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  Exhibit 10.1

 

NOTE
PURCHASE AGREEMENT

 

This
Note Purchase Agreement (this “Agreement”) is dated as
of February 14, 2019, between AzurRx BioPharma, Inc., a Delaware
corporation (the “Company”), and ADEC
Private Equity Investments, LLC, a Delaware limited liability
company (the “Purchaser”).

 

WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant
to Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities
Act”), and/or Rule 506 promulgated thereunder, the
Company desires to issue and sell to the Purchasers, and the
Purchasers, severally and not jointly, desire to purchase from the
Company, securities of the Company as more fully described in this
Agreement.

 

NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company
and each of the Purchasers agree as follows:

 

 

ARTICLE I.

DEFINITIONS

 

1.1 Definitions. In addition to the
terms defined elsewhere in this Agreement: (a) capitalized terms
that are not otherwise defined herein have the meanings given to
such terms in the Notes (as defined herein), and (b) the following
terms have the meanings set forth in this Section 1.1:

 

“ABS” means AzurRx BioPharma SAS (formerly ProteaBio Europe SAS), a company
incorporated in October 2008 under the laws of France and a wholly
owned subsidiary of the Company.

 

 “Action”
shall have the meaning ascribed to such term in Section
2.1(j).

 

“Affiliate” means any
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.

 

“Board of Directors” means
the board of directors of the Company.

 

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

 

“Closing” means the
closing of the purchase and sale of the Securities pursuant to
Section 1.2.

 

“Closing Date” means the
Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto pursuant
to Section 1.2(a) and (b), and all conditions precedent to (i) the
Purchaser’s obligations to pay the Purchase Price as to the
Closing and (ii) the Company’s obligations to deliver the
Securities as to the Closing have been satisfied or
waived.

 

“Closing Statement” means
the Closing Statement in the form on Annex A attached
hereto.

 

“Commission” means the
United States Securities and Exchange Commission.

 

“Common Stock” means the
common stock of the Company, par value $0.0001 per share, and any
other class of securities into which such securities may hereafter
be reclassified or changed.

 

“Common Stock Equivalents”
means any securities of the Company that entitle the holder thereof
to acquire at any time Common Stock, including, without limitation,
any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or
exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

“Company Counsel” means
the Disclosure Law Group, a Professional Corporation.

 

 

1

 

 

“Conversion Price” has the
meaning ascribed to such term in the Notes.

 

“Conversion Shares” has
the meaning ascribed to such term in the Notes.

 

“Effective Date” means the
earliest of the date that (a) the initial Registration Statement
has been declared effective by the Commission, (b) all of the
Underlying Shares have been sold pursuant to Rule 144 or may be
sold pursuant to Rule 144 without the requirement for the Company
to be in compliance with the current public information required
under Rule 144 and without volume or manner-of-sale restrictions,
(c) following the one year anniversary of the Closing Date provided
that a holder of the Underlying Shares is not an Affiliate of the
Company or (d) all of the Underlying Shares may be sold pursuant to
an exemption from registration under Section 4(1) of the Securities
Act without volume or manner-of-sale restrictions and Company
Counsel has delivered to such holders a standing written
unqualified opinion that resales may then be made by such holders
of the Underlying Shares pursuant to such exemption which opinion
shall be in form and substance reasonably acceptable to such
holders.

 

“Evaluation Date” has the
meaning ascribed to such term in Section 2.1(s).

 

“Exchange Act” means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

 

“FCPA” means the Foreign
Corrupt Practices Act of 1977, as amended.

 

“FDA” has the meaning
ascribed to such term in Section 2.1(ee).

 

“FDCA” has the meaning
ascribed to such term in Section 2.1(ee).

 

“GAAP” has the meaning
ascribed to such term in Section 2.1(h).

 

“Indebtedness” has the
meaning ascribed to such term in Section 2.1(aa).

 

“Intellectual Property
Rights” has the meaning ascribed to such term in
Section 2.1(p).

 

“Legend Removal Date” has
the meaning ascribed to such term in Section 3.1(c).

 

“Liens” means a lien
(statutory or other), charge, pledge, security interest,
encumbrance, right of first refusal, preemptive right, mortgage,
assignment, hypothecation or other restriction,  sale with a right of
redemption or other title retention agreement and any capitalized
lease with respect to any property (real or personal) or asset, and
the filing of, or agreement to give, any financing statement
perfecting a security interest or providing a notice filing (other
than a notice filing with respect to a bailment, a consignment or
an operating lease) of a lien or security interest under the law of
any jurisdiction.

 

“Material Adverse Effect”
has the meaning assigned to such term in Section
2.1(b).

 

“Material Permits” has the
meaning ascribed to such term in Section 2.1(n).

 

“Maximum Rate” has the
meaning ascribed to such term in Section 4.15.

 

“Notes” means the Senior
Convertible Notes issued by the Company to the Purchasers hereunder
in the form of Exhibit
A and Exhibit
B attached hereto, each having a maturity date as set forth
therein.

 

 “Person”
means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.

 

“Pharmaceutical Product”
has the meaning ascribed to such term in Section
3.1(ee).

 

 

2

 

 

“Pledge Agreement” means a
pledge agreement executed by the Company and/or ABS pledging to
Purchaser ABS’s bank account into which the aggregate amount
of funds received as a result of each of the 2019 Tax Credit and
the 2020 Tax Credit shall be held.

 

 “Purchase
Price” has the meaning ascribed to such term in
Section 1.2(a).

 

 “Principal
Amount” means, as to the Purchasers, the amount set
forth below the Purchaser’s signature block on the signature
pages hereto next to the heading “Principal Amount,” in
United States Dollars, which shall equal the Purchase
Price.

 

 “Proceeding”
means an action, claim, suit, investigation or proceeding
(including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or
threatened.

 

“Purchaser Party” has the
meaning ascribed to such term in Section 3.8.

 

“Registration Rights
Agreement” means the Registration Rights Agreement,
dated the date hereof, among the Company and the Purchasers, in the
form of Exhibit C
attached hereto.

 

“Registration Statement”
means a registration statement meeting the requirements set forth
in the Registration Rights Agreement and covering the resale of the
Underlying Shares by the Purchaser as provided for in the
Registration Rights Agreement.

 

“Required Approvals” shall
have the meaning ascribed to such term in Section
2.1(e).

 

“Required Minimum” means,
as of any date, the maximum aggregate number of shares of Common
Stock then issued or potentially issuable in the future pursuant to
the Transaction Documents, including any Underlying Shares issuable
upon conversion in full of the Notes (including Underlying Shares
issuable as payment of interest on the Notes), ignoring any
conversion limits set forth therein.

 

“Rule 144” means Rule 144
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially
the same effect as such Rule.

 

“Rule 424” means Rule 424
promulgated by the Commission pursuant to the Securities Act, as
such Rule may be amended or interpreted from time to time, or any
similar rule or regulation hereafter adopted by the Commission
having substantially the same purpose and effect as such
Rule.

 

“SEC Reports” shall have
the meaning ascribed to such term in Section 2.1(h).

 

“Securities” means the
Notes and the Underlying Shares.

 

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

 

“Short Sales” means all
“short sales” as defined in Rule 200 of Regulation SHO
under the Exchange Act (but shall not be deemed to include locating
and/or borrowing shares of Common Stock). 

 

 “Subsidiary”
means ABS and shall, where applicable, also include any direct or
indirect subsidiary of the Company formed or acquired after the
date hereof.

 

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

 

“Trading Market” means any
of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE MKT,
the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq
Global Select Market, the New York Stock Exchange, OTCQB or OTCQX
(or any successors to any of the foregoing).

 

 “Transaction
Documents” means this Agreement, the Notes, the
Registration Rights Agreement, the Pledge Agreement, the Warrant
Reprice Agreement, all exhibits and schedules hereto and thereto
and any other documents or agreements executed in connection with
the transactions contemplated hereunder.

 

“Transfer Agent” means
Colonial
Stock Transfer, 66 Exchange Place, 1st Floor, Salt Lake City, Utah
84111, and any successor transfer agent of the
Company.

 

 

3

 

 

“Underlying Shares” means
the shares of Common Stock issued and issuable pursuant to the
terms of the Notes, including without limitation, shares of Common
Stock issued and issuable in lieu of the cash payment of interest
on the Notes in accordance with the terms of the Notes, without
respect to any limitation or restriction on conversions of the
Notes.

 

“Warrants” means each of
those issued and outstanding warrants to purchase Common Stock
previously issued by the Company to those individuals identified in
Exhibit D attached
hereto (“Affiliated
Purchasers”).

 

“Warrant Reprice
Agreement” means the Warrant Reprice Agreement, dated
the date hereof, among the Company and the Affiliated Purchasers,
in the form of Exhibit
E attached hereto.

 

 “2019
Tax Credit” means the French research and development
tax credits for the 2018 tax year, which the Company or ABS is
expected to receive within nine (9) months following December 31,
2018.

 

“2020 Tax Credit” means
the French research and development tax credits for the 2019 tax
year, which the Company or ABS is expected to receive within nine
(9) months following December 31, 2019.

 

PURCHASE AND SALE

 

1.2 Closing and Warrant
Reprice.

 

(a) Closing. On the Closing Date,
upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this
Agreement by the parties hereto, the Company agrees to sell, and
each of the Purchasers, severally and not jointly, agree to
purchase two Notes, in the aggregate principal amount of $1,000,000
for each Note, and together in the aggregate principal amount of
$2,000,000, as more particularly set forth herein (collectively,
the “Purchase
Price”). At Closing, the Purchasers shall deliver to
the Company, via wire transfer of immediately available funds, the
Purchase Price as set forth opposite each Purchaser’s name on
the signature page hereto, and the Company shall deliver to the
Purchasers the Notes, and the Company and the Purchasers shall
deliver the other items which are deliverable at Closing as set
forth in Section 1.3.

 

(b) Repricing of Warrants, As
additional consideration for this Agreement, on the Closing Date,
upon the terms and subject to the conditions set forth in the
Warrant Reprice Agreement, the Company shall decrease the exercise
price of the Warrants to $1.50 per share. All other terms of the
Warrants shall remain in effect, and shall not be altered or
amended by this Agreement or the Warrant Reprice
Agreement.

 

1.3 Deliveries.

 

(a) On or prior to the
Closing Date (except as noted), the Company shall deliver or cause
to be delivered to the Purchasers the following:

 

(i) this Agreement duly
executed by the Company;

 

(ii) the
Notes, each with an aggregate principal amount equal to $1,000,000,
registered in the name of the Purchasers; and

 

(iii) the
Registration Rights Agreement, duly executed by the
Company.

 

(b) On or prior to the
Closing, the Purchasers shall deliver or cause to be delivered to
the Company, the following:

 

(i) this Agreement duly
executed by the Purchasers;

 

(ii) the
Purchase Price by wire transfer;

 

(iii) the
Registration Rights Agreement, duly executed by the Purchasers;
and

 

(iv) the
Warrant Reprice Agreement.

