Exhibit 10.1

JANUARY 2020 EXCHANGE AGREEMENT

This JANUARY 2020 EXCHANGE AGREEMENT (including the schedules, annexes and
exhibits hereto, this “Agreement”), dated as of January 12, 2020, is by and
among KemPharm, Inc., a Delaware corporation (the “Borrower”), and M. Kingdon
Offshore Master Fund, LP (the “Lender”). Capitalized terms used but not
otherwise defined in this Agreement shall have the meanings given to them in the
Facility Agreement (as defined below).

RECITALS:

A.    The Lender owns an aggregate of $3,000,000.00 principal amount of the
Borrower’s 5.50% Senior Convertible Notes due 2021 (the “Indenture Notes”)
issued pursuant to the Indenture, dated as of February 9, 2016 (the
“Indenture”), between the Borrower and U.S. Bank National Association, as
trustee under the Indenture (together with any successor thereto, the
“Trustee”).

B.    The Borrower and certain holders of the Company’s outstanding senior
secured convertible promissory notes have entered into that certain Facility
Agreement, dated as of June 2, 2014 (as the same has been amended, modified,
restated or otherwise supplemented from time to time (including any such
amendment, modification or restatement which is effective as of the Effective
Date (as defined below), the “Facility Agreement”).

C.    Pursuant to this Agreement (and subject to the terms and conditions
hereof), the Lender will exchange all of the Indenture Notes for a Senior
Secured Convertible Note of the Borrower in substantially the form attached
hereto as Exhibit A (the “Note”) in an aggregate principal amount equal to the
sum of the outstanding principal amount of all of the Indenture Notes, plus 50%
of the accrued and unpaid interest thereon through the Effective Date. The Note
will be issued pursuant to the Facility Agreement.

D.     Subject to the terms and conditions of this Agreement, the Lender has
agreed with the Borrower to, among other things, (i) allow the “payment in kind”
of interest on the indebtedness currently evidenced by the Indenture Notes,
(ii) defer the maturity date in respect of the indebtedness evidenced by the
Indenture Notes to March 31, 2021, and (iii) modify certain rights of the Lender
under the Indenture Notes that would result from a delisting of the Borrower’s
Common Stock, all to be effected through the Exchange (as defined below) and the
terms of the Note.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:

ARTICLE I.

EXCHANGE

Section 1.01.    Exchange. Subject to the terms and conditions hereof, the
Lender hereby agrees to exchange all of the Indenture Notes held by it for the
issuance by the Borrower to Lender of a Note with an initial principal amount
equal to the sum of the outstanding principal amount of

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Lender’s Indenture Notes (the “Exchange”), in each case as set forth on Schedule
1 hereto. The Exchange is being made as part of and pursuant to a plan of
reorganization of the Borrower described in Section 368(a)(1)(E) of the Code.

Section 1.02.    Exchange Settlement; Joinder to Facility Agreement.

(a)    As soon as practicable following the effectiveness of the Exchange, which
shall be deemed to occur at 8:00 a.m. (New York time) on January 13, 2020 (such
time on such date, the “Effective Time”) (subject to satisfaction (or waiver by
the Lender) of the conditions set forth in Article V hereto), but in any event
prior to 4:00 p.m. (New York time) on January 13, 2020 (such date, the
“Effective Date”), (i) Lender shall assign and transfer all right, title and
interest in and to the Indenture Notes to the Borrower, and deliver or cause to
be delivered all of the Indenture Notes held by Lender to the Trustee, by
book-entry transfer through the facilities of The Depositary Trust Company
(“DTC”) from the account(s) of Lender, free and clear of any mortgage, lien,
pledge, charge, security interest, encumbrance, title retention agreement,
option, equity or other adverse claim thereto (collectively, “Liens”), together
with any customary documents of conveyance or transfer that the Borrower or
Trustee may reasonably deem necessary or desirable to transfer the Indenture
Notes to the Borrower; (ii) the Borrower shall issue and deliver to Lender a
Note, duly executed on behalf of the Borrower in the principal amount set forth
across from Lender’s name on Schedule 1 hereto in the column captioned “Notes
(principal amount)” which shall not bear any restrictive legend (or be subject
to stop transfer instructions or similar restrictions on the transfer thereof)
and shall provide for the 4.985% Cap (as defined in the Note); (iii) the
Borrower shall record in the Register the interests of Lender in the Loans and
the Note, including the amount of the Loan evidenced by the Note (which, for the
avoidance of doubt, shall be the amount set forth across from the Lender’s name
in Schedule 1 hereto in the column captioned “Notes (principal amount)”) and
(iv) the Borrower shall pay, in cash, by wire transfer of immediately available
funds to an account designated by Lender, fifty percent (50%) of the accrued and
unpaid interest on Lender’s Indenture Notes through the Effective Date. The
Borrower and Lender acknowledge and agree that (y) the aggregate amount of
accrued and unpaid interest on the Indenture Notes held by Lender through the
Effective Date is the amount set forth across from Lender’s name on Schedule 1
hereto under the column captioned “Accrued and Unpaid Interest on Indenture
Notes”); and (z) the portion of such interest that is not paid in cash on the
Effective Date shall be paid by including such amount in the original principal
amount of Lender’s Note issued hereunder, as set forth in Schedule 1 hereto.

(b)    Upon the Effective Time, (i) Lender shall be deemed for all purposes to
have become the legal, beneficial and record holder of the Note to which it is
entitled pursuant to Section 1.02(a) and (ii) Lender’s Indenture Notes shall be
deemed cancelled.

(c)    For the avoidance of doubt, from and after the date hereof, the Borrower
shall not incur any Indebtedness under the Indenture, or otherwise issue any
Global Note (as defined in the Indenture) or any other Note (as defined in the
Indenture) pursuant to the Indenture.

