Exhibit 5
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
$100,000 New York, New York
------------------
Bion Environmental Technologies, Inc. a Colorado corporation (the
"Company"), for value received, hereby promises to pay to D2 Co., LLC or
registered assigns (the "Holder"), the principal sum of one hundred thousand
dollars ($100,000.00), 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 a private offering of a minimum 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 Prepayment or 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
- 2 -
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.
- 3 -
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.
- 4 -
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 -
(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.
- 6 -
(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.
- 7 -
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.
- 8 -
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.
ATTEST: BION ENVIRONMENTAL
TECHNOLOGIES, INC.
----------------------- By:
-------------------------------
Name:
Its:
(Corporate Seal)
- 9 -
Schedule A
Holder:
D2 Co., LLC
0 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
- 10 -
