EXHIBIT 10.3

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER SAID ACT.

THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”) FOR U.S. FEDERAL INCOME
TAX PURPOSES. THE ISSUE PRICE, AMOUNT OF OID, ISSUE DATE AND YIELD TO MATURITY
WITH RESPECT TO THIS NOTE MAY BE OBTAINED BY WRITING TO THE COMPANY AT THE
FOLLOWING ADDRESS: 1180 CELEBRATION, FL., SUITE 103, ATTENTION: R. LADUANE
CLIFTON, FAX NUMBER: 321-250-3698.

SENIOR SECURED CONVERTIBLE NOTE

 

Issuance Date: December 18, 2019

   Principal: U.S. $[______]

FOR VALUE RECEIVED, KEMPHARM, INC., a Delaware corporation (the “Company”),
hereby promises to pay to [______] or its registered assigns (the “Holder”), the
principal amount of [______] ($[______]) pursuant to, and in accordance with,
the terms of that certain Facility Agreement, dated as of June 2, 2014, by and
among the Company and the Lenders party thereto (together with all exhibits and
schedules thereto and as may be amended, restated, modified and supplemented
from time to time, the “Facility Agreement”). The Company hereby promises to pay
accrued and unpaid Interest (as defined below) and premium, if any, on the
Principal on the dates, at the rates and in the manner provided for in the
Facility Agreement. All capitalized terms used and not otherwise defined herein
shall have the respective meanings set forth in the Facility Agreement.

Except as set forth herein, the Company has no right, but under certain
circumstances may have an obligation, to make payments of Principal prior to the
due date for such payments set forth in Section 2.3(b) of the Facility
Agreement. At any time an Event of Default exists, the Principal of this Note,
together with all accrued and unpaid Interest and any applicable premium due, if
any, may be declared, or shall otherwise become, due and payable in the manner,
at the price and with the effect provided in the Facility Agreement.

1. Definitions.

(a) Certain Defined Terms. For purposes of this Note, the following terms shall
have the following meanings:

(i) “Affiliate” means any person or entity that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common
control with a person or entity, as such terms are used in and construed under
Rule 144 under the Securities Act (“Rule 144”). With respect to a Holder, any
investment fund or managed account that is managed on a discretionary basis by
the same investment manager as such Holder will be deemed to be an Affiliate of
such Holder.

 

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

(ii) “Applicable Value” means (i) at any time that the Company is subject to the
reporting requirements under the Exchange Act, (A) the product of (x) the number
of issued and outstanding shares of Common Stock on the date the Company
delivers the Major Transaction Notice (as defined in Section 3(b)) multiplied by
(y) the per share closing price of the Common Stock on such date plus (B) the
amount of the Company’s debt as shown on the latest financial statements filed
with the SEC (the “Current Financial Statements”) plus (C) the aggregate
liquidation preference of each class of the Company’s preferred stock less
(D) the amount of cash and cash equivalents of the Company as shown on the
Current Financial Statements; and (ii) at any time that the Company is not
subject to the reporting requirements under the Exchange Act, the book value of
the Company’s assets as shown on the most recent financial statements of the
Company.

(iii) “Bylaws” means the Amended and Restated Bylaws of the Company, as amended
from time to time.

(iv) “Cash-Out Major Transaction” means a Major Transaction in which the
consideration payable to holders of capital stock in connection with the Major
Transaction (whether paid directly or in liquidation of the Company following
such Major Transaction) consists solely of cash (whether or not subject to
escrows, holdbacks or other contingencies).

(v) Intentionally Deleted.

(vi) “Common Stock” means the common stock, par value $0.0001 per share, of the
Company.

(vii) “Conversion Amount” means the sum of (A) the Principal to be converted,
redeemed or otherwise exchanged with respect to which this determination is
being made and (B) the amount of all accrued and unpaid Interest on the
Principal to be converted, redeemed or otherwise exchanged with respect to which
this determination is being made (the “Interest Amount”).

(viii) “Conversion Price” means, as of any Conversion Date or other date of
determination, $17.11 per share of Common Stock, subject to adjustment as
provided herein.

(ix) “Dollars” or “$” means United States Dollars.

(x) “Eligible Market” means the New York Stock Exchange, Inc., the NYSE
American, the NASDAQ Capital Market, the NASDAQ Global Market, or the NASDAQ
Global Select Market (or, in each case, any successor thereto).

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

 

2

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

(xii) “Fair Market Value” means the fair market value as mutually determined by
the Company and Required Note Holders, subject to the dispute resolution
provisions set forth in Section 2(c)(iii) below.

(xiii) “Initial Holder” means [______].

(xiv) “Interest” means any interest (including any default interest) accrued on
the Principal pursuant to the terms of this Note and the Facility Agreement.

(xv) Intentionally Deleted.

(xvi) Intentionally Deleted.

(xvii) “Issuance Date” means December 18, 2019, regardless of any exchange or
replacement hereof.

(xviii) “Major Transaction” means any of the following events:

(A) a consolidation, merger, exchange of shares, recapitalization,
reorganization, business combination or other similar event, (1) following which
the holders of shares of voting stock immediately preceding such consolidation,
merger, exchange, recapitalization, reorganization, combination or event either
(a) no longer hold a majority of the shares of voting stock of the Company or
(b) no longer have the ability to elect a majority of the board of directors of
the Company, or (2) as a result of which Shares or shares of the Company’s
voting stock shall be changed into (or the holders of Shares or shares of the
Company’s voting stock become entitled to receive) the same or a different
number of shares of the same or another class or classes of stock or securities
of another entity, other than such an event undertaken to adopt a holding
company structure without otherwise changing the relative holdings of capital
stock (any event following which or resulting in the conditions described in the
foregoing clauses (1) or (2), collectively, a “Change of Control Transaction”);

(B) the sale or transfer in one transaction or a series of related transactions
of (i) all or substantially all of the assets of the Company to any Person or
(ii) assets of the Company for a purchase price equal to more than 50% of the
Applicable Value;

(C) a third-party purchase, tender or exchange offer made to the holders of
outstanding Conversion Shares or shares of any class(es) or series capital
stock, such that following such purchase, tender or exchange offer a Change of
Control Transaction shall have occurred;

(D) the liquidation, bankruptcy, insolvency, dissolution or winding-up (or the
occurrence of any analogous proceeding) affecting the Company;

(E) at any time after March 31, 2021 the shares of Common Stock are not listed
on an Eligible Market;

(F) the shares of Common Stock cease to be registered under Section 12 of the
Exchange Act; or

 

3

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

(G) an “Event of Liquidation” under the Company’s certificate of incorporation,
as in effect on June 2, 2014.

provided, however, that a Major Transaction or Change of Control shall not be
deemed to have occurred solely as a result of the transfer of ownership of any
shares of capital stock of the Company without the consent or agreement of the
Company; provided that such proviso shall not apply to an event specified in
subsection (G) of the definition of Major Transaction.

