II.
NOTE AND PLEDGE AGREEMENT
NOTE AND PLEDGE AGREEMENT (this "Agreement") dated as of the day of
February, 2005 by and among Biophan Technologies, Inc., a Nevada corporation
("Obligor"), TomoVation GmbH, a company organized under the laws of Germany
("TomoVation"), Prof. Xx. Xxxxxxx Xxxxxx ("Xxxxxx" and collectively with
TomoVation, the "Sellers").
Statement of the Premises
Pursuant to the Purchase Agreement among Obligor, Sellers, aMRIs GmbH, a
company organized under the laws of Germany (the "Company"), and Xx. Xxxxxxx
Xxxxxx dated as of February 24, 2005 (the "Purchase Agreement" according to I.1
above), Obligor acquired from the Sellers a 51% interest in the Company which
amounts to (euro) 12,750 (the "Company Interest"). Pursuant to the Purchase
Agreement, this Agreement must be entered into as partial consideration for the
Company Interest.
Statement of Consideration
Accordingly, in consideration of the premises, all the parties hereto
agree as follows.
Agreement
Definitions. The term "Liabilities" means all debts, liabilities and
obligations of Obligor to the Sellers pursuant to and under this Agreement.
The term "Collateral" means shares of the Company in the nominal amount of
(euro) 1,150 . whereby the Collateral is granted by shares in the nominal amount
of (euro) 400 to TomoVation and in the nominal amount of (euro) 750 to Xxxxxx
and in all increases, profits or rights received therefrom, in all substitutions
and additions, together with any proceeds except for rights to the shares which
relate to the ownership of the shares exclusively and cannot be transferred
without title to the shares.
The term "Event of Default" shall occur if:
(a) Obligor shall fail to make any payment of principal or interest
when due hereunder and such failure is not cured within five (5) days
after written notice thereof by either Seller to Obligor provided,
however, that no written notice of default shall be required for a failure
to pay on the Maturity Date; or
(b) Obligor's obligation to make capital contributions pursuant to
Section 1.4 of the Purchase Agreement between the Parties has been
suspended in accordance with Section 1.4(e) of the Purchase Agreement (the
Purchase Agreement is signed by the Parties of this Agreement, and the
Parties herewith refer to this Section 1.4 and waive the right to attach
this to this Agreement); or
-2-
(c) Obligor fails to perform any term, condition or covenant of this
Agreement with respect to the Collateral or under the Capital Pledge
Agreement between between Obligor, TomoVation GmbH and Xx. Xxxxxxx Xxxxxx,
and such failure is not cured within thirty (30) days after written notice
thereof by either Seller to Obligor; or
(d) Obligor fails to perform any material term of the License
Agreement of even date therewith (the "License"), between aMRIs Patent,
GmbH ("AMP") and obligor and such failure is not cured within thirty (30)
days after written notice thereof by AMP or either Seller to Obligor; or
(e) Obligor shall make an assignment for the benefit of creditors,
or file a voluntary petition under the United States Bankruptcy Code, as
amended, or any other federal or state insolvency law, or apply for or
consent to the appointment of a receiver, trustee or custodian of all or
part of his property, which assignment, petition or appointment remains
outstanding for more than sixty (60) days; or
(f) an involuntary petition shall be filed against Obligor under the
United States Bankruptcy Code, as amended, or if a proceeding shall be
commenced against Obligor seeking the appointment of a trustee, receiver
or custodian of all or part of Obligor's property, which petition or
proceeding shall remain undismissed for more than ninety (90) days; or
(g) Obligor, without prior written consent of Sellers, sells or
purports to sell, transfer, assign, pledge or hypothecate all or any
portion of the Collateral (except to Sellers pursuant to the terms of this
Note and Pledge Agreement); or
(i) Obligor sells all or substantially all of its assets; or
(j) more than 50% of the capital stock of the Obligor is sold or
otherwise transferred incident to a stock purchase, share exchange, merger
or consolidation of Obligor with another person such that the holders of
more than 50% of the capital stock of Obligor immediately prior to the
transaction holder less than 50% of the outstanding capital of the
surviving entity after the transaction.
Promise to Pay; Interest Rate. FOR VALUE RECEIVED, Obligor hereby promises
to pay to Sellers the principal sum of Two Hundred Thousand United States
Dollars (US $200,000.00), with interest on the principal amount outstanding from
time to time until paid in full at the rate of two and seventy-four one
hundredths percent (2.74%) per year compounded monthly. Interest payable
hereunder shall be calculated based on a 360 day year and the actual number of
days elapsed in any period. In the event any principal payment due hereunder is
not made when due, such unpaid principal amount bear interest at a rate equal to
12% per annum until paid. In the event any interest on the principal amount is
not paid when due, such unpaid interest amount shall bear interest at a rate
equal to 6.74% until paid.
-3-
Payments. The entire principal and interest accrued thereon shall be paid
in a single payment due on June 1, 2005 (the "Maturity Date"). Principal and
interest may be prepaid at any time with no penalty. All payments under this
Agreement shall be made fifty percent (50%) to Tomovation and fifty percent
(50%) to Xxxxxx. All payments hereunder shall be made to Sellers in lawful money
of the United States by wire transfer to such accounts as shall be designated by
Sellers. Each Seller shall provide account information for such accounts to
Obligor in writing no less than five (5) business days after Obligor has
requested such account information. All payments shall be applied first to the
payment of interest accrued to the date received and then to the payment of
principal. After the occurrence and during the continuance of any Event of
Default, payments shall first be applied to the costs of collection, then to
interest, then to principal.
Grant of Security Interest. As security for the payment of the
Liabilities, Obligor hereby grant(s) to Sellers a security interest in, a
general lien upon and/or right of set-off against (as applicable) the
Collateral. This security interest is granted to Tomovation with respect to
shares of the Company in the nominal amount of (euro) 400 and to Xxxxxx with
respect to shares of the Company in the nominal amount of (euro) 750.
Release of Security Interest. The security interest in the Collateral
shall be released as Obligor fulfills its liabilities under this Agreement.
Covenants. As long as any part of the Liabilities remain unpaid Obligor
agrees to:
(a) defend the Collateral against all claims, keep the collateral free
from other security interests, liens, pledges or other encumbrances, and
not dispose of any portion of the Collateral without Sellers' written
consent;
(b) notify Sellers promptly of any changes in Obligor's name or address;
(c) notify Sellers of any change in legal entity structure, if applicable;
(d) execute and deliver any financing statements or other documents, pay
any costs of title searches and filing fees, and take any other action
Sellers request in relation to the security interest;
(e) pay all taxes and other charges which may be levied against the
Collateral.
Warranties. As long as any part of the Liabilities remain unpaid Obligor
warrants to Sellers that:
(a) each document representing the Collateral is genuine;
(b) Obligor owns the Collateral (except to the extent that Obligor did not
get good title to the Collateral from the Sellers) free and clear of all
liens, encumbrances, charges or security interests, other than those in
favor of Sellers under this Agreement;
(c) Obligor is fully authorized to enter into this Agreement.
Default. Upon the occurrence and during the continuance of an Event of
Default, all Liabilities shall, at the written election of Sellers given to
Obligor, become immediately due and payable without any further presentment,
demand or other notice of any kind, all of which are hereby waived, provided
that if there shall occur an Event of Default under Subparagraphs (e) or (f) of
the definition of Event of Default, then all Liabilities shall automatically
become forthwith due and payable without any demand, and in each case the same
shall become due and payable without presentment, protest or notice of any kind,
all of which are hereby waived.
-4-
Upon the occurrence of an Event of Default and giving notice of such Event
of Default then Sellers may, at their discretion at any time prior to Obligor
curing such Event of Default (if by its nature it can be cured), collect the
Collateral and sell it in a public auction which shall be announced to Obligor
and publicly in accordance with applicable law. The public auction may take
place anywhere in Germany. Sellers may be the purchaser at such auction, and
Sellers shall not be liable for any reduction in the value of the Collateral by
reason of Sellers' exercising any discretion they may have under applicable law
as to whether or when to proceed with any such auction or to postpone an auction
once scheduled.
Obligor agrees to pay on demand or, if a requirement to such payment on
demand is not permitted under applicable law, as otherwise provided under
applicable law all costs and expenses incurred by Sellers in enforcing this
Agreement and in realizing upon any Collateral, including, without limitation
reasonable attorneys' fees and legal expenses. After deducting all expenses
incurred by Sellers in protecting or enforcing their rights in the Collateral,
the residue of any proceeds of collection shall be applied to the payment of the
Liabilities and any excess shall be promptly paid over to Obligor except as
otherwise required by applicable law. Nothing contained herein shall be deemed
to release Obligor from its obligation to pay any deficiencies under the
Liabilities.
Dividends/income. So long as no Event of Default has occurred and is
continuing, Obligor shall have the right to receive all cash income from the
Collateral. If Sellers receive any cash income before the occurrence of an Event
of Default, Sellers agree to turn it over to Obligor. Once an Event of Default
occurs, Obligor will no longer be entitled to receive any cash income and if
Obligor receives any, Obligor agrees to turn it over to Sellers. Sellers may
apply the net cash payments to the Liabilities but Sellers will account for it
and pay over to Obligor any cash which remains on hand after the Liabilities are
satisfied.
Custody of Collateral. Sellers agree to use reasonable care to protect any
Collateral in their possession. However, Sellers shall not be required to:
(a) vote the shares of the Company representing the Collateral;
(b) collect any debt;
(c) exercise any conversion rights;
(d) take any steps necessary to preserve rights against prior parties;
(e) notify Obligor of any maturities, calls, conversions, or other similar
matters concerning the Collateral, except for forwarding to Obligor those
communications which are addressed to Obligor;
(f) act upon any request Obligor may send Sellers.
Except as otherwise required under applicable law, the existence of the
Collateral does not confer on Sellers any rights or obligations as a
shareholders of the Company.
-5-
Changes in Collateral. Whether or not an Event of Default has occurred,
Obligor authorizes Sellers to:
(a) receive and hold as additional collateral any non-cash increases in or
profits on the Collateral;
(b) surrender the Collateral and receive any payment or distribution upon
redemption, dissolution or liquidation of the issuer of the Collateral.
If Obligor receives any of the payments or distributions described above,
Obligor agrees to turn them over to Sellers.
Modification. This Agreement cannot be modified, waived, discharged or
terminated except upon payment in full of the Liabilities or by a written
agreement signed by the party to be charged therewith.
Miscellaneous. No delay or omission on the part of Sellers in exercising
any right under this Agreement shall operate as a waiver of any other rights of
Sellers, nor shall any delay, omission, or waiver on any one occasion be deemed
a bar to or waiver of any other right on any future occasion. This Agreement
shall be binding upon the Obligor and the Obligor's successors and assigns and
shall inure to the benefit of Sellers and Seller's successors. In the event of
any conflict between the terms of this Agreement and the Purchase Agreement, the
terms of this Agreement, as to the specific term or provision which may be in
conflict, shall be superceding and controlling. Any term or provision of this
Agreement that is invalid or unenforceable under applicable law shall be
ineffective to the extent of such invalidity or enforceability and shall not
affect the validity or enforceability of the remaining terms and provisions of
this Agreement. Any such term or provision shall be construed so as to be valid
and enforceable in any situation or jurisdiction where such validity or
enforceability is permitted. Any such invalid term or provision shall be
enforceable to the fullest extent permitted by applicable law.
Notices. Obligor waives any right to notice of any action Sellers may take
with respect to the Collateral, except as otherwise required by applicable law.
Notices given under this Agreement shall be given as provided in the Purchase
Agreement. Obligor agrees that notice of foreclosure sale sent at least five
days before the sale, except as otherwise provided by applicable law, provides
Obligor with a reasonable opportunity to exercise its right of redemption of the
Collateral and any other legal rights.
Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of Germany.
III.
