Exhibit 10.2
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL
TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
CONVERTIBLE PROMISSORY NOTE
$250,000 Date of Issuance: June 4, 2002
For value received, Biophan Technologies, Inc. a Nevada corporation (the
"Company"), promises to pay to Biomed Solutions, LLC (the "Lender"), the
principal sum of $250,000, or such lesser amount as shall have been advanced
hereunder from time to time, together with interest from the date of this
Note on the unpaid principal balance as provided in Section 2 below. This
Note is the Note referred to in the Line of Credit Agreement between Company
and Lender dated June 4, 2002. This Note is subject to the following terms
and conditions.
1. Maturity
The principal and all accrued interest under this Note shall be due and
payable as provided in Section 3 on September 1, 2002 (the "Maturity
Date"). Notwithstanding the foregoing, the entire unpaid principal sum
of this Note, together with all accrued interest thereon, shall become
immediately due and payable as provided in Section 3 upon the occurrence
of an Event of Default (as hereinafter defined).
2. Interest
(a) Interest Rate
The outstanding principal hereunder will bear interest at the rate of 8%
per annum.
(b) Interest Payments
Interest on the outstanding principal shall be payable at the rate set
forth above and shall be payable at such time as the outstanding
principal amount hereof is otherwise due and payable. Interest shall be
computed on the basis of a three hundred sixty (360)-day year and actual
days elapsed.
(c) Reduction of Interest
If at any time, the rate of interest, together with all amounts which
constitute interest and which are reserved, charged or taken by the
Lender as compensation for fees, services or expenses incidental to the
making, negotiating or collection of any advance evidenced hereby, shall
be deemed by any competent court of law, governmental agency or tribunal
to exceed the maximum of rate of interest permitted to be charged by the
Lender to the Company, then, during such time as such rate of interest
would be deemed excessive, that portion of each sum paid attributable to
that portion of such interest rate that exceeds the maximum rate of
interest so permitted shall be deemed a voluntary prepayment of
principal.
3. Conversion
(a) Investment by the Lender
The entire principal amount of and accrued interest on this Note may, at
the Lender's option, be converted into shares of the Company's common
stock (the "Note Shares") at any time prior to payment in full. The
number of Note Shares to be issued upon such conversion shall be equal to
the quotient obtained by dividing (i) the entire principal amount of this
Note plus accrued interest by (ii) the Conversion Price (defined below),
rounded to the nearest whole share. The Note Shares shall bear
"piggyback" registration rights as set forth in the Warrant.
(b) Conversion Price
The Conversion Price shall be equal to the lesser of (a) 80% of the
volume weighted average price for the Company's Common Stock for the 5
(five) trading days prior to the Date of Issuance or (b) 80% of the
volume weighted average price for the Company's Common Stock for the 5
(five) trading days prior to the Maturity Date.
(c) Mechanics and Effect of Conversion
No fractional shares of the Company's capital stock will be issued upon
conversion of this Note. In lieu of any fractional share to which the
Lender would otherwise be entitled, the Company will pay to the Lender in
cash the amount of the unconverted principal and interest balance of this
Note that would otherwise be converted into such fractional share. Upon
conversion of this Note pursuant to this Section 3, the Lender shall
surrender this Note, duly endorsed, along with the form of Notice of
Conversion attached hereto as Exhibit A, at the principal offices of the
Company or any transfer agent of the Company. At its expense, the
Company will, as soon as practicable thereafter, issue and deliver to
such Lender, at such principal office, a certificate or certificates for
the number of shares to which such Lender is entitled upon such
conversion, together with other securities and property to which the
Lender is entitled upon such conversion under the terms of this Note,
including a check payable to the Lender for any cash amounts payable as
described herein. Upon conversion of this Note, the Company will be
forever released from all of its obligations and liabilities under this
Note with regard to that portion of the principal amount and accrued
interest being converted including without limitation the obligation to
pay such portion of the principal amount and accrued interest.
4. Payment
All payments shall be made in lawful money of the United States of
America at such place as the Lender hereof may from time to time
designate in writing to the Company. Payment shall be credited first to
the accrued interest then due and payable and the remainder applied to
principal. The Company shall have the right to prepay this Note, in
whole or in part, prior to the Maturity Date without penalty.
