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Exhibit 10.4
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "Agreement") is entered into as of February 8, 2021, by and among AYTU BIOSCIENCE, INC., a Delaware corporation ("Subordinated Creditor"), NEOS THERAPEUTICS, INC., a Delaware corporation ("Neos"), NEOS THERAPEUTICS BRANDS, LLC, a Delaware limited liability company ("NT Brands"), NEOS THERAPEUTICS, LP, a Texas limited partnership ("NT LP"; together with Neos and NT Brands, each a "Borrower" and collectively the "Borrowers"), NEOS THERAPEUTICS COMMERCIAL, LLC, a Delaware limited liability company ("NT Commercial"), PHARMAFAB TEXAS, LLC, a Texas limited liability company ("NT PharmaFab"; and, together with Borrowers, NT Commercial and each other Person that from time to time becomes a "Loan Party" under and as defined in the Senior Credit Agreement or guarantees the Senior Debt), the "Companies", and each individually, a "Company"), and ENCINA BUSINESS CREDIT, LLC, in its capacity as Agent for all Senior Lenders.
R E C I T A L S
A.        Borrowers and the other Loan Party Obligors (as defined in the Senior Credit Agreement) party thereto, Agent and Senior Lenders have entered into a Loan and Security Agreement dated as of October 2, 2019 (as the same may be amended, amended and restated, supplemented or otherwise modified from time to time, the "Senior Credit Agreement") pursuant to which, among other things, Senior Lenders have agreed, subject to the terms and conditions set forth in the Senior Credit Agreement, to make certain loans and financial accommodations to Borrowers.  All of Borrowers' obligations to Agent and Senior Lenders under the Senior Credit Agreement and the other Senior Debt Documents (as hereinafter defined) are guaranteed by the Companies (other than any Company that is a Borrower under and as defined in the Senior Credit Agreement) and secured by liens on and security interests in substantially all of the now existing and hereafter acquired real and personal property of the Companies (the "Collateral").
B.         Neos has issued to Subordinated Creditor that certain Unsecured Convertible Promissory Note of even date herewith in the original principal amount of $5,000,000 (as the same may be amended, restated, supplemented and/or otherwise modified from time to time as permitted hereunder, the "Subordinated Note").
C.         As an inducement to and as one of the conditions precedent to the agreement of Agent and Senior Lenders to continue making the loans and other financial accommodations available to Borrowers as contemplated by the Senior Credit Agreement, Agent and Senior Lenders have required the execution and delivery of this Agreement by Subordinated Creditor and the Companies in order to set forth the relative rights and priorities of Agent, Senior Lenders and Subordinated Creditor under the Senior Debt Documents and the Subordinated Note.
NOW, THEREFORE, in order to induce Agent and Senior Lenders to consummate the transactions contemplated by the Senior Credit Agreement, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows:
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1.         Definitions.  The following terms shall have the following meanings in this Agreement:
"Agent" shall mean Encina Business Credit, LLC, as Agent for the Senior Lenders, or any other Person appointed by the holders of the Senior Debt as administrative agent for purposes of the Senior Debt Documents and this Agreement.
"Bankruptcy Code" shall mean Chapter 11 of Title 11 of the United States Code, as amended from time to time and any successor statute and all rules and regulations promulgated thereunder.
"Distribution" shall mean, with respect to any security, indebtedness or obligation, (a) any payment or distribution by any Person of cash, securities or other property, by set-off or otherwise, on account of such security, indebtedness or obligation, (b) any redemption, purchase or other acquisition of such security, indebtedness or obligation by any Person or (c) the granting of any lien or security interest to or for the benefit of the holders of such security, indebtedness or obligation in or upon any property of any Person.
"Encina Loan Documents" shall mean the Senior Credit Agreement and all other agreements, documents and instruments executed from time to time in connection therewith, as the same may be amended, supplemented or otherwise modified from time to time.
"Enforcement Action" shall mean (a) to take from or for the account of any Company or any guarantor of the Subordinated Debt, by set-off or in any other manner, the whole or any part of any moneys which may now or hereafter be owing by any Company or any such guarantor with respect to the Subordinated Debt, (b) to initiate or participate with others in any suit, action or proceeding against any Company or any such guarantor to (i) sue for or enforce payment of or to collect the whole or any part of the Subordinated Debt, (ii) commence or join with other Persons to commence a Proceeding, or (iii) commence judicial enforcement of any of the rights and remedies under any Subordinated Debt Document or applicable law with respect to the Subordinated Debt, (c) to accelerate the Subordinated Debt, (d) to exercise any put option or to cause any Company or any such guarantor to honor any redemption or mandatory prepayment obligation under any Subordinated Debt Document or (e) take any action under the provisions of any state or federal law, including, without limitation, the Uniform Commercial Code, or under any contract or agreement, to enforce, foreclose upon, take possession of or sell any property or assets of any Company or any such guarantor.
"Hedging Obligation" shall mean, with respect to any Company, any liability of such Company to Agent, any Lender or any affiliate of Agent or any Lender under any interest rate, currency or commodity swap agreement, cap agreement or collar agreement, and any other agreement or arrangement designed to protect such Company against fluctuations in interest rates, currency exchange rates or commodity prices.
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"paid in full" or "payment in full" shall mean with respect to the Senior Debt, that: (a) all of such Senior Debt (other than contingent indemnification, reimbursement and/or other similar obligations to the extent no claim giving rise thereto has been asserted) has been paid in full in cash, (b) no Person has any further right to obtain any loans or other extensions of credit under the applicable Senior Debt Documents, and (c) any costs, expenses and contingent indemnification obligations which are not yet due and payable but with respect to which a claim has been asserted or may reasonably be expected to be asserted by Agent or any Lender are backed by standby letters of credit (issued by a bank, and in form and substance, acceptable to the Agent) or cash collateralized, in each case in an amount reasonably estimated by the Agent, to be the amount of costs, expenses and contingent indemnification obligations that may become due and payable.
"Permitted Refinancing" shall mean any refinancing or replacement of the Senior Debt under the Encina Loan Documents (or any Permitted Refinancing Senior Debt Documents).
"Permitted Refinancing Senior Debt Documents" shall mean any financing documentation which replaces the Encina Loan Documents (or any Permitted Refinancing Senior Debt Documents) and pursuant to which the Senior Debt under the Encina Loan Documents (or any Permitted Refinancing Senior Debt Documents) is refinanced or replaced, as such financing documentation may be amended, replaced, restated, supplemented or otherwise modified from time to time in compliance with this Agreement.
"Permitted Subordinated Debt Payments" shall mean (i) regularly scheduled payments of capitalized payments-in-kind of accrued interest (but not, for the sake of clarity, any payments in cash) on the Subordinated Note due and payable on a non-accelerated basis, (ii) payments effected through conversion of indebtedness under the Subordinated Note to common stock of the Company (or other qualified capital stock (on terms and conditions reasonably satisfactory to Agent) of the Company) and (iii) payments effected through conversion of the indebtedness under the Subordinated Note to other indebtedness so long as, to the extent any Company is an obligor thereunder, such convertible indebtedness is subject to a subordination agreement on the same terms and conditions of this Agreement and otherwise satisfactory to Agent.
"Person" shall mean any natural person, corporation, general or limited partnership, limited liability company, firm, trust, association, government, governmental agency or other entity, whether acting in an individual, fiduciary or other capacity.
"Proceeding" shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of a Person.
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"Senior Debt" shall mean (a) all obligations, liabilities and indebtedness of every nature of the Companies from time to time owed to Agent or any Senior Lender under the Senior Debt Documents, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, indirect, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a Proceeding under the Bankruptcy Code together with any interest, fees, costs and expenses accruing thereon after the commencement of a Proceeding, without regard to whether or not such interest, fees, costs and expenses are an allowed claim, and (b) all Hedging Obligations.
"Senior Debt Documents" shall mean the Encina Loan Documents and, after the consummation of any Permitted Refinancing, the Permitted Refinancing Senior Debt Documents.
"Senior Default" shall mean any "Event of Default" under the Senior Debt Documents.
"Senior Lenders" shall mean the holders of the Senior Debt.
"Subordinated Debt" shall mean all of the obligations of the Companies to Subordinated Creditor evidenced by or incurred pursuant to the Subordinated Debt Documents (including all obligations in respect of the Subordinated Note).
"Subordinated Debt Documents" shall mean the Subordinated Note.
2.         Subordination.
2.1.      Subordination of Subordinated Debt to Senior Debt.  Each Company covenants and agrees, and Subordinated Creditor by its acceptance of the applicable Subordinated Debt Document (whether upon original issue or upon transfer or assignment) likewise covenants and agrees, notwithstanding anything to the contrary contained in such Subordinated Debt Documents, that the payment of any and all of the Subordinated Debt shall be subordinate and subject in right and time of payment, to the extent and in the manner hereinafter set forth, to the prior payment in full of all of the Senior Debt.  Each holder of Senior Debt, whether now outstanding or hereafter created, incurred, assumed or guaranteed, shall be deemed to have acquired Senior Debt in reliance upon the provisions contained in this Agreement.
2.2.      Liquidation, Dissolution, Bankruptcy.  In the event of any Proceeding involving any Company that owes Subordinated Debt to Subordinated Creditor:
(a)        All Senior Debt shall first be paid in full before any Distribution, whether in cash, securities or other property, shall be made to Subordinated Creditor on account of any Subordinated Debt.
(b)        Any Distribution which would otherwise, but for the terms hereof, be payable or deliverable in respect of the Subordinated Debt shall be paid or delivered
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directly to Agent (to be held and/or applied by Agent in accordance with the terms of the Senior Debt Documents) until all Senior Debt is paid in full.  Subordinated Creditor irrevocably authorizes, empowers and directs any debtor, debtor in possession, receiver, trustee, liquidator, custodian, conservator or other Person having authority, to pay or otherwise deliver all such Distributions to Agent.  Subordinated Creditor also irrevocably authorizes and empowers Agent, in the name of Subordinated Creditor, to demand, sue for, collect and receive any and all such Distributions.
