Document:

Exhibit 10.3

 

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT
(this “Agreement”), dated as of February 5, 2020, is by and between PREDICTIVE ONCOLOGY INC., a Delaware corporation
(the “Grantor”), and OASIS CAPITAL, LLC, a Puerto Rico limited liability company (the “Secured Party”).

 

WHEREAS, on the date
hereof, the Grantor has issued its Senior Secured Convertible Promissory Note (the “Note”) to the Secured Party
pursuant to that certain Securities Purchase Agreement of even date herewith (as amended, supplemented or otherwise modified from
time to time, the “Purchase Agreement”) between the Grantor and the Secured Party; Capitalized terms used but
not otherwise defined herein shall have the meanings assigned to such terms in the Purchase Agreement;

 

WHEREAS, this Agreement
is given by the Grantor in favor of the Secured Party to secure the payment and performance of all of the Secured Obligations (as
defined below); and

 

WHEREAS, one of the
conditions of the Purchase Agreement is that the obligations of the Grantor thereunder shall be secured by a security interest
in the Collateral owned by the Grantor in favor of the Secured Party;

 

NOW, THEREFORE, in
consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.                  
Definitions.

 

(a)               
Unless otherwise specified herein, all references to Sections and Schedules herein are to Sections and Schedules of this
Agreement.

 

(b)               
Unless otherwise defined herein, terms used herein that are defined in the UCC shall have the meanings assigned to them
in the UCC. However, if a term is defined in Article 9 of the UCC differently than in another Article of the UCC, the term has
the meaning specified in Article 9.

 

(c)               
For purposes of this Agreement, the following terms shall have the following meanings:

 

“Collateral”
has the meaning set forth in Section 2.

 

“Event
of Default” has the meaning set forth in the Note.

 

“First
Priority” means, with respect to any lien and security interest purported to be created in any Collateral pursuant to
this Agreement, such lien and security interest is the most senior lien to which such Collateral is subject (subject only to liens
permitted under the Purchase Agreement).

 

“Proceeds”
means “proceeds” as such term is defined in section 9-102 of the UCC and, in any event, shall include, without
limitation, all dividends or other income from the Collateral, collections thereon or distributions with respect thereto.

 

“Secured
Obligations” has the meaning set forth in Section 3.

 

     

    
 

    

 

“UCC”
means the Uniform Commercial Code as in effect from time to time in the State of New York or, when the laws of any other state
govern the method or manner of the perfection or enforcement of any security interest in any of the Collateral, the Uniform Commercial
Code as in effect from time to time in such state.

 

2.                  
Grant of Security Interest. The Grantor hereby pledges and grants to
the Secured Party, and hereby creates a continuing First Priority lien and security interest in favor of the Secured Party in and
to all of its right, title and interest in and to the following, wherever located, whether now existing or hereafter from time
to time arising or acquired (collectively, the “Collateral”):

 

(a)               
all fixtures and personal property of every kind and nature including all accounts (including health-care-insurance receivables),
goods (including inventory and equipment), documents (including, if applicable, electronic documents), instruments, promissory
notes, chattel paper (whether tangible or electronic), letters of credit, letter-of-credit rights (whether or not the letter of
credit is evidenced by a writing), securities and all other investment property, stock and all securities of the Grantor’s
subsidiaries, commercial tort claims, copyrights, patents, trademarks, all intellectual property, general intangibles (including
all payment intangibles), money, deposit accounts, and any other contract rights or rights to the payment of money; and

 

(b)               
all Proceeds and products of each of the foregoing, all books and records relating to the foregoing, all supporting obligations
related thereto, and all accessions to, substitutions and replacements for, and rents, profits and products of, each of the foregoing,
and any and all Proceeds of any insurance, indemnity, warranty or guaranty payable to the Grantor from time to time with respect
to any of the foregoing.

 

3.                  
Secured Obligations. The Collateral secures the due and prompt payment
and performance of:

 

(a)               
the obligations of the Grantor from time to time arising under the Note, the Purchase Agreement, this Agreement, the other
Transaction Documents or otherwise with respect to the due and prompt payment of (i) the principal of and premium, if any, and
interest on the Note (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise and (ii) all other monetary obligations, including fees, commissions, costs,
attorneys’ fees and disbursements, reimbursement obligations, contract causes of action, expenses and indemnities, whether
primary, secondary, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, fixed
or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other
similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Grantor under or in respect of the Note,
the Purchase Agreement and this Agreement; and

 

(b)               
all other covenants, duties, debts, obligations and liabilities of any kind of the Grantor under or in respect of the Note,
the Purchase Agreement, this Agreement, the other Transaction Documents or any other document made, delivered or given in connection
with any of the foregoing, in each case whether evidenced by a note or other writing, whether allowed in any bankruptcy, insolvency,
receivership or other similar proceeding, whether arising from an extension of credit, issuance of a letter of credit, acceptance,
loan, guaranty, indemnification or otherwise, and whether primary, secondary, direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising, fixed or otherwise (all such obligations, covenants, duties, debts, liabilities,
sums and expenses set forth in this Section 3 being herein collectively called the “Secured Obligations”).

 

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4.                  
Perfection of Security Interest and Further Assurances.

 

(a)               
The Grantor shall take all actions required to perfect the security interest of the Secured Party in the Collateral, including,
without limitation, with respect to all Collateral over which control may be obtained within the meaning of sections 8-106, 9-104,
9-105, 9-106 and 9-107 of the UCC. The Grantor shall promptly take all actions as may be requested from time to time by the Secured
Party so that control of such Collateral is obtained and at all times held by the Secured Party. All of the foregoing shall be
at the sole cost and expense of the Grantor.

 

(b)               
The Grantor hereby irrevocably authorizes the Secured Party at any time and from time to time to file in any relevant jurisdiction
any financing statements and amendments thereto that contain the information required by Article 9 of the UCC of each applicable
jurisdiction for the filing of any financing statement or amendment relating to the Collateral, including any financing or continuation
statements or other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest
granted by the Grantor hereunder, without the signature of the Grantor where permitted by law, including the filing of a financing
statement describing the Collateral as all assets now owned or hereafter acquired by the Grantor, or words of similar effect. The
Grantor agrees to provide all information required by the Secured Party pursuant to this Section promptly to the Secured Party
upon request.

 

(c)               
The Grantor hereby further authorizes the Secured Party to file with the United States Patent and Trademark Office and the
United States Copyright Office (and any successor office and any similar office in any state of the United States or in any other
country) this Agreement and other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the
security interest granted by the Grantor hereunder, without the signature of the Grantor where permitted by law.

 

(d)               
If the Grantor shall at any time hold or acquire any certificated securities, promissory notes, tangible chattel paper,
negotiable documents or warehouse receipts relating to the Collateral, the Grantor shall promptly endorse, assign and deliver the
same to the Secured Party, accompanied by such instruments of transfer or assignment duly executed in blank as the Secured Party
may from time to time specify.

 

(e)               
If the Grantor shall at any time hold or acquire a commercial tort claim, the Grantor shall promptly notify the Secured
Party in a writing signed by the Grantor of the particulars thereof and grant to the Secured Party in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance satisfactory
to the Secured Party.

 

(f)                
If any Collateral is at any time in the possession of a bailee, the Grantor shall promptly notify the Secured Party thereof
and, at the Secured Party’s request and option, shall promptly obtain an acknowledgment from the bailee, in form and substance
satisfactory to the Secured Party, that the bailee holds such Collateral for the benefit of the Secured Party and the bailee agrees
to comply, without further consent of the Grantor, at any time with instructions of the Secured Party as to such Collateral.

 

(g)               
The Grantor agrees that at any time and from time to time, at the expense of the Grantor, the Grantor will promptly execute
and deliver all further instruments and documents, obtain such agreements from third parties, and take all further action, that
may be necessary or desirable, or that the Secured Party may reasonably request, in order to create and/or maintain the validity,
perfection or priority of and protect any security interest granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder or under any other agreement with respect to any Collateral.

 

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5.                  
Representations and Warranties. The Grantor represents and warrants
as follows:

 

(a)               
That: (i) the Grantor’s exact legal name is that indicated on the signature page hereof, (ii) the Grantor is a corporation
and is duly organized in the State of Delaware, and (iii) the Grantor’s place of business (or, if more than one, its chief
executive office), and its mailing address are identified in Section 9(h) the Purchase Agreement.

 

(b)               
Other than investment securities and capital stock in its subsidiaries, the Grantor holds no capital stock. All Collateral
consisting of securities have been duly authorized and validly issued, and are fully paid and non-assessable and subject to no
options to purchase or similar rights.

 

(c)               
As of the date hereof, the Grantor holds no commercial tort claims.

 

(d)               
All intellectual property owned by the Grantor is valid, subsisting and enforceable and all filings necessary to maintain
the effectiveness of such registrations have been made. The Grantor is the sole and exclusive owner of the entire and unencumbered
right, title and interest in and to all intellectual property purported to be owned by the Grantor, free and clear of any liens
(including without limitation licenses and covenants by such Grantor not to sue third persons). The Grantor has no notice of any
suits or actions commenced or threatened in writing with reference to any intellectual property. The operation of the Grantor’s
business as currently conducted and the use of its intellectual property in connection therewith do not infringe, misappropriate
or otherwise violate the intellectual property rights of any third party. The execution, delivery and performance of this Agreement
or any notice of grant of security interest in copyrights, trademarks or patents and the filing of such notice by the Grantor will
not violate or cause a default under any intellectual property of the Grantor or any agreement in connection therewith.

 

(e)               
None of the Collateral constitutes, or is the proceeds of, (i) farm products, (ii) as-extracted collateral, (iii) manufactured
homes, (iv) timber to be cut, or (v) aircraft, aircraft engines, satellites, ships or railroad rolling stock. None of the account
debtors or other persons obligated on any of the Collateral is a governmental authority covered by the Federal Assignment of Claims
Act or like federal, state or local statutes or rules in respect of such Collateral.

 

(f)                
The Grantor has at all times operated its business in compliance with all applicable provisions of the federal Fair Labor
Standards Act, as amended, and with all applicable provisions of federal, state and local statutes and ordinances dealing with
the control, shipment, storage or disposal of hazardous materials or substances.

 

(g)               
At the time the Collateral becomes subject to the lien and security interest created by this Agreement, the Grantor will
be the sole, direct, legal and beneficial owner thereof, free and clear of any lien, security interest, encumbrance, claim, option
or right of others.

 

(h)               
The pledge of the Collateral pursuant to this Agreement creates a valid and perfected First Priority security interest in
the Collateral, securing the payment and performance when due of the Secured Obligations, subject to the security interest of L2
Capital, LLC related to the L2 Note (as defined in the Note).