Section 1.03.    Joinder to Facility Agreement. Lender hereby acknowledges that
it has been provided with, and has had an opportunity to review, the Facility
Agreement and the Guaranty and Security Agreement and that the Note shall be
deemed a “Note” subject to the terms and conditions of the Facility Agreement.
Each of the Borrower and Lender hereby agree that,

 

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effective as of the Effective Time, Lender shall (i) become a party to the
Facility Agreement as a “Lender” (within the meaning of the Facility Agreement),
(ii) be fully bound by, and subject to, all of the covenants, terms, conditions,
restrictions and provisions of the Facility Agreement and the other Transaction
Documents applicable to a Lender that holds a “Note” under the Facility
Agreement, (iii) be entitled to the rights, remedies, benefits and privileges of
a Lender that holds a “Note” under the Facility Agreement and the other
Transaction Documents, and (iv) acknowledges and agrees that Deerfield Private
Design Fund III, L.P. has been designated as collateral agent under the Guaranty
and Security Agreement (the “Collateral Agent”) and as Lender’s “representative”
for purposes of any filings under the uniform commercial code. Lender
acknowledges and agrees that Lender shall have no rights as a Lender in respect
of the repayment of any Loans or Disbursements made prior to the date hereof
pursuant to the Facility Agreement or any right to receive any Warrants.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES

Section 2.01.    Representations and Warranties of the Lender. Lender hereby
represents and warrants to the Borrower as of the date of this Agreement and as
of the Effective Date as follows:

(a)    Organization and Good Standing. Lender is an entity duly incorporated or
otherwise organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted.

(b)    Authority. Lender has the requisite corporate power and authority to
enter into and to consummate the transactions contemplated by this Agreement and
each Transaction Document to which it is a party and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery by Lender of
this Agreement and each Transaction Document to which it is a party and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of Lender and no further
action is required in connection herewith or therewith.

(c)    Valid and Binding Agreement. This Agreement and each Transaction Document
to which Lender is a party have been duly executed and delivered by Lender and
constitute the valid and binding obligations of Lender, enforceable against
Lender in accordance with their terms, except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.

(d)    Non-Contravention. The execution and delivery by Lender of this Agreement
and each Transaction Document to which Lender is a party and the performance by
Lender of its obligations hereunder and thereunder, do not and will not
(i) violate any provision of Lender’s organizational documents, or (ii) conflict
with or result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which Lender is subject, or by which any of Lender’s Indenture Notes is bound
or

 

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affected except, in each instance of clauses (i) and (ii) hereof, where such
violation or conflict would not reasonably be expected, individually or in the
aggregate, to result in a material adverse effect on the ability of Lender to
timely perform its obligations under this Agreement or any other Transaction
Document to which Lender is a party.

(e)    Exemption. Lender has held Lender’s Indenture Notes of record and
beneficially for a period of at least one (1) year for purposes of Rule 144
under the Securities Act and is not, and during the three-month period prior to
the date hereof has not been, an “affiliate” (as such term is used in Rule 144
under the Securities Act) of the Borrower. Lender understands that the Note and
the shares of Common Stock issuable upon conversion thereof (the “Conversion
Shares”) are being offered, sold, issued and delivered to it in reliance upon
specific exemptions from registration or qualification under federal and
applicable state securities laws.

(f)    Ownership of the Notes. Lender is the record and beneficial owner of, and
has good and valid title to, Lender’s Indenture Notes, free and clear of all
Liens, and has full power to dispose thereof and to exercise all rights
thereunder (other than as restricted by this Agreement or the Indenture and
other than pledges or security interests that Lender may have created in favor
of a prime broker under and in accordance with its prime brokerage account with
such broker), without the consent or approval of, or any other action on the
part of, any other Person. Other than the transactions contemplated by this
Agreement, there is no outstanding contract, vote, plan, pending proposal or
other right of any Person to acquire Lender’s Indenture Notes or any portion
thereof. Lender has not, in whole or in part, (a) assigned, transferred,
hypothecated, pledged, exchanged or otherwise disposed of any of its Indenture
Notes or its rights in its Indenture Notes, or (b) except as would not
materially and adversely affect the ability of Lender to consummate the
transactions contemplated hereby, given any person or entity any transfer order,
power of attorney or other authority of any nature whatsoever with respect to
its Indenture Notes. Upon Lender’s delivery of the Indenture Notes to the
Borrower pursuant to the Exchange, the Indenture Notes shall be free and clear
of all Liens created by Lender.

(g)    Accredited Investor/Qualified Institutional Buyer. Lender is an
“accredited investor” as that term is defined in Rule 501(a) of Regulation D
under the Securities Act. Lender is a “qualified institutional buyer” as that
term is defined in Rule 144A under the Securities Act. Lender understands the
economic risk of its investment in the Note and the Conversion Shares, and has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of an investment in the Note and the
Conversion Shares.

(h)    Information. Lender acknowledges and agrees that (i) Lender has had the
opportunity to review the Borrower’s SEC Reports (as defined below) and this
Agreement (including the exhibits hereto) and the Transaction Documents,
(ii) Lender has had an opportunity to submit questions to the Borrower
concerning the Borrower, its business, operations, financial performance,
financial condition and prospects, and the terms and conditions of the Exchange
and has all information that it considers necessary in making an informed
investment decision, (iii) Lender has had the opportunity to consult with its
accounting, tax, financial and legal advisors to be able to evaluate the risks
involved in the Exchange and to make an informed investment decision with
respect to the Exchange. Notwithstanding anything to the contrary contained
herein, the rights and remedies available to Lender, neither any such review nor
any due diligence investigation conducted by Lender or its advisors, if any, or
its representatives shall modify, amend

 

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or otherwise affect Lender’s right to rely on the representations, warranties,
covenants and agreements of the Borrower contained in this Agreement and the
other Transaction Documents.

(i)    Transactions in Borrower’s Securities. Lender has not, directly or
indirectly, and no person acting on behalf of or pursuant to any understanding
with it has, engaged in any purchase or sale of the securities of the Borrower
(including, without limitation, any Short Sales (as defined below) involving any
of the Borrower’s securities) from October 29, 2019 through the date of this
Agreement, “Short Sales” include, without limitation, all “short sales” as
defined in Rule 200 of Regulation SHO promulgated under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and all types of direct and
indirect forward sale contracts, options, puts, calls, short sales, swaps,
derivatives and similar arrangements (including on a total return basis), and
sales and other transactions through non-U.S. broker-dealers or foreign
regulated brokers. Solely for purposes of this Section 2.01(i), subject to
Lender’s compliance with their respective obligations under the U.S. federal
securities laws and Lender’s internal policies, (a) “Lender” shall not be deemed
to include any employees, subsidiaries or affiliates of Lender that are
effectively walled off by appropriate information barriers approved by Lender’s
respective legal or compliance department (and thus have not been privy to any
information concerning the Transactions), and (b) the foregoing representations
and covenants of this Section 2.01(i) shall not apply to any transaction by or
on behalf of an account of Lender that was effected without the advice or
participation of, or such account’s receipt of information regarding the
Transactions provided by, Lender.

Section 2.02.    Representations and Warranties of the Borrower. The Borrower
hereby represents and warrants to the Lender as of the date of this Agreement
and as of the Effective Time as follows:

(a)    Organization and Good Standing. The Borrower is an entity duly
incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization, with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted.

(b)    Authority. The Borrower has the requisite corporate power and authority,
as applicable, to enter into and to consummate the transactions contemplated by
this Agreement, the Note and other Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and delivery by the
Borrower of this Agreement, the Note and the other Transaction Documents and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Borrower, and no
further action of the Borrower, its board of directors, managers, members or
stockholders, as applicable, is required in connection herewith or therewith.

(c)    Consents. The Borrower is not required to obtain any consent from,
authorization or order of, or make any filing or registration with any
governmental authority or any regulatory or self-regulatory agency or any other
Person in order for it to execute, deliver or perform any of its respective
obligations under or contemplated by this Agreement, the Note or any other
Transaction Document, in accordance with the terms hereof or thereof, other than
filing the Announcing 8-K Filing (as defined below) with the U.S. Securities and
Exchange Commission (the “Commission”). The Note is not being issued in
violation of, any preemptive or similar rights

 

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of any Person, or otherwise subject to any preemptive or similar rights of any
Person that have not been validly waived.

(d)    Valid and Binding Agreement. This Agreement has been duly executed and
delivered by the Borrower, and constitutes, and upon the execution and delivery
by the Borrower thereof, the Note and each other Transaction Document being
executed or amended in connection herewith will constitute the valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their terms, except (i) as limited by general equitable principles and
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally and (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.

(e)    Non-Contravention. The execution and delivery by the Borrower of this
Agreement, the Note and each other Transaction Document being executed and
delivered by the Borrower in connection herewith and the performance by the
Borrower of its obligations hereunder and under the Notes and the other
Transaction Documents do not and will not (i) violate any provision of the
Borrower’s organizational documents, (ii) conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Borrower is
subject, or by which any property or asset of the Borrower is bound or affected,
(iii) require any permit, authorization, consent, approval, exemption or other
action by, notice to or filing with, any court or other federal, state, local or
other governmental authority or other Person, other than filing the Announcing
8-K Filing with the Commission, (iv) violate, conflict with, result in a
material breach of, or constitute (with or without notice or lapse of time or
both) a material default under, or an event which would give rise to any right
of notice, modification, acceleration, payment, cancellation or termination
under, or in any manner release any party thereto from any obligation under, any
permit or contract to which the Borrower is a party or by which any of its
properties or assets are bound, (v) violate, conflict with, result in a material
breach of, or constitute (with or without notice or lapse of time or both) a
material default under, or an event which would give rise to any right of
notice, modification, acceleration, payment, cancellation or termination under,
or in any manner release any party thereto from any obligation under, the
Indenture or the GPC License Agreement, or (vi) result in the creation or
imposition of any Lien on any part of the properties or assets of the Borrower,
except, in each instance of clauses (ii), (iii), (iv) and (vi) hereof, where
such violation, conflict, breach, default or Lien would not reasonably be
expected, individually or in the aggregate, to result in a material adverse
effect on (a) the business, operations, results of operations, condition
(financial or otherwise) or properties of the Borrower and its Subsidiaries,
taken as a whole, (b) the legality, validity or enforceability of any provision
of this Agreement, the Note or any other Transaction Document, (c) the ability
of the Borrower to timely perform its obligations under this Agreement, the Note
or any other Transaction Documents, or (d) the rights and remedies of the Lender
under this Agreement, the Note or any other Transaction Document. As of the date
hereof, no Event of Default (as defined in the Indenture) under the Indenture
exists and no Event of Default (as defined in the Facility Agreement) under the
Facility Agreement exists, and, to the knowledge of the Borrower, no event has
occurred, and no fact or circumstance exists, that, with or without notice,
lapse of time or both would reasonably be expected to result in an Event of
Default under either the Indenture or the Facility Agreement.

 

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(f)    Issuance of Conversion Shares. The Conversion Shares issuable upon
conversion of the Note are duly authorized and, when issued in accordance with
the applicable Note, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Borrower, and will not
be issued in violation of, or subject to, any preemptive or similar rights of
any person. The Borrower has reserved from its duly authorized capital stock an
aggregate of 519,206 shares of Common Stock for issuance hereafter upon
conversion of the Note in accordance with the terms thereof (plus any additional
shares of Common Stock that may be issuable as a result of the anti-dilution
provisions of the Note), in each case, free and clear of preemptive or similar
rights. As of the date of this Agreement, there are 39,350,785 shares of Common
Stock issued and outstanding.

