Exhibit 10.1
 
EXCHANGE AND AMENDMENT AGREEMENT
 
THIS EXCHANGE AND AMENDMENT AGREEMENT (this “Agreement”), is made and entered
into as of December 11, 2014 (the “Effective Date”) by and among DARA
THERAPEUTICS, INC., a North Carolina corporation (the “Company”), and DARA
BIOSCIENCES, INC., a Delaware corporation (“Parent” and, together with Company,
“DARA”), on the one hand, and THE GENERAL HOSPITAL CORPORATION D/B/A
MASSACHUSETTS GENERAL HOSPITAL, a Massachusetts not-for-profit corporation
(“General”), on the other hand.
 
STATEMENT OF PURPOSE
 
WHEREAS, General and Company are parties to that certain License Agreement dated
as of May 4, 2004, as amended by that certain First Amendment to License
Agreement dated as of July 7, 2009 (as amended, the “License Agreement”;
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the License Agreement);
 
WHEREAS, pursuant to the License Agreement, General has, among other things,
licensed to Company the Patent Rights and, in fulfillment of certain of
Company’s obligations under the License Agreement, the Company has, among other
things, issued three hundred thirty-three thousand three hundred thirty-four
(333,334) shares of its common stock to General (the “Existing Shares”);
 
WHEREAS, DARA and General desire to (a) exchange the Existing Shares for shares
of Parent’s common stock, $0.01 par value per share (“Parent Common Stock”) and
warrants to purchase shares of Parent Common Stock, such that after such
exchange, Parent shall be the Company’s sole stockholder and (b) further amend
the License Agreement, all as more fully set forth herein.
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
 
1.           Exchange of Existing Shares.
 
(a)           Subject to the terms and conditions set forth in this Agreement,
General hereby transfers to DARA the Existing Shares and shall deliver to DARA
the stock certificate(s) representing the Existing Shares, and in exchange
therefor shall receive from Parent:
 
(i)             165,000 shares of Parent Common Stock (the “Exchange Stock”);
 
(ii)            a warrant to purchase 125,000 shares of Parent Common Stock in
substantially the form attached hereto as Exhibit A (the “Phase 2b Warrant”);
and
 
(iii)           a warrant to purchase 175,000 shares of Parent Common Stock in
substantially the form attached hereto as Exhibit B (the “FDA Approval Warrant”
and, together with the Exchange Stock and the Phase 2b Warrant, the “Exchange
Securities”).
 
 
 

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(b)           From and after the date hereof, the Existing Shares shall be
deemed cancelled and are hereby exchanged for, and shall hereafter only
represent, the right to receive the Exchange Securities.
 
(c)           As soon as practicable following DARA’s receipt of General’s
original stock certificate representing the Existing Shares, Parent shall
deliver to General certificates representing the Exchange Stock, as well as the
Phase 2b Warrant and the FDA Approval Warrant.
 
2.           Amendments to License Agreement.
 
(a)            Articles 3 and 5 of the License Agreement are hereby deleted.
 
(b)            Article 6 of the License Agreement is hereby amended and restated
in its entirety to read as follows:
 
“6.1          Except as provided in Section 6.1(a) and (b) below, and as may be
required pursuant to Articles 7 and 8 hereof, no further reporting obligations
shall exist between the parties.
 
(a)           With respect to the Phase 2b Warrant, within fifteen (15) days of
completion of a the final study report of a clinical trial in which KRN5500 is
demonstrated to meet the pre-specified endpoints contained in the final
Statistical Analysis Plan with a well-tolerated dose demonstrated to have
clinical significance (change in NRS score of > 2) and statistical significance
(p < 0.05) over placebo (the “Final Phase 2b Study Report”), DARA shall provide
to GENERAL a true and accurate copy of the Final Phase 2b Study Report.  The
foregoing notwithstanding, GENERAL shall not make any public disclosure of any
information contained in such final study report without the prior written
consent of DARA, which consent may be withheld in DARA’s sole and absolute
discretion.
 
(b)           With respect to the FDA Approval Warrant, within fifteen (15) days
of the date on which DARA receives the U.S. Food and Drug Administration’s
approval for the use of KRN5500 for the parenteral treatment of painful,
chronic, chemotherapy-induced peripheral neuropathy that is refractory to
conventional analgesics (the “FDA Approval”), DARA shall notify GENERAL in
writing of the FDA Approval.”
 
(c)            Section 9.2 of the License Agreement is hereby amended and
restated in its entirety to read as follows:
 
“9.2          If either party shall fail to faithfully perform any of its
obligations under this Agreement, the nondefaulting party may give written
notice of the default to the defaulting party.  If the default is not cured
within sixty (60) days, the defaulting party is not utilizing diligent and
continuous efforts to remedy such default, the notifying party may terminate
this Agreement and the license hereunder.”
 
