THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF BION
ENVIRONMENTAL TECHNOLOGIES, INC. (THE "COMPANY"). THE SECURITIES REPRESENTED BY
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN
EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE
SECURITIES LAWS.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
No. B-
Convertible Bridge Note
$
Date
Bion Environmental Technologies, Inc. a Colorado corporation (the
"Company"), for value received, hereby promises to pay to or registered assigns
(the "Holder"), the principal sum of ( ), with interest from the date of
issuance of this Convertible Bridge Note on the unpaid principal balance at a
rate equal to ten percent (10%) per annum, July 1, 2001 (the "Maturity Date").
Payment shall be made at such place as designated by the Holder upon surrender
of this Convertible Bridge Note, and shall be in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts. Interest shall be computed on the basis of
a 360-day year of twelve 30-day months. This Convertible Bridge Note is one of a
duly authorized issue of Bion Environmental Technologies, Inc. 10% Convertible
Bridge Notes in an aggregate principal amount of $1,000,000 and a maximum
aggregate principal amount of $5,000,000 (individually a "Note" and collectively
the "Notes") issued pursuant to a Note and Warrant Purchase Agreement of even
date herewith between the Company, the Holder and the other parties thereto (the
"Purchase Agreement").
SECTION 1. Prepayment
This Note (including interest accrued on the principal hereof) may be
prepaid by the Company, at any time without penalty or premium.
SECTION 2. Mandatory Conversion
(a) Prepayment or Conversion. In the event the Company shall issue
any capital stock (or instrument convertible into capital stock) ("Stock") of
the Company subsequent to the issuance of at least $1,000,000 of Convertible
Bridge Notes pursuant to the offering in which this Note was issued, for an
aggregate purchase price of at least $5,000,000 (exclusive of the sale of the
Notes), pursuant to a public or private offering (an "Offering"), then, at the
Company's option, either (i) the Company shall prepay the Notes, without penalty
or premium, no later than 30 days following the closing of the Offering or (ii)
the Notes shall be converted ("Conversion") into such number of shares of the
Stock of the Company as is equal to the Conversion Amount (as defined below)
divided by the then current Conversion Price (as defined below). The Conversion
Amount shall be the aggregate principal value of the Notes held by such Holder
plus any accrued and unpaid interest. The Conversion Price shall be the price
paid for one share of Stock issued in the Offering, subject to adjustment as
provided below.
(b) Conversion Procedures. Each Holder of Notes shall surrender the
Notes at the offices of the Company, which Notes shall be accompanied by
irrevocable written notice to the Company specifying the name or names (with
address) in which a certificate or certificates evidencing shares of Stock are
to be issued.
The Company shall deliver to the holder of the Notes, or to the
nominee or nominees of such person, certificates evidencing the number of full
shares of Stock to which such person shall be entitled as aforesaid, together
with a cash adjustment of any fraction of a share as hereinafter provided.
Subject to the following provisions of this paragraph, such conversion shall be
deemed to have been made as of the date of such notice and the person or persons
entitled to receive Stock deliverable upon conversion of such Notes shall be
treated for all purposes as the record holder or holders of such Stock on such
date; provided, however, that the Company shall not be required to convert any
Notes while the stock transfer books of the Company are closed for any purpose,
but the giving of notice during any period while such books are so closed shall
become effective for conversion immediately upon the reopening of such books as
if the notice had been given on the date of such reopening, and the conversion
shall be at the conversion rate in effect on such date.
(c) Protection in Case of a Merger, Etc. (i) In case of any capital
reorganization or reclassification, or any consolidation or merger to which the
Company is a party other than a merger or consolidation in which the Company is
the continuing corporation, or in case of any sale or conveyance to another
entity of the property of the Company as an entirety or substantially as a
entirety, or in the case of any statutory exchange of securities with another
corporation (including any exchange effected in connection with a merger of a
third corporation into the Company), the Holder of this Note shall have the
right thereafter to receive on the conversion of this Note the kind and amount
of securities, cash or other property which the Holder would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Note been converted into shares of Common Stock immediately prior to
the effective date of such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this Section 2 with respect to the rights and interests
thereafter of the Holder of this Note to the end that the provisions set forth
in this Section 2 shall thereafter correspondingly be made applicable, as nearly
as may reasonably be, in relation to any shares of stock or other securities or
property thereafter deliverable on the Note. The above provisions of this
Subsection (c)(i) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, statutory exchanges, sales or
conveyances. The Company shall require the issuer of any shares of stock or
other securities or property thereafter deliverable on the exercise of this
Note to be responsible for all of the agreements and obligations of the Company
hereunder. Notice of any such reorganization, reclassification, consolidation,
merger, statutory exchange, sale or conveyance and of said provisions so
proposed to be made, shall be mailed to the Holders of the Notes not less than
30 days prior to such event. A sale of all or substantially all of the assets of
the Company for a consideration consisting primarily of securities shall be
deemed a consolidation or merger for the foregoing purposes.
(ii) In case any event shall occur as to which the other
provision of this Section 2 is not strictly applicable but as to which the
failure to make any adjustment would not fairly protect the conversion rights
represented by this Note in accordance with the essential intent and principles
hereof then, in each such case, the Holders of Notes may appoint a firm of
independent public accountants of recognized national standing reasonably
acceptable to the Company, which shall give their opinion as to the adjustment,
if any, on a basis consistent with the essential intent and principles
established herein, necessary to preserve the conversion rights. Upon receipt of
such opinion, the Company will promptly mail a copy thereof to the Holder of
this Note and shall make the adjustments described therein. The fees and
expenses of such independent public accountants shall be borne by the Company.
(d) Reservation of Shares; Transfer Taxes; Etc. The Company shall at
all times reserve and keep available, out of its authorized and unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
Notes, such number of shares of its Common Stock as shall be sufficient to
effect the conversion of all Notes from time to time outstanding. The Company
shall use its best efforts from time to time, in accordance with the laws of the
State of Colorado, to increase the authorized number of shares of Common Stock
if at any time the number of shares of Common Stock not outstanding shall not be
sufficient to permit the conversion of all the then-outstanding Notes. In the
event the Company intends to offer Stock other than Common Stock, the Company
shall authorize the issuance of sufficient shares of such Stock to permit the
conversion of all the then-outstanding Notes.
The Company shall pay any and all issue or other taxes that may be
payable in respect of any issue or delivery of shares of Stock on conversion of
the Notes. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue or delivery of Stock
(or other securities or assets) in a name other than that in which the Notes so
converted were registered, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Company the amount of
such tax or has established, to the satisfaction of the Company, that such tax
has been paid.
SECTION 3. Fractional Shares
The Company shall not be required to issue fractions of shares of
Common Stock or other Stock of the Company upon the conversion of the Note. If
any fraction of a share would be issuable on the Conversion of the Note, the
Company shall purchase such fraction for an amount in cash equal to the same
fraction of the closing price for the Common Stock on the trading date
immediately preceding the date of exercise of the conversion or the fair market
value of such other Stock, as determined in good faith by the Board of Directors
of the Company.
SECTION 4. Affirmative Covenants of the Company.
The Company covenants and agrees that until the payment in full of this
Note, the Company shall:
(a) Existence; Business. (i) Preserve, renew and keep in full force
and effect its legal existence and (ii) obtain, preserve, renew, extend and keep
in full force and effect the licenses, permits, authorizations, patents,
trademarks and trade names material to its business.
(b) Use of Proceeds. Use the proceeds of the Notes of this issue
solely as set forth in Section 7.3 of the Purchase Agreement.
(c) Reports. Furnish to the Holder, at the time furnished to the
Company's shareholders, reports furnished generally to the Company's
shareholders, and copies of Current Reports on Form 8-K.
(d) Notice of Events of Default. Furnish to the Holder prompt written
notice of any Event of Default, specifying the nature and extent thereof and
corrective action, if any, proposed to be taken with respect thereto.
(e) Authorization of Stock Issuable Upon Conversion. Authorize and
reserve a sufficient number of its shares of Stock and Common Stock for issuance
upon Conversion of the Note.
SECTION 5. Negative Covenants of the Company.
The Company covenants and agrees with the Holder that until the payment in
full of this Note, the Company shall not:
(a) Dividends and Distributions. Declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction of capital
or otherwise), whether in cash, property, securities or a combination thereof,
with respect to any shares of its capital stock or directly or indirectly
redeem, purchase, retire or otherwise acquire for value any shares of any class
of its capital stock or set aside any amount for any such purpose, except as
permitted by Section 7.14 of the Purchase Agreement.
(b) No Impairment. By amendment of its charter or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Note, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of this
Note against impairment.
SECTION 6. Events of Default Defined.
The following shall each constitute an "Event of Default" hereunder:
(a) the failure of the Company to make any payment of principal of or
interest on this Note when due and payable;
(b) the failure of the Company to observe or perform any covenant in
this Note or in the Purchase Agreement, and such failure shall have continued
unremedied for a period of five (5) days;
(c) if the Company shall:
(1) admit in writing its inability to pay its debts generally as
they become due,
(2) file a petition in bankruptcy or a petition to take advantage
of any insolvency act,
(3) make an assignment for the benefit of its creditors,
(4) consent to the appointment of a receiver of itself or of the
whole or any substantial part of its property,
(5) on a petition in bankruptcy filed against, be adjudicated a
bankrupt, or
(6) file a petition or answer seeking reorganization or
arrangement under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any state thereof;
(d) if a court of competent jurisdiction shall enter an order,
judgment or decree appointing, without the consent of the Company, a receiver of
the Company or of the whole or any substantial part of its property, or
approving a petition filed against it seeking reorganization or arrangement of
the Company under the federal bankruptcy laws or any other applicable law or
statute of the United States of America or any State thereof, and such order,
judgment or decree shall not be vacated or set aside or stayed within thirty
(30) days from the date of entry thereof;
(e) if, under the provisions of any other law for the relief or aid
of debtors, any court of competent jurisdiction shall assume custody or control
of the Company or the whole or any substantial part of its property and such
custody or control shall not be terminated or stayed within thirty (30) days
from the date of assumption of such custody or control;
(f) the liquidation, dissolution or winding up of the Company;
(g) the failure of the shareholders to authorize and approve the
issuance of these Notes or the issuance of the Stock underlying these Notes, the
Bridge Warrants (as such terms are defined in the Purchase Agreement), or any
Common Stock underlying the foregoing to the extent such authorization is
necessary pursuant to the rules of the Nasdaq National Market or any other
applicable law, rule or regulation; or
(h) A final judgment or judgments for the payment of money in excess
of $100,000 in the aggregate shall be rendered by one or more courts,
administrative or arbitral tribunals or other bodies having jurisdiction against
the Company and the same shall not be discharged (or provision shall not be made
for such discharge), or a stay of execution thereof shall not be procured,
within 30 days from the date of entry thereof and the Company shall not, within
such 30-day period, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal.
SECTION 7. Remedies upon Event of Default.
(a) Upon the occurrence of an Event of Default, (i) the entire
principal amount of, and all accrued and unpaid interest on, this Note shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company. In addition, the Holder may take any action available to
it under the Purchase Agreement or at law or in equity or by statute or
otherwise.
(b) No remedy herein conferred upon the Holder of this Note is
intended to be exclusive of any other remedy and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
SECTION 8. Note Register.
(a) The Company shall keep at its principal executive office a
register (herein sometimes referred to as the "Note Register"), in which,
subject to such reasonable regulations as it may prescribe, but at its expense
(other than transfer taxes, if any), the Company shall provide for the
registration and transfer of this Note.
(b) Whenever this Note shall be surrendered at the principal
executive office of the Company for transfer or exchange, accompanied by a
written instrument of transfer in form reasonably satisfactory to the Company
duly executed by the Holder hereof or his attorney duly authorized in writing,
the Company shall execute and deliver in exchange therefor a new Note or Notes,
as may be requested by such Xxxxxx, in the same aggregate unpaid principal
amount and payable on the same date as the principal amount of the Note or Notes
so surrendered; each such new Note shall be dated as of the date to which
interest has been paid on the unpaid principal amount of the Note or Notes so
surrendered and shall be in such principal amount and registered in such name or
names as such Holder may designate in writing.
(c) Upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Note and of
indemnity reasonably satisfactory to it, and upon reimbursement to the Company
of all reasonable expenses incidental thereto, and upon surrender and
cancellation of this Note (in case of mutilation) the Company will make and
deliver in lieu of this Note a new Note of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on the unpaid
principal amount of this Note in lieu of which such new Note is made and
delivered.
SECTION 9. Registration Under Securities Act of 1933.
The Holder of this Note shall have registration rights as provided in
Section 8 of the Purchase Agreement, with respect to the Securities issuable
upon conversion of the Notes. If the Holder is not a party to the Purchase
Agreement, by acceptance of this Note, the Holder agrees to comply with
provisions of Section 8 of the Purchase Agreement to the same extent as if it
were a party thereto.
SECTION 10. Miscellaneous.
(a) Amendments and Waivers. The holders of a majority in principal
amount of outstanding Notes of this issue may waive or otherwise consent to the
amendment of any of the provisions hereof, provided that no such waiver or
amendment may reduce the principal amount of or interest on any of the Notes of
this issue or change the stated maturity of the principal or reduce the
percentage of holders of Notes of this issue necessary to waive or amend the
provisions of this Note, without the consent of each holder of any Note affected
thereby.
(b) Restrictions on Transferability. In addition to the restrictions
set forth in Section 9 of this Note, the securities represented by this Note
have been acquired for investment and have not been registered under the
Securities Act of 1933, as amended, or the securities laws of any state or other
jurisdiction. Without such registration, such securities may not be sold,
pledged, hypothecated or otherwise transferred, except pursuant to exemptions
from the Securities Act of 1933, and the securities laws of any state or other
jurisdiction. Notwithstanding the above, the holder of this Note has been
provided the registration rights contained in Section 8 of the Purchase
Agreement with respect to the shares of the Company's Common Stock which may be
acquired upon the Conversion of the Note.
(c) Forbearance from Suit. No holder of Notes of this issue shall
institute any suit or proceeding for the enforcement of the payment of principal
or interest unless the holders of at least a majority in principal amount of all
of the outstanding Notes of this issue join in such suit or proceeding.
(d) Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, excluding the body of law
relating to conflict of laws. Notwithstanding anything to the contrary contained
herein, in no event may the effective rate of interest collected or received by
the Holder exceed that which may be charged, collected or received by the Holder
under applicable law.
(e) Interpretation. If any term or provision of this Note shall be
held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
(f) Successors and Assigns. This Note shall be binding upon the Company and
its successors and assigns and shall inure to the benefit of the Holder and its
successors and assigns.
(g) Notices. All notices, requests, consents and demands shall be made in
writing and shall be mailed postage prepaid, or delivered by hand, to the
Company or to the Holder thereof at their respective addresses set forth below
or to such other address as may be furnished in writing to the other party
hereto:
If to the Holder: At the address shown on Schedule A attached hereto.
If to the Company: Bion Environmental Technologies, Inc.
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Chief Executive Officer
(h) Saturdays, Sundays, Holidays. If any date that may at any time be
specified in this Note as a date for the making of any payment of principal or
interest under this Note shall fall on Saturday, Sunday or on a day which in New
York shall be a legal holiday, then the date for the making of that payment
shall be the next subsequent day which is not a Saturday, Sunday or legal
holiday.
(i) Purchase Agreement. This Note is subject to the terms contained
in the Purchase Agreement dated the date hereof between the Company and the
purchasers of the Notes and the holder of this Note is entitled to the benefits
of such Purchase Agreement and may, in addition to any rights hereunder, enforce
the agreements of the Company contained therein and exercise the remedies
provided for thereby or otherwise available in respect thereof.
IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed
instrument on the date first above written by the duly authorized representative
of the Company.
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ATTEST: BION ENVIRONMENTAL TECHNOLOGIES,
INC.
By:
Name:
Its:
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(Corporate Seal)
Schedule A
Holder:
