EXHIBIT 10.1

 
                  
$1,053,000.00                                                                                                                                                                                                                                                              
March 31, 2010
QUICK-MED TECHNOLOGIES, INC.

SENIOR CONVERTIBLE PROMISSORY NOTE
 

FOR VALUE RECEIVED, the undersigned, QUICK-MED TECHNOLOGIES, INC. (the
“Borrower”), promises unconditionally to pay to the order of PHRONESIS PARTNERS,
L.P., its successors or assigns (the “Lender”), at the Lender’s office at 130 E.
Chestnut Street, Suite 403, Columbus, Ohio 43215, or at such other place as the
Lender may from time to time designate, the principal amount of ONE MILLION
FIFTY-THREE THOUSAND DOLLARS ($1,053,000.00) (the “Principal Amount”), 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 Senior Convertible
Promissory Note (the “Note”).  This Note evidences (i) the Borrower’s
obligations under the Prior Note (defined below) in the principal amount of
Three Hundred Seventy-Five Thousand Dollars ($375,000.00), together with unpaid
accrued interest thereon of Seventy-Seven Thousand Eight Hundred Thirty Six
Dollars ($77,836.00), and (ii) an additional loan made by the Lender to the
Borrower on the date hereof in the principal amount of Six Hundred Thousand One
Hundred Sixty-Four Dollars ($600,164.00).  The following terms shall apply to
this Note:

1. Amendment of Prior Note.  This Note amends, restates and replaces the
promissory note previously issued by the Borrower to the Lender on June 27,
2007, in the principal amount of Three Hundred Seventy-Five Thousand Dollars
($375,000.00) (the "Prior Note").  Accordingly, the terms of the Prior Note are
superseded in their entirety by the terms of this Note.
 
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 December 31, 2013 (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.
 
 
 
 

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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(c), 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 6(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  $0.60  per share of Common Stock.
 
(c) Mechanics of Conversion.
 
(i) 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., Eastern
Time, on such date, a copy of an executed notice of conversion in the form
attached hereto as Exhibit B (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 6(c)(ii) 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.
 
(ii) 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.
 
(iii) 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 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.
 
 
 
 

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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, including, without limitation, any
equity security, convertible note, secured note or promissory note and (v) 
amend or repeal any provision of, or add any provision to, the Borrower's
certificate of incorporation or by-laws other than for subject matters not
involving the items subject to Lender’s prior written consent listed above;
provided however, Lender shall not be obligated to provide affirmative written
consent, if in Lender’s reasonable opinion, consent to any of the foregoing
actions would: (a) impair Lender’s ability to be repaid under this Note or (b)
impair Borrower’s ability to perform its obligations under the Share Exchange
Agreement.  Without the prior written consent of the Lender, the Borrower shall
not amend any of the Other Senior Notes (defined below), and the Borrower shall
treat the indebtedness evidenced thereby as if it were Senior Indebtedness (as
defined in the Intercreditor Agreement) under the Intercreditor Agreement.
 
9. Repayment Extension.  If any payment of principal or interest shall be due on
a Saturday, Sunday or any other day on which banking institutions in the State
of Florida are required or permitted to be closed, such payment shall be made on
the next succeeding business day and such extension of time shall be included in
computing interest under this Note.
 
10. Manner and Application of Payments.  All payments due hereunder shall be
paid in lawful money of the United States of America which shall be legal tender
in payment of all debts and dues, public and private, in immediately available
funds, without offset, deduction or recoupment. Any payment by check or draft
shall be subject to the condition that any receipt issued therefore shall be
ineffective unless the amount due is actually received by the Lender.
 
11. Collateral; Security Interest.  The Borrower hereby grants to the Lender as
collateral security for its obligations hereunder a security interest in and to
all right, title and interest of the Borrower in and to all of the Borrower’s
personal property assets of each and every type more specifically identified in
Article 9 of the Uniform Commercial Code as in effect in the State of Florida,
whether now owned or hereafter acquired, wherever located.  The Lender is hereby
authorized to file a financing statement naming the Borrower, as debtor, and the
Lender, as secured party, in respect of all such collateral.  Lender’s interest
in the collateral security shall be limited to the outstanding principal and
interest under this Note.  Notwithstanding the foregoing, the Lender shall not
unreasonably withhold the Borrower’s request to restructure the security
interest in case of a future debt or equity financing.
 
12. No Other Outstanding Notes. The Borrower represents to the Lender that it
has no outstanding obligations for borrowed monies except as previously
disclosed to the Lender and that this Note shall rank senior to all outstanding
obligations of the Borrower; provided, however, that (i) this Note shall rank
pari passu with certain debt obligations owed to Michael Granito in accordance
with the provisions of the Intercreditor Agreement dated as of September 27,
2007 among Michael Granito, the Lender and the Borrower, as amended (the
“Intercreditor Agreement”), and (ii) this Note shall rank pari passu in right of
payment with the $150,000 senior convertible note issued to 2849232 CANADA INC
and the $100,000 senior convertible note issued to Peter L. Berry Holdings, Inc.
(collectively, the “Other Senior Notes”) to the same extent as if the debt
evidenced by such Other Senior Notes was included in the Senior Indebtedness (as
defined in the Intercreditor Agreement) under the Intercreditor Agreement..
 
