtherance of such amendment
and in accordance with Section 5.3(d) of the Investors Rights Agreement, vSpring
and the other 2003 Investors hereby ratify, confirm and approve of the actions
taken by the Company's Board of Directors on February 11, 2005 to increase the
authorized number of Board members from seven (7) to eight (8) and to elect
Eugene Bauer as a Director of this Company to fill the vacancy created thereby.

               (z) The 2003 Investors hereby waive their registration rights
under Section 3.3 of the Investor Rights Agreement pursuant to Section 6.1
thereunder with respect to the Company's registration contemplated in Section
3.1 of the Registration Rights Agreement so long as the 2003 Investors'
Registrable Securities (as defined in the Investor Rights Agreement) are
registered pursuant to Section 3.1 of the Investor Rights Agreement.

          (c) Shareholder Agreement. Pursuant to Section 13 of that certain
September 18, 2003 Shareholder Agreement by and between the Company and the 2003
Investors (as well as other investors) (the "Shareholder Agreement"), subject to
the consent of the "Existing Shareholders" (as defined therein), the Company and
the 2003 Investors hereby agree retroactively to waive the requirement to vote
in favor of fixing and maintaining the number of directors of the Company at
seven (7) at the Company's last annual shareholder meeting. Subject to obtaining
the consent of the Existing Shareholders, the Company and each 2003 Investor
agree that such requirement as set forth in Section 4 of the Shareholder
Agreement may at any time after the date hereof be waived by vSpring without the
consent of the 2003 Investors.

     Use of Proceeds. The Company hereby covenants to vSpring that it will use
the proceeds it receives upon the Initial Closing and the Final Closing for the
payment of expenses incurred in connection therewith, for working capital and
other general corporate purposes. No portion of the proceeds from the sale of
the Securities to vSpring will be used for any purpose in contravention of any
provisions of Part 107 of Title 13 of the Code of Federal Regulations.

                                      -6-

<PAGE>

                                   SCHEDULE A

                   WARRANT AND COMMON STOCK PURCHASE AGREEMENT

<PAGE>

                                    EXHIBIT C

                          REGISTRATION RIGHTS AGREEMENT

<PAGE>

                                    EXHIBIT D

                                     WARRANT

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