$1.2M
OF $2.2M CREDIT FACILITY CONVERTED TO COMMON STOCK AT $5.00 PER SHARE


 


THIS
NOTE AND THE SHARES OF CAPITAL STOCK THAT MAY BE ISSUABLE UPON THE CONVERSION OF THIS NOTE (THE “SECURITIES”)
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND
HAVE BEEN TAKEN FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH ANY DISTRIBUTION THEREOF. THE
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT, EXCEPT UNDER
CERTAIN SPECIFIC LIMITED CIRCUMSTANCES, AN OPINION OF COUNSEL FOR THE HOLDER, CONCURRED WITH BY COUNSEL FOR THE COMPANY, THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.


 


HANCOCK
JAFFE LABORATORIES, INC.


 


CONVERTIBLE
PROMISSORY NOTE


 


	Irvine,
    California	Credit
    Facility Up To $2,200,000.00	June
    26, 2015


 


1.
Principal and Interest.


 


Subject
to the terms and conditions of this Convertible Promissory Note (this “Note”), for value received, Hancock
Jaffe Laboratories, Inc., a Delaware corporation (the “Company”), hereby promises to pay to the order of BIODYNE
HOLDING SA (“Payee”) in lawful money of the United States the principal amount of ONE MILLION TWO HUNDRED THOUSAND
DOLLARS AND NO/100S ($1,200,000.00), together with simple interest on the unpaid principal balance of this Note at the rate of
EIGHT PERCENT (8.0%) per annum until this Note is converted in full or paid in full by the Company. The principal of and unpaid
accrued interest on this Note is due and payable on or before June 26, 2017 (the “Maturity Date”).


 


Upon
payment by the Company in full of all principal and interest payable hereunder or conversion of this Note in full as described
in Section 2 below, this original Note shall be surrendered to the Company for cancellation.


 


2.
Conversion Upon Closing Series A or B Preferred or IPO.


 


	 	a.	If,
    prior to the Maturity Date, the Company closes one or more in a Series A or B Preferred financing(s), in the aggregate amount
    of at least $5,500,000 (five million five hundred thousand dollars) in gross proceeds or an IPO (or series of related equity
    financings) with the principal purpose of raising capital pursuant to which the Company has an IPO valuation of not less than
    ONE HUNDRED MILLION DOLLARS ($100,000,000), (a “Qualified Financing”), then all principal and unpaid accrued interest
    under this Note, shall automatically be converted into the class of securities issued in such Qualified Financing at a conversion
    price of such Qualified Financing. This Note will convert into the class of securities issued in such Qualified Financing
    and, upon receiving the conversion shares, the Payee will be subject to the same terms as the other investors purchasing the
    class of securities issued in such Qualified Financing and will sign stock purchase agreements, stockholder agreements and
    similar instruments governing the ownership of such equity securities reflecting such terms.


 




    	 



    	 



    

 


	 	b.	Optional
    Conversion. Provided no Qualified Financing has occurred, at any time that this Note is outstanding prior to the Maturity
    Date, the Payee may convert all or any portion of the outstanding principal and accrued unpaid interest thereon into common
    stock of the Company at a conversion price (the “Conversion Price”) of SIX DOLLARS ($6.00) per share. If at any
    time while this Note is outstanding, the Company issues capital stock for less than SIX DOLLARS ($6.00) per share (on a common
    stock equivalent basis), then the conversion price of the Notes will be automatically reset to such lower price.
	 	 	 
	 	c.	Mechanics
    of Conversion. Upon the conversion of this Note, the outstanding principal and accrued unpaid interest of the Note shall be
    converted automatically without any further action by the holder and whether or not the Note is surrendered to the Company
    or its transfer agent. The Company shall not be obligated to issue certificates evidencing the shares of the securities issuable
    upon conversion unless such Note is either delivered to the Company or its transfer agent, or the holder notifies the Company
    or its transfer agent that such Note has been lost, stolen or destroyed and executes an agreement satisfactory to the Company
    to indemnify the Company from any loss incurred by it in connection with such Note. The Company shall, as soon as practicable
    after such delivery, or such agreement and indemnification, issue and deliver at such office to such holder of such Note,
    a certificate or certificates for the securities to which the holder shall be entitled and a check payable to the holder in
    the amount of any cash amounts payable as the result of a conversion into fractional shares of the Securities. Such conversion
    shall be deemed to have been made immediately prior to the close of business on the date of closing of the event triggering
    conversion. The person or persons entitled to receive securities issuable upon such conversion shall be treated for all purposes
    as the record holder or holders of such securities on such date. The person entitled to receive securities issuable upon conversion
    shall also execute and deliver any stock purchase agreements, stockholder agreements or similar instruments as may be required
    to effect the conversion of this Note. The stock issued on conversion of this Note will be fully paid and non-assessable.
    All principal and unpaid accrued interest that is converted pursuant to this Section 2 will no longer be outstanding or due
    and payable from the Company and will be deemed to have been fully paid and satisfied on the effective date of such conversion
    and the Company shall thereafter have no further obligation or liability with respect to such amounts.
	 	 	 
	 	d.	Mechanics
    of Credit Facility up to $2,200,000. At any time, prior to the Company consummating an IPO, the Payee may loan the Company
    and the Company may accept such loan of up to $2,200,000 minus loans previously made to the Company by Payee. All loans made
    by Payee to the Company under this credit facility shall be made with the same terms, as those provided to either Series Preferred
    or Series Common (most favored terms) investors at the time the Payee converts the loan into equity, and will be subject to
    the same automatic conversion terms stated herein.
	 	 	 
	 	e.	Placement
    Agent Fees Upon Conversion. At any time prior to the Company consummating an IPO, if at Payee option, Payee converts Note,
    or if Payee Note is automatically converted, as described in section two herein, Company shall pay a Placement Agent fee equal
    to ten percent (10%) of such amount of loan converted. Upon conversion, such Placement Agent fee shall be paid by the Company
    to the designated Escrow Agent of the Qualified Financing for disbursement.








 






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3.
Prepayment.


 


The
Company will notify the Payee thirty (30) days prior to prepaying all or a portion of this Note to allow the Payee to exercise
its right to an optional conversion as described in Section 2, above. Subject to such notice requirement, the Company may,
at any time, prepay all or any part of the unpaid principal amount of this Note without premium or penalty. Partial prepayments
will be applied first to pay accrued unpaid interest and second, after all interest accrued through the date of such partial prepayment
has been paid in full, to reduce the principal amount outstanding hereunder.


 


4.
Most Favored Terms.


 


If
at any time while this Note is outstanding the Company issues any additional debt that is convertible into the Company’s
equity securities and such additional debt has a lower conversion price, a higher interest rate, an earlier maturity date or is
secured by collateral of the Company, then the terms of this Note will be modified to incorporate any such more favorable terms.


 


5.
Fees.


 





The Company agrees to
pay, in addition to the Placement Agent fees, principal and interest payable hereunder, reasonable fees, if incurred by Payee. 


  


6.
Savings Clause.


 


It
is the intention of the Company and the Payee to conform strictly to all applicable usury laws. In determining whether or
not the consideration that is taken, reserved, contracted for, charged or received under this Note (or otherwise in
connection with this Note) constitutes interest or whether or not such interest, under any specific contingency, exceeds the
maximum amount of interest allowed by applicable law, the Company and the Payee will, to the greatest extent permitted by
applicable law, (a) characterize any non-principal payment as an expense, fee or premium rather than as interest, (b)
amortize, prorate, allocate and spread the total amount of interest throughout the full term of this Note so that the actual
rate of interest on account of such indebtedness is uniform throughout the term hereof and/or (c) allocate interest between
portions of this Note, to the end that no such portion will bear interest at a rate greater than that permitted by applicable
law. After application of the preceding sentence, if the aggregate of all consideration constituting interest under
applicable law that is taken, reserved, contracted for, charged or received under this Note (or otherwise in connection with
this Note) exceeds the maximum amount of interest allowed by applicable law or would otherwise be usurious under applicable
law, then (i) the Company will not be obligated to pay the amount of such interest to the extent that it exceeds the maximum
amount permitted by applicable law, (ii) any such excess interest that may have been collected will be applied as a credit
against the then unpaid principal amount of the Note (or, to the extent that this Note is or would thereby be paid in full,
refunded to the Company) and (iii) the effective rate of interest will be automatically reduced to the maximum lawful rate
under applicable usury laws as now or hereafter construed by the courts having jurisdiction. The terms and provisions of this Section
6 will supersede every other conflicting provision of this Note or any other document evidencing or securing this
Note.


 




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7.
Amendment.


 


No
amendment, modification or supplement of or to this Note will be effective unless made in writing and signed by the Company and
the Payee.


 


8.
Integration.


 


This
Note, represents, and is intended to be, a complete statement of all of the terms and the arrangements between the Company and
the Payee with respect to the matters provided for herein, supersedes any and all previous oral or written and all contemporaneous
oral agreements, understandings, negotiations and discussions between the Company and the Payee with respect to those matters.


 


9.
Governing Law.


 


This
Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State
of California.


 


	 	Hancock
    Jaffe Laboratories, Inc.
	 	 	 
	 	By:	/s/
    Norman Jaffe
	 	Name:	Norman
    Jaffe
	 	Its:	President
	 	 	 
	 	Payee
	 	 	 
	 	By:	/s/
    Yury Zhivilo
	 	Name:	Yury
    Zhivilo
	 	Its:	Managing
    Director


 




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