 
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3.           Release.  General, for itself and its direct and indirect parent
companies, members, stockholders, direct and indirect subsidiaries, corporate
affiliates, predecessors, successors, assigns, officers, directors, employees
and agents (collectively, the “Releasing Parties”), hereby release and forever
discharge DARA, including but not limited to its direct and indirect parent
companies, stockholders, direct and indirect subsidiaries, corporate affiliates,
predecessors, successors, assigns, officers, directors, employees and agents, in
their official and unofficial capacities (collectively, the “Released Parties”),
from any and all claims, demands, liabilities, damages, causes of action, costs,
expenses and compensation of any kind or nature, whatsoever, whether or not
suspected or claimed, matured or unmatured, fixed or contingent, which any of
the Releasing Parties may now have, could have claimed, have claimed, or may now
claim to have, relating to or arising out of either the Existing Shares or the
License Agreement.  Without limiting the foregoing, the Releasing Parties agree
and acknowledge that the Releasing Parties shall have no further equity,
profits, debt or other rights or interests in Company or Parent or any of their
affiliates arising out of Section 5 or Section 6 of the License Agreement except
as specifically provided for herein.  Additionally, this Section 3 shall not
affect any rights to indemnification as they may exist pursuant to Article 8 of
the License Agreement as of the date of this Agreement.  Nothing in this Section
3, however, shall be interpreted to release DARA from its obligations under this
Agreement.
 
4.           Representations and Warranties of General.  General hereby
represents and warrants to DARA as follows:
 
(a)           General has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder.  The execution, delivery and
performance by General of this Agreement and the other transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of General.  This Agreement constitutes the valid and binding obligation of
General, enforceable against General in accordance with its respective terms,
except as may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting the enforcement
of creditors’ rights, or the availability of equitable remedies.
 
(b)      The execution, delivery and performance by General of this Agreement
and the consummation of the transactions contemplated hereby, do not and will
not:  (a) violate or conflict with the articles of incorporation, by-laws or
other organizational documents of General; or (b) violate or conflict with any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to General.  No consent, approval, waiver or authorization is required to be
obtained by General from any person or entity (including any governmental
authority) in connection with the execution, delivery and performance by General
of this Agreement or the consummation of the transactions contemplated hereby.
 
(c)      General is the sole owner of the Existing Shares, free and clear of any
pledges, liens, security interests, claims or other encumbrances of any kind
(other than those arising under applicable securities laws).
 
(d)      General is an “accredited investor” for purposes of Regulation D under
the Securities Act of 1933, as amended (the “Securities Act”), and is acquiring
the Exchange Securities for its own account for investment and not for the
benefit or account of any other person or entity and not with a view to resale
or distribution thereof.
 
 
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(e)      General acknowledges that General is informed as to the business
affairs and financial condition of DARA and risks of the transactions
contemplated hereby and of ownership of the Exchange Securities and the
securities issuable upon exercise of the Phase 2b Warrant and the FDA Approval
Warrant (the “Warrant Shares”).  General has acquired sufficient information
about DARA to reach an informed and knowledgeable decision to acquire the
Exchange Securities.  General, individually and/or together with its
professional advisors, has such knowledge and experience in financial business
matters that it is capable of evaluating the merits and risks of the
transactions contemplated hereby.  General acknowledges that investments in the
Exchange Securities and the Warrant Shares involve a high degree of risk, and
that General has determined that it is suitable for General to participate in
the transactions contemplated hereby.
 
(f)      General acknowledges that the Exchange Securities and the Warrant
Shares have not been registered under the Securities Act or any state or foreign
securities laws and that the Exchange Securities and the Warrant Shares may not
be sold, transferred, offered for sale, pledged hypothecated or otherwise
disposed of unless such transfer, sale, assignment, pledge, hypothecation or
other disposition is pursuant to the terms of an effective registration
statement under the Securities Act and is registered under any applicable state
or foreign securities laws or pursuant to an exemption from registration under
the Securities Act and any applicable state or foreign securities laws.  General
further acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Exchange
Securities and the Warrant Shares, and on requirements related to DARA which are
outside General’s control, and which DARA is under no obligation and may not be
able to satisfy.
 
5.           Representations and Warranties of DARA.  DARA hereby represents and
warrants to General as follows:
 
(a)           DARA has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder.  The execution, delivery and
performance by DARA of this Agreement and the other transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of DARA.  This Agreement constitutes the valid and binding obligation of DARA,
enforceable against DARA in accordance with its respective terms, except as may
be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights, or the availability of equitable remedies.
 
(b)           The execution, delivery and performance by DARA of this Agreement
and the consummation of the transactions contemplated hereby, do not and will
not:  (a) violate or conflict with the articles of incorporation or certificate
of incorporation (as applicable), by-laws or other organizational documents of
either Company or Parent; or (b) violate or conflict with any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to DARA.  No
consent, approval, waiver or authorization is required to be obtained by DARA
from any person or entity (including any governmental authority) in connection
with the execution, delivery and performance by DARA of this Agreement or the
consummation of the transactions contemplated hereby.
 
 
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6.           Survival of Representations and Warranties.  All of the
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by or on behalf
of any party hereto, and the consummation of the transactions contemplated
hereby.
 
7.           Miscellaneous.
 
(a)           At any time from time to time the parties shall, without further
consideration, execute and deliver or cause to be executed and delivered to the
other parties any additional instruments, and shall take such other action as
the other parties may reasonably request to carry out, or evidence the
consummation of, the transactions contemplated by this Agreement.
 
(b)           Neither this Agreement nor any provisions hereof shall be waived,
modified, discharged or terminated except by an instrument in writing signed by
the party against whom any waiver, change, discharge or termination is sought.
 
(c)           This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted successors, assigns, heirs,
estates, executors, administrators and personal representatives.  Neither this
Agreement nor any right, remedy, obligation or liability arising hereunder or by
reason hereof shall be transferable or assignable by General (including pursuant
to termination, liquidation or dissolution) without the prior written consent of
DARA.  Any transfer or assignment made in violation of this Section 7(c) shall
be entirely null and void.
 