5. Events of Default
The occurrence of any of the following shall constitute an "Event of
Default" hereunder:
(a) Failure to Pay
The Company shall fail to pay (i) any principal payment within 30 days
after the Maturity Date or (ii) any interest or other payment required
pursuant to the terms hereof on the date due; or
(b) Breaches of Covenants
The Company shall fail to observe or perform any covenant, obligation,
condition or agreement contained herein (other than failure to pay as
specified in Section 5(a) of this Note) and (i) such failure shall
continue for more than 15 days, or (ii) if such failure is not curable
within such 15 day period, but is reasonably capable of cure within 30
days, the Company shall have commenced to cure the default within the
original 15 days and completed the cure within 30 days; or
(c) Voluntary Bankruptcy or Insolvency Proceedings
The Company shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a
substantial part of its property, (ii) be unable, or admit in writing its
inability, to pay its debts generally as they mature, (iii) make a
general assignment for the benefit of its or any of its creditors, (iv)
be dissolved or liquidated in full or in part, (v) become insolvent (as
such term may be defined or interpreted pursuant to any applicable
statute), (vi) commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts pursuant to any bankruptcy, insolvency or other similar law now or
hereafter in effect or consent to any such relief or to the appointment
of or taking possession of its property by any official in an involuntary
case or other proceeding commenced against it which is not dismissed
within 90 days, or
(d) Involuntary Bankruptcy or Insolvency Proceedings
Proceedings for the appointment of a receiver, trustee, liquidator or
custodian of the Company or of all or a substantial part of the property
thereof, or an involuntary case or other proceedings seeking liquidation,
reorganization or other relief with respect to the Company or the debts
thereof pursuant to any bankruptcy, insolvency or other similar law now
or hereafter in effect shall be commenced and an order for relief entered
or such proceeding shall not be dismissed or discharged within 120 days
of commencement.
6. Rights of Lender upon Default
Upon the occurrence or existence of any Event of Default and at any time
thereafter during the continuance of such Event of Default, Lender may,
by written notice to the Company, declare all outstanding obligations
payable as provided in Section 3 by the Company hereunder to be
immediately due and payable as provided in Section 3 without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived. Upon the occurrence or existence of any Event of
Default, Xxxxxx's rights, powers or remedies shall be limited to those
granted to it hereunder or pursuant to the Pledge and Security Agreement.
7. Transfer, Successors and Assigns
The terms and conditions of this Note shall inure to the benefit of and
be binding upon the respective successors and assigns of the parties.
Notwithstanding the foregoing, the Lender may not assign, pledge, or
otherwise transfer this Note except in compliance with Section 12(d)
hereof. Subject to the preceding sentence, this Note may be transferred
only upon surrender of the original Note for registration of transfer,
duly endorsed, or accompanied by a duly executed written instrument of
transfer in form satisfactory to the Lender. Thereupon, a new note for
the same principal amount and interest will be issued to, and registered
in the name of, the transferee. Interest and principal are payable only
to the registered Lender of this Note. Neither this Note nor any of the
rights, interests or obligations hereunder may be assigned, by operation
of law or otherwise, in whole or in part, by the Company without the
prior written consent of Lender except in connection with an assignment
in whole to a successor corporation to the Company, provided that such
successor corporation acquires all or substantially all of the Company's
property and assets and PROVIDED FURTHER THAT none of the Lender's
rights hereunder are impaired.
8. Governing Law
This Note and all acts and transactions pursuant hereto and the rights
and obligations of the parties hereto shall be governed, construed and
interpreted in accordance with the laws of the State of New York, without
giving effect to principles of conflicts of law.
9. Notices
Any notice required or permitted by this Note shall be in writing and
shall be deemed sufficient upon delivery, when delivered personally or by
a nationally-recognized delivery service (such as Federal Express or
UPS), or one day after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, addressed to the party to be
notified at such party's address as set forth below or as subsequently
modified by written notice.
10. Amendments and Waivers
Any term of this Note may be amended or waived only with the written
consent of the Company and Lender. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon the Company, the
Lender and each transferee of the Note.
11. Shareholders, Officers and Directors Not Liable
Except as expressly provided in the Pledge and Security Agreement, in no
event shall any shareholder, officer or director of the Company be liable
for any amounts due or payable pursuant to this Note.
12. Representations and Warranties of Lender and Transfer Restrictions
Lender hereby represents and warrants to the Company with respect to the
purchase of this Note and any equity security of the Company issued upon
conversion of (or with respect to) this Note (the "Note Shares"):
(a) Binding Obligation
The Lender has full legal capacity, power and authority to execute and
deliver this Note and to perform its obligations hereunder. This Note
is a valid and binding obligation of the Lender, enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency
or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and general principles of
equity.
(b) Investment and Accredited Investor
The Lender understands that the investment in the Note and the Note
Shares is a speculative investment, and represents that it is aware of
the business affairs and financial condition of the Company, and has
acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Note, and that it is
purchasing the Note for investment for its own account only and not with
a view to, or for resale in connection with, any "distribution" within
the meaning of the Securities Act of 1933, as amended (the "Securities
Act") or applicable state securities laws. Lender further represents
that it understands that the Note and the Note Shares have not been
registered under the Securities Act or applicable state securities laws
by reason of specific exemptions therefrom, which exemptions depend upon,
among other things, the bona fide nature of the Lender's investment
intent as expressed herein. The Lender acknowledges and understands that
the Note and the Note Shares must be held indefinitely unless
subsequently registered under the Securities Act and qualified under
applicable state securities laws or unless exemptions from such
registration and qualification requirements are available, and that the
Company is under no obligation to register or qualify the Note or the
Note Shares. The Lender is an accredited investor as such term is
defined in Rule 501 of Regulation D promulgated pursuant to the
Securities Act.
(c) Access to Data
The Lender acknowledges that it has had an opportunity to discuss the
Company's business, management and financial affairs with its officers
and directors. The Lender understands that such discussions as well as
any written information issued by the Company were intended to describe
the aspects of the Company's business and prospects which it believes to
be material but were not necessarily a thorough or exhaustive
description.
(d) Restrictions on Transferability
The Note and the Note Shares shall not be sold, assigned, transferred or
pledged except upon the conditions specified in this Section 12(d), which
conditions are intended to ensure compliance with the provisions of the
Securities Act. The Lender will cause any proposed purchaser, assignee,
transferee, or pledge of the Note and the Note Shares held by the Lender
to agree to take and hold such securities subject to the provisions and
upon the conditions specified in this Section 13(d). Prior to any
proposed sale, assignment, transfer or pledge of this Note or the Note
Shares (collectively the "Restricted Securities"), unless there is in
effect a registration statement under the Securities Act covering the
proposed transfer, the Lender shall give written notice to the Company of
the Lender's intention to effect such transfer, sale, assignment or
pledge. Each such notice shall describe the manner and circumstances of
the proposed transfer, sale, assignment or pledge in sufficient detail,
and shall be accomplished at the Lender's expense by either (i) an
unqualified written opinion of legal counsel who shall be, and whose
legal opinion shall be, reasonably satisfactory to the Company, addressed
to the Company, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Securities and
Exchange Commission (the "Commission") to the effect that the transfer of
such securities without registration will not result in a recommendation
by the staff of the Commission that action be taken with respect
thereto, whereupon the Lender of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the
terms of the notice delivered by the Lender to the Company. Each
certificate evidencing the Restricted Securities transferred as above
provided shall bear, except if such transfer is made pursuant to the
Commission's Rule 144, an appropriate restrictive legend, except that
such certificate shall not bear such restrictive legend if, in the
opinion of counsel for the Lender and the Company, such legend is not
required in order to establish compliance with any provisions of the
Securities Act.
13. Treatment of Note
To the extent permitted by generally accepted accounting principles, the
Company will treat, account and report the Note as debt and not equity
for accounting purposes and with respect to any returns filed with
federal, state or local tax authorities.
IN WITNESS WHEREOF, the Company has caused this Note to be issued as of the
date first written above.
BIOPHAN TECHNOLOGIES, INC.:
By: /s/Xxxxxxx Xxxxxxx
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Name: Xxxxxxx Xxxxxxx
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Title: Chairman
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AGREED TO AND ACCEPTED:
LENDER:
By: /s/Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
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Title: Manager
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EXHBIT A
NOTICE OF CONVERSION
The undersigned hereby elects to convert principal and interest under
the Convertible Promissory Note of Biophan Technologies, Inc., (the
"Company") issued on June 4, 2002, into shares of common stock, $0.005
par value per share (the "Common Stock"), of the Company according to
the conditions hereof, as of the date written below. If shares are to
be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto
and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be
charged to the Lender for any conversion, except for such transfer
taxes, if any.
By the delivery of this Notice of Conversion the undersigned represents
and warrants to the Company that its ownership of the Company's Common
Stock does not exceed the amounts determined in accordance with Section
13(d) of the Exchange Act.
Conversion calculations:
Date to Effect Conversion:
Principal Amount of Debentures to be Converted
Payment of Interest in Kind
Number of shares of Common Stock to be Issued:
Applicable Conversion Price:
Signature:
Name:
Address:
