Document:

ex10-1.htm

[*] Redacted subject to a confidential treatment request that was filed by the Company with the Securities and Exchange Commission on July 17, 2012

Exhibit 10.1

CHROMADEX, INC. - DARTMOUTH EXCLUSIVE LICENSE AGREEMENT

This Agreement, effective this 13th day of July 2012, between

    TRUSTEES OF DARTMOUTH COLLEGE, a non-profit educational and research institution existing under the laws of the State of New Hampshire, and being located at Hanover, New Hampshire  03755, hereinafter called Dartmouth,

    And

    CHROMADEX, INC., a corporation of the State of California, with a principal place of business at 10005 Muirlands Blvd., Suite G, Irvine, California 92618; hereinafter called Company.

    WHEREAS, Dartmouth, under the direction of principal investigator Charles Brenner, Ph.D. has developed Nicotinamide Riboside Assay System and its uses; and

    WHEREAS, Dartmouth represents that it has the right to grant licenses granted in this agreement; and

    WHEREAS, Company wishes to obtain a license under the terms and conditions hereinafter set forth, and to use its expertise and resources to manufacture and market the technology;

    NOW THEREFORE, in consideration of the premises and the faithful performance of the covenants herein contained, IT IS AGREED:

ARTICLE I.  Definitions

    Section 1.01  Dartmouth Patent Rights.  "Dartmouth Patent Rights" shall mean United States Patent No. 8,197,807 Issued June 12, 2012, United States Patent Application Serial No. 11/542,832 filed October 4, 2006, United States Patent Application Serial No. 13/260,392, filed September 26, 2011, and United States Patent No. 8,114,626,Issued February 14, 2012  and any United States or Foreign Patents issuing therefrom, and any continuations, continuations-in-part, divisions, reissues, reexaminations or extensions thereof.  Dartmouth shall be the assignee and owner of all such Patents and Patent Applications.

    Section 1.02  Licensed Products.  "Licensed Products" shall mean any products or processes covered by or made, in whole or in part in a given territory, by the use of Dartmouth Patent Rights.

    Section 1.03  Field.  The "Field" of this Agreement shall mean the following fields:

    Field 1: dietary supplements, sports performance enhancing products, foods with health claims, such as energy bar, skin care/cosmetic products;

    Field 2: food or drink products requiring FDA approval;

    Field 3: consumer foods, such as margarine, yogurt, and cereal;

    Field 4: research.

    Section 1.04 Territory.  The “Territory” shall mean the world.

  

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[*] Redacted subject to a confidential treatment request that was filed by the Company with the Securities and Exchange Commission on July 17, 2012

    Section 1.05  Subsidiary.  "Subsidiary" shall mean a legal entity at least 50% of the voting stock of which is owned directly or indirectly by Company.

    Section 1.06  Agreement.  "Agreement" shall mean this License Agreement.

    Section 1.07  Net Sales.  "Net Sales" shall mean the gross billing price Company or its subsidiaries charge to their customers for Licensed Products, less sales, use, occupation and excise taxes, and transportation, discounts, returns and allowances in lieu of returns.

    Section 1.08  Effective Date.  "Effective Date" shall mean the date first written above and shall be the Effective Date of this Agreement.

    Section 1.09  License Year.  The "First License Year" shall mean the period commencing on the Effective Date and ending December 31, 2012.  The second and all subsequent "License Years" shall commence on January 1 and end on December 31 of each year.

    Section 1.10 Calendar Quarter.  "Calendar Quarter" shall mean the periods ending on March 31, June 30, September 30 and December 31 of each year.

ARTICLE II.  Grant

    Section 2.01  License Grant.  Dartmouth hereby grants to Company and its Subsidiaries an exclusive, royalty-bearing license under Dartmouth Patent Rights to make, have made, use, and/or sell Licensed Products in the Field in the Territory subject to any rights which may be required to be granted to the Government of the United States of America pursuant to 35 U.S.C. §§200-211.  Notwithstanding the foregoing, Dartmouth expressly reserves a non-transferable royalty-free right to use the Dartmouth Patent Rights in the Field by its faculty, staff and researchers, for educational and research purposes only.  Company agrees during the period of exclusivity of this license in the United States that any Licensed Product produced for sale in the United States will be manufactured substantially in the United States to the extent it is commercially reasonable.

    Section 2.02  Sublicenses.  Company shall have the right to grant sublicenses to third parties under Dartmouth Patent Rights to make, have made, use and sell the Licensed Products with the consent of Dartmouth , which consent shall not be unreasonably withheld, except that such sublicenses shall be in writing and expressly subject to the terms of this Agree­ment.  Such consent is given to Opko Health, Inc. as of the Effective Date. Company agrees to be responsible for the performance hereunder by its sublicensees.  Dartmouth shall have the right to review such sublicenses to assure conformity with this Section.  Upon termination of this Agreement, any such sublicenses will revert directly to Dartmouth.

    Section 2.03  Patents.  Upon execution of the Agreement, Company shall reimburse Dartmouth for expenses Dartmouth has incurred for the preparation, filing, prosecution and maintenance of Dartmouth Patent Rights as of the Effective Date and in accordance with the amounts below:

	
a)  

	
US Patent No. 8,197,807 – $[*]

	
b)  

	
US Patent Application Serial No. 11/542,832 - Company will reimburse for future expenses.

	
c)  

	
US Patent No. 8,114,626 - $[*]

	
d)  

	
US Patent Application Serial No.  13/260,392 - Company will reimburse for future expenses.

	
e)  

	
Australian Patent Application Serial No. 2006238858 – Company will pay $[*] Annuity due by August 1 and future expenses

	
f)  

	
Canadian Patent Application Serial No. 2,609,633 – Company will pay $[*] Annuity due by August 1 and future expenses

  

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[*] Redacted subject to a confidential treatment request that was filed by the Company with the Securities and Exchange Commission on July 17, 2012

Dartmouth shall control all future preparation, filing, prosecution and maintenance of Dartmouth Patent Rights.  Dartmouth shall invoice and Company shall reimburse Dartmouth for all future expenses in connection with these activities. Late payments shall be subject to an interest charge of one and one half percent (11/2%) per month. If Company chooses to discontinue prosecution or maintenance of any United States Patent or Patent Application, which is a subject of Dartmouth Patent Rights, it will so inform Dartmouth within a reasonable time before implementation of such decision.  Dartmouth then shall have the right to prosecute or maintain such Patent or Patent Application on its own and at its own expense, in which case the license to Company under such Patent or Patent Application will terminate.  COMPANY shall notify Dartmouth by at least three (3) months before a National Phase deadline whether it will support the filing of patent applications in particular foreign territories. If COMPANY decides not to support the filing or maintaining foreign applications, Dartmouth reserves the right to file or maintain such applications on its own, in which case the license to COMPANY in the particular territory will terminate.

           ARTICLE III.

Confidentiality and Representations

    Section 3.01  Mutual Confidentiality.  Company and Dartmouth realize that some information received by one party from the other pursuant to this Agreement shall be confidential.  It is therefore agreed that any information received by one party from the other, and clearly designated in writing as "CONFIDENTIAL" at the time of transfer, shall not be disclosed by either party to any third party and shall not be used by either party for purposes other than those contemplated by this Agreement for a period of three (3) years from the termination of the Agreement, unless or until --

    (a)  said information shall become known to third parties not under any obligation of confidentiality to the disclosing party, or shall become publicly known through no fault of the receiving party, or

    (b)  said information was already in the receiving party's possession prior to the disclosure of said information to the receiving party, except in cases when the information has been covered by a preexisting Confidentiality Agreement, or

    (c)  said information shall be subsequently disclosed to the receiving party by a third party not under any obligation of confidentiality to the disclosing party, or

    (d)  said information is approved for disclosure by prior written consent of the disclosing party, or

    (e)  said information is required to be disclosed by court order or govern­mental law or regulation, provided that the receiving party gives the disclosing party prompt notice of any such requirement and cooperates with the disclosing party in attempting to limit such disclosure.

    Section 3.02  Corporate Action.  Dartmouth and Company each represent and warrant to the other party that they have full power and authority to enter into this Agreement and carry out the transactions contemplated hereby, and that all necessary corporate action had been duly taken in this regard.

ARTICLE IV.  Due Diligence

    Section 4.01  Milestones. Company has represented to Dartmouth, to induce Dartmouth to issue this license, that it will commit itself to a diligent program of exploiting the Licensed Products so that public utilization will result therefrom.  As evidence thereof, Company shall adhere to the following milestones timeline from the Effective Date and associated payments:

  

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[*] Redacted subject to a confidential treatment request that was filed by the Company with the Securities and Exchange Commission on July 17, 2012

	
Field

	
Milestone

	
Timing

	
Payment

	
Field 1

	
[*]

	
[*]

	
$[*]

	
[*]

	
[*]

	
$[*]

	
[*]

	
[*]

	
$[*]

	
[*]

	
[*]

	
$[*]

	
Field 2

	
[*]

	
[*]

	
$[*]

	
[*]

	
[*]

	
$[*]

	
Field 3

	
[*]

	
[*]

	
$[*]

	
[*]

	
[*]

	
$[*]

	
[*]

	
[*]

	
$[*]

	
Field 4

	
[*]

	
[*]

	
$[*]

	
[*]

	
[*]

	
$[*]

It is acknowledged that if the above milestones are not accomplished by the dates specified in this Section 4.01, the licenses shall terminate unless payments in the above amounts are made to Dartmouth within [*] days of the specified dates in accordance with Section 9.02.

 

ARTICLE V.  Payments, Records and Reports

    Section 5.01  Payments.  For the rights and privileges granted under this license, Company shall pay to Dartmouth

    (a) an earned royalty of [*]% based on the value of Net Sales of the Licensed Products. If Licensed Product is combined with another product and/or ingredient and sold by Company in such a combination ("Combination Product"), then Net Sales of the Licensed Product for the earned royalty calculation shall be Net Sales of the Combination Product multiplied by A divided by B (A/B), where A is the sale price of the Licensed Product when sold separately and B is the sale price of the Combination Product; and

    (b) a non-refundable, non-creditable, one-time license access fee of $[*] due upon execution of this Agreement; and

    (c) annual license maintenance fee of $35,000 due upon each anniversary of the agreement and creditable towards preceding annum's royalty payments per Section 5.01(a); and

    (d) [*] percent ([*]%) of any consideration received from an infringement settlement less litigation expenditures, as described in Section 8.01, and from each sublicense, on the sale of Licensed Products (e.g., license issue fees, license maintenance fees, lump sum payments in lieu of royalty payments, stocks, and earned royalty, etc.) received from each sublicensee of Company for the grant of a sublicense

  

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[*] Redacted subject to a confidential treatment request that was filed by the Company with the Securities and Exchange Commission on July 17, 2012

    Section 5.02 Reports. Company shall render to Dartmouth:

 

    (a) within [*] days after the end of each Calendar Quarter a written account of all quantities of Licensed Products subject to royalty hereunder sold by Company, any Subsidiary, and any sublicensee during such Calendar Quarter, the calculation of royalty thereon, and sufficient data for Dartmouth to verify the calculation, including gross sales and allowable deductions to derive to Net Sales figures, and shall simultaneously pay in United States dollars to Dartmouth the royalty due with respect to such sales.  Conversion of foreign currency to U.S. dollars shall be made at the conversion rate existing in the United States on the date of royalty payments by Company.  Such report shall be certified as correct by an officer of Company.  If no Licensed Products subject to royalty hereunder have been sold by Company, its Subsidiaries and its sublicensees during any such quarter, Company shall so report in writing to Dartmouth within [*] days after the end of said quarter.  If royalties for any License Year do not equal or exceed the minimum royalties established in Section 4.02, Company shall include the balance of the minimum royalty with the payment for the Calendar Quarter ending December 31.  Late payments shall be subject to an interest charge of one and one half percent (11/2%) per month.

    (b) within [*] days after the close of each License Year written annual reports which shall include but not limited to: reports of progress on research and development, regulatory approvals, manufacturing, sublicensing, marketing and sales during preceding twelve (12) months as well as plans for coming year.  Company shall also provide any reasonable additional data Dartmouth requires to evaluate Company's performance.

    (c) within [*] days of occurrence report of the date of first sale of Licensed Products in each country.

 

    Section 5.03  Books of Accounts.  Company, its Subsidiaries and sublicensees shall keep full, true and accurate books of accounts and other records containing all particulars which may be necessary for the purpose of ascertaining and verifying the royalties payable to Dartmouth by Company hereunder.  Upon Dartmouth's request, Company, its Subsidiaries and sublicensees shall permit an independent Certified Accountant selected by Dartmouth (except one to whom Company has some reasonable objection), to periodically have access during ordinary business hours to such records of Company, its Subsidiaries and sublicensees as may be necessary to determine, for any quarter ending not more than [*] years prior to the date of such request, the correctness of any report and/or payment made under this Agreement.  In the event that any such inspection shows an underreporting and underpayment in excess of [*] percent ([*]%) for any [*] month period, then Company shall pay the cost of such examination.

ARTICLE VI.  Technical Assistance and Commercial Development

    Section 6.01  Technical Assistance.  Throughout the term of the Agreement, Dartmouth agrees to permit Company and its designees to consult with its employees and agents regarding developments and enhancements made subsequent to the Effective Date relating to the Licensed Products, at such times and places as may be mutually agreed upon; provided that Company agrees to make suitable arrangements with, and to compensate the Dartmouth employees and agents for such consultation.

    Section 6.02  Commercial Development.  During the term of this Agreement, Company agrees to use commercially reasonable efforts to effectively manufacture and market Licensed Products.  Such efforts will include sublicensing, development of promotional literature, mailings, and journal advertisements.

    Section 6.03  Name.  Company shall not use and shall not permit to be used by any other person or entity the name of Dartmouth nor any adaptation thereof, or the name of Dartmouth's employees, in any advertising, promotional or sales literature, or for any other purpose without prior written permission of Dartmouth, such permission not to be unreasonably withheld, except that Company may state that it is licensed by Dartmouth under Dartmouth Patent Rights and that Company may refer to publications by Dartmouth personnel which relate to the Dartmouth Patent Rights.

  

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[*] Redacted subject to a confidential treatment request that was filed by the Company with the Securities and Exchange Commission on July 17, 2012

ARTICLE VII.  Indemnity, Insurance, Disclaimers

    Section 7.01   Indemnity.  Company shall defend and indemnify and hold Dartmouth and its trustees, officers, agents and employees (the "Indemnitees") harmless from any judgements and other liabilities based upon claims or causes of action against Dartmouth or its employees which arise out of alleged negligence in the development, manufacture or sale of Licensed Products by Company, its Subsidiaries, and sublicensees, or from the use by the end users of Licensed Products, except to the extent that such judgements or liabilities arise in whole or in part from the gross negligence or willful misconduct of Dartmouth or its employees, provided that Dartmouth promptly notifies Company of any such claim coming to its attention and that it cooperates with Company in the defense of such claim.  If any such claims or causes of action are made, Dartmouth shall be defended by counsel to Company, subject to Dartmouth's approval, which shall not be unreasonably withheld.  Dartmouth reserves the right to be represented by its own counsel at its own expense.

    Section 7.02  Insurance.  At such time as any product, process, service relating to, or developed pursuant to, this Agreement is being commercially distributed or sold (other than for the purpose of obtaining regulatory approvals) by Company or by a sublicensee, Subsidiary or agent of Company, Company shall at its sole cost and expense, procure and maintain comprehensive general liability insurance in amounts not less than $[*] per incident  and naming the Indemnitees as additional insureds.  Such comprehensive general liability insurance shall provide (i) product liability coverage and (ii) broad form contractual liability coverage for Company's indemnification under this Agreement.  If Company elects to self-insure all or part of the limits described above (including deductibles or retentions which are in excess of $[*] annual aggregate) such self-insurance program must be acceptable to Dartmouth and Dartmouth Risk Manager. Such insurance will be considered primary as to any other valid and collectible insurance, but only as to acts of the named insured. The minimum amounts of insurance coverage required shall not be construed to create a limit of Company's liability with respect to its indemnification under this Agreement.