 

 

4

 

 

1.4 Closing
Conditions.

 

(a) The obligations of
the Company hereunder in connection with the Closing are subject to
the following conditions being met:

 

(i) the accuracy in all
material respects on (or, to the extent representations or
warranties are qualified by materiality or Material Adverse Effect,
in all respects) the Closing Date of the representations and
warranties of the Purchasers contained herein (unless as of a
specific date therein in which case they shall be accurate as of
such date);

 

(ii) all
obligations, covenants and agreements of the Purchasers required to
be performed at or prior to the Closing Date shall have been
performed; and

 

(iii) the
delivery by the Purchasers of the items set forth in Section 1.3(b)
of this Agreement.

 

(b) The respective
obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being
met:

 

(i) the accuracy in all
material respects (or, to the extent representations or warranties
are qualified by materiality or Material Adverse Effect, in all
respects) when made and on the applicable Closing Date of the
representations and warranties of the Company contained herein
(unless as of a specific date therein);

 

(ii) all
obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been
performed;

 

(iii) with
respect to the Closing the delivery by the Company of the items set
forth in Section 1.3(a) of this Agreement;

 

(iv) there
shall have been no Material Adverse Effect with respect to the
Company since the date hereof; and

 

(v) from the date
hereof to the Closing Date, trading in the Common Stock shall not
have been suspended by the Commission or the Company’s
principal Trading Market and, at any time prior to the applicable
Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades
are reported by such service, or on any Trading Market, nor shall a
banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each
case, in the reasonable judgment of such Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the
Closing Date.

 

1.1   Post-Closing
Covenants. The Company hereby covenants that it shall
deliver or cause to be delivered to the Purchaser (a) a legal
opinion of Company Counsel, substantially in the form of
Exhibit F attached
hereto, within two (2) Business Days of the Closing Date, and (b)
the Pledge Agreement executed by the Company and/or ABS within
forty-five (45) days of the Closing Date, which Pledge Agreement
shall comply in all material respects with French law. The
Purchasers hereby covenant that they will deliver or cause to be
delivered to the Company within two (2) Business Days of the
Closing Date wire instructions pursuant to which the Company may
prepay all amounts due Purchasers under the terms of the Notes on
or prior to the maturity date thereof.

 

 

ARTICLE II.

REPRESENTATIONS AND WARRANTIES

 

2.1 Representations
and Warranties of the Company. Except as set forth in the Disclosure
Schedules attached hereto, which Disclosure Schedules shall be
deemed a part hereof and shall qualify any representation or
otherwise made herein to the extent of the disclosure contained in
the corresponding section of the Disclosure Schedules, the Company
hereby makes the following representations and warranties to the
Purchaser as of the date hereof and as of the Closing
Date:

 

(a) Subsidiaries. All of the direct
and indirect subsidiaries of the Company are set forth on
Schedule 2.1(a).
Except as set forth on Schedule 2.1(a), the Company
owns, directly or indirectly, all of the capital stock or other
equity interests of each Subsidiary free and clear of any Liens,
and all of the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities. If the Company has no
subsidiaries, all other references to the Subsidiaries or any of
them in the Transaction Documents shall be
disregarded.

 

 

5

 

 

(b)          Organization
and Qualification. The Company and each of the Subsidiaries
is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of
its incorporation or organization, with the requisite power and
authority to own and use its properties and assets and to carry on
its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of
its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of the Company and
the Subsidiaries is duly qualified to conduct business and is in
good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the
case may be, could not have or reasonably be expected to result in:
(i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse
effect on the results of operations, assets, business, prospects or
condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, (iii) a material adverse effect on
the Company’s ability to perform in any material respect on a
timely basis its obligations under any Transaction Document, or
(iv) a material adverse effect on the legality, validity, binding
effect or enforceability against the Company of any Transaction
Document (any of (i), (ii), (iii) or (iv), a “Material Adverse Effect”)
and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

 

(c) Authorization; Enforcement. The
Company has the requisite corporate power and authority to enter
into and to consummate the transactions contemplated by this
Agreement and each of the other Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and each of the other
Transaction Documents by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the
Company and no further action is required by the Company, the Board
of Directors or the Company’s stockholders in connection
herewith or therewith other than in connection with the Required
Approvals. This Agreement and each other Transaction Document to
which it is a party has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

(d)         No
Conflicts. The execution, delivery and performance by the
Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Securities and
the consummation by it of the transactions contemplated hereby and
thereby do not and will not, subject to the Required Approvals: (i)
conflict with or violate any provision of the Company’s or
any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, (ii) conflict
with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the
creation of any Lien (except as contemplated pursuant to the
Transaction Documents) upon any of the properties or assets of the
Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or
Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or
(iii) subject to the Required Approvals, conflict with or result in
a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be
expected to result in a Material Adverse Effect.

 

(e) Filings, Consents and
Approvals. The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the consents,
waivers, authorizations, orders, notices or filings required
pursuant to Section 3.6 of this Agreement or listed on Schedule 2.1(e), (ii) the
filings with the Commission pursuant to the Registration Rights
Agreement, (iii) the notice and/or application(s) to each
applicable Trading Market for the issuance and sale of the
Securities and the listing of the Conversion Shares for trading
thereon in the time and manner required thereby and (iv) the filing
of Form D with the Commission and such filings as are required to
be made under applicable state securities laws (collectively, the
“Required
Approvals”).

 

(f) Issuance of the Securities. The
Securities are duly authorized and, when issued and paid for in
accordance with the applicable Transaction Documents, will be duly
and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Underlying
Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable,
free and clear of all Liens imposed by the Company other than
restrictions on transfer provided for in the Transaction Documents.
The Company has reserved from its duly authorized capital stock a
number of shares of Common Stock for issuance of the Underlying
Shares at least equal to the Required Minimum on the date
hereof.

 

(g)          Capitalization.
The capitalization of the Company is as set forth on Schedule 2.1(g), which
Schedule 2.1(g)
also includes the number of shares of Common Stock owned
beneficially, and of record, by Affiliates of the Company as of the
date hereof. Except as set forth in Schedule 2.1(g), the Company
has not issued any capital stock since its most recently filed
periodic report under the Exchange Act other than pursuant to the
exercise of employee stock options under the Company’s stock
option plans, the issuance of shares of Common Stock to employees
pursuant to the Company’s employee stock purchase plans and
pursuant to the conversion and/or exercise of Common Stock
Equivalents outstanding as of the date of the most recently filed
periodic report under the Exchange Act. No Person has any right of
first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by
the Transaction Documents. Except as set forth in Schedule 2.1(g) and as a result
of the purchase and sale of the Securities, there are no
outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any Person any right to subscribe
for or acquire any shares of Common Stock or the capital stock of
any Subsidiary, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock or Common
Stock Equivalents or capital stock of any Subsidiary.

 

 

6

 

 

(h)        SEC
Reports; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period
as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto
and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely
basis, except as set forth on Schedules 2.1(h), or has
received a valid extension of such time of filing and has filed any
such SEC Reports prior to the expiration of any such extension. As
of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and none of the SEC Reports, when
filed, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
Company has never been an issuer subject to Rule 144(i) under the
Securities Act. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the
Commission with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.

 

(i) Material Changes; Undisclosed Events,
Liabilities or Developments. Since the date of the latest
audited financial statements included within the SEC Reports,
except as specifically disclosed in a subsequent SEC Report filed
prior to the date hereof and as set forth on Schedule 2.1(i): (i) there has
been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or disclosed
in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared
or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the
Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock
option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
Except for the issuance of the Securities contemplated by this
Agreement or as set forth on Schedule 2.1(i), no event,
liability, fact, circumstance, occurrence or development has
occurred or exists or is reasonably expected to occur or exist with
respect to the Company or its Subsidiaries or their respective
businesses, properties, operations, assets or financial condition,
that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made
or deemed made that has not been publicly disclosed at least one
(1) Trading Day prior to the date that this representation is
made.

 

(j) Litigation. Except as set forth
on Schedule 2.1(j),
there is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an
“Action”) which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision,
have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor, to the
knowledge of the Company, any director or officer thereof, is or
has been the subject of any Action involving a claim of violation
of or liability under federal or state securities laws or a claim
of breach of fiduciary duty. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any
current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities
Act.

 

(k)        Labor
Relations. No labor dispute exists or, to the knowledge of
the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a
Material Adverse Effect. None of the Company’s or its
Subsidiaries’ employees is a member of a union that relates
to such employee’s relationship with the Company or such
Subsidiary, and neither the Company nor any of its Subsidiaries is
a party to a collective bargaining agreement, and the Company and
its Subsidiaries believe that their relationships with their
employees are good. To the knowledge of the Company, no executive
officer of the Company or any Subsidiary, is, or is now expected to
be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or
any restrictive covenant in favor of any third party, and the
continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its
Subsidiaries are in compliance with all U.S. federal, state, local
and foreign laws and regulations relating to employment and
employment practices, terms and conditions of employment and wages
and hours, except where the failure to be in compliance could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 

(l)     Compliance.
Except as set forth on Schedule 2.1(l), neither the
Company nor any Subsidiary: (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with
notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound (whether or
not such default or violation has been waived), (ii) is in
violation of any judgment, decree or order of any court, arbitrator
or other governmental authority or (iii) is or has been in
violation of any statute, rule, ordinance or regulation of any
governmental authority, including without limitation all foreign,
federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and
safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material
Adverse Effect.

 

(m) Environmental
Laws.                                            The
Company and its Subsidiaries (i) are in compliance with all
federal, state, local and foreign laws relating to pollution or
protection of human health or the environment (including ambient
air, surface water, groundwater, land surface or subsurface
strata), including laws relating to emissions, discharges, releases
or threatened releases of chemicals, pollutants, contaminants, or
toxic or hazardous substances or wastes (collectively,
“Hazardous
Materials”) into the environment, or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Materials, as well as all authorizations, codes, decrees, demands,
or demand letters, injunctions, judgments, licenses, notices or
notice letters, orders, permits, plans or regulations, issued,
entered, promulgated or approved thereunder (“Environmental Laws”);
(ii) have received all permits licenses or other approvals required
of them under applicable Environmental Laws to conduct their
respective businesses; and (iii) are in compliance with all terms
and conditions of any such permit, license or approval where in
each clause (i), (ii) and (iii), the failure to so comply or to
have received could be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect.

 

(n)         Regulatory
Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary
to conduct their respective businesses as described in the SEC
Reports, except where the failure to possess such certificates,
authorizations and permits could not reasonably be expected to
result in a Material Adverse Effect (“Material Permits”), and
neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any
Material Permit.