(xix) Intentionally Deleted.

(xx) “Note” means this Senior Secured Convertible Note (including all Senior
Secured Convertible Notes issued in exchange, transfer or replacement hereof,
and as may be amended, restated or supplemented from time to time).

(xxi) “Notes” means this Note, the other December 2019 Notes and the Senior
Secured Convertible Notes issued pursuant to Section 2.2(a) of the Facility
Agreement (including all Senior Secured Convertible Notes issued in exchange,
transfer or replacement thereof, and as may be amended, restated or supplemented
from time to time).

(xxii) “Parent Entity” of a Person means an entity that, directly or indirectly,
controls the applicable Person, or, if there is more than one such Person or
Parent Entity, the Person or Parent Entity with the largest enterprise value as
of the date of consummation of a Major Transaction.

(xxiii) Intentionally Deleted.

(xxiv) “Person” means an individual, a limited liability company, a partnership,
a joint venture, a corporation, a trust, an unincorporated organization, any
other entity and a government or any department or agency thereof.

(xxv) “Principal” means the outstanding principal amount of this Note as of any
date of determination.

(xxvi) “Publicly Traded Successor Entity” means a Successor Entity that is a
publicly traded corporation whose common stock is quoted on or listed for
trading on an Eligible Market.

(xxvii) Intentionally Deleted.

(xxviii) Intentionally Deleted.

(xxix) “Required Note Holders” means, as of any date of determination, holders
of at least 50% of the aggregate outstanding principal amount of the Notes.

(xxx) “Securities Act” means the Securities Act of 1933, as amended.

 

4

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

(xxxi) Intentionally Deleted.

(xxxii) Intentionally Deleted.

(xxxiii) “Shares” means shares of Common Stock.

(xxxiv) “Standard Settlement Period” means the standard settlement period for
equity trades effected by U.S. broker-dealers, expressed in a number of Trading
Days, as in effect on the date the applicable Conversion Notice (as defined
below) is received or deemed received by the Company.

(xxxv) “Successor Entity” means any Person purchasing the Company’s assets sold
in a Major Transaction or a majority of the Company’s capital stock in a Major
Transaction, or any successor entity resulting from such Major Transaction, or
if the Note is to be convertible for shares of capital stock of its Parent
Entity (as defined above), its Parent Entity.

(xxxvi) “Trading Day” means any day on which trading occurs on the principal
securities exchanges or other securities markets in the United States.

2. Conversion Rights. This Note may be converted into shares of Common Stock on
the terms and conditions set forth in this Section 2.

(a) Conversion at Option of the Holder. At any time, the Holder shall be
entitled to convert all or any part of the Principal (and the Interest Amount
thereon) or any Interest accrued hereunder into fully paid and nonassessable
shares of Common Stock (the “Conversion Shares”) in accordance with this
Section 2 at the Conversion Rate (as defined in Section 2(b)). The Company shall
not issue any fraction of a Share upon any conversion. If the issuance would
result in the issuance of a fraction of a Share, then the Company shall round
such fraction of a Share up or down to the nearest whole share (with 0.5 rounded
up).

(b) Conversion Rate. The number of Conversion Shares issuable upon a conversion
of any portion of this Note pursuant to this Section 2 shall be determined
according to the following formula (the “Conversion Rate”):

 

 

Conversion Amount

    Conversion Price  

(c) Mechanics of Conversion. The conversion of this Note shall be conducted in
the following manner:

(i) Holder’s Delivery Requirements. To convert a Conversion Amount into
Conversion Shares on any date (the “Conversion Date”), the Holder shall
(A) transmit by facsimile or electronic mail (or otherwise deliver), for receipt
on or prior to 5:00 p.m. New York City time on such date, a copy of an executed
conversion notice in the form attached hereto as Exhibit A (the “Conversion
Notice”) to the offices of the Company, 1180 Celebration Blvd., Suite 103,
Celebration, FL 34747 (Attention: Chief Financial Officer, Fax: (321) 250-3698,
Email: lclifton@kempharm.com), or such other address, facsimile number or

 

5

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

email address as the Company may designate in writing, and (B) if required by
Section 2(c)(vi), surrender to a common carrier for delivery to the Company, no
later than three (3) Business Days after the Conversion Date, the original Note
being converted (or an indemnification undertaking in customary form with
respect to this Note in the case of its loss, theft or destruction).

(ii) Company’s Response. Upon receipt or deemed receipt by the Company of a copy
of a Conversion Notice, the Company (I) shall as soon as practicable send, via
facsimile or electronic mail, a confirmation of receipt of such Conversion
Notice to the Holder and the Company’s designated transfer agent (the “Transfer
Agent”), if applicable, which confirmation shall constitute an instruction to
any such Transfer Agent to process such Conversion Notice in accordance with the
terms herein and (II) on or before the second (2nd) Trading Day (or, if earlier,
the last day of the Standard Settlement Period) following the date of receipt or
deemed receipt by the Company of such Conversion Notice (the “Share Delivery
Date”), issue and deliver to the address as specified in the Conversion Notice
or otherwise specified by the Holder, a stock certificate, registered in the
name of the Holder or its designee, for the number of Conversion Shares to which
the Holder shall be entitled. If this Note is submitted for conversion, as may
be required by Section 2(c)(vi), and the Principal represented by this Note is
greater than the Principal being converted, then the Company shall, as soon as
practicable and in no event later than two (2) Trading Days after receipt of
this Note (the “Note Delivery Date”) and at its own expense, issue and deliver
to the Holder a new Note representing the Principal not converted and cancel
this Note.