    Company shall provide Dartmouth with written evidence of such insurance upon request of Dartmouth.  Company shall provide Dartmouth with written notice at least [*] days prior to the cancellation, non-renewal or material change in such insurance; if Company does not obtain replacement insurance providing comparable coverage within such [*] day period, Dartmouth shall have the right to terminate this Agreement effective at the end of such [*] day period without notice or any additional waiting periods.

    Company shall maintain such comprehensive general liability insurance beyond the expiration or termination of this Agreement during (i) the period that any product, process, or service, relating to, or developed pursuant to, this Agreement is being commercially distributed or sold by Company or by a sublicensee, Subsidiary or agent of Company and (ii) a reasonable period after the period referred to in (i) above which in no event shall be less than fifteen (15) years.

    Section 7.03  Disclaimer.  Nothing contained in this Agreement shall be construed as:

    (a) a warranty or representation by Dartmouth as to the validity or scope of any Patent Rights;

    (b) a warranty or representation that any Licensed Products manufac­tured, used or sold will be free from infringement of patents, copyrights, or rights of third parties, except that Dartmouth represents that it has no knowledge of any existing issued patents or copyrights which might be infringed;

    (c) except as provided in Section 7.01, an agreement to defend against actions or suits of any nature brought by any third parties.

DARTMOUTH MAKES NO WARRANTIES, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF LICENSED PRODUCTS

  

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[*] Redacted subject to a confidential treatment request that was filed by the Company with the Securities and Exchange Commission on July 17, 2012

 ARTICLE VIII.  Infringement Matters

    Section 8.01  Infringement by Third Parties.  Company shall give Dartmouth prompt notice of any incident of infringement of Dartmouth Patent Rights coming to its attention.  The parties shall thereupon confer together as to what steps are to be taken to stop or prevent such infringement.  Company shall be entitled to commence proceedings in its own name against the infringer, in which event Company shall be responsible for all legal costs incurred, without recourse to Dartmouth, however Dartmouth agrees to appear as a party in any such proceedings if requested by COMPANY and such request is not unreasonably burdensome on Dartmouth. Company also agrees to reimburse Dartmouth for out of pocket costs spent in connection with said request. Financial recoveries from any such litigation will first be applied to reimburse Company for its litigation expenditures and [*]% of additional recoveries will be paid to Dartmouth. If Company chooses not to commence litigation within [*] days from the date the parties confer regarding the infringement, Dartmouth may  commence proceedings against the infringer, in which case Dartmouth shall be responsible for any legal costs incurred  and will be entitled to retain any damages recovered.   In any action to enforce Dartmouth Patent Rights, either party, at the request and expense of the other party shall cooperate to the fullest extent reasonably possible.  Company may not settle any infringement action in any way detrimental to Dartmouth Patent Rights without the expressed written consent of Dartmouth.

ARTICLE IX.  Duration and Termination

    Section 9.01  Term.  This Agreement shall become effective upon the date first written above, and unless sooner terminated in accordance with any of the provisions herein, shall remain in full force during the life of the last to expire patents under Dartmouth Patent Rights contemplated by this agreement in the last to expire territory.  If mutually desired, the parties may negotiate for an extension of this License.  Upon the termination of the Agreement Company shall have the right to sell the remainder of the Licensed Product on hand, provided the sales will be subject to the royalty payments of this Agreement.

    Section 9.02  Termination - Breach.  In the event that either party defaults or breaches any of the provisions of this Agreement, the other party shall have the right to terminate this Agreement by giving written notice to the defaulting party, provided, however, that if the said defaulting party cures said default within [*] days after said notice shall have been given, this Agreement shall continue in full force and effect.  The failure on the part of either of the parties hereto to exercise or enforce any right conferred upon it hereunder shall not be deemed to be a waiver of any such right nor operate to bar the exercise or enforcement thereof at any time or times thereafter.

    Section 9.03 Termination at Will. Company shall have the right to terminate this Agreement by giving three (3) months advance written notice to Dartmouth to that effect and paying a termination fee of $[*]. Upon termination, a final report shall be submitted and royalty and other payments due under Article V, as well as unreimbursed patent expenses per Section 2.03 due Dartmouth become immediately payable.

 

    Upon receipt of the termination notice, Dartmouth should be free to start negotiations with a Third Party for the rights granted herein.

    Section 9.04  Insolvency. In the event that Company shall become insolvent, shall make an assignment for the benefit of creditors, or shall file a petition for bankruptcy, the Agreement shall terminate.

    Section 9.05   Prior Obligations and Survivability.  Termination of this Agreement for any reason shall not release either party from any obligation theretofore accrued. Sections 3.01, 5.01 – 5.03, 7.01 – 7.03, 9.03, 10.01 – 10.09 shall survive the termination of this Agreement.

  

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[*] Redacted subject to a confidential treatment request that was filed by the Company with the Securities and Exchange Commission on July 17, 2012

ARTICLE X.  Miscellaneous

    Section 10.01  Governing Law.  This Agreement shall be construed, governed, interpreted and enforced according to the laws of the State of New York.