 

 

7

 

 

(o)        Title
to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by
them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for
Permitted Liens (as defined in the Notes). Any real property and
facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases with
which the Company and the Subsidiaries are in compliance, except
for any failure to be in compliance that could not reasonably be
expected to have a Material Adverse Effect.

 

(p)          Intellectual
Property. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets,
inventions, copyrights, licenses and other intellectual property
rights and similar rights as described in the SEC Reports as
necessary or required for use in connection with their respective
businesses and which the failure to so have could have a Material
Adverse Effect (collectively, the “Intellectual Property
Rights”). Neither the Company nor any Subsidiary has
received, since the date of the latest audited financial statements
included within the SEC Reports, a written notice of a claim, has
been accused or otherwise has any knowledge that the Intellectual
Property Rights violate or infringe (and will not infringe) upon
the rights of any Person, except as could not have or reasonably be
expected to not have a Material Adverse Effect.  To the
knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.  The Company and
its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual
properties, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has no knowledge of any facts that
would preclude it from having valid license rights or clear title
to the Intellectual Property Rights.  The Company has no
knowledge that it lacks or will be unable to obtain any rights or
licenses to use all Intellectual Property Rights that are necessary
to conduct its business.

 

(q)        Insurance.
The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses
in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at
least equal to the Purchase Price. Neither the Company nor any
Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant
increase in cost.

 

(r) Transactions With Affiliates and
Employees. Except as set forth in the SEC Reports, none of
the officers or directors of the Company or any Subsidiary and, to
the knowledge of the Company, none of the employees of the Company
or any Subsidiary is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from
providing for the borrowing of money from or lending of money to,
or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee, stockholder, member
or partner, in each case in excess of $120,000 other than for: (i)
payment of salary or consulting fees for services rendered, (ii)
reimbursement for expenses incurred on behalf of the Company and
(iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.

 

(s) Sarbanes-Oxley; Internal Accounting
Controls. The Company and the Subsidiaries are in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act
of 2002 that are effective as of the date hereof, and any and all
applicable rules and regulations promulgated by the Commission
thereunder that are effective as of the date hereof. Except as set
forth on Schedule
2.1(s), the Company and the
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions
are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences. Except as set forth on
Schedule 2.1(s),
the Company and the Subsidiaries have
established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and the
Subsidiaries and designed such disclosure controls and procedures
to ensure that information required to be disclosed by the Company
in the reports it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in the Commission’s rules and forms. The
Company’s certifying officers have evaluated the
effectiveness of the disclosure controls and procedures of the
Company and the Subsidiaries as of the end of the period covered by
the most recently filed periodic report under the Exchange Act
(such date, the “Evaluation
Date”). The Company
presented in its most recently filed periodic report under the
Exchange Act the conclusions of the certifying officers about the
effectiveness of the disclosure controls and procedures based on
their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the internal control over
financial reporting (as such term is defined in the Exchange Act)
that have materially affected, or is reasonably likely to
materially affect, the internal control over financial reporting of
the Company and its Subsidiaries.

 

(t) Certain Fees. Except as set
forth on Schedule
2.1(t), no brokerage or finder’s fees or commissions
are or will be payable by the Company or any Subsidiaries to any
broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the
transactions contemplated by the Transaction Documents. The
Purchaser shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by the Transaction
Documents.

 

(u)       Private
Placement. Assuming the accuracy of the Purchaser’s
representations and warranties set forth in Section 2.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchaser as
contemplated hereby. The issuance and sale of the Securities
hereunder does not contravene the rules and regulations of the
Trading Market.

 

(v)          Investment
Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not
be or be an Affiliate of, an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that
it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as
amended.

 

 

8

 

 

(w) Registration Rights. Other than
the Purchaser and except as set forth on Schedule 2.1(w), no Person has
any right to cause the Company to effect the registration under the
Securities Act of any securities of the Company or any
Subsidiaries.

 

(x)       Listing
and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge
is likely to have the effect of, terminating the registration of
the Common Stock under the Exchange Act, nor has the Company
received any notification that the Commission is contemplating
terminating such registration. Except as set forth on Schedule 2.1(x), (i) the
Company has not, in the twelve (12) months preceding the date
hereof, received notice from any Trading Market on which the Common
Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance
requirements of such Trading Market and (ii) the Company is, and
has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements. The Common Stock is currently eligible for electronic
transfer through the Depository Trust Company or another
established clearing corporation and the Company is current in
payment of the fees to the Depository Trust Company (or such other
established clearing corporation) in connection with such
electronic transfer.

 

(y)       No
General Solicitation. Neither the Company nor any Person
acting on behalf of the Company has offered or sold any of the
Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only
to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the
Securities Act.

 

(z)      Accountants.
The Company’s accounting firm is set forth on Schedule 2.1(z) of the
Disclosure Schedules. To the knowledge and belief of the Company,
such accounting firm: (i) is a registered public accounting firm as
required by the Exchange Act and (ii) shall express its opinion
with respect to the financial statements to be included in the
Company’s Annual Report for the fiscal year ending December
31, 2018.

 

(aa) Seniority.
No Indebtedness or other claim against the Company is senior to the
Notes in right of payment, whether upon liquidation or dissolution,
or otherwise, other than indebtedness secured by purchase money
security interests (which is senior only as to underlying assets
covered thereby) and capital lease obligations (which is senior
only as to the property covered thereby). For the purposes of this
Agreement, “Indebtedness” means (x)
any liabilities for borrowed money or amounts owed in excess of
$50,000 (other than trade accounts payable incurred in the ordinary
course of business), (y) all guaranties, endorsements and other
contingent obligations in respect of indebtedness of others,
whether or not the same are or should be reflected in the
Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (z) the present value of any lease payments
in excess of $50,000 due under leases required to be capitalized in
accordance with GAAP.

 

(bb) No
Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise, between the Company and the
accountants and lawyers formerly or presently employed by the
Company and the Company is current with respect to any fees owed to
its accountants and lawyers which could affect the Company’s
ability to perform any of its obligations under any of the
Transaction Documents.

 

(cc) Acknowledgment
Regarding Purchasers’ Purchase of Securities. The
Company acknowledges and agrees that the Purchasers are acting
solely in the capacity of an arm’s length purchaser with
respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no
Purchasers are acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and
any advice given by any Purchasers or any of their respective
representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely
incidental to the Purchasers’ purchase of the Securities. The
Company further represents to the Purchasers that the
Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company
and its representatives.

 

(dd) Regulation
M Compliance.  Except as set forth on Schedule 2.1(dd), the Company
has not, and to its knowledge no one acting on its behalf has, (i)
taken, directly or indirectly, any action designed to cause or to
result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of
the Securities, (ii) sold, bid for, purchased, or paid any
compensation for soliciting purchases of, any of the Securities, or
(iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company,
other than, in the case of clauses (ii) and (iii), compensation
paid to any placement agent in connection with the placement of the
Securities.

 

(ee) FDA.
As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration (“FDA”) under the Federal
Food, Drug and Cosmetic Act, as amended, and the regulations
thereunder (“FDCA”) that is
manufactured, packaged, labeled, tested, distributed, sold, and/or
marketed by the Company or any of its Subsidiaries (each such
product, a “Pharmaceutical Product”),
such Pharmaceutical Product is being manufactured, packaged,
labeled, tested, distributed, sold and/or marketed by the Company
in compliance with all applicable requirements under FDCA and
similar laws, rules and regulations relating to registration,
investigational use, premarket clearance, licensure, or application
approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling,
advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse
Effect.  There is no pending, completed or, to the Company's
knowledge, threatened, action (including any lawsuit, arbitration,
or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its
Subsidiaries, and none of the Company or any of its Subsidiaries
has received any notice, warning letter or other communication from
the FDA or any other governmental entity, which (i) contests the
premarket clearance, licensure, registration, or approval of, the
uses of, the distribution of, the manufacturing or packaging of,
the testing of, the sale of, or the labeling and promotion of any
Pharmaceutical Product, (ii) withdraws its approval of, requests
the recall, suspension, or seizure of, or withdraws or orders the
withdrawal of advertising or sales promotional materials relating
to, any Pharmaceutical Product, (iii) imposes a clinical hold on
any clinical investigation by the Company or any of its
Subsidiaries, (iv) enjoins production at any facility of the
Company or any of its Subsidiaries, (v) enters or proposes to enter
into a consent decree of permanent injunction with the Company or
any of its Subsidiaries, or (vi) otherwise alleges any violation of
any laws, rules or regulations by the Company or any of its
Subsidiaries, and which, either individually or in the aggregate,
would have a Material Adverse Effect.  The properties,
business and operations of the Company have been and are being
conducted in all material respects in accordance with all
applicable laws, rules and regulations of the FDA. The Company
has not been informed by the FDA that the FDA will prohibit the
marketing, sale, license or use in the United States of any product
proposed to be developed, produced or marketed by the Company nor
has the FDA expressed any concern as to approving or clearing for
marketing any product being developed or proposed to be developed
by the Company. To the Company’s knowledge, there are no
legal or governmental proceedings relating to the FDC act, the
Public Health Services Act or any regulations of the FDA pending or
threatened to which the Company is a party, nor is it aware of any
material violations of such acts or regulations by the
Company.

 

 

9

 

 

(ff) Stock
Option Plans. Each stock option granted by the Company under
the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii)
with an exercise price at least equal to the fair market value of
the Common Stock on the date such stock option would be considered
granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The
Company has not knowingly granted, and there is no and has been no
Company policy or practice to knowingly grant, stock options prior
to, or otherwise knowingly coordinate the grant of stock options
with, the release or other public announcement of material
information regarding the Company or its Subsidiaries or their
financial results or prospects.

 

(gg) No
Disqualification Events. With respect to the Securities to
be offered and sold hereunder in reliance on Rule 506 under the
Securities Act, none of the Company, any of its predecessors, any
affiliated issuer, any director, executive officer, other officer
of the Company participating in the offering hereunder, any
beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power,
nor any promoter (as that term is defined in Rule 405 under the
Securities Act) connected with the Company in any capacity at the
time of sale (each, an “Issuer Covered Person”
and, together, “Issuer Covered Persons”)
is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act
(a “Disqualification
Event”), except for a Disqualification Event covered
by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable
care to determine whether any Issuer Covered Person is subject to a
Disqualification Event. The Company has complied, to the extent
applicable, with its disclosure obligations under Rule 506(e), and
has furnished to the Purchaser a copy of any disclosures provided
thereunder.

 

(hh) Other
Covered Persons. The Company is not aware of any person
(other than any Issuer Covered Person) that has been or will be
paid (directly or indirectly) remuneration for solicitation of
purchaser in connection with the sale of any Regulation D
Securities.

 

(ii)        Notice
of Disqualification Events. The Company will notify the
Purchaser in writing, prior to Closing and the Extension Notice
Date (if applicable) of (i) any Disqualification Event relating to
any Issuer Covered Person and (ii) any event that would, with the
passage of time, become a Disqualification Event relating to any
Issuer Covered Person.

