Document:

NOTICE
OF GRANT OF [INCENTIVE/NON-QUALIFIED] STOCK OPTION

 

HANCOCK
JAFFE LABORATORIES, INC.

2016 OMNIBUS INCENTIVE PLAN

 

FOR
GOOD AND VALUABLE CONSIDERATION, Hancock Jaffe Laboratories, Inc. (the “Company”) hereby grants, pursuant to
the provisions of the Hancock Jaffe Laboratories, Inc. 2016 Omnibus Incentive Plan (the “Plan”), to the Grantee
designated in this Notice of Grant of [Incentive/Non-qualified] Stock Option (“Notice of Grant”) [an Incentive/a
Non-qualified] Stock Option to purchase the number of Shares set forth in this Notice of Grant (the “Option”),
subject to certain terms and conditions as outlined below in this Notice of Grant and the additional terms and conditions set
forth in the attached Terms and Conditions of Stock Option (together with this Notice of Grant, the “Award Agreement”).

 

	Grantee:	 	[Name]
	 	 	 
	Type
    of Option:	 	[Incentive/Non-qualified]
    Stock Option
	 	 	 
	Grant
    Date:	 	[Date]
	 	 	 
	Number
    of Shares Purchasable:	 	[####]
	 	 	 
	Option
    Price per Share:	 	$[#.##],
    which is the Fair Market Value as of the Grant Date
	 	 	 
	Expiration
    Date:	 	[Date],
    which is [10] years from the Grant Date
	 	 	 
	Exercisability
    Schedule:	 	[Insert
                                         schedule – time-based or performance-based]

         

        [Notwithstanding
        the foregoing Exercisability Schedule, exercisability of all or some portion of the Option may be accelerated in accordance
        with the terms and conditions of Section 2(c) of the attached Terms and Conditions.]

	 	 	 
	Exercise
                                                         after Separation from
                                                         Service:
	 	Separation
                                         from Service for any reason other than death, Disability or Cause: any non-exercisable
                                         portion of the Option expires immediately and any exercisable portion of the Option remains
                                         exercisable for [90 days] following Separation from Service for any reason other than
                                         death, Disability or Cause.

         

        Separation
        from Service due to death or Disability: any non-exercisable portion of the Option expires immediately and any exercisable
        portion of the Option remains exercisable for [12 months] following Separation from Service due to death or Disability.

         

        Separation
        from Service for Cause: the entire Option, including any exercisable and non-exercisable portion, expires immediately
        upon Separation from Service for Cause.

         

        In
        no event may THE Option be exercised after the Expiration Date as provided above.

 

    	Notice of Grant - Page 1

     

    

 

By
signing below, the Grantee agrees that the Option is granted under and governed by the terms and conditions of the Plan and the
Award Agreement, as of the Grant Date.

 

	GRANTEE	 	HANCOCK
    JAFFE LABORATORIES, INC.
	 	  	 	 	      
	Sign
    Name:	 	 	Sign
    Name:	 
	 	 	 	 	 
	Print
    Name:	 	 	Print
    Name:	 
	 	 	 	 	 
	 	 	 	Title:	 

 

    	Notice of Grant - Page 2

     

    

 

TERMS
AND CONDITIONS OF STOCK OPTION

 

1.       Grant
of Option. The Option granted to the Grantee and described in the Notice of Grant is subject to the terms and conditions of
the Plan. The terms and conditions of the Plan are hereby incorporated herein by reference. Except as otherwise expressly set
forth herein, the Award Agreement shall be construed in accordance with the terms and conditions of the Plan. Any capitalized
term not otherwise defined in the Award Agreement shall have the definition set forth in the Plan.

 

The
Committee has approved the grant to the Grantee of the Option, conditioned upon the Grantee’s acceptance of the terms and
conditions of the Award Agreement within 60 days after the Award Agreement is presented to the Grantee for review.

 

If
designated in the Notice of Grant as an Incentive Stock Option, the Option is intended to qualify as an Incentive Stock Option.
To the extent that the Option fails to meet the requirements of an Incentive Stock Option or is not designated as an Incentive
Stock Option, the Option shall be treated as a Non-qualified Stock Option.