(g)    SEC Reports; Nasdaq. The Borrower has filed all reports, schedules,
forms, statements and other documents required to be filed by it under the
Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (the foregoing
materials, including the exhibits thereto and documents incorporated by
reference therein, being collectively referred to herein as the “SEC Reports”).
None of the SEC Reports, when filed, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Except as set forth in
the Borrower’s Quarterly Report on Form 10-Q for the quarter ended September 30,
2019, as filed with the Commission on November 14, 2019, and the Borrower’s
Current Reports on Form 8-K filed with the Commission on May 23, 2019,
October 3, 2019, November 21, 2019 and December 23, 2019 (such disclosure the
“Potential Delisting”), the Borrower is not in violation of the requirements of
the Nasdaq Global Market (“Nasdaq GM”) and has no knowledge of any facts or
circumstances which could reasonably lead to delisting or suspension of trading
of the Common Stock in the foreseeable future.

(h)    Certain Fees. No brokerage or finder’s fees or commissions are or will be
payable by the Borrower or any of its affiliates or representatives to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Lender shall have no obligation with respect to any fees or
with respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section 2.02(h) that may be due in connection with the
transactions contemplated hereby.

(i)    Exemption from Registration. No registration under the Securities Act or
any state securities laws is or will be required for the offer and issuance of
the Note by the Borrower to the Lender as contemplated hereby or for the offer
and issuance of the Conversion Shares by the Borrower to the Lender as
contemplated hereby and by the Note. The amendments and transactions
contemplated hereby or entered into in connection herewith, including the
issuance and sale of the Note hereunder and the issuance and sale of the
Conversion Shares pursuant to the terms of the Note do not and will not
contravene, or require stockholder approval pursuant to, the rules and
regulations of The Nasdaq Stock Market LLC, as currently in effect. Assuming
Lender is not as of the date of issuance, and for a period of three (3) months
prior to the date of issuance has not been, an “affiliate” (as such term is used
in Rule 144 under the Securities Act) of the Borrower (which the Borrower shall
assume (and the Lender shall be deemed to represent) unless Lender has otherwise
advised the Borrower in writing) and in reliance on Lender’s representations

 

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contained in Section 2.01(e) hereof, the Note and the Conversion Shares will be
freely tradeable by Lender without restriction or limitation (including volume
limitation), pursuant to Rule 144 under the Securities Act, and will not contain
or be subject to any legend or stop transfer instructions restricting the sale
or transferability thereof. The Borrower has not paid or given (and will not pay
or give), directly or indirectly, any commission or other remuneration for
soliciting the exchange to be effected pursuant to this Agreement or otherwise
in connection with the issuance and sale of the Note or any Conversion Shares
pursuant to this Agreement or the Note. The Borrower is not, and never has been,
a “shell company” (as defined in Rule 12b-2 under the Exchange Act) and is not
an issuer of a type identified in, or subject to, Rule 144(i)(1) under the
Securities Act.

(j)    No Integrated Offering. Neither the Borrower, nor any of its affiliates,
nor any person acting on its or their behalf has, directly or indirectly, made,
or will make, any offers or sales of any security or solicited, or will solicit,
any offers to buy any security, under circumstances that would cause the
offering and issuance of the Note or the offering and issuance of any of the
Conversion Shares to be integrated with prior or contemporaneous offerings by
the Borrower (i) for purposes of the Securities Act and which would require the
registration of any such securities under the Securities Act, or (ii) for
purposes of any applicable stockholder approval provisions of the Nasdaq GM and
which would require stockholder approval for the issuance of the Note or
Conversion Shares.

(k)    No Bad Actor Disqualification. None of the Credit Parties, any of its
predecessors, any director, executive officer, other officer of any Credit Party
participating in the offering of the Note or the Conversion Shares, any
beneficial owner (as that term is defined in Rule 13d-3 under the Exchange Act)
of 20% or more of any Credit Party’s outstanding voting equity securities,
calculated on the basis of voting power, any “promoter” (as that term is defined
in Rule 405 under the Securities Act) connected with any Credit Party at the
time this representation is made, any placement agent or dealer participating in
the offering of the Note or the Conversion Shares and any of such agents’ or
dealer’s directors, executive officers, other officers participating in the
offering of the Note or the Conversion Shares (each, a “Covered Person”) is
subject to any of the “Bad Actor” disqualifications described in Rule
506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”).
The Borrower has exercised reasonable care to determine (i) the identity of each
person that is a Covered Person and (ii) whether any Covered Person is subject
to a Disqualification Event. Each Credit Party has complied in all material
respects, to the extent applicable, with its disclosure obligations under Rule
506(e). No Credit Party is any other reason disqualified from reliance upon Rule
506 of Regulation D for purposes of the offer, sale and issuance of the Note or
the Conversion Shares.

(l)    No Unlawful Payments. Neither the Borrower, to the knowledge of the
Borrower, nor any of its directors or officers or any employee, agent,
affiliate, representative of or other person associated with or acting on behalf
of the Borrower, has (a) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expense relating to political activity,
(b) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds, (c) violated or is in
violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or (d) made any bribe, unlawful rebate, payoff, influence payment,
kickback or other unlawful payment.

(m)    Compliance with Money Laundering Laws. The operations of the Borrower are
and have been conducted at all times in compliance with all financial
recordkeeping and reporting requirements applicable to the Borrower, including
those of the Bank Secrecy Act, as amended by Title III of the Uniting and
Strengthening America by Providing Appropriate Tools

 

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Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, and the
money laundering and any related or similar laws of all jurisdictions in which
the Borrower conducts business (collectively, the “Money Laundering Laws”), and
no action, suit or proceeding by or before any governmental authority involving
the Borrower with respect to the Money Laundering Laws is pending or, to the
knowledge of the Borrower, threatened.

(n)    OFAC. The Borrower is not (a) a country, the government of a country, or
an agency of the government of a country, (b) an organization directly or
indirectly controlled by a country or its government, or (c) a person resident
in or determined to be resident in a country, in each case, that is subject to a
comprehensive country sanctions program administered and enforced by the Office
of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), and
the Borrower is not a person named on the list of Specially Designated Nationals
maintained by OFAC.

