LINE OF CREDIT AGREEMENT
Date: May ___, 2005
THIS AGREEMENT is entered into between BIOPHAN TECHNOLOGIES, INC., a
Nevada corporation having an office address at 150 Xxxxxx Xxxxxx Drive, Suite
215, Xxxx Xxxxxxxxx, New York 14586 (the "Borrower") and BIOMED SOLUTIONS, LLC,
a New York limited liability company having an office address at 150 Xxxxxx
Xxxxxx Drive, Suite 215, Xxxx Xxxxxxxxx, New York 14586 (the "Lender").
The Lender has agreed to lend Borrower an amount up to two million
dollars ($2,000,000.00) in accordance with the terms of this Agreement.
1. COMMITMENT. The Lender agrees to make loans to the Borrower at any
time during this Agreement and prior to the Termination Date, in an
aggregate principal amount up to but not exceeding the sum of
$2,000,000 at any one time outstanding (the "Commitment"). Advances
(the "Advances") shall be requested and made in accordance with the
terms of Section 10(a) hereof. During this period, the Borrower may
use the Commitment by borrowing, paying, renewing or prepaying the
outstanding balance as reflected by this Agreement, in whole or in
part, and reborrowing, all in accordance with the terms and
conditions hereof. The Commitment shall extend through November 30,
2005, which date shall be the Termination Date. During the term of
the Commitment, Borrower's obligations shall be represented by the
Lender's Convertible Promissory Note in the form attached hereto as
Exhibit A (the "Note").
2. NOTICE OF BORROWING. The Borrower shall give the Lender written
notice of the date and the amount of each proposed borrowing
pursuant to the Commitment, which notice shall comply with the
requirements of Section 10(a) hereof. Notwithstanding any provision
herein to the contrary, the Borrower must provide the Lender at
least ten (10) days' prior written notice before each Advance. On or
before the date specified in such notice, the Lender will make the
amount then to be loaned by it available to the Borrower.
3. INTEREST. The Borrower shall pay interest upon the amount at any
time outstanding upon the Note, at the rate of eight percent (8%)
per annum. Interest on the outstanding balance of principal advanced
shall accrue and be payable upon payment or prepayment in full of
the unpaid principal balance.
4. PAYMENT. Payment shall be made on the Termination Date in accordance
with the terms of the Note. All payments (including prepayments) by
the Borrower on account of principal and interest on either Note
shall be made to the Lender by corporate check at the address
specified in the Note or by wire transfer.
5. WARRANTS. In consideration of the Commitment, the Lender shall
receive warrants to purchase five hundred thousand (500,000) shares
of common stock of the Borrower, at an exercise price equal to one
hundred ten percent (110%) of the average of the closing prices for
the twenty (20) trading days prior to the execution of this
Agreement. The warrants shall have a life of one (1) year and shall
be subject to vesting at a rate of one warrant share vested for
every $4.00 lent in Advances by the Lender. Any unvested portion of
the warrant shall expire on the Termination Date. The form of
warrant is attached hereto as Exhibit B.
6. USE OF PROCEEDS. The proceeds of the loans made hereunder shall be
used for the corporate working capital purposes of the Borrower.
7. EVENTS OF DEFAULT. Upon the occurrence and continuance of any Event
of Default as defined in the Note, the Lender may, by notice to the
Borrower, declare the Commitment immediately terminated and/or any
amounts outstanding hereunder to be forthwith due and payable,
whereupon the Commitment shall be immediately terminated and/or the
outstanding principal amount of the Note, together with accrued
interest thereon, shall become immediately due and payable without
presentment, demand, protest, or other notice of any kind, all of
which are hereby expressly waived, notwithstanding anything
contained herein to the contrary.
8. REGISTRATION RIGHTS.
a. The Lender acknowledges that the certificates for the
securities comprising the shares that underlie the warrants
granted hereunder and by the conversion of the Note (as set
forth therein)(the "Shares" or "Securities") which the Lender
will receive will contain a legend substantially as follows:
THE SECURITIES WHICH ARE REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A
REGISTRATION STATEMENT WITH RESPECT THERETO IS
DECLARED EFFECTIVE UNDER SUCH ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH LAWS IS AVAILABLE.
