Exhibit 10.5

 

Principal Amount: $954,546.07  Original Issue Date: September 28, 2018   
Restated as of: February 7, 2018

 

AMENDED AND RESTATED SENIOR SECURED PROMISSORY NOTE

 

FOR VALUE RECEIVED, PRECISION THERAPEUTICS, INC., a Delaware corporation
(hereinafter called the “Borrower”), as of September 28, 2018 (the “Issue Date”)
and amended and restated as of February 7, 2019 (the “Restatement Date”) hereby
promises to pay to the order of PEAK ONE OPPORTUNITY FUND, LP, a Delaware
limited partnership, or its registered assigns (the “Holder”) the principal sum
of $954,546.07 (the “Principal Amount”), together with interest at the rate of
Default Interest (as defined below) or eight percent (8%) per annum as set forth
herein (with the understanding that the initial twelve months of such interest
of each tranche funded shall be guaranteed), at maturity or upon acceleration or
otherwise, as set forth herein (the “Note”). The consideration to the Borrower
for this Note is up to $750,000 (the “Consideration”) in United States currency,
due to the prorated original issuance discount of up to $102,273.25 (the “OID”).
In addition, Borrower and Holder have entered into a Forbearance Agreement dated
and effective as of February 7, 2019 (the “Forbearance Agreement”) relating to
certain Events of Default under this Note. Pursuant to the Forbearance
Agreement, among other things, (1) a 15% Increase (as defined in the Forbearance
Agreement) has been effected pursuant to which an additional sum of $102,272.82
has been added to the Principal Amount as of the Restatement Date, and (2)
interest will be paid at the rate of Default Interest for the period described
below and in the Forbearance Agreement.

 

The Holder shall pay $600,000 of the Consideration (the “First Tranche”) within
a reasonable amount of time of the full execution of the securities purchase
agreement (the “Purchase Agreement”) and its ancillary transactional documents
pursuant to which this Note is issued. At the closing of the First Tranche and
as adjusted for the 15% Increase as of the Restatement Date, the outstanding
principal amount under this Note shall be $784,091.62, consisting of (a) the
First Tranche plus (b) the prorated portion of the OID (as defined herein) plus
(c) the 15% Increase. The Holder shall pay such additional amounts of the
Consideration and at such dates as set forth in the Purchase Agreement. The
maturity date for each tranche funded shall be twelve (12) months from the
effective date of each payment (each, a “Maturity Date”), and is the date upon
which the principal sum, as well as any accrued and unpaid interest and other
fees, shall be due and payable. This Note may not be repaid in whole or in part
except as otherwise explicitly set forth herein. Any amount of principal or
interest on this Note which is not paid by the Maturity Date shall bear interest
at the rate of the lesser of (i) eighteen percent (18%) per annum or (ii) the
maximum amount allowed by law, from the due date thereof until the same is paid
(“Default Interest”). Pursuant to the Forbearance Agreement, interest on this
Note will accrue at the rate of Default Interest from November 15, 2018 through
the earlier of (a) the date of the Default Cure (as defined in the Forbearance
Agreement) or (b) the remaining term of this Note.

 

Interest shall commence accruing on the date that this Note is issued and shall
be computed on the basis of a 365-day year and the actual number of days
elapsed. All payments due hereunder (to the extent not converted into the
Borrower’s common stock, par value $0.01 per share (the “Common Stock”) in
accordance with the terms hereof) shall be made in lawful money of the United
States of America. All payments shall be made at such address as the Holder
shall hereafter give to the Borrower by written notice made in accordance with
the provisions of this Note. Whenever any amount expressed to be due by the
terms of this Note is due on any day which is not a business day, the same shall
instead be due on the next succeeding day which is a business day and, in the
case of any interest payment date which is not the date on which this Note is
paid in full, the extension of the due date thereof shall not be taken into
account for purposes of determining the amount of interest due on such date. As
used in this Note, the term “business day” shall mean any day other than a
Saturday, Sunday or a day on which commercial banks in the city of New York, New
York are authorized or required by law or executive order to remain closed.

 

 

This Note is free from all taxes, liens, claims and encumbrances with respect to
the issue thereof and shall not be subject to preemptive rights or other similar
rights of shareholders of the Borrower and will not impose personal liability
upon the holder thereof.