 

2.2 Representations and Warranties of the
Purchasers. Each Purchaser hereby represents and warrants,
severally and not jointly, as of the date hereof and as of the
applicable Closing and Extension Notice Date (if applicable) to the
Company as follows (unless as of a specific date
therein):

 

(a) Organization; Authority. Such
Purchaser is either an individual or an entity duly incorporated or
formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with full right,
corporate, partnership, limited liability company or similar power
and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry
out its obligations hereunder and thereunder. The execution and
delivery of the Transaction Documents and performance by such
Purchaser of the transactions contemplated by the Transaction
Documents have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as
applicable, on the part of such Purchaser. As of the Closing Date,
each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against
it in accordance with its terms, except: (i) as limited by general
equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and
(iii) insofar as indemnification and contribution provisions may be
limited by applicable law.

 

(b) Own Account. Such Purchaser
understands that the Securities are “restricted
securities” and have not been registered under the Securities
Act or any applicable state securities law and is acquiring the
Securities as principal for its own account and not with a view to
or for distributing or reselling such Securities or any part
thereof in violation of the Securities Act or any applicable state
securities law, has no present intention of distributing any of
such Securities in violation of the Securities Act or any
applicable state securities law and has no direct or indirect
arrangement or understandings with any other persons to distribute
or regarding the distribution of such Securities in violation of
the Securities Act or any applicable state securities law (this
representation and warranty not limiting such Purchaser’s
right to sell the Securities pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.

 

(c) Purchaser Status. At the time
such Purchaser was offered the Securities, it was, and as of the
date hereof it is, and on each date on which it converts any Notes
it will be an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities
Act.

 

(d) Experience of Such Purchaser.
Such Purchaser, either alone or together with its representatives,
has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser
is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete
loss of such investment.

 

(e) General Solicitation. Such
Purchaser is not, to such Purchaser’s knowledge, purchasing
the Securities as a result of any advertisement, article, notice or
other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television
or radio or presented at any seminar or any other general
solicitation or general advertisement.

 

The
Company acknowledges and agrees that the representations contained
in this Section 2.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.

 

 

10

 

 

ARTICLE III.

OTHER AGREEMENTS OF THE PARTIES

 

3.1 Transfer
Restrictions.

 

(a) The Securities may
only be disposed of in compliance with state and federal securities
laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to the
Company or to an Affiliate of a Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require
the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor and reasonably acceptable to the
Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer,
any such transferee shall agree in writing to be bound by the terms
of this Agreement and the Registration Rights Agreement and shall
have the rights and obligations of a Purchaser under this Agreement
and the Registration Rights Agreement.

 

(b)        The
Purchasers agree to the imprinting, so long as is required by this
Section 4.1, of a legend on any of the Securities in the following
form:

 

NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAS BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION
THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE
501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES.

 

(c) Certificates
evidencing the Underlying Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i)
while a registration statement (including the Registration
Statement) covering the resale of such security is effective under
the Securities Act, (ii) following any sale of such Underlying
Shares pursuant to Rule 144, (iii) if such Underlying Shares are
eligible for sale under Rule 144 without the Company to be in
compliance with the current public information requirements under
Rule 144 or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue a legal
opinion to the Transfer Agent if required by the Transfer Agent to
effect the removal of the legend hereunder. If all or any portion
of a Note is converted at a time when there is an effective
registration statement to cover the resale of the Underlying
Shares, or if such Underlying Shares may be sold under Rule 144
without the requirement for the Company to be in compliance with
the current public information required under Rule 144 as to such
Underlying Shares and without volume or manner-of-sale restrictions
or if such legend is not otherwise required under applicable
requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the
Commission) then such Underlying Shares shall be issued free of all
legends. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section
4.1(c), it will, no later than the earlier of (i) three (3) Trading
Days and (ii) the number of Trading Days comprising the Standard
Settlement Period (as defined below) following the delivery by a
Purchaser to the Company or the Transfer Agent of a certificate
representing Underlying Shares, as applicable, issued with a
restrictive legend (such third Trading Day, the “Legend Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate
representing such shares that is free from all restrictive and
other legends. The Company may not make any notation on its records
or give instructions to the Transfer Agent that enlarge the
restrictions on transfer set forth in this Section 4. Certificates
for Underlying Shares subject to legend removal hereunder shall be
transmitted by the Transfer Agent to the Purchaser by crediting the
account of the Purchaser’s prime broker with the Depository
Trust Company System as directed by such Purchaser. As used herein,
“Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of a certificate representing
Underlying Shares, as applicable, issued with a restrictive
legend.

 

(d) The Purchaser
agrees with the Company that such Purchaser will sell any
Securities pursuant to either the registration requirements of the
Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities are
sold pursuant to a Registration Statement, they will be sold in
compliance with the plan of distribution set forth therein, and
acknowledges that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section
4.1 is predicated upon the Company’s reliance upon this
understanding.

 

3.2 Acknowledgment of Dilution. The
Company acknowledges that the issuance of the Securities may result
in dilution of the outstanding shares of Common Stock, which
dilution may be substantial under certain market conditions. The
Company further acknowledges that its obligations under the
Transaction Documents, including, without limitation, its
obligation to issue the Underlying Shares pursuant to the
Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the
Company may have against any Purchaser and regardless of the
dilutive effect that such issuance may have on the ownership of the
other stockholders of the Company.

 

3.3 Furnishing of Information; Public
Information. Until the time that no Purchaser owns
Securities, the Company covenants to maintain the registration of
the Common Stock under Section 12(b) or 12(g) of the Exchange Act
and to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange
Act even if the Company is not then subject to the reporting
requirements of the Exchange Act.

 

3.4 Integration. The Company shall
not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities or that
would be integrated with the offer or sale of the Securities for
purposes of the rules and regulations of any Trading Market such
that it would require shareholder approval prior to the closing of
such other transaction unless shareholder approval is obtained
before the closing of such subsequent transaction.

 

 

11

 

 

3.5 Conversion Procedures. The form
of Notice of Conversion included in the Notes set forth the totality of the
procedures required of the Purchaser in order to convert the Notes.
Without limiting the preceding sentences, no ink-original Notice of
Conversion shall be required, nor shall any medallion guarantee (or
other type of guarantee or notarization) of any Notice of
Conversion form be required in order to convert the Notes. No
additional legal opinion, other information or instructions shall
be required of the Purchaser to convert the Notes. The Company
shall honor conversions of the Notes and shall deliver Underlying
Shares in accordance with the terms, conditions and time periods
set forth in the Transaction Documents.

 

3.6 Securities Laws Disclosure;
Publicity. The Company shall, by 9:30 a.m. (New York City
time) on the Trading Day immediately following the date hereof,
file a Current Report on Form 8-K, including the Transaction
Documents as exhibits thereto, with the Commission. From and after
the filing of such Form 8-K, the Company represents to the
Purchaser that it shall have publicly disclosed all material,
non-public information delivered to the Purchaser by the Company or
any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. In addition, effective
upon the filing of such Form 8-K, the Company acknowledges and
agrees that any and all confidentiality or similar obligations
under any agreement, whether written or oral, between the Company,
any of its Subsidiaries or any of their respective officers,
directors, agents, employees or Affiliates on the one hand, and the
Purchaser or Affiliates on the other hand, shall
terminate.

 

3.7 Use
of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and
shall not use such proceeds: (a) for the satisfaction of any
portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and
prior practices), (b) for the redemption of any Common Stock or
Common Stock Equivalents, (c) for the settlement of any outstanding
litigation or (d) in violation of FCPA or OFAC
regulations.

 

3.8 Indemnification of Purchaser.
Subject to the provisions of this Section 3.8, the Company will
indemnify and hold the Purchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any
other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any
other title), each Person who controls the Purchaser (within the
meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents,
members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such
controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable
attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to
(a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against the
Purchaser Party in any capacity, or any of them or their respective
Affiliates, by any stockholder of the Company, with respect to any
of the transactions contemplated by the Transaction Documents
(except for any violations by such Purchaser Party of state or
federal securities laws or any conduct by such Purchaser Party
which constitutes fraud, gross negligence, willful misconduct or
malfeasance, as determined by a final, non-appealable judgment by a
court of competent jurisdiction). If any action shall be brought
against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall
promptly notify the Company in writing, and the Company shall have
the right to assume the defense thereof with counsel of its own
choosing reasonably acceptable to the Purchaser Party. Any
Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such
Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing,
(ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of counsel, a material conflict
on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall
be responsible for the reasonable fees and expenses of no more than
one such separate counsel. The Company will not be liable to any
Purchaser Party under this Agreement for any settlement by a
Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed. The
indemnification required by this Section 4.10 shall be made by
periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or are
incurred. The indemnity agreements contained herein shall be in
addition to any cause of action or similar right of any Purchaser
Party against the Company or others and any liabilities the Company
may be subject to pursuant to law.

 

3.9 Reservation and Listing of
Securities.

 

(a) The Company shall
maintain a reserve of the Required Minimum from its duly authorized
shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may then be required to fulfill its
obligations in full under the Transaction Documents.

 

(b) If, on any date,
the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such
date, then the Board of Directors shall use commercially reasonable
efforts to amend the Company’s certificate or articles of
incorporation to increase the number of authorized but unissued
shares of Common Stock to at least the Required Minimum at such
time, as soon as possible and in any event not later than the 75th
day after such date.

 

(c) The Company shall,
if applicable: (i) in the time and manner required by the principal
Trading Market, prepare and file with such Trading Market an
additional shares listing application covering a number of shares
of Common Stock at least equal to the Required Minimum on the date
of such application, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing or quotation on
such Trading Market as soon as possible thereafter, (iii) provide
to the Purchaser evidence of such listing or quotation and (iv)
maintain the listing or quotation of such Common Stock on any date
at least equal to the Required Minimum on such date on such Trading
Market or another Trading Market. The Company agrees to maintain
the eligibility of the Common Stock for electronic transfer through
the Depository Trust Company or another established clearing
corporation, including, without limitation, by timely payment of
fees to the Depository Trust Company or such other established
clearing corporation in connection with such electronic
transfer.

 

3.10 Actions
Inconsistent with the Transaction Documents. The Company
hereby covenants that it will not, either directly or indirectly
through any Affiliate or Subsidiary including, without limitation,
ABS take any actions which are inconsistent with the terms of the
Transaction Documents.