    Section 10.02  Notices.  Any notice or communication required or permitted to be given by either party hereunder, shall be deemed sufficiently given, if mailed by certified mail, return receipt requested, and addressed to the party to whom notice is given as follows:

 

	If to Company, to:	
Frank Jaksch, CEO

ChromaDex, Inc.

10005 Muirlands Blvd Suite G

Irvine, CA 92618

	 
	 	 	 
	If to Dartmouth, to:	
Alla Kan

Director

Technology Transfer Office

Dartmouth College

11 Rope Ferry Road

Hanover, NH 03755

	 

    Section 10.03.  Assignment. Neither party shall assign or transfer this Agreement without the express prior written consent of the other.  For purposes of this Agreement, an assignment or transfer of this Agreement by COMPANY shall be deemed to occur in connection with (a) an express assignment or transfer or (b) a general assignment for the benefit of creditors or in connection with any bankruptcy or other debtor relief law.  This section will not be deemed to prohibit an assignment or transfer of this Agreement in connection to a merger or consolidation to which COMPANY is a party (regardless of whether COMPANY is the surviving corporation) or to any other transaction pursuant to which a change would occur in the "ultimate parent entity" of COMPANY, applying the rules in effect from time to time under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

    Section 10.04  Entire Agreement.  This Agreement represents the entire Agreement between the parties as of the effective date hereof, and may only be subsequently altered or modified by an instrument in writing.  This agreement cancels and supersedes any and all prior oral or written agreements between the parties which relate to the subject matter of this Agreement.

    Section 10.05  Mediation and Arbitration.  Both parties agree that they shall attempt to resolve any dispute arising from this Agreement through mediation.  Both parties agree that at least one employee, capable of negotiating an agreement on behalf of his employer, shall, within three weeks of receipt of written notification of a dispute, meet with at least one employee of the other party who is also capable of negotiating an agreement on behalf of his employer. If no agreement can be reached, both parties agree to meet again within a four week period after the initial meeting to negotiate in good faith to resolve the dispute.  If no agreement can be reached after this second meeting, both parties agree to submit the dispute to binding arbitration under the Rules of the American Arbitration Association before a single arbitrator.

  

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[*] Redacted subject to a confidential treatment request that was filed by the Company with the Securities and Exchange Commission on July 17, 2012

 

    Section 10.06  Waiver.  A failure by one of the parties to this Agreement to assert its rights for or upon any breach or default of this Agreement shall not be deemed a waiver of such rights nor shall any such waiver be implied from accep­tance of any payment.  No such failure or waiver in writing by any one of the parties hereto with respect to any rights, shall extend to or affect any subsequent breach or impair any right consequent thereon.

    Section 10.07  Severability.  The parties agree that it is the intention of neither party to violate any public policy, statutory or common laws, and govern­mental or supranational regulations; that if any sentence, paragraph, clause or combination of the same is in violation of any applicable law or regulation, or is unenforceable or void for any reason whatsoever, such sentence, paragraph, clause or combinations of the same shall be inoperative and the remainder of the Agreement shall remain binding upon the parties.

    Section 10.08  Marking.  Upon Dartmouth's direction and consultation, Company agrees to mark the Licensed Products with all applicable trademarks, and patent numbers.

    Section 10.09  Headings.  The headings of the paragraphs of this Agree-ment are inserted for convenience only and shall not constitute a part hereof.

    IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in duplicate originals, by their respective officers hereunto duly authorized, the day and year herein written.

 

	 	THE TRUSTEES OF DARTMOUTH COLLEGE
	 	 	 
	 	 	
By:  /s/ Alla Kan

Date:  July 11, 2012

Name:  Alla Kan

Title:  Director Technology Transfer Officer

	 	 	 
	 	CHROMADEX, INC.
	 	 	
By:  /s/ Thomas C. Varvaro

Date:  July 13, 2012

Name:  Thomas C. Varvaro

Title:  Chief Financial Officerex4-1.htm

Exhibit 4.1

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

WARRANT NO.  CSW-255

 

COMMON STOCK PURCHASE WARRANT

To Purchase 4,000,000 Shares of Common Stock of

 

ECHO THERAPEUTICS, INC.

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Platinum-Montaur Life Sciences, LLC (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after August 31, 2012 (the “Initial Exercise Date”) and on or prior to the close of business on August 31, 2017 (the “Termination Date”) but not thereafter, to subscribe for and purchase from Echo Therapeutics, Inc., a Delaware corporation (the “Company”), up to 4,000,000 shares (the “Warrant Shares”) of Common Stock, par value $0.01 per share, of the Company (the “Common Stock”).  The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b) below.  This is the Commitment Fee Warrant referenced in the Loan Agreement dated on or about the Initial Exercise Date by and between the Company and the Holder (the “Loan Agreement”).

 

	
Section 1.         

	
Definitions.

 

Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Loan Agreement. As used herein, the following terms shall have the following meanings:

 

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

 

“Independent Appraiser” means a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) that is regularly engaged in the business of appraising the capital stock or assets of corporations or other entities as going concerns, and which is not affiliated with either the Company or the Holder.