(d)           This Agreement may be executed by the parties in multiple
counterparts and shall be effective as of the date set forth above when each
party shall have executed and delivered a counterpart hereof, whether or not the
same counterpart is executed and delivered by each party.  When so executed and
delivered, each such counterpart shall be deemed an original and all such
counterparts shall be deemed one and the same document.  Transmission of images
of signed signature pages by facsimile, e-mail or other electronic means shall
have the same effect as the delivery of manually signed documents in person.
 
(e)           All other terms and conditions of the License Agreement shall
remain in full force and effect.
 
(f)           This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of law.
 
(g)           Any term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms or provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction.
 
 
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[signature page follows]
 
 
 
 
 
 
 
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IN WITNESS WHEREOF, the undersigned have executed this Exchange and Amendment
Agreement as of the date first above written.
 
 
“Company”
     
DARA THERAPEUTICS, INC.
          By:    
Name:
    Title:                
“Parent”
     
DARA BIOSCIENCES, INC.
          By:     Name:     Title:                
“General”
     
THE GENERAL HOSPITAL CORPORATION
D/B/A MASSACHUSETTS GENERAL
HOSPITAL
          By:     Name:     Title:    

 
 
 

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EXHIBIT A
 
Phase 2b Warrant
 
 
 
 
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) AND SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
 
COMMON STOCK PURCHASE WARRANT
 
To Purchase Shares of Common Stock of
 
DARA BIOSCIENCES, INC.
 
December ____, 2014
Warrant Number ____

 
THIS COMMON STOCK PURCHASE WARRANT (this “Warrant”) certifies that The General
Hospital Corporation d/b/a Massachusetts General Hospital (“Holder”) is entitled
to purchase from DARA BioSciences, Inc., a Delaware corporation (the “Company”),
at an initial Exercise Price (as defined below) of $____ per share, One Hundred
Twenty-Five Thousand (125,000) shares (the “Aggregate Number”) of Common Stock
(as defined below).  The Exercise Price and Aggregate Number are subject to
adjustment as set forth in Section 4.
 
8.           Definitions.
 
“Aggregate Exercise Price” is defined in Section 3(a).
 
“Aggregate Number” is defined in the opening paragraph.
 
 “Business Day” means any day that is not a Saturday, Sunday or any other day on
which banks are required or authorized by law to be closed in Raleigh, North
Carolina.
 
“Capital Transaction” means any merger, consolidation, share exchange,
recapitalization, reorganization, business combination, or other similar event,
as a result of which shares of Common Stock shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the Company or another Person.
 
“Charter” means the Certificate of Incorporation of the Company, as amended or
supplemented.
 
“Common Stock” means the Common Stock of the Company, $0.01 par value or any
other capital stock into which the foregoing is reclassified or reconstituted.
 
“Company” is defined in the opening paragraph.
 
 
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“Convertible Securities” means evidences of indebtedness, shares of stock or
other securities that, directly or indirectly, are exchangeable for or
exercisable or convertible into Common Stock.
 
“Election to Purchase” is defined in Section 3(a).
 
“Exercise Amount” is defined in Section 3(a).
 
“Exercise Price” means the price per share of Common Stock at which shares of
Common Stock are purchasable pursuant to this Warrant.
 
“Expiration Date” means the eighth (8th) anniversary of the date hereof;
provided, however, that if the such eighth (8th) anniversary is not a Business
Day, then the Expiration Date shall mean the first Business Day following the
eighth (8th) anniversary of the date hereof.
 
“Holder” is defined in the opening paragraph.
 
“Other Securities” shall mean any stock and other securities of the Company or
any other Person which Holder at any time shall be entitled to receive, upon the
exercise of this Warrant or pursuant to Section 4, in lieu of or in addition to
Common Stock.
 
“Person” means any individual, corporation, limited liability company,
partnership, company, sole proprietorship, joint venture, trust, estate,
association, organization, labor union or other entity.
 
“Phase 2b Trial Completion Date” means the date of the completion of the final
study report of a clinical trial in which KRN5500 is demonstrated to meet the
pre-specified endpoints contained in the final Statistical Analysis Plan with a
well-tolerated dose demonstrated to have clinical significance (change in NRS
score of > 2) and statistical significance (p < 0.05) over placebo.
 
“Stock Combination” is defined in Section 4(a)(ii).
 
“Stock Dividend” is defined in Section 4(a)(i).
 
“Stock Subdivision” is defined in Section 4(a)(i).
 
“Warrant” is defined in the opening paragraph.
 
“Warrant Shares” means (a) the shares of Common Stock or Other Securities issued
or issuable hereunder and, (b) all other shares of the Company’s capital stock
issued with respect to such shares by way of stock dividend, stock split or
other reclassification or in connection with any Capital Transaction, or
acquired by way of any rights offering or similar offering made in respect of
the capital stock referred to in this clause (b) or the foregoing clause (a).
 
 
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9.             Exchange and Amendment Agreement.  This Warrant is being issued
pursuant to that certain Exchange and Amendment Agreement, dated December __,
2014, by and among the Company and DARA Therapeutics, Inc., on the one hand, and
the Holder, on the other hand.
 