The Lender further acknowledges that stop transfer orders will
be placed upon the certificates for the Securities comprising
the Shares in accordance with the 0000 Xxx.
b. The Lender acknowledges that the Borrower has agreed to use
its best efforts to include the Shares or Securities (also
referred to as the "Registrable Securities") in any
registration statement to be filed with the Securities and
Exchange Commission (the "Commission") for its own account or
the accounts of others under the Securities Act any of its
equity securities, other than on Form S-4 or Form S-8 or their
equivalents relating to shares of its common stock to be
issued solely in connection with any acquisition of any entity
or business or shares of common stock issuable in connection
with stock option or other employee benefit plans. The piggy
back registration rights shall be subject to underwriter's
approval and other such restrictions (the "Registration
Statement"). The Borrower shall use its good faith efforts to
keep such Registration Statement continuously effective as
long as the delivery of a prospectus thereunder is required
under the Act and its regulations (including but not limited
to Rule 144 thereunder or its successor regulations ("Rule
144")) in connection with the disposition of the Securities;
provided, that it is agreed and acknowledged that such
obligation of the Borrower to maintain the effectiveness of
the Registration Statement shall cease upon the ability of the
Lender to sell or otherwise dispose of all of the Registrable
Securities covered by the Registration Statement under Rule
144; provided further, that notwithstanding the Borrower's
obligation to maintain the effectiveness of the Registration
Statement pursuant to the immediately preceding proviso, and
notwithstanding the duration of any Blackout Period, such
obligation to maintain the effectiveness of the Registration
Statement shall cease under all circumstances no later than
the second anniversary of the date of the Termination Date.
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c. The Borrower agrees to pay all Registration Expenses in
connection with the Registration Statement. All Selling
Expenses relating to Registrable Securities registered on
behalf of the Lender pursuant to the Registration Statement
shall be borne by the Lender. For purposes of this Agreement,
"Registration Expenses" shall mean (1) all registration,
listing, qualification and filing fees (including NASD filing
fees), (ii) fees and disbursements of counsel for the
Borrower, (iii) accounting fees incident to any such
registration, (iv) blue sky fees and expenses (including
counsel fees in connection with the preparation of a Blue Sky
Memorandum and legal investment survey and NASD filings), and
(v) all expenses of any persons in preparing or assisting in
preparing, printing, distributing, mailing and delivering the
Registration Statement, any prospectus, any underwriting
agreements, transmittal letters, securities sales agreements,
securities certificates and other documents relating to the
performance of and compliance with this Agreement and (vi) all
internal expenses of the Borrower (including all salaries and
expenses of officers and employees performing legal or
accounting duties); provided, however, Registration Expenses
shall not include any Selling Expenses. For purposes of this
Agreement, "Selling Expenses" shall mean underwriting
discounts, selling commissions and stock transfer taxes
applicable to the Registrable Securities registered on behalf
of the Lender for Shares hereunder.
d. The Registration Statement will not be deemed to have become
effective (and the related registration will not be deemed to
have been effected) unless it has been declared effective by
the Commission prior to a request by the Lender that such
Registration Statement be withdrawn; provided, however, that
if, after it has been declared effective, the offering of any
Registrable Securities pursuant to such Registration Statement
is interfered with by any stop order, injunction or other
order or requirement of the Commission or any other
governmental agency or court then the Borrower will use its
reasonable best efforts to obtain withdrawal of such order.
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e. At any time or from time to time, the Lender may elect to have
its Registrable Securities sold in an underwritten offering
and may select the investment banker or investment bankers and
manager or managers that will serve as lead and co-managing
underwriters with respect to the offering of its Registrable
Securities, subject to the consent of the Borrower which shall
not be unreasonably withheld.
f. The Lender agrees, as a condition to the registration
obligations with respect to the Lender provided herein, to
furnish to the Borrower such information regarding the Lender
required to be included in the Registration Statement, the
ownership of Registrable Securities by the Lender and the
proposed distribution by the Lender of such Registrable
Securities as the Borrower may from time to time reasonably
request in writing.
g. The Lender agrees that, upon receipt of any notice from the
Borrower of the happening of any event of the kind which the
Borrower reasonably regards as requiring Lender to discontinue
sale of the Registrable Securities pursuant to the
Registration Statement, the Lender will forthwith discontinue
disposition of the Registrable Securities pursuant to the
affected Registration Statement until the Lender's receipt of
the copies of any supplemented or amended prospectus as shall
be required in the reasonable opinion of the Borrower, and, if
so directed by the Borrower, the Lender will deliver to the
Borrower (at the expense of the Borrower), all copies in its
possession, other than permanent file copies then in the
Lender's possession, of any prospectus covering such
Registrable Securities which was current at the time of
receipt of such notice.