(c)        Subordinated Creditor agrees to execute, verify, deliver and file any proofs of claim in respect of the Subordinated Debt reasonably requested by Agent in connection with any such Proceeding and hereby irrevocably authorizes, empowers and appoints Agent its agent and attorney-in-fact to (i) execute, verify, deliver and file such proofs of claim upon the failure of Subordinated Creditor promptly to do so prior to 30 days before the expiration of the time to file any such proof of claim and (ii) vote such claim in any such Proceeding upon the failure of Subordinated Creditor to do so prior to 15 days before the expiration of the time to vote any such claim; provided, Agent shall have no obligation to execute, verify, deliver, file and/or vote any such proof of claim.  In the event that Agent votes any claim in accordance with the authority granted hereby, Subordinated Creditor shall not be entitled to change or withdraw such vote.
2.3.      Subordinated Debt Payment Restrictions.  Notwithstanding the terms of the Subordinated Note, each Company hereby agrees that it shall not make, and Subordinated Creditor hereby agrees that it will not accept, any Distribution with respect to the Subordinated Debt until all of the Senior Debt is paid in full other than Permitted Subordinated Debt Payments (subject however to subsection 2.2).
2.4.      Subordinated Debt Standstill Provisions. Until all of the Senior Debt is paid in full, Subordinated Creditor shall not, without the prior written consent of Agent, take any Enforcement Action with respect to the Subordinated Debt.  Notwithstanding the foregoing or any provision of this Agreement to the contrary, Subordinated Creditor may (i) file proofs of claim against any Company in any Proceeding involving such Company, (ii) seek specific performance or injunctive relief to compel a Company to provide financial reporting required under the Subordinated Debt Documents (as in effect on the date hereof as the same may be amended, restated, supplemented and/or otherwise modified from time to time in accordance with this Agreement) so long as it is not accompanied by a claim for monetary damages or remuneration, (iii) to the extent (but only to such extent) that the commencement of a legal action is required to toll the running of any applicable statute of limitations or similar restriction of claims in respect of such legal action (other than actions to enforce Subordinated Creditor's rights to receive payment from the Companies or any rights with respect to any assets of the Companies, and other than initiating or joining with other creditors to initiate a Proceeding), then Subordinated Creditor may take such legal action, and (iv) declare and send notice of default to a Company (so long as not accompanied by a demand for payment).  Any Distributions or other proceeds of any Enforcement Action obtained by Subordinated Creditor shall in any event be held in trust by it for the benefit of Agent and Senior Lenders and promptly paid or delivered to Agent for the benefit of Senior Lenders in the form received until all of the Senior Debt is paid in full.
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2.5.      Incorrect Payments.  If any Distribution on account of the Subordinated Debt not permitted to be made by a Company or accepted by Subordinated Creditor under this Agreement is received by Subordinated Creditor, such Distribution shall not be commingled with any of the assets of Subordinated Creditor, shall be held in trust by Subordinated Creditor for the benefit of Agent and Senior Lenders and shall be promptly paid over to Agent for application (in accordance with the Senior Debt Documents ) to the payment of the Senior Debt then remaining unpaid, until all of the Senior Debt is paid in full.
2.6.      Subordination of Liens and Security Interests; Agreement Not to Contest; Sale of Collateral; Release of Liens.  Until all of the Senior Debt has been paid in full, Subordinated Creditor shall not obtain any liens or security interests in any Collateral or any other assets of any Company or other guarantor of the Subordinated Debt.  To the extent Subordinated Creditor obtains any such liens or security interest in violation of this Agreement, such liens and security interests which may exist shall be and hereby are subordinated for all purposes and in all respects to the liens and security interests of Agent and Senior Lenders in the Collateral, regardless of the time, manner or order of perfection of any such liens and security interests and regardless of the validity, perfection or enforceability of such liens and security interests of Agent.  Subordinated Creditor agrees that it will not at any time contest the validity, perfection, priority or enforceability of the Senior Debt, the Senior Debt Documents, or the liens and security interests of Agent and Senior Lenders in the Collateral securing the Senior Debt.  Until all of the Senior Debt has been paid in full, Subordinated Creditor shall not obtain any guaranty of the Subordinated Debt by any Person unless such Person executes and delivers a joinder to this Agreement in form and substance reasonably satisfactory to Agent to become party to this Agreement as a Company.  In the event that a Company desires to sell any of the Collateral and Agent consents to such sale, Subordinated Creditor shall be deemed to have consented to such sale and such sale shall be free and clear of any liens and security interests of Subordinated Creditor in such Collateral (and in the event that such sale includes the equity interests of Initial Borrower, Initial Borrower shall be immediately released by Subordinated Creditor from its obligations in respect of the Subordinated Debt upon the consummation of such sale) and any purchaser of any Collateral may rely on this Agreement as evidence of Subordinated Creditor's consent to such sale and that such sale is free and clear of any liens and security interests of Subordinated Creditor in such Collateral (and, in the case of a sale of equity interests of a Company other than Holdings, of the release of such Company from its obligations in respect of the Subordinated Debt).  In the event that Subordinated Creditor obtains any liens or security interests in the Collateral or other assets, or any guaranty of the Subordinated Debt by any Person other than Holdings, Subordinated Creditor shall promptly execute and deliver to Agent such termination statements and releases as Agent shall request to effect the release of the liens and security interests in such Collateral and/or such guaranty.  In furtherance of the foregoing, Subordinated Creditor hereby irrevocably appoints Agent its attorney-in-fact, with full authority in the place and stead of Subordinated Creditor and in the name of Subordinated Creditor or otherwise, to execute and deliver any document or instrument which Subordinated Creditor may be required to deliver pursuant to this subsection 2.6.
2.7.      Sale, Transfer or other Disposition of Subordinated Debt.  Subordinated Creditor shall not sell, assign, pledge, dispose of or otherwise transfer all or any portion of the Subordinated Debt or its Subordinated Note:  (i) without giving prior written notice of such action to Agent, (ii) to any Person other than an affiliate of Subordinated Creditor, and (iii) unless, prior to the consummation of any such action, the transferee thereof shall execute and deliver to Agent
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a counterpart signature page to this Agreement, an agreement joining such transferee as a party to this Agreement as a Subordinated Creditor or an agreement substantially identical to this Agreement, providing for the continued subordination of the Subordinated Debt to the Senior Debt as provided herein and for the continued effectiveness of all of the rights of Agent and Senior Lenders arising under this Agreement.  Notwithstanding the failure of any transferee to execute or deliver an agreement substantially identical to this Agreement, the subordination effected hereby shall survive any sale, assignment, pledge, disposition or other transfer of all or any portion of the Subordinated Debt, and the terms of this Agreement shall be binding upon the successors and assigns of Subordinated Creditor, as provided in Section 9 hereof.
2.8.      Legends.  Until the termination of this Agreement in accordance with Section 15 hereof, Subordinated Creditor will cause each Subordinated Debt Document to clearly and conspicuously state that it is subject to the terms of this Subordination Agreement and that any transferee thereof shall be bound hereby.
2.9.      Obligations Hereunder Not Affected.  All rights and interests of Senior Lenders and Agent hereunder, and all agreements and obligations of Subordinated Creditor and Companies hereunder, shall remain in full force and effect irrespective of (a) any lack of validity or enforceability of any document evidencing any of the Senior Debt; (b) any change in the time, manner or place of payment of, or any other term of, all or any of the Senior Debt, or any other permitted amendment or waiver of or any release or consent to departure from any of the Senior Debt Documents; any exchange, release or non-perfection of any collateral for all or any of the Senior Debt; (c) any failure of any Senior Lender or Agent to assert any claim or to enforce any right or remedy against any other party hereto under the provisions of this Agreement or any Senior Debt Document other than this Agreement; (d) any reduction, limitation, impairment or termination of the Senior Debt for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and Companies and Subordinated Creditor hereby waive any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of invalidity, illegality, non-genuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Senior Debt; and (e) any other circumstance which might otherwise constitute a defense available to, or a discharge of, Companies in respect of the Senior Debt or Subordinated Creditor in respect of this Agreement.  Subordinated Creditor acknowledges and agrees that Senior Lenders and Agent may in accordance with the terms of the Senior Debt Documents, without notice or demand and without affecting or impairing Subordinated Creditor's obligations hereunder, (i) modify the Senior Debt Documents at any time without notice to or the consent of Subordinated Creditor; (ii) take or hold security for the payment of the Senior Debt and exchange, enforce, foreclose upon, waive and release any such security; (iii) apply such security and direct the order or manner of sale thereof as Agent and Senior Lenders in their sole discretion, may determine; (iv) release and substitute one or more endorsers, warrantors, borrowers or other obligors; and (v) exercise or refrain from exercising any rights against any Company or any other Person.  The Senior Debt shall continue to be treated as Senior Debt and the provisions of this Agreement shall continue to govern the relative rights and priorities of Agent and Senior Lenders and Subordinated Creditor even if all or part of the Senior Debt or the security interests securing the Senior Debt are subordinated, set aside, avoided, invalidated or disallowed.