 

This Note shall be a senior secured obligation of the Borrower, with priority
over all existing and future Indebtedness (as defined below) of the Borrower as
provided for herein. The obligations of the Borrower under this Note are secured
pursuant to the terms of the security agreement of even date herewith by and
among the Borrower, its Subsidiaries, and the Secured Parties (as defined
therein), as well as being secured by the terms of the security agreement of
even date herewith by and between the borrower and Helomics Holding Corporation
(“Helomics”), and such security interest includes but is not limited to all of
the assets of the Borrower and its Subsidiaries as well as of Helomics. So long
as the Borrower shall have any obligation under this Note, the Borrower shall
not (directly or indirectly through any Subsidiary or affiliate) incur or suffer
to exist or guarantee any Indebtedness that is senior to or pari passu with (in
priority of payment and performance) the Borrower’s obligations hereunder. For
purposes of this paragraph, the term “Borrower” shall include any Subsidiary of
the Borrower in addition to the Borrower. As used herein, the term
“Indebtedness” means (a) all indebtedness of the Borrower for borrowed money or
for the deferred purchase price of property or services, including any type of
letters of credit, but not including deferred purchase price obligations in
place as of the Issue Date and as disclosed in the SEC Documents or obligations
to trade creditors incurred in the ordinary course of business, (b) all
obligations of the Borrower evidenced by notes, bonds, debentures or other
similar instruments, (c) purchase money indebtedness hereafter incurred by the
Borrower to finance the purchase of fixed or capital assets, including all
capital lease obligations of the Borrower which do not exceed the purchase price
of the assets funded, (d) all guarantee obligations of the Borrower in respect
of obligations of the kind referred to in clauses (a) through (c) above that the
Borrower would not be permitted to incur or enter into, and (e) all obligations
of the kind referred to in clauses (a) through (d) above that the Borrower is
not permitted to incur or enter into that are secured and/or unsecured by (or
for which the holder of such obligation has an existing right, contingent or
otherwise, to be secured and/or unsecured by) any lien or encumbrance on
property (including accounts and contract rights) owned by the Borrower, whether
or not the Borrower has assumed or become liable for the payment of such
obligation.

 

The following additional terms shall also apply to this Note:

 

ARTICLE I. [INTENTIONALLY OMITTED]

 

ARTICLE II. CERTAIN COVENANTS

 

2.1               Distributions on Capital Stock. So long as the Borrower shall
have any obligation under this Note, the Borrower shall not without the Holder’s
written consent (a) pay, declare or set apart for such payment, any dividend or
other distribution (whether in cash, property or other securities) on shares of
capital stock other than dividends on shares of Common Stock solely in the form
of additional shares of Common Stock or (b) directly or indirectly or through
any Subsidiary make any other payment or distribution in respect of its capital
stock except for distributions pursuant to any shareholders’ rights plan which
is approved by a majority of the Borrower’s disinterested directors.

 

2.2               Restriction on Stock Repurchases. So long as the Borrower
shall have any obligation under this Note, the Borrower shall not without the
Holder’s written consent redeem, repurchase or otherwise acquire (whether for
cash or in exchange for property or other securities or otherwise) in any one
transaction or series of related transactions any shares of capital stock of the
Borrower or any warrants, rights or options to purchase or acquire any such
shares.

 2 

 

2.3               Piggyback Registration Rights. The Borrower shall include on
the registration statement required to be filed with the SEC by January 31,
2019, pursuant to the Registration Rights Agreement between the parties (the
“RRA”), all shares issuable upon conversion of this Note (as defined in the
Purchase Agreement). Failure to do so will result in liquidated damages of 25%
of the outstanding principal balance of this Note, but not less than Fifteen
Thousand and No/100 United States Dollars ($15,000), being immediately due and
payable to the Holder at its election in the form of cash payment or addition to
the balance of this Note.

 

2.4               Repayment from Proceeds. While any portion of this Note is
outstanding, if the Borrower receives cash proceeds from any source or series of
related or unrelated sources, including but not limited to, from payments from
customers, the issuance of equity or debt, the conversion of outstanding
warrants of the Borrower, the issuance of securities pursuant to an equity line
of credit of the Borrower or the sale of assets, the Borrower shall, within one
(1) business day of Borrower’s receipt of such proceeds, inform the Holder of
such receipt, following which the Holder shall have the right in its sole
discretion to require the Borrower to immediately apply up to 50% of such
proceeds to repay all or any portion of the outstanding amounts owed under this
Note. Failure of the Borrower to comply with this provision shall constitute an
Event of Default. The foregoing repayment requirement in this Section shall not
be applicable to (a) sales of products by Borrower or (b) securities offering
transactions after the Execution Date yielding in the aggregate less than
$2,000,000 gross proceeds to the Borrower; provided, that for an offering
transaction that causes such cumulative gross proceeds to exceed $2,000,000, the
partial repayment obligation in this Section shall apply only to the excess
amount of proceeds. In the event that such excess proceeds are received by the
Holder prior to the Maturity Date, the required prepayment shall be subject to
the terms of Section 4.14 herein.