(o)    Application of Takeover Protections. The Borrower and its board of
directors have taken all necessary action, if any, in order to render
inapplicable the Borrower’s issuance of the Note and Conversion Shares and the
Lender’s ownership of such securities from the provisions of any control share
acquisition, interested stockholder, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the organizational documents of the Borrower or
the laws of the state of its incorporation which is applicable to the Lender as
a result of the transactions contemplated by this Agreement, including the
Borrower’s issuance of the Note and Conversion Shares and the Lender’s ownership
of such securities.

(p)    Litigation. No proceeding is pending before or, to the knowledge of
Borrower, threatened by any Governmental Authority (a) to which any Credit Party
is a party, (b) that purports to affect or pertain to the Transaction Documents
or the transactions contemplated hereby or thereby or (c) that has as the
subject thereof any assets owned by any Credit Party or any of its Subsidiaries,
in each case, that could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. No injunction, writ, temporary
restraining order or any order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain the execution,
delivery or performance of this Agreement or any other Transaction Document or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.

(q)    Compliance with Laws. Except as could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, each Credit
Party is in compliance with all Applicable Laws and authorizations.

ARTICLE III.

COVENANTS

Section 3.01.    Reservation of Shares. On and after the date hereof, the
Borrower shall at all times reserve and keep available, free of preemptive or
similar rights, a sufficient number of shares of Common Stock for the purpose of
enabling the Borrower to issue all of the Conversion Shares pursuant to the Note
(without regard to the 4.985% Cap (as defined in the Note).

 

9

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Section 3.02.    Blue Sky Filings. The Borrower shall take such action as is
necessary in order to obtain an exemption for, or to qualify the Note and the
Conversion Shares for, issuance and sale to the Lender under applicable
securities or “Blue Sky” laws of the states of the United States, and shall
provide evidence of such actions promptly upon request of the Lender.

Section 3.03.    Listing. The Borrower has submitted an application for the
listing of the Conversion Shares on the Nasdaq GM and will use its commercially
reasonable efforts to secure such listing. For so long as the Note remains
outstanding, the Borrower shall use commercially reasonable efforts to maintain
the Common Stock’s listing on the Nasdaq GM. The Borrower shall not take any
action which would be reasonably expected to result in the delisting or
suspension of trading the Common Stock on the Nasdaq GM. If the Common Stock is,
or is reasonably expected to be, delisted from the Nasdaq GM, the Borrower shall
use its best efforts to cause the Common Stock to be listed on the Nasdaq
Capital Market contemporaneously with such delisting and, thereafter, (i) shall
use commercially reasonable efforts to maintain the Common Stock’s listing on
the Nasdaq Capital Market and (ii) shall not take any action which would be
reasonably expected to result in the delisting or suspension of trading the
Common Stock on the Nasdaq Capital Market. The Borrower shall pay all fees and
expenses in connection with satisfying its obligations under this Section 3.03.
Lender hereby (x) acknowledges and agrees that Lender has been made aware of the
Potential Delisting, and (y) agrees that any delisting or suspension of trading
the Common Stock on the Nasdaq GM in connection with the Potential Delisting
will not be deemed a breach of this Section 3.03.

Section 3.04.    Disclosure; Confidentiality. On or before 8:00 a.m., New York
time, on the first Business Day following the date of this Agreement, the
Borrower shall file with the Commission a Current Report on Form 8-K describing
all the material terms of the transactions contemplated by this Agreement,
disclosing the effectiveness of this Agreement and the other Transaction
Documents entered into pursuant to, or in connection with, this Agreement,
attaching this Agreement and the other Transaction Documents entered into
pursuant to, or in connection with, this Agreement (in each case, without any
redaction therefrom) and disclosing any other presently material non-public
information (if any) provided or made available to Lender (or Lender’s agents or
representatives) on or prior to the date hereof (the “Announcing 8-K Filing”).
The Borrower represents and warrants that, from and after the filing of the
Announcing 8-K Filing, it shall have publicly disclosed all material, non-public
information (if any) provided or made available to Lender (or Lender’s agents or
representatives) by the Borrower or any of its officers, directors, employees,
Affiliates or agents in connection with the transactions contemplated by this
Agreement or otherwise on or prior to the date hereof. Notwithstanding anything
contained in this Agreement to the contrary, and without implication that the
contrary would otherwise be true, the Borrower expressly acknowledges and agrees
that, from and after the Announcing 8-K Filing, no Lender nor any affiliate of
Lender shall have (unless expressly agreed to by Lender after the date hereof in
a written definitive and binding agreement executed by the Borrower and Lender
or customary oral (confirmed by e-mail) “wall cross” agreement), any duty of
trust or confidence with respect to, or a duty not to trade in any securities
while aware of, any information regarding the Borrower.

Section 3.05.    Taxes. The Borrower shall be responsible for paying all present
or future stamp, court or documentary, intangible, recording, filing or similar
taxes that arise from any

 

10

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payment or issuance made under, from the execution, delivery, performance or
enforcement of, or otherwise with respect to, this Agreement.

Section 3.06.    License Acknowledgement. Lender hereby acknowledges that the
Borrower is a party to the GPC License Agreement, and that Lender has had an
opportunity to review the GPC License Agreement, including the provisions
thereunder relating to portions of the Collateral.

ARTICLE IV.

ACKNOWLEDGMENT OF THE BORROWER

Section 4.01.    The Borrower irrevocably and unconditionally acknowledges,
affirms and covenants to Lender that:

(a)    Lender is not in default under the Indenture and has not otherwise
breached any obligations to the Borrower; and

(b)    there are no offsets, counterclaims or defenses to the obligations under
the Indenture as of the date hereof, including the liabilities and obligations
of the Borrower under the Indenture Notes or the rights, remedies or powers of
Lender in respect of any of the obligations under the Indenture, and the
Borrower agrees not to interpose (and each does hereby waive and release) any
such defense, set off or counterclaim in any action brought by Lender with
respect thereto.

ARTICLE V.

CONDITIONS PRECEDENT.

Section 5.01.    Conditions. The consummation of the Exchange is subject to the
following conditions on or prior to the Effective Time:

(a)    Delivery of Documents. The Borrower and the Lender shall each have
executed and delivered this Agreement, the Borrower shall have executed and
delivered to Lender its Note in accordance with Section 1.02.