9. INDEMNIFICATION; CONTRIBUTION.
a. Indemnification by the Borrower. The Borrower agrees to
indemnify and hold harmless each person who participates as an
underwriter of the Securities pursuant to the Registration
Statement, the Lender and their respective partners,
directors, officers and employees and each person, if any, who
controls any Lender or underwriter within the meaning of
Section 15 of the Act or Section 20 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") as follows:
i. against any and all losses, liabilities, claims,
damages, judgments and reasonable expenses whatsoever,
as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in
the Registration Statement pursuant to which Securities
were registered under the Act, including all documents
incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact
contained in any prospectus, including all documents
incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact necessary
in order to make the statements therein, in light of the
circumstances under which they were made, not
misleading;
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ii. against any and all losses, liabilities, claims,
damages, judgments and reasonable expenses whatsoever,
as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, investigation or
proceeding by any governmental agency or body, commenced
or threatened, or of any other claim whatsoever based
upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement
is effected with the written consent of the Borrower;
and
iii. against any and all reasonable expense whatsoever, as
incurred (including fees and disbursements of counsel),
incurred in investigating, preparing or defending
against any litigation, investigation or proceeding by
any governmental agency or body, commenced or
threatened, in each case whether or not such person is a
party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue
statement or omission; provided, however, that this
indemnity agreement does not apply to the Lender or
underwriter with respect to any loss, liability, claim,
damage, judgment or expense to the extent arising out of
any untrue statement or alleged untrue statement of a
material fact contained in any prospectus, or the
omission or alleged omission therefrom of a material
fact necessary to make the statements therein, in the
light of the circumstances under which they were made,
not misleading, in any such case made in reliance upon
and in conformity with written information furnished to
the Borrower by the Lender or underwriter expressly for
use in a Registration Statement (or any amendment
thereto) or any prospectus (or any amendment or
supplement thereto); and provided further, in the case
of an offering that is not an underwritten offering, the
Borrower will not be liable to the Lender under the
indemnity agreement in this Section 9(a) for any such
loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense that arises out of the
Lender's failure to send or give a copy of the final
prospectus (as its may then be amended or supplemented)
to the person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of the
Securities to such person if such statement or omission
was corrected in such final prospectus (as it may then
be amended or supplemented) and the Borrower has
previously furnished copies thereof in accordance with
this Agreement.
b. Indemnification by the Lender. The Lender agrees to indemnify
and hold harmless the Borrower, and each underwriter and each
of their respective partners, directors, officers and
employees (including each officer of the Borrower who signed
the Registration Statement), and each person, if any, who
controls the Borrower or any underwriter within the meaning of
Section 15 of the Act, against any and all losses,
liabilities, claims, damages, judgments and expenses described
in the indemnity contained in paragraph (a) of this Section
(provided that any settlement of the type described therein is
effected with the written consent of the Lender), as incurred,
but only with respect to untrue statements or alleged untrue
statements of a material fact contained in any prospectus or
the omissions or alleged omissions therefrom of a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, in
any such case made in reliance upon and in conformity with
written information furnished to the Borrower by the Lender
expressly for use in such Registration Statement (or any
amendment thereto) or such prospectus (or any amendment or
supplement thereto).
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c. Conduct of Indemnification Proceedings. Each indemnified party
or parties shall give reasonably prompt notice to each
indemnifying party or parties of any action or proceeding
commenced against it in respect of which indemnity may be
sought hereunder, but which it or they may have under this
indemnity agreement, except to the extent that the
indemnifying party is materially prejudiced by such failure to
give notice. If the indemnifying party or parties so elects
within a reasonable time after receipt of such notice, the
indemnifying party or parties may assume the defense of such
action or proceeding at such indemnifying party's or parties'
expense with counsel chosen by the indemnifying party or
parties and approved by the indemnified party defendant in
such action or proceeding, which approval shall not be
unreasonably withheld; provided, however, that, if such
indemnified party or parties determines in good faith that a
conflict of interest exists and that therefore it is advisable
for such indemnified party or parties to be represented by
separate counsel or that, upon advice of counsel, there may be
legal defenses available to it or them which are different
from or in addition to those available to the indemnifying
party, then the indemnifying party or parties shall not be
entitled to assume such defense and the indemnified party or
parties shall be entitled to separate counsel (limited in each
jurisdiction to one counsel for all underwriters and another
counsel for all other indemnified parties under this
Agreement) at the indemnifying party's or parties' expense. If
an indemnifying party or parties is not entitled to assume the
defense of such action or does not assume such defense, after
having received the notice referred to in the first sentence
of this paragraph, the indemnifying party or parties will pay
the reasonable fees and expenses of counsel for the
indemnified party or parties (limited in each jurisdiction to
one counsel for all underwriters and another counsel for all
other indemnified parties under this Agreement). No
indemnifying party or parties will be liable for any
settlement effected without the written consent of such
indemnifying party or parties, which consent shall not be
unreasonably withheld. If an indemnifying party is entitled to
assume, and assumes, the defense of such action or proceeding
in accordance with this paragraph, such indemnifying party or
parties shall not, except as otherwise provided in this
subsection (c), be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection
with such action or proceeding.
