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 AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
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.
Date: June 6, 2018||$325,000
SECURED Convertible NOTE
SENIOR SECURED CONVERTIBLE NOTE is issued at a 15.38% original issue discount by Adial Pharmaceuticals, Inc., a Delaware corporation
(the “Company”) (this note, the “Note” and, collectively with any other denominations of notes issued
hereunder pursuant to Section 3(a) below, the “Notes”).
VALUE RECEIVED, the Company promises to pay to Xxxxx X Xxxxxxxxx 2003 Revocable Trust Dtd 7/2/03 or its registered assigns
(the “Holder”), or shall have paid pursuant to the terms hereunder, the principal sum of Three Hundred Twenty Three
Thousand Five Hundred Dollars ($325,000) (“Original Principal Amount”) on March 5, 2019 (the “Maturity Date”)
or such earlier date as this Note is required or permitted to be repaid as provided hereunder, and to pay other fees in accordance
with the provisions hereof. As a result of the 15.38% original issue discount, on the date hereof, the Holder shall deliver to
the Company, or its assigns, cash in the amount of Two Hundred Seventy Five Thousand ($275,000). This Note is subject to the following
1. Definitions. For the purposes hereof, (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:
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 days after such appointment, (e) the Company or any Significant
Subsidiary thereof makes a general assignment for the benefit of creditors, or (f) 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.
Ownership Limitation” shall have the meaning set forth in Section 4(d).
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any
day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
of Control Transaction” 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
50% or more of the voting securities of the Company (other than by means of conversion, exercise or exchange of the Notes or the
Securities issued together with the Notes), (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 shareholders 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 shareholders 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.
Stock” shall mean the common stock, par value $0.001 per share, of the Company.
shall have the meaning ascribed to such term in Section 4.
Date” shall have the meaning set forth in Section 4(a).
Price” shall have the meaning set forth in Section 4(b).
Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.
Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Note in accordance with the terms
of Default” shall have the meaning set forth in Section 8(a).
York Courts” shall have the meaning set forth in Section 9(e).
Register” shall mean the note register maintained by the Company.
of Conversion” shall have the meaning set forth in Section 4(a).
Issue Date” means the date of the first issuance of the Notes, regardless of any transfers of any Note and regardless of
the number of instruments which may be issued to evidence such Notes.
Indebtedness” means bank debt, capital lease obligations and purchase money indebtedness incurred in connection with the
acquisition of machinery and equipment and in accordance with the Security Agreement.
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 (i) 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 (ii) 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,
and (c) Liens incurred in connection with Permitted Indebtedness under the definition of “Permitted Indebtedness,”
provided that such Liens are not secured by assets of the Company or its Subsidiaries other than the assets so acquired or leased.
Amount” means the Original Principal Amount.
Agreement” means the Securities Purchase Agreement, dated as of June 3, 2018 among the Company and the Holder, as amended,
modified or supplemented from time to time in accordance with its terms.
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Agreement” means the Security Agreement, dated June 6, 2018 by and between the Company and the Holder.
Delivery Date” shall have the meaning set forth in Section 4(c)(ii).
The Company shall make a payment to the Holder in the amount of the unpaid balance of the Original Principal Amount on the Maturity
Date. All payments shall be made to the Holder in cash. This Note does not bear interest.
3. Registration of Transfers and Exchanges.
Denominations. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations
(of no less than $1,000 in principal amount), as requested by the Holder surrendering the same. No service charge will be payable
for such registration of transfer or exchange.
Representations. This Note has been issued subject to certain investment representations of the original Holder set forth
in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.
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.
Conversion. After the Original Issue Date until this Note is no longer outstanding, and provided that that the provisions
of Rule 144 under the Securities Act so permit, the Principal Amount of this Note shall be convertible, in whole or in part, at
any time, and from time to time, into shares of Common Stock at the option of the Holder (a “Conversion”). 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. 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 has been so converted. 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 in each conversion, the date of each conversion, and the Conversion Price in effect at the time
of each conversion. The Company shall pay any and all transfer, stamp, issuance and similar taxes, costs and expenses (including,
without limitation, fees and expenses of any transfer agent of the Company (the “Transfer Agent”) and the Depository
Trust Company (“DTC”)), that may be payable with respect to the issuance and delivery of Common Stock upon any Conversion.