 

3.11 No
Short Selling. The Purchaser represents and warrants to the
Company that at no time prior to the date of this Agreement has any
of the Purchaser, its agents, representatives or affiliates engaged
in or effected, in any manner whatsoever, directly or indirectly,
any (i) “short sale” (as such term is defined in Rule
200 of Regulation SHO of the Exchange Act) of the Common Stock or
(ii) hedging transaction, which establishes a net short position
with respect to the Common Stock. The Purchaser agrees that
beginning on the date of this Agreement and ending on the date of
termination of this Agreement, the Purchaser and its agents,
representatives and affiliates shall not in any manner whatsoever
enter into or effect, directly or indirectly, any (i) “short
sale” (as such term is defined in Rule 200 of Regulation SHO
of the Exchange Act) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to
the Common Stock.

 

 

12

 

 

3.12 Form
D; Blue Sky Filings. The Company agrees to timely file a
Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of the
Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption
for, or to qualify the Securities for, sale to the Purchaser at the
Closing under applicable securities or “Blue Sky” laws
of the states of the United States, and shall provide evidence of
such actions promptly upon request of the Purchaser.

 

 

ARTICLE IV.

MISCELLANEOUS

 

4.1 Fees and Expenses. The Company
shall pay all of the Purchasers’ out-of-pocket costs and
expenses, including legal fees, incurred by the Purchasers incurred
in connection with the negotiation and execution of the Transaction
Documents; provided that, the aggregate amount of legal fees
incurred Lender in connection with the preparation, negotiation,
and finalization of this Agreement and the other Transaction
Documents by the Purchaser on or before the Closing Date and to be
paid by the Company shall not exceed $15,000. The Company shall
deliver to the Purchasers a completed and executed copy of the
Closing Statement, attached hereto as Annex A. Except as expressly
set forth herein to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts,
if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance
of the Transaction Documents. The Company shall pay all Transfer
Agent fees (including, without limitation, any fees required for
same-day processing of any instruction letter delivered by the
Company and any conversion notice delivered by a Purchaser), stamp
taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchaser.

 

4.2 Entire Agreement. The
Transaction Documents, together with the exhibits and schedules
thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.

 

4.3 Notices. Any and all notices or
other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given
and effective on the earliest of: (a) the date of transmission, if
such notice or communication is delivered via facsimile at the
facsimile number or email attachment as set forth on the signature
pages attached hereto at or prior to 5:30 p.m. (New York City time)
on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via
facsimile at the facsimile number or email attachment as set forth
on the signature pages attached hereto on a day that is not a
Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (c) the second (2nd) Trading Day
following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual receipt by
the party to whom such notice is required to be given. The address
for such notices and communications shall be as set forth on the
signature pages attached hereto. To the extent that any notice
provided pursuant to any Transaction Document constitutes, or
contains, material, non-public information regarding the Company or
any of the Subsidiaries, the Company shall simultaneously file such
notice with the Commission pursuant to a Current Report on Form
8-K.

 

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

 

4.5 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchaser (other than by
merger). The Purchaser may assign any or all of its rights under
this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by
the provisions of the Transaction Documents that apply to the
Purchaser.

 

4.6 No Third Party Beneficiaries.
This Agreement is intended for the benefit of the parties hereto
and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by,
any other Person, except as otherwise set forth in Section
4.10.

 

4.7 Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all legal
Proceedings concerning the interpretations, enforcement and defense
of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or
its respective affiliates, directors, officers, shareholders,
partners, members, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of
New York, State of New York. Each party hereby irrevocably submits
to the exclusive jurisdiction of the state and federal courts
sitting in the City of New York, State of New York for the
adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees
not to assert in any Action or Proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such
Action or Proceeding is improper or is an inconvenient venue for
such Proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such
Action or Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to
such party at the address in effect for notices to it under this
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. If any party hereto
shall commence an Action or Proceeding to enforce any provisions of
the Transaction Documents, then, in addition to the obligations of
the Company under Section 4.10, the prevailing party in such Action
or Proceeding shall be reimbursed by the non-prevailing party for
its reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such Action or Proceeding.

 

4.8 Survival. The representations
and warranties contained herein shall survive the Closing and the
delivery of the Securities.

 

4.9 Execution. This Agreement may
be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party
and delivered to each other party, it being understood that the
parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature
page were an original thereof.

 

 

13

 

 

4.10 Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It
is hereby stipulated and declared to be the intention of the
parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or
unenforceable.

 

4.11 Rescission
and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever the Purchaser
exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related
obligations within the periods therein provided, then the Purchaser
may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future
actions and rights; provided, however, that in the case of a
rescission of a conversion of a Note, the Purchaser shall be
required to return any shares of Common Stock subject to any such
rescinded conversion notice.

 

4.12 Replacement
of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for
and upon cancellation thereof (in the case of mutilation), or in
lieu of and substitution therefor, a new certificate or instrument,
but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction. The applicant for a new
certificate or instrument under such circumstances shall also pay
any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement
Securities.

 

4.13 Remedies.
In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, the
Purchaser and the Company will be entitled to specific performance
under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations contained in the Transaction
Documents and hereby agree to waive and not to assert in any Action
for specific performance of any such obligation the defense that a
remedy at law would be adequate.

 

4.14 Payment
Set Aside. To the extent that the Company makes a payment or
payments to the Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such
payment or payments or the proceeds of such enforcement or exercise
or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by
or are required to be refunded, repaid or otherwise restored to the
Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such enforcement or setoff had not occurred.

 

4.15 Usury.
To the extent it may lawfully do so, the Company hereby agrees not
to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or
advantage of, usury laws wherever enacted, now or at any time
hereafter in force, in connection with any Action or Proceeding
that may be brought by the Purchaser in order to enforce any right
or remedy under any Transaction Document. Notwithstanding any
provision to the contrary contained in any Transaction Document, it
is expressly agreed and provided that the total liability of the
Company under the Transaction Documents for payments in the nature
of interest shall not exceed the maximum lawful rate non-usurious
interest authorized under applicable law (the “Maximum Rate”), and,
without limiting the foregoing, in no event shall any rate of
interest or default interest, or both of them, when aggregated with
any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of
interest allowed by law and applicable to the Transaction Documents
is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate
of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date thereof forward,
unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum
Rate is paid by the Company to the Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess
shall be applied by the Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner
of handling such excess to be at such Purchaser’s
election.

 

4.16 Liquidated
Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not
terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument
or security pursuant to which such partial liquidated damages or
other amounts are due and payable shall have been
canceled.

 

4.17 Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then such action may be
taken or such right may be exercised on the next succeeding
Business Day.

 

4.18 Construction.
The parties agree that each of them and/or their respective counsel
have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each
and every reference to share prices and shares of Common Stock in
any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the
date of this Agreement.

 

4.19 WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE
PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.

 

(Signature Pages Follow)

 

 

14

 

 

IN
WITNESS WHEREOF, the parties hereto have caused this Note Purchase
Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

 

	

AZURRX BIOPHARMA, INC.

 

	

Address
for Notice:

	

By:
/s/ Johan M.
Spoor

     Name:
Johan M. Spoor

     Title:
Chief Executive Officer

 

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

 

 

	

Email:
tspoor@azurrx.com

 

Daniel
W. Rumsey, Esq.

Disclosure
Law Group, a Professional Corporation

Fax:
619-330-2101

Email:
drumsey@disclosurelawgroup.com

	
 

	
 

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE
PAGE FOR PURCHASER FOLLOWS]

 

 

 

15

 

[PURCHASER
SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]

 

IN
WITNESS WHEREOF, the undersigned have caused this Note Purchase
Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

 

Name of
Purchaser: ADEC Private Equity Investments, LLC

Signature of Authorized Signatory of
Purchaser: /s/ E.
Burke Ross, Jr.

Name of
Authorized Signatory: E. Burke Ross, Jr.

Title
of Authorized Signatory: Manager

Email
Address of Authorized Signatory:
burke@eburkerossjr.com

Facsimile Number of
Authorized Signatory: N/A

Address
for Notice to Purchaser: 172 South Ocean Boulevard, Palm Beach, FL
33480

 

Address
for Delivery of Securities to Purchaser (if not same as address for
notice): N/A

 

 

 

 

 

Total Purchase
Price: $ 2,000,000.00

Note A: $
1,000,000.00

Note B: $
1,000,000.00

 

 

 

16

 

 

EXHIBIT
A

 

[FORM
OF NOTE A]

 

EXHIBIT
B

 

[FORM
OF NOTE B]

 

EXHIBIT
C

 

[FORM
OF REGISTRATION RIGHTS AGREEMENT]

 

EXHIBIT
D

 

[WARRANT
HOLDERS]

 

EXHIBIT
E

 

[FORM
OF WARRANT REPRICE AGREEMENT]

 

EXHIBIT
F

 

[FORM
OF LEGAL OPINION]

 

 

 

 

17Blueprint

  Exhibit
10.2

 

NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY
AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.

 

Original Issue Date: February 14,
2019

Original
Conversion Price: (subject to adjustment herein):
$2.50

 

$1,000,000

 

 

SENIOR CONVERTIBLE NOTE

 

               
THIS SENIOR CONVERTIBLE NOTE is a duly authorized and validly
issued Senior Convertible Note (this “Note”) of AzurRx
BioPharma, Inc., a Delaware corporation, (the “Company”), having its
principal place of business at 760 Parkside Avenue, Suite 304
Brooklyn, New York 11226 pursuant to that certain Note Purchase
Agreement, dated February 14, 2019, by and between the Company and
the Holder (as hereinafter defined), as amended, modified or
supplemented from time to time in accordance with its terms (the
“Purchase
Agreement”).

 

FOR
VALUE RECEIVED, the Company promises to pay to ADEC Private Equity
Investments, LLC, a Delaware limited liability company (together
with its its registered assigns, the “Holder”), or shall have
paid pursuant to the terms hereunder, the principal sum of
$1,000,000.00 (the “Principal Amount”),
together with all accrued but unpaid interest thereon, on the
earlier to occur of (i) ten (10) Business Days following the
receipt by the Company or ABS of the 2019 Tax Credit, or (ii)
December 31, 2019 (the “Repayment Date”). This
Note is subject to the following additional
provisions:

 

            

Section
1. 

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

 

“Alternate Consideration”
has the meaning set forth in Section 5(d).

 

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

 

“Beneficial Ownership
Limitation” has the meaning set forth in Section
4(d).

“Buy-In” has the meaning
set forth in Section 4(c)(v).

 

“Change of Control” means
the occurrence after the date hereof of any of (a) an acquisition
after the date hereof by an individual or legal entity or
“group” (as described in Rule 13d-5(b)(1) promulgated
under the Exchange Act) of effective control (whether through legal
or beneficial ownership of capital stock of the Company, by
contract or otherwise) of in excess of 35% of the voting securities
of the Company (other than by means of conversion or exercise of
the Debenture and the Securities issued together with the
Debenture), (b) the Company merges into or consolidates with any
other Person, or any Person merges into or consolidates with the
Company and, after giving effect to such transaction, the
stockholders of the Company immediately prior to such transaction
own less than 50% of the aggregate voting power of the Company or
the successor entity of such transaction, (c) the Company sells or
transfers all or substantially all of its assets to another Person
and the stockholders of the Company immediately prior to such
transaction own less than 50% of the aggregate voting power of the
acquiring entity immediately after the transaction, (d) a
replacement at one time or within a three year period of more than
one-half of the members of the Board of Directors which is not
approved by a majority of those individuals who are members of the
Board of Directors on the Original Issue Date (or by those
individuals who are serving as members of the Board of Directors on
any date whose nomination to the Board of Directors was approved by
a majority of the members of the Board of Directors who are members
on the date hereof), or (e) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth in clauses (a) through
(d) above.

