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Exhibit 10.1
FORBEARANCE AGREEMENT
This FORBEARANCE AGREEMENT (this "
Agreement " ) is entered into as of
February 16, 2007, by and among the note holders identified on
Schedule A hereto (each a " Note Holder
" and collectively, the "
Note Holders ") and Biophan
Technologies, Inc., a Nevada Corporation (the "
Company " ).
All capitalized terms not defined in this
Agreement but defined in that certain Securities Purchase
Agreement, dated as of October 11, 2006 (the "
Purchase Agreement "), by
and among the Note Holders and the Company, shall have the meanings
given to such terms in the Purchase Agreement.
Preliminary Statements
:
A. Pursuant to the
Purchase Agreement, on October 12, 2006, the Company issued to the
Note Holders (i) an aggregate of $7,250,000 face amount of Senior
Secured Convertible Notes (the "
Notes "), (ii) warrants to
purchase an aggregate of 5,410,498 shares of the Company’s
common stock, par value $0.005 per share, (the "
Common Stock ") at an
exercise price of $0.81 per share (the " A
Warrants ") (iii) warrants to purchase
an aggregate of 5,410,498 shares of Common Stock at an exercise
price of $0.89 per share (the " B
Warrants ") and (iv) warrants to
purchase an aggregate of 10,820,896 shares of Common Stock at an
exercise price of $0.67 per share (the " C
Warrants "), in the respective amounts
set forth next to each Note Holders name on Schedule A hereto;
and
B. Events (as
defined in the Purchase Agreement) ( " Triggering
Events " ), including that the
Registration Statement filed by the Company (No. 333-138632)
(the " Registration Statement "
) was not declared effective by the Commission by
the Required Effectiveness Date have occurred and remain uncured;
and
C. The Purchase
Agreement provides, in part, that upon the occurrence of an
Triggering Event, and on each monthly anniversary of the Event
Date, so long as the Triggering Event remains uncured, the Company
shall pay to each Purchaser liquidated damages as provided in the
Purchase Agreement and the Note Holders are the Purchasers entitled
to the benefits of the Purchase Agreement; and
D. The Company
failed to make a scheduled payment of principal on the Notes due
and payable on February 1, 2007 (the " Principal
Payment Default "); and
E. Pursuant to
Section 8(e) of the Notes, the Note Holders are entitled to enforce
any and all of their rights and remedies thereunder. Such rights
include, but are not limited to, the right to demand that the
Company repurchase all of the outstanding principal amount of the
Notes at a repurchase price equal to 110% of such outstanding
principal amount plus all accrued but unpaid interest
thereon.
F. The Company does
not anticipate making any interest, principal, penalty payment
or liquidated damages payments on the Notes or with respect to the
Purchase Agreement prior to March 31, 2007 (together with the
Principal Payment Default, the " Payment
Defaults "); and
G. The Company has
requested that the Note Holders forbear from exercising their
rights and remedies under the Purchase Agreement and Notes with
respect to the Triggering Events and the Payment Defaults (and any
other defaults and Events of Default under the Notes) prior to
March 31, 2007; and
H. In consideration
for the Note Holders entering into this Forbearance Agreement, the
Company shall issue to the Note Holders warrants to purchase an
aggregate of 60,000 shares of Common Stock with an exercise price
of $0.51 per share (the " Fee
Warrants "); and
I. The A Warrants
and B Warrants contain anti-dilution protection whereby, upon
issuance of the Fee Warrants, the exercise price of the A Warrants
and B Warrants will be automatically adjusted to $0.51 per share
pursuant to Section 9(d)(i) of the respective warrant.
NOW THEREFORE, in consideration of the mutual
covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Forbearance .
1.1 No
Forbearance Except as Expressly Stated . Nothing in this
Agreement shall in any way limit, restrict or bar any rights or
remedies available to the Note Holders (whether pursuant to the
Purchase Agreement or Note or at law or in equity or otherwise) or
the exercise or enforcement thereof by the Note Holders,
except only as is expressly provided in
this Section 1, and subject to the limitations set forth
therein.
1.2 Forbearance
Period . The Note Holders hereby agree that during the
period commencing on the date hereof and terminating on the earlier
of either March 31, 2007 or the date on which any Termination Event
(as defined below) first occurs (said period is hereinafter
referred to as the " Forbearance Period
" ), the Note Holders will forbear from
exercising any and all of the rights and remedies which the Note
Holders may have against the Company or any of their respective
assets under the Purchase Agreement or Notes or at law or in equity
as a result of the occurrence or continuance of any Payment Default
or any other default or Event of Default under the Notes or any
Triggering Event with respect to the Purchase Agreement. Upon the
occurrence of any Termination Event, the Forbearance Period shall
immediately and automatically terminate and be null and void and
have no further force or effect.
1.3 Termination
Events . The occurrence of any of the following events shall
constitute a Termination Event (hereinafter referred to
collectively as the " Termination Events
" and each singly as a "
Termination Event " ) under this
Agreement:
1.3.1 The failure by
the Company to promptly, punctually, and faithfully observe,
perform, discharge or comply with any provisions of this Agreement;
or
1.3.2 The
determination that any written statement, certificate, report,
financial statement, representation or warranty made or furnished
by the Company to the Note Holders in connection with or pursuant
to this Agreement is false when it was made in any material adverse
respect, or omits or fails to state a material fact necessary in
order to make the statement, representation or warranty contained
therein not misleading in any material adverse respect;
or
1.3.3 The occurrence
of any action (a) taken or initiated by, assented or agreed to,
acquiesced in or permitted by the Company, or (b) taken or
initiated by another party which is not in control of or controlled
by the Company (other than a Note Holder) and which is not acting
with the assent, agreement, acquiescence or permission of the
Company, which action results in any of the following events: (i)
the filing of any complaint, application or petition seeking relief
or the entry of any order of judgment for any such relief with
respect to the Company pursuant to the Bankruptcy Code, or pursuant
to any similar state or federal law or procedure for any
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar for debtors; (ii) the
appointment of any trustee, receiver, master, assignee, liquidator,
custodian or other similar party with respect to the Company or any
of their respective properties; (iii) any assignment for the
benefit of other creditors of the Company; (iv) the convening of
any meeting of creditors, formal or informal, of the Company; or
(v) the taking of possession, custody or control of a substantial
part or all of the property of the Company by any other party;
or
1.3.4 The
dissolution, termination of existence, winding up or liquidation of
the Company; or
1.3.5 Any
preferential transfer by the Company as described in Section 547 of
the Bankruptcy Code, or any fraudulent transfer or conveyance by
the Company as described in Section 548 of the Bankruptcy Code, or
in the MFTA, in each case without the requirement of the filings of
any petition under the Bankruptcy Code, or commencement of any
action under the MFTA; or
1.3.6 The Company,
or any Person claiming by or through the Company, commences, joins
in, assists, cooperates in or participates as an adverse party in
any suit or other proceeding against the Note Holders which relates
to the Notes or the Purchase Agreement.
1.4 Consequence
of Termination Event . Notwithstanding any provision
contained in this Agreement to the contrary, the parties hereto
acknowledge and agree that upon the occurrence and during the
continuance of any Termination Event, that:
1.4.1 Subsection 1.2
of this Agreement shall immediately and automatically terminate and
be null and void and have no further force or effect.
1.4.2 All of the
other remaining provisions contained in this Agreement shall remain
in full force and effect, and shall continue to be binding upon the
parties hereto, it being understood and agreed that the Note
Holders shall continue to retain the Fee Warrants.
2. Forbearance
Fee . The Company shall issue to the Note Holders on the
date hereof Fee Warrants, in substantially the form attached hereto
as Exhibit I, in the denominations set forth opposite the names of
the Note Holders on Schedule B. Each Note Holder, by accepting a
Fee Warrant, represents and warrants to the Company and to each
other Note Holder that (i) it is acquiring such Fee Warrant for
investment purposes and with no present intention of distributing
such Fee Warrant or any shares of Common Stock issuable upon
exercise thereof in violation of applicable securities laws, (ii)
it is acquiring such Fee Warrant hereunder in the ordinary course
of its business, and (iii) it understands that the Company, in
issuing the Fee Warrants, is relying upon, among other things, the
representations and warranties of such Note Holder herein.
3. Anti-dilution
Provisions of Outstanding Notes and Warrants .
3.1 Adjustment of
the A Warrants and the B Warrants . The Company hereby
acknowledges that, pursuant to Section 9(d)(i) of each of the A
Warrants and B Warrants, upon the issuance of the Fee Warrants, the
exercise price of the A Warrants and B Warrants will automatically
be adjuste
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