(iii) Dispute Resolution. In the case of a dispute as to the determination of
the Conversion Price or the Major Transaction Note Early Termination Price
(including any determination as to Fair Market Value) or the arithmetic
calculation of the Conversion Rate, the Company shall issue, or instruct the
Transfer Agent to issue, as applicable, to the Holder the number of Conversion
Shares that is not disputed and shall transmit an explanation of the disputed
determinations or arithmetic calculations to the Holder via facsimile within two
(2) Business Days of receipt or deemed receipt of the Holder’s Conversion Notice
or other date of determination. If the Holder and the Company are unable to
agree upon the determination of the Conversion Price, Major Transaction Note
Early Termination Price or arithmetic calculation of the Conversion Rate within
one (1) Business Day of such disputed determination or arithmetic calculation
being transmitted to the Holder, then the Company shall promptly (and in any
event within two (2) Business Days) submit via facsimile or email (A) the
disputed determination of the Conversion Price or Major Transaction Note Early
Termination Price to an independent, reputable investment banking firm agreed to
by the Company and the Required Note Holders, or (B) the disputed arithmetic
calculation of the Conversion Rate to the Company’s independent registered
public accounting firm, as the case may be. The Company shall use commercially
reasonable best efforts to direct the investment bank or the accounting firm, as
the case may be, to perform the determinations or calculations and notify the
Company and the Holder of the results no later than two (2) Business Days from
the time it receives the disputed determinations or calculations. Such
investment bank’s or accounting firm’s determination or calculation, as the case
may be, shall be binding upon all parties absent manifest error.

 

6

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

(iv) Record Holder. The person or persons entitled to receive the Conversion
Shares issuable upon a conversion of this Note shall be treated for all purposes
as the legal and record holder or holders of such Shares as of immediately
following the delivery of the Conversion Notice applicable to such conversion,
or in the case of Conversion Shares the issuance of which is subject to a bona
fide dispute that is subject to and being resolved pursuant to, and in
compliance with the time periods and other provisions of, the dispute resolution
provisions of Section 2(c)(iii), the first Business Day after the resolution of
such bona fide dispute and the fees and expenses of such investment bank or
accountant shall be paid by the Company.

(v) Company’s Failure to Timely Convert.

(A) Cash Damages. If, on or before the Share Delivery Date, the Company shall
fail to issue and deliver a certificate to the Holder for the number of
Conversion Shares (free of any restrictive legend, subject to the terms of
Section 2(e) hereof) to which the Holder is entitled upon the Holder’s
conversion of any Conversion Amount, or if the Company fails to issue and
deliver a new Note representing the Principal to which such Holder is entitled
on or before the Note Delivery Date pursuant to Section 2(c)(ii), then in
addition to all other available remedies that the Holder may pursue hereunder
and under the Facility Agreement, the Company shall pay additional damages to
the Holder for each 30-day period (prorated for any partial period) after the
Share Delivery Date such conversion is not timely effected and/or each day after
the Note Delivery Date such Note is not delivered in an amount equal to (x) in
the case of a failure to deliver a certificate for the Conversion Shares, one
percent (1%) of the Conversion Amount or (y) in the case of a failure to deliver
a new Note, one percent (1%) of the outstanding balance of the new Note. If the
Company fails to pay the additional damages set forth in this Section 2(c)(v)(A)
within five (5) Business Days of the date incurred, then the Holder entitled to
such payments shall have the right at any time, so long as the Company continues
to fail to make such payments, to require the Company, upon written notice, to
immediately issue, in lieu of such damages payments described herein, the number
of Shares equal to the quotient of (X) the aggregate amount of the damages
payments described in this Section 2(c)(v)(A) divided by (Y) the lower of
(i) the Conversion Price in effect on such Conversion Date as specified by the
Holder in the Conversion Notice and (ii) the Fair Market Value Price per
Conversion Share on the date of the Conversion Notice.

(B) Void Conversion Notice. If for any reason the Holder has not received all of
the Conversion Shares prior to the tenth (10th) Business Day after the Share
Delivery Date (a “Conversion Failure”), then the Holder, upon written notice to
the Company (a “Void Conversion Notice”) delivered prior to the receipt of such
Conversion Shares, may void such applicable conversion with respect to, and
retain or have returned, as the case may be, any portion of this Note that has
not been converted pursuant to such notice; provided, that the voiding of such
conversion shall not affect the Company’s obligations to make any payments that
have accrued prior to the date of such notice pursuant to Section 2(c)(v)(A),
2(c)(v)(C) or otherwise.

(C) Event of Default. A Conversion Failure shall constitute an Event of Default
under the Facility Agreement and entitle the Lenders to all payments and
remedies provided under the Facility Agreement upon the occurrence of an Event
of Default.

 

7

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

(vi) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon
conversion or redemption of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to the Company
unless all of the Principal is being converted or redeemed. The Holder and the
Company shall maintain records showing the Principal converted or redeemed and
the dates of such conversions or redemptions or shall use such other method,
reasonably satisfactory to the Holder and the Company, so as not to require
physical surrender of this Note upon any such partial conversion or redemption.
Notwithstanding the foregoing, if this Note is converted or redeemed as
aforesaid, the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Company, whereupon the Company will
forthwith issue and deliver upon the order of the Holder a new Note of like
tenor, registered as the Holder may request, representing in the aggregate the
remaining Principal represented by this Note. The Holder and any assignee, by
acceptance of this Note, acknowledge and agree that, by reason of the provisions
of this paragraph, following conversion or redemption of any portion of this
Note, the Principal of this Note may be less than the principal amount stated on
the face hereof.

(d) Taxes. The Company shall pay any and all taxes (excluding income taxes,
franchise taxes or other taxes levied on gross earnings, profits or the like of
the Holder) that may be payable with respect to the issuance and delivery of
Conversion Shares upon the conversion of this Note.

(e) Legends; Delivery of Electronic Shares.

(i) Unless the Holder is an Affiliate of the Company as of the Issuance Date,
neither this Note nor any note issued in substitution or replacement of this
Note (or portion thereof) shall contain or be subject to, any legend, stop
transfer instruction or similar notation, in each case, restricting the transfer
hereof or thereof. Provided the Holder to which Conversion Shares are to be
issued represents that it is not as of the applicable Conversion Date, and for a
period of three (3) months prior to the applicable Conversion Date has not been,
an “affiliate” (as such term is used in Rule 144 under the Securities Act) of
the Company, upon each conversion of this Note (in whole or in part) the
Conversion Shares shall be issued and delivered without (and without being
subject to) any legend, stop transfer instruction or similar notation, in each
case, restricting the transfer hereof or thereof. For the avoidance of doubt, by
delivering a Conversion Notice, the Holder shall be deemed to have made the
representations contemplated by the immediately preceding sentence as of the
applicable Conversion Date, unless the applicable Holder otherwise indicates in
such Conversion Notice. The Company shall use best efforts to cause its counsel
to issue a legal opinion to the Transfer Agent, if required by the Transfer
Agent to issue certificates evidencing the Conversion Shares without restrictive
legends (and without being subject to any stop transfer instruction or similar
notation) in accordance with this Agreement.

