EXHIBIT 10.3


 


Letter Agreement by and between ProPhase
Labs, Inc. and


Dutchess Opportunity Fund, II, LP, dated
as of May 28, 2014


 



    	 



    	 



    










 


 


May 28, 2014


 


VIA EMAIL


 


Dutchess Opportunity Fund, II, LP


50 Commonwealth Ave, Suite 2


Boston, MA 02116


Telephone: (617) 301-4700


Attention: Doug Leighton and Ted Smith


 


Gentlemen:


 


Reference is made to
that certain Investment Agreement dated as of November 26, 2012, (the “Investment Agreement”) between Dutchess
Opportunity Fund, II, L.P. (“Dutchess”) and ProPhase Labs, Inc., a Nevada corporation (“ProPhase”),
and to that certain Registration Rights Agreement dated as of November 26, 2012, (the “Registration Rights Agreement”)
between Dutchess and ProPhase. Dutchess and ProPhase are referred to herein as a “party” and the “parties”.
Capitalized terms used herein but not defined herein shall have the meanings given to them in the Investment Agreement.


 


The parties have agreed
to enter a new investment agreement and registration rights agreement (the “New Agreements”), to be entered
at or about the date hereof, pursuant to which Dutchess shall agree to purchase from ProPhase up to 3,000,000 shares of common
stock, par value $0.0005, of ProPhase (the “Shares”), and ProPhase shall register such Shares for resale. Prior
to or simultaneously with the effective time of the New Agreements, ProPhase desires to terminate the Investment Agreement and
Registration Rights Agreement.


 


Notice is hereby given
to Dutchess that ProPhase is exercising its right pursuant to Section 9(c) of the Investment Agreement to terminate the Investment
Agreement effective as of the date hereof (the “Termination Date”). By signing this letter agreement and the
acknowledgment hereto, the parties agree and acknowledge that no shares of common stock of ProPhase and no penalties or other payments
are due and outstanding in connection with such termination.


 


ProPhase hereby agrees
to terminate the Registration Rights Agreement, and by signing below, Dutchess acknowledges and agrees to the termination of the
Registration Rights Agreement as of the Termination Date. In addition, by signing below, Dutchess confirms that it will discontinue
any use or distribution of the prospectus filed as part of the Registration Statement Number 333-185167, along with any supplements
or amendments thereto; that it will no longer resell shares of common stock of ProPhase in reliance on Registration Statement Number
333-185167; and that it has no unsold shares of ProPhase common stock issued by the Company in connection with the Investment Agreement.
The parties hereby acknowledge and agree that they will continue to comply with any such terms of the Investment Agreement and
Registration Rights Agreement that survive termination, in accordance with their terms.


 



    	 



    	 



    




 


This letter agreement
shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of laws
rules thereof. This letter agreement may be executed in any number of counterparts, each of which shall be an original, but all
of which together shall constitute one and the same instrument.


 


[The remainder of this page is intentionally
left blank.]


 


 


 


 






    	 



    	 



    

 


If the foregoing correctly
sets forth your understanding of our agreement, please so indicate by signing in the space below and returning a copy to the undersigned.


 


 


	 	Sincerely,
	 	 
	 	PROPHASE LABS,
INC.
	 	 
	 	By: 	/s/ Ted Karkus
	 	 	Ted Karkus
Chairman of the Board and Chief Executive Officer



 


 


ACCEPTED AND AGREED


 


as of the date first written above:


 


DUTCHESS OPPORTUNITY
FUND, II, LP





	 
	By: 	/s/ Douglas Leighton
	 	Name: Douglas Leighton
Title:   Managing Director