Exhibit 10.4
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 6th day of June,
2002, by and between Biophan Technologies, Inc. (the "Company"), a
corporation organized under the laws of the State of Nevada, with its
principal offices at 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxx Xxxxxxxxx,
Xxx Xxxx 00000, and the purchaser whose name and address is set forth on the
signature page hereof (the "Purchaser").
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and the Purchaser agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the
terms and conditions of this Agreement, the Company shall sell to the
Purchaser and the Purchaser shall purchase from the Company up to $2,400,000
worth of the Company's Common Stock (the "Shares"), par value $.005 per share
(the "Common Stock"). The Company has authorized and has reserved and
covenants to continue to reserve, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized but
unissued shares of its Common Stock to cover the Shares to be issued pursuant
to the terms of this Agreement.
SECTION 2. Agreement to Sell and Purchase the Shares. The
parties hereby agrees as follows:
2.1 The Purchaser agrees to purchase the Shares in monthly
investment with a minimum monthly investment amount of $250,000 (the "Minimum
Monthly Commitment") worth of the Company's Common Stock during each 20 day
trading period (the "Monthly Trading Period") following the Effective Date.
The Effective Date shall mean the date the Registration Statement (as
described in Section 7) of the Company covering the Shares is declared
effective. The Minimum Monthly Commitment is subject to adjustment as
provided herein below.
2.2 The number of shares of Common Stock purchased by the
Purchaser with respect to each Monthly Trading Period shall be determined as
set forth in herein and settled (i) as to the 1st through the 5th Trading Days
for the applicable Monthly Trading Period (the "First Settlement Period"), on
the 7th Trading Day and (ii) as to the 6th through the 10th Trading Days for
the applicable Monthly Trading Period (the "Second Settlement Period"), on the
12th Trading Day, (iii) as to the 11th through the 15th Trading Days for the
applicable Monthly Trading Period (the "Third Settlement Period"), on the 17th
Trading Day and (iv) as to the 16th through the 20th Trading Days for the
applicable Monthly Trading Period (the "Fourth Settlement Period"), on the
22nd Trading Day (each, a "Settlement Date" and the First, Second, Third and
Fourth Settlement Periods collectively referred to as "Settlement Periods" or
"Closings").
2.3 The Purchase Price per share shall be equal to 80% of the
VWAP price of the Company's Common Stock for each of the Trading Days
included in the applicable Settlement Period. VWAP" shall mean the daily
volume weighted average price of the Company's Common Stock on the Principal
Market as reported by Bloomberg Financial L.P. (based on a trading day from
9:30 am EST to 4:00 pm EST). Trading Day shall mean any day on which the
principal market on which the Company's stock trades (the "Principal Market")
is open for business.
2.4 The Minimum Weekly Commitment during any Settlement Period
shall be $62,500 worth of the Company's Common Stock. Notwithstanding any
provision herein to the contrary, the Minimum Weekly Commitment during any
Settlement Period may, upon mutual agreement, be increased to an amount equal
to the product obtained by multiplying (i) the total trading volume for the
Company's Common Stock on the Principal Market, for the Trading Days included
in the Settlement Period (the "Trading Day Measurement Period") times (ii)
the average VWAP during the Trading Day Measurement Period, times (iii) 30%.
The Minimum Weekly Commitment may be increased if the preceding formula would
result in an increased investment amount but shall in no event shall the
formula result in a reduction of the Minimum Weekly Commitment during any
Settlement Period.
2.5 If the Purchase Price per Share is less is less than the
Threshold Price on any Trading Day, then at the Company's election, the
Trading Day on which the Purchase Price is less than the Threshold Price
shall not be in included in the Purchase Price calculation and the investment
amount for the applicable Settlement Period shall be reduced by $12,500 for
each Trading Day that is excluded. The Threshold Price shall be $0.60 per
share.
2.6 Additionally, if trading of the Company's Common Stock on
the Principal Market is suspended, for any reason, on any trading day, then
the Trading Day on which the suspension occurred shall not be included in the
Purchase Price calculation and the investment amount for the applicable
Settlement Period shall be reduced by $12,500 for each Trading Day that is
excluded. In the event there are excluded days, Purchaser is obligated to
purchase Shares for any of the five consecutive Trading Days not excluded due
to the Threshold Price or trading suspension.
2.7 The number of Shares of Common Stock to be issued on each
Settlement Date shall be a number of shares equal to the investment amount
(x) for the applicable Settlement Period, divided by (y) the Purchase Price
for the same Settlement Period.