 

2.       Exercise
of Option.

 

(a)       Right
to Exercise. The Option shall be exercisable, in whole or in part, during its term in accordance with the Exercisability Schedule
set forth in the Notice of Grant and with the applicable provisions of the Plan and the Award Agreement. No Shares shall be issued
pursuant to the exercise of the Option unless the issuance and exercise comply with applicable laws. Assuming such compliance,
for income tax purposes the Shares shall be considered transferred to the Grantee on the date on which the Option is exercised
with respect to such Shares. Until such time as the Option has been duly exercised and Shares have been delivered, the Grantee
shall not be entitled to exercise any voting rights with respect to such Shares, shall not be entitled to receive dividends or
other distributions with respect thereto and shall not have any other rights of a Stockholder with respect thereto.

 

(b)       Method
of Exercise. The Grantee may exercise the Option by delivering an exercise notice in a form approved by the Company (the “Exercise
Notice”), which shall state the election to exercise the Option, the number of Shares with respect to which the Option
is being exercised, and such other representations and agreements as may be required by the Company. The Exercise Notice shall
be accompanied by payment of the aggregate Option Price as to all Shares exercised. The Option shall be deemed to be exercised
upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Option Price (as well as any applicable
withholding or other taxes).

 

(c)       Acceleration
of Exercisability under Certain Circumstances. The exercisability of the Option shall not be accelerated under any circumstances,
except as otherwise provided in the Plan; provided, however, that the Option shall become fully vested and exercisable
in the event of disability or death of the optionee or immediately prior to, and contingent upon, a Change in Control.

 

3.       Method
of Payment. If the Grantee elects to exercise the Option by submitting an Exercise Notice in accordance with Section 2(b)
above, the aggregate Option Price (as well as any applicable withholding or other taxes) shall be paid by cash or check; provided,
however, that the Committee may, but is not required to, consent to payment in any of the following forms, or a combination
of them:

 

(a)       cash
or check;

 

(b)       a
“net exercise” under which the Company reduces the number of Shares issued upon exercise by the largest whole number
of Shares with a Fair Market Value that does not exceed the aggregate Option Price and any applicable withholding, or such other
consideration received by the Company under a cashless exercise program approved by the Company in connection with the Plan;

 

    	Terms and Conditions - Page 1

     

    

 

(c)       surrender
of other Shares owned by the Grantee that have a Fair Market Value on the date of surrender equal to the aggregate Option Price
of the exercised Shares and any applicable withholding; or

 

(d)       any
other consideration that the Committee deems appropriate and in compliance with applicable law.

 

4.       Restrictions
on Exercise. The Option may not be exercised until such time as the Plan has been approved by the Stockholders, or if the
issuance of the Shares upon exercise or the method of payment of consideration for those Shares would constitute a violation of
any applicable law, regulation or Company policy.

 

5.       Transferability.

 

(a)       The
Option may not be transferred in any manner other than by will or by the laws of descent or distribution and may be exercised
during the lifetime of the Grantee only by the Grantee; provided, however, that the Grantee may transfer the Option
(a) pursuant to a domestic relations order by a court of competent jurisdiction or (b) to any Family Member of the Grantee in
accordance with Section 17.11.2 of the Plan (entitled “Family Transfers,” or any successor provision thereto) by delivering
to the Company a notice of assignment in a form acceptable to the Company. No transfer or assignment of the Option to or on behalf
of a Family Member under this Section 5 shall be effective until the Company has acknowledged such transfer or assignment in writing.

 

(b)       Without
limitation of Section 9 below, any Issued Shares in connection with the Option shall be subject to the Company’s right of
first refusal under Section 17.4.1 of the Plan (entitled “Right of First Refusal,” or any successor provision thereto),
the Company’s right of repurchase under Section 17.4.2 of the Plan (entitled “Right of Repurchase,” or any successor
provision thereto), the market standoff requirement under Section 17.5 of the Plan (entitled “Market Standoff Requirement,”
or any successor provision thereto), and the transfer restrictions under Section 17.11.3 of the Plan (entitled “Issued Shares,”
or any successor provision thereto).

