EXHIBIT 10.12
NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT (this "Agreement") dated as of______ __, 2003,
by and among BION DAIRY CORPORATION, a Colorado corporation ("Dairy"), BION
TECHNOLOGIES, INC. a Colorado corporation ("BionTech"), BIONSOIL INC., a
Colorado corporation ("BionSoil"), BION ENVIRONMENTAL TECHNOLOGIES, INC., a
publicly-held Colorado corporation ("Bion") and the other parties executing
signature pages hereto (collectively, the "Purchasers"). Dairy, BionTech and
BionSoil are all wholly owned subsidiaries of Bion.
WHEREAS, in a series of transactions and upon and subject to the terms
and conditions hereinafter set forth, Bion and Dairy will use their best
efforts raise funds for their operations, and, for such purpose, Dairy
desires to issue and sell to the Purchasers, and the Purchasers desire to
purchase from Dairy a maximum of $2,065,000 aggregate face amount of 2003
Series A Convertible Promissory Notes (the "Promissory Notes" or "Notes") in
the form attached hereto as Exhibit A;
WHEREAS, these Promissory Notes are part of a multiple series of duly
authorized issues of Bion Dairy Corporation 2003 Convertible Promissory Notes
in which the conversion prices of the various series may be different from
each other, but all of the amounts due under all of the series of the 2003
Convertible Promissory Notes are intended to be secured by the same identical
collateral which is to be shared in pari pasu by all of the holders of all of
the 2003 Convertible Promissory Notes, irrespective of the dates of issuance
of any of the underlying promissory notes and irrespective of the dates of
any related lien filings.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the Purchasers and Dairy hereby agree as
follows:
1. The Transaction.
1.1 Purchase and Sale of the Promissory Notes; Minimum Offering Amount.
Subject to the terms and conditions set forth herein, Dairy hereby agrees to
issue and sell to the Purchasers, and each Purchaser, hereby agrees to
purchase from Dairy, such number of Promissory Notes (as defined below) at
the Closing (as such term is defined in Section 2.1 hereof) as is listed on
its signature page. Closing will only take place if Purchasers, in the
aggregate, agree to purchase a minimum of $1,065,000 in principal amount of
Promissory Notes. See paragraphs 1.5 and 2.1 below.
1.2 Collateral. Bion shall execute and deliver a Pledge Agreement, and
Dairy, BionTech, BionSoil and Bion shall each execute and deliver a Security
Agreement, all in substantially the forms attached hereto, pursuant to which
Bion will pledge all of its stock in Dairy and Centerpoint Corporation
("CPTX") and each of Dairy, BionTech, BionSoil and Bion will pledge all of
their right, title and interest in and to their respective and collective
intellectual property rights, patents, copyrights, trade secrets and know-how
(collectively, "Bion Intellectual Property") as collateral for the repayment
of the Promissory Notes; provided, however, that the Purchasers hereby
specifically consent to the granting of a security interest in the collateral
for the Promissory Notes to the purchasers of additional series of 2003
Convertible Promissory Notes after the date hereof. In connection with the
Bion Intellectual Property, Dairy shall be responsible for the costs of: (a)
the 2003 Biobalance license payment, which payment shall be based on a
renegotiated license that is acceptable in form and substance to Dairy
(unless Dairy elects to make the payment pursuant to the existing Biobalance
license), (b) filings for patent protection in such foreign jurisdictions as
shall be mutually agreed to by Bion and Dairy, and (c) normal maintenance of
the Intellectual Property. Bion shall be responsible for all other costs
related to the Bion Intellectual Property, unless otherwise agreed.
1.3 Maximum Amount of 2003 Series Debt. The maximum aggregate
principal amount of the 2003 Series A Convertible Promissory Notes combined
shall not exceed $2,065,000. The aggregate principal amount of all of the
various series of 2003 Convertible Promissory Notes shall not exceed
$6,000,000.
1.4 Repayment and Conversion. If the first of the Bion Conditions as
set forth at Schedule D to the Promissory Notes has been satisfied, upon the
happening of the earliest to occur of: a) one year after the meeting of the
Technical Conditions for the Texas/XxXxxxx Dairy Installation as set forth
in Schedule B to the 2003 Convertible Promissory Notes; or b) meeting all of
the Technical Conditions (both Texas/XxXxxxx Dairy installation and the
California/Fresno State installation) set forth in Schedule B to the 2003
Convertible Promissory Note; or c) meeting the Technical Conditions for the
Texas/XxXxxxx Dairy installation and Dairy having sufficient funds to cover
its next 12 month operating budget, all amounts due under the Promissory
Notes will be mandatorily and automatically converted into equity securities
of Dairy in accordance with the terms and conditions of the Promissory Notes,
unless the holders of a majority in principal amount of the outstanding
Promissory Notes elect to convert the amounts due under the Promissory Notes
into equity securities of Bion, in which case, all amounts due under the
Promissory Notes will be mandatorily and automatically converted into equity
securities of Bion.