 

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

 

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

 

 

1

 

 

“Conversion Price” has the
meaning set forth in Section 4(b).

 

“Conversion Schedule”
means the Conversion Schedule in the form of Schedule 1 attached
hereto.

 

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

 

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

 

“Note Register” means the
records of the Company regarding registration and transfers of this
Note.

 

“Effectiveness Date” has
the meaning set forth in the Registration Rights
Agreement.

 

“Effectiveness Period” has
the meaning set forth in the Registration Rights
Agreement.

 

“Event of
Default” has the meaning
set forth in Section 7(a).

 

“Fundamental Transaction”
has the meaning set forth in Section 5(d).

 

“New York Courts” has the
meaning set forth in Section 9(d).

 

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

 

“Permitted Indebtedness ”
means (a) the Indebtedness evidenced by the Note, (b) Indebtedness
evidenced by the other Notes issued in connection with the Purchase
Agreement on the date of this Note, (c) Indebtedness that (i) is
expressly subordinate to the Note and the other Transaction
Documents pursuant to a subordination agreement in form and
substance reasonably satisfactory to the Holder, and (ii) matures
at a date later than the 91st day following the
Repayment Date, and (d) other unsecured Indebtedness, in addition
to the Indebtedness listed above, in an aggregate principal amount
not to exceed $100,000 at any time outstanding.

 

“Permitted Lien” means the
individual and collective reference to the following: (a) Liens for
taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges
or levies being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment
of the management of the Company) have been established in
accordance with GAAP, (b) Liens imposed by law which were incurred
in the ordinary course of the Company’s business, such as
carriers’, warehousemen’s and mechanics’ Liens,
statutory landlords’ Liens, and other similar Liens arising
in the ordinary course of the Company’s business, and which
(x) do not individually or in the aggregate materially detract from
the value of such property or assets or materially impair the use
thereof in the operation of the business of the Company and its
consolidated Subsidiaries or (y) are being contested in good faith
by appropriate proceedings, which proceedings have the effect of
preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien, (c) Liens incurred in
connection with Permitted Indebtedness under clauses (a) and (b)
thereunder, and (d) Liens in connection with equipment leases in
effect on the Original Issue Date.

 

“Refund Notice” means the
notice that the Company provides to the Purchaser of the receipt by
the Company or ABS of the 2019 Tax Credit.

 

“Share Delivery Date” has
the meaning set forth in Section 4(c)(ii).

 

“Successor Entity” has the
meaning set forth in Section 5(d).

 

“2019 Tax Credit” means
the French research and development tax credits for the 2018 tax
year, which the Company or ABS is expected to receive within nine
(9) months following December 31, 2018.

 

 

2

 

 

            

Section 2.

Interest;
Prepayment.

a) Interest. The Principal Amount
and any other payments due directly and/or indirectly shall bear
simple interest at a rate equal to ten percent (10%) per annum,
based upon a 360-day year (the “Interest Rate”), payable
in arrears. Interest shall be payable at such time as all
outstanding Principal Amount owed under this Note shall be fully
repaid, but unless earlier paid in accordance with the terms of
this Note, shall be paid in full on the Repayment
Date.

 

b) Prepayment. The Note may be
prepaid by the Company at 100% of the outstanding principal and
interest at any time; provided,
however, that in the event the Company elects to prepay any
amount due under the terms of the Note, the Company shall provide
written notice of its intent to prepay all amounts due under the
terms of the Note at least ten (10) Business Days prior to such
prepayment date, during which period the Holder shall have the
right to convert as more particularly set forth in Section 4 of
this Note, and, provided,
further, that in the event the Company elects to prepay this
Note in its entirety on or before December 31, 2019, together with
a prepayment of the entire amount of all outstanding principal and
interest on any other Note issued to the Holder in connection with
the Purchase Agreement on the date of this Note, the Interest Rate
to be applied in connection with any such prepayment shall be
reduced to six percent (6%) per annum solely for the purposes of
such prepayment.

 

Section
3.                      Registration
of Transfers and Exchanges.

a) Different Denominations. This
Note is exchangeable for an equal aggregate principal amount of
Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be payable for
such registration of transfer or exchange.

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

 

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

 

Section
4.                      Conversion.

a) Voluntary Conversion. At any
time prior to Repayment Date, this Note shall be convertible, in
whole or in part, into shares of Common Stock at the sole option of
the Holder, at any time and from time to time (subject to the
conversion limitations set forth in Section 4(d) hereof). The
Holder shall effect conversions by delivering to the Company a
Notice of Conversion, the form of which is attached hereto as
Annex A (each, a
“Notice of
Conversion”), specifying therein the amount of this
Note to be converted and the date on which such conversion shall be
effected (such date, the “Conversion Date”). If no
Conversion Date is specified in a Notice of Conversion, the
Conversion Date shall be the date that such Notice of Conversion is
deemed delivered hereunder. No ink-original Notice of Conversion
shall be required, nor shall any medallion guarantee (or other type
of guarantee or notarization) of any Notice of Conversion form be
required. To effect
conversions hereunder, the Holder shall not be required to
physically surrender this Note to the Company unless the entire
principal amount of this Note, together with accrued but unpaid
interest due thereon (the “Outstanding Amount”) has
been so converted, in which case the Holder shall surrender this
Note as promptly as is reasonably practicable after such conversion
without delaying the Company’s obligation to deliver the
shares on the Share Delivery Date. Partial conversions hereunder
shall have the effect of lowering the outstanding principal amount
of this Note in an amount equal to the applicable conversion. The
Holder and the Company shall maintain records showing the principal
amount(s) converted and the date of such conversion(s). The Company
may deliver an objection to any Notice of Conversion within one (1)
Business Day of delivery of such Notice of Conversion. In the event
of any dispute or discrepancy, the records of the Holder shall be
controlling and determinative in the absence of manifest error.
The Holder, and any assignee by
acceptance of this Note, acknowledges and agrees that, by reason of
the provisions of this paragraph, following conversion of a portion
of this Note, the unpaid and unconverted principal amount of this
Note may be less than the amount stated on the face
hereof.

b) Conversion Price. The
conversion price shall be equal to $2.50 per share, subject to
adjustment herein (the “Conversion Price”). For
purposes of clarification, whether or not the Company provides a
notice of adjustment of the Conversion Price pursuant to Section
5(g), the Holder shall receive a number of Conversion Shares and
retain the principal amount based upon the Conversion Price as it
may be adjusted pursuant to Section 5, regardless of whether the
Holder accurately refers to such price or principal amount of this
Note converted in any Notice of Conversion.

 

c)

Mechanics of
Conversion.

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

 

ii. Delivery of Conversion Shares Upon
Conversion. Not later than the earlier of (i) three (3)
Trading Days and (ii) the number of Trading Days comprising the
Standard Settlement Period (as defined below) after each Conversion
Date (the “Share
Delivery Date”), the Company shall deliver, or cause
to be delivered, to the Holder (A) the Conversion Shares which, on
or after the earlier of (i) the six month anniversary of the
Original Issue Date or (ii) the Effective Date, shall be free of
restrictive legends and trading restrictions (other than those
which may then be required by the Purchase Agreement) representing
the number of Conversion Shares being acquired upon the conversion
of this Note. On or after the earlier of (i) the six month
anniversary of the Original Issue Date or (ii) the Effective Date,
the Company shall deliver any Conversion Shares required to be
delivered by the Company under this Section 4(c) electronically
through the Depository Trust Company or another established
clearing corporation performing similar functions. As used herein,
“Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, on the Company’s
primary Trading Market with respect to the Common Stock as in
effect on the date of delivery of the Notice of
Conversion.

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

 

3

 

 

iv. Obligation Absolute; Partial
Liquidated Damages. The Company’s obligations to issue
and deliver the Conversion Shares upon conversion of this Note in
accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the
same, any waiver or consent with respect to any provision hereof,
the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment,
limitation or termination, or any breach or alleged breach by the
Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other
Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Holder in
connection with the issuance of such Conversion Shares;
provided,
however, that such
delivery shall not operate as a waiver by the Company of any such
action the Company may have against the Holder. In the event the
Holder of this Note shall elect to convert any or all of the
outstanding amount hereof, the Company may not refuse conversion
based on any claim that the Holder or anyone associated or
affiliated with the Holder has been engaged in any violation of
law, agreement or for any other reason, unless an injunction from a
court, on notice to Holder, restraining and or enjoining conversion
of all or part of this Note shall have been sought and obtained,
and the Company posts a surety bond for the benefit of the Holder
in the amount of 150% of the outstanding principal amount of this
Note, which is subject to the injunction, which bond shall remain
in effect until the completion of arbitration/litigation of the
underlying dispute and the proceeds of which shall be payable to
the Holder to the extent it obtains judgment. In the absence of
such injunction, the Company shall issue Conversion Shares or, if
applicable, cash, upon a properly noticed conversion. If the
Company fails for any reason to deliver to the Holder such
Conversion Shares pursuant to Section 4(c)(ii) by the Share
Delivery Date, the Company shall pay to the Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of
principal amount being converted, $10 per Trading Day (increasing
to $20 per Trading Day on the fifth (5th) Trading Day after
such liquidated damages begin to accrue) for each Trading Day after
such Share Delivery Date until such Conversion Shares are delivered
or Holder rescinds such conversion. Nothing herein shall limit a
Holder’s right to pursue actual damages or declare an Event
of Default pursuant to Section 7 hereof for the Company’s
failure to deliver Conversion Shares within the period specified
herein and the Holder shall have the right to pursue all remedies
available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive
relief. The exercise of any such rights shall not prohibit the
Holder from seeking to enforce damages pursuant to any other
Section hereof or under applicable law.

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

vi. Reservation of Shares Issuable Upon
Conversion. The Company covenants that it will at all times
reserve and keep available out of its authorized and unissued
shares of Common Stock for the sole purpose of issuance upon
conversion of this Note, each as herein provided, free from
preemptive rights or any other actual contingent purchase rights of
Persons other than the Holder (and the other holders of the Notes),
not less than such aggregate number of shares of the Common Stock
as shall (subject to the terms and conditions set forth in the
Purchase Agreement) be issuable (taking into account the
adjustments and restrictions of Section 5) upon the conversion of
the then outstanding principal amount of this Note. The Company
covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid
and nonassessable and, if the Registration Statement is then
effective under the Securities Act, shall be registered for public
resale in accordance with such Registration Statement (subject to
such Holder’s compliance with its obligations under the
Registration Rights Agreement).