 

6.       Term
of Option. The Option may be exercised only within the term set forth in the Notice of Grant, and may be exercised during
such term only in accordance with the Plan and the terms of the Award Agreement.

 

7.       Withholding.

 

(a)       The
Committee shall determine the amount of any withholding or other tax required by law to be withheld or paid by the Company with
respect to any income recognized by the Grantee with respect to the Option.

 

(b)       The
Grantee shall be required to meet any applicable tax withholding obligation in accordance with the provisions of Section 17.3
of the Plan (entitled “Tax Withholding,” or any successor provision thereto).

 

(c)       Subject
to any rules prescribed by the Committee, the Grantee shall have the right to elect to meet any withholding requirement (i) by
having withheld from the Option at the appropriate time that number of whole Shares whose Fair Market Value is equal to the amount
of any taxes required to be withheld with respect to the Option, (ii) by direct payment to the Company in cash of the amount of
any taxes required to be withheld with respect to the Option or (iii) by a combination of Shares and cash.

 

    	Terms and Conditions - Page 2

     

    

 

(d)       If
the Grantee makes any disposition of Shares delivered pursuant to the exercise of an Incentive Stock Option under the circumstances
described in Code Section 421(b) (relating to certain disqualifying dispositions), the Grantee shall notify the Company of such
disposition within 10 days of such disposition.

 

8.       Adjustment.
Upon any event described in Section 15 of the Plan (entitled “Effect of Changes in Capitalization,” or any successor
provision thereto) occurring after the Grant Date, the adjustment provisions as provided for under Section 15 of the Plan shall
apply to the Option.

 

9.       Bound
by Plan and Committee Decisions. By accepting the Option, the Grantee acknowledges that the Grantee has received a copy of
the Plan, has had an opportunity to review the Plan, and agrees to be bound by all of the terms and conditions of the Plan. In
the event of any conflict between the provisions of the Award Agreement and the Plan, the provisions of the Plan shall control.
The authority to manage and control the operation and administration of the Award Agreement and the Plan shall be vested in the
Committee, and the Committee shall have all powers with respect to the Award Agreement as it has with respect to the Plan. Any
interpretation of the Award Agreement or the Plan by the Committee and any decision made by the Committee with respect to the
Award Agreement or the Plan shall be final and binding on all persons.

 

10.       Grantee
Representations. The Grantee hereby represents to the Company that the Grantee has read and fully understands the provisions
of the Award Agreement and the Plan and that the Grantee’s decision to participate in the Plan is completely voluntary.
Further, the Grantee acknowledges that the Grantee is relying solely on his or her own advisors with respect to the tax consequences
of the Option.

 

11.       Regulatory
Limitations on Exercises. Notwithstanding the other provisions of the Award Agreement, the Committee may impose such conditions,
restrictions, and limitations (including suspending the exercise of the Option and the tolling of any applicable exercise period
during such suspension) on the issuance of Common Stock with respect to the Option unless and until the Committee determines that
such issuance complies with (a) any applicable registration requirements under the Securities Act or the Committee has determined
that an exemption therefrom is available, (b) any applicable listing requirement of any stock exchange on which the Common Stock
is listed, (c) any applicable Company policy or administrative rules, and (d) any other applicable provision of state, federal,
or foreign law, including foreign securities laws where applicable.

 

12.       Miscellaneous.

 

(a)       Notices.
Any notice that either party hereto may be required or permitted to give to the other shall be in writing and may be delivered
personally, by intraoffice mail, by fax, by electronic mail or other electronic means, or via a postal service, postage prepaid,
to such electronic mail or postal address and directed to such person as the Company may notify the Grantee from time to time;
and to the Grantee at the Grantee’s electronic mail or postal address as shown on the records of the Company from time to
time, or at such other electronic mail or postal address as the Grantee, by notice to the Company, may designate in writing from
time to time.