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.
Price. The “Conversion Price” in effect on any Conversion Date means, as of any Conversion Date or other date
of determination, $2.00, subject to adjustment as provided in Section 5 below.
of Conversion or Prepayment.
Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder
shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Note by (y) the Conversion
Price in effect at the time of such conversion.
of Certificate Upon Conversion. Not later than three (3) Business Days after each Conversion Date (the “Share Delivery
Date”), the Company shall (1) provided the Transfer Agent is participating in the DTC Fast Automated Securities Transfer
Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled pursuant to such conversion
to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian system, or
(2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, upon the request of the
Holder, issue and deliver (via reputable overnight courier) to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled
pursuant to such conversion under this Section 4(c), which, on or after the date on which such Conversion Shares are eligible
to be sold under Rule 144 without the need for current public information and the Company has received an opinion of counsel to
such effect reasonably acceptable to the Company (which opinion the Company will be responsible for obtaining at its own cost),
shall be free of restrictive legends and trading restrictions.
to Deliver Certificates. If, in the case of any Notice of Conversion, Holder’s or its designees’ account with
DTC is not credited or such certificate or certificates are not delivered to or as directed by the applicable Holder by the Share
Delivery Date (as the case may be), the Holder shall be entitled to elect by written notice to the Company at any time on or before
its receipt of such certificate or certificates, to rescind such Conversion, in which event the Company shall promptly return
to the Holder any original Note delivered to the Company and the Holder shall promptly return to the Company the Common Stock
certificates issued to such Holder pursuant to the rescinded Conversion Notice.
of Shares Issuable Upon Conversion. The Company covenants that it will reserve and keep available out of its authorized and
unissued shares of Common Stock for the purpose of issuances upon conversion of this Note and the issued with this Note, 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 the amount of shares of Common Stock as shall from time to time be sufficient to effect the conversion
of the outstanding principal amount of this Note; and if at any time the number of authorized but unissued shares of Common Stock
shall be insufficient to effect such conversion, the Company shall take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for
such purpose. The Company covenants that all shares of Common Stock that shall be issuable upon conversion of this Note shall,
upon issue, be duly authorized, validly issued, fully paid and nonassessable.
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.
Taxes and Expenses. The issuance of certificates for shares of the Common Stock 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 certificates, 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 certificate 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 certificates 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.
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 Persons acting as a group together with the Holder
or any of the Holder’s Affiliates) 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
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 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. 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 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) 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 a 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 Business 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 4.99% 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. The Holder, upon not less than 61 days’ prior notice to the Company, may increase the Beneficial
Ownership Limitation provisions of this Section 4(d) solely with respect to the Holder’s Note, provided that the Beneficial
Ownership Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding immediately after giving effect
to the issuance of shares of Common Stock upon conversion of this Note held by the Holder and the provisions of this Section 4(d)
shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered
to the Company. The Holder may also decrease the Beneficial Ownership Limitation provisions of this Section 4(d) solely with respect
to the Holder’s Note at any time, which decrease shall be effectively immediately upon delivery of notice to the Company.
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.
5. Certain Adjustments.
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 the Notes
or pursuant to any of the other Transaction Documents), (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. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the determination of shareholders 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.
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, 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 conversion 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 in the beneficial ownership of any shares of Common Stock as a result of such Distribution to
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 or warrants to acquire its assets, or subscribe for or purchase any security other than Common
Stock, 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 exercise 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 with respect to the Company or any other publicly-traded corporation subject to Section 13(d)
of the Exchange Act, 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 with respect to the Company or any other publicly-traded corporation subject
to Section 13(d) of the Exchange Act).).
Upon Issuance of Shares of Common Stock. If the Company issues or sells, or in accordance with this Section 5 is deemed to
have issued or sold, any shares of Common Stock in a financing with gross proceeds in excess of $2,000,000 (excluding an Exempt
Issuance) (a “Dilutive Financing”) for a consideration per share (the “Dilutive Issuance Price”) that
is less than a price equal to the twice the Conversion Price in effect immediately prior to such issue or sale or deemed issuance
or sale (the “Applicable Conversion Price”) (the foregoing, a “Dilutive Issuance”), then immediately following
such Dilutive Issuance, the Applicable Conversion Price then in effect shall be reduced to a price equal to 50% of the Dilutive
Exceptions to Adjustment of Conversion Price. The provisions of clause (e) above will not apply to, and no adjustment to
the Conversion Price or Applicable Conversion Price will be made upon an Exempt Issuance. An “Exempt Issuance” means
the issuance of: (i) securities to employees, officers or directors of, or consultants to, the Company, pursuant to any stock
or option plan duly adopted for such purpose and approved by a majority of the non-employee members of the Board of Directors
or a majority of the members of a committee of non-employee directors established for such purpose for services rendered to the
Company, (ii) securities upon the exercise or exchange of or conversion of any securities issued hereunder or the related warrant,
(iii) any securities issued upon the exercise or exchange of or conversion of any securities or any equity linked securities of
the Company existing on the Original Issue Date or existing after such date if such securities are issued thereafter as a result
of such exercise, exchange or conversion, (iv) shares of Common Stock issued for interest on debt instruments existing on the
Original Issue Date as a result of in kind payments of shares of Common Stock in lieu of cash, (v) securities issued pursuant
to any purchase money equipment loan or capital leasing arrangement, real property leasing arrangement or debt financing from
a commercial bank or similar financial institution approved by a majority of the non-employee members of the Board of Directors,
(vi) securities in full or partial consideration in connection with a bona fide strategic merger, acquisition, joint venture,
license, consolidation or similar business combination or other strategic transaction approved by a majority of the non-employee
members of the Board of Directors, so long as such issuance is not for the primary purpose of raising capital by the Company,
and (vii) upon a stock split, stock dividend or subdivision of the Common Stock.
to the Holder.
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.
to Allow Conversion by Xxxxxx. 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 shareholders 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 thirty (30) 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.
7. Negative Covenants. As long as any portion of this Note remains outstanding, unless the holders of a majority
in principal amount of the then outstanding Notes shall have otherwise given prior written consent, the Company shall not, and
shall not permit any of the Subsidiaries to, directly or indirectly:
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;
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;
8. Events of Default. The Company must notify the Holder within one (1) Business Day after it has become aware of
an Event of Default.
“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):
default in the payment of (A) the principal amount of any Note and other amounts owing to a Holder on any Note, as and when the
same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default,
solely in the case of an interest payment or other default under clause (B) above, is not cured within three (3) Business Days;
Company shall fail to observe or perform any other covenant or agreement contained in the Transaction Documents (other than as
specifically set forth in another clause of this Section 8(a)) which failure is not cured, if possible to cure, within the earlier
to occur of (A) five (5) Business Days after notice of such failure sent by the Holder or by any other Holder to the Company and
(B) seven (7) Business Days after the Company has become aware of such failure;
representation or warranty made in this Note, any other Transaction Document, 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 pursuant hereto or
thereto shall be untrue or incorrect in any material respect as of the date when made or deemed made;
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
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 and such default
is not cured within ten (10) Business Days;
Company shall have consummated a Change of Control Transaction without the Holder’s consent without paying in full all amounts
owed under the Note at or prior to such consummation;
final judgment for the payment of money aggregating in excess of $100,000 is rendered against the Company and/or any of its Subsidiaries
and which judgment is not, within 45 days after the entry thereof, bonded, discharged or stayed pending appeal, or is not discharged
within 60 days after the expiration of such stay; provided, however, any judgment that is covered by insurance or an indemnity
from a credit-worthy party will not be included in calculating the amount of the judgment so long as the Company provides the
Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to
the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company or such Subsidiary (as the
case may be) will receive the proceeds of such insurance or indemnity within 30 days of the issuance of such judgment;
the Company shall fail to satisfy the current public information requirement under Rule 144(c) of the Securities Act after the
Company’s shares are publicly traded, and any such failure remains uncured for at least five (5) Business Days;
the Company shall fail to remove any restrictive legend on any certificate or any shares of Common Stock issued to the Holder
upon conversion or exercise (as the case may be) of any Securities acquired by the Holder under the Purchase Agreement (including
this Note) as and when required by such Securities, unless otherwise then prohibited by applicable federal securities laws, and
any such failure remains uncured for at least five (5) Business Days; or
the Company’s (A) failure to cure a Conversion Failure or a Delivery Failure (as defined in the Warrants) by delivery of
the required number of shares of Common Stock within five Business Days after the applicable Conversion Date or exercise date
(as the case may be) or (B) notice to any holder of Notes or Warrants, including by way of public announcement, of the Company’s
intention to not honor requests for conversions of any Notes in accordance with the terms hereof or honor requests for exercise
of any Warrants in accordance with the terms thereof.
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 at the Mandatory Default Amount together with the payment of any applicable success fee. Upon the payment
in full of the Mandatory Default Amount, 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 Xxxxxx 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.
Rights as Stockholder Until Conversion. This Note does not entitle the Holder to any voting rights, dividends or other rights
as a stockholder of the Company prior to the conversion hereof other than as explicitly set forth in Section 4.
All notices, offers, acceptance and any other acts under this Agreement (except payment) shall be in writing, and shall be sufficiently
given if delivered to the addressees in person, by Federal Express or similar receipted next business day delivery, as follows:
||If to the Company:
||Adial Pharmaceuticals, Inc.|
||0000 Xxxxxxxx Xxxxx, Xxxxx 000|
||Charlottesville, VA 22901|
||Telephone No.: (000) 000-0000|
||Attention: Xxxxxxx Xxxxxxx|
||with a copy to:
||Xxxxxx & Xxxxxx, LLP|
||The Chrysler Building|
||000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx|
||New York, New York 10174|
||Telephone No.: (000) 000-0000|
||Facsimile No.: (000) 000-0000|
||If to Holder:
||Address on signature page|
to such other address as any of them, by notice to the other may designate from time to time. Time shall be counted to, or from,
as the case may be, the date of delivery.
Obligation; Ranking. 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 and late fees,
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 those certain Senior Secured Promissory Notes dated February
22, 2018 and March 19, 2018.
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. The applicant
for a new Note under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated
with the issuance of the new Note.
Jurisdiction; 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 only be commenced in the state and federal
courts sitting in New York, 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
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.
If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, as long as
the essential terms and conditions of this Note for each party remain valid, binding, and enforceable.
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. 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 would 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 reasonably requested by the Holder to enable the Holder to confirm the Company’s compliance with the terms and conditions
of this Note.
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.
Shares. The Company covenants that, during the period the Note is outstanding, it will reserve from its authorized and unissued
Common Stock, free of preemptive rights, a sufficient number of shares equal to two times the number of shares of Common Stock
issuable upon conversion of this Note issuable under the Purchase Agreement to all Purchasers thereunder (without regard to any
limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation). The Company further covenants
that its issuance of this Note shall constitute full authority to its officers who are charged with the duty of executing the
Company’s securities to execute and issue the necessary certificates for the shares of Common Stock issuable upon conversion
of this Note upon the exercise of the purchase rights under this Note. The Company will take all such commercially reasonable
action as may be necessary to assure that such shares of Common Stock issuable upon conversion of this Note may be issued as provided
herein without violation of any applicable law or regulation, or of any requirements of any trading market upon which the Common
Stock may be listed. The Company covenants that all shares of Common Stock issuable upon conversion of this Note which may be
issued upon the exercise of the purchase rights represented by this Note will, upon exercise of the purchase rights represented
by this Note and payment for such shares of Common Stock issuable upon conversion of this Note in accordance herewith, be duly
authorized, validly issued, fully paid and non-assessable and free from all taxes, liens and charges created by the Company in
respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Note against impairment.
Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any shares of Common Stock
issuable upon conversion of this Note above the amount payable therefor upon such exercise immediately prior to such increase
in par value; (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock issuable upon conversion of this Note upon the conversion of this Note; and
(iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory
body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Note.
taking any action which would result in an adjustment in the number of shares of Common Stock issuable upon conversion of this
Note or in the Conversion Price, the Company shall use commercially reasonable efforts to obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above
undersigned hereby elects to convert principal under the Senior Secured Convertible Note issued by Adial Pharmaceuticals, Inc.,
a Delaware corporation (the “Company”) on June [ ], 2018, 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.
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
undersigned agrees to comply with applicable securities laws in connection with any transfer of the aforesaid shares of Common
||Date to Effect Conversion:|
||Amount of Note to be Converted:|
||Number of shares of Common Stock to be issued:|
Senior Secured Convertible Note issued on June, 2018 in the original principal amount of $312,000 by Adial Pharmaceuticals, Inc.,
a Delaware corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Note.