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d. Contribution.
i. In order to provide for just and equitable contribution
in circumstances in which the indemnity agreement
provided for in this Section is for any reason held to
be unenforceable by the indemnified parties although
applicable in accordance with its terms in respect of
any losses, liabilities, claims, damages, judgments and
expenses suffered by an indemnified party referred to
therein, each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as
a result of such losses, liabilities, claims, damages,
judgments and expenses in such proportion as is
appropriate to reflect the relative fault of the
Borrower on the one hand and of the Lender (including,
in each case, that of their respective officers,
directors, employees and agents) on the other, in
connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages,
judgments or expenses, as well as any other relevant
equitable considerations. The relative fault of the
Borrower on the one hand and of the Lender (including,
in each case, that of their respective officers,
directors, employees and agents) on the other, shall be
determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a
material fact relates to information supplied by the
Borrower, on the one hand, or by or on behalf of the
Lender, on the other, and the parties' relative intent,
knowledge, access to information and opportunity to
correct or prevent such statement or omission. The
amount paid or payable by a party as a result of the
losses, liabilities, claims, damages, judgments and
expenses referred to above shall be deemed to include,
subject to the limitations set forth in paragraph (c) of
this Section, any legal or other fees or expenses
reasonably incurred by such party in connection with
investigating or defending any action or claim.
ii. The Borrower and the Lender agree that it would not be
just and equitable if contribution pursuant to this
paragraph (d) were determined by pro rata allocation or
by any other method of allocation which does not take
account of the equitable considerations referred to in
sub-paragraph (i) above. Notwithstanding the provisions
of this paragraph (d), in the case of distributions to
the public, the Lender shall not be required to
contribute any amount in excess of the amount by which
(A) the total price at which the Securities sold by the
Lender and distributed to the public were offered to the
public exceeds (B) the amount of any damages which the
Lender has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission. No
person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) with respect to
the Securities shall be entitled to contribution from
any person who was not guilty of such fraudulent
misrepresentation.
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iii. For purposes of this Section, each person, if any, who
controls the Lender or an underwriter within the meaning
of Section 15 of the Act (and their respective partners,
directors, officers and employees) shall have the same
rights to contribution as the Lender or underwriter; and
each director of the Borrower, each officer of the
Borrower who signed the Registration Statement and each
person, if any, who controls the Borrower within the
meaning of Section 15 of the Act, shall have the same
rights to contribution as the Borrower.
10. MISCELLANEOUS.
a. Notices. All notices, requests, and demands to or upon the
respective parties hereto shall be deemed to have been given
or made when deposited in the mail, postage prepaid, addressed
as set forth above or to such other address as may be
hereafter designated in writing by the respective parties
hereto.
b. No Waiver, Cumulative Remedies, Amendment. No failure to
exercise and no delay in exercising on the part of the Lender,
any right, power, or privilege hereunder or under either Note
shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise
of any other right, power, or privilege. The rights and
remedies herein provided are cumulative and not exclusive of
any rights or remedies provided by law. No modification or
waiver of any provision of this Agreement nor consent to any
departure by the Borrower from the provisions hereof shall be
effective unless the same shall be in writing from the Lender,
and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which it is given.
No notice to the Borrower shall entitle the Borrower to any
other or further notice in other similar circumstances unless
expressly provided for herein. No course of dealing between
the Borrower and the Lender shall operate as a waiver of any
of the rights of the Lender under this Agreement.
c. Payment of Fees. The Borrower agrees to pay all reasonable
costs and expenses of the Lender in connection with the
enforcement of, or the preservation of rights arising under,
the Note, including reasonable legal fees and disbursements
arising in connection therewith.
d. Entire Agreement. This Agreement and Exhibit A constitute the
entire agreement between Borrower and Lender with respect to
the subject matter hereof and supersede all prior
understandings and agreements, written or oral, regarding the
subject matter. Unless otherwise provided herein, this
Agreement may be modified or amended only by a written consent
executed by both parties.
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e. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Lender and
their respective successors and assigns, except that the
Borrower may not transfer or assign any of its rights or
interests hereunder without the prior written consent of the
Lender.
f. Construction. This Agreement and the rights and obligations of
the parties hereunder and thereunder shall be governed by, and
construed in accordance with, the laws of the State of New
York. Both parties consent to the jurisdiction of the state
and federal courts located in Rochester, New York with respect
to any disputes arising between the parties.
(Signature page to follow)
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date set forth above.
BORROWER:
BIOPHAN TECHNOLOGIES, INC.
By:
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Printed Name: Xxxxxxx Xxxxxxx
Title: Chairman
LENDER:
BIOMED SOLUTIONS, LLC
By:
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Printed Name:
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Title:
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