 

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

 

viii. Transfer
Taxes and Expenses. The issuance of Conversion Shares on
conversion of this Note shall be made without charge to the Holder
hereof for any documentary stamp or similar taxes that may be
payable in respect of the issue or delivery of such Conversion
Shares, provided that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such Conversion Shares upon conversion
in a name other than that of the Holder of this Note so converted
and the Company shall not be required to issue or deliver such
Conversion Shares unless or until the Person or Persons requesting
the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the
Company that such tax has been paid. The Company shall pay all
Transfer Agent fees required for same-day processing of any Notice
of Conversion and all fees to the Depository Trust Company (or
another established clearing corporation performing similar
functions) required for same-day electronic delivery of the
Conversion Shares.

 

 

4

 

 

d) Holder’s
Conversion Limitations. The Company shall not effect any
conversion of this Note, and a Holder shall not have the right to
convert any portion of this Note, to the extent that after giving
effect to the conversion set forth on the applicable Notice of
Conversion, the Holder (together with the Holder’s
Affiliates, and any other Persons acting as a group together with
the Holder or any of the Holder’s Affiliates (such Persons,
“Attribution
Parties”)) would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of
the foregoing sentence, the number of shares of Common Stock
beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the
number of shares of Common Stock issuable upon conversion of this
Note with respect to which such determination is being made, but
shall exclude the number of shares of Common Stock which are
issuable upon (i) conversion of the remaining, unconverted
principal amount of this Note beneficially owned by the Holder or
any of its Affiliates or Attribution
Parties and (ii) exercise or conversion of the unexercised
or unconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the
limitation contained herein (including, without limitation, any
other Notes or the Warrants) beneficially owned by the Holder or
any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for
purposes of this Section 4(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder. To the extent
that the limitation contained in this Section 4(d) applies, the
determination of whether this Note is convertible (in relation to
other securities owned by the Holder together with any Affiliates
and Attribution Parties) and of
which principal amount of this Note is convertible shall be in the
sole discretion of the Holder, and the submission of a Notice of
Conversion shall be deemed to be the Holder’s determination
of whether this Note may be converted (in relation to other
securities owned by the Holder together with any Affiliates
or Attribution Parties) and
which principal amount of this Note is convertible, in each case
subject to the Beneficial Ownership Limitation. To ensure
compliance with this restriction, the Holder will be deemed to
represent to the Company each time it delivers a Notice of
Conversion that such Notice of Conversion has not violated the
restrictions set forth in this paragraph and the Company shall have
no obligation to verify or confirm the accuracy of such
determination. In addition, a
determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated
thereunder. For purposes of
this Section 4(d), in determining the number of outstanding shares
of Common Stock, the Holder may rely on the number of outstanding
shares of Common Stock as stated in the most recent of the
following: (i) the Company’s most recent periodic or annual
report filed with the Commission, as the case may be, (ii) a more
recent public announcement by the Company, or (iii) a more recent
written notice by the Company or the Company’s transfer agent
setting forth the number of shares of Common Stock outstanding.
Upon the written or oral request of a Holder, the Company shall
within two Trading Days confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding. In any case,
the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of
securities of the Company, including this Note, by the Holder or
its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The
“Beneficial
Ownership Limitation” shall be 19.99% of the number of
shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon
conversion of this Note held by the Holder (a “Beneficial Ownership
Change”); provided, however, the foregoing
limitation shall not apply in the event the Company’s
stockholders approve the Beneficial Ownership Change, as required
by Rule 5635 of the Nasdaq Stock Market. The Beneficial Ownership
Limitation provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with
the terms of this Section 4(d) to correct this paragraph (or any
portion hereof) which may be defective or inconsistent with the
intended Beneficial Ownership Limitation contained herein or to
make changes or supplements necessary or desirable to properly give
effect to such limitation. The
limitations contained in this paragraph shall apply to a successor
holder of this Note.

Section
5. 

Certain
Adjustments.

a) Stock Dividends and Stock
Splits. If the Company, at any time while this Note is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on
shares of Common Stock or any Common Stock Equivalents (which, for
avoidance of doubt, shall not include any shares of Common Stock
issued by the Company upon conversion of, or payment of interest
on, the Notes), (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, (iii) combines (including by way of
a reverse stock split) outstanding shares of Common Stock into a
smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of
capital stock of the Company, then the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number
of shares of Common Stock (excluding any treasury shares of the
Company) outstanding immediately before such event, and of which
the denominator shall be the number of shares of Common Stock
outstanding immediately after such event, and the number of shares
issuable upon conversion of this Note shall be proportionally
adjusted such that the aggregate Conversion Price of this Note
shall remain unchanged. Any adjustment made pursuant to this
Section shall become effective immediately after the record date
for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination
or re-classification.

b) Subsequent Rights Offerings.
In addition to any adjustments
pursuant to Section 5(a) above, if at any time the Company grants,
issues or sells any Common Stock Equivalents or rights to purchase
stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the
“Purchase
Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Note
(without regard to any limitations on exercise hereof, including
without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the grant, issue or sale
of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right
would result in the Holder exceeding the Beneficial Ownership
Limitation, then the Holder shall not be entitled to participate in
such Purchase Right to such extent (or beneficial ownership of such
shares of Common Stock as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in
abeyance for the Holder until such time, if ever, as its right
thereto would not result in the Holder exceeding the Beneficial
Ownership Limitation).

c) Pro Rata Distributions. During
such time as this Note is outstanding, if the Company shall declare
or make any dividend or other distribution of its assets (or rights
to acquire its assets) to holders of shares of Common Stock, by way
of return of capital or otherwise (including, without limitation,
any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any
time after the issuance of this Note, then, in each such case, the
Holder shall be entitled to participate in such Distribution to the
same extent that the Holder would have participated therein if the
Holder had held the number of shares of Common Stock acquirable
upon complete conversion of this Note (without regard to any
limitations on conversion hereof, including without limitation, the
Beneficial Ownership Limitation) immediately before the date of
which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares
of Common Stock are to be determined for the participation in such
Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result
in the Holder exceeding the Beneficial Ownership Limitation, then
the Holder shall not be entitled to participate in such
Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such
extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as
its right thereto would not result in the Holder exceeding the
Beneficial Ownership Limitation).

 

5

 

 

d) Fundamental Transaction. If, at
any time while this Note is outstanding, (i) the Company, directly
or indirectly, in one or more related transactions effects any
merger or consolidation of the Company with or into another Person,
(ii) the Company, directly or indirectly, effects any sale, lease,
license, assignment, transfer, conveyance or other disposition of
all or substantially all of its assets in one or a series of
related transactions, (iii) any, direct or indirect, purchase
offer, tender offer or exchange offer (whether by the Company or
another Person) is completed pursuant to which holders of Common
Stock are permitted to sell, tender or exchange their shares for
other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the
Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or
recapitalization of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property,
or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or
other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with another Person whereby such other Person acquires
more than 50% of the outstanding shares of Common Stock (not
including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with
the other Persons making or party to, such stock or share purchase
agreement or other business combination) (each a
“Fundamental
Transaction”), then, upon any subsequent conversion of
this Note, the Holder shall have the right to receive, for each
Conversion Share that would have been issuable upon such conversion
immediately prior to the occurrence of such Fundamental Transaction
(without regard to any limitation in Section 4(d) and Section 4(e)
on the conversion of this Note), the number of shares of Common
Stock of the successor or acquiring corporation or of the Company,
if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder
of the number of shares of Common Stock for which this Note is
convertible immediately prior to such Fundamental Transaction
(without regard to any limitation in Section 4(d) and Section 4(e)
on the conversion of this Note). For purposes of any such
conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect
of one (1) share of Common Stock in such Fundamental Transaction,
and the Company shall apportion the Conversion Price among the
Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to
the Alternate Consideration it receives upon any conversion of this
Note following such Fundamental Transaction. The Company shall
cause any successor entity in a Fundamental Transaction in which
the Company is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of the Company under this
Note and the other Transaction Documents (as defined in the
Purchase Agreement) in accordance with the provisions of this
Section 5(e) pursuant to written agreements in form and substance
reasonably satisfactory to the Holder and approved by the Holder
(without unreasonable delay) prior to such Fundamental Transaction
and shall, at the option of the holder of this Note, deliver to the
Holder in exchange for this Note a security of the Successor Entity
evidenced by a written instrument substantially similar in form and
substance to this Note which is convertible for a corresponding
number of shares of capital stock of such Successor Entity (or its
parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon conversion of this Note (without regard to any
limitations on the conversion of this Note) prior to such
Fundamental Transaction, and with a conversion price which applies
the conversion price hereunder to such shares of capital stock (but
taking into account the relative value of the shares of Common
Stock pursuant to such Fundamental Transaction and the value of
such shares of capital stock, such number of shares of capital
stock and such conversion price being for the purpose of protecting
the economic value of this Note immediately prior to the
consummation of such Fundamental Transaction), and which is
reasonably satisfactory in form and substance to the Holder. Upon
the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and
after the date of such Fundamental Transaction, the provisions of
this Note and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Note and
the other Transaction Documents with the same effect as if such
Successor Entity had been named as the Company herein.

e) Calculations. All calculations
under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of
this Section 5, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the
number of shares of Common Stock (excluding any treasury shares of
the Company) issued and outstanding.

 

f) Notice to the
Holder.

 

i. Adjustment to Conversion Price.
Whenever the Conversion Price is adjusted pursuant to any provision
of this Section 5, the Company shall promptly deliver to each
Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment.

ii. Notice to Allow Conversion by
Holder. If (A) the Company shall declare a dividend (or any
other distribution in whatever form) on the Common Stock, (B) the
Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Company shall authorize the
granting to all holders of the Common Stock of rights or warrants
to subscribe for or purchase any shares of capital stock of any
class or of any rights, (D) the approval of any stockholders of the
Company shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially
all of the assets of the Company, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash
or property or (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company, then, in each case, the
Company shall cause to be filed at each office or agency maintained
for the purpose of conversion of this Note, and shall cause to be
delivered to the Holder at its last address as it shall appear upon
the Note Register, at least twenty (20) calendar days prior to the
applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which
the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected
to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be
entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any
defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such
notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a
Current Report on Form 8-K. The Holder shall remain entitled to
convert this Note during the 20-day period commencing on the date
of such notice through the effective date of the event triggering
such notice except as may otherwise be expressly set forth
herein.

 

6

 

 

iii. Notice
of 2019 Tax Credit and Change of Control. The Company shall
provide the Holder with a Refund Notice no later than five (5)
calendar days following either (A) the receipt by the Company or
ABS of the 2019 Tax Credit, or (B) the execution of a definitive
agreement that, upon consummation of the transactions contemplated
thereby, would result in a Change of Control.