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3.         Modifications to Subordinated Debt Documents.  Until all of the Senior Debt has been paid in full, and notwithstanding anything to the contrary contained in the Subordinated Note, Companies and Subordinated Creditor shall not, without the prior written consent of Agent, agree to any amendment, modification or supplement to any Subordinated Debt Document the effect of which is to (a) increase the maximum principal amount of the Subordinated Debt or rate of interest (or required cash pay rate of interest) on any of the Subordinated Debt, (b) change the dates upon which payments of principal or interest on the Subordinated Debt are due to an earlier date, (c) change any redemption or prepayment provisions of the Subordinated Debt, (d) alter the subordination provisions with respect to the Subordinated Debt, including, without limitation, subordinating the Subordinated Debt to any other Indebtedness, (e) take any liens or security interests in any assets of any Company or any guarantor of the Subordinated Debt, (f) change or add any default or event of default or any covenant with respect to the Subordinated Debt, or (g) change or amend any other term of the Subordinated Debt Documents if such change or amendment would (i) result in a Senior Default, increase the obligations of any Company or any guarantor of the Subordinated Debt or (ii) confer additional material rights on Subordinated Creditor or any other holder of the Subordinated Debt in a manner adverse to the Senior Lenders.
4.         Representations and Warranties of Subordinated Creditor.  Subordinated Creditor hereby represents and warrants to Agent and Senior Lenders that as of the date hereof:  (a) Subordinated Creditor is a corporation duly formed and validly existing under the laws of the State of Delaware; (b)  Subordinated Creditor has the power and authority to enter into, execute, deliver and carry out the terms of this Agreement, all of which have been duly authorized by all proper and necessary action; (c) the execution of this Agreement by Subordinated Creditor will not violate or conflict with the organizational documents of Subordinated Creditor, any material agreement binding upon Subordinated Creditor or any law, regulation or order or require any consent or approval which has not been obtained; (d) this Agreement is the legal, valid and binding obligation of Subordinated Creditor, enforceable against Subordinated Creditor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by equitable principles; and (e)  Subordinated Creditor is the sole owner, beneficially and of record, of the Subordinated Debt Documents and the Subordinated Debt evidenced thereby.
5.         Subrogation; Recovery.  Subject to the payment in full of all of the Senior Debt, Subordinated Creditor shall be subrogated to the rights of Agent and Senior Lenders to receive Distributions with respect to the Senior Debt until the Subordinated Debt is paid in full.  If Agent or any Senior Lender is required to disgorge any proceeds of Collateral, payment or other amount received by such Person (whether because such proceeds, payment or other amount is invalidated, declared to be fraudulent or preferential or otherwise) or turn over or otherwise pay any amount (a "Recovery") to the estate or to any creditor or representative of a Company or any other Person, then the Senior Debt shall be reinstated (to the extent of such Recovery) as if such Senior Debt had never been paid and to the extent Subordinated Creditor has received proceeds, payments or other amounts to which Subordinated Creditor would not have been entitled under this Agreement had such reinstatement occurred prior to receipt of such proceeds, payments or other amounts, Subordinated Creditor shall turn over such proceeds, payments or other amounts to Agent for reapplication to the Senior Debt.  A Distribution made pursuant to this Agreement to Agent or Senior Lenders which otherwise would have been made to Subordinated Creditor is not, as
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between the Companies and Subordinated Creditor, a payment by the Companies to or on account of the Senior Debt.
6.         Modification.  Any modification or waiver of any provision of this Agreement, or any consent to any departure by any party from the terms hereof, shall not be effective in any event unless the same is in writing and signed by Agent and Subordinated Creditor, and then such modification, waiver or consent shall be effective only in the specific instance and for the specific purpose given.  Any notice to or demand on any party hereto in any event not specifically required hereunder shall not entitle the party receiving such notice or demand to any other or further notice or demand in the same, similar or other circumstances unless specifically required hereunder.
7.         Further Assurances.  Each party to this Agreement promptly will execute and deliver such further instruments and agreements and do such further acts and things as may be reasonably requested in writing by any other party hereto that may be necessary or desirable in order to effect fully the purposes of this Agreement.
8.         Notices.  Unless otherwise specifically provided herein, any notice delivered under this Agreement shall be in writing addressed to the respective party as set forth below and may be personally served, telecopied, sent by electronic mail (to the extent an electronic mail address is listed below) or sent by overnight courier service or certified or registered United States mail and shall be deemed to have been given (a) if delivered in person, when delivered; (b) if delivered by telecopy, on the date of transmission if transmitted on a business day before 4:00 p.m. (Chicago time) or, if not, on the next succeeding business day; (c) if delivered by overnight courier, one business day after delivery to such courier properly addressed; or (d) if by United States mail, four business days after deposit in the United States mail, postage prepaid and properly addressed.
Notices shall be addressed as follows:
If to Subordinated Creditor:
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Aytu Bioscience, Inc.
373 Inverness Parkway, Suite 206
Englewood, CO 80112
Attention: Joshua Disbrow
Email: josh.disbrow@aytubio.com
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with a copy to (which shall not constitute notice):
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Dorsey and Whitney LLP
111 South Main Street, Suite 2100
Salt Lake City, Utah 84111
Attention: Ken Logsdon
Email: logsdon.ken@dorsey.com
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If to any Company:
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Neos Therapeutics, Inc.
2940 N. Hwy 360, Suite 400
Grand Prairie, Texas 75050
Attention:  Richard Eisenstadt
Email:  reisenstadt@neostx.com
with a copy to (which shall not constitute notice):
Goodwin Procter LLP
53 State Street
Boston, Massachusetts 02109
Attention:  Mark Smith
Email:  marksmith@goodwinlaw.com
If to Agent or Senior Lenders:
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Encina Business Credit, LLC
123 N Wacker, Suite 2400
Chicago, Illinois  60606
Attention:  Neos Account Manager
Email: jelie@encinabc.com
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with a copy to (which shall not constitute notice):
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Goldberg Kohn Ltd.
55 E. Monroe, Suite 3300
Chicago, Illinois 60603
Attention: Jeffrey Dunlop
Email:  jeffrey.dunlop@goldbergkohn.com
or in any case, to such other address as the party addressed shall have previously designated by written notice to the serving party, given in accordance with this Section 8.
9.         Successors and Assigns; Permitted Refinancing.  This Agreement shall inure to the benefit of, and shall be binding upon, the respective successors and assigns of Agent, Senior Lenders, Subordinated Creditor and the Companies.  Senior Lenders may, from time to time, without notice to Subordinated Creditor, assign or transfer any or all of the Senior Debt or any interest therein to any Person and, notwithstanding any such assignment or transfer, or any subsequent assignment or transfer, the Senior Debt shall, subject to the terms hereof, be and remain Senior Debt for purposes of this Agreement, and every permitted assignee or transferee of any of the Senior Debt or of any interest therein shall, to the extent of the interest of such permitted assignee or transferee in the Senior Debt, be entitled to rely upon and be the third party beneficiary of the subordination provided under this Agreement and shall be entitled to enforce the terms and provisions hereof to the same extent as if such assignee or transferee were initially a party hereto.  Subordinated Creditor agrees that any party that consummates a Permitted Refinancing may rely on and enforce this Agreement.  Subordinated Creditor further agrees that it will, at the request of Agent, enter into an agreement, in the form of this Agreement, mutatis mutandis, with the party that consummates the Permitted Refinancing; provided, that the failure of Subordinated Creditor
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to execute such an agreement shall not affect such party's right to rely on and enforce the terms of this Agreement.
10.       Relative Rights.  This Agreement shall define the relative rights of Agent, Senior Lenders and Subordinated Creditor.  Nothing in this Agreement shall (a) impair, as among the Companies, Agent and Senior Lenders and as between the Companies and Subordinated Creditor, the obligation of the Companies with respect to the payment of the Senior Debt and the Subordinated Debt in accordance with their respective terms or (b) affect the relative rights of Agent, Senior Lenders or Subordinated Creditor with respect to any other creditors of any Company.
11.       Conflict.  In the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant or condition of the Subordinated Debt Documents, the provisions of this Agreement shall control and govern.
12.       Headings.  The paragraph headings used in this Agreement are for convenience only and shall not affect the interpretation of any of the provisions hereof.
13.       Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  This document may be executed and delivered electronically, via telecopy, "portable document format" or ".pdf" sent by electronic email or otherwise, and any such electronic execution and delivery shall be equally effective as the manual execution and physical delivery of a counterpart to this Agreement.
14.       Severability.  In the event that any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Agreement.
15.       Continuation of Subordination; Termination of Agreement.  This Agreement shall remain in full force and effect until the payment in full of all of the Senior Debt after which this Agreement shall terminate without further action on the part of the parties hereto; provided, that if any payment is, subsequent to such termination, recovered from any holder of Senior Debt, this Agreement shall be reinstated; provided, further that a Permitted Refinancing shall not be deemed to be payment in full of all of the Senior Debt.
16.       APPLICABLE LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
17.       CONSENT TO JURISDICTION.  SUBORDINATED CREDITOR AND EACH COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL ACTIONS OR
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PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS.  SUBORDINATED CREDITOR AND EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  SUBORDINATED CREDITOR AND EACH COMPANY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUBORDINATED CREDITOR AND SUCH COMPANY AT THEIR RESPECTIVE ADDRESSES SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE 10 DAYS AFTER THE SAME HAS BEEN POSTED.
18.       WAIVER OF JURY TRIAL.  SUBORDINATED CREDITOR, EACH COMPANY AND AGENT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE SUBORDINATED DEBT DOCUMENTS OR ANY OF THE SENIOR DEBT DOCUMENTS.  SUBORDINATED CREDITOR, EACH COMPANY AND AGENT ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE SENIOR DEBT DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.  SUBORDINATED CREDITOR, EACH COMPANY AND AGENT WARRANTS AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
​
[Signature pages follow]
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​
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-12-