 

8

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

(ii) Holder agrees that the issuance of Conversion Shares without any
restrictive legends is predicated upon the Company’s reliance that the Holder
will sell such Conversion Shares pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if such securities are sold
pursuant to a registration statement, they will be sold in compliance with the
plan of distribution set forth therein.

(iii) Delivery of Electronic Shares. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, or representing
Conversion Shares, upon written request of Holder, the Company shall cause its
Transfer Agent to electronically transmit the Conversion Shares issuable upon
conversion of this Note to the Holder by crediting the account of Holder’s prime
broker with the Depository Trust Company through its Deposit/Withdrawal at
Custodian (DWAC) system. The time periods for delivery and penalties described
herein shall apply to the electronic transmittals described herein. Any delivery
not effected by electronic transmission shall be effected by delivery of
physical certificates.

(f) Adjustments to Conversion Price.

(i) Adjustment of Conversion Price upon Issuance of Common Stock, Options,
Convertible Securities, Etc.

(A) If at any time after the Issuance Date for so long as this Note is
outstanding, the Company (x) issues or sells any Common Stock, Convertible
Securities, warrants, or Options or (y) directly or indirectly effectively
reduces the conversion, exercise or exchange price for any Convertible
Securities or Options which are currently outstanding, at or to an effective Per
Share Selling Price (as defined below) which is less than the greater of (I) the
closing sale price per share of the Common Stock on the principal securities
exchange, trading market or quotation system on which shares of Common Stock are
then traded, listed or quoted on the Trading Day immediately preceding such
issue or sale (“Fair Market Price”), or (II) the Conversion Price, then in each
such case the Conversion Price in effect immediately prior to such issue or sale
date, as applicable, shall be automatically reduced effective concurrently with
such issue or sale to an amount determined by multiplying the Conversion Price
then in effect by a fraction, (x) the numerator of which shall be the sum of
(1) the number of shares of Common Stock outstanding immediately prior to such
issue or sale, plus (2) the number of shares of Common Stock which the aggregate
consideration received by the Company for such additional shares would purchase
at such Fair Market Price or Conversion Price, as the case may be, and (y) the
denominator of which shall be the number of shares of Common Stock of the
Company outstanding immediately after such issue or sale. The foregoing
provision shall not apply to any issuances or sales of (i) Common Stock or
Convertible Securities (A) pursuant to any Convertible Securities or Options
outstanding on the Issuance Date in accordance with the terms of such
Convertible Securities in effect on the Issuance Date provided that such
securities have not been amended since the date hereof to directly or indirectly
effectively reduce the conversion, exercise or exchange price for any
Convertible Securities or Options which are currently outstanding, (B) to a
Lender in connection with the conversion or exchange of any Notes (as defined in
the Facility Agreement) or the conversion or exchange of any Convertible
Security or Options issued to a Lender pursuant to any such conversion or
exchange of Notes, or (ii) any Common Stock issued or issuable upon exercise of
any options to employees, officers, directors, consultants and advisors (and any
individuals who have accepted an offer of employment), in each case in
connection with any Approved Stock Plan (defined below).

 

9

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

Notwithstanding anything herein to the contrary, nothing in this
Section 2(f)(i)(A) shall result in the Conversion Price of this Note, or any
other Note, equaling a price per share less than $0.38 (subject to adjustment as
provided herein (the “Floor Price”)).

Notwithstanding anything to the contrary contained in the immediately preceding
paragraph, if the Company issues or sells any Common Stock, Convertible
Securities, warrants, or Options in a firm commitment underwritten public
offering (an “Underwritten Public Offering”), then for purposes of determining
any adjustment to the Conversion Price under this Section 2(f)(i)(A) in respect
of such Underwritten Public Offering the Fair Market Price shall be the closing
sale price per share of the Common Stock on the principal securities exchange,
trading market or quotation system on which shares of Common Stock are then
traded, listed or quoted on the date of execution of the underwriting agreement
(the “Offering Effective Date”) between the Company and the underwriters in such
offering, provided, that (x) if the Offering Effective Date is not a Trading
Day, then the Fair Market Price shall be the closing sale price per share of the
Common Stock on the principal securities exchange, trading market or quotation
system on which shares of Common Stock are then traded, listed or quoted on the
Trading Day immediately preceding the Offering Effective Date and (y) if the
underwriting agreement in such offering is executed prior to closing of trading
on the principal securities exchange, trading market or quotation system on
which shares of Common Stock are then traded, listed or quoted on a given date,
then the Fair Market Price shall be the closing sale price per share of the
Common Stock on such principal securities exchange, trading market or quotation
system on the Trading Day immediately preceding such date.

Notwithstanding anything to the contrary contained herein, this
Section 2(f)(i)(A) shall not apply to any issuance or sale of Common Stock by
the Company if such issuance or sale is made in an “at the market offering” (as
defined in Rule 415 under the Securities Act) at a Per Share Selling Price equal
to or greater than the then applicable Conversion Price, provided that, if the
Company makes any such sale of Common Stock at a Per Share Selling Price less
than the then applicable Conversion Price then (x) this Section 2(f)(i)(A) shall
apply, but (y), for purposes of calculating any adjustment of the Conversion
Price hereunder, the Fair Market Price for such sale shall be the price per
share at which shares of Common Stock are sold in such “at the market offering.”

Notwithstanding anything to the contrary contained herein, this
Section 2(f)(i)(A) shall not apply to any issuance or sale of Common Stock,
Convertible Securities or Options by the Company if such issuance or sale is
made pursuant to the terms of (x) that certain Purchase Agreement, dated
February 28, 2019, by and between the Company and Lincoln Park Capital Fund,
LLC, (y) that certain Common Stock Sales Agreement, dated as of September 4,
2018, by and between the Company and RBC Capital Markets, LLC, or (z) that
certain September 2019 Exchange Agreement and Amendment to Facility Agreement,
dated as of September 3, 2019, by and among the Company, Deerfield Private
Design Fund III, L.P. and Deerfield Special Situations Fund, L.P. (as amended as
of the Issuance Date).

 

10

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

For the purposes of the foregoing adjustments, in the case of the issuance of
any Convertible Securities or Options, the maximum number of shares of Common
Stock issuable upon exercise, exchange or conversion of such Convertible
Securities or Options shall be deemed to be outstanding, provided that no
further adjustment shall be made upon the actual issuance of Common Stock upon
exercise, exchange or conversion of such Convertible Securities or Options, and
provided further that to the extent such Convertible Securities or Options
expire or terminate unconverted or unexercised, then at such time the Conversion
Price shall be readjusted as if such portion of such Convertible Securities or
Options had not been issued.

For purposes of this Section 2(f), if an event occurs that triggers more than
one of the above adjustment provisions, then only one adjustment shall be made
and the calculation method which yields the greatest downward adjustment in the
Conversion Price shall be used.

(B) Record Date. If the Company takes a record of the holders of Shares for the
purpose of entitling them (1) to receive a dividend or other distribution
payable in shares of Common Stock, Options or in Convertible Securities or
(2) to subscribe for or purchase shares of Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the Shares deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.

(C) Certain Definitions. For purposes of this Section 2(f), the following terms
have the respective meanings set forth below:

(I) “Approved Stock Plan” means any employee benefit plan which has been duly
adopted by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee
directors established for such purpose, pursuant to which the Company’s
securities may be issued to any employee, consultant, advisor, officer or
director (or any individual who has accepted an offer of employment) for
services provided to the Company, and in all cases, providing for a Conversion
Price that is at or above the fair market value (as defined in such Approved
Stock Plan).

(II) “Convertible Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exchangeable or exercisable for
shares of Common Stock.

(III) “Exempt Issuances” shall mean: the issuance of (a) any Common Stock issued
or issuable upon exercise of any options to employees, officers, directors,
consultants and advisors (and any individuals who have accepted an offer of
employment), in each case in connection with any Approved Stock Plan, up to a
maximum amount of Common Stock not to exceed in any one calendar year 5% of the
total number of outstanding shares of the Company (as of the beginning of such
calendar year), (b) securities upon the exercise, exchange of, conversion or
redemption of, or payment of interest or liquidated or similar damages on, any
Common Stock issued hereunder, (c) other securities exercisable, exchangeable
for, convertible into, or redeemable for shares of Common Stock issued and
outstanding on the date of this Note, provided that such securities have not
been amended since the date of this Note to directly or indirectly increase the
number of such securities or to decrease

 

11

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

the exercise, exchange or conversion price of such securities (and including any
issuances of securities pursuant to the anti-dilution provisions of any such
securities), and (d) the issuance of Common Stock, Options, Convertible
Securities, stock appreciation rights, phantom stock rights or other rights with
equity features (collectively, “Management Incentives”) issued or granted to
employees, officers, directors, consultants and advisors (and individuals who
have accepted an offer of employment), which Management Incentives have been
approved by the Required Note Holders.

(IV) “Options” means any rights, warrants or options to subscribe for or
purchase shares of Common Stock or Convertible Securities.

(V) “Per Share Selling Price” shall include the amount actually paid by third
parties for each share of Common Stock in a sale or issuance by the Company. In
the event a fee is paid by the Company in connection with such transaction
directly or indirectly to such third party or its affiliates, any such fee shall
be deducted from the selling price pro rata to all shares sold in the
transaction to arrive at the Per Share Selling Price, provided that, for the
avoidance of doubt, if a fee is paid to a placement agent, sales agent or party
operating in a similar capacity for sales made in an “at the market offering”
(as defined in Rule 415 under the Securities Act), such fee shall not be
deducted from the selling price for purposes of determining the Per Share
Selling Price hereunder. A sale of shares of Common Stock shall include the sale
or issuance of Convertible Securities or Options, and in such circumstances the
Per Share Selling Price of the Common Stock covered thereby shall also include
the exercise, exchange or conversion price thereof (in addition to the
consideration received by the Company upon such sale or issuance less the fee
amount as provided above). In case of any such security issued in a transaction
in which the purchase price or the conversion, exchange or exercise price is
directly or indirectly subject to adjustment or reset based on a future date,
future trading prices of the Common Stock, specified or contingent events
directly or indirectly related to the business of the Company or the market for
the Common Stock, or otherwise (but excluding standard stock split anti-dilution
provisions or weighted-average anti-dilution provisions similar to that set
forth herein, provided that any actual reduction of such price under any such
security pursuant to such weighted-average anti-dilution provision shall be
included and cause an adjustment hereunder), the Per Share Selling Price shall
be deemed to be the lowest conversion, exchange, exercise or reset price at
which such securities are converted, exchanged, exercised or reset or might have
been converted, exchanged, exercised or reset, or the lowest adjustment, as the
case may be, over the life of such securities. If shares are issued for a
consideration other than cash, the Per Share Selling Price shall be the fair
value of such consideration as determined in good faith by independent certified
public accountants mutually acceptable to the Company and the Holder. In the
event the Company directly or indirectly effectively reduces the conversion,
exercise or exchange price for any Convertible Securities or Options which are
currently outstanding, then the Per Share Selling Price shall equal such
effectively reduced conversion, exercise or exchange price.

(ii) Adjustment of Conversion Price and Floor Price upon Subdivision or
Combination of Shares. If the Company at any time on or after the Issuance Date
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
outstanding Shares into a greater number of Shares, each of the Conversion Price
and Floor Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company at any time on or after the Issuance
Date combines (by combination, reverse stock split or otherwise) its outstanding
Shares into a lesser number of Shares, each of the Conversion Price and Floor
Price in effect immediately prior to such combination will be proportionately
increased.

 

12

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

(iii) Adjustment of Conversion Price and Floor Price upon a Distribution of
Assets. If the Company at any time on or after the Issuance Date shall declare
or make any dividend or other distribution of its assets (or rights to acquire
its assets) to holders of Shares, by way of return of capital or otherwise
(including any distribution of cash, stock or other securities, property or
options by way of a dividend, spin-off, reclassification, corporate
rearrangement or other similar transaction (a “Distribution”)), then, in each
such case, the applicable Conversion Price and Floor Price in effect immediately
prior to the close of business on the date fixed for the determination of
holders of Shares entitled to receive the Distribution shall be reduced,
effective as of the close of business on such date, to a price determined by
multiplying such applicable Conversion Price and Floor Price by a fraction of
which (A) the numerator shall be the Fair Market Value of one Share immediately
preceding such date minus the Fair Market Value of the Distribution applicable
to one Share, and (B) the denominator shall be the Fair Market Value of one
Share on the Trading Day immediately preceding such date.

(iv) Recapitalization or Reclassification. In the event of any reclassification,
recapitalization, reorganization, or change affecting the Shares, or any
automatic or mandatory conversion of all of the outstanding shares of the class
or series of capital stock for which this Note is then convertible, this Note
shall become convertible for the kind and amount of shares of stock and other
securities and property receivable in connection with such reclassification,
reorganization, change or conversion by a holder of the same number of
Conversion Shares as were purchasable by the Holder pursuant to conversion
hereof immediately prior to such reclassification, reorganization, change or
conversion. In any such case, appropriate provisions shall be made with respect
to the rights and interest of the Holder so that the provisions hereof shall
thereafter be applicable with respect to any shares of stock or other securities
and property deliverable upon conversion hereof, and appropriate adjustments
shall be made to the Conversion Price payable hereunder and the applicable Floor
Price, provided the aggregate Conversion Price shall remain the same.

(v) Adjustment for Tax Purposes. The Company shall be entitled to make such
reductions in the Conversion Price, in addition to those otherwise required by
this Section 2(f), as the Company’s Board of Directors in its discretion shall
determine to be advisable in order that any stock dividends, subdivisions of
shares, distribution of rights to purchase stock or securities, or any
distribution of securities convertible into or exchangeable for stock, made
after the Issuance Date by the Company to its stockholders shall not be taxable.

(vi) Other Events. If any event occurs of the type contemplated by the
provisions of this Section 2(f) but not expressly provided for by such
provisions (including the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company’s Board of
Directors will make an appropriate adjustment in the Conversion Price and the
Floor Price so as to protect the rights of the Holder; provided that no such
adjustment will increase the Conversion Price or the Floor Price as otherwise
determined pursuant to this Section 2(f).

 

13

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

(vii) Notices. Promptly upon any adjustment of the Conversion Price, the Company
will give written notice thereof to the Holder, setting forth in reasonable
detail, and certifying, the calculation of such adjustment. The Company will
give written notice to the Holder at least ten (10) Business Days prior to the
date on which the Company closes its books or takes a record (I) with respect to
any dividend or distribution upon the Common Stock or the Shares, (II) with
respect to any pro rata subscription offer to holders of Common Stock or Shares
or (III) for determining rights to vote with respect to any Major Transaction,
provided that such information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder. The Company will also
give written notice to the Holder with respect to any Major Transaction as
provided under Section 3(b) below.

(g) Intentionally Deleted.

(h) Intentionally Deleted.

(i) Limitations on Conversion. Notwithstanding anything herein to the contrary,
the Company shall not issue to the Holder, and the Holder may not acquire, a
number of Conversion Shares upon conversion of this Note to the extent that,
upon such exercise, the number of shares of Common Stock then beneficially owned
by the Holder and its Affiliates and any other persons or entities whose
beneficial ownership of Common Stock would be aggregated with the Holder’s for
purposes of Section 13(d) of the Exchange Act (including shares held by any
“group” of which the Holder is a member, but excluding shares beneficially owned
by virtue of the ownership of securities or rights to acquire securities that
have limitations on the right to convert, exercise or purchase similar to the
limitation set forth herein) would exceed [4.985%/19.985%] of the total number
of the shares of Common Stock then issued and outstanding (the “[4.985%
Cap/19.985% Cap]”); provided that the [4.985%/19.985%] Cap shall not apply to
the extent that shares of Common Stock are not deemed to constitute “equity
securities” pursuant to Rule 13d-1(i) under the Exchange Act and, provided
further, that the [4.985%/19.985%] Cap shall not apply to an exercise effected
following receipt of a Major Transaction Notice (as defined below) in respect of
a Major Transaction described in clause (A) of the definition of Major
Transaction above in which the Company will not be the surviving entity, until
consummation or abandonment of such Major Transaction. For the avoidance of
doubt, a conversion hereunder (whether at the election of the Holder or the
Company) shall be null and void to the extent the issuance of shares upon such
conversion would violate this subsection (i).

3. Rights Upon Major Transaction. Notwithstanding anything contained herein or
in the Facility Agreement to the contrary, in the event that a Major Transaction
occurs, then the Holder, at its option, may require the Company to redeem all or
any portion of the Principal (and the Interest Amount thereon) outstanding on
the Holder’s Notes for cash in accordance with Section 3(b) below. In the event
the Holder shall not have exercised any of its rights under the immediately
preceding sentence within the applicable time periods set forth herein, then the
Major Transaction shall be treated as an Assumption (as defined below) in
accordance with Section 3(a) below unless the Holder waives its rights under
this Section 3 with respect to such Major Transaction. For the avoidance of
doubt, the Holder may waive the above provisions of this Section 3 with respect
to any Major Transaction and, without limitation, may elect to convert this Note
in accordance with the other terms hereof prior to any Major Transaction.

 

14

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

(a) Assumption. The Company shall not enter into or be party to a Major
Transaction that is to be treated as an Assumption pursuant to this Section 3,
unless any Successor Entity assumes in writing all of the obligations of the
Company under this Note and provides (a) registration rights that are comparable
to those provided to the initial Holder under the Investor Rights Agreement, if
the Successor Entity is not a Publicly Traded Successor Entity, or (b) resale
registration rights reasonably acceptable to the Holder, if the Successor Entity
is a Publicly Traded Successor Entity, in accordance with the provisions of this
Section 3(a) pursuant to written agreements and instruments in form and
substance reasonably satisfactory to the Holder and approved by the Holder prior
to such Major Transaction (not to be unreasonably withheld or delayed),
including a security of the Successor Entity evidenced by a written instrument
(a “Replacement Note”) substantially similar in form and substance to this Note,
including, without limitation, representing the appropriate number of shares of
the Successor Entity, having similar conversion rights as this Note (including
but not limited to a similar Conversion Price and similar Conversion Price
adjustment provisions based on the price per share or conversion ratio, and
taking into account any cash consideration, to be received by the holders of
Conversion Shares in the Major Transaction) and providing for conversion into
the shares of the Successor Entity into or for which shares of the same class
and series as the Shares are to be converted or exchanged (“Successor Conversion
Shares”). Upon the occurrence of any Major Transaction, but only if a
Replacement Note has not been delivered to the Holder in connection therewith,
any Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such Major Transaction, the provisions of this Note referring
to the “Company” shall refer instead to the Successor Entity), and may exercise
every right and power of the Company and shall assume all of the obligations of
the Company under this Note with the same effect as if such Successor Entity had
been named as the Company herein. Upon consummation of the Major Transaction,
but only if a Replacement Note has not been delivered to the Holder in
connection therewith, any Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon conversion or redemption of this
Note at any time after the consummation of the Major Transaction, in lieu of the
Conversion Shares (or other securities, cash, assets or other property) issuable
upon the conversion of this Note prior to such Major Transaction, such Successor
Conversion Shares in accordance with the provisions of this Note. The provisions
of this Section shall apply similarly and equally to successive Major
Transactions and shall be applied without regard to any limitations on the
conversion of this Note, including any applicable beneficial ownership
limitations. Any assumption of Company obligations under this paragraph shall be
referred to herein as an “Assumption.”