 

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(i)                
It has full power, authority and legal right to deliver the Note and pledge the Collateral pursuant to this Agreement.

 

(j)                
This Agreement has been duly authorized, executed and delivered by the Grantor and constitutes a legal, valid and binding
obligation of the Grantor enforceable against the Grantor in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors’ rights generally and subject to equitable principles
(regardless of whether enforcement is sought in equity or at law).

 

(k)               
No authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory
body is required for the pledge by the Grantor of the Collateral pursuant to this Agreement or for the execution and delivery of
this Agreement by the Grantor or the performance by the Grantor of its obligations hereunder other than (a) filings required to
perfect liens under the Transaction Documents and (b) approvals, consents, exemptions, authorizations, actions, notices and filings
which have been duly obtained, taken, given or made and are in full force and effect.

 

(l)                
The execution and delivery of this Agreement by the Grantor and the performance by the Grantor of its obligations hereunder,
will not violate any provision of any applicable law or regulation or any order, judgment, writ, award or decree of any court,
arbitrator or governmental authority, domestic or foreign, applicable to the Grantor or any of its property, or the organizational
or governing documents of the Grantor or any agreement or instrument to which the Grantor is party or by which it or its property
is bound.

 

(m)             
The Grantor has taken all action required on its part for control (as defined in sections 8-106, 9-104, 9-105, 9-106 and
9-107 of the UCC, as applicable) over all Collateral with respect to which such control may be obtained pursuant to the UCC.

 

6.                  
Voting, Distributions and Receivables.

 

(a)               
The Secured Party agrees that unless an Event of Default shall have occurred and be continuing, the Grantor may, to the
extent the Grantor has such right as a holder of the Collateral consisting of securities, other capital stock or indebtedness owed
by any obligor, vote and give consents, ratifications and waivers with respect thereto, except to the extent that, in the Secured
Party’s reasonable judgment, any such vote, consent, ratification or waiver could detract from the value thereof as Collateral
or which could be inconsistent with or result in any violation of any provision of the Purchase Agreement or this Agreement, and
from time to time, upon request from the Grantor, the Secured Party shall deliver to the Grantor suitable proxies so that the Grantor
may cast such votes, consents, ratifications and waivers.

 

(b)               
The Secured Party agrees that the Grantor may, unless an Event of Default shall have occurred and be continuing, receive
and retain all cash dividends and other distributions with respect to the Collateral consisting of securities, other capital stock
or indebtedness owed by any obligor.

 

(c)               
If any Event of Default shall have occurred and be continuing, the Secured Party may, or at the request and option of the
Secured Party the Grantor shall, notify account debtors and other persons obligated on any of the Collateral of the security interest
of the Secured Party in any account, chattel paper, general intangible, instrument or other Collateral and that payment thereof
is to be made directly to the Secured Party.

 

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7.                  
Covenants. The Grantor covenants as follows:

 

(a)               
The Grantor will not, without providing at least 30 days’ prior written notice to the Secured Party, change its legal
name, identity, type of organization, jurisdiction of organization, corporate structure, or the location of its chief executive
office or its principal place of business. The Grantor will, prior to any change described in the preceding sentence, take all
actions reasonably requested by the Secured Party to maintain the perfection and priority of the Secured Party’s security
interest in the Collateral.

 

(b)               
The Collateral will be kept at the principal places of business of the Grantor and/or its subsidiaries, and the Grantor
will not remove the Collateral from such locations without providing at least 30 days’ prior written notice to the Secured
Party. The Grantor will, prior to any change described in the preceding sentence, take all actions reasonably required by the Secured
Party to maintain the perfection and priority of the Secured Party’s security interest in the Collateral.

 

(c)               
The Grantor shall, at its own cost and expense, defend title to the Collateral and the First Priority lien and security
interest of the Secured Party therein against the claim of any person claiming against or through the Grantor and shall maintain
and preserve such perfected First Priority security interest for so long as this Agreement shall remain in effect. The Grantor
hereby agrees that it shall promptly notify the Secured Party upon obtaining information which would require any action in order
to perfect or maintain the perfection of the Secured Party’s security interest in the Collateral.

 

(d)               
The Grantor will not sell, offer to sell, dispose of, convey, assign or otherwise transfer, grant any option with respect
to, restrict, or grant, create, permit or suffer to exist any mortgage, pledge, lien, security interest, option, right of first
offer, encumbrance or other restriction or limitation of any nature whatsoever on, any of the Collateral or any interest therein
except with the prior written consent of the Secured Party or as otherwise permitted by the Purchase Agreement.

 

(e)               
The Grantor will keep the Collateral in good order and repair and will not use the same in violation of law or any policy
of insurance thereon. The Grantor will permit the Secured Party, or its designee, to inspect the Collateral at any reasonable time,
wherever located.

 

(f)                
The Grantor will pay promptly when due all taxes, assessments, governmental charges, and levies upon the Collateral or incurred
in connection with the use or operation of the Collateral or incurred in connection with this Agreement except as provided in the
Purchase Agreement.

 

(g)               
The Grantor will continue to operate its business in compliance with all applicable provisions of the federal Fair Labor
Standards Act, as amended, and with all applicable provisions of federal, state and local statutes and ordinances dealing with
the control, shipment, storage or disposal of hazardous materials or substances.