(b)    Performance; No Default. The representations and warranties of the
Borrower and Lender contained herein and in each other document, agreement or
instrument being executed and delivered pursuant to, or in connection with the
execution and delivery of, this Agreement shall be true and correct, and the
Borrower and Lender shall have performed and complied with all agreements and
conditions contained in this Agreement and in each such other document,
agreement or instrument, in each case, to be performed by or complied with by
the Borrower or Lender, as applicable, prior to the Effective Time in all
respects, and the Lender shall have received a certification from the chief
executive officer or chief financial officer of the Borrower to the foregoing
effect.

(c)    Authorization. The Borrower shall have delivered to the Lender evidence
of authority, officer’s certificates and good standing certificates in the
jurisdiction of organization of the Borrower, in form and substance satisfactory
to the Lender.

 

11

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(d)    Financing Statements. All Uniform Commercial Code financing statements
required to be filed, registered or recorded in connection with the Guaranty and
Security Agreement shall have been filed, registered and recorded, and the
Borrower is not aware of any defect with respect thereto.

(e)    Security Interest. The Collateral Agent shall have, for the benefit of
the Lender, a first priority security interest (subject to Permitted Liens) in
all Collateral in which a lien can be perfected by (i) the filing of a Uniform
Commercial Code financing statement, and (ii) the filing of the Intellectual
Property Security Agreements.

ARTICLE VI.

MISCELLANEOUS

Section 6.01.    Entire Agreement. This Agreement together with the Note and the
other Transaction Document constitute the entire agreement, and supersede all
other prior and contemporaneous agreements and understandings, both oral and
written, among the Lender and the Borrower with respect to the subject matter
hereof.

Section 6.02.    Amendments and Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed by the Borrower and
(i) prior to the Effective Time, the Lender and (ii) following the Effective
Time, the Required Lenders. Any amendment that is approved by the Required
Lenders following the Effective Time as aforesaid shall bind the Lender,
provided that any such amendment applies to the rights and obligations of the
Lender and the holders of December 2019 Notes on substantially the same basis.
No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.

Section 6.03.    Successors and Assigns. All of the covenants and provisions of
this Agreement by or for the benefit of the Lender or the Borrower shall bind
and inure to the benefit of their respective successors and permitted assigns.
No party hereunder may assign its rights or obligations hereunder without the
prior written consent of the other parties hereto, except that after the
Effective Time, Lender may assign or otherwise transfer its rights hereunder to
any transferee or assignee of the Note (in whole or in part), provided that
(a) Lender agrees in writing with the transferee or assignee to assign such
rights, and such assignee or transferee agrees in writing to accept such rights
subject to, and to be bound by, the terms of this Agreement, and a copy of such
agreement is furnished to the Borrower after such transfer or assignment; and
(b) in the case of an assignment or transfer of rights or obligations hereunder
to a transferee or assignee of the Note, such assignment or transfer is effected
in compliance with the Facility Agreement.

Section 6.04.    Notices. Any notice, request or other communication to be given
or made under this Agreement shall be in writing. Such notice, request or other
communication shall be deemed to have been duly given or made when it shall be
delivered by hand, overnight mail, international courier (confirmed by
facsimile), electronic mail or facsimile to the party to which it is required or
permitted to be given or made at such party’s address specified below or at such
other address as such party shall have designated by notice to the other
parties.

 

12

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If to the Borrower:

KemPharm, Inc.

1180 Celebration Blvd.

Suite 103

Celebration, FL 34747

Fax: (321) 250-3698

E-mail: lclifton@kempharm.com

Attention: R. LaDuane Clifton, Chief Financial Officer

With a copy to (which shall not constitute notice hereunder):

Cooley LLP

1299 Pennsylvania Avenue, NW

Suite 700

Washington, DC 20004

Fax: (703) 456-8100

Email: bsiler@cooley.com

Attention: Brent Siler

If to Lender:

M. Kingdon Offshore Master Fund, LP

c/o Kingdon Capital Management, LLC

152 W. 57th Street, 50th Floor

New York, NY 10019

Fax: 212-849-4901

Email: rweinstein@kingdon.com

With a copy to (which shall not constitute notice hereunder):

legal@kingdon.com

Section 6.05.    Applicable Law; Consent to Jurisdiction.

(a)    As part of the consideration and mutual promises being exchanged and
given in connection with this Agreement, the parties hereto agree that all
claims, controversies and disputes of any kind or nature arising under or
relating in any way to the enforcement or interpretation of this Agreement or to
the parties’ dealings, rights or obligations in connection herewith, including
disputes relating to the negotiations for, inducements to enter into, or
execution of, this Agreement, and disputes concerning the interpretation,
enforceability, performance, breach, termination or validity of all or any
portion of this Agreement shall be governed by the laws of the State of New York
without giving effect to any laws, rules or provisions that would cause the
application of the laws of any jurisdiction other than the State of New York.

(b)    The parties hereto agree that all claims, controversies and disputes of
any kind or nature relating in any way to the enforcement or interpretation of
this Agreement or to the

 

13

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parties’ dealings, rights or obligations in connection herewith, shall be
brought exclusively in the state and federal courts sitting in The City of New
York, borough of Manhattan. With respect to any such claims, controversies or
disputes, each of the parties hereby irrevocably:

(i)    submits itself and its property, generally and unconditionally, to the
personal jurisdiction of the aforesaid courts and agrees that it will not bring
any action in any court or tribunal other than the aforesaid courts;

(ii)    waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or proceeding (A) any claim that it is
not personally subject to the jurisdiction of the above named courts for any
reason other than the failure to serve process in accordance with this
Section 6.05, (B) any claim that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise)
and (C) to the fullest extent permitted by the applicable law, any claim that
(1) the suit, action or proceeding in such court is brought in an inconvenient
forum, (2) the venue of such suit, action or proceeding is improper or (3) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts; and

(iii)    WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE
FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED
THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY
AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.05.

Notwithstanding the foregoing in this Section 6.05, a party may commence any
action or proceeding in a court other than the above-named courts solely for the
purpose of enforcing an order or judgment issued by one of the above-named
courts.

Section 6.06.    Counterparts; Effectiveness. This Agreement and any amendment
hereto may be executed and delivered in any number of counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement. In the event that any signature to this
Agreement or any amendment hereto is delivered by facsimile transmission or by
e-mail delivery of a “.pdf” format data file, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile or
“.pdf” signature page were an original thereof. No party hereto shall raise the
use of a facsimile machine or e-mail delivery of a “.pdf” format data file to
deliver a signature to this Agreement or any amendment hereto or the fact that
such signature was

 

14

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transmitted or communicated through the use of a facsimile machine or e-mail
delivery of a “.pdf” format data file as a defense to the formation or
enforceability of a contract, and each party hereto forever waives any such
defense.

Section 6.07.    No Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any person (other than
the parties to this Agreement) any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

Section 6.08.    Remedies; Specific Performance. The rights and remedies
provided in this Agreement shall be cumulative and in addition to all other
remedies available under the Facility Agreement, the Note, the other Transaction
Documents and/or otherwise at law or in equity. No remedy contained herein shall
be deemed a waiver of compliance with the provisions giving rise to such remedy,
and nothing herein shall limit Lender’s right to pursue actual damages for any
failure by the Borrower to comply with the terms of this Agreement, the Facility
Agreement, the Note and the other Transaction Documents. The parties to this
Agreement agree that irreparable damage would occur and that the parties to this
Agreement would not have any adequate remedy at law in the event that any of the
provisions of this Agreement, the Facility Agreement or any other Transaction
Document were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that each of the parties to this
Agreement shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement, the Facility Agreement or any other Transaction Document and
to enforce specifically the terms and provisions of this Agreement, the Facility
Agreement, and the other Transaction Documents in each case without the
necessity of posting bond or other security or showing actual damages, and this
being in addition to any other remedy to which such party is entitled at law or
in equity.

Section 6.09.    Effect of Headings. The section and subsection headings herein
are for convenience only and not part of this Agreement and shall not affect the
interpretation thereof.

Section 6.10.    Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement so long as this Agreement as so modified continues to express,
without material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties.
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

Section 6.11.    Reservation of Rights. Lender has not hereby waived any of
Lender’s rights or remedies arising from any breach or default or any right
otherwise available under the Facility Agreement, any other Transaction Document
or at law or in equity as to Lender’s Note. Lender expressly reserves all such
rights and remedies. Notwithstanding anything else to the contrary herein,
Lender hereby agrees that the issuance of the Note to Lender satisfies in full
any and all obligations of the Borrower under the Indenture as to the Indenture
Notes held by Lender and

 

15

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Lender’s remedies with regard to such Indenture Notes shall be solely as
described in this Agreement.

Section 6.12.    Further Assurances. The parties hereby agree, from time to
time, as and when reasonably requested by any other party hereto, to execute and
deliver or cause to be executed and delivered, all such documents, instruments
and agreements, including secretary’s certificates, stock powers and irrevocable
transfer agent instructions, and to take or cause to be taken such further or
other action, as any party may reasonably deem necessary or desirable in order
to carry out the intent and purposes of this Agreement. Without limiting the
foregoing, the Borrower shall take such action, and deliver such notices,
documents, instruments and agreements as the Trustee may reasonably require to
effectuate the exchange and surrender of Indenture Notes in accordance with this
Agreement.

Section 6.13.    No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.

Section 6.14.    Interpretative Matters. Unless otherwise indicated or the
context otherwise requires, (a) all references to Sections, Schedules,
Appendices or Exhibits are to Sections, Schedules, Appendices or Exhibits
contained in or attached to this Agreement, (b) 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,
(c) the words “hereof,” “herein” and words of similar effect shall reference
this Agreement in its entirety, and (d) the use of the word “including” in this
Agreement shall be by way of example rather than limitation. Unless otherwise
indicated, references to “Transaction Documents” in this Agreement refer to
Transaction Documents (as defined in the Facility Agreement), each as amended as
of the Effective Date.

Section 6.15.    Reaffirmation. Other than as expressly provided in this
Agreement, the execution and delivery of this Agreement shall not operate as a
waiver of any right, power or remedy of the Lender, constitute a waiver of any
provision of the Facility Agreement, any other Transaction Documents (as
currently in effect) or any other document executed in connection therewith or
serve to effect a novation of the obligations thereunder. The Borrower, as
issuer, debtor, grantor, pledger, mortgagor, guarantor or assignor, or in other
any other similar capacity in which it grants liens or security interests in its
property hereby (i) acknowledges and agrees that it has reviewed this Agreement,
(ii) ratifies and reaffirms all of its obligations, contingent or otherwise,
under each of the Transaction Documents, and (iii) to the extent the Borrower
granted Liens on or security interests in any of its property pursuant to any
such Transaction Document as security for the Obligations under or with respect
to the Transaction Documents, ratifies and reaffirms such grant of security
interests and Liens as provided in the Transaction Documents and confirms and
agrees that such security interests and Liens continue to secure all of the
currently outstanding or future Obligations on the terms and conditions of the
Transactions Documents (for the avoidance of doubt as amended as of the
Effective Date). The Borrower hereby consents to this Agreement and acknowledges
that this Agreement, the Note and each document or agreement executed and
delivered pursuant to, or in connection with, the execution and delivery of this
Agreement is a Transaction Document and each of the other Transaction Documents,
each as amended as of the Effective Date (including as provided in this
Agreement), remains in full force

 

16

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and effect and is hereby ratified and reaffirmed; provided that, nothing in this
Section 6.15 shall obligate the Borrower to restate, or be considered to be a
restatement of, the representations of the Borrower contained in Article 3 of
the Facility Agreement as of the date hereof. Any reference in the Transaction
Documents to “hereunder,” “hereof,” “herein,” or words of like import referring
to such agreement shall refer to such Transaction Document as amended as of the
Effective Date. For the avoidance of doubt, the parties acknowledge and agree
that, nothing contained herein or in the Facility Agreement shall be deemed or
construed as an agreement by Lender to make any Disbursement or additional Loan
on or after the date hereof.

Section 6.16.    Payment Set Aside. Notwithstanding anything to the contrary
contained herein, if any payment or transfer (or any portion thereof) to the
Lender shall be subsequently invalidated, declared to be fraudulent or a
fraudulent conveyance or preferential, avoided, rescinded, set aside or
otherwise required to be returned or repaid, whether in bankruptcy,
reorganization, insolvency or similar proceedings involving the Borrower or
otherwise, then the Obligations purportedly satisfied with such payment or
transfer, to the extent that such payment is or must be invalidated, declared to
be fraudulent or a fraudulent conveyance or preferential, avoided, rescinded,
set aside or otherwise required to be return or repaid, shall immediately be
reinstated, without need for any action by any Person, and shall be enforceable
against the Borrower, any guarantor and their successors and permitted assigns
as if such payment had never been made (in which case this Agreement shall in no
way impair the claims of Lender with respect to such payment or transfer). The
provisions of this Section 6.16 shall survive the satisfaction in full of the
Obligations and the termination of the Facility Agreement.

Section 6.17.    Termination. Except to the extent otherwise agreed in writing
by the Lender prior to the Effective Time, this Agreement shall terminate and be
of no further force or effect if any of the conditions set forth in Article V
are not satisfied or waived by the Lender on or prior to January 13, 2020.

Section 6.18.    Independent Nature of Facility Agreement Lenders. The
obligations of Lender under this Agreement and each of the other Transaction
Documents are several and not joint with the obligations of any other “Lender”
(as defined in the Facility Agreement) party to the Facility Agreement (the
“Facility Agreement Lenders”), and no Facility Agreement Lender shall be
responsible in any way for the performance of the obligations of any other
Facility Agreement Lender under any Transaction Document. Each Facility
Agreement Lender shall be responsible only for its own representations,
warranties, agreements and covenants under the Transaction Documents. The
decision of Lender to enter into this Agreement, consummate the Exchange and
acquire the Note pursuant to this Agreement has been made by Lender
independently of any other Facility Agreement Lender and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Borrower that may have been made or
given by any other Facility Agreement Lender or by any agent, attorney, advisor,
representative or employee of any other Facility Agreement Lender, and no
Facility Agreement Lender or any of its agents, attorneys, advisors,
representatives or employees shall have any liability to Lender (or any other
Person) relating to or arising from any such information, materials, statements
or opinions. Nothing contained in this Agreement, and no action taken by any
Facility Agreement Lender pursuant hereto or thereto (including a Facility
Agreement Lender’s acquisition of Obligations, Notes, Conversion Shares or any
other securities at the same time as any other Facility Agreement

 

17

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Lender), shall be deemed to constitute the Facility Agreement Lenders as, and
the Borrower acknowledges and agrees that the Facility Agreement Lenders do not
thereby constitute, a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Facility Agreement Lenders are
in any way acting in concert or as a group with respect to such Obligations or
the transactions contemplated by this Agreement or any other Transaction
Document, and the Borrower shall not assert any contrary position.

Section 6.19.     No Fiduciary Relationship. The Borrower acknowledges and
agrees that (a) Lender is acting at arm’s length from the Borrower with respect
to this Agreement and the Transaction Documents and the transactions
contemplated hereby and thereby; (b) Lender will not, solely by virtue of this
Agreement or any of the Transaction Documents or any transaction contemplated
hereby or thereby, become an Affiliate of, or have any agency, tenancy or joint
venture relationship with, the Borrower; (c) Lender has not acted, or is or will
be acting, as a financial advisor to, or fiduciary (or in any similar capacity)
of, or has any fiduciary or similar duty to, the Borrower with respect to, or in
connection with, this Agreement and the Transaction Documents and the
transactions contemplated hereby and thereby, and the Borrower agrees not to
assert, and hereby waives, any claim that Lender has any fiduciary duty to the
Borrower; (d) any advice given by Lender or any of its representatives or agents
in connection with this Agreement and the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to Lender’s
performance of its obligations hereunder and thereunder (including, in the case
of the Lender, its acquisition of the Note and any Conversion Shares); and
(e) the Borrower’s decision to enter into this Agreement has been based solely
on the independent evaluation by the Borrower and their representatives.

 

18

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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be duly
executed as of the date first written above.

 

THE BORROWER: KEMPHARM, INC. By:  

/s/ R. LaDuane Clifton                    

Name:   R. LaDuane Clifton Title:   Chief Financial Officer

 

[Signature Page to January 2020 Exchange Agreement]

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

LENDER: M. KINGDON OFFSHORE MASTER FUND, LP

By:

  KINGDON CAPITAL MANAGEMENT, LLC,   As agent and investment advisor By:  

/s/ William Walsh

Name:   William Walsh Title:   CFO

 

[Signature Page to January 2020 Exchange Agreement]

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Schedule 1

 

LENDER

   Indenture Notes
(principal
amount)      Accrued and
Unpaid
Interest on
Indenture
Notes as of
the Effective
Date      Accrued and
Unpaid
Interest on
Indenture
Notes Paid in
Cash      Accrued and
Unpaid
Interest on
Indenture
Notes Paid in
Kind      Note
(principal
amount)*  

M. Kingdon Offshore Master Fund, LP

   $ 3,000,000.00      $ 74,708.33      $ 37,354.17      $ 37,354.16      $
3,037,354.16     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total:

   $ 3,000,000.00      $ 74,708.33      $ 37,354.17      $ 37,354.16      $
3,037,354.16     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

*

Includes 50% of the accrued and unpaid interest on the Indenture Notes as of the
Effective Date.

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

Exhibit A

Form of Note

[Included as Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed
on January 13, 2020]