2.8 In addition to the Shares to be issued to the Purchaser,
once the Purchaser has purchased $250,000 worth of the Company's Common Stock,
the Company shall issue the Purchaser warrants to purchase up to 100,000
shares of the Company's Common Stock (the "Warrants"). The Warrants shall
have a three year life and a purchase price of 125% of the least of: (a) five
(5) day average closing price of the Company's common stock on the Settlement
Date; (b) the average closing bid price for the twenty (20) consecutive
trading days preceding the Settlement Date; or (c) the closing bid price on
the Settlement Date. Once the Purchaser has completed the purchase of Shares
pursuant to this Agreement, the Company will issue the Purchaser warrants to
purchase an additional 100,000 shares of the Company's Common Stock upon the
same terms and conditions as the initial Warrants.
2.9 The Company may enter into agreements in substantially
identical form to this Agreement with certain other investors in Shares (the
"Other Purchasers") and expects to complete sales of Shares to them. The
Purchaser and the Other Purchasers are hereinafter sometimes collectively
referred to as the "Purchasers," and this Agreement and the agreements
executed by the Other Purchasers are hereinafter sometimes collectively
referred to as the "Agreements."
SECTION 3. Delivery of the Shares. The delivery of the Shares
to the Purchaser shall occur as follows:
3.1 On the Trading Day following the end of each Settlement
Period (i) the Company and the Purchaser shall each execute and deliver to
the other and to the Escrow Agent via facsimile transmission, a settlement
certificate in the form of Exhibit A to the Escrow Agreement (the "Settlement
Certificate") quantifying the amount of the investment and the number of
Shares of Common Stock to be purchased, (ii) the Company shall cause the
delivery of that number of whole shares of Common Stock of the Company
designated in the Settlement Certificate (the "Settlement Shares"), in the
manner required by the Escrow Agreement, and (iii) the Purchaser shall
transmit payment in an amount equal to the payment designated as "Net
Proceeds to the Company" in the Settlement Certificate (the "Settlement
Payment"), to the Escrow Agent in the manner required by the Escrow
Agreement.
3.2 On the Settlement Date, and provided that the provisions of the
Agreement have been complied with (i) the Escrow Agent shall transmit the
Settlement Payment to the Company in the manner required by the Escrow
Agreement and (ii) the Escrow Agent shall cause the delivery of the Shares to
the Purchaser in the manner required by the Escrow Agreement.
SECTION 4. Representations, Warranties and Covenants of the
Company. The Company hereby represents and warrants to, and covenants with,
the Purchaser, as of the date hereof, as follows:
4.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and the Company is qualified to do
business as a foreign corporation in each jurisdiction in which qualification
is required, except where the failure to so qualify would not individually or
in the aggregate have a material adverse effect on the financial condition,
results of operations, properties, business or prospects of the Company taken
as a whole (a "Material Adverse Effect").
4.2 Subsidiaries. The Company does not have any subsidiaries
other than LTR Antisense, LLC, a New York limited liability company. As used
in this Section 4, the term "the Company" shall include such subsidiary.
4.3 Disclosure Documents. The Purchaser acknowledges having
received or obtained various disclosure documents requested by it which
describe the Company, its business affairs and its financial condition
(collectively the "Disclosure Documents").
4.4 Significant Risk Factor. The Purchaser has also been
advised that the Company is still in the development stage and does not have
operating revenues.
4.5 Authorized and Outstanding Capital Stock. The Company has
authorized the issuance of 60,000,000 shares of its common stock, par value
$.005 per share, of which as of the date of this Purchase Agreement
29,549,439 shares are outstanding. The Company's stock option plan provides
for the granting of options to the Company's employees, directors,
consultants and advisors, to purchase an aggregate of 2,500,000 shares of the
Company's common stock, of which as of March 1, 2002, options to purchase an
aggregate of 1,529,997 shares of common stock were outstanding. The Company
has also granted warrants to purchase an aggregate of 546,294 shares of the
Company's common stock (as of March 1, 2002) which warrants are not part of
the Company's stock option plan. The exercise prices at which such
outstanding stock options and warrants could be exercised range from $.10 to
$1.00 per share.
4.6 Compensation of Investment Banker. Carolina Financial
Securities, LLC ("CFS") is to receive a cash fee equal to ten percent of the
gross proceeds from the sale of the Shares to the Purchasers and to the Other
Purchasers. The Company will also grant CFS five year warrants to purchase
so many shares of the Company's common stock as shall equal five percent of
the total number of Shares sold (to the Purchaser and to the Other
Purchasers). The warrants will be exercisable at a price equal to 110% of
per Share purchase price.