 

(b)       Waiver.
The waiver by any party hereto of a breach of any provision of the Award Agreement shall not operate or be construed as a waiver
of any other or subsequent breach.

 

(c)       Entire
Agreement. The Award Agreement and the Plan constitute the entire agreement between the parties with respect to the Option.
Any prior agreements, commitments, or negotiations concerning the Option are superseded.

 

(d)       Binding
Effect; Successors. The obligations and rights of the Company under the Award Agreement shall be binding upon and inure to
the benefit of the Company and any successor corporation or organization resulting from the merger, consolidation, sale, or other
reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets
and business of the Company. The obligations and rights of the Grantee under the Award Agreement shall be binding upon and inure
to the benefit of the Grantee and the beneficiaries, executors, administrators, heirs, and successors of the Grantee.

 

    	Terms and Conditions - Page 3

     

    

 

(e)       Governing
Law; Consent to Jurisdiction; Consent to Venue. The Award Agreement shall be construed and interpreted in accordance with
the internal laws of the State of Delaware without regard to principles of conflicts of law thereof, or principles of conflicts
of laws of any other jurisdiction that could cause the application of the laws of any jurisdiction other than the State of Delaware.
For purposes of resolving any dispute that arises directly or indirectly from the relationship of the parties evidenced by the
Option or the Award Agreement, the parties hereto hereby submit to and consent to the exclusive jurisdiction of the State of California
and agree that any related litigation shall be conducted solely in the courts of Orange County, California or the federal courts
for the United States for the Central District of California where the Award Agreement is made and/or to be performed, and no
other courts.

 

(f)       Headings.
The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of the Award Agreement.

 

(g)       Amendment.
The Award Agreement may be amended at any time by the Committee, provided that no amendment may, without the consent of
the Grantee, materially impair the Grantee’s rights with respect to the Option.

 

(h)       Severability.
The invalidity or unenforceability of any provision of the Award Agreement shall not affect the validity or enforceability of
any other provision of the Award Agreement, and each other provision of the Award Agreement shall be severable and enforceable
to the extent permitted by law.

 

(i)       No
Rights to Service. Nothing contained in the Award Agreement shall be construed as giving the Grantee any right to be retained,
in any position, as a director, officer, employee, or consultant of the Company or its Affiliates, or shall interfere with or
restrict in any way the rights of the Company or its Affiliates, which are hereby expressly reserved, to remove, terminate, or
discharge the Grantee at any time for any reason whatsoever or for no reason, subject to the Company’s articles of incorporation,
bylaws, and other similar governing documents and applicable law.

 

(j)       Section
409A. It is intended that the Award Agreement and the Option will be exempt from (or in the alternative will comply with)
Code Section 409A, and the Award Agreement shall be administered accordingly and interpreted and construed on a basis consistent
with such intent. This Section 12(j) shall not be construed as a guarantee of any particular tax effect for the Grantee’s
benefits under the Award Agreement and the Company does not guarantee that any such benefits will satisfy the provisions of Code
Section 409A or any other provision of the Code.

 

(k)       Further
Assurances. The Grantee agrees, upon demand of the Company or the Committee, to do all acts and execute, deliver, and perform
all additional documents, instruments, and agreements that may be reasonably required by the Company or the Committee, as the
case may be, to implement the provisions and purposes of the Award Agreement and the Plan.

 

(l)       Confidentiality.
The Grantee agrees that the terms and conditions of the Option award reflected in the Award Agreement are strictly confidential
and, with the exception of the Grantee’s counsel, tax advisor, immediate family, or as required by applicable law, have
not and shall not be disclosed, discussed, or revealed to any other persons, entities, or organizations, whether within or outside
Company, without prior written approval of Company. The Grantee shall take all reasonable steps necessary to ensure that confidentiality
is maintained by any of the individuals or entities referenced above to whom disclosure is authorized.