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IN WITNESS WHEREOF, Subordinated Creditor, the Companies and Agent have caused this Agreement to be executed as of the date first above written.
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	SUBORDINATED CREDITOR:

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	​

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	AYTU BIOSCIENCE, INC.

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	​

	​
	​

	​
	By:
	/s/ Joshua Disbrow

	​
	Title: Chief Executive Officer

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Signature Page to Subordination Agreement

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	​

	​

	​

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	COMPANIES:

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	​

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	NEOS THERAPEUTICS, INC.

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	​

	​
	​

	​
	By:
	/s/ Richard Eisenstadt

	​
	Name:
	Richard Eisenstadt

	​
	Its:
	Chief Financial Officer

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	​

	​
	​

	​
	NEOS THERAPEUTICS BRANDS, LLC

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	​

	​
	​

	​
	By:
	/s/ Richard Eisenstadt

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	Name:
	Richard Eisenstadt

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	Its:
	Chief Financial Officer

	​
	​

	​
	​

	​
	NEOS THERAPEUTICS, LP

	​
	​

	​
	​

	​
	By:
	/s/ Richard Eisenstadt

	​
	Name:
	Richard Eisenstadt

	​
	Its:
	Chief Financial Officer

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	​

	​
	​

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	NEOS THERAPEUTICS COMMERCIAL, LLC

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	​

	​
	​

	​
	By:
	/s/ Richard Eisenstadt

	​
	Name:
	Richard Eisenstadt

	​
	Its:
	Chief Financial Officer

	​
	​

	​
	​

	​
	NEOS THERAPEUTICS, LP

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	​

	​
	​

	​
	By:
	/s/ Richard Eisenstadt

	​
	Name:
	Richard Eisenstadt

	​
	Its:
	Chief Financial Officer

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​

Signature Page to Subordination Agreement

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	PHARMAFAB TEXAS, LLC

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	​

	​
	​

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	By:
	/s/ Richard Eisenstadt

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	Name:
	Richard Eisenstadt

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	Its:
	Chief Financial Officer

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Signature Page to Subordination Agreement

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	AGENT:

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	ENCINA BUSINESS CREDIT, LLC, 

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	as Agent

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	​

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	​

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	By:
	/s/ Jean R. Elie

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	Name:
	Jean R. Elie

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	Title:
	Authorized Signatory

​

Signature Page to Subordination AgreementExhibit 10.1
THIS INSTRUMENT AND THE INDEBTEDNESS EVIDENCED HEREBY, AND THE RIGHTS AND REMEDIES OF THE HOLDER OF THIS INSTRUMENT, ARE SUBORDINATED TO THE REPAYMENT AND FULL PERFORMANCE OF THE COMPANY’S INDEBTEDNESS AND OTHER OBLIGATIONS UNDER (I) THAT CERTAIN FACILITY AGREEMENT, DATED AS OF MAY 11, 2016 (AS AMENDED, RESTATED, SUPPLEMENTED AND OTHERWISE MODIFIED FROM TIME TO TIME, THE “SENIOR FACILITY AGREEMENT”), BY AND AMONG THE COMPANY AND THE LENDERS FROM TIME TO TIME PARTY THERETO (THE “SENIOR FACILITY LENDERS”) AND (II) THAT CERTAIN LOAN AND SECURITY AGREEMENT, DATED AS OF OCTOBER 2, 2019 (AS AMENDED, RESTATED, SUPPLEMENTED AND OTHERWISE MODIFIED FROM TIME TO TIME, THE “ABL AGREEMENT”), BY AND AMONG THE COMPANY, CERTAIN AFFILIATES OF THE COMPANY PARTY THERETO AND THE LENDERS FROM TIME TO TIME PARTY THERETO (THE “ABL LENDERS”) AND ENCINA BUSINESS CREDIT, LLC, AS AGENT FOR SUCH ABL LENDERS; AND THE HOLDER OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE PROVISIONS HEREOF AND THE PROVISIONS OF (A) THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF THE DATE HEREOF AMONG THE COMPANY, THE HOLDER HEREOF AND THE SENIOR FACILITY LENDERS (AS AMENDED, RESTATED, SUPPLEMENTED AND OTHERWISE MODIFIED FROM TIME TO TIME, THE “SENIOR FACILITY SUBORDINATION AGREEMENT”) AND (B) THAT CERTAIN SUBORDINATION AGREEMENT DATED AS OF THE DATE HEREOF, AMONG THE COMPANY, THE HOLDER HEREOF AND THE ABL LENDERS (AS AMENDED, RESTATED, SUPPLEMENTED AND OTHERWISE MODIFIED FROM TIME TO TIME, THE “ABL SUBORDINATION AGREEMENT” AND, TOGETHER WITH THE SENIOR FACILITY SUBORDINATION AGREEMENT, THE “SUBORDINATION AGREEMENTS”).
UNSECURED CONVERTIBLE PROMISSORY NOTE
​
	​