10.           Exercise.
 
(a)           Right to Exercise; Exercise Amount.  The Warrant Shares shall vest
upon, and the Holder shall not be entitled to exercise this Warrant with respect
to such Warrant Shares until, the Phase 2b Trial Completion Date. Once the
Warrant Shares have vested pursuant to this Section 3(a), the Holder may
exercise this Warrant in whole or in part at any time and from time to time up
until the close of business on the Expiration Date (but not thereafter) by
delivering this Warrant to the Company, together with a duly executed Election
to Purchase in the form attached hereto as Exhibit A (the “Election to
Purchase”), and payment of the Exercise Price for each share to be
purchased.  For the avoidance of doubt, if the Expiration Date occurs prior to
the Phase 2b Trial Completion Date, this Warrant shall not be exercisable.  The
aggregate Exercise Price (the “Aggregate Exercise Price”) to be paid for the
shares to be purchased (the “Exercise Amount”) shall equal the product of (i)
the Exercise Amount multiplied by (ii) the Exercise Price.
 
(b)           Payment of Aggregate Exercise Price.  Payment of the Aggregate
Exercise Price shall be made to the Company in cash or other immediately
available funds or as provided in Section 3(f) or a combination thereof.
 
(c)           Issuance of Shares of Common Stock.  Upon receipt by the Company
of this Warrant accompanied by an Election to Purchase and payment of the
Aggregate Exercise Price, Holder shall be deemed to be the holder of record of
the shares of Common Stock issuable upon such exercise, notwithstanding that
certificates representing such shares of Common Stock may not then be actually
delivered.  Upon such surrender of this Warrant and payment of the Aggregate
Exercise Price, the Company shall issue and deliver as soon as practicable to,
or upon the written order of, Holder (and in such name or names as Holder may
designate) a certificate or certificates for the Exercise Amount.
 
(d)           Fractional Shares.  The Company shall deliver whole shares of
Common Stock upon exercise of this Warrant (rounded down to the nearest whole
number).
 
(e)           Partial Exercise.  Following any partial exercise of this Warrant,
the Company shall issue to Holder a Warrant in like form for the unexercised
portion thereof.
 
(f)           Cashless Exercise.  In lieu of exercising this Warrant by payment
of the Exercise Price in cash for the Warrant Shares in accordance with Section
3(b) hereof, the Holder may if Common Stock is publicly traded at such time,
elect to make a cashless exercise of this Warrant by surrendering Warrant Shares
with a fair market value equal to Aggregate Exercise Price of the Warrant Shares
subject to such exercise, as determined below, by the surrender of this Warrant
to the Company (with the notice of exercise form attached hereto as Exhibit A
duly executed), at the principal office of the Company.  Thereupon, the Company
shall issue to such Holder such whole number of fully paid and nonassessable
Warrant Shares as is computed using the following formula (rounded down to the
nearest whole number):
 
 
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X =   Y (A - B) A

 
Where
 
 
X =
The number of Shares to be issued to the Holder.

 
 
Y =
The number of Shares purchasable under this Warrant or, if only a portion of the
Warrant is being exercised, the portion of the Warrant being cancelled (at the
date of such calculation).

 
 
A =
The fair market value of one (1) Share (at the date of such calculation).

 
 
B = 
The Exercise Price (as adjusted to the date of such calculation).

 
11.           Adjustments to Exercise Price and Aggregate Number.  The Exercise
Price and the Aggregate Number shall be adjusted as provided in this
Section 4.  Upon each adjustment of the Exercise Price, the Aggregate Number
shall be adjusted by multiplying the Aggregate Number then in effect by a
fraction, the numerator of which shall be the Exercise Price immediately prior
to such adjustment, and the denominator of which shall be the Exercise Price
immediately following such adjustment.
 
(a)           Stock Dividends, Subdivisions and Combinations.  If at any time:
 
(i)           the number of shares of Common Stock outstanding is increased by a
stock dividend payable in shares of Common Stock (a “Stock Dividend”) or by a
subdivision or split-up of shares of Common Stock (a “Stock Subdivision”), then,
following the record date for the determination of holders of Common Stock
entitled to receive such Stock Dividend, or to be affected by such Stock
Subdivision, the Exercise Price shall be appropriately decreased so that the
Aggregate Number shall be increased in proportion to such increase in
outstanding shares.
 
(ii)           the number of shares of Common Stock outstanding is decreased by
a combination of the outstanding shares of Common Stock into a smaller number of
shares of Common Stock (a “Stock Combination”), then, following the record date
to determine shares affected by such Stock Combination, the Exercise Price shall
be appropriately increased so that the Aggregate Number shall be decreased in
proportion to such decrease in outstanding shares.
 
(b)           Adjustment Upon Reclassifications, Reorganizations, Consolidations
or Mergers.  If, at any time, there shall occur any Capital Transaction, then
Holder thereafter shall have the right to receive upon exercise of this Warrant,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore issuable upon exercise, such
stock, securities, cash or other assets which Holder would have been entitled to
assuming full exercise of this Warrant immediately prior thereto, at an Exercise
Price economically equivalent to the Exercise Price in effect immediately prior
thereto.
 
 
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12.           Reservation of Shares; Validly Issued Shares. The Company will at
all times reserve and keep available out of its authorized shares solely for the
purpose of issuance upon the exercise of this Warrant as herein provided, such
number of its duly authorized shares of Common Stock, or Other Securities
deliverable upon the exercise of this Warrant, as shall be sufficient to enable
the Company at any time to fulfill all of its obligations hereunder.  The
Company covenants and agrees that the shares of Common Stock or Other Securities
which shall be so issuable will, upon issuance, be duly authorized and issued,
fully paid and non-assessable, free from all taxes, liens and charges with
respect to the issue or delivery thereof and otherwise free of all other
security interests, encumbrances and claims of any nature whatsoever other than
those created by Holder.
 