 

    	Terms and Conditions - Page 4NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”)AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF CORPORATE COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF
WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

Original
Issue Date: June 15, 2017

 

$[*]

 

SENIOR
SECURED CONVERTIBLE NOTE 

DUE
JANUARY 1, 2018

 

THIS
SENIOR SECURED CONVERTIBLE NOTE is one of a series of duly authorized and validly issued Senior Secured Convertible Notes of Hancock
Jaffe Laboratories, Inc, a Delaware corporation company (the “Company”), having its principal place of business
at 70 Doppler Irvine, CA, 92618, designated as its Senior Secured Convertible Note due January 11, 2018 (this Note, the “Note”
and, collectively with the other Notes of such series, the “Notes”).

 

FOR
VALUE RECEIVED, the Company promises to pay to [*] or its registered assigns (the “Holder”), or shall
have paid pursuant to the terms hereunder, the principal sum of $[*] together with interest thereon on January 11, 2018 (the “Maturity
Date”) or such earlier date as this Note is required or permitted to be repaid as provided hereunder. This Note shall
bear interest at a rate of fifteen percent (15%) payable quarterly in cash. This Note is subject to the following additional provisions:

 

Section
1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms
not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have
the following meanings:

 

“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof
any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary
thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered,
(d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant
Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company
or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence
in any of the foregoing or takes any limited liability company or other action for the purpose of effecting any of the foregoing.

 

    	1

    	 

    

 

“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.

 

“Buy-In”
shall have the meaning set forth in Section 4(d)(v).

 

“Common
Share” means the common Share of the Company, and any other class of securities into which such securities may hereafter
be reclassified or changed.

 

“Conversion”
shall have the meaning ascribed to such term in Section 4.

 

“Conversion
Date” shall have the meaning set forth in Section 4(a).

 

“Conversion
Price” shall have the meaning set forth in Section 4(c).

 

“Conversion
Shares” means, collectively, the Common Shares issuable upon conversion of this Note in accordance with the terms hereof.

 

“Event
of Default” shall have the meaning set forth in Section 5(a).

 

“New
York Courts” shall have the meaning set forth in Section 6(d).

 

“Note
Register” shall have the meaning set forth in Section 2(c).

 

“Notice
of Conversion” shall have the meaning set forth in Section 4(a).

 

“Original
Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless
of the number of instruments which may be issued to evidence such Notes.

 

“Purchase
Agreement” means the Securities Purchase Agreement, dated as of May [*], 2017among the Company and the original Holders,
as amended, modified or supplemented from time to time in accordance with its terms.

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Share
Delivery Date” shall have the meaning set forth in Section 4(d)(ii).

 

    	2

    	 

    

 

“Trading
Day” means a day on which the principal Trading Market is open for trading.

 

“Trading
Market” means any of the following markets or exchanges on which the Company’s Common Shares (or an equivalent
thereof) is listed or quoted for trading on the date in question: the NYSE MKT (formerly NYSE AMEX), the Nasdaq Capital Market,
the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTC Bulletin Board or the Pink OTC
Markets (or any successors to any of the foregoing).

 

Section 2. Interest; Prepayment. The
Company acknowledges and agrees that this Note has been issued with an annual interest rate of 15% to be paid quarterly. Regularly
scheduled interest payments shall be made on this Note. All payments hereunder will be paid to the Person in whose name this Note
is registered on the records of the Company regarding registration and transfers of this Note (the “Note Register”).
At the discretion of the Company, the Principal Amount and unpaid accrued interest of the Senior Secured Convertible Notes may
be prepaid at any time, provided that written notice is provided to the note holders at least 15 days in advance of the
prepayment.

 

Section
3. Registration of Transfers and Exchanges.

 

a)
Different Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized
denominations, as requested by the Holder surrendering the same; provided, that the minimum principal amount of any replacement
Note shall be $50,000. No service charge will be payable for such registration of transfer or exchange.

 

b)
Investment Representations. This Note has been issued subject to certain investment representations of the original Holder
set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable
federal and state securities laws and regulations to successor Holders who provide the same investment representations to the
Company.

 

c)
Reliance on Note Register. Prior to due presentment for transfer to the Company of this Note, the Company and any agent
of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.

 

Section
4. Conversion.

 

a)
Voluntary Conversion. At any time after the Original Issue Date until this Note is no longer outstanding, this Note shall
be convertible, in whole or in part, into Common Shares at the option of the Holder, at any time and from time to time. The Holder
shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto as Annex
A (each, a “Notice of Conversion”), specifying therein the date on which such conversion shall be effected
(such date, the “Conversion Date”). If no Conversion Date is specified in a Notice of Conversion, the Conversion
Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect conversions hereunder, the Holder
shall be required to physically surrender this Note to the Company. The Company may deliver an objection to any Notice of Conversion
within two (2) Business Days of delivery of such Notice of Conversion.

 

    	3

    	 

    

 

b)
Conversion Price. The Conversion Price in effect on a Conversion Date in connection with the Company’s initial public
offering (the “IPO”) shall be equal to the lesser of (A) (i) $6.00 or (B) (i) the highest price per Common
Share sold in the Company’s initial public offering, multiplied by (ii) 70%. In the event the Company (i) makes a distribution
or distributions on Common Shares payable in Common Shares or any Common Share Equivalents (which, for avoidance of doubt, shall
not include any Common Shares issued by the Company upon conversion of, or payment of interest on, the Notes), (ii) subdivides
outstanding Common Shares into a larger number of Common Shares, (iii) combines (including by way of a reverse split) outstanding
Common Shares into a smaller number of Common Shares or (iv) issues, in the event of a reclassification of Common Shares, any
Common Shares of the Company, then the Conversion Price shall be adjusted by multiplying the Conversion Price by a fraction of
which the numerator shall be the number of Common Shares outstanding immediately before such event, and of which the denominator
shall be the number of Common Shares outstanding immediately after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of members entitled to receive such distribution and
shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

c)
Adjustments for Reorganization, Merger, Consolidation or Sales of Assets. If at any time or from time to time after the issuance
date of this Note there shall be a capital reorganization of the Company (other than by way of a stock split or combination of
shares or stock dividends or distributions, or a reclassification, exchange or substitution of shares), or a merger or consolidation
of the Company with or into another corporation where the holders of the Company’s outstanding voting securities prior to
such merger or consolidation do not own over 50% of the outstanding voting securities of the merged or consolidated entity, immediately
after such merger or consolidation, or the sale of all or substantially all of the Company’s properties or assets to any
other person (an “Organic Change”), then as a part of such Organic Change an appropriate revision to the conversion
price shall be made if necessary and provision shall be made if necessary (by adjustments of the conversion price or otherwise)
so that, upon any subsequent conversion of this Note, the Holder shall have the right to receive, in lieu of Conversion Shares,
the kind and amount of shares of stock and other securities or property of the Company or any successor corporation resulting
from the Organic Change. In any such case, appropriate adjustment shall be made in the application of the provisions of Section
4(a) with respect to the rights of the Holder after the Organic Change to the end that the provisions of Section 4(a) (including
any adjustment in the conversion price then in effect and the number of shares of stock or other securities deliverable upon conversion
of this Note) shall be applied after that event in as nearly an equivalent manner as may be practicable.

 

d)
Mechanics of Conversion.

 

i.
Conversion Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion
hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note to be converted
by (y) the Conversion Price.

 

    	4

    	 

    

 

ii.
Delivery of Certificate Upon Conversion. The Company shall promptly deliver, or cause to be delivered, to the Holder a certificate
or certificates representing the Conversion Shares representing the number of Conversion Shares being acquired upon the conversion
of this Note, provided, however, provided if the Company’s transfer agent is participating in the DTC Fast
Automated Securities Transfer Program, the Company may credit such aggregate number of shares of Common Stock to which the Holder
shall be entitled pursuant to such conversion to the Holder’s or its designee’s balance account with DTC through its
Deposit/Withdrawal at custodian system.