 

(h)               
The Grantor shall carry and maintain in full force and effect, at its own expense and with financially sound and reputable
insurance companies, insurance with respect to the Collateral in such amounts, with such deductibles and covering such risks as
is customarily carried by companies engaged in the same or similar businesses and owning similar properties in the localities where
the Grantor operates. All such insurance shall (i) name the Secured Party as loss payee (to the extent covering risk of loss or
damage to tangible property) and as an additional named insured as its interests may appear (to the extent covering any other risk),
(ii) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until
at least thirty (30) days after receipt by the Secured Party of written notice thereof and (iii) be reasonably satisfactory in
all other respects to Secured Party.

 

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8.                  
Secured Party Appointed Attorney-in-Fact. The Grantor hereby appoints
the Secured Party the Grantor’s attorney-in-fact, with full authority in the place and stead of the Grantor and in the name
of the Grantor or otherwise, from time to time during the continuance of an Event of Default in the Secured Party’s discretion
to take any action and to execute any instrument which the Secured Party reasonably may deem necessary or advisable to accomplish
the purposes of this Agreement (but the Secured Party shall not be obligated to and shall have no liability to the Grantor or any
third party for failure to do so or take action). This appointment, being coupled with an interest, shall be irrevocable. The Grantor
hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.

 

9.                  
Secured Party May Perform. If the Grantor fails to perform any obligation
contained in this Agreement, the Secured Party may itself perform, or cause performance of, such obligation, and the expenses of
the Secured Party incurred in connection therewith shall be payable by the Grantor; provided that the Secured Party shall not be
required to perform or discharge any obligation of the Grantor.

 

10.              
Reasonable Care. The Secured Party shall have no duty with respect to
the care and preservation of the Collateral beyond the exercise of reasonable care. The Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially
equal to that which the Secured Party accords its own property, it being understood that the Secured Party shall not have any responsibility
for (a) ascertaining or taking action with respect to any claims, the nature or sufficiency of any payment or performance by any
party under or pursuant to any agreement relating to the Collateral or other matters relative to any Collateral, whether or not
the Secured Party has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against
any parties with respect to any Collateral. Nothing set forth in this Agreement, nor the exercise by the Secured Party of any of
the rights and remedies hereunder, shall relieve the Grantor from the performance of any obligation on the Grantor’s part
to be performed or observed in respect of any of the Collateral.

 

11.              
Remedies Upon Default.

 

(a)               
If any Event of Default shall have occurred and be continuing, the Secured Party, without any other notice to or demand
upon the Grantor, may assert all rights and remedies of a secured party under the UCC or other applicable law, including, without
limitation, the right to take possession of, hold, collect, sell, lease, deliver, grant options to purchase or otherwise retain,
liquidate or dispose of all or any portion of the Collateral. If notice prior to disposition of the Collateral or any portion thereof
is necessary under applicable law, written notice mailed to the Grantor at its notice address as provided in Section 15 hereof
ten days prior to the date of such disposition shall constitute reasonable notice, but notice given in any other reasonable manner
shall be sufficient. So long as the sale of the Collateral is made in a commercially reasonable manner, the Secured Party may sell
such Collateral on such terms and to such purchaser(s) as the Secured Party in its absolute discretion may choose, without assuming
any credit risk and without any obligation to advertise or give notice of any kind other than that necessary under applicable law.
Without precluding any other methods of sale, the sale of the Collateral or any portion thereof shall have been made in a commercially
reasonable manner if conducted in conformity with reasonable commercial practices of creditors disposing of similar property. At
any sale of the Collateral, if permitted by applicable law, the Secured Party may be the purchaser, licensee, assignee or recipient
of the Collateral or any part thereof and shall be entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold, assigned or licensed at such sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price of the Collateral or any part thereof payable at such sale. To the extent
permitted by applicable law, the Grantor waives all claims, damages and demands it may acquire against the Secured Party arising
out of the exercise by it of any rights hereunder. The Grantor hereby waives and releases to the fullest extent permitted by law
any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any,
of marshalling the Collateral and any other security for the Secured Obligations or otherwise. At any such sale, unless prohibited
by applicable law, the Secured Party or any custodian may bid for and purchase all or any part of the Collateral so sold free from
any such right or equity of redemption. Neither the Secured Party nor any custodian shall be liable for failure to collect or realize
upon any or all of the Collateral or for any delay in so doing, nor shall it be under any obligation to take any action whatsoever
with regard thereto. The Grantor agrees that it would not be commercially unreasonable for the Secured Party to dispose of the
Collateral or any portion thereof by utilizing internet sites that provide for the auction of assets of the type included in the
Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets. The Secured Party shall
not be obligated to clean-up or otherwise prepare the Collateral for sale.

 

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(b)               
If any Event of Default shall have occurred and be continuing, all rights of the Grantor to (i) exercise the voting and
other consensual rights it would otherwise be entitled to exercise pursuant to Section 6(a) and (ii) receive the dividends and
other distributions which it would otherwise be entitled to receive and retain pursuant to Section 6(b), shall immediately cease,
and all such rights shall thereupon become vested in the Secured Party, which shall have the sole right to exercise such voting
and other consensual rights and receive and hold such dividends and other distributions as Collateral.

 

(c)               
If any Event of Default shall have occurred and be continuing, any cash held by the Secured Party as Collateral and all
cash Proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon all or any part
of the Collateral shall be applied in whole or in part by the Secured Party to the payment of expenses incurred by the Secured
Party in connection with the foregoing or incidental to the care or safekeeping of any of the Collateral or in any way relating
to the Collateral or the rights of the Secured Party hereunder, including reasonable attorneys’ fees, and the balance of
such proceeds shall be applied or set off against the Secured Obligations.