 

ARTICLE III. EVENTS OF DEFAULT

 

The occurrence of each of the following events of default shall each be an
“Event of Default”, with no right to notice or right to cure except as
specifically stated:

 

3.1               Failure to Pay Principal or Interest. The Borrower fails to
pay the principal hereof or interest thereon when due on this Note, whether at
the Maturity Date, upon acceleration, or otherwise.

 

3.2               Conversion and the Shares. The Borrower fails to reserve a
sufficient amount of shares of common stock as required under the terms of this
Note (including without limitation, Section 1.3 of this Note), fails to issue
shares of Common Stock to the Holder (or announces or threatens in writing that
it will not honor its obligation to do so) upon exercise by the Holder of the
conversion rights of the Holder in accordance with the terms of this Note, fails
to transfer or cause its transfer agent to transfer (issue) (electronically or
in certificated form) shares of Common Stock issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when required by this
Note, the Borrower directs its transfer agent not to transfer or delays,
impairs, and/or hinders its transfer agent in transferring (or issuing)
(electronically or in certificated form) shares of Common Stock to be issued to
the Holder upon conversion of or otherwise pursuant to this Note as and when
required by this Note, or fails to remove (or directs its transfer agent not to
remove or impairs, delays, and/or hinders its transfer agent from removing) any
restrictive legend (or to withdraw any stop transfer instructions in respect
thereof) on any shares of Common Stock issued to the Holder upon conversion of
or otherwise pursuant to this Note as and when required by this Note (or makes
any written announcement, statement or threat that it does not intend to honor
the obligations described in this paragraph) and any such failure shall continue
uncured (or any written announcement, statement or threat not to honor its
obligations shall not be rescinded in writing) for two (2) business days after
the Holder shall have delivered a Notice of Conversion. It is an obligation of
the Borrower to remain current in its obligations to its transfer agent. It
shall be an event of default of this Note, if a conversion of this Note is
delayed, hindered or frustrated due to a balance owed by the Borrower to its
transfer agent. If at the option of the Holder, the Holder advances any funds to
the Borrower’s transfer agent in order to process a conversion (excluding for
the avoidance of doubt, the conversion price which is the Holder’s obligation to
pay), such advanced funds shall be paid by the Borrower to the Holder within
five (5) business days, either in cash or as an addition to the balance of this
Note, and such choice of payment method is at the discretion of the Borrower.

 3 

 

3.3               Breach of Covenants. The Borrower breaches any material
covenant or other material term or condition contained in this Note, the
Forbearance Agreement, the RRA or any documents entered into between the
Borrower and the Holder, as such documents may be modified by the Forbearance
Agreement, and such breach continues for a period of three (3) days after
written notice thereof to the Borrower from the Holder or after five (5) days
after the Borrower should have been aware of the breach.

 

3.4               Breach of Representations and Warranties. Any representation
or warranty of the Borrower made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith, shall be
false or misleading in any material respect when made and the breach of which
has (or with the passage of time will have) a material adverse effect on the
rights of the Holder with respect to this Note.

 

3.5               Receiver or Trustee. The Borrower or any Subsidiary of the
Borrower shall make an assignment for the benefit of creditors, or apply for or
consent to the appointment of a receiver or trustee for it or for a substantial
part of its property or business, or such a receiver or trustee shall otherwise
be appointed.

 

3.6               Judgments. Any money judgment, writ or similar process shall
be entered or filed against the Borrower or any Subsidiary of the Borrower or
any of its property or other assets for more than $100,000, and shall remain
unvacated, unbonded or unstayed for a period of ten (10) days unless otherwise
consented to by the Holder, which consent will not be unreasonably withheld.

 

3.7               Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings, voluntary or involuntary, for
relief under any bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Borrower or any subsidiary of the Borrower and, in
the case of involuntary proceedings, have not been dismissed within 61 days.

 

3.8               Delisting of Common Stock. The Borrower shall fail to maintain
the listing or quotation of the Common Stock on the Trading Market or an
equivalent replacement exchange, the Nasdaq Global Market, the Nasdaq Capital
Market, the New York Stock Exchange, the NYSE American, or the OTCQB or OTCQX
market places of the OTC Markets.

 

3.9               Failure to Comply with the Exchange Act. The Borrower shall
fail to comply with the reporting requirements of the Exchange Act (including
but not limited to becoming delinquent in its filings), and/or the Borrower
shall cease to be subject to the reporting requirements of the Exchange Act.

 

3.10           Liquidation. The Borrower commences any dissolution, liquidation,
or winding up of Borrower or any substantial portion of its business.