13. Events of Default.  The occurrence of any one or more of the following
events shall constitute an “Event of Default” under this Note:
 
(a) the failure of the Borrower to pay any sum due under this Note within three
(3) days after such payment was first due, whether by demand or otherwise;
 
(b) the occurrence or commencement of a liquidation or bankruptcy or similar
proceeding in respect of the Borrower or any of its assets; and
 
(c) the breach by Lender of any of the Negative Covenants set forth in Section 8
of this Note.
 
 
 
 

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14. Rights and Remedies Upon Default.  Upon the occurrence of an Event of
Default hereunder, the Lender, in the Lender’s sole discretion and without
notice to the Borrower, may: (a) declare the entire outstanding Principal
Amount, together with all accrued interest and all other sums due under this
Note to be immediately due and payable, and the same shall thereupon become
immediately due and payable without presentment, demand or notice which are
hereby expressly waived; (b) exercise its right of setoff against any money,
funds, credits or other property of any nature whatsoever of the Borrower now or
at any time hereafter in the possession of, in transit to or from, under the
control or custody of, or on deposit with, the Lender in any capacity
whatsoever, including without limitation, any balance of any deposit account and
any credits with the Lender; (c) terminate any outstanding commitments of the
Lender to the Borrower; (d) exercise all rights and remedies of a secured party
in respect of the collateral referred to above as provided under Article 9 of
the Uniform Commercial Code as in effect on the date hereof in the State of
Florida; and (e) exercise any or all rights, powers, and remedies now or
hereafter existing at law, in equity, by statute or otherwise.
 
15. Remedies Cumulative.  Each right, power and remedy of the Lender hereunder,
or now or hereafter existing at law, in equity, by statute or otherwise shall be
cumulative and concurrent, and the exercise or beginning of the exercise of any
one or more of them shall not preclude the simultaneous or later exercise by the
Lender of any or all such other rights, powers or remedies. No failure or delay
by the Lender to insist upon the strict performance of any one or more
provisions of this Note or to exercise any right, power or remedy consequent
upon a breach thereof or default hereunder shall constitute a waiver thereof or
preclude the Lender from exercising any such right, power or remedy. By
accepting full or partial payment after the due date of any amount of principal
of or interest on this Note, or other amounts payable on demand, the Lender
shall not be deemed to have waived the right either to require prompt payment
when due and payable of all other amounts of principal of or interest on this
Note or other amounts payable on demand, or to exercise any rights and remedies
available to it in order to collect all such other amounts due and payable under
this Note.
 
16. Maximum Rate of Interest.  Notwithstanding any provision of this Note to the
contrary, the Borrower shall not be obligated to pay interest pursuant to this
Note in excess of the maximum rate of interest permitted by the laws of any
state determined to govern this Note or the laws of the United States applicable
to loans in such state. If any provisions of this Note shall ever be construed
to require the payment of any amount of interest in excess of that permitted by
applicable law, then the interest to be paid pursuant to this Note shall be held
subject to reduction to the amount allowed under applicable law and any sums
paid in excess of the interest rate allowed by law shall be applied in reduction
of the principal balance outstanding pursuant to this Note.  The Borrower
acknowledges that it has been contemplated at all times by the Borrower that the
laws of the State of Florida will govern the maximum rate of interest that it is
permissible for the Lender to charge the Borrower pursuant to this Note.
 
17. Waiver of Presentment.  The Borrower waives demand, presentment, protest,
and notice of demand, of non-payment, of dishonor, protest and all other demands
in connection with the delivery, acceptance, performance or enforcement of this
Note.
 
18. Choice of Law; Forum Selection; Consent to Jurisdiction.  This Note shall be
governed by, construed and interpreted in accordance with the laws of the State
of Florida. The Borrower hereby (a) agrees that all disputes and matters
whatsoever arising under, in connection with, or incident to this Note shall be
litigated, if at all, in and before a court located in the State of Florida to
the exclusion of the courts of any other state or country and (b) irrevocably
submits to the non-exclusive jurisdiction of any Florida court or federal court
sitting in the State of Florida in any action or proceeding arising out of or
relating to this Note, and hereby irrevocably waives any objection to the laying
of venue of any such action or proceeding in any such court and any claim that
any such action or proceeding has been brought in an inconvenient forum. A final
judgment in any such action or proceeding shall be conclusive and may be
enforced in any other jurisdiction by suit on the judgment or in any other
manner provided by law.
 
 
 
 

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19. Service of Process.  The Borrower hereby consents to process being served in
any suit, action or proceeding instituted in connection with this Note by the
mailing of a copy thereof to the Borrower by certified mail, postage prepaid,
return receipt requested. The Borrower hereby irrevocably agrees that such
service shall be deemed to be service of process upon the Borrower in any such
suit, action or proceeding. Nothing in this Note shall affect the right of the
Lender to serve process in any other manner otherwise permitted by law, and
nothing in this Note will limit the right of the Lender otherwise to bring
proceedings against the Borrower in the courts of any other jurisdiction or
jurisdictions.
 
20. Notice.  Any notice, demand, request or other communication which the Lender
or the Borrower may be required to give hereunder shall be in writing and shall
be effective when delivered and at the address provided below:
 
 
(a)
if to the Lender, to Phronesis Partners, L.P. at 130 E. Chestnut Street, Suite
403, Columbus, Ohio 43215; and

 
 
(b)
if to the Borrower, to it at Quick-Med Technologies, Inc., 902 N.W. 4th Street,
Gainesville, Florida 32601, Attention: Chief Financial Officer.

 
Notwithstanding anything to the contrary, all notices and demands for payment
from the Lender actually received in writing by the Borrower shall be considered
to be effective upon the receipt thereof by the Borrower regardless of the
procedure or method utilized to accomplish delivery thereof to the Borrower.
 
21. Miscellaneous.  Time is of the essence under this Note. The paragraph
headings of this Note are for convenience only, and shall not limit or otherwise
affect any of the terms hereof.  This Note and the Exhibits hereto, if any,
constitute the entire agreement between the parties with respect to their
subject matter and supersede all prior letters, representations, or agreements,
oral or written, with respect thereto.  The Lender may, without notice to or
consent of the Borrower, sell, assign, pledge or transfer this Note or sell,
assign, transfer or grant participations in all or any part of the obligations
evidenced by this Note to others at any time and from time to time, and the
Lender may divulge to any potential assignee, transferee or participant all
information, reports, financial statements and documents obtained in connection
with this Note or otherwise.  No modification, release, or waiver of this Note
shall be deemed to be made by the Lender unless in writing signed by the Lender,
and each such waiver, if any, shall apply only with respect to the specific
instance involved. No course of dealing or conduct shall be effective to modify,
release or waive any provisions of this Note.  This Note shall inure to the
benefit of and be enforceable by the Lender and the Lender’s successors and
assigns and any other person to whom the Lender may grant an interest in the
obligations evidenced by this Note and shall be binding upon and enforceable
against the Borrower and the Borrower’s successors and assigns. Whenever used
herein, the singular number shall include the plural, the plural the singular,
and the use of the masculine, feminine, or neuter gender shall include all
genders. This Note may be executed in any number of counterparts, all of which,
when taken together shall constitute one Note.
 
[signature page follows]
 

 
 
 

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IN WITNESS WHEREOF, the Borrower has duly executed this Note in Concord,
Massachusetts as of the day and year first hereinabove set forth.
 
 
 
BORROWER:

 
 
 
QUICK-MED TECHNOLOGIES, INC.

 
 
By:__J Ladd Greeno___________________

 
Name: J Ladd Greeno

 
Title: CEO

 
LENDER:

 
PHRONESIS PARTNERS, L.P.

 
By:___James Wiggins___________________

 
Name:  James Wiggins

 
Title: General Partner

 
 
 

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EXHIBIT A

QUICK-MED TECHNOLOGIES, INC.
CONVERSION NOTICE
 
Reference is made to the Senior Convertible Note (the “Note”) issued to the
undersigned by Quick-Med Technologies, Inc. (the “Company”).  In accordance with
and pursuant to the Note, the undersigned hereby elects to convert the
Conversion Amount (as defined in the Note) of the Note indicated below into
shares of Common Stock (as defined in the Note), as of the date specified below.
 
Date of Conversion:
 
Aggregate Conversion Amount to be converted:
 
Please confirm the following information:
Conversion Price:
 
Number of shares of Common Stock to be issued:
 
Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:
Issue to:
         
Facsimile Number:
 
Authorization:
 
By:
 
Title:
 
Dated:
 
Account Number:
 
  (if electronic book entry transfer)
 
Transaction Code Number:
 
  (if electronic book entry transfer)
     

 
 
 
 
 

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ACKNOWLEDGMENT
 
The Company hereby acknowledges this Conversion Notice and hereby directs
[Insert Name of Transfer Agent] to issue the above indicated number of shares of
Common Stock from the Company and acknowledged and agreed to by [Insert Name of
Transfer Agent].
 

QUICK-MED TECHNOLOGIES, INC.
By:                                                                
Name:
Title:

 
 
 

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