Section
6.                      Negative
Covenants. So long as any principal amount of the Note is
then outstanding, unless the Holder shall have otherwise given
prior written consent, the Company shall not, and shall not permit
any of the Subsidiaries to, directly or indirectly:

 

a) other
than Permitted Indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of
any kind, including, but not limited to, a guarantee, on or with
respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom;

 

b) other
than Permitted Liens, enter into, create, incur, assume or suffer
to exist any Liens of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest
therein or any income or profits therefrom;

 

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

 

d) repay, repurchase
or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares of its
Common Stock or Common Stock Equivalents other than as to (i) the
Note or the Conversion Shares as permitted or required under the
Transaction Documents and (ii) repurchases of Common Stock or
Common Stock Equivalents of departing officers and directors of the
Company, provided that such repurchases shall not exceed an
aggregate of $100,000 for all officers and directors during the
term of this Note;

 

e) repay,
repurchase or offer to repay, repurchase or otherwise acquire any
indebtedness, other than the Note if on a pro-rata basis and other
than regularly scheduled principal and interest payments as such
terms are in effect as of the Original Issue Date, provided that
such payments shall not be permitted if, at such time, or after
giving effect to such payment, any Event of Default exists or occur
as a result thereof;

 

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

 

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

 

h) enter
into any agreement with respect to any of the foregoing; or

 

i) other
than Permitted Indebtedness, enter into, create, incur, assume,
guarantee or suffer to exist any indebtedness for borrowed money of
any kind, including, but not limited to, a guarantee, on or with
respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits
therefrom

            

Section
7. 

Events of Default.

 

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

 

i. any
default in the payment of (A) the amount due under any Note or (B)
liquidated damages and other amounts owing to a Holder on any Note,
as and when the same shall become due and payable (whether on a
Conversion Date or the Repayment Date or by acceleration or
otherwise) which default, solely in the case of a default under
clause (B) above, is not cured in five (5) Trading
Days;

ii. the
Company shall breach, or fail to observe or perform, any covenant
or agreement (including, without limitation, negative covenants and
Section 2.4 of the Purchase Agreement) contained in the Note (other
than a breach by the Company of its obligations to deliver shares
of Common Stock to the Holder upon conversion, which breach is
addressed in clause (viii) below) or in any Transaction Document,
which breach or failure is not cured, but only if a cure period is
expressly provided for such breach or failure) within the earlier
to occur of (A) five (5) Trading Days
after notice of such failure sent by the Holder or by any other
Holder to the Company and (B) ten (10) Trading Days after the
Company has become or should have become aware of such
failure;

 

iii. any
representation or warranty made in this Note, any other Transaction
Documents, any written statement pursuant hereto or thereto or any
other report, financial statement or certificate made or delivered
to the Holder or any other Holder shall be untrue or incorrect in
any material respect as of the date when made or deemed
made;

 

7

 

 

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

v. the Company or any
Subsidiary shall default on any of its obligations under any
mortgage, credit agreement or other facility, indenture agreement,
factoring agreement or other instrument under which there may be
issued, or by which there may be secured or evidenced, any
indebtedness for borrowed money or money due under any long term
leasing or factoring arrangement that (a) involves an obligation
greater than $100,000, whether such indebtedness now exists or
shall hereafter be created, and (b) results in such indebtedness
becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable, which default is
not cured within five (5) Trading Days;

 

vi. the Common Stock
shall not be eligible for listing or quotation for trading on a
Trading Market and shall not be eligible to resume listing or
quotation for trading thereon within five (5) Trading
Days;

vii. the
Company shall fail for any reason to deliver Conversion Shares to a
Holder prior to the fifth (5th) Trading Day after a Conversion Date
pursuant to Section 4(c) or the Company shall provide at any time
notice to the Holder, including by way of public announcement, of
the Company’s intention to not honor requests for conversions
of the Note in accordance with the terms hereof;

 

viii. any
Change in Control shall occur; or

ix. any event that
materially impairs or delays the payment of the 2019 Tax Credit to
the Company or ABS.

b) Remedies Upon Event of Default.
If any Event of Default occurs, the outstanding principal amount of
this Note, liquidated damages and other amounts owing in respect
thereof through the date of acceleration, shall become, at the
Holder’s election, immediately due and payable in cash.
Commencing five (5) days after the occurrence of any Event of
Default that results in the eventual acceleration of this Note (or,
with respect Event of Default referred to in Section 7(a)(i),
commencing immediately subject to all applicable cure periods), the
(i) interest rate on this Note shall accrue at an interest rate
equal to the lesser of 16% per annum or the maximum rate permitted
under applicable law. Upon the payment in full of all amounts due
under the terms of this Note, the Holder shall promptly surrender
this Note to or as directed by the Company. In connection with such
acceleration described herein, the Holder need not provide, and the
Company hereby waives, any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights
and remedies hereunder and all other remedies available to it under
applicable law. Such acceleration may be rescinded and annulled by
Holder at any time prior to payment hereunder and the Holder shall
have all rights as a holder of the Note until such time, if any, as
the Holder receives full payment pursuant to this Section 7(b). No
such rescission or annulment shall affect any subsequent Event of
Default or impair any right consequent thereon.

 

            

Section 8.

Miscellaneous.

a) Notices. Any and all notices or
other communications or deliveries to be provided by the Holder
hereunder, including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, by
email attachment, or sent by a nationally recognized overnight
courier service, addressed to the Company, at the address set forth
above, or such other facsimile number, email address, or address as
the Company may specify for such purposes by notice to the Holder
delivered in accordance with this Section 9(a). Any and all notices
or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by
facsimile, by email attachment, or sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile
number, email address or address of the Holder appearing on the
books of the Company, or if no such facsimile number or email
attachment or address appears on the books of the Company, at the
principal place of business of such Holder, as set forth in the
Purchase Agreement. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number or email attachment
to the email address set forth on the signature pages attached
hereto prior to 5:30 p.m. (New York City time) on any Trading Day,
(ii) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile
number or email attachment to the email address set forth on the
signature pages attached hereto on a day that is not a Trading Day
or later than 5:30 p.m. (New York City time) on any Trading Day,
(iii) the second Trading Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service or (iv)
upon actual receipt by the party to whom such notice is required to
be given.

b) Absolute Obligation. Except as
expressly provided herein, no provision of this Note shall alter or
impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, liquidated damages and
accrued interest, as applicable, on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed. This Note
is a direct debt obligation of the Company. This Note ranks
pari passu with all other Notes now
or hereafter issued under the terms set forth herein.

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

 

d) Governing Law. All questions
concerning the construction, validity, enforcement and
interpretation of this Note shall be governed by and construed and
enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflict of laws thereof.
Each party agrees that all legal proceedings concerning the
interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought
against a party hereto or its respective Affiliates, directors,
officers, shareholders, employees or agents) shall be commenced in
the state and federal courts sitting in the City of New York, (the
“New York
Courts”). Each party hereto hereby irrevocably submits
to the exclusive jurisdiction of the New York Courts for the
adjudication of any dispute hereunder or in connection herewith or
with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such New York
Courts, or such New York Courts are improper or inconvenient venue
for such proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this
Note and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve
process in any other manner permitted by applicable law. Each party
hereto hereby irrevocably waives, to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Note or the
transactions contemplated hereby. If any party shall commence an
action or proceeding to enforce any provisions of this Note, then
the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys fees and other
costs and expenses incurred in the investigation, preparation and
prosecution of such action or proceeding.

 

8

 

 

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

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

 

g) 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 and any of the other
Transaction Documents at law or in equity (including a decree of
specific performance and/or other injunctive relief), and nothing
herein shall limit the Holder’s right to pursue actual and
consequential 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 and shall not, except as expressly provided herein, be
subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and
that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or
threatened breach, the Holder shall be entitled, in addition to all
other available remedies, to an injunction restraining any such
breach or any such threatened breach, without the necessity of
showing economic loss and without any bond or other security being
required. The Company shall provide all information and
documentation to the Holder that is requested by the Holder to
enable the Holder to confirm the Company’s compliance with
the terms and conditions of this Note.

 

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

 

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

 

Section 9. Disclosure. Upon receipt or
delivery by the Company of any notice in accordance with the terms
of this Note, unless the Company has in good faith determined that
the matters relating to such notice do not constitute material,
nonpublic information relating to the Company or its Subsidiaries,
the Company shall within two (2) Business Days after such receipt
or delivery publicly disclose such material, nonpublic information
on a Current Report on Form 8-K or otherwise. In the event that the
Company believes that a notice contains material, non-public
information relating to the Company or its Subsidiaries, the
Company so shall indicate to the Holder contemporaneously with
delivery of such notice, and in the absence of any such indication,
the Holder shall be allowed to presume that all matters relating to
such notice do not constitute material, nonpublic information
relating to the Company or its Subsidiaries.

 

*********************

 

(Signature Pages Follow)

 

 

9

 

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

 

 

 

 

 

 

	
 

	

AzurRx
BioPharma, Inc.

 

 

	
 

	

By:
/s/ Johan M.
Spoor

     Name:
Johan M. Spoor

     Title:
Chief Executive Officer

 

Email
and Facsimile No. for delivery of Notices:
tspoor@azurrx.com

 

	
 

	
 

	
 

	
 

 

 

10

 

 

ANNEX
A

 

NOTICE
OF CONVERSION

 

            

The undersigned
hereby elects to convert principal and accrued but unpaid interest
under the Senior Convertible Note, due on or before the earlier to
occur of (i) ten (10) Business Days following the receipt by the
Company or ABS of the 2019 Tax Credit, or (ii) December 31, 2019,
of AzurRx BioPharma, Inc., a Delaware corporation (the
“Company”), into shares of
common stock (the “Common Stock”), of the
Company according to the conditions hereof, as of the date written
below. If shares of Common Stock are to be issued in the name of a
person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the
holder for any conversion, except for such transfer taxes, if
any.

 

            

By the delivery of
this Notice of Conversion the undersigned represents and warrants
to the Company that its ownership of the Common Stock does not
exceed the amounts specified under Section 4 of this Note, as
determined in accordance with Section 13(d) of the Exchange
Act.

 

            

The undersigned
agrees to comply with the prospectus delivery requirements under
the applicable securities laws in connection with any transfer of
the aforesaid shares of Common Stock.

 

Conversion
calculations:

Date to
Effect Conversion:

 

Amount
of Note to be Converted:

 

Applicable
Conversion Price:

 

Number
of shares of Common Stock to be issued:

Signature:

Name:

Address
for Delivery of Common Stock Certificates:

 

                                                       

Or

 

                                                       

DWAC
Instructions:

 

                                                       

Broker
No:                                                       

                                                       

Account
No:

 

11

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