 

3.11           Cessation of Operations. The Borrower ceases operations or
Borrower admits it is otherwise generally unable to pay its debts as such debts
become due, provided, however, that any disclosure of the Borrower’s ability to
continue as a “going concern” shall not be an admission that the Borrower cannot
pay its debts as they become due.

 4 

 

3.12           Financial Statement Restatement. There is a restatement of any
financial statements filed by the Borrower with the SEC for any date or period
from two years prior to the Issue Date of this Note and until this Note is no
longer outstanding, if the result of such restatement would, by comparison to
the unrestated financial statements, have constituted a material adverse effect
on the Borrower or the rights of the Holder with respect to this Note.

 

3.13           Reverse Splits. The Borrower effectuates a reverse split of its
Common Stock without twenty (20) days prior written notice to the Holder, unless
Holder waives this notice period.

 

3.14           Replacement of Transfer Agent. In the event that the Borrower
replaces its transfer agent, and the Borrower fails to provide prior to the
effective date of such replacement, a fully executed Irrevocable Transfer Agent
Instructions (including but not limited to the provision to irrevocably reserve
shares of Common Stock in the Reserved Amount) signed by the successor transfer
agent to Borrower and the Borrower that reserves the greater of the (i) total
amount of shares previously held in reserve for this Note with the Borrower’s
immediately preceding transfer agent and (ii) Reserved Amount.

 

3.15           Cross-Default. Notwithstanding anything to the contrary contained
in this Note or the other related or companion documents, a breach or default by
the Borrower of any covenant or other term or condition contained in any of the
other financial instruments, including but not limited to all convertible
promissory notes currently issued, or hereafter issued, by the Borrower, to the
Holder or any 3rd party (the “Other Agreements”), shall, at the option of the
Holder, be considered a default under this Note, in which event the Holder shall
be entitled to apply all rights and remedies of the Holder under the terms of
this Note by reason of a default under said Other Agreement or hereunder;
provided, that any promissory notes of Helomics that are outstanding as of the
effective date of the Merger (as defined below) will not result in a default
under this Note unless there is a default in payment of such promissory notes
which is not cured within 15 days.

 

3.16           Inside Information. Any attempt by the Borrower or its officers,
directors, and/or affiliates to transmit, convey, disclose, or any actual
transmittal, conveyance, or disclosure by the Borrower or its officers,
directors, and/or affiliates of, material non-public information concerning the
Borrower, to the Holder or its successors and assigns, which is not immediately
cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same
date.

 

3.17           No bid. The lowest Trading Price on the Trading Market or other
applicable principal trading market for the Common Stock is equal to or less
than $0.01. “Trading Price” means, for any security as of any date, the lowest
VWAP price on NASDAQ, or applicable trading market (the “Trading Market”) as
reported by a reliable reporting service designated by the Holder (i.e.,
www.Nasdaq.com) or, if the Trading Market is not the principal trading market
for such security, on the principal securities exchange or trading market where
such security is listed or traded or, if the lowest intraday trading price of
such security is not available in any of the foregoing manners, the lowest
intraday price of any market makers for such security that are quoted on the OTC
Markets. “Trading Day” shall mean any day on which the Common Stock is tradable
for any period on the Trading Market, or on the principal securities exchange or
other securities market on which the Common Stock is then being traded.

 

3.18           Prohibition on Debt and Variable Securities. The Borrower,
without written consent of the Holder, issues any Variable Security (as defined
herein), unless (i) the Borrower is permitted to pay off this Note in cash at
the time of the issuance of the respective Variable Security and (ii) the
Borrower pays off this Note, pursuant to the terms of this Note, in cash at the
time of the issuance of the respective Variable Security. A “Variable Security”
shall mean any security issued by the Borrower, not subject to a floor price
that is within fifty percent (50%) of the then current market price of the
Common Stock, that (i) has or may have conversion rights of any kind,
contingent, conditional or otherwise in which the number of shares that may be
issued pursuant to such conversion right varies with the market price of the
Common Stock; (ii) is or may become convertible into Common Stock (including
without limitation convertible debt, warrants or convertible preferred stock),
with a conversion or exercise price that varies with the market price of the
common stock, even if such security only becomes convertible or exercisable
following an event of default, the passage of time, or another trigger event or
condition; or (iii) was issued or may be issued in the future in exchange for or
in connection with any contract, security, or instrument, whether convertible or
not, where the number of shares of Common Stock issued or to be issued is based
upon or related in any way to the market price of the Common Stock, including,
but not limited to, Common Stock issued in connection with a Section 3(a)(9)
exchange, a Section 3(a)(10) settlement, or any other similar settlement or
exchange. Notwithstanding the foregoing, the Company shall not be deemed to be
in default under this subsection to the extent that it issues securities in
compliance with obligations under written transaction documents that existed,
unaltered, prior to the Issue Date.

 5 

 

3.19           Failure to Approve Helomics Merger. The Borrower fails to
acquire, on or before March 31, 2019, all required board, stockholder and other
approvals (including without limitation that certain “Parent Stockholder
Consent” as defined in the Agreement and Plan of Merger between the Borrower and
Helomics) regarding the consummation of the Borrower’s merger with Helomics (the
“Merger”).

 

3.20           Failure to Repay Upon Qualified Offering. The Borrower completes
an offering and/or sale of securities, or becomes a borrower under any loan
documents and/or credit facilities, on or after the Issue Date and fails to
apply the proceeds of such offering, sale or loan to the repayment of this Note,
to the extent required under Section 2.4, until this Note is repaid in its
entirety as required under Section 2.4.

 

3.21           SEC Stop Order. The United States Securities and Exchange
Commission issues a stop order regarding the use of the Company’s registration
statement on Form S-3 (Registration No. 333-228908), dated January 30, 2019, or
takes any other regulatory action to stop the use of such registration
statement.

 

3.22           Failure of Registration Statement. The Company’s registration
statement on Form S-3 (Registration No. 333-228908), dated January 30, 2019,
fails to effectively cover the resale of the securities set forth therein by the
Holder..

 

UPON THE OCCURRENCE OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE
SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE BORROWER SHALL PAY TO THE
HOLDER, IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT AMOUNT (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the
occurrence of any Event of Default specified in Sections 3.1, 3.3, 3.4, 3.5,
3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, 3.18, 3.19,
3.20, 3.21 and/or this 3.22, this Note shall become immediately due and payable
and the Borrower shall pay to the Holder, in full satisfaction of its
obligations hereunder, an amount equal to 135% (plus an additional 5% per each
additional Event of Default that occurs hereunder) multiplied by the then
outstanding entire balance of this Note (including principal and accrued and
unpaid interest) plus Default Interest from the date of the Event of Default, if
any, plus any amounts owed to the Holder pursuant to Sections 1.3(g) hereof
(collectively, in the aggregate of all of the above, the “Default Amount”), and
all other amounts payable hereunder shall immediately become due and payable,
all without demand, presentment or notice, all of which hereby are expressly
waived, together with all costs, including, without limitation, legal fees and
expenses, of collection, and the Holder shall be entitled to exercise all other
rights and remedies available at law or in equity.

 6 

 

Upon the earlier to occur of an Event of Default or the filing of any Securities
Act registration statement by the Borrower on a form other than Form S-4 in
connection with the Merger or Form S-8, subject to the Exchange Cap (as defined
below), the Holder shall have the right at any time thereafter to convert all or
any part of the Note (including without limitation, the Principal Amount,
accrued and unpaid interests, Default Interest, and any other amounts owed to
the Holder under the Note) into fully paid and non-assessable shares of Common
Stock of the Borrower at the conversion price, which is equal to the lesser of
(i) $1.00 and (ii) 70% of the lowest VWAP of the Common Stock during the twenty
(20) Trading Day (as defined herein) period ending on either (i) the last
complete Trading Day prior to the conversion date or (ii) the conversion date,
as determined by the Holder in its sole discretion upon such conversion (subject
to adjustment as provided in this Note) (the “Conversion Price”). In no event
shall the Holder be entitled to convert any portion of this Note in excess of
that portion of this Note upon conversion of which the sum of (1) the number of
shares of Common Stock beneficially owned by the Holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Notes or the unexercised
or unconverted portion of any other security of the Borrower subject to a
limitation on conversion or exercise analogous to the limitations contained
herein) and (2) the number of shares of Common Stock issuable upon the
conversion of the portion of this Note with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and
Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such
proviso. “Trading Day” shall mean any day on which the Common Stock is tradable
for any period on the principal securities exchange or other securities market
on which the Common Stock is then being traded. All expenses incurred by Holder
for the issuance and clearing of the Common Stock into which this Note is
convertible into shall immediately and automatically be added to the balance of
the Note at such time as the expenses are incurred by Holder. If, at any time
when the Note is issued and outstanding, and either (A) an Event of Default has
occurred under this Note or (B) the Borrower has an filed an effective
registration statement covering the Holder’s sale of Conversion shares issued
pursuant to this Note, the Borrower issues or sells, or is deemed to have issued
or sold, any shares of Common Stock for a consideration per share less than the
Conversion Price in effect on the date of such issuance (or deemed issuance) of
such shares of Common Stock (a “Dilutive Issuance”), then the Holder shall have
the right, in Holder’s sole discretion on each conversion after such Dilutive
Issuance, to utilize the price per share of the Dilutive Issuance as the
Conversion Price for such conversion. The Borrower is required at all times to
have authorized and reserved one and a half times (and upon the Merger
Certification Date (as defined in the Purchase Agreement) two times) the number
of shares that is actually issuable upon full conversion of the Note (based on
the Conversion Price of the Note as if an Event of Default under the Note has
occurred, even if an Event of Default has not occurred), and otherwise as set
forth in the Purchase Agreement (the “Reserved Amount”). Upon receipt by the
Borrower from the Holder of a facsimile transmission or e-mail (or other
reasonable means of communication) of a notice of conversion in the form
attached hereto as Exhibit A (the “Notice of Conversion”), the Borrower shall
issue and deliver or cause to be issued and delivered to or upon the order of
the Holder the Common Stock issuable upon such conversion within two (2)
business days after such receipt (the “Deadline”). Without in any way limiting
the Holder’s right to pursue other remedies, including actual damages and/or
equitable relief, the parties agree that if delivery of the Common Stock
issuable upon conversion of this Note is not delivered by the Deadline, the
Borrower shall pay to the Holder $3,000 per day in cash, for each day beyond the
Deadline that the Borrower fails to deliver such Common Stock. Until such time
as the shares of Common Stock issuable upon conversion of this Note have been
registered under the Securities Act or otherwise may be sold pursuant to Rule
144 or other available exemption, the Common Stock issuable upon conversion of
this Note shall bear a restrictive legend in form, substance, and scope
customary for such legends. Notwithstanding anything in this Note to the
contrary, and in addition to the beneficial ownership limitations provided
herein above, the sum of (a) the total number of shares of Common Stock that may
be issued under this Note plus (b) the number of Inducement Shares plus (c) the
number of Forbearance Shares (as defined in the Forbearance Agreement), shall be
limited to 803,498 shares of Common Stock (equal to 5.997% of the outstanding
shares of Common Stock of the Company as of the Issue Date hereof) (the
“Exchange Cap”) The Exchange Cap shall be appropriately adjusted for any
reorganization, recapitalization, non-cash dividend, stock split, reverse stock
split or other similar transaction. The Company and Holder agree that the
Company shall not seek or obtain stockholder approval of issuance of a greater
number of shares upon conversion in excess of the Exchange Cap. In the event of
a conversion by Holder that results in the issuance of a number of shares equal
to the Exchange Cap, the Maturity Date of each tranche of this Note shall be the
earlier of (1) the date ninety (90) days after the date of such conversion, or
(2) the Maturity Date for such tranche set forth in the first paragraph of this
Note.

 7 

 

ARTICLE IV. MISCELLANEOUS

 

4.1               Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

 

4.2               Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, facsimile, or
electronic mail addressed as set forth below or to such other address as such
party shall have specified most recently by written notice. Any notice or other
communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery, upon electronic mail delivery, or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be:

 

If to the Borrower, to:

 

PRECISION THERAPEUTICS INC.

2915 Commers Drive, Suite 900

Eagan, Minnesota 55121

Attention: Bob Myers, CFO

E-mail: bmyers@skylinemedical.com

Phone: 651.389.4800

 

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

 

Maslon LLP

3300 Wells Fargo Center, 90 S. Seventh Street

Minneapolis, MN 55402

E-mail: martin.rosenbaum@maslon.com

Attention: Martin Rosenbaum

Phone: 612-672-8326

 

 

 8 

 

If to the Holder:

 

PEAK ONE OPPORTUNITY FUND, LP

333 S. Hibiscus Dr.

Miami Beach, Florida. 33139

Attn: Jason C. Goldstein

E-mail: jgoldstein@peakoneinvestments.com

 

with a copy to that shall not constitute notice:

 

Chad Friend, Esq., LL.M.

Anthony L.G., PLLC

625 N. Flagler Drive, Suite 600

West Palm Beach, FL 33401

E-mail: CFriend@AnthonyPLLC.com

 

4.3               Amendments. This Note and any provision hereof may only be
amended by an instrument in writing signed by the Borrower and the Holder. The
term “Note” and all reference thereto, as used throughout this instrument, shall
mean this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented.

 

4.4               Assignability. This Note shall be binding upon the Borrower
and its successors and assigns, and shall inure to be the benefit of the Holder
and its successors and assigns. Notwithstanding anything to the contrary herein,
the rights, interests or obligations of the Borrower hereunder may not be
assigned, by operation of law or otherwise, in whole or in part, by the Borrower
without the prior signed written consent of the Holder, which consent may be
withheld at the sole discretion of the Holder (any such assignment or transfer
shall be null and void if the Borrower does not obtain the prior signed written
consent of the Holder). This Note or any of the severable rights and obligations
inuring to the benefit of or to be performed by Holder hereunder may be assigned
by Holder to a third party, in whole or in part, without the need to obtain the
Borrower’s consent thereto. Each transferee of this Note must be an “accredited
investor” (as defined in Rule 501(a) of the Securities Act). Notwithstanding
anything in this Note to the contrary, this Note may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.

 

4.5               Cost of Collection. If default is made in the payment of this
Note, the Borrower shall pay the Holder hereof costs of collection, including
reasonable attorneys’ fees.

 

4.6               Governing Law. This Note shall be governed by and interpreted
in accordance with the laws of the State of Nevada without regard to the
principles of conflicts of law (whether of the State of Nevada or any other
jurisdiction).

 

4.7               Venue; Severability; Attorney’s Fees. Any action brought by
either party against the other concerning the transactions contemplated by this
Note shall be brought only in the state or federal courts of Miami-Dade County,
Florida. The parties to this Note hereby irrevocably waive any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack of jurisdiction or venue or based upon forum non
conveniens. The costs and expenses of such action shall be paid by and be the
sole responsibility of the Borrower, including but not limited to the Holder’s
attorneys’ fees and court fees. In the event that any provision of this Note or
any other agreement delivered in connection herewith is invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any such provision which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision of any agreement. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this Note or any
other Transaction Document 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 law.

 9 

 

4.8               JURY TRIAL WAIVER. THE BORROWER AND THE HOLDER HEREBY WAIVE A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE
PARTIES HERETO AGAINST THE OTHER IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH THIS NOTE.

 

4.9               Certain Amounts. Whenever pursuant to this Note the Borrower
is required to pay an amount in excess of the outstanding Principal Amount (or
the portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest on such interest, the Borrower and the Holder
agree that the actual damages to the Holder from the receipt of cash payment on
this Note may be difficult to determine and the amount to be so paid by the
Borrower represents stipulated damages and not a penalty and is intended to
compensate the Holder in part for loss of the opportunity to convert this Note
and to earn a return from the sale of shares of Common Stock acquired upon
conversion of this Note at a price in excess of the price paid for such shares
pursuant to this Note. The Borrower and the Holder hereby agree that such amount
of stipulated damages is not plainly disproportionate to the possible loss to
the Holder from the receipt of a cash payment without the opportunity to convert
this Note into shares of Common Stock.

 

4.10           Remedies. The Borrower acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Borrower acknowledges that the remedy at law for a breach of its obligations
under this Note will be inadequate and agrees, in the event of a breach or
threatened breach by the Borrower of the provisions of this Note, that the
Holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Note and to
enforce specifically the terms and provisions thereof, without the necessity of
showing economic loss and without any bond or other security being required.

 

4.11           Section 3(a)(10) Transactions. If at any time while this Note is
outstanding, the Borrower enters into a transaction structured in accordance
with, based upon, or related or pursuant to, in whole or in part,
Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”), then a
liquidated damages charge of 100% of the outstanding principal balance of this
Note at that time, will be assessed and will become immediately due and payable
to the Holder, either in the form of cash payment, an addition to the balance of
this Note, or a combination of both forms of payment, as determined by the
Holder. The liquidated damages charge in this Section 4.11 shall be in addition
to, and not in substitution of, any of the other rights of the Holder under this
Note.

 

4.12           Restriction on Section 3(a)(9) Transactions. So long as this Note
is outstanding, the Borrower shall not enter into any 3(a)(9) Transaction with
any party other than the Holder, without prior written consent of the Holder. In
the event that the Borrower does enter into, or makes any issuance of Common
Stock related to a 3(a)(9) Transaction while this Note is outstanding, a
liquidated damages charge of 25% of the outstanding principal balance of this
Note, but not less than $15,000, will be assessed and will become immediately
due and payable to the Holder at its election in the form of cash payment or
addition to the balance of this Note. “3(a)(9) Transaction” means a transaction
structured in accordance with, based upon, or related or pursuant to, in whole
or in part, Section 3(a)(9) of the Securities Act. The liquidated damages charge
in this Section 4.12 shall be in addition to, and not in substitution of, any of
the other rights of the Holder under this Note.

 10 

 

4.13           Usury. 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 Borrower
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 Borrower from paying all or any portion of the principal
of or interest on this Note as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Note, and the Borrower (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.

 

4.14           Repayment. Notwithstanding anything to the contrary contained in
this Note, the Borrower may repay any amount outstanding under this Note, during
the 30 calendar day period after the Issue Date, by making a payment to the
Holder of an amount in cash equal to 105% multiplied by the amount that the
Borrower is repaying. Notwithstanding anything to the contrary contained in this
Note, the Borrower may repay any amount outstanding under this Note, during the
31st through 60th calendar day period after the Issue Date, by making a payment
to the Holder of an amount in cash equal to 110% multiplied by the amount that
the Borrower is repaying. Notwithstanding anything to the contrary contained in
this Note, the Borrower may repay any amount outstanding under this Note, during
the 61st through 90th calendar day period after the Issue Date, by making a
payment to the Holder of an amount in cash equal to 115% multiplied by the
amount that the Borrower is repaying. Notwithstanding anything to the contrary
contained in this Note, the Borrower may repay any amount outstanding under this
Note, during the 91st through 120th calendar day period after the Issue Date, by
making a payment to the Holder of an amount in cash equal to 120% multiplied by
the amount that the Borrower is repaying. Notwithstanding anything to the
contrary contained in this Note, the Borrower may repay any amount outstanding
under this Note, after the 120th calendar day after the Issue Date, including on
and after the Maturity Date, by making a payment to the Holder of an amount in
cash equal to 125% multiplied by the amount that the Borrower is repaying. In
order to repay this Note, the Borrower shall provide notice to the Holder ten
(10) business days prior to such respective repayment date, and the Holder must
receive such repayment within twelve (12) business days of the Holder’s receipt
of the respective repayment notice, but not sooner than ten (10) business days
from the date of notice (the “Repayment Period”). The Holder may convert the
Note in whole or in part at any time during the Repayment Period, subject to the
terms and conditions of this Note. Any repayment hereunder shall be applied to
the tranches funded under this Note in reverse chronological order (applied
first to the most recently funded tranches under this Note).

 

4.15           Terms of Future Financings. So long as this Note is outstanding,
upon any issuance by the Borrower or any of its Subsidiaries of any security
with any term more favorable to the holder of such security or with a term in
favor of the holder of such security that was not similarly provided to the
Holder in this Note, then the Borrower shall notify the Holder of such
additional or more favorable term and such term, at Holder’s option, shall
become a part of the transaction documents with the Holder. The types of terms
contained in another security that may be more favorable to the holder of such
security include, but are not limited to, terms addressing conversion discounts,
prepayment rate, conversion look back periods, interest rates, original issue
discounts, stock sale price, private placement price per share, and warrant
coverage.

 

 

 11 

 

** signature page to follow **

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 12 

 

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by
its duly authorized officer on the Issue Date.

 

 

PRECISION THERAPEUTICS INC.

 

 

By: /s/ Bob Myers   Name: Bob Myers   Title: Chief Financial Officer  

 

 

 13 

 

EXHIBIT A -- NOTICE OF CONVERSION

 

The undersigned hereby elects to convert $___________________ amount of this
Note (defined below) into that number of shares of Common Stock to be issued
pursuant to the conversion of this Note (“Common Stock”) as set forth below, of
Precision Therapeutics, Inc., a Delaware corporation (the “Borrower”), according
to the conditions of the senior secured promissory note of the Borrower dated as
of September 28, 2018, as amended and restated on February 7, 2019 (the “Note”),
as of the date written below. No fee will be charged to the Holder for any
conversion, except for transfer taxes, if any.

 

Box Checked as to applicable instructions:

 

 [ ] The Borrower shall electronically transmit the Common Stock issuable
pursuant to this Notice of Conversion to the account of the undersigned or its
nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC
Transfer”).         Name of DTC Prime    Broker: Account Number:

 

 [ ] The undersigned hereby requests that the Borrower issue a certificate or
certificates for the number of shares of Common Stock set forth below (which
numbers are based on the Holder’s calculation attached hereto) in the name(s)
specified immediately below or, if additional space is necessary, on an
attachment hereto:         PEAK ONE OPPORTUNITY FUND, LP    33 S. Hibiscus Dr.
   Miami Beach, Florida. 33139    Attn: Jason C. Goldstein    E-mail:
jgoldstein@peakoneinvestments.com

 

Date of Conversion:

  _____

Applicable Conversion Price:

$_____

Number of Shares of Common Stock to be Issued Pursuant to Conversion of this
Notes:

  _____

Amount of Principal Balance Due remaining Under this Note after this
conversion: 

  _____

 

PEAK ONE OPPORTUNITY FUND, LP       By:     Name:     Title:     Date:    

 

 

 

 

14

--------------------------------------------------------------------------------