13.           Transfers of the Warrant.
 
(a)   Register.  The Company shall initially record this Warrant on a register
to be maintained by the Company with its other stock books and, subject to
Section 6(b), thereafter shall transfer this Warrant on such register when this
Warrant is:  (i) surrendered for transfer in accordance with the terms hereof,
and (ii) properly endorsed and accompanied by appropriate instructions.  Upon
any such transfer, a new Warrant or Warrants shall be issued to the transferee
and Holder (in the event that this Warrant is only partially transferred) and
the surrendered Warrant shall be canceled.
 
(b)           Transfers.  Subject to the securities law restrictions set forth
in the legend on the first page of this Warrant, Holder may at any time freely
transfer this Warrant and the Warrant Shares in whole or in part.
 
14.           Miscellaneous.
 
(a)           No Voting Rights.  Prior to the exercise of this Warrant, Holder
shall not be entitled to any voting or other rights as a stockholder of the
Company as a result of being a holder of the Warrant.
 
(b)           Replacement Warrant.  If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue and deliver in exchange and substitution
for and upon cancellation of the mutilated Warrant, or in lieu of and in
substitution for the Warrant lost, stolen or destroyed, a new Warrant in like
form and representing an equivalent right or interest, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction of such Warrant and upon receipt of indemnity reasonably
satisfactory to the Company.
 
(c)           Delays, Omissions and Indulgences.  No delay or omission to
exercise any right, power or remedy accruing to Holder upon any breach or
default of the Company hereunder shall impair any such right, power or remedy,
nor shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring.
 
 
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(d)           Notices.  Any notice pursuant to this Warrant must be in writing
and will be deemed effectively given on the earliest of the date (i) three (3)
Business Days after such notice is sent by registered U.S. mail, return receipt
requested, (ii) one (1) Business Day after receipt of confirmation if such
notice is sent by facsimile, (iii) one (1) Business Day after delivery of such
notice into the custody and control of an overnight courier service for next day
delivery, (iv) one (1) Business Day after delivery of such notice in person and
(v) such notice is received; in each case to the appropriate address below (or
to such other address as a Person may designate by notice hereunder):
 
 
(A)
if to the Company:

 
DARA BioSciences, Inc.
8601 Six Forks Road, Suite 160
Raleigh, NC  27615
Attention: Chief Executive Officer
Fax No.:  (919) 861-0239
 
With a copy to:
 
K&L Gates LLP
4350 Lassiter at North Hills, Suite 300
Raleigh, North Carolina 27609
Attention:  D. Scott Coward, Esq.
Fax No.:  (919) 516-2028

 
 
(B)
If to the Holder hereunder to the address set forth on the corporate records of
the Company.

 
(e)           Successors and Assigns.  This Warrant shall be binding upon and
inure to the benefit of the Company and Holder and their respective successors
and assigns, provided that the Company shall have no right to assign its rights,
or to delegate its obligations, hereunder without the prior written consent of
Holder.
 
(f)            Amendments and Waivers.  No amendment of any provision of this
Warrant will be valid unless the amendment is in writing and signed by Holder
and the Company.  No waiver of any provision of this Warrant will be valid
unless the waiver is in writing and signed by the waiving party.  The failure of
any Person at any time to require performance of any provision of this Warrant
will not affect its rights at a later time to enforce such provision.  No waiver
by any Person of any breach of this Warrant will be deemed to extend to any
other breach hereunder or affect in any way any rights arising by virtue of any
other such occurrence.
 
(g)           Severability.  Any provision of this Warrant that is determined by
any court of competent jurisdiction to be invalid or unenforceable will not
affect the validity or enforceability of any other provision hereof or the
invalid or unenforceable provision in any other situation or in any other
jurisdiction. Any provision of this Warrant held invalid or unenforceable only
in part or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
 
(h)           Governing Law.  This Warrant will be governed by the laws of the
State of North Carolina without giving effect to any choice or conflict of law
principles of any jurisdiction.
 
 
14

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(i)            Entire Agreement.  This Warrant constitutes the entire agreement
between the Company and the Holder with respect to the subject matter hereof and
thereof and supersede all prior agreements (whether written or oral and whether
express or implied) between the Company and the Holder to the extent related to
the subject matter hereof and thereof.
 
[signature page follows]
 
 
 
 
15

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as
of the date first above written.
 
DARA BIOSCIENCES, INC.
 
By:
   
Name:
 
Title:

 
 
 
 
16

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EXHIBIT A
 
FORM OF ELECTION TO PURCHASE
 
To:          DARA BioSciences, Inc.
 
1.           The undersigned, pursuant to the provisions of the attached
Warrant, hereby elects to exercise such Warrant with respect to ________ shares
of Common Stock (the “Exercise Amount”) and tenders herewith full payment of the
exercise price.  Capitalized terms used but not otherwise defined herein have
the meanings ascribed thereto in the attached Warrant.
 
2.           Payment shall take the form of (check the applicable box):
 
o          in lawful money of the United States; or
 
o          the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in Section 3(f), to exercise this Warrant
with respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in Section 3(f).
 