 

iii.
Failure to Deliver Certificates. If, in the case of a Notice of Conversion in connection with the IPO, such certificate
or certificates are not delivered to or as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled
to elect by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind
such Conversion, in which event the Company shall promptly return to the Holder any original Note delivered to the Company and
the Holder shall promptly return to the Company the Common Share certificates issued to such Holder pursuant to the rescinded
Notice of Conversion.

 

iv.
Obligation Absolute; Partial Liquidated Damages. The Company’s obligations to issue the Conversion Shares upon conversion
of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the
Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any
Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or
alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Company of any such action the Company may have against the Holder. Nothing herein shall
limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 5 hereof for the Company’s
failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive
relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section
hereof or under applicable law.

 

    	5

    	 

    

 

v.
Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion at IPO. In addition to any other rights
available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates by the
Share Delivery Date pursuant to Section 4(d)(ii), and if after such Share Delivery Date the Holder is required by its brokerage
firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, Common
Shares to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon
the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to
the Holder (in addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s
total purchase price (including any brokerage commissions) for the Common Shares so purchased exceeds (y) the product of (1) the
aggregate number of Common Shares that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual
sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions)
and (B) at the option of the Holder, either reissue (if surrendered) this Note in a principal amount equal to the principal amount
of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number of Common
Shares that would have been issued if the Company had timely complied with its delivery requirements under Section 4(d)(ii). For
example, if the Holder purchases Common Shares having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of this Note with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions)
giving rise to such purchase obligation was a total of $10,000 under clause of the immediately preceding sentence, the Company
shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation,
a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates
representing Common Shares upon conversion of this Note as required pursuant to the terms hereof.

 

vi.
Fractional Common Shares. No fractional Common Shares shall be issued upon the conversion of this Note. As to any fraction
of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its election, either
pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price
or round up to the next whole Common Share.

 

Section
5. Negative Covenants.

 

Except
as set forth in the Disclosure Schedules and exhibits thereto attached to the Securities Purchase Agreement, as long as at least
33% of the aggregate Principal Amount of the Notes issued pursuant to the Purchase Agreement remains outstanding, the Company
shall not, and shall not permit any of the Subsidiaries to, directly or indirectly:

 

a)
amend its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially
and adversely affects any rights of the Holder;

 

b)
pay cash dividends or distributions on any equity securities of the Company;

 

c)
enter into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with
the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested
directors of the Company (even if less than a quorum otherwise required for board approval); or

 

d)
enter into any agreement with respect to any of the foregoing.

 

    	6

    	 

    

 

Section
6. Events of Default.

 

a)
“Event of Default” means, wherever used herein, any of the following events (whatever the reason for such event
and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or
order of any court, or any order, rule or regulation of any administrative or governmental body):

 

i.
any default in the payment of (A) the principal amount of any Note or (B) interest, liquidated damages and other amounts owing
to a Holder on any Note, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date
or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above,
is not cured within fifteen (15) Trading Days;

 

ii.
the Company shall fail to observe or perform any other material covenant or agreement contained in the Notes which failure is
not cured, if possible to cure, within the earlier to occur of (A) fifteen (15) Trading Days after notice of such failure sent
by the Holder or by any other Holder to the Company and thirty (30) Trading Days after receipt of written notice thereof;

 

iii.
any material representation or warranty made in this Note or any other Transaction Documents shall be untrue or incorrect in any
material respect as of the date when made or deemed made that would cause a Material Adverse Effect;

 

iv.
the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy
Event; or

 

v.
following the date the Company initially becomes a reporting company pursuant to the Exchange Act and its shares of Common Shares
are listed on a Trading Market, the Common Shares shall subsequently not be eligible for listing or quotation for trading on a
Trading Market and shall not be eligible to resume listing or quotation for trading thereon within ten (10) Trading Days.

