Convertible Promissory Note between Biophan Technologies, Inc. and Biomed Solutions, LLC dated January 24, 2006

Summary

Biophan Technologies, Inc. promises to repay Biomed Solutions, LLC up to $5,000,000, plus 8% annual interest, under this convertible promissory note. The loan can be repaid after 18 months upon demand, with the option for early repayment if proper notice is given. Biomed Solutions may convert the outstanding balance into Biophan’s common stock at a set price before full repayment. The agreement outlines default events, conversion procedures, and limits on interest rates. This note is not registered with the SEC and is subject to certain transfer restrictions.

EX-4.2 3 v033883_ex4-2.txt Exhibit 4.2 NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. CONVERTIBLE PROMISSORY NOTE $5,000,000 January 24, 2006 FOR VALUE RECEIVED, the undersigned, Biophan Technologies, Inc., a corporation organized under the laws of the State of Nevada, with its principal offices at 150 Lucius Gordon Drive, Suite 215, West Henrietta, New York 14586 ("Debtor"), hereby promises to pay to Biomed Solutions, LLC, a limited liability corporation organized under the laws of the State of New York, with its principal offices 150 Lucius Gordon Drive, Suite 215, West Henrietta, New York 14586 ("Creditor"), the principal sum of five million dollars ($5,000,000.00) or such lesser amount as shall have been advanced pursuant to the Line of Credit Agreement, together with interest thereon at a rate of eight percent (8%) per annum, in lawful money of the United States of America. 1. Repayment. The entire amount of principal and interest due under this Note shall be payable within fifteen (15) business days after demand therefor, which demand may be made at any time after eighteen (18) months has elapsed from the date of the issuance of this Note. Debtor may prepay all or any part of this Note at any time without premium or penalty, provided that Debtor has provided fifteen (15) days' prior written notice (the "Notice Period") of its intent to prepay and Creditor has not elected to convert all or part of the outstanding obligation prior to the expiration of the Notice Period. 2. Interest Calculations. Interest under this Note shall be compounded monthly. Partial payments shall be applied first to accrued and unpaid interest and then to principal. 3. Events of Default. Upon the occurrence and during the continuance of any of the following events (each of which shall be an "Event of Default"), Creditor may declare the principal of and interest on this Note to be due and payable upon thirty (30) days' prior written notice, and the principal of and interest on this Note shall, upon such declaration, become due and payable, anything in this Note to the contrary notwithstanding: (a) Debtor fails to pay any principal of or interest on this Note when due; or -2- (b) Debtor is dissolved or liquidated; or (c) Debtor makes an assignment for the benefit of creditors, commences (as the debtor) a case in bankruptcy, or commences (as the debtor) any proceeding under any other insolvency law; or (d) A case in bankruptcy or any proceeding under any other insolvency law is commenced against Debtor (as the debtor) and a court having jurisdiction in the premises enters a decree or order for relief against Debtor as the debtor in such case or proceeding, and such case or proceeding is continued for sixty (60) days, or Debtor consents to or admits the material allegations against it in any such case or proceeding; or (e) A trustee, receiver or agent (however named) is appointed or authorized to take charge of substantially all of the property of Debtor for the purpose of enforcing a lien against such property or for the purpose of general administration of such property for the benefit of creditors. 4. Conversion. (a) Investment by the Creditor. The entire principal amount of and accrued interest on this Note may, at the Creditor's option, be converted into shares of the Debtor's common stock (the "Note Shares") at any time prior to payment in full. The number of Note Shares to be issued upon such conversion shall be equal to the quotient obtained by dividing (i) the principal and interest amount of this Note that the Creditor desires to convert by (ii) the Conversion Price (defined below), rounded to the nearest whole share. The Note Shares shall bear registration rights as set forth in the Line of Credit Agreement. (b) Conversion Price. The Conversion Price for each Advance (as defined in the Line of Credit Agreement) shall be $1.46. (c) Mechanics and Effect of Conversion. No fractional shares of the Debtor's common stock will be issued upon conversion of this Note. In lieu of any fractional share to which the Creditor would otherwise be entitled, the Debtor will pay to the Creditor in cash the amount of the unconverted principal and interest balance of this Note that would otherwise be converted into such fractional share. Upon conversion of this Note pursuant to this Section 4, the Creditor shall surrender this Note, duly endorsed, along with written notice of Creditor's intent to convert, at the principal offices of the Debtor or any transfer agent of the Debtor. At its expense, the Debtor will, as soon as practicable thereafter, issue and deliver to such Creditor, at such principal office, a certificate or certificates for the number of shares to which such Creditor is entitled upon such conversion, together with other securities and property to which the Creditor is entitled upon such conversion under the terms of this Note, including a check payable to the Creditor for any cash amounts payable as described herein. Upon conversion of this Note, the Debtor will be forever released from all of its obligations and liabilities under this Note with regard to that portion of the principal amount and accrued interest being converted, including, without limitation, the obligation to pay such portion of the principal amount and accrued interest. -3- 5. Severability. The invalidity, illegality or unenforceability of any provision of this Note shall not render invalid, illegal or unenforceable any other provision hereof. 6. No Waiver of Remedies. No failure or delay on the part of Creditor in the exercise of any power or right in this Note shall operate as a waiver thereof, and no exercise or waiver of any single power or right, or the partial exercise thereof, shall affect Creditor's rights with respect to any and all other rights and powers. 7. Maximum Interest. This Note is subject to the express condition that at no time shall Debtor be obligated or required to pay interest on the unpaid principal balance due hereunder at a rate which is in excess of the maximum interest rate permitted under applicable law. If by the terms of this Note, Debtor is at any time required or obligated to pay interest on the unpaid principal balance due hereunder at a rate in excess of such maximum rate, then for such time as the rate of interest under this Note would be deemed excessive, its application shall be suspended and there shall be charged instead interest at such maximum rate. 8. Notices. Any and all notices to be delivered in connection herewith shall be in writing and shall be deemed given when delivered if delivered personally, ten days after being sent if properly sent by airmail, or three days after being sent if properly sent by recognized express courier service guaranteeing delivery during such period, in each case addressed to the other party at the address set forth above or such other address as any party may furnish by notice to the other as herein provided. 9. Successors and Assigns. This Note shall inure to the benefit of Creditor, any holder of this Note and their respective successors and permitted assigns. Whenever Debtor or Creditor is referred to in this Note, such references shall be deemed references to its successors and permitted assigns and, in the case of Creditor, any other holder of this Note. Neither party may assign its rights or obligations under this Note without the prior written consent of the other party. 10. Headings and Captions. Any headings or captions preceding the text of the separate sections hereof are intended solely for convenience of reference and shall not constitute a part of this Note, nor shall they affect its meaning, construction or effect. 11. Governing Law; Jurisdiction. This Note shall be construed and interpreted in accordance with the laws of New York without reference to New York's choice of law rules. Debtor and Creditor agree that any litigation in connection with this Note shall be commenced and conducted by any of them only in New York in the County of Monroe, or in the U.S. District Court whose jurisdiction includes such county, which courts shall have exclusive jurisdiction thereof. Debtor and Creditor submit to the venue of such courts and agree that service of process upon them shall be valid if delivered to the applicable address specified herein. -4- BIOPHAN TECHNOLOGIES, INC. By: /s/ Darryl Canfield --------------------------------------------- Name: Darryl Canfield Title: Vice President and Chief Financial Officer