3.           Please issue a certificate or certificates representing the shares
issuable in respect hereof under the terms of the attached Warrant, as follows:
 
 

 
(Name of Record Holder/Transferee)

 
and deliver such certificate or certificates to the following address:

              (Address of Record Holder/Transferee)

 
4.           The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
 
 
[SIGNATURE PAGE TO EXCHANGE AND AMENDMENT AGREEMENT]
 

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5.           If the Exercise Amount is less than all of the shares of Common
Stock purchasable hereunder, please issue a new warrant representing the
remaining balance of such shares, as follows:
 

 
(Name of Record Holder/Transferee)

 
and deliver such warrant to the following address:

              (Address of Record Holder/Transferee)

 
 
In witness whereof, the undersigned Holder has caused this Election to Purchase
to be executed as of this _____ day of __________, ______.
 

 
(Name of Holder)
     
By:
 
Name:
 
Title:
 

 
 
 

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EXHIBIT B
 
FDA Approval Warrant
 
 
 
 
 
 
 
 

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THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) AND SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
 
COMMON STOCK PURCHASE WARRANT
 
To Purchase Shares of Common Stock of
 
DARA BIOSCIENCES, INC.
 
December __, 2014
Warrant Number ____

 
THIS COMMON STOCK PURCHASE WARRANT (this “Warrant”) certifies that The General
Hospital Corporation d/b/a Massachusetts General Hospital (“Holder”) is entitled
to purchase from DARA BioSciences, Inc., a Delaware corporation (the “Company”),
at an initial Exercise Price (as defined below) of $___ per share, One Hundred
Seventy-Five Thousand (175,000) shares (the “Aggregate Number”) of Common Stock
(as defined below).  The Exercise Price and Aggregate Number are subject to
adjustment as set forth in Section 4.
 
15.           Definitions.
 
“Aggregate Exercise Price” is defined in Section 3(a).
 
“Aggregate Number” is defined in the opening paragraph.
 
 “Business Day” means any day that is not a Saturday, Sunday or any other day on
which banks are required or authorized by law to be closed in Raleigh, North
Carolina.
 
“Capital Transaction” means any merger, consolidation, share exchange,
recapitalization, reorganization, business combination, or other similar event,
as a result of which shares of Common Stock shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the Company or another Person.
 
“Charter” means the Certificate of Incorporation of the Company, as amended or
supplemented.
 
“Common Stock” means the Common Stock of the Company, $0.01 par value or any
other capital stock into which the foregoing is reclassified or reconstituted.
 
“Company” is defined in the opening paragraph.
 
 
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“Convertible Securities” means evidences of indebtedness, shares of stock or
other securities that, directly or indirectly, are exchangeable for or
exercisable or convertible into Common Stock.
 
“Election to Purchase” is defined in Section 3(a).
 
“Exercise Amount” is defined in Section 3(a).
 
“Exercise Price” means the price per share of Common Stock at which shares of
Common Stock are purchasable pursuant to this Warrant.
 
“Expiration Date” means the eighth (8th) anniversary of the date hereof;
provided, however, that if the such eighth (8th) anniversary is not a Business
Day, then the Expiration Date shall mean the first Business Day following the
eighth (8th) anniversary of the date hereof.
 
“FDA Approval Date” means the date on which the U.S. Food and Drug
Administration approves the use of KRN 5500 for the parenteral treatment of
painful, chronic, chemotherapy-induced peripheral neuropathy that is refractory
to conventional analgesics.
 
“Holder” is defined in the opening paragraph.
 
“Other Securities” shall mean any stock and other securities of the Company or
any other Person which Holder at any time shall be entitled to receive, upon the
exercise of this Warrant or pursuant to Section 4, in lieu of or in addition to
Common Stock.
 
“Person” means any individual, corporation, limited liability company,
partnership, company, sole proprietorship, joint venture, trust, estate,
association, organization, labor union or other entity.
 
 “Stock Combination” is defined in Section 4(a)(ii).
 
“Stock Dividend” is defined in Section 4(a)(i).
 
“Stock Subdivision” is defined in Section 4(a)(i).
 
“Warrant” is defined in the opening paragraph.
 
“Warrant Shares” means (a) the shares of Common Stock or Other Securities issued
or issuable hereunder and, (b) all other shares of the Company’s capital stock
issued with respect to such shares by way of stock dividend, stock split or
other reclassification or in connection with any Capital Transaction, or
acquired by way of any rights offering or similar offering made in respect of
the capital stock referred to in this clause (b) or the foregoing clause (a).
 
 
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16.           Exchange and Amendment Agreement.  This Warrant is being issued
pursuant to that certain Exchange and Amendment Agreement, dated December __,
2014, by and among the Company and DARA Therapeutics, Inc., on the one hand, and
the Holder, on the other hand.
 
17.           Exercise.
 
(a)            Right to Exercise; Exercise Amount.  The Warrant Shares shall
vest upon, and the Holder shall not be entitled to exercise this Warrant with
respect to such Warrant Shares until, the FDA Approval Date. Once the Warrant
Shares have vested pursuant to this Section 3(a), the Holder may exercise this
Warrant in whole or in part at any time and from time to time up until the close
of business on the Expiration Date (but not thereafter) by delivering this
Warrant to the Company, together with a duly executed Election to Purchase in
the form attached hereto as Exhibit A (the “Election to Purchase”), and payment
of the Exercise Price for each share to be purchased.  For the avoidance of
doubt, if the Expiration Date occurs prior to the FDA Approval Date, this
Warrant shall not be exercisable.  The aggregate Exercise Price (the “Aggregate
Exercise Price”) to be paid for the shares to be purchased (the “Exercise
Amount”) shall equal the product of (i) the Exercise Amount multiplied by (ii)
the Exercise Price.
 