(b) Notice; Major Transaction Early Termination Right. At least fifteen
(15) days prior to the consummation of any Major Transaction, but, in any event,
within five (5) Business Days following the first to occur of (y) the date of
the public announcement of such Major Transaction if such announcement is made
before 4:00 p.m., New York City time, and (z) the day following the public
announcement of such Major Transaction if such announcement is made on and after
4:00 p.m., New York City time, the Company shall deliver written notice thereof
via facsimile and overnight courier to the Holder (a “Major Transaction
Notice”). At any time during the period beginning after the Holder’s receipt of
a Major Transaction Notice and ending five (5) Trading Days prior to the
consummation of such Major Transaction (the “Early Termination Period”), the
Holder may require the Company to redeem (an “Early Termination Upon Major
Transaction”) all or any portion of the outstanding portion of this Note
(without regard to any ownership limitations) by delivering written notice
thereof (“Major

 

15

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

Transaction Early Termination Notice”) to the Company, which Major Transaction
Early Termination Notice shall indicate the portion (the “Early Termination
Portion”) of this Note that the Holder is electing to have so redeemed. The
Early Termination Portion shall be redeemed by the Company at a price (the
“Major Transaction Note Early Termination Price”) payable in cash equal to the
greater of (1) the Principal amount of the Early Termination Portion and the
Interest Amount thereon (additionally including, for this purpose, any interest
that would have accrued on such Principal amount from the date of the Major
Transaction until the then applicable maturity date of the Note were such
Principal amount on the Note outstanding throughout such period), and (2) the
amount of cash payable or distributable per Conversion Share plus the Fair
Market Value of any property (other than cash) payable or distributable per
Conversion Share (or the shares of Common Stock into which such Conversion
Shares are then convertible, if greater), in each case, pursuant to the terms of
the Company’s certificate of incorporation, as it may be amended from time to
time, in connection with such Major Transaction.

(c) Payment of Major Transaction Note Early Termination Price. Following the
receipt of a Major Transaction Early Termination Notice from the Holder, the
Company shall not effect a Major Transaction that is being treated as an early
termination unless it obtains the written agreement of any Successor Entity that
payment of the Major Transaction Note Early Termination Price shall be made to
the Holder prior to or concurrently with consummation of such Major Transaction
(subject to any holdbacks or escrows applicable to such payment pursuant to the
applicable acquisition agreement and subject to standard non-material conditions
on such payment imposed by such Successor Entity, such as surrender of this Note
and delivery of a letter of transmittal and an applicable IRS Form W-9 or
applicable W-8, if applicable), and such payment shall be a condition precedent
or concurrent to consummation of such Major Transaction.

(d) Injunction. Following the receipt of a Major Transaction Early Termination
Notice from the Holder, in the event that the Company attempts to consummate a
Major Transaction without the Major Transaction Note Early Termination Price
being paid to the Holder prior to or concurrently with the consummation of such
Major Transaction in accordance with Section 3(c) above, or obtaining any
written agreement of the Successor Entity required by Section 3(c) above, the
Holder shall have the right to apply for an injunction in any state or federal
courts sitting in the City of New York, borough of Manhattan to prevent the
closing of such Major Transaction until the Major Transaction Note Early
Termination Price is paid to the Holder, in full.

Any payment determined pursuant to clause (1) of Section 3(b) in connection with
an early termination shall have priority to payments to holders of capital stock
in connection with a Major Transaction and to the extent an early termination
required by this Section 3 is deemed or determined by a court of competent
jurisdiction to be prepayments of this Note by the Company, such early
termination shall be deemed to be voluntary prepayments. Notwithstanding
anything to the contrary in this Section 3, until the Major Transaction Note
Early Termination Price is paid in full (excluding any amount subject to escrows
or holdbacks and any other contingent consideration that has not accrued), this
Note may be converted, in whole or in part, by the Holder into Shares, or in the
event the Conversion Date is after the consummation of a Major Transaction,
Successor Conversion Shares pursuant to this Section 3.

 

16

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

The parties hereto agree that in the event of the early termination of any
portion of the Note under this Section 3, the Holder’s damages would be
uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder. Accordingly, any premium due
under this Section 3 is intended by the parties to be, and shall be deemed, a
reasonable estimate of the Holder’s actual loss of its investment opportunity
and not as a penalty.

4. Amendment; Waiver. The terms and provisions of this Note shall not be amended
or waived except in a writing signed by the Company and the Required Note
Holders. Any amendment so approved shall bind all holders of the Notes, provided
that such amendment applies to all of the Notes on substantially the same basis.

5. Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Note shall be cumulative and in addition
to all other remedies available under this Note, the Facility Agreement, at law
or in equity (including a decree of specific performance and/or other injunctive
relief). No remedy contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy, and nothing herein shall limit the
Holder’s right to pursue actual damages for any failure by the Company to comply
with the terms of this Note. The Company covenants to the Holder that, except as
may be set forth in the Facility Agreement, there shall be no characterization
concerning this instrument other than as expressly provided herein. Amounts set
forth or provided for herein with respect to payments, conversion and the like
(and the computation thereof) shall be the amounts to be received by the Holder
thereof and shall not, except as expressly provided herein, be subject to any
other obligation of the Company (or the performance thereof). The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

6. Specific Shall Not Limit General; Construction. No specific provision
contained in this Note shall limit or modify any more general provision
contained herein. This Note shall be deemed to be jointly drafted by the Company
and all purchasers of this Note pursuant to the Facility Agreement and shall not
be construed against any Person as the drafter hereof.

7. Failure or Indulgence Not Waiver. No failure or delay on the part of the
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.

8. Notices. Whenever notice is required to be given under this Note, unless
otherwise provided herein, such notice shall be given in accordance with
Section 4.1 of the Facility Agreement.

 

17

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

9. Restrictions on Transfer.

(a) Intentionally Deleted.