 

“Per Share Market Value” means on any particular date (a) the last trading price on any national securities exchange on which the Common Stock is listed, or, if there is no such price, the closing bid price for a share of Common Stock in the over-the-counter market, as reported by the OTC Bulletin Board, the OTCQB, the OTCQX, or in the National Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of reporting prices) at the close of business on such date, or (b) if the Common Stock is not then reported by the OTC Bulletin Board or the National Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions of reporting prices), then the average of the “Pink Sheet” quotes for the Common Stock on such date, or (c) if the Common Stock is not then publicly traded, the fair market value of a share of Common Stock on such date as determined by the Company’s board of directors (the “Board”) in good faith; provided, however, that the Holder, after receipt of the determination by the Board, shall have the right to select, jointly with the Company, an Independent Appraiser (as defined below), in which case, the fair market value shall be the determination by such Independent Appraiser; and provided, further that all determinations of the Per Share Market Value shall be appropriately adjusted for any stock dividends, stock splits or other similar transactions during the period between the date as of which such market value was required to be determined and the date it is finally determined.  The determination of fair market value shall be based upon the fair market value of the Company determined on a going concern basis as between a willing buyer and a willing seller and taking into account all relevant factors determinative of value, and shall be final and binding on all parties.  In determining the fair market value of any shares of Common Stock, no consideration shall be given to any restrictions on transfer of the Common Stock imposed by agreement or by federal or state securities laws, or to the existence or absence of, or any limitations on, voting rights.

  

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Section 2. 

	
Exercise.

 

	
(a)  

	
Exercise of Warrant.

 

Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed original or facsimile copy of the Notice of Exercise form annexed hereto (or by delivery to such other office or agency of the Company as the Company may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company). Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within 5 Trading Days of the date the final Notice of Exercise is delivered to the Company.  Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  For purposes of this Warrant, the term “Trading Days” means any day during which the market or exchange on which the Company’s common stock is listed or quoted for trading on the date in question shall be open for business or, if the Common Stock is not listed or quoted on any recognized market or exchange, then a business day.

 

	
(b)  

	
Exercise Price; Cashless Exercise.

 

The exercise price of the Common Stock under this Warrant shall be $2.00 per share, subject to adjustment hereunder (the “Exercise Price”). Within 5 Trading Days of the date said Notice of Exercise is delivered to the Company, the Holder shall have surrendered this Warrant (if required) to the Company and the Company shall have received  payment of the aggregate Exercise Price of the Warrant Shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank; provided, however, that at any time and from time to time on or after the Initial Exercise Date and on or before the Termination Date and for so long as an effective registration statement under the Securities Act providing for resale of all Warrant Shares is not then in effect, the Holder may exercise this Warrant in whole or in part pursuant to a cashless exercise, in which event the Holder shall receive that number of Warrant Shares computed using the following formula:

 

X = Y - (A)(Y)

  B

	
Where

	
X =

	
the number of Warrant Shares to be issued to the Holder.

	
  

	
Y =

	
the number of Warrant Shares purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised.

	
  

	
A =

	
the Exercise Price.

 

	 	B = 	the Per Share Market Value of one share of Common Stock.

  

-2-

  

 

	
(c)  

	
Exercise Limitations; Holder’s Restrictions.

 

The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, to the extent that, after giving effect to the exercise set forth on the applicable Notice of Exercise, such Holder (together with such Holder’s Affiliates, and any other person or entity acting as a group together with such Holder or any of such Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of  shares of Common Stock beneficially owned by such Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of the Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which are issuable upon (A) exercise of the remaining, unexercised number of Warrants Shares beneficially owned by such Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company owned by such Holder or any of its Affiliates subject to a limitation on conversion or exercise analogous to the limitation contained herein.  Except as set forth in the preceding sentence, for purposes of this Section 2(c), beneficial ownership shall be calculated in accordance with Rule 13d-3 promulgated under the Exchange Act.  To the extent that the limitation contained in this Section 2(c) applies, the determination of whether the Warrant is exercisable (in relation to other securities owned by such Holder together with any Affiliates) and of how many Warrant Shares are exercisable shall be in the sole discretion of such Holder, and the submission of a Notice of Exercise shall be deemed to be such Holder’s determination of whether the shares of this Warrant may be exercised (in relation to other securities owned by such Holder together with any Affiliates) and how many shares of the Warrant are exercisable, in each case subject to such aggregate percentage limitations. To ensure compliance with this restriction, each Holder will be deemed to represent to the Company each time it delivers a Notice of Exercise that such Notice of Exercise has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination.  In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(c), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in the most recent of the following: (A) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two (2) Trading Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company by such Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant held by the applicable Holder.  The Beneficial Ownership Limitation provisions of this Section 2(c)may be waived by such Holder, at the election of such Holder, upon not less than 61 days’ prior notice to the Company, to change the Beneficial Ownership Limitation to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon conversion of this Warrant held by the applicable Holder, and the provisions of this Section 2(c) shall continue to apply.  Upon such a change by a Holder of the Beneficial Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the Beneficial Ownership Limitation may not be further waived by such Holder.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(c) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

	
(d)  

	
Mechanics of Exercise.

 

	
(i)  

	
Authorization of Warrant Shares.

 

The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid, nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue and liens imposed upon such shares as a result of Holder's actions).

 

  

-3-

  

 

	
(ii)  

	
Delivery of Certificates Upon Exercise.