 

(d)               
Any surplus of such cash or cash Proceeds held by the Secured Party and remaining after payment in full of all the Secured
Obligations shall be paid over to the Grantor or to whomsoever may be lawfully entitled to receive such surplus. The Grantor shall
remain liable for any deficiency if such cash and the cash Proceeds of any sale or other realization of the Collateral are insufficient
to pay the Secured Obligations and the reasonable fees and other charges of any attorneys employed by the Secured Party to collect
such deficiency.

 

(e)               
If the Secured Party shall determine to exercise its rights to sell all or any of the Collateral pursuant to this Section,
the Grantor agrees that, upon request of the Secured Party, the Grantor will, at its own expense, do or cause to be done all such
acts and things as may be necessary to make such sale of the Collateral or any part thereof valid and binding and in compliance
with applicable law.

 

12.              
No Waiver and Cumulative Remedies. The Secured Party shall not by any
act (except by a written instrument pursuant to Section 14), delay, indulgence, omission or otherwise be deemed to have waived
any right or remedy hereunder or to have acquiesced in any default or Event of Default. All rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies provided by law.

 

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13.              
SECURITY INTEREST ABSOLUTE.
The Grantor hereby waives, to the extent permitted by law, demand, notice, protest, notice of acceptance of this Agreement, notice
of loans made, credit extended, Collateral received or delivered or other action taken in reliance hereon and all other demands
and notices of any description. All rights of the Secured Party and liens and security interests hereunder, and all Secured Obligations
of the Grantor hereunder, shall be absolute and unconditional irrespective of:

 

(a)               
any change in the time, place or manner of payment of, or in any other term of, the Secured Obligations, or any rescission,
waiver, amendment or other modification of the Purchase Agreement, this Agreement or any other agreement, including any increase
in the Secured Obligations resulting from any extension of additional credit or otherwise;

 

(b)               
any taking, exchange, substitution, release, impairment or non-perfection of any Collateral or any other collateral, or
any taking, release, impairment, amendment, waiver or other modification of any guaranty, for all or any of the Secured Obligations;

 

(c)               
any manner of sale, disposition or application of proceeds of any Collateral or any other collateral or other assets to
all or part of the Secured Obligations;

 

(d)               
any default, failure or delay, willful or otherwise, in the performance of the Secured Obligations; or

 

(e)               
any defense, set-off or counterclaim (other than a defense of payment or performance) that may at any time be available
to, or be asserted by, the Grantor against the Secured Party.

 

14.              
Amendments. None of the terms or provisions of this Agreement may be
amended, modified, supplemented, terminated or waived, and no consent to any departure by the Grantor therefrom shall be effective
unless the same shall be in writing and signed by the Secured Party and the Grantor, and then such amendment, modification, supplement,
waiver or consent shall be effective only in the specific instance and for the specific purpose for which made or given.

 

15.              
Addresses For Notices. All notices and other communications provided
for in this Agreement shall be in writing and shall be given in the manner and become effective as set forth in the Purchase Agreement,
and addressed to the respective parties at their addresses as specified in Section 9(h) of the Purchase Agreement or as to either
party at such other address as shall be designated by such party in a written notice to each other party.

 

16.              
Continuing Security Interest; Further Actions. This Agreement shall
create a continuing First Priority lien and security interest in the Collateral and shall (a) subject to Section 17, remain in
full force and effect until payment and performance in full of the Secured Obligations, (b) be binding upon the Grantor, its successors
and assigns, and (c) inure to the benefit of the Secured Party and its successors, transferees and assigns; provided that the Grantor
may not assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of
the Secured Party.

 

17.              
Termination; Release. On the date on which all Secured Obligations have
been paid and performed in full, the Secured Party will, at the request and sole expense of the Grantor, (a) duly assign, transfer
and deliver to or at the direction of the Grantor (without recourse and without any representation or warranty) such of the Collateral
as may then remain in the possession of the Secured Party, together with any monies at the time held by the Secured Party hereunder,
and (b) execute and deliver to the Grantor a proper instrument or instruments acknowledging the satisfaction and termination of
this Agreement.

 

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18.              
GOVERNING LAW.
This Agreement and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising
out of or relating to this Agreement and the transactions contemplated hereby and thereby shall be governed by, and construed in
accordance with, the laws of the State of New York.

 

19.              
Arbitration; Waiver of Jury Trial.  Any disputes, claims, or controversies arising out of or relating to this
Agreement or the transactions contemplated thereby, or the breach, termination, enforcement, interpretation or validity thereof,
including the determination of the scope or applicability of this Agreement to arbitrate, shall be referred to and resolved solely
and exclusively by binding arbitration to be conducted before the Judicial Arbitration and Mediation Service (“JAMS”
), or its successor pursuant the expedited procedures set forth in the JAMS Comprehensive Arbitration Rules and Procedures (the
“Rules” ), including Rules 16.1 and 16.2 of those Rules. The arbitration shall be held in New York, New York,
before a tribunal consisting of three (3) arbitrators each of whom will be selected in accordance with the “strike and rank”
methodology set forth in Rule 15. Either party to this Agreement may, without waiving any remedy under this Agreement, seek from
any federal or state court sitting in the State of New York any interim or provisional relief that is necessary to protect the
rights or property of that party, pending the establishment of the arbitral tribunal. The costs and expenses of such arbitration
shall be paid by and be the sole responsibility of the Grantor, including but not limited to the Secured Party’s attorneys’
fees and each arbitrator’s fees. The arbitrators’ decision must set forth a reasoned basis for any award of damages
or finding of liability. The arbitrators’ decision and award will be made and delivered as soon as reasonably possibly and
in any case within sixty (60) days’ following the conclusion of the arbitration hearing and shall be final and binding on
the parties and may be entered by any court having jurisdiction thereof. THE GRANTOR AND THE SECURED PARTY 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 AGREEMENT.