(b) Assignment. Subject to Section 6.5 of the Facility Agreement, the Holder may
sell, transfer, assign, pledge, hypothecate or otherwise dispose (collectively,
“Transfer”) of this Note, in whole or in part. Holder shall deliver a written
notice to Company, substantially in the form of the Assignment attached hereto
as Exhibit B, indicating the Person or Persons to whom the Note shall be
Transferred and the respective principal amount of this Note to be Transferred
to each assignee. The Company shall effect the Transfer within three
(3) Business Days (the “Transfer Delivery Period”), and shall deliver to the
assignee(s) designated by Holder a Note or Notes of like tenor and terms for the
appropriate principal amount. This Note and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors and assigns of the
Holder. The provisions of this Note are intended to be for the benefit of all
Holders from time to time of this Note, and shall be enforceable by any such
Holder.

10. Payment of Collection, Enforcement and Other Costs. If (a) this Note is
placed in the hands of an attorney for collection or enforcement or is collected
or enforced through any legal proceeding; or (b) an attorney is retained to
represent the Holder in any bankruptcy, reorganization, receivership of the
Company or other proceedings affecting Company creditors’ rights and involving a
claim under this Note, then the Company shall pay the costs incurred by the
Holder for such collection, enforcement or action, including reasonable
attorneys’ fees and disbursements.

11. Cancellation. After all Principal, Interest and other amounts at any time
owed under, or on account of, this Note have been paid in full or converted into
Shares in accordance with the terms hereof, this Note shall automatically be
deemed cancelled, shall be surrendered to the Company for cancellation and shall
not be reissued.

12. Registered Note. This Note may be transferred only upon notation of such
transfer on the Register, and no assignment thereof shall be effective until
recorded therein.

13. Waiver of Notice. To the extent permitted by law, the Company hereby waives
demand, notice, presentment, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Facility Agreement.

14. Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Note shall be governed by and construed
and enforced in accordance with the laws of the State of New York applicable to
contracts made and to be performed in such State. All legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Note (whether brought against a party or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is

 

18

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

improper or is an inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Note and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by law. The parties
hereby waive all rights to a trial by jury.

15. Interpretative Matters. Unless the context otherwise requires, (a) all
references to Sections or Exhibits are to Sections or Exhibits contained in or
attached to this Note, (b) each accounting term not otherwise defined in this
Note has the meaning assigned to it in accordance with GAAP, (c) words in the
singular or plural include the singular and plural and pronouns stated in either
the masculine, the feminine or neuter gender shall include the masculine,
feminine and neuter and (d) the use of the word “including” in this Note shall
be by way of example rather than limitation. If a stock split, stock dividend,
stock combination or other similar event occurs during any period over which an
average price is being determined, then an appropriate adjustment will be made
to such average to reflect such event.

16. Execution. A facsimile, telecopy, PDF or other reproduction of this Note may
be delivered by the Company, and an executed copy of this Note may be delivered
by the Company by facsimile, e-mail or other similar electronic transmission
device pursuant to which the signature of or on behalf of the Company can be
seen, and such execution and delivery shall be considered valid, binding and
effective for all purposes. The Company hereby agrees that it shall not raise
the execution of facsimile, PDF or other reproduction of this Note, or the fact
that any signature was transmitted by facsimile, e-mail or other similar
electronic transmission device, as a defense to the Company’s execution of this
Note. Notwithstanding the foregoing, the Company shall be required to deliver an
originally executed Note to the Holder.

 

 

19

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

IN WITNESS WHEREOF, the Company has caused this Senior Secured Convertible Note
to be duly executed as of the date first set forth above.

 

COMPANY: KEMPHARM, INC. By:  

                              

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

Exhibit A

CONVERSION NOTICE

Reference is made to the Senior Secured Convertible Note (the “Note”) of
KEMPHARM, INC., a Delaware corporation (the “Company”), in the original
principal amount of $[______]. In accordance with and pursuant to the Note, the
undersigned hereby elects to convert the Conversion Amount (as defined in the
Note) of the Note indicated below into shares of the Company, as of the date
specified below.

Date of Conversion:                     

Aggregate Conversion Amount to be converted at the Conversion Price (as defined
in the Note):

 

                                                                      

 

Principal, applicable thereto, to be converted:
                                                                             

 

Interest, applicable thereto, to be converted:
                                         
                                         

Please confirm the following information:

 

Conversion Price:                                          
                                         
                                                   

 

Number of shares of [                         ] to be issued:
                                                                               

Please issue the [                         ] into which the Note is being
converted in the following name and to the following address:

☐ Deposit/Withdrawal at Custodian (“DWAC”) system; or

☐ Physical Certificate

 

Issue to:                                          
                                         
                                         
                                         

 

Facsimile Number:                                          
                                         
                                                                 

 

DTC Participant Number and Name (if through DWAC):
                                         
                                             

 

Account Number (if through DWAC):                                          
                                                                            

 

Authorization:                                                               

By:                                                                        

Title:                                                                    

Dated:                                                                  

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

ACKNOWLEDGMENT

The Company hereby acknowledges this Conversion Notice and hereby directs
[TRANSFER AGENT] to issue the above indicated number of shares of Common Stock
in accordance with the Irrevocable Transfer Agent Instructions dated [______],
2019 from the Company and acknowledged and agreed to by [TRANSFER AGENT].

 

KEMPHARM, INC. By:  

                                      

Name:  

 

Title:  

 

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

Exhibit B

ASSIGNMENT

(To be executed by the registered holder

desiring to transfer the Note)

FOR VALUE RECEIVED, the undersigned holder of the attached Senior Secured
Convertible Note (the “Note”) hereby sells, assigns and transfers unto the
person or persons below named the right to receive the principal amount of
$__________ from KEMPHARM, INC., a [___________] corporation, evidenced by the
attached Note and does hereby irrevocably constitute and appoint __________
attorney to transfer the said Note on the books of the Company, with full power
of substitution in the premises.

 

Dated:                                              

     

Signature

 

Fill in for new registration of Note:

 

Name

 

Address

 

Please print name and address of assignee

(including zip code number)

NOTICE

The signature to the foregoing Assignment must correspond to the name as written
upon the face of the attached Note in every particular, without alteration or
enlargement or any change whatsoever.

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

Schedule of Noteholders

 

Noteholder

  

Principal Amount of Notes

 

Deerfield Private Design Fund III, L.P.

   $ 52,567,366.96  

Deerfield Special Situations Fund, L.P.

   $ 10,513,675.50  

Delaware Street Capital Master Fund, L.P.

   $ 8,336,968.75     

 

 

 

Total:

   $ 71,418,011.21