 

Certificates for shares issuable upon the exercise hereof shall be transmitted by the transfer agent of the Company to the Holder by crediting the account of the Holder’s broker with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system and such shares are eligible for legend removal, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise within Five (5) Trading Days (the “Warrant Share Delivery Date”) from the delivery to the Company of the Notice of Exercise form, surrender of this Warrant (if required) and payment of the aggregate Exercise Price as set forth above.  This Warrant shall be deemed to have been exercised on the date the Notice of Exercise is transmitted to the Company.  The shares issuable upon the exercise of the Warrant shall be deemed to have been issued, and the Holder or any other person designated in the Notice of Exercise as the person in whose name the shares issuable upon the exercise of this Warrant shall be issued, shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vii) prior to the issuance of such shares, have been paid.   The Warrant Shares shall be issued without any legend or stop transfer orders provided (i) a registration statement under the Securities Act covering the proposed disposition of such Warrant Shares has become effective under the Securities Act, (ii) the Company has received other evidence reasonably satisfactory to the Company that such registration and qualification under the Securities Act and state securities laws are not required, or (iii) the Holder provides the Company with reasonable documentation confirming the legend can be removed pursuant to applicable provisions of the Securities Act (such as Rule 144).

 

	
(iii)  

	
Delivery of New Warrants Upon Exercise.

 

If this Warrant shall have been exercised in part, and if the Holder shall have surrendered this Warrant together with the Notice of Exercise, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

	
(iv)  

	
Rescission Rights.

 

If the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares by the Warrant Share Delivery Date, then the Holder will have the right to unconditionally rescind such exercise and the Company shall within three (3) business days return all monies paid to the Company by the Holder in connection with such rescinded exercise.

 

	
(v)  

	
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.

 

In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

  

-4-

  

 

	
(vi)  

	
No Fractional Shares or Scrip.

 

No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall issue to the Holder one whole share.

 

	
(vii)  

	
Charges, Taxes and Expenses.

 

Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

	
(viii)  

	
Closing of Books; No Impairment.

 

The Company will not close its stockholder books or records or take any other action which in any manner prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

	
Section 3.

	
Certain Adjustments; Covenants

 

	
(a)  

	
Stock Dividends and Splits.

 

If the Company, at any time while this Warrant is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Warrant), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately and equitably adjusted upward.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

	
(b)  

	
Pro Rata Distributions.

 

If the Company, at any time prior to the Termination Date, shall distribute to all holders of Common Stock (and not to Holders of the Warrants) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security other than the Common Stock, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the Closing Price determined as of the record date mentioned above, and of which the numerator shall be such Closing Price on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors of the Company in good faith.  In either case the adjustments shall be described in a statement provided by the Company to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.  At the time of such adjustment, the number of Warrant Shares issuable following such adjustment shall be equitably and proportionally adjusted upward.

  

-5-

  

 

	
(c)  

	
Adjustment for Reorganization, Consolidation, Merger, etc.

 

In the event that the Company shall 1) effect a reorganization, 2) consolidate with or merge into any other entity or 3) transfer all or substantially all of its properties or assets to any other entity under any plan or arrangement contemplating the dissolution of the Company, then, in each such case, as a condition precedent to the consummation of such a transaction, proper and adequate provision shall be made whereby the Holder of this Warrant, on the exercise hereof as provided in Section 2 above, at any time after the consummation of any such reorganization, consolidation or merger or the effective date of any such dissolution, shall receive in lieu of the shares of Common Stock issuable on such exercise immediately prior to any such consummation or effective date, the stock and other securities and property (including cash) to which such Holder would have been entitled to receive upon any such consummation or dissolution if the Holder had so exercised this Warrant immediately prior to such consummation or dissolution.

 

	
(d)  

	
Certificate as to Adjustments.

 

The computation of any adjustments described in this Section 3 shall be the sole responsibility of the Company, which shall expeditiously prepare and mail to the Holder a notice setting forth the nature of any necessary adjustment together with the basis thereof and the calculations therefor.  The Company shall immediately notify the Holder of any information which bears on any of the events referenced in this Section 3 and which may have an effect on the exercise of this Warrant.

 

	
(e)  

	
Calculations.

 

All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

	
(f)  

	
Voluntary Adjustment By Company.

 

The Company may at any time during the term of this Warrant reduce (but not increase) the then-current Exercise Price, as the case may be, to an amount not less than $ 1.45, the closing bid price of the Common Stock on the Trading Day immediately preceding the Initial Exercise Date (as adjusted for splits, combinations and the like), and for any period of time deemed appropriate by the Board of Directors of the Company.

 

	
(g)  

	
Notice to Allow Exercise by Holder.

 

If (1) the Company shall declare a dividend (or any other distribution) on the Common Stock; or (2) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; or (3) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; or (4) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; or (5) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register (defined in Section 4(c)) of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (y) the date on which a survey of the holders of record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (z) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the unintentional failure to mail such notice or any unintentional defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  The Holder is entitled to exercise this Warrant during the 20-day period commencing on the date of such notice to the effective date of the event triggering such notice.

 

  

-6-

  

 

	
(h)  

	
Covenants.