 

b)
Remedies Upon Event of Default. If any Event of Default occurs and is continuing before the Maturity Date, (a) the outstanding
principal amount of this Note, plus liquidated damages, interest and other amounts owing in respect thereof through the date of
acceleration, shall become, at the Holder’s election, immediately due and payable in cash. Commencing fifteen (15) Trading
Days after the occurrence of any Event of Default that results in the eventual acceleration of this Note, the Principal Amount
on this Note shall increase 20% and (b) the number of Warrant Shares (as defined in the Warrant) exercisable pursuant to the Warrant
shall increase from 50% to 75%. Upon the payment in full, the Holder shall promptly surrender this Note to or as directed by the
Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any
presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration
may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder
of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 5(b). No such rescission or
annulment shall affect any subsequent Event of Default or impair any right consequent thereon. If this Note is placed in the hands
of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise
takes action to collect amounts due under this Note or to enforce the provisions of this Note the Company shall be obligated and
pay reasonable attorneys’ fees in connection with such collection, enforcement or action.

 

    	7

    	 

    

 

Section
7. Miscellaneous.

 

a)
Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without
limitation, any Notice of Conversion, shall be in writing and delivered personally, by e-mail, facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Company, at the address set forth above, or such other e-mail address,
facsimile number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with
this Section 6(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be
in writing and delivered personally, by e-mail or facsimile, or sent by a nationally recognized overnight courier service addressed
to each Holder at the e-mail address, facsimile number or address of the Holder appearing on the signature pages attached to the
Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest
of (i) the date of transmission, if such notice or communication is delivered via e-mail or facsimile at the email address or
facsimile number set forth on the signature pages attached to the Purchase Agreement prior to 5:30 p.m. (New York City time) on
any date, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via e-mail or
facsimile at the e-mail address or facsimile number set forth on the signature pages attached to the Purchase Agreement on a day
that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following
the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party
to whom such notice is required to be given.

 

b)
Absolute Obligation. Except as expressly provided herein, no provision of this Note shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable,
on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation
of the Company.

 

c)
Lost or Mutilated Note. If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver,
in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen
or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt
of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

 

    	8

    	 

    

 

d)
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 internal laws of the State of New York, without regard to the principles
of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense
of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), 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 such New York Courts, or such New York Courts are improper or 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 applicable law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this
Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of
this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s
fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

e)
Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the
Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this
Note on any other occasion. Any waiver by the Company or the Holder must be in writing.

 

f)
Severability. If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain
in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all
other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates
the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the
maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal
of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect
the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such
law has been enacted.

 

g)
Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day.

 

h)
Headings. The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be
deemed to limit or affect any of the provisions hereof.

 

i)
Amendment. This Note may be modified or amended or the provisions hereof waived in accordance with the Purchase Agreement.
Holder acknowledges and agrees that this Note is subject to the Operating Agreement.

 

    	9

    	 

    

 

IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above
indicated.

 

	 	Hancock
    Jaffe Laboratories, Inc.
	 	 	 
	 	By:	 
	 	Name:	William
    Abbott
	 	Title:	Chief
    Financial Officer

 

    	10

    	 

    

 

ANNEX
A 

 

NOTICE
OF CONVERSION

 

The
undersigned hereby elects to convert the principal under the Senior Secured Convertible Note due January 11, 2018 of Hancock Jaffe
Labs, Inc, a Delaware corporation (the “Company”), into Common Shares (the “Common Shares”),
of the Company according to the conditions hereof, as of the date written below. If Common Shares are to be issued in the name
of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged
to the holder for any conversion, except for such transfer taxes, if any.

 

Conversion
calculations: ________________________________________________________

 

Date
to Effect Conversion: _______________________________________________________

 

Principal
Amount of Note to be Converted: __________________________________________

 

Number
of Common Shares to be issued: ______________________________________

 

Cash
to be paid to Holder: _______________________________________________________

 

Signature:
____________________________________________________________________

 

Name:
_______________________________________________________________________

 

Address
for Delivery of Common Share Certificates: ___________________________________

 

Or

 

DWAC
Instructions: ____________________________________________________________

 

Broker
No: ____________________________________________________________________

 

Account
No: ___________________________________________________________________

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