1.5 Purpose; Use of Proceeds; Disbursement Procedures; Risks to Bion.
The primary purposes of this transaction (including the subsequent sale of
the Promissory Notes) are: first, to finance the Xxxxxxx dairy installation
in Texas and preliminary work in preparation for the Fresno State dairy
installation in California (including the cost of Bion's current employees
and related operating overhead necessary for these installations); next, to
fund the extension, protection and commercialization of the Bion Intellectual
Property; and finally, to provide funds to Bion to allow Bion to: (a)obtain
release of an existing contractual restriction, (b) work out its existing
problems with creditors, and (c) become current in its SEC filings and
related matters, provided , however, if at the date of the initial Closing
of this offering Bright Capital, Ltd. (and others connected with Bion's prior
management) has advanced in excess of $665,000 to Bion for the purposes set
forth above, it may elect to convert only $665,000 of such advances into
Promissory Notes and to receive reimbursement of the excess, unconverted
advances in cash from the proceeds of this offering .See paragraph 2.1
below.. The proceeds from the sale of the Promissory Notes shall be
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segregated by Dairy into a separate account for disbursement solely pursuant
to requests from the designated General Manager of Dairy (see paragraph 1.9
below) to the officers of Dairy for the purposes set forth herein consistent
with the Use of Proceeds as set forth in Schedule 7.2 attached hereto.
Purchasers acknowledge that if substantially less than the maximum amount of
Promissory Notes is sold, there will be significant risks to Bion which will
result from the limited funds available for it to use in resolving its
problems with its creditors and to become current in its SEC filings and
related matters.
1.6 Corporate Governance. Immediately upon the conversion of the 2003
Convertible Promissory Notes into Dairy Stock, Bion shall cause the board of
directors of Dairy to consist of three members, one of whom shall be
designated by Bion and the remaining two of whom shall be designated by a
majority of the shareholders of Dairy other than Bion (the former Holders of
the Promissory Notes). Until the earlier to occur of the conversion of the
Promissory Notes into shares of Bion or the effective date of a registration
statement allowing Bion to distribute its Dairy shares, Bion agrees to vote
its shares to maintain this Dairy board composition and to vote in agreement
with such Dairy board of directors, except as to the sale by Dairy of a
material portion of its assets or stock, or a merger of Dairy (or
transactions of similar type and magnitude). Upon conversion of the
Promissory Notes into Dairy stock, Dairy shall have the right for a period of
two years to nominate a majority of Bion's Board of Directors and Bion and
its Board of Directors shall make such filings with the Securities and
Exchange Commission and take such actions as are necessary and appropriate to
appoint or support the election of such nominees, provided, however, that in
regard to transactions, if any, between Bion and Dairy, the Directors
nominated by Dairy shall abstain from voting.
1.7 Subsequent Tax Free Exchange By a date which is the earlier of
two years after the initial conversion into shares of Dairy Stock (if such
conversion takes place) or 36 months from the initial Closing of this
Offering, Dairy (and/or its shareholders) shall use their best efforts to
either: (a) enter into an agreed upon tax- free exchange transaction with
Bion at a ratio of one share of Dairy Stock for one share of Bion stock (with
equivalent exchange/reissuance for outstanding options/warrants of Dairy, if
any) (this ratio is based upon Bion's capital structure consisting of: (i)
4,800,000 shares of its common stock (reflecting "cancellation" of Bion's
prorata shares of its common stock held in CPTX, if any), (ii) 2,000,000
warrants and options (in aggregate)(with exercise prices of $7.50 or
below)(which number of options/warrants shall be adjusted upward for any
options/warrants issued in connection with the compensation by Bion and/or
Dairy of additional (and/or existing) management and/or consulting personnel
between the date hereof and the date of the tax-free exchange transaction),
and (iii) no debt (other than (aa) D2 debt( and/or other obligations to
affiliates of management personnel/consultants including without limitation
Xxxxxxx Xxxxxxx and Xxxx X. Xxxxx), (bb) debt owed to Dairy, and (cc) normal
trade creditor obligations(all of which #s may be adjusted upward by mutual
agreement of Bion and Dairy subsequent to the conversion of the Notes into
Dairy Stock). In the event that the capitalization of Bion differs
materially from the structure described herein (whether in favor of Bion or
Dairy), the exchange ratio shall be equitably adjusted to reflect such
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material variance); or (b) Dairy shall cause to become effective, at its own
cost, a registration statement which allows Bion to distribute its shares of
Dairy Stock to its shareholders and/or creditors.
1.8 Right of First Refusal. Upon conversion of the Promissory Notes
into Dairy common stock, Bion, BionTech and BionSoil shall jointly grant to
Dairy the first right of refusal to license all of the Bion Intellectual
Property for uses outside of the dairy industry for a period of two years
from the date of conversion of the Notes into Dairy Stock.
1.9 Operations; Personnel.
(a) Upon initial Closing, Xx. Xxxxxxx Xxxxxxx shall serve as the
initial designated General Manager of Dairy on a consulting basis and shall
serve Bion as a consultant, pursuant to an agreement between each of Bion and
Dairy and Bright Capital, Ltd. Xx. Xxxxxxx will coordinate and supervise the
activities of Dairy, and assist Bion in connection with the matters set forth
in paragraph 1.5 above and such other matters as shall be requested from time
to time by the officers of Dairy and/or Bion.
(b) It is currently anticipated that initially most of the
activities of Dairy will be carried out by Bion's core technical and
engineering staff (including, without limitation, Xxxx Xxxxxxxx, Technical
Director, Xxxxx Xxxxxx, Chief Technical Officer, and Xxxxxx Xxxxx, the Chief
Operating Officer of BionTech) and third party contractors; provided,
however, that in the event that the Bion Conditions (set forth at Schedule D
to the Promissory Notes) have not been satisfied by December 31, 2003, i) all
of Bion's key employees/consultants shall become direct
employees/consultants of Dairy (on identical compensation terms as each had
with Bion), ii) all of the Bion options of each employee/consultant shall be
cancelled and Dairy shall grant/issue to each employee/consultant (effective
January 1, 2004) Dairy options for a number of shares of Dairy Stock equal
to the cancelled Bion options with equivalent terms as to exercise price,
exercise term, etc., and iii) the number of options/warrants at paragraph 1.7
a) ii) shall be reduced by the number of such cancelled Bion options which
had been granted as of the Initial Closing Date.
2. Closing.
2.1 Closing. The initial Closing and each additional Closing of the
purchase and sale of the Promissory Notes will take place at the offices of
Bion. Such closings (each, a "Closing" and collectively, the "Closings")
will take place at 10:00 A.M., local time, on such dates as may be mutually
agreed upon by Dairy and the Purchasers. The initial Closing shall take
place when Bion has received commitments for the purchase of not less than
$1,065,000 of Promissory Notes. The date of each Closing is referred to
herein as a "Closing Date." The date of the first Closing shall hereafter be
referred to as the "Initial Closing Date" and the date of the final Closing
shall hereafter be referred to as the "Final Closing Date." At each Closing,
Dairy will deliver to the Purchasers the Promissory Notes as set forth in
Section 1 hereof, against payment of the Purchase Price, by wire transfer
payable to Dairy; provided , however, that in such Initial Closing it is
anticipated that Promissory Notes totaling approximately $665,000 will be
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issued in exchange for advances made by Bion's former management to Bion
through D2, LLC. and/or Bright Capital, Ltd. which advances have already been
applied to the purposes set forth at paragraph 1.5 above (and such issuances
shall count toward the commitments needed for the initial Closing). The
Promissory Notes shall be registered in each Purchaser's name or the name of
its nominee(s) in such denominations as the Purchaser shall request pursuant
to instructions delivered to Dairy not less than two days prior to such
Closing Date.
3. Conditions to the Obligations of Purchasers at the Closing The
obligation of each Purchaser to purchase and pay for the Promissory Notes to
be purchased by it at a Closing is subject to the satisfaction on or prior to
the Closing Date of the following conditions, which may only be waived by
written consent of Purchasers:
3.1 Representations and Warranties. All of the representations and
warranties of Dairy contained in this Agreement shall be true and correct at
and as of such Closing Date, except for changes caused by the transactions
contemplated hereby.
3.2 Performance of Covenants. All of the covenants and agreements of
Dairy contained in this Agreement and required to be performed on or prior to
the Closing Date shall have been performed in a manner satisfactory in all
respects to Purchasers.
3.3 Legal Action. No injunction, order, investigation, claim, action
or proceeding before any court or governmental body shall be pending or
threatened wherein an unfavorable judgment, decree or order would restrain,
impair or prevent the carrying out of this Agreement or any of the
transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause any such transaction to be rescinded.
3.4 Consents. Each of Dairy, Bion, BionSoil, and BionTech shall have
obtained in writing or made all consents, waivers, approvals, orders,
permits, licenses and authorizations of, and registrations, declarations,
notices to and filings and applications with, any governmental authority or
any other person or entity required to be obtained or made in order to enable
Bion and each of its subsidiaries to observe and comply with all its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
4. Conditions to the Obligations of Dairy at the Closing. The obligation of
Dairy to issue and sell the Promissory Notes to the Purchasers at a Closing
is subject to the satisfaction on or prior to the Closing Date of the
following conditions, any of which may be waived by Dairy:
4.1 Representations and Warranties. The representations and warranties
of the Purchasers contained in this Agreement shall be true and correct at
and as of the Closing Date.
4.2 Legal Action. No injunction, order, investigation, claim, action
or proceeding before any court or governmental body shall be pending or
threatened wherein an unfavorable judgment, decree or order would restrain,
impair or prevent the carrying out of this Agreement or any of the
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transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause any such transaction to be rescinded.
5. Representations and Warranties of Dairy. Dairy hereby represents and
warrants to the Purchasers that:
5.1 Organization. Dairy is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado. Dairy
has all requisite corporate power and authority, and holds all licenses,
permits and other required authorizations from governmental authorities,
necessary to conduct its business as it is now being conducted or proposed to
be conducted and to own or lease the properties and assets it now owns or
holds under lease. Except where such failure to qualify could not reasonably
be deemed to have a material adverse effect on Dairy, Dairy is duly qualified
or licensed and in good standing as a foreign corporation in each
jurisdiction wherein the character of its properties or the nature of the
activities conducted by it makes such qualification or licensing necessary.
5.2 Capitalization. Dairy currently has authorized capital of
20,000,000 Common Shares and 100,000 Preferred Shares, of which 4,000,000
Common Shares are currently issued and outstanding (all of which are
currently owned by Bion). No shares of preferred stock are currently issued
and outstanding. Bion's authorized capitalization is set forth in the SEC
Documents (as defined below). All outstanding securities of both Bion and
Dairy are validly issued, fully paid and nonassessable. No shareholder of
either Bion or Dairy is entitled to any preemptive rights with respect to the
purchase or sale of any securities by Dairy or Bion, as the case may be.
There are no outstanding options, warrants or other rights, commitments or
arrangements, written or oral, to purchase or otherwise acquire any
authorized but unissued shares of capital stock of Dairy or any security
directly or indirectly convertible into or exchangeable for any capital stock
of Dairy or under which any such option, warrant or convertible security may
be issued in the future, and there are no voting trusts or agreements,
shareholders' agreements, pledge agreements, buy-sell, rights of first offer,
negotiation or refusal or proxies or similar arrangements relating to any
securities of Dairy to which Dairy is a party, and to the best knowledge of
Dairy after due investigation there are no such trusts, agreement, rights,
proxies or similar arrangements as to which Dairy is not a party. Except as
has been set forth in the SEC Documents, there are no outstanding options,
warrants or other rights, commitments or arrangements, written or oral, to
purchase or otherwise acquire any authorized but unissued shares of capital
stock of Bion or any security directly or indirectly convertible into or
exchangeable for any capital stock of Bion under which any such option,
warrant or convertible security may be issued in the future, and there are no
voting trusts or agreements, shareholders' agreements, pledge agreements,
buy-sell, rights of first offer, negotiation or refusal or proxies or similar
arrangements relating to any securities of Bion to which Bion is a party, and
to the best knowledge of Dairy after due investigation there are no such
trusts, agreement, rights, proxies or similar arrangements as to which Bion
is not a party. Except as set forth in the SEC Documents, no antidilution
adjustments with respect to the outstanding securities of Bion will be
triggered by the issuance or conversion of the securities contemplated
hereby.
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5.3 Due Authorization, Valid Issuance, Etc. The Promissory Notes have
been duly authorized and, when issued in accordance with this Agreement upon
the Closing Date, will be free and clear of all liens imposed by or through
Dairy. The shares of capital stock to be issued by Dairy and/or Bion upon
conversion of the Promissory Notes have been duly authorized and shares of
Common