 

20.              
Counterparts. This Agreement and any amendments, waivers, consents or
supplements hereto may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall
constitute an original, but all taken together shall constitute a single contract. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as
delivery of a manually executed counterpart of this Agreement. This Agreement and the other Transaction Documents constitute the
entire contract among the parties with respect to the subject matter hereof and supersede all previous agreements and understandings,
oral or written, with respect thereto.

 

[signature page
follows]

 

 

    	 	10	 

    
 

    

 

IN WITNESS WHEREOF,
the parties hereto have executed this Security Agreement as of the date first above written.

 

	 	PREDICTIVE ONCOLOGY INC.,
	 	 
	 	as Grantor	 
	 	 	 	 
	 	 	 	 
	 	By: 	/s/ Bob Myers	 
	 	Name: Bob Myers	 
	 	Title: CFO	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	OASIS CAPITAL, LLC,
	 	 
	 	as Secured Party	 
	 	 	 	 
	 	 	 	 
	 	By: 	/s/ Adam Long	 
	 	Name: Adam Long	 
	 	Title: Managing Partner 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

** Signature Page to Security Agreement
**EXHIBIT 10.1

 

SEPARATION AND RELEASE AGREEMENT

 

This Separation and Release Agreement (the “Release
Agreement”) is entered into by James McGorry (the “Executive”) and Biostage, Inc. (the
 “Company”) as of the date that the last party executing this Release Agreement executes the same as noted
on the signature page hereto. Reference is made to the Employment Agreement between the Executive and the Company made as of June
23, 2015 (as amended or modified from time to time, the “Employment Agreement”).

 

The parties agree as follows:

 

1.            
Separation and Consideration. Executive agrees that effective as of the Effective Date (as defined below), his employment
with the Company shall terminate and he shall be deemed to have resigned from his role as Chief Executive Officer and director
of the Company, and any other role Executive holds with the Company or any of its subsidiaries. For purposes of clarity, Executive
will continue to receive his full compensation and benefits until both he and the Company have executed this Release Agreement.
In consideration for the Executive’s agreement to this Release Agreement, and, in light of the fact that the original schedule
for paying termination benefits set forth in the Employment Agreement shall jeopardize the ability of the Company to continue as
a going concern, the Company is providing certain termination benefits as set forth in the Employment Agreement, in accordance
with a termination of the Executive’s employment without Cause as described in Paragraph 7(d) of the Employment Agreement
(as revised hereby), and the terms of this Release Agreement which in part revise such benefits in conformity with the terms and
conditions of Treasury Regulation Section 1. 409A-1(b)(4)(ii); except that, notwithstanding anything to the contrary contained
in the Employment Agreement and in consideration of signing this Release Agreement: 

 

(a)
        The Severance Amount, as defined in the Employment Agreement, shall be $187,500.00 (being
equal to six months of the Executive’s current Base Salary), and will be paid in equal bi-weekly installments over the course
of twelve (12) months from the Effective Date, in accordance with the regular payroll schedule of the Company, commencing in the
first regularly scheduled payroll date following the Effective Date;

 

(b)
        The Company will grant the Executive, on the Effective Date, a fully vested non-qualified
stock option to purchase a total of 80,000 shares of common stock of the Company, with a strike price at $3.00, and a term of eighteen
(18) months from the date of grant, which such grant shall be subject to the Company’s 2013 Equity Incentive Plan; 

 

(c)        In
addition, promptly following the Effective Date, the Company shall reimburse Executive for all reasonable expenses incurred by
Executive on behalf of the Company through the Effective Date, in accordance with the policies and procedures then in effect immediately
prior to the Effective Date;

 

(d)       The Parties waive all provisions concerning advance notice periods regarding Executive’s employment termination set forth
in the Employment Agreement;

 

    	 	 	 

     

    

 

(e)
       At or following the Effective Date, Executive will execute any formal documents reasonably
requested by the Company to evidence his resignation as an officer (and director of any subsidiaries of the Company); 

 

(f)        Nothing
in this Release Agreement limits the Executive’s equity rights and such rights will be governed by the terms of the applicable
equity documents, provided that notwithstanding anything to the contrary contained in the Employment Agreement or the grant agreements
evidencing the options and deferred stock awards of restricted stock units evidencing the Executive’s equity grants under
the Company’s 2013 Equity Incentive Plan, as of the Effective Date the following will occur:

 

(i)
The vesting of Executive’s unvested restricted stock units (representing 3,300 shares) will be accelerated and deemed fully
vested. 