(b)           Payment of Aggregate Exercise Price.  Payment of the Aggregate
Exercise Price shall be made to the Company in cash or other immediately
available funds or as provided in Section 3(f) or a combination thereof.
 
(c)            Issuance of Shares of Common Stock.  Upon receipt by the Company
of this Warrant accompanied by an Election to Purchase and payment of the
Aggregate Exercise Price, Holder shall be deemed to be the holder of record of
the shares of Common Stock issuable upon such exercise, notwithstanding that
certificates representing such shares of Common Stock may not then be actually
delivered.  Upon such surrender of this Warrant and payment of the Aggregate
Exercise Price, the Company shall issue and deliver as soon as practicable to,
or upon the written order of, Holder (and in such name or names as Holder may
designate) a certificate or certificates for the Exercise Amount.
 
(d)           Fractional Shares.  The Company shall deliver whole shares of
Common Stock upon exercise of this Warrant (rounded down to the nearest whole
number).
 
(e)            Partial Exercise.  Following any partial exercise of this
Warrant, the Company shall issue to Holder a Warrant in like form for the
unexercised portion thereof.
 
(f)            Cashless Exercise.  In lieu of exercising this Warrant by payment
of the Exercise Price in cash for the Warrant Shares in accordance with Section
3(b) hereof, the Holder may if Common Stock is publicly traded at such time,
elect to make a cashless exercise of this Warrant by surrendering Warrant Shares
with a fair market value equal to Aggregate Exercise Price of the Warrant Shares
subject to such exercise, as determined below, by the surrender of this Warrant
to the Company (with the notice of exercise form attached hereto as Exhibit A
duly executed), at the principal office of the Company.  Thereupon, the Company
shall issue to such Holder such whole number of fully paid and nonassessable
Warrant Shares as is computed using the following formula (rounded down to the
nearest whole number):
 
 
6

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X =   Y (A - B) A

 
Where
 
 
X =
The number of Shares to be issued to the Holder.

 
 
Y =
The number of Shares purchasable under this Warrant or, if only a portion of the
Warrant is being exercised, the portion of the Warrant being cancelled (at the
date of such calculation).

 
 
A =
The fair market value of one (1) Share (at the date of such calculation).

 
 
B =   The Exercise Price (as adjusted to the date of such calculation).

 
18.           Adjustments to Exercise Price and Aggregate Number.  The Exercise
Price and the Aggregate Number shall be adjusted as provided in this
Section 4.  Upon each adjustment of the Exercise Price, the Aggregate Number
shall be adjusted by multiplying the Aggregate Number then in effect by a
fraction, the numerator of which shall be the Exercise Price immediately prior
to such adjustment, and the denominator of which shall be the Exercise Price
immediately following such adjustment.
 
(a)           Stock Dividends, Subdivisions and Combinations.  If at any time:
 
(i)             the number of shares of Common Stock outstanding is increased by
a stock dividend payable in shares of Common Stock (a “Stock Dividend”) or by a
subdivision or split-up of shares of Common Stock (a “Stock Subdivision”), then,
following the record date for the determination of holders of Common Stock
entitled to receive such Stock Dividend, or to be affected by such Stock
Subdivision, the Exercise Price shall be appropriately decreased so that the
Aggregate Number shall be increased in proportion to such increase in
outstanding shares.
 
(ii)            the number of shares of Common Stock outstanding is decreased by
a combination of the outstanding shares of Common Stock into a smaller number of
shares of Common Stock (a “Stock Combination”), then, following the record date
to determine shares affected by such Stock Combination, the Exercise Price shall
be appropriately increased so that the Aggregate Number shall be decreased in
proportion to such decrease in outstanding shares.
 
(b)           Adjustment Upon Reclassifications, Reorganizations, Consolidations
or Mergers.  If, at any time, there shall occur any Capital Transaction, then
Holder thereafter shall have the right to receive upon exercise of this Warrant,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore issuable upon exercise, such
stock, securities, cash or other assets which Holder would have been entitled to
assuming full exercise of this Warrant immediately prior thereto, at an Exercise
Price economically equivalent to the Exercise Price in effect immediately prior
thereto.
 
 
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19.           Reservation of Shares; Validly Issued Shares. The Company will at
all times reserve and keep available out of its authorized shares solely for the
purpose of issuance upon the exercise of this Warrant as herein provided, such
number of its duly authorized shares of Common Stock, or Other Securities
deliverable upon the exercise of this Warrant, as shall be sufficient to enable
the Company at any time to fulfill all of its obligations hereunder.  The
Company covenants and agrees that the shares of Common Stock or Other Securities
which shall be so issuable will, upon issuance, be duly authorized and issued,
fully paid and non-assessable, free from all taxes, liens and charges with
respect to the issue or delivery thereof and otherwise free of all other
security interests, encumbrances and claims of any nature whatsoever other than
those created by Holder.
 
20.           Transfers of the Warrant.
 
(a)   Register.  The Company shall initially record this Warrant on a register
to be maintained by the Company with its other stock books and, subject to
Section 6(b), thereafter shall transfer this Warrant on such register when this
Warrant is:  (i) surrendered for transfer in accordance with the terms hereof,
and (ii) properly endorsed and accompanied by appropriate instructions.  Upon
any such transfer, a new Warrant or Warrants shall be issued to the transferee
and Holder (in the event that this Warrant is only partially transferred) and
the surrendered Warrant shall be canceled.
 