	

	Issue Date:  February 8, 2021
	Principal: Up to U.S.
$5,000,000.00

​
FOR VALUE RECEIVED, NEOS THERAPEUTICS, INC., a Delaware corporation (the “Company”), hereby promises to pay to AYTU BIOSCIENCE, INC., a Delaware corporation, or its permitted registered assigns (collectively, the “Holder”), the Principal (as defined below) in the amount of up to Five Million U.S. dollars ($5,000,000.00) on the terms and conditions set forth in this Note (as defined below), which has been issued by the Company pursuant to, and in accordance with, the terms of that certain Agreement and Plan of Merger dated December 10, 2020 by and among the Company, Holder and Argon Merger Sub, Inc., a Delaware corporation, (as amended, supplemented or otherwise modified from time to time, in accordance with its terms, the “Merger Agreement”).   The Company hereby promises to pay accrued and unpaid
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Interest and premium, if any, on the Principal on the dates, at the rates and in the manner provided herein.
1.         Definitions.
(a)        Certain Defined Terms.  For purposes of this Note, the following terms shall have the following meanings:
(i)         “Act of Bankruptcy” means, with respect to any Person, if (i) the Person shall (1) be or become insolvent, or (2) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, liquidator or the like of the Person or entity or of all or a substantial part of the Person’s or entity’s property, or (3) commence a voluntary case under any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation or similar proceeding under the laws of any jurisdiction, or (4) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, or (5) the Person’s inability to pay the Person’s debts as they mature, or (6) make an assignment for the benefit of the Person’s creditors; or (ii) a proceeding or case shall be commenced, without the application or consent of the Person, and which is not dismissed within 90 days after such commencement, in any court of competent jurisdiction, seeking (1) the liquidation, reorganization, dissolution, winding up or the composition or adjustment of debts of the Person or entity, (2) the appointment of a trustee, receiver, custodian or liquidator or the like of the Person or entity, or of all or any substantial part of the Person’s property, or (3) similar relief in respect of the Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts.
(ii)       “Business Day” means any day other than Saturday, Sunday or any other day on which commercial banks in New York, New York are authorized or required by law to close.
(iii)      “Change of Control” means (a) any “Person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) other than the holders of the Company’s voting stock on the date the Merger Agreement is executed and delivered by the parties thereto or their Controlled Investment Affiliates, is or shall at any time become the “beneficial owner” (as defined in Rule 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of greater than 50% of the voting interest in the Company’s stock, (b) a sale of substantially all of the assets of the Company and its subsidiaries, or (c) the occurrence of a “Change of Control”, “Change in Control”, “Fundamental Change” or concepts of similar import under the Senior Facility Agreement or the ABL Agreement; provided, however, in no event shall a “Change of Control” include or be a reference to, or be deemed to have occurred upon, the consummation of the transactions contemplated under the Merger Agreement on the Closing Date (as defined therein).
(iv)       “Controlled Investment Affiliates” means as to any Person, any other Person that (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such Person and (b) is organized by such Person primarily for the purpose of making equity or debt investments in one or more companies.
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(v)        “Common Stock” means the common stock of the Company, $0.001 par value per share.
(vi)       “Conversion Amount” means the aggregate amount of  Principal and Interest to be converted, which as of the Conversion Date, will be 100% of Principal as of such date, together with all accrued and unpaid Interest thereon as of such date.
(vii)     “Conversion Date” means the date of delivery via facsimile or electronic mail of a Conversion Notice.
(viii)    “Conversion Price” means, as of any Conversion Date, the greater of (i) $0.50, subject to adjustment for any Stock Event that occurs after the date hereof (the “Floor Price”), and (ii) 90% of the arithmetic average of the Volume Weighted Average Prices per Share on each of the thirty (30) Trading Days immediately preceding the Conversion Date (the “Measurement Period”); provided, that in the event that a stock split, stock combination, reclassification, payment of stock dividend, recapitalization or other similar transaction of such character that the Shares shall be changed into or become exchangeable for a larger or small number of Shares (a “Stock Event”) is consummated during the Measurement Period, the Volume Weighted Average Price for all Trading Days during the Measurement Period prior to the effectiveness of the Stock Event shall be appropriately adjusted to reflect such Stock Event.
(ix)       “Conversion Shares” means fully paid and nonassessable Shares issuable upon conversion of the Note in accordance with Section 3.
(x)        “Delisting Event” means an event which shall be deemed to have occurred if the Shares cease to be listed, traded or publicly quoted on the Principal Market on which Shares are listed as of such date, and shall continue until such Shares are relisted or requoted on either the New York Stock Exchange, the NYSE American, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or, in each case, any successor thereto (each, a “Principal Market”).
(xi)       “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the SEC thereunder.
(xii)     “Interest” means any interest (including any default interest) accrued on the Principal pursuant to the terms of this Note.
(xiii)    “Maturity Date” shall mean the earlier of (i) acceleration of the obligations evidenced hereby and (ii) November 7, 2022.
(xiv)     “Market Disruption Event” means, with respect to any Trading Day and any security, (a) a failure by the Principal Market to open for trading during its entire regular trading session, (b) the occurrence or existence prior to 1:00 p.m., New York City time, on such day for such securities for more than one half-hour period in the aggregate during regular trading hours of any suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the relevant securities exchange or otherwise) in such securities or in any options, contracts or future contracts relating to such securities, or (c) to the extent “Volume Weighted Average Price” is determined in accordance with clause (b) of
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the definition thereof, the suspension of trading for the one-half hour period ending on the scheduled close of trading on such day (by reason of movements in price exceeding limits permitted by the stock exchange or otherwise) in such securities.
(xv)      “Note” means this Unsecured Convertible Promissory Note (including all unsecured convertible promissory notes issued in exchange herefor or, upon transfer or replacement hereof, and as any of the foregoing may be further amended, restated, supplemented or otherwise modified from time).
(xvi)     “Person” means and includes any natural person, individual, partnership, limited partnership, joint venture, corporation, trust, limited liability company, limited company, joint stock company, unincorporated organization, government entity or any political subdivision or agency thereof, or any other entity.
(xvii)   “Principal” means the outstanding principal amount of this Note as of any date of determination.
(xviii)  “Principal Market” shall have the meaning set forth in the definition of Delisting Event above.
(xix)     “Reg Rights Side Letter” means the letter agreement, dated as of December 10, 2020 between Holder and the Company and substantially in the form attached hereto as Exhibit B.
(xx)      “Register” means the register for the recordation of the name and address of the Holder of this Note and the Principal (and stated Interest) owing to such Holder from time to time.
(xxi)     “SEC” means the United States Securities and Exchange Commission.
(xxii)   “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated by the SEC thereunder.
(xxiii)  “Shares” means shares of Common Stock.
(xxiv)   “Trading Day” means any day on which the Common Stock is traded for any period on the Principal Market; provided, that Trading Day shall not include any Trading Day on which there is a Market Disruption Event.
(xxv)    “Volume Weighted Average Price” for any security as of any Trading Day means (a) the volume weighted average sale price of such security on the principal U.S. national or regional securities exchange on which such security is traded as reported by Bloomberg Financial Markets or an equivalent, reliable reporting service mutually acceptable to and hereinafter designated by Holder and the Company (“Bloomberg”), or (b) if no volume weighted average sale price is reported for such security, then the closing price per share of such security as reported by Bloomberg, or, if no closing price per share is reported for such security by Bloomberg, the average of the last bid and last ask price (or if more than one in either case,
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the average of the average last bid and average last ask prices) on such Trading Day as reported in the composite transactions for the principal U.S. national or regional securities exchange on which such security is traded.  If the security is not listed for trading on a U.S. national or regional securities exchange on the relevant Trading Day, then the Volume Weighted Average Price will be the average of the mid-point of the last bid and last ask prices of the security in the over-the-counter market on the relevant Trading Day as reported  by the OTC Markets Group, Inc. or similar organization. If the Volume Weighted Average Price cannot be calculated for such security on such date in the manner provided above, the Volume Weighted Average Price shall be the fair market value as mutually determined by the Company and the holders of a majority in interest of the Notes being converted (based on the Principal amount being converted by each such holder) for which the calculation of the Volume Weighted Average Price is required in order to determine the Conversion Price of such Notes.  Volume Weighted Average Price will be determined without regard to after-hours trading or any other trading outside of the regular trading hours.
2.         Multi-Advances; Principal & Interest; Payments.
(a)        Advances. From time to time upon not less than 10 days’ prior written notice (which may be by electronic mail) by the Company to Holder and provided that the aggregate amount of all advances made hereunder does not exceed $5,000,000, the Company may request, and Holder shall advance, such sums as requested by the Company; provided that (i) no Event of Default has occurred and is continuing, (ii) no “Event of Default”, as defined under each of the Senior Facility Agreement and the ABL Agreement, has occurred and is continuing (iii) the Merger Agreement has not been terminated in accordance with its terms and (iv) any advance is in an amount of not less than $100,000 and in $100,000 increments thereof.
(b)        Interest & Principal.  Interest shall accrue on the Principal at the rate of 6.0% per annum, calculated on the basis of the actual number of days elapsed in a 365 day year, and shall compound monthly and be added to the Principal on the first day of each month beginning February 1, 2021, and the first day of each month thereafter, and shall be due and payable with the Principal.  The Company acknowledges that this addition to Principal will result in the total outstanding principal amount of indebtedness evidenced by this Note exceeding the face amount of this Note. If an Event of Default has occurred and is continuing, the interest rate then in effect will be increased by 2.0% per annum (the “Default Margin”) and all overdue obligations under this Note will bear interest at the interest rate in effect at such time plus the Default Margin. Subject to the provisions of the Subordination Agreements, on the earlier to occur of acceleration of this Note and the Maturity Date, all Principal plus all accrued and unpaid Interest shall be due and payable.
(c)        Optional Prepayments.  Subject to the provisions of the Subordination Agreements, the Company may prepay at any time and from time to time, all or any portion of the balance remaining on this Note, without premium or penalty.
(d)        Mandatory Prepayments.       Subject to the provisions of the Subordination Agreements, upon payment in full in cash of all obligations under each of the Senior Facility Agreement and the ABL Agreement and termination of all commitments to lend thereunder, the Company shall repay the entire balance remaining under this Note on the first
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Business Day following the date each of the Senior Facility Agreement and the ABL Agreement has been “Paid in Full” (as such term or any similar term is defined in the applicable Subordination Agreement).
3.         Conversion Rights.  The Principal and accrued and unpaid Interest may be converted, in whole but not in part, into Shares on the terms and conditions set forth in this Section 3.
(a)        Conversion at Option of the Holder.  At any time beginning 30 days after termination of the Merger Agreement, subject to (i) the 9.985% Cap (as defined below), and (ii), the Exchange Cap (as defined below), the Holder shall be entitled to convert all or any part of the outstanding Principal and accrued Interest, as of the date of the Conversion Notice therefor delivered in accordance with this Section 3, into Conversion Shares in accordance with this Section 3 at the Conversion Rate (as defined in Section 3(b)).  The Company shall not issue any fraction of a Share upon any conversion.  If the issuance would result in the issuance of a fraction of a Share, then the Company shall round such fraction of a Share up or down to the nearest whole share (with 0.5 rounded up).
(b)        Conversion Rate.  The number of Conversion Shares issuable upon a conversion of any portion of this Note pursuant to Section 3 shall be determined according to the following formula (the “Conversion Rate”):
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            Conversion Amount          
Conversion Price
(c)        Mechanics of Conversion.  The conversion of Principal and Interest (“Conversion”) shall be conducted in the following manner:
(i)         Holder’s Delivery Requirements.  To convert a Conversion Amount into Conversion Shares pursuant to Section 3(a) above on any date, the Holder shall transmit by facsimile or electronic mail (or otherwise deliver), for receipt on or prior to 5:00 p.m. New York City time on such date, a copy of a conversion notice in the form attached hereto as Exhibit A (the “Conversion Notice”) to the Company (Attention: Richard Eisenstadt, Fax:  (972) 408-1143, Email: reisenstadt@neostx.com).
(ii)       Company’s Response.  Subject to Section 3(g)(ii), upon receipt or deemed receipt by the Company of a copy of a Conversion Notice, the Company (I) shall promptly send, via electronic mail a confirmation of receipt of such Conversion Notice to the Holder and the Company’s designated transfer agent (the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process such Conversion Notice in accordance with the terms herein, and (II) on or before the second (2nd) Business Day following the date of receipt or deemed receipt by the Company of such Conversion Notice (or, if earlier, the end of the then standard settlement period for U.S. broker-dealer securities transactions) (the “Share Delivery Date”), (A) provided the Holder (or its designee) is eligible to receive such Conversion Shares through The Depository Trust Company (“DTC”) (which shall include any time at which the Unrestricted Conditions (as defined below) are satisfied), credit such aggregate number of Conversion Shares to which the Holder shall be entitled to the
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Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian (“DWAC”) system, or (B) if the foregoing shall not apply, issue and deliver to the address as specified in the Conversion Notice, a stock certificate, registered in the name of the Holder or its designee, in each case, for the number of Conversion Shares to which the Holder shall be entitled.  The Conversion Shares will be free-trading, and freely transferable, and will not contain a legend (or stop transfer instructions) restricting the resale or transferability of the Conversion Shares if any of the Unrestricted Conditions (as defined below) is met.
(iii)      Dispute Resolution.  In the case of a dispute as to the determination of the Conversion Price or the arithmetic calculation of the Conversion Rate, the Company shall instruct the Transfer Agent to issue to the Holder the number of Conversion Shares that is not disputed and shall transmit an explanation of the disputed determinations or arithmetic calculations to the Holder via electronic mail within two (2) Business Days of receipt or deemed receipt of the Holder’s Conversion Notice or other date of determination.  If the Holder and the Company are unable to agree upon the determination of the Conversion Price or arithmetic calculation of the Conversion Rate within one (1) Business Day of such disputed determination or arithmetic calculation being transmitted to the Holder, then the Company shall promptly (and in any event within two (2) Business Days) submit via electronic mail (A) the disputed determination of the Conversion Price to an independent, reputable investment banking firm agreed to by the Company and the Holder, or (B) the disputed arithmetic calculation of the Conversion Rate to the Company’s independent registered public accounting firm, as the case may be.  The Company shall direct the investment bank or the accounting firm, as the case may be, to perform the determination or calculation and notify the Company and the Holder of the results no later than two (2) Business Days from the time it receives the disputed determination or calculation.  Such investment bank’s or accounting firm’s determination or calculation, as the case may be, shall be binding upon all parties absent manifest error.  The fees and expenses of such investment bank or accountant shall be paid by the Company.  Notwithstanding the existence of a dispute contemplated by this paragraph, if requested by the Holder, the Company shall issue to the Holder the Conversion Shares not in dispute in accordance with the terms hereof.
(iv)       Record Holder.  The Person or Persons entitled to receive the Conversion Shares issuable upon a Conversion shall be treated for all purposes as the legal and record holder or holders of such Shares upon delivery by the Holder of the Conversion Notice, or in the case of Conversion Shares the issuance of which is subject to a bona fide dispute that is subject to and being resolved pursuant to, and in compliance with the time periods and other provisions of, the dispute resolution provisions of Section 3(c)(iii), the first Business Day after the resolution of such bona fide dispute.
(v)        Company’s Failure to Timely Convert.
(A)       Cash Damages.  If by the Share Delivery Date, the Company shall fail to issue the Conversion Shares and deliver a certificate to the Holder for, or credit the Holder’s or its designee’s balance account with DTC with, the number of Conversion Shares, as applicable, (free of any restrictive legend, provided any of the Unrestricted Conditions is satisfied) (a “Delivery Failure”), then, in addition to all other available remedies that the Holder may pursue hereunder and under the Merger Agreement, the Company shall pay
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additional damages to the Holder for each day after the Share Delivery Date such conversion is not timely effected in an amount equal to two percent (2%) of the product of (I) the number of Conversion Shares not issued to the Holder or its designee on or prior to the Share Delivery Date and to which the Holder is entitled and (II) the Volume Weighted Average Price of the Common Stock on the Share Delivery Date (such product is referred to herein as the “Share Product Amount”).  Alternatively in lieu of the foregoing damages, subject to Section 3(c)(iii), at the written election of the Holder made in the Holder’s sole discretion, if, on or after the applicable Conversion Date, the Holder purchases (in an open market transaction or otherwise) Shares to deliver in satisfaction of a sale by such Holder of Conversion Shares that such Holder anticipated receiving from the Company (such purchased Shares, “Buy-In Shares”), the Company shall be obligated to promptly pay to such Holder (in addition to all other available remedies that the Holder may otherwise have), 110% of the amount by which (A) such Holder’s total purchase price (including brokerage commissions, if any) for such Buy-In Shares exceeds (B) the net proceeds received by such Holder from the sale of the number of Conversion Shares such Holder was entitled to receive but had not received on the Share Delivery Date. If the Company fails to pay the additional damages set forth in this Section 3(c)(v)(A) within five (5) Business Days of the date incurred, then the Holder entitled to such payments shall have the right at any time, so long as the Company continues to fail to make such payments, to require the Company, upon written notice, to immediately issue, in lieu of such cash damages, the number of Shares equal to the quotient of (X) the aggregate amount of the damages payments described herein divided by (Y) the Conversion Price specified by the Holder in the Conversion Notice.  Amounts payable pursuant to this Section 3(c)(v) shall be paid on or before the fifth (5th) Business Day of each month following a month in which such payment  accrued.
(B)       Void Conversion Notice.  If for any reason the Holder has not received all of the Conversion Shares prior to the tenth (10th) Business Day after the Share Delivery Date with respect to a Conversion (a “Conversion Failure”), then the Holder, upon written notice to the Company (a “Void Conversion Notice”), may void its Conversion with respect to, and retain or have returned, as the case may be, any portion of Principal that has not been converted pursuant to the Holder’s Conversion Notice; provided, that the voiding of the Holder’s Conversion Notice shall not affect the Company’s obligations to make any payments that have accrued prior to the date of such notice pursuant to Section 3(c)(v)(A) or otherwise.
(vi)       Book-Entry.  Notwithstanding anything to the contrary set forth herein, upon Conversion or repayment of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company.
(d)        Taxes.  The Company shall pay any and all taxes (excluding income taxes, franchise taxes or other taxes levied on gross earnings, profits or the like of the Holder) that may be payable with respect to the issuance and delivery of Conversion Shares upon the conversion of this Note, unless the tax is due because the Holder requests any Conversion Shares to be issued in a name other than the Holder’s name, in which case the Holder will pay that tax.
(e)        Legends.
(i)         Restrictive Legend. The Holder understands that until such time as the Conversion Shares have been registered under the Securities Act as contemplated by the Reg
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Rights Side Letter or otherwise may be sold pursuant to Rule 144 under the Securities Act or an exemption from registration under the Securities Act without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares, as applicable, may bear a restrictive legend in substantially the following form (and a stop-transfer order consistent therewith may be placed against transfer of the certificates for such securities):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, INCLUDING PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER SECTION 4(a)(7) OF THE SECURITIES ACT OR APPLICABLE FORMAL OR INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(a)(1) AND A HALF SALE.”  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
(ii)       Removal of Restrictive Legends. The certificates evidencing the Conversion Shares shall not contain or be subject to (and the Holder shall be entitled to the removal of) any legend or stop transfer instructions restricting the transfer thereof (including the legend set forth above in subsection 3(e)(i)): (A) while a registration statement covering the resale of such security by the Holder is effective under the Securities Act, (B) following any sale of such Conversion Shares pursuant to Rule 144, (C) if such Conversion Shares are eligible for sale under Rule 144(b)(1) without limitations, including with respect to those described in Rule 144(c)(1), (D) if the Holder certifies at any time that the Holder is not an “affiliate” of the Company (as such term is used under Rule 144 pursuant to the Securities Act), and the Holder’s holding period for purposes of Rule 144 and subsection (d)(3)(iii) thereof with respect to the Conversion Shares is at least six (6) months (it being acknowledged and agreed by the Company that the Holder’s holding period for the Conversion Shares shall be deemed to have commenced on the date hereof), or (E) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the SEC) (the “Unrestricted Conditions”).  Promptly following such time as any of the Unrestricted Conditions has been satisfied, the Company shall cause its counsel to issue a legal opinion or other instruction to the Transfer Agent (if required by the Transfer Agent) to effect the issuance of the Conversion Shares without a restrictive legend or, in the case of Conversion Shares that have previously been issued, the removal of the legend thereunder.  If any of the Unrestricted Conditions is met at the time of issuance of the Conversion Shares, then the Conversion Shares shall be issued free of all legends.  The Company agrees that following such time as any of the Unrestricted Conditions is met or such legend is otherwise no longer required under this Section 3(e), it will, no later than two (2) Trading Days (or if earlier, the number of Trading Days comprising the then standard settlement period for U.S. broker-dealer securities transactions) following the delivery (the “Unlegended Shares Delivery Deadline”) by the Holder to the Company or the Transfer Agent of any certificate representing Conversion Shares, as applicable,
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issued with a restrictive legend (such fourth Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Holder a certificate (or electronic transfer) representing such Shares that is free from all restrictive and other legends.  The Company shall assume (and the Holder shall be deemed to represent) that the Holder is not an affiliate of the Company, unless the Holder has otherwise advised the Company in writing.
(iii)      Sale of Unlegended Shares.  Holder agrees that the removal of the restrictive legend from any certificates representing securities as set forth in Section 3(e)(i) above is predicated upon the Company’s reliance that the Holder will sell any Conversion Shares pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and that if such securities are sold pursuant to a Registration Statement, they will be sold in compliance with the plan of distribution set forth therein.
(f)        Reservation of Shares.  The Company shall at all times reserve and keep available out of its authorized but unissued Shares solely for the purpose of effecting Conversions of this Note, such number of Shares as shall from time to time be sufficient to effect the conversion of the Note (without giving effect to the 9.985% Cap); and if at any time the number of authorized but unissued Shares shall not be sufficient to effect the conversion of the entire Principal amount convertible under this Note, the Company will use its best efforts to take such corporate action as may, in the opinion of counsel, be necessary to increase its authorized but unissued Shares to such number of Shares as shall be sufficient for such purpose.  The Company covenants and agrees that, upon any Conversion of this Note, all Shares issuable upon such Conversion shall be duly and validly issued, fully paid and nonassessable and not subject to preemptive rights, rights of first refusal or similar rights of any Person.
(g)        Limitations on Conversion.
(i)         Beneficial Ownership Limitation.  Notwithstanding anything herein to the contrary, the Company shall not be required to issue to the Holder, and the Holder may not acquire, a number of Shares upon Conversion or otherwise issue any Shares pursuant hereto to the extent that, upon such Conversion, the number of Shares then beneficially owned by the Holder and any other Persons or entities whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (including Shares held by any “group” of which the Holder is a member, but excluding Shares beneficially owned by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth herein) would exceed 9.985% of the total number of Shares then issued and outstanding (the “9.985% Cap”); provided, however, that the 9.985% Cap shall only apply to the extent that the Common Stock is deemed to constitute an “equity security” pursuant to Rule 13d-1(i) promulgated under the Exchange Act. For purposes hereof (including the representation contemplated by the second paragraph of this Section 3(g)(i)), “group” has the meaning set forth in Section 13(d) of the Exchange Act and applicable regulations of the SEC, and the percentage held by the Holder shall be determined in a manner consistent with the provisions of Section 13(d) of the Exchange Act.  For purposes hereof (including the representation contemplated by the second paragraph of this Section 3(g)(i)), in determining the number of outstanding Shares, the Holder may rely on the number of outstanding Shares as stated in the Company’s most recent
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quarterly or annual report filed with the SEC, or any current report filed by the Corporation with the SEC subsequent thereto.  Upon the written request of the Holder, the Company shall, within two (2) Trading Days, confirm orally and in writing to the Holder the number of Shares then outstanding, and the Holder shall be entitled to rely upon such confirmation for purposes hereof (including the representation contemplated by the second paragraph of this Section 3(g)(i)).
Delivery of a Conversion Notice by the Holder shall constitute a representation by the Holder that the issuance of Common Stock in accordance with such Conversion Notice will not cause the Holder (together with any other Person whose beneficial ownership of Common Stock would be aggregated with such Holder’s for purposes of Section 13(d) of the Exchange Act and the applicable regulations of the SEC) to beneficially own a number of Shares in excess of the 9.985% Cap, as determined in accordance with, and subject to the terms, conditions, qualifications and assumptions set forth in, the immediately preceding paragraph.
(ii)       Principal Market Regulation.  The Company shall not be required to issue any Shares upon a Conversion if the issuance of such Shares together with any previous issuances of Shares pursuant to this Note by the Holder hereof would exceed 9,901,906 Shares, subject to appropriate adjustment for any Stock Event that occurs after the date hereof (the “Exchange Cap”). Upon any conversion of this Note, the Company shall issue the maximum amount of the number of Shares set forth in the applicable Conversion Notice that may be issued without exceeding the Exchange Cap. For the avoidance of doubt, to the extent the conversion of any Principal and Interest of this Note pursuant to any Conversion Notice in respect of a Conversion would have resulted in an issuance of Shares in excess of the Exchange Cap, such Principal and Interest shall not be converted (the Company having no obligation to net cash settle such conversion), and such Principal shall remain outstanding and shall be repaid in cash in accordance with the terms of this Note. Alternatively, at the option of the Holder, the Floor Price will be increased to $0.8427 (subject to adjustment for any Stock Event that occurs after the date hereof) for the portion of the Conversion that would result in an issuance of Shares in excess of the Exchange Cap.
4.         Voting Rights.  Except as required by law, the Holder shall have no voting rights with respect to any of the Conversion Shares until the Conversion Date relating to the conversion of this Note upon which such Conversion Shares are issuable (or in the case of Conversion Shares the issuance of which is subject to a bona fide dispute that is subject to and being resolved pursuant to, and in compliance with the time periods and other provisions of, the dispute resolution provisions of Section 3(c)(iii), the first Business Day after the resolution of such bona fide dispute).
5.         Events of Default.  Subject to the provisions set forth in the Subordination Agreements, the Principal of this Note, together with all Interest accrued and unpaid thereon, shall at the option of the Holder become immediately due and payable if any one or more of the following events (an “Event of Default”) shall have occurred and be continuing:  (i) the Company’s failure to pay any amount due on this Note when due; or (ii) any Act of Bankruptcy shall occur with respect to the Company.
6.         Acceleration; Due on Sale. Subject to the provisions of the Subordination Agreements in the event of: (i) a Change of Control or (ii) an Event of Default, Holder may, by
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written notice to the Company, declare all amounts owing under this Note to be due and payable forthwith, whereupon the same shall immediately become due and payable.
7.         Amendment; Waiver.  The terms and provisions of this Note shall not be amended or waived except in a writing signed by the Company and the Holder.
8.         Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, the Merger Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief). No remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy, and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Note.  The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein.  Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof).  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies (at law or in equity), to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.
9.         Specific Shall Not Limit General; Construction.  No specific provision contained in this Note shall limit or modify any more general provision contained herein.  This Note shall be deemed to be jointly drafted by the Company and Holder and shall not be construed against any Person as the drafter hereof.
10.       Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
11.       Notices.  All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be provided in accordance with the notice provisions in the Merger Agreement.
12.       Restrictions on Transfer.
(a)        Registration or Exemption Required.  This Note has been issued in a transaction exempt from the registration requirements of the Securities Act.  None of the Note or the Conversion Shares may be transferred, sold, assigned, hypothecated or otherwise disposed of except pursuant to an effective registration statement or an exemption to the registration requirements of the Securities Act and applicable state securities laws including, without limitation, pursuant to Section 4(a)(7) of the Securities Act, Rule 144 under the Securities Act or a so-called “4(a)(1) and a half” transaction.
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(b)        Assignment. The Holder may not sell, transfer, assign, pledge, hypothecate or otherwise dispose of this Note, in whole or in part without the express prior written consent of the Company and any such purported sale, transfer, assignment, pledge, hypothecation or other disposition shall be void ab initio; provided, however, following the termination of the Merger Agreement, the Company shall not unreasonably withhold, condition or delay such consent.  No assignment of this Note shall be effective unless effected by the Company (including by making appropriate notation of such transfer on the Register).  This Note and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors and expressly permitted assigns of the Holder.
(c)        Registered Note.  This Note may be transferred only upon notation of such transfer on the Register, which the Company shall promptly endeavor to do upon any transfer otherwise permitted hereunder, and no assignment thereof shall be effective until recorded therein.
13.       Payment of Collection, Enforcement and Other Costs.  If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding; or (b) an attorney is retained to represent the Holder in any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action, including reasonable attorneys’ fees and disbursements.
14.       Cancellation.  After all Principal, Interest and other amounts at any time owed under, or on account of, this Note have been paid in full or converted into Shares in accordance with the terms hereof, this Note shall automatically be deemed cancelled, shall be surrendered to the Company for cancellation and shall not be reissued.  Notwithstanding anything in this Note to the contrary, this Note shall automatically, and without any action on the part of either the Company or the Holder, be deemed to be paid in full and cancelled effective as of the Effective Time (as defined in the Merger Agreement).
15.       Waiver of Notice.  To the extent permitted by law, the Company hereby waives demand, notice, presentment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note and the Merger Agreement.
16.       Governing Law.  This Note shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such State. All legal proceedings concerning the interpretation and enforcement of this Note shall be brought and determined in the Court of Chancery of the State of Delaware; provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then any such proceeding may be brought in any federal court located in the State of Delaware or any other Delaware state court.  The Company hereby and each Holder (by its acceptance of this Note) irrevocably submits to the exclusive jurisdiction of such courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby, and hereby irrevocably waives, and agrees not to assert in any suit, action or other proceeding, any claim that it is not personally subject to the jurisdiction of any such
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court, that such suit, action or other proceeding is improper or is an inconvenient venue for such proceeding.  The Company hereby and each Holder (by its acceptance of this Note) irrevocably waives personal service of process and consents to process being served in any such suit, action or other proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such Person at the address in effect for notices to it under the Merger Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.  EACH OF THE COMPANY AND THE HOLDER (BY ACCEPTANCE HEREOF) IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE ANY PROVISION OF THIS NOTE OR ANY OTHER TRANSACTION DOCUMENT.  THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.  EACH OF THE COMPANY AND THE HOLDER (BY ITS ACCEPTANCE HEREOF (A) CERTIFIES THAT NO OTHER PARTY AND NO AGENT, REPRESENTATIVE OR OTHER PERSON AFFILIATED WITH OR RELATED TO ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 16.
17.       Interpretative Matters.  Unless the context otherwise requires, (a) all references to Sections or Exhibits are to Sections or Exhibits contained in or attached to this Note, (b) each accounting term not otherwise defined in this Note has the meaning assigned to it in accordance with generally accepted accounting principles, (c) words in the singular or plural include the singular and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include the masculine, feminine and neuter and (d) the use of the word “including” in this Note shall be by way of example rather than limitation.  If a stock split, stock dividend, stock combination or other similar event occurs during any period over which an average price is being determined, then an appropriate adjustment will be made to such average to reflect such event.
18.       Execution.  A facsimile, telecopy, PDF or other reproduction of this Note may be delivered by the Company, and an executed copy of this Note may be delivered by the Company by facsimile, e-mail or other similar electronic transmission device pursuant to which the signature of or on behalf of the Company can be seen, and such execution and delivery shall be considered valid, binding and effective for all purposes.  The Company hereby agrees that it shall not raise the execution of facsimile, PDF or other reproduction of this Note, or the fact that any signature was transmitted by facsimile, e-mail or other similar electronic transmission device, as a defense to the Company’s execution of this Note.  Notwithstanding the foregoing, the Company shall be required to deliver an originally executed Note to the Holder.
[Signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the date first set forth above.
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	COMPANY:

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	NEOS THERAPEUTICS, INC.

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	By:
	/s/ Richard Eisenstadt

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	Name:
	Richard Eisenstadt

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	Title:
	Chief Financial Officer

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Accepted and agreed:
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HOLDER:
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AYTU BIOSCIENCE, INC.
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	By:
	/s/ Joshua Disbrow
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	Name:
	Joshua Disbrow
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	Title:
	Chief Executive Officer
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Exhibit A
CONVERSION NOTICE
Notice Date: ________
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Reference is made to the Unsecured Subordinated Convertible Promissory Note, dated February [•], 2021 (the “Note”) of NEOS THERAPEUTICS, INC., a Delaware corporation (the “Company”), in the original principal amount of up to $5,000,000.00; capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Note.  In accordance with and pursuant to the Note, the undersigned hereby elects to convert the Conversion Amount indicated below, which is 100% of the Principal as of the Notice Date set forth above, into shares of common stock, par value $0.001 per share (the “Common Stock”), of the Company, as of the date specified below.
Date of Conversion:                   
Amount of Principal to be converted:                                                           
Please confirm the following information:
Conversion Price:                                           
Number of shares of Common Stock to be issued:                                                                     
Please issue the Common Stock into which the Note is being converted in the following name and, if physical certificates are applicable, to the following address:
Issue to:                                                                                                                                  
DTC Participant Number and Name:                                                                                                          
Account Number:                                                                                                                                        
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Exhibit B
Reg Rights Side Letter

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