Exhibit 4.1
LINE OF CREDIT AGREEMENT
Date: January 24, 2006
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 Borrower 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 five million
dollars ($5,000,000.00) in accordance with the terms of this Agreement.
1. COMMITMENT. The Lender agrees to make advances 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 $5,000,000 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. Notwithstanding any provision herein to
the contrary, the Borrower may not request an aggregate advances of
greater than $1,500,000 in any thirty (30) day period. The Commitment
shall extend through June 30, 2007, which date shall be the Termination
Date. During the term of the Commitment, Borrower's obligations shall be
represented by the Borrower's Convertible Promissory Note payable to the
order of the Lender, in substantially the form attached hereto as Exhibit
A (the "Note").
2. NOTICE OF BORROWING. The Borrower shall give the Lender at least fifteen
(15) days' prior written notice of the date and the amount of each
borrowing pursuant to the Commitment, which notice shall comply with the
requirements of Section 10(a) hereof. 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. The Borrower shall be obligated to borrow the
entire amount of the Commitment prior to the Termination Date.
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 Borrower shall issue to
the Lender warrants for the purchase of one million one hundred ninety
eight thousand six hundred thirty (1,198,630) shares of common stock of
the Borrower, at an exercise price of $1.89 (the "Warrants"). The Warrants
shall have a life of five (5) years. 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) Restrictions on Sale of Shares. The Lender acknowledges that the
Shares issuable upon conversion of the Note or exercise of the
Warrants (collectively, the "Shares") will be issued pursuant to an
exemption from registration under the Securities Act, have not been
registered under the Securities Act and, therefore, cannot be resold
unless they are registered under the Securities Act and any
applicable securities laws or unless an exemption from such
registration is available. Each certificate representing the Shares
shall be stamped or otherwise imprinted with a legend substantially
in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT")
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH LAWS.
The Borrower may refuse to register (or to permit its transfer agent
to register) any transfer of any Shares not made in accordance with
this Article V and for such purpose may place stop order
instructions with its transfer agent with respect to the Shares.
The Borrower shall, at the request of the Lender, remove from each
certificate evidencing the Shares the legend described above and
cause its transfer agent to remove any stop transfer instructions if
in the opinion of counsel reasonably satisfactory to the Borrower
the securities evidenced thereby may be publicly sold without
registration under the Securities Act and applicable state
securities laws.
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(b) Registration Procedures. The Borrower shall:
(i) use its reasonable best efforts to prepare and file with the SEC
as soon as practicable, but in any event no later than one hundred
eighty (180) days following the date of the first Advance under the
Note, a registration statement under the Securities Act on Form S-3,
or such other form that the Borrower is eligible to use for such
purpose, relating to the sale of the Shares by the Lender from time
to time (the "Registration Statement");
(ii) use its reasonable best efforts to cause such Registration
Statement promptly to become and remain effective for a period of
time required for the disposition of the Shares by the holders
thereof or until the second anniversary of the date of the first
Advance under the Note, whichever is earlier; provided, however,
that before filing such Registration Statement or any amendments
thereto, the Borrower shall furnish the representatives of the
Lender copies of all documents proposed to be filed, which documents
shall be subject to the review of such representatives. The Borrower
shall not be deemed to have used its reasonable best efforts to keep
a Registration Statement effective if it voluntarily takes any
action that would result in the Lender not being able to sell its
Shares, unless such action is required under applicable law;
(iii) prepare and file with the SEC such amendments and supplements
to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement
effective and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all securities
covered by such Registration Statement until such time as all of
such securities have been disposed of or until the second
anniversary of the date of the first Advance under the Note,
whichever is earlier;
(iv) furnish to the Lender such number of conformed copies of the
applicable Registration Statement and each such amendment and
supplement thereto (including in each case all exhibits if requested
by the Lender), and of each prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as the
Lender may reasonably request;
(v) use its reasonable best efforts to register or qualify the
securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions within the United
States and Puerto Rico as the Lender shall reasonably request, and
to keep such registration or qualification in effect for so long as
such Registration Statement remains in effect (provided, however,
that the Borrower shall not be required in connection therewith or
as a condition thereto to qualify to do business, subject itself to
taxation in or to file a general consent to service of process in
any jurisdiction wherein it would not but for the requirements of
this clause (v) be obligated to do so; and provided further that the
Borrower shall not be required to qualify such Shares in any
jurisdiction in which the securities regulatory authority requires
that the Lender submit any shares of its Shares to the terms,
provisions and restrictions of any escrow, lockup or similar
agreement(s) for consent to sell Shares in such jurisdiction unless
the Lender agrees to do so), and do such other reasonable acts and
things as may be required of it to enable the Lender to consummate
the disposition in such jurisdiction of the securities covered by
such Registration Statement;
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(vi) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the SEC, and make an earnings
statement satisfying the provisions of Section 11(a) of the
Securities Act generally available to the Lender no later than 45
days after the end of any twelve-month period (or 90 days, if such
period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Shares are sold to underwriters in an underwritten
public offering, or (ii) if not sold to underwriters in such an
offering, beginning with the first month of the Borrower's first
fiscal quarter commencing after the effective date of the
Registration Statement, which statement shall cover said
twelve-month period;
(vii) use its reasonable best efforts to cause all such Shares to be
listed on each securities exchange or quotation system on which the
Common Stock is then listed or quoted, if any;
(viii) give written notice to the Lender:
(a) when such Registration Statement or any amendment thereto
has been filed with the SEC and when such Registration Statement or
any post-effective amendment thereto has become effective;
(b) of any request by the SEC for amendments or supplements to
such Registration Statement or the prospectus included therein or
for additional information;
(c) of the issuance by the SEC of any stop order suspending
the effectiveness of such Registration Statement or the initiation
of any proceedings for that purpose;
(d) of the receipt by the Borrower or its legal counsel of any
notification with respect to the suspension of the qualification of
the Common Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(e) of the happening of any event that requires the Borrower
to make changes in such Registration Statement or the prospectus in
order to make the statements therein not misleading (which notice
shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made);
(ix) use its reasonable best efforts to prevent the issuance or
obtain the withdrawal of any order suspending the effectiveness of
such Registration Statement at the earliest possible time;
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(x) furnish to the Lender, without charge, at least one copy of such
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, and, if the Lender so
requests in writing, all exhibits (including those, if any,
incorporated by reference);
(xi) upon the occurrence of any event contemplated by Section
8(b)(vii)(e) above, promptly prepare a post-effective amendment to
such Registration Statement or a supplement to the related
prospectus or file any other required document so that, as
thereafter delivered to the Lender, the prospectus will not contain
an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the
Borrower notifies the Lender in accordance with Section 8(b)(vii)(e)
above to suspend the use of the prospectus until the requisite
changes to the prospectus have been made, then the Lender shall
suspend use of such prospectus and use its reasonable best efforts
to return to the Borrower all copies of such prospectus (at the
Borrower's expense) other than permanent file copies then in the
Lender's possession;
(xii) make reasonably available for inspection by representatives of
the Lender, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant
or other agent retained by such representative or any such
underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Borrower and cause the
Borrower's officers, directors and employees to supply all relevant
information reasonably requested by such representative or any such
attorney, accountant or agent in connection with the registration;
and
(xiii) use reasonable best efforts to procure the cooperation of the
Borrower's transfer agent in settling any offering or sale of
Shares, including with respect to the transfer of physical stock
certificates into book-entry form in accordance with any procedures
reasonably requested by the Lender.
Notwithstanding anything in this Section 8(b) to the contrary, the
Borrower shall not be obligated to request acceleration of the
effectiveness of the registration statement or to prepare and file a
post-effective amendment or supplement to the registration statement
or the prospectus constituting a part thereof during the continuance
of a Blackout Event. A "Blackout Event" means any of the following:
(i) the possession by the Borrower of material information that is
not ripe for disclosure in a registration statement or prospectus,
as determined in good faith by the Chief Executive Officer or the
Board of Directors of the Borrower or that disclosure of such
information in a registration statement or the prospectus
constituting a part thereof would be detrimental to the business and
affairs of the Borrower; or (ii) any material engagement or activity
by the Borrower which would, in the good faith determination of the
Chief Executive Officer or the Board of Directors of the Borrower,
be adversely affected by disclosure in a registration statement or
prospectus at such time.
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(c) Expenses. All expenses incurred in connection with each registration
pursuant to Section 8(b), including without limitation all
registration, filing and qualification fees, word processing,
duplicating, printers' and accounting fees (including the expenses
of any special audits or "comfort" letters required by or incident
to such performance and compliance), listing fees or fees of the
NASD, messenger and delivery expenses, all fees and expenses of
complying with state securities or blue sky laws and fees and
disbursements of counsel for the Borrower, shall be paid by the
Borrower, except that the Lender shall bear and pay (i) any
commissions or discounts applicable to securities offered for its
account in connection with any registrations, filings and
qualifications made pursuant to this Agreement and (ii) any fees and
expenses incurred in respect of counsel or other advisors to the
Lender.
(d) Indemnification and Contribution. i.The Borrower shall indemnify and
hold harmless the Lender, each of its directors and officers, each
Person who participates in the offering of such Shares, including
underwriters (as defined in the Securities Act), and each Person, if
any, who controls the Lender or a participating Person within the
meaning of the Securities Act (collectively, the "Lender Indemnified
Parties"), against any losses, claims, damages or liabilities, joint
or several, to which any such Lender Indemnified Party may become
subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or proceedings in respect
thereof) arise out of or are based on any untrue or alleged untrue
statement of any material fact contained in such registration
statement on the effective date thereof (including any prospectus
filed under Rule 424 under the Securities Act or any amendments or
supplements thereto) or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and shall reimburse any such Lender Indemnified Party
for any legal or other expenses reasonably incurred by them (but not
in excess of expenses incurred in respect of one counsel for all of
them unless there is an actual conflict of interest between any
indemnified parties, which indemnified parties may be represented by
separate counsel) in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however,
that the Borrower shall not be liable to an Lender Indemnified Party
in any such case for any such loss, claim, damage, liability or
action to the extent that it arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission (i) made in connection with such registration statement,
preliminary prospectus, final prospectus or amendments or
supplements thereto, in reliance upon and in conformity with written
information furnished expressly for use in connection with such
registration by such Lender Indemnified Party, or (ii) contained in
any Prospectus that is corrected or disclosed in any subsequent
Prospectus that was delivered to the Lender prior to the pertinent
sale or sales by the Lender. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on
behalf of any Lender Indemnified Party, and shall survive the
transfer of such securities by the Lender.
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The Lender shall indemnify and hold harmless the Borrower, each of
its directors and officers, each Person, if any, who controls the
Borrower within the meaning of the Securities Act, and each agent
and any underwriter for the Borrower (within the meaning of the
Securities Act) (collectively, "Borrower Indemnified Parties")
against any losses, claims, damages or liabilities, joint or
several, to which any of them may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or proceedings in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of
any material fact contained in such registration statement on the
effective date thereof (including any prospectus filed under Rule
424 under the Securities Act or any amendments or supplements
thereto) or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged
omission was made in such registration statement, preliminary or
final prospectus, or amendments or supplements thereto, in reliance
upon and in conformity with written information furnished by or on
behalf of the Lender expressly for use in connection with such
registration; and the Lender shall reimburse any legal or other
expenses reasonably incurred by any Borrower Indemnified Party (but
not in excess of expenses incurred in respect of one counsel for all
of them unless there is an actual conflict of interest between any
indemnified parties, which indemnified parties may be represented by
separate counsel) in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however,
that the liability of the Lender hereunder shall be limited to the
net proceeds received by the Lender in connection with any such
registration under the Securities Act.
If the indemnification provided for in this Section 8(d) from the
indemnifying party is unavailable to an indemnified party hereunder
in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the 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, claims, damages, liabilities or expenses in such proportion
as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which
resulted in such losses, claims, damages, liabilities or expenses,
as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action
in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct
or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses
referred to above shall include any legal or other fees or expenses
reasonably incurred by such party in connection with any
investigation or proceeding. If the allocation provided in this
paragraph (c) is not permitted by applicable Law, the parties shall
contribute based upon the relevant benefits received by the Borrower
from the original issuance of the securities on the one hand and the
aggregate proceeds received by the Lender from the sale of
securities on the other.
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The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 8(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 the
immediately preceding paragraph. No party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from the other
party who was not guilty of such fraudulent misrepresentation.
Any person entitled to indemnification hereunder agrees to give
prompt written notice to the indemnifying party after the receipt by
the indemnified party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made
in writing for which the indemnified party intends to claim
indemnification or contribution pursuant to this Agreement;
provided, that the failure so to notify the indemnified party shall
not relieve the indemnifying party of any liability that it may have
to the indemnifying party hereunder unless such failure is
materially prejudicial to the indemnifying party. If notice of
commencement of any such action is given to the indemnifying party
as provided above, the indemnifying party shall be entitled to
participate in and, to the extent it may wish, to assume the defense
of such action at its own expense, with counsel chosen by it and
reasonably satisfactory to such indemnified party. The indemnified
party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and
expenses of such counsel shall be paid by the indemnified party
unless (i) the indemnifying party agrees to pay the same, (ii) the
indemnifying party fails to assume the defense of such action, or
(iii) the named parties to any such action (including any impleaded
parties) have been advised by such counsel that either (A)
representation of such indemnified party and the indemnifying party
by the same counsel would be inappropriate under applicable
standards of professional conduct or (B) there are one or more legal
defenses available to it which are substantially different from or
additional to those available to the indemnifying party. No
indemnifying party shall be liable for any settlement entered into
without its written consent, which consent shall not be unreasonably
withheld.
The agreements contained in this Section 8(d) shall survive the
transfer of the Shares by the Lender and sale of all the Shares
pursuant to any registration statement and shall remain in full
force and effect, regardless of any investigation made by or on
behalf of the Lender, the Lender's directors or officers or any
participating or controlling Person.
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(e) Prospectus Delivery. In connection with the sale of any Shares
pursuant to a Registration Statement, the Lender shall deliver to
the purchaser thereof the Prospectus forming a part of the
Registration Statement and all relevant supplements thereto which
have been provided by the Borrower to the Lender on or prior to the
applicable delivery date, all in accordance with the requirements of
the Securities Act and the rules and regulations promulgated
thereunder and any applicable state securities laws. If at any time
or from time to time, the Borrower notifies the Lender in writing
that the registration statement or the prospectus forming a part
thereof (taking into account any prior amendments or supplements
thereto) contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein,
in light of the circumstances under which they are made, not
misleading, the Lender shall not offer or sell any Shares or engage
in any other transaction involving or relating to the Shares, from
the time of the giving of notice with respect to such untrue
statement or omission until the Lender receives written notice from
the Borrower that such untrue statement or omission no longer exists
or has been corrected or disclosed in an effective post-effective
amendment to the registration statement or a valid prospectus
supplement to the prospectus forming a part thereof.
9. 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.
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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.
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: /s/ Xxxxxx Xxxxxxxx
---------------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Vice President and Chief Financial Officer
LENDER:
BIOMED SOLUTIONS, LLC
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Manager
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