$300,000.00
October 30, 2007
QUICK-MED TECHNOLOGIES, INC.
SENIOR
CONVERTIBLE PROMISSORY NOTE 2
FOR
VALUE RECEIVED, the undersigned, QUICK-MED TECHNOLOGIES, INC.
(the “Borrower”), promises unconditionally to pay
to the order of Michael Granito, his successors or assigns
(the “Lender”) at the Lender’s offices at
1088 Shady Avenue, Pittsburgh, Pennsylvania 15232, or at such
other place as the Lender may from time to time designate, the
principal amount of up to three hundred thousand dollars
($300,000.00) (the “Principal Amount”) or so much
thereof as is disbursed to Borrower pursuant to this Note,
together with interest on the unpaid Principal Amount
outstanding from time to time at the rate or rates hereafter
specified and any and all other sums which may be owing to the
Lender by the Borrower pursuant to this
Note. The following terms shall apply to this
Promissory Note:
1.
Receipts of Funds . Borrower acknowledges that it
received Fifty Thousand Dollars ($50,000) each (the
“Advance”) on the following dates – October 30,
2007, November 29, 2007, December 13, 2007, December 27, 2007,
January 14, 2008, and January 30, 2008. Lender
shall have no obligations to make an additional funding the
Borrower hereunder if the total principal amount outstanding at any
time exceed $300,000.00.
2.
Interest Rate . Interest shall accrue on the
outstanding Principal Amount at the rate of eight percent (8%) per
annum. Interest shall be calculated on the basis of a
year of three hundred sixty five (365) days applied to the actual
days on which there exists an unpaid balance under this
Note.
3.
Interest Payments . The Borrower shall pay
accrued and unpaid interest on the Maturity Date, as the case may
be and as hereinafter defined, and thereafter on demand until all
sums due under this Note, whether principal, interest, or other
sums, have been paid in full.
4.
Principal . Unless sooner paid or converted, the
entire outstanding Principal Amount as well as all other sums under
this Note that remain unpaid shall be due and payable on October
29, 2010 (the “Maturity Date”); provided that, the
Borrower shall make amortized payments on the outstanding principal
plus interest during the term of this Note depending on the free
cash flow from operations in excess of anticipated cost from
operations as determined in the discretion of the Borrower’s
Board of Directors.
5.
Prepayment . Borrower may prepay any portion of
the outstanding principal amount of this Promissory Note with 30
days prior written notice.
6.
Conversion . This Note shall be convertible into
shares of Common Stock of the Borrower, on the terms and conditions
set forth in this Section 6.
(a)
Conversion
Right . Subject to the provisions of Section
6(d), at any time or times on or after the first date of this
Note, the Lender shall be entitled to convert any portion of
the outstanding and unpaid Conversion Amount (as defined
below) into validly issued, fully paid and nonassessable
shares of Common Stock in accordance with Section 7(c), at the
Conversion Rate (as defined below).
(b)
Conversion Rate . The number of shares of Common
Stock issuable upon conversion of any Conversion Amount pursuant to
Section 6(a) shall be determined by dividing (x) such Conversion
Amount by (y) the Conversion Price (the “Conversion
Rate”).
(i) “Conversion
Amount” means the portion of the Principal and interest to be
converted, redeemed or otherwise with respect to which this
determination is being made.
(ii) “Conversion
Price” means, as of any Conversion Date (as defined
below), the closing price per share of the Borrower’s
common stock at the date each Advance is
received.
(iii)
Mechanics of Conversion .
(iv)
Optional Conversion . To convert any Conversion
Amount into shares of Common Stock on any date (a “Conversion
Date”), the Lender shall (A) transmit by facsimile (or
otherwise deliver), for receipt on or prior to 5:00 p.m., Pacific
Time, on such date, a copy of an executed notice of conversion in
the form attached hereto as Exhibit A (the
“Conversion Notice”) to the Borrower and (B) if
required by Section 6(c)(iii), surrender this Note to a common
carrier for delivery to the Borrower as soon as practicable on or
following such date (or an indemnification undertaking with respect
to this Note in the case of its loss, theft or
destruction). The Borrower shall transmit by facsimile a
confirmation of receipt of such Conversion Notice to the Lender and
the Borrower’s transfer agent, (the “Transfer
Agent”). The Transfer Agent shall issue and
deliver to the address as specified in the Conversion Notice, a
certificate or certificates, registered in the name of the Lender
or its designee, for the number of shares of Common Stock to which
the Lender shall be entitled. If this Note is physically
surrendered for conversion as required by Section 6(c)(iii) and the
outstanding Principal of this Note is greater than the Principal
portion of the Conversion Amount being converted, then the Borrower
shall as soon as practicable and in no event later than ten (10)
Business Days after receipt of this Note and at its own expense,
issue and deliver to the holder a new Note (in accordance with
Section 15(d)) representing the outstanding Principal not
converted. The Person or Persons entitled to receive the
shares of Common Stock issuable upon a conversion of this Note
shall be treated for all purposes as the record holder or holders
of such shares of Common Stock on the Conversion Date.
(v)
Book-Entry . Notwithstanding anything to the
contrary set forth herein, upon conversion of any portion of this
Note in accordance with the terms hereof, the Lender shall not be
required to physically surrender this Note to the Borrower unless
(A) the full Conversion Amount represented by this Note is being
converted or (B) the Lender has provided the Borrower with prior
written notice (which notice may be included in a Conversion
Notice) requesting physical surrender and reissue of this
Note. The Lender and the Borrower shall maintain records
showing the Principal converted and the dates of such conversions
or shall use such other method, reasonably satisfactory to the
Lender and the Borrower, so as not to require physical surrender of
this Note upon conversion.
(vi)
Legend . The Converted Shares shall bear a legend
that reads:
THE
SECURITIES EVIDENCED BY THIS STOCK CERTIFICATE MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
7.
Adjustment . If the Borrower at any time on or
after the date of this Note subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced. If the
Borrower at any time on or after the Closing Date combines (by
combination, reverse stock split or otherwise) one or more classes
of its outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to such
combination will be proportionately increased..
8.
Negative Covenants. During the term of this Promissory Note
and until all obligations hereunder are
satisfied, Borrower shall not, without first obtaining
the affirmative written consent of the Lender, which shall not be
unreasonably withheld: (i) pay or declare any dividend or
distribution on any common stock or preferred stock (“Capital
Stock”), or apply any of its assets to the redemption,
purchase or acquisition, directly or indirectly, through
subsidiaries or otherwise, of any share capital or assets of
another entity; (ii) sell, transfer, lease, offer as
collateral or otherwise dispose of any of its Capital Stock, assets
or properties other than in the ordinary course of business
transactions or as unanimously approved by the Board of Directors;
(iii) enter into any joint venture, business
combination, merger, consolidation, recapitalization or other
reorganization or permit any subsidiary to enter into any merger,
consolidation, recapitalization or other reorganization; (iv) enter
into any agreement, or allow any subsidiary, to enter any agreement
to issue or offer any security, includ
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