(b)           Transfers.  Subject to the securities law restrictions set forth
in the legend on the first page of this Warrant, Holder may at any time freely
transfer this Warrant and the Warrant Shares in whole or in part.
 
21.           Miscellaneous.
 
(a)           No Voting Rights.  Prior to the exercise of this Warrant, Holder
shall not be entitled to any voting or other rights as a stockholder of the
Company as a result of being a holder of the Warrant.
 
(b)           Replacement Warrant.  If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue and deliver in exchange and substitution
for and upon cancellation of the mutilated Warrant, or in lieu of and in
substitution for the Warrant lost, stolen or destroyed, a new Warrant in like
form and representing an equivalent right or interest, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction of such Warrant and upon receipt of indemnity reasonably
satisfactory to the Company.
 
(c)           Delays, Omissions and Indulgences.  No delay or omission to
exercise any right, power or remedy accruing to Holder upon any breach or
default of the Company hereunder shall impair any such right, power or remedy,
nor shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring.
 
(d)           Notices.  Any notice pursuant to this Warrant must be in writing
and will be deemed effectively given on the earliest of the date (i) three (3)
Business Days after such notice is sent by registered U.S. mail, return receipt
requested, (ii) one (1) Business Day after receipt of confirmation if such
notice is sent by facsimile, (iii) one (1) Business Day after delivery of such
notice into the custody and control of an overnight courier service for next day
delivery, (iv) one (1) Business Day after delivery of such notice in person and
(v) such notice is received; in each case to the appropriate address below (or
to such other address as a Person may designate by notice hereunder):
 
 
8

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(A)
if to the Company:

 
DARA BioSciences, Inc.
8601 Six Forks Road, Suite 160
Raleigh, NC  27615
Attention: Chief Executive Officer
Fax No.:  (919) 861-0239
 
With a copy to:
 
K&L Gates LLP
4350 Lassiter at North Hills, Suite 300
Raleigh, North Carolina 27609
Attention:  D. Scott Coward, Esq.
Fax No.:  (919) 516-2028

 
 
 
(B)
If to the Holder hereunder to the address set forth on the corporate records of
the Company.

 
(e)           Successors and Assigns.  This Warrant shall be binding upon and
inure to the benefit of the Company and Holder and their respective successors
and assigns, provided that the Company shall have no right to assign its rights,
or to delegate its obligations, hereunder without the prior written consent of
Holder.
 
(f)           Amendments and Waivers.  No amendment of any provision of this
Warrant will be valid unless the amendment is in writing and signed by Holder
and the Company.  No waiver of any provision of this Warrant will be valid
unless the waiver is in writing and signed by the waiving party.  The failure of
any Person at any time to require performance of any provision of this Warrant
will not affect its rights at a later time to enforce such provision.  No waiver
by any Person of any breach of this Warrant will be deemed to extend to any
other breach hereunder or affect in any way any rights arising by virtue of any
other such occurrence.
 
(g)           Severability.  Any provision of this Warrant that is determined by
any court of competent jurisdiction to be invalid or unenforceable will not
affect the validity or enforceability of any other provision hereof or the
invalid or unenforceable provision in any other situation or in any other
jurisdiction. Any provision of this Warrant held invalid or unenforceable only
in part or degree will remain in full force and effect to the extent not held
invalid or unenforceable.
 
(h)           Governing Law.  This Warrant will be governed by the laws of the
State of North Carolina without giving effect to any choice or conflict of law
principles of any jurisdiction.
 
 
9

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(i)           Entire Agreement.  This Warrant constitutes the entire agreement
between the Company and the Holder with respect to the subject matter hereof and
thereof and supersede all prior agreements (whether written or oral and whether
express or implied) between the Company and the Holder to the extent related to
the subject matter hereof and thereof.
 
[signature page follows]
 
 
10

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as
of the date first above written.
 

 
DARA BIOSCIENCES, INC.
     
By:
     
Name:
   
Title:

 
 
11

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EXHIBIT A
 
FORM OF ELECTION TO PURCHASE
 
To:           DARA BioSciences, Inc.
 
1.           The undersigned, pursuant to the provisions of the attached
Warrant, hereby elects to exercise such Warrant with respect to ________ shares
of Common Stock (the “Exercise Amount”) and tenders herewith full payment of the
exercise price.  Capitalized terms used but not otherwise defined herein have
the meanings ascribed thereto in the attached Warrant.
 
2.           Payment shall take the form of (check the applicable box):
 
o          in lawful money of the United States; or
 
o          the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in Section 3(f), to exercise this Warrant
with respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in Section 3(f).
 
3.           Please issue a certificate or certificates representing the shares
issuable in respect hereof under the terms of the attached Warrant, as follows:
 

 
(Name of Record Holder/Transferee)

 
and deliver such certificate or certificates to the following address:

             
(Address of Record Holder/Transferee)

 
4.           The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
 
 
 

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

 
 
5.           If the Exercise Amount is less than all of the shares of Common
Stock purchasable hereunder, please issue a new warrant representing the
remaining balance of such shares, as follows:
 

 
(Name of Record Holder/Transferee)

 
and deliver such warrant to the following address:

             
(Address of Record Holder/Transferee)

 
In witness whereof, the undersigned Holder has caused this Election to Purchase
to be executed as of this _____ day of __________, ______.
 

 
(Name of Holder)
           
By:
 
Name:
 
Title:
 

 
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