 

The Company shall cause its Common Stock to continue to be registered under Section 12(b) of the Exchange Act and to comply in all respects with its reporting and filing obligations under the Exchange Act.  The Company shall not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act.  The Company shall use its best efforts to comply with the listing or trading of its Common Stock on the Nasdaq Capital Market. The Company further covenants that it will take such further action as the Holder may reasonably request, all to the extent required from time to time to enable the Holder to sell the shares of Common Stock issuable upon exercise of this Warrant without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act.  The Company shall provide, at the Company’s expense, such legal opinions in the future as are appropriate and necessary for the issuance and resale of the Common Stock issuable upon exercise of this Warrant pursuant to an effective registration statement, Rule 144 under the Securities Act or an exemption from registration.  In the event that such shares of Common Stock issuable upon exercise of this Warrant are sold in a manner that complies with an exemption from registration, the Company shall promptly cause its counsel (at the Company’s expense) to issue to the Holder and the Company’s transfer agent an opinion permitting removal of the legend to permit sales of the shares of Common Stock issuable upon exercise of this Warrant under Rule 144 of the Securities Act. The Company shall timely file all reports required to be filed with the SEC pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination.  The Company shall use its best efforts to cause its Common Stock to be eligible for transfer pursuant to the Depository Trust Company Automated Securities Transfer Program at all times.

 

	
Section 4.

	
Transfer of Warrant.

 

	
(a)  

	
Transferability.

 

Subject to compliance with any applicable securities laws and the conditions set forth in Section 5(a) and Section 4(d) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

	
(b)  

	
New Warrants.

 

This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 3(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

 

	
(c)  

	
Warrant Register.

 

The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

  

-7-

  

 

	
(d)  

	
Transfer Restrictions.

 

If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a conditon of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect taht such transfer may be made without registration under the Securities Act and under applicable state securities or blue sky laws, and (ii) that the transferee be an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act or a qualified institutional buyer as defined in Rule 144A(a) under the Securities Act.

 

	
Section 5.

	
Miscellaneous.

 

	
(a)  

	
Title to Warrant.

 

Prior to the Termination Date and subject to compliance with applicable laws and Section 4 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed.  The transferee shall sign an investment letter in form and substance reasonably satisfactory to the Company.

 

	
(b)  

	
No Rights as Shareholder Until Exercise.

 

This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof.  Upon the surrender of this Warrant and the payment of the aggregate Exercise Price, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment.

 

	
(c)  

	
Loss, Theft, Destruction or Mutilation of Warrant.

 

The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares or any portion thereof, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

	
(d)  

	
Saturdays, Sundays, Holidays, etc.

 

If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

 

	
(e)  

	
Authorized Shares.

 

The Company covenants that during the period that any of this Series of Warrants is outstanding, it will reserve from its authorized and unissued Common Stock no less than 110% of the shares of Common Stock issuable upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

 

  

-8-

  

 

Except and to the extent as waived or consented to by the Holder in writing, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock issuable upon the exercise of this Warrant above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of shares of Common Stock for which this Warrant is exercisable or in the Exercise Price in effect on the date of such action, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

	
(f)  

	
Jurisdiction and Governing Law.

 

All questions concerning the construction, validity, enforcement, governing law and interpretation of this Warrant shall be determined in accordance with the provisions of the Loan Agreement.

 

	
(g)  

	
Restrictions.

 

The Holder acknowledges that the shares of Common Stock acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

	
(h)  

	
Nonwaiver and Expenses.

 

No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date.  If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

	
(i)  

	
Notices.

 

Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Loan Agreement.

 

	
(j)  

	
Limitation of Liability.

 

No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant or purchase shares of Common Stock issuable upon the exercise of this Warrant, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

	
(k)  

	
Remedies.

 

Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

 

  

-9-

  

 

	
(l)  

	
Successors and Assigns.

 

Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of all Holders of this Warrant from the Initial Exercise Date through the Termination Date, and shall be enforceable by any such Holder or holder of Warrant Shares.

 

	
(m)  

	
Amendment.

 

This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

	
(n)  

	
Severability.

 

Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

	
(o)  

	
Headings.

 

The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

  

-10-

  

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated:  August 31, 2012

                               

	 	
ECHO THERAPEUTICS, INC.

 

 

	 	
By:  /s/ Christopher Schnittker

Name: Christopher P. Schnittker

Title:  Duly Authorized Agent

  

-11-

  

NOTICE OF EXERCISE

TO:           ECHO THERAPEUTICS, INC.

 

The undersigned _______________, pursuant to the provisions of the within Warrant, hereby elects to purchase _____ shares of Common Stock of ECHO THERAPEUTICS, INC. covered by the within Warrant.

Dated: _________________                           Signature               ___________________________

Address                _____________________

_____________________

The undersigned is an “accredited investor” as defined in Regulation D under the Securities Act of 1933, as amended.

 

	
The undersigned intends that payment of the Warrant Price shall be made as (check one):

 

Cash Exercise_______

 

Cashless Exercise_______

 

If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $________ by certified or official bank check (or via wire transfer) to the Company in accordance with the terms of the Warrant.

 

If the Holder has elected a Cashless Exercise, a certificate shall be issued to the Holder for the number of shares equal to the whole number portion of the product of the calculation set forth below, which is ___________.

 

X = Y - (A)(Y)

  B

	
Where

	
X =

	
the number of Warrant Shares to be issued to the Holder.

	
  

	
Y =

	
the number of Warrant Shares purchasable upon exercise of all of the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised.

	
  

	
A =

	
the Exercise Price.

B =           the Per Share Market Value of one share of Common Stock.

  

-12-

  

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

_______________________________________________________________, whose address is

 

______________________________________________________________________________

_____________________________________________________________________________.

 

Dated:  ______________, _______

Holder’s Name:                                      _________________________________________

Holder’s Signature:                               _________________________________________

Holder’s Address:                                 _________________________________________

_________________________________________

Signature Guaranteed:  ___________________________________________

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

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