4.7 Issuance, Sale and Delivery of the Shares. The Shares have
been duly authorized and, when issued, delivered and paid for in the manner
set forth in this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable. No preemptive rights or other rights to subscribe for
or purchase exist with respect to the issuance and sale of the Shares by the
Company pursuant to this Agreement. No stockholder of the Company has any
right (which has not been waived or has not expired by reason of lapse of
time following notification of the Company's intent to file the Registration
Statement) to request or require the Company to register the sale of any
shares owned by such stockholder under the Securities Act of 1933, as amended
(the "Securities Act"), in the Registration Statement. No further approval
or authority of the stockholders or the Board of Directors of the Company
will be required for the issuance and sale of the Shares to be sold by the
Company as contemplated herein.
4.8 Due Execution, Delivery and Performance of the Agreements.
The Company has full legal right, corporate power and authority to enter into
the Agreements and perform the transactions contemplated hereby and thereby.
The Agreements have been duly authorized, executed and delivered by the
Company. The execution, delivery and performance of the Agreements by the
Company and the consummation of the transactions herein and therein
contemplated will not violate any provision of the organizational documents of
the Company and will not result in the creation of any lien, charge, security
interest or encumbrance upon any assets or property of the Company pursuant to
the terms or provisions of, or will not conflict with, result in the breach or
violation of, or constitute, either by itself or upon notice or the passage
of time or both, a default under any agreement, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to which the
Company is a party or by which the Company or any of its respective assets or
properties may be bound or affected or any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any regulatory
body, administrative agency or other governmental body applicable to the
Company or any of its properties. No consent, approval, authorization or
other order of any court, regulatory body, administrative agency or other
governmental body is required for the execution, delivery and performance of
the Agreements or the consummation of the transactions contemplated hereby or
thereby, except for compliance with the Blue Sky laws and federal securities
laws applicable to the offering of the Shares. Upon their execution and
delivery, and assuming the valid execution thereof by the respective
Purchasers, the Agreements will constitute legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and except as the indemnification
agreements of the Company in Section 7.3 hereof may be legally unenforceable.
4.9 Accountants. Xxxxxxxxx Xxxxx Xxxxxxx, LLP have or will have
prior to the filing of the Registration Statement or will have prior to the
filing of the Registration Statement expressed their opinion with respect to
the audited consolidated financial statements to be incorporated by reference
into the Registration Statement and the Prospectus which forms a part thereof
from the Company's Form 10-K, and are independent accountants as required by
the Securities Act and the rules and regulations promulgated thereunder (the
"Rules and Regulations"). The Company's consolidated financial statements
(including all notes and schedules thereto) included in the Form 10-K and the
November 10-Q present fairly the financial position, the results of
operations, the statements of cash flows and the statements of stockholders'
equity and the other information purported to be shown therein of the Company
at the respective dates and for the respective periods to which they apply
and such consolidated financial statements have been prepared in conformity
with generally accepted accounting principles, consistently applied
throughout the periods involved.
4.10 No Defaults. The Company is not (i) in violation or
default in any material respect of any provision of its certificate of
incorporation, bylaws or other organizational documents, or (ii) in breach of
or default with respect to any provision of any agreement, judgment, decree,
order, mortgage, deed of trust, lease, franchise, license, indenture, permit
or other instrument to which it is a party or by which it or any of its assets
or properties are bound, except for breaches and defaults which individually
or in the aggregate would not have a Material Adverse Effect; and there does
not exist any state of fact which, with notice or lapse of time or both,
would constitute an event of default on the part of the Company as defined in
such documents, except such defaults which individually or in the aggregate
would not have a Material Adverse Effect.
4.11 Contracts. The contracts, if any, described in the
Disclosure Documents that are material to the Company are in full force and
effect on the date hereof and are valid and enforceable by the Company in
accordance with the terms thereof, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, and except as may be limited by general principles of
equity and public policy; nor, to the Company's knowledge, is any other party
in breach of or default under any of such contracts, which breaches and
defaults would individually or in the aggregate have a Material Adverse
Effect.
4.12 No Actions. Except as disclosed in the Disclosure
Documents, there are no legal or governmental actions, suits or proceedings
pending or, to the Company's knowledge, threatened to which the Company is or
may be a party or of which property owned or leased by the Company is or may
be the subject, or related to environmental or discrimination matters, which
actions, suits or proceedings, individually or in the aggregate, might prevent
or might reasonably be expected to materially and adversely affect the
transactions contemplated by this Agreement or result in a Material Adverse
Effect; and no labor disturbance exists or, to the Company's knowledge, is
imminent which might reasonably be expected to have a Material Adverse Effect.
The Company is not a party to or subject to the provisions of any material
injunction, judgment, decree or order of any court, regulatory body
administrative agency or other governmental body.
4.13 Properties. The Company has good and marketable title to
all the properties and assets reflected as owned by them in the consolidated
financial statements included or incorporated by reference in the Disclosure
Documents, subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except (i) those, if any, reflected in such consolidated financial
statements, or (ii) those which are not material in amount and do not
materially and adversely affect the use made and intended to be made of such
property by the Company. The Company holds its leased properties under valid
and binding leases, with such exceptions as are not materially significant in
relation to the business of the Company, taken as a whole. Except as
disclosed in the Disclosure Documents or in this Agreement, the Company owns
or leases all such properties as are necessary to its operations as now
conducted.
4.14 No Material Change. Except as disclosed in the Disclosure
Documents, since November 30, 2001 (i) the Company has not incurred any
liabilities or obligations, indirect, or contingent, or entered into any
verbal or written agreement or other transaction which is not in the ordinary
course of business or which could reasonably be expected to result in a
material reduction in the future earnings of the Company or, other than the
use of its cash resources for its research and development and business
operations in accordance with its past practices, in a Material Adverse Effect;
(ii) the Company has not sustained any material loss or interference with its
businesses or properties from fire, flood, windstorm, accident or other
calamity not covered by insurance; (iii) the Company has not paid or declared
any dividends or other distributions with respect to its capital stock and
the Company is not in default in the payment of principal or interest on any
outstanding debt obligations; (iv) there has not been any change in the
capital stock of the Company other than the sale of the Shares hereunder and
shares or options issued pursuant to exercise of outstanding warrants or
employee and director stock option plans approved by the Company's Board of
Directors, or indebtedness material to the Company; and (v) there has not
been any other change or event that would result in a Material Adverse
Effect.
4.15 Intellectual Property. Except as otherwise disclosed in
the Disclosure Documents, (i) the Company owns or has obtained valid licenses,
options or rights to use for the material inventions, patent applications,
patents, trademarks (both registered and unregistered), tradenames,
copyrights and trade secrets necessary for the conduct of the Company's
businesses as currently conducted and as the Disclosure Documents indicate
the Company contemplates conducting in all material respects (collectively,
the "Intellectual Property"); (ii) the Company has not received notice of any
third parties who have any ownership rights to any Intellectual Property that
is owned by, or has been licensed to, the Company for the product indications
described in the Disclosure Documents that would preclude the Company from
conducting its businesses as currently conducted and as the Disclosure
Documents indicate the Company contemplates conducting in all material
respects; (iii) to the Company's knowledge there are currently no sales of
any products that would constitute an infringement by third parties of any
material Intellectual Property owned, licensed or optioned by the Company;
(iv) there is no pending or, to the Company's knowledge, threatened action,
suit, proceeding or claim by others challenging the rights of the Company in
or to any material Intellectual Property owned, licensed or optioned by the
Company; (v) there is no pending or, to the Company's knowledge, threatened
action, suit, proceeding or claim by others challenging the validity or scope
of any material Intellectual Property owned, licensed or optioned by the
Company; and (vi) there is no pending or, to the Company's knowledge,
threatened action, suit, proceeding or claim by others that the Company
infringes or otherwise violates any patent, trademark, copyright, trade
secret or other proprietary right of others as would reasonably be expected
to result in a Material Adverse Effect.
4.16 Compliance. The Company has not been advised, and has no
reason to believe, that it is not conducting its business in compliance with
all applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, including, without limitation, all applicable local,
state and federal environmental laws and regulations; except where failure to
be so in compliance would not individually or in the aggregate have a
Material Adverse Effect.
4.17 Taxes. The Company has filed or obtained filing extensions
with respect to all federal, state, local and foreign income and franchise tax
returns material to the Company, taken as a whole and has paid or accrued all
taxes shown as due thereon, and the Company has no knowledge of a tax
deficiency which has been or might be asserted or threatened against it which
would reasonably be expected to have a Material Adverse Effect.
4.18 Transfer Taxes. On each Closing Date, all stock transfers or
other taxes (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Shares to be sold to the
Purchaser hereunder at the applicable Closing will be, or will have been,
fully paid or provided for by the Company and all laws imposing such taxes
will be or will have been fully complied with.
4.19 Insurance. The Company maintains insurance of the type and
in the amount that the Company reasonably believes is adequate for its
business, including, but not limited to, insurance covering all real and
personal property owned or leased by the Company against risks customarily
insured against by similarly situated companies, all of which insurance is in
full force and effect.
4.20 Investment Company. The Company is not an "investment
company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for an investment company, within the meaning of the Investment
Company Act of 1940, as amended.
4.21 Legal Opinions. Prior to and as a condition to each
Closing, (i) Boylan, Brown, Code, Xxxxxx & Xxxxxx, LLP, counsel to the
Company, will deliver its legal opinion to the Purchaser with regard to the
validity of the Shares, capitalization of the Company, authorization of this
Agreement, absence of conflict with law, absence of defaults and other
customary matters (including negative assurance with respect to the accuracy
and completeness of the disclosures contained in the Registration Statement),
in form and substance reasonably satisfactory to the Purchaser in form and
substance as agreed with the Purchaser. Such opinion shall also state that
each of the Purchasers may rely thereon as though it were addressed directly
to such Purchaser.
4.22 Related Party Transactions. No transaction has occurred
between or among the Company and its affiliates, officers or directors or any
affiliate or affiliates of any such officer or director that is required to be
described in the Company's reports and other filings under the Securities
Exchange Act of 1934 (the "Exchange Act") attached as Disclosure Documents
that is not so described.
4.23 Books and Records. The books, records and accounts of the
Company accurately and fairly reflect, in reasonable detail, the transactions
in, and dispositions of, the assets of, and the results of operations of, the
Company, all to the extent required by generally accepted accounting
principles. The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting
principles and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
4.24 Additional Information. The Company represents and
warrants that the Disclosure Documents furnished to the Purchaser, and the
Registration Statement that the Company will furnish to the Purchaser prior to
each Closing, as of its date (or date of filing with the Commission, as
applicable), does not or will not contain an untrue statement of a material
fact or omit or will omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were or will be made, not misleading.
4.25 Certificate. At each Closing, the Company will deliver to
the Purchaser a certificate executed by the Chairman of the Board or President
and the chief financial or accounting officer of the Company, dated the
applicable Closing Date, to the effect that the representations and
warranties of the Company set forth in this Section 4 are true and correct in
all material respects as of the date of this Agreement and as of such Closing
Date (except for such changes or modifications as are specified therein), and
the Company has complied with all the agreements and satisfied all the
conditions herein on its part to be performed or satisfied on or prior to
such Closing Date.
SECTION 5. Representations, Warranties and Covenants of the
Purchaser.
(a) The Purchaser represents and warrants to, and covenants with,
the Company that: (i) the Purchaser is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to
investments in shares representing an investment decision like that involved
in the purchase of the Shares, including investments in securities issued by
the Company, and has requested, received, reviewed and considered all
information it deems relevant in making an informed decision to purchase the
Shares; (ii) the Purchaser is acquiring the number of Shares set forth in
Section 2 above in the ordinary course of its business and for its own account
for investment only and with no present intention of distributing any of such
Shares or any arrangement or understanding with any other persons regarding
the distribution of such Shares (it being understood that the foregoing does
not limit the Purchaser's right to sell Shares pursuant to the Registration
Statement or, other than with respect to any claims arising out of a breach
of this Section 5, the Purchaser's right to indemnification pursuant to
Section 7.3); (iii) the Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the Shares except
in compliance with the Securities Act and the Rules and Regulations; (iv) the
Purchaser has completed or caused to be completed the Registration Statement
Questionnaire and the Stock Certificate Questionnaire, both attached hereto
as Appendix I, for use in preparation of the Registration Statement, and the
answers thereto are true and correct as of the date hereof and will be true
and correct as of the effective date of the Registration Statement; (v) the
Purchaser has, in connection with its decision to purchase the number of
Shares set forth in Section 2 above, relied solely upon the Disclosure
Documents and the representations and warranties of the Company contained
herein; (vi) the Purchaser is an "accredited investor" within the meaning of
Rule 501(a) of Regulation D promulgated under the Securities Act; and (vi)
the Purchaser is not a "dealer" within the meaning of the Securities Act or a
"broker" or "dealer" within the meaning of the Exchange Act.
(b) The Purchaser further represents and warrants to, and
covenants with, the Company that (i) the Purchaser has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action, obtained
all necessary consents and has satisfied or will satisfy all notification and
filing requirements necessary to authorize the execution, delivery and
performance of this Agreement by the Purchaser, and (ii) upon the execution
and delivery of this Agreement, this Agreement shall constitute a legal,
valid and binding obligation of the Purchaser, enforceable in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and except as the indemnification
agreements of the Purchaser in Section 7.3 hereof may be legally
unenforceable.
(c) The Purchaser agrees that it has not and will not, for a
period of eighteen months following the execution of this Agreement, carry a
net short position in the common shares of the Company. A net short position
will include any derivative instruments such as a put option, collar, swap or
any other instrument which would result in a net short position.
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in the certificates for the Shares delivered
pursuant hereto shall survive the execution of this Agreement, the delivery
to the Purchaser of the Shares being purchased and the payment therefor.
SECTION 7. Registration of the Shares; Compliance with the
Securities Act.
7.1 Registration Procedures and Expenses. The Company shall:
(a) as soon as practicable, but in any event no later than one
(1) business day following public disclosure of the
transactions contemplated by this Agreement, prepare and
file with the Commission the Registration Statement on Form
S-3 or other applicable form relating to the sale of the
Shares by the Purchasers from time to time on the
facilities of any securities exchange on which the Common
Stock is then traded or in privately-negotiated
transactions, which Registration Statement on Form S-3
shall or other applicable from contain all material non-
public information disclosed to the Purchasers by the
Company in connection with the issuance and sale of the
Shares;
(b) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to keep the
Registration Statement effective until the date on which
the Shares may be resold by the Purchasers without
registration by reason of Rule 144(k) under the Securities
Act or any other rule of similar effect;
(c) furnish to the Purchaser with respect to the Shares
registered under the Registration Statement (and to each
underwriter, if any, of such Shares) such number of copies
of prospectuses and such other documents as the Purchaser
may reasonably request, in order to facilitate the public
sale or other disposition of all or any of the Shares by the
Purchaser; provided, however, that the obligation of the
Company to deliver copies of prospectuses to the Purchaser
shall be subject to the receipt by the Company of reasonable
assurances from the Purchaser that the Purchaser will comply
with the applicable provisions of the Securities Act and of
such other securities or blue sky laws as may be applicable
in connection with any use of such prospectuses;
(d) file documents required of the Company for normal blue sky
clearance in states specified in writing by the Purchaser;
provided, however, that the Company shall not be required to
qualify to do business or consent to service of process in
any jurisdiction in which it is not now so qualified or has
not so consented; and
(e) bear all expenses in connection with the procedures in
paragraphs (a) through (d) of this Section 7.1 and the
registration of the Shares pursuant to the Registration
Statement, other than fees and expenses, if any, of counsel
or other advisers to the Purchaser or the Other Purchasers
or underwriting discounts, brokerage fees and commissions
incurred by the Purchaser or the Other Purchasers, if any.
7.2 Transfer of Shares After Registration. The Purchaser agrees
that it will not effect any disposition of the Shares or its right to purchase
the Shares that would constitute a sale within the meaning of the Securities
Act, except as contemplated in the Registration Statement referred to in
Section
7.1, and that it will promptly notify the Company of any changes
in the information set forth in the Registration Statement regarding the
Purchaser or its plan of distribution.
7.3 Indemnification. For the purpose of this Section 7.3:
(i) the term "Purchaser Affiliate" shall mean any person who
controls the Purchaser within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act; and
(ii) the term "Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or
relating to the Registration Statement referred to in
Section 7.1.
(a) The Company agrees to indemnify and hold harmless the
Purchaser and each Purchaser Affiliate, against any losses, claims, damages,
liabilities or expenses, joint or several, to which such Purchaser or such
Purchaser Affiliate may become subject, under the Securities Act, the Exchange
Act, or any other federal or state statutory law or regulation, or at common
law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company), insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, as amended at the time of effectiveness of the
Registration Statement, including any information deemed to be a part thereof
as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or
pursuant to Rule 434, of the Rules and Regulations, or the prospectus, in the
form first filed with the Commission pursuant to Rule 424(b) of the
Regulations, or filed as part of the Registration Statement at the time of
effectiveness if no Rule 424(b) filing is required (the "Prospectus"), or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state in any of them a material fact required
to be stated therein or necessary to make the statements in the Registration
Statement or any amendment or supplement thereto not misleading or in the
Prospectus or any amendment or supplement thereto not misleading in the light
of the circumstances under which they were made, or arise out of or are based
in whole or in part on any inaccuracy in the representations and warranties of
the Company contained in this Agreement, or any failure of the Company to
perform its obligations hereunder, and will reimburse the Purchaser and each
such Purchaser Affiliate for any legal and other expenses as such expenses
are reasonably incurred by such Purchaser or such Purchaser Affiliate in
connection with investigating, defending, settling, compromising or paying
any such loss, claim, damage, liability, expense or action; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon (i) an untrue statement or alleged untrue statement or omission or
alleged omission made in the Registration Statement, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by the Purchaser expressly for
use therein, or (ii) the failure of such Purchaser to comply with the
covenants and agreements contained in Section 7.2 hereof respecting the sale
of the Shares, or (iii) the inaccuracy of any representations made by such
Purchaser herein or (iv) any statement or omission in any Prospectus that is
corrected in any subsequent Prospectus that was delivered to the Purchaser
prior to the pertinent sale or sales by the Purchaser.
(b) The Purchaser will indemnify and hold harmless the Company,
each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act and the Exchange Act, against any losses, claims,
damages, liabilities or expenses to which the Company, each of its directors,
each of its officers who signed the Registration Statement or controlling
person may become subject, under the Securities Act, the Exchange Act, or any
other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Purchaser) insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon (i) any failure to comply
with the covenants and agreements contained in Section 7.2 hereof respecting
the sale of the Shares or (ii) the inaccuracy of any representation made by
such Purchaser herein or (iii) any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or (iv) the omission or alleged omission to
state in the Registration Statement, the Prospectus or any amendment or
supplement thereto a material fact required to be stated therein or necessary
to make the statements in the Registration Statement or any amendment or
supplement thereto not misleading or in the Prospectus or any amendment or
supplement thereto not misleading in the light of the circumstances under
which they were made, 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 the Registration Statement, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by the Purchaser expressly for
use therein, and will reimburse the Company, each of its directors, each of
its officers who signed the Registration Statement or controlling person for
any legal and other expense reasonably incurred by the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action.
(c) Promptly after receipt by an indemnified party under this
Section 7.3 of notice of the threat or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 7.3 promptly notify the indemnifying
party in writing thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party for contribution or otherwise than under the indemnity agreement
contained in this Section 7.3 or to the extent it is not prejudiced as a
result of such failure. In case any such action is brought against any
indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be entitled
to participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof with
counsel reasonably satisfactory to such indemnified party. Upon receipt of
notice from the indemnifying party to such indemnified party of its election
so to assume the defense of such action and approval by the indemnified party
of counsel, the indemnifying party will not be liable to such indemnified
party under this Section 7.3 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof
unless the indemnified party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of action, in which case
the reasonable fees and expenses of counsel shall be at the expense of the
indemnifying party.
(d) If the indemnification provided for in this Section 7.3 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(a), (b) or (c) of this Section 7.3 in respect to any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable indemnifying
party shall contribute to the amount paid or payable by such indemnified
party as a result of any losses, claims, damages, liabilities or expenses
referred to herein (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Purchaser from the
placement of the Common Stock contemplated by this Agreement or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but the relative fault of the
Company and the Purchaser in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Agreement that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and each Purchaser on the other shall be
deemed to be in the same proportion as the amount paid by such Purchaser to
the Company pursuant to this Agreement for the Shares purchased by such
Purchaser that were sold pursuant to the Registration Statement bears to the
difference (the "Difference") between the amount such Purchaser paid for the
Shares that were sold pursuant to the Registration Statement and the amount
received by such Purchaser from such sale. The relative fault of the Company
on the one hand and each Purchaser on the other shall be determined by
reference to, among other things, whether the untrue or alleged statement of
a material fact or the omission or alleged omission to state a material fact
or the inaccurate or the alleged inaccurate representation and/or warranty
relates to information supplied by the Company or by such Purchaser 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, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in paragraph (c) of this Section 7.3, any legal or other fees or
expenses reasonably incurred by such party in connection with investigating
or defending any action or claim. The provisions set forth in paragraph (c)
of this Section 7.3 with respect to the notice of the threat or commencement
of any threat or action shall apply if a claim for contribution is to be made
under this paragraph (d); provided, however, that no additional notice shall
be required with respect to any threat or action for which notice has been
given under paragraph (c) for purposes of indemnification. The Company and
each Purchaser agree that it would not be just and equitable if contribution
pursuant to this Section 7.3 were determined solely by pro rata allocation or
by any other method of allocation which does not take account of the
equitable considerations referred to in this paragraph. Notwithstanding the
provisions of this Section 7.3, the Purchaser shall not be required to
contribute any amount in excess of the amount by which the Difference exceeds
the amount of any damages that such Purchaser has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
7.4 Information Available. So long as the Registration
Statement is effective covering the resale of Shares then still owned by the
Purchaser, the Company will furnish to the Purchaser:
(a) as soon as practicable after available, one copy of (i) its
Annual Report to Stockholders (which Annual Report shall
contain financial statements audited in accordance with
generally accepted accounting principles by a national firm
of certified public accountants), (ii) upon written request,
its Annual Report on Form 10-K, (iii) upon written request,
its Quarterly Reports on Form 10-Q, (iv) upon written
request, its Current Reports on Form 8-K, and (v) a full
copy of the particular Registration Statement covering the
Shares (the foregoing, in each case, excluding exhibits);
(b) upon the written request of the Purchaser, all exhibits
excluded by the parenthetical to subparagraph (a)(v) of this
Section 7.5; and
(c) upon the written request of the Purchaser, a reasonable
number of copies of the prospectuses to supply to any other
party requiring such prospectuses in connection with the
Purchaser's prospectus delivery requirements under the
Securities Act;
and the Company, upon the reasonable request of the Purchaser, will meet with
the Purchaser or a representative thereof at the Company's headquarters to
discuss information relevant for disclosure in the Registration Statement
covering the Shares, subject to appropriate confidentiality limitations as
the Company may require.
SECTION 8. Fees.
8.1 Broker's Fee. The Purchaser acknowledges that the Company
intends to pay to the CFS a fee in respect of the sale of the Shares to the
Purchaser, as described in Section 4.6 of this Agreement. Each of the parties
hereto hereby represents that, on the basis of any actions and agreements by
it, there are no other brokers or finders entitled to compensation in
connection with the sale of the Shares to the Purchaser.
8.2 Fee to Purchaser. At the First Settlement Date, the Company
shall pay to Purchaser a non-refundable, non-accountable fee of Fifteen
Thousand Dollars ($15,000) for legal and due diligence costs. The Purchaser
hereby acknowledges having already received a payment from the Company in the
amount of Ten Thousand Dollars ($10,000) for legal and due diligence costs.
8.3 Penalty Fee. Should either the Company or the Purchaser fail
to perform its obligations hereunder necessary to consummate the transactions
contemplated by this Agreement, the party which has failed to perform shall
pay a fee to the other party equal to $150,000 (the "Penalty Fee").
SECTION 9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, confirmed facsimile or nationally recognized
overnight express courier postage prepaid, and shall be deemed given when so
mailed and shall be delivered as addressed as follows:
(a) if to the Company, to:
Biophan Technologies, Inc.
000 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxxxxxxx, Xxx Xxxx 00000
Telephone: 000.000.0000
Attn: Xxxxxxx X. Xxxxxx
with a copy to:
Boylan, Brown, Code, Xxxxxx & Xxxxxx LLP
0000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: 000.000.0000
Attn.: Xxxxxxx X. Xxxxxx, Esq.
or to such other person at such other place as the Company
shall designate to the Purchaser in writing; and
(b) if to the Purchaser, at its address as set forth at the end
of this Agreement, or at such other address or addresses as
may have been furnished to the Company in writing.
SECTION 10. Changes. This Agreement may not be modified or
amended except pursuant to an instrument in writing signed by the Company and
the Purchaser.
SECTION 11. Headings. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
SECTION 12. Severability. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 13. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York and the
federal law of the United States of America.
SECTION 14. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their duly authorized representatives as of the day and year
first above written.
Biophan Technologies, Inc.
By: Xxxxxxx X. Xxxxxx
_______________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
Print or Type:
Name of Purchaser
(Individual or Institution):
Bonanza Capital Masterfund LTD
________________________________
Name of Individual representing
Purchaser (if an Institution):
Xxxxx Xxxxx
________________________________
Title of Individual representing
Purchaser (if an Institution):
Managing Director
________________________________
Signature by:
Individual Purchaser or Individual
representing Purchaser:
/s/Xxxxx Ladin__________________
________________________________
Address:________________________
Telephone:_______________________________
Facsimile:_______________________________
APPENDIX I
(one of two)
BIOPHAN TECHNOLOGIES, INC.
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 3 of this Agreement, please provide us with the
following information:
1. The exact name that your Shares are to be registered in (this is the name
that will appear on your stock certificate(s)). You may use a nominee
name if appropriate: Depository Trust Company or its nominee
2. The relationship between the Purchaser of the Shares and the Registered
Holder listed in response to item 1 above: nominee
3. The mailing address of the Registered Holder listed in response to item
1 above:
______________________
______________________
______________________
______________________
4. The Social Security Number or Tax Identification Number of the Registered
Holder listed in response to item 1 above: ______________________
APPENDIX I
(two of two)
BIOPHAN TECHNOLOGIES, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. Pursuant to the "Selling Stockholder" section of the Registration
Statement, please state your or your organization's name exactly as it should
appear in the Registration Statement:
2. Please provide the number of shares that you will beneficially own
immediately after Closing, including those Shares purchased by you pursuant
to this Agreement and those shares purchased by you or your affiliates
through other transactions:
3. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its affiliates?
_____ Yes _____ No
If yes, please indicate the nature of any such relationships below:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