 

(ii)
The options described in the table below shall be respectively deemed vested (and except for the option grant described in Section
1(b) above, to the extent not set forth in the table below shall be deemed expired and forfeited), and exercisable through and
including the earlier of (I) the expiration date of such option in accordance with its terms, and (II) the date that is the end
of eighteen (18) months from the Effective Date:

 

	Scheduled Expiration Date	 	Option Shares	 	Exercise Price
	 	 	 	 	 
	November 18, 2023	 	1,250	 	$85.80
	 	 	 	 	 
	May 29, 2025	 	1,250	 	$36.80
	 	 	 	 	 
	July 6, 2025	 	33,570	 	$27.60
	 	 	 	 	 
	March 22, 2026	 	7,500	 	$33.80
	 	 	 	 	 
	March 14, 2027	 	13,400	 	$7.68
	 	 	 	 	 
	May 29, 2028	 	180,000	 	$2.72

 

2.            
Release. Subject to Sections 1 and 3 hereof, the Executive voluntarily releases and forever discharges the Company
and each of its subsidiaries, affiliates, predecessors, successors, assigns, and current and former directors, officers, employees,
representatives, attorneys and agents (any and all of whom or which are hereinafter referred to as “Company
Parties”), from any and all charges, complaints, claims, liabilities, obligations,
promises, agreements, controversies, damages, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses
(including attorney’s fees and costs actually incurred), of any nature whatsoever, known or unknown (collectively, “Claims”)
that the Executive now has, owns or holds, or claims to have, own, or hold, or that he at any time had, owned, or held, or claimed
to have had, owned, or held against any Company Party or Parties. Subject to Sections 1 and 3 hereof, this general release of Claims
includes, without implication of limitation, the release of all Claims: 

 

    	 	2	 

     

    

 

•       relating to the Executive’s employment by and termination from employment with the Company;

 

•       of
wrongful discharge;

 

•       of
breach of contract;

 

•       of
retaliation or discrimination under federal, state or local law (including, without limitation, Claims of age discrimination or
retaliation under the Age Discrimination in Employment Act, Claims of disability discrimination or retaliation under the Americans
with Disabilities Act, Claims of discrimination or retaliation under Title VII of the Civil Rights Act of 1964 and Claims of discrimination
or retaliation under Mass. Gen. Laws ch. 151B);

 

•       under the Massachusetts Weekly Payment of Wages Act, the Massachusetts Fair Employment Practice Act, and the Fair Labor Standards
Act;

 

•       under any other federal or state statute, to the fullest extent that Claims may be released;

 

•       of defamation or other torts;

 

•       of violation of public policy;

 

•       for salary, bonuses, vacation pay or any other compensation or benefits; and

 

•       for damages or other remedies of any sort, including, without limitation, compensatory damages, punitive damages, injunctive relief
and attorney’s fees.

 

		3.	Limitations/Exclusions on Release.

 

a.                 
Employment Agreement. Nothing in this Release Agreement limits the Executive’s or the Company’s rights
under this Agreement, or the Employment Agreement, to the extent such rights continue to be applicable after termination of the
Executive’s employment without Cause.

 

b.                 
Benefit and Enforcement Rights. Nothing in this Release Agreement releases or waives the Executive’s right
to COBRA, or unemployment insurance benefits or any accrued and vested retirement benefits/equity, the right to seek enforcement
of this Release Agreement or any rights referenced in this Section of this Release Agreement.

 

c.                 
Indemnification. It is further understood and agreed that the Executive’s rights to indemnification as provided
in the Company’s certificate of incorporation, bylaws, each as amended, or any indemnification agreement between the Company
and the Executive (it being acknowledged and agreed by the Executive that, as of the date this Agreement was executed, there are
no amounts owing to the Executive pursuant to any such indemnification rights), remain fully binding and in full effect subsequent
to the execution of this Release Agreement.

 

    	 	3	 

     

    

 

d.                
Exceptions. In addition to the above, this Release Agreement does not prohibit or restrict the Executive from communicating,
providing relevant information to or otherwise cooperating with the EEOC or any other governmental authority with responsibility
for the administration of fair employment practices laws regarding a possible violation of such laws or responding to any inquiry
from such authority, including an inquiry about the existence of this Release Agreement or its underlying facts; provided that
such interaction with EEOC or any other governmental authority shall not result in the Executive’s receipt of any monetary
benefit or substantial equivalent thereof. This Release Agreement also does not preclude the Executive from benefiting from classwide
injunctive relief awarded in any fair employment practices case brought by any governmental agency; provided that such relief does
not result in the Executive’s receipt of any monetary benefit or substantial equivalent thereof.

 

4.            
No Assignment. The Executive represents that he or it has not assigned to any other person or entity any Claims against
any Company Party. 

 

5.            
No Disparagement. The Executive shall not make any disparaging statements about the Company, members of the Board
of Directors, any officer of the Company, any other employee of the Company or any registered shareholder of the Company as of
the Effective Date that is known to the Executive to be such a shareholder. Notwithstanding the foregoing, nothing in this paragraph
shall be construed to apply to any truthful statements made in the course of testimony in a legal proceeding or government investigation
or proceeding, or in any required written statements in any such investigation or proceeding. 

 

6.            
Litigation and Regulatory Cooperation. The Executive shall reasonably cooperate with the Company in the defense or
prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company
which relate to events or occurrences that transpired while Executive was employed by the Company; provided, however, that such
cooperation shall not materially and adversely affect Executive or expose Executive to an increased probability of civil or criminal
litigation. Executive’s cooperation in connection with such claims or actions shall include, but not be limited to, being
available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient
times. Executive also shall cooperate fully with the Company in connection with any investigation or review of any federal, state
or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while Executive
was employed by the Company. The Company shall also provide Executive with compensation on an hourly basis of $250.00 and reimburse
Executive for all costs and expenses incurred in connection with his performance under this Section 6, including, but not limited
to, reasonable attorneys’ fees and costs. This paragraph supersedes paragraph 17 of the Employment Agreement.

 

7.            
Reaffirmation of Post-Employment Restrictive Covenants. The Executive reaffirms the restrictive covenants under the
Employment Agreement which continue by their terms.

 

8.            
Right to Consider and Revoke Release Agreement. This Release Agreement shall be considered to have been offered to
the Executive on the date that it has been executed by the Company and delivered to the Executive for countersignature (the “Delivery
Date”). The Executive acknowledges that he has been given the opportunity to consider this
Release Agreement for a period ending twenty-one (21) days after the Delivery Date. In the event that the Executive has executed
this Release Agreement within less than twenty-one (21) days of the Delivery Date, the Executive acknowledges that such decision
was entirely voluntary and that he had the opportunity to consider this Release Agreement until the end of the twenty-one (21)
day period. To accept this Release Agreement, the Executive shall deliver a signed Release Agreement to the Company’s Board
of Directors within such twenty-one (21) day period. The Executive acknowledges that for a period of seven (7) days from the date
when the Executive executes this Release Agreement (the “Revocation Period”),
he shall retain the right to revoke this Release Agreement by written notice that is received by the Board of Directors of the
Company before the end of the Revocation Period. This Release Agreement shall take effect only if it is executed by the Executive
within the twenty-one (21) day period as set forth above and if it is not revoked pursuant to the preceding sentence. If those
conditions are satisfied, this Release Agreement shall become effective and enforceable on the date immediately following the last
day of the Revocation Period (the “Effective Date”). 

 

    	 	4	 

     

    

 

9.             Accrued
Wages. The Executive acknowledges that he will be paid in accordance herewith and that no other wages are due to the Executive.
The Executive acknowledges that Executive is unaware of any facts or circumstances indicating that Executive may have an outstanding
claim for unpaid wages, improper deductions from pay, or any violation of the Massachusetts Weekly Payment of Wages Act (M.G.L.
c. 149, s. 148) or the Fair Labor Standards Act or any other federal, state or local laws, rules, ordinances or regulations that
are related to payment of wages. 

 

10.          
Other Terms. 

 

a.                 
Legal Representation; Review of Release Agreement. The Executive acknowledges that he has been advised to discuss
all aspects of this Release Agreement with his own attorney. The Executive represents that he has carefully read and fully understands
all of the provisions of this Release Agreement and that he is voluntarily entering into this Release Agreement.

 

b.                 
Binding Nature of Release Agreement. This Release Agreement shall be binding upon the Executive and upon his heirs,
administrators, representatives, executors, successors and assigns, and the Company and its successors and assigns. This Release
Agreement shall inure to the benefit of the Executive and the Company and to their heirs, administrators, representatives, executors,
successors, and assigns.

 

c.                 
Modification of Release Agreement; Waiver. This Release Agreement may be amended, revoked, changed, or modified only
upon a written agreement executed by the Executive and the Company. No modification waiver of any provision of this Release Agreement
will be valid unless it is in writing and signed by the party against whom such waiver is charged. The failure of one party to
require the performance of any term or obligation of this Release Agreement, or the waiver by one party of any breach of this Release
Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

 

    	 	5	 

     

    

 

d.                 
Severability. In the event that at any future time it is determined by a court of competent jurisdiction that any
covenant, clause, provision or term of this Release Agreement is illegal, invalid or unenforceable, the remaining provisions and
terms of this Release Agreement shall not be affected thereby and the illegal, invalid or unenforceable term or provision shall
be severed from the remainder of this Release Agreement. In the event of such severance, the remaining covenants shall be binding
and enforceable.

 

e.                 
Enforcement. Sections 5, 6, and 7 of this Release Agreement shall be subject to enforcement pursuant to the same
procedures that apply to a breach of Paragraphs 4 or 5 of the Employment Agreement (as further detailed in Paragraph 15 of the
Employment Agreement). Any other disputes concerning this Release Agreement shall be subject to resolution pursuant to Paragraph
15 of the Employment Agreement.

 

f.                  
Governing Law and Interpretation. This Release Agreement shall be deemed to be made and entered into in the Commonwealth
of Massachusetts, and shall in all respects be interpreted, enforced and governed under the laws of Massachusetts, without giving
effect to the conflict of laws provisions of Massachusetts law. The language of all parts of this Release Agreement shall in all
cases be construed as a whole, according to its fair meaning, and not strictly for or against either the Executive or the Company.

 

g.                 
Entire Agreement; Absence of Reliance. This Release Agreement, together with the Employment Agreement as modified
herein, and all relevant equity agreements, constitutes the entire agreement of the Executive concerning any subject matter of
this Release Agreement and supersedes all prior agreements between the Executive and the Company with respect to any related subject
matter. The Executive acknowledges that he is not relying on any promises or representations by the Company or its agents, representatives
or attorneys regarding any subject matter addressed in this Release Agreement, other than the provisions of this Release Agreement
and the Employment Agreement pursuant to which Executive is to receive certain consideration in return for signing this Release
Agreement and allowing it to become effective.

 

[Signatures on following page]

 

    	 	6	 

     

    

 

 

So agreed by the Executive.

 

	/s/ James McGorry	 	1/31/2020
	James McGorry	 	Date

 

 

 

So agreed by the Company.

 

Biostage, Inc.

 

	/s/ Jason Chen	 	1/31/2020
	By: Jason Chen	 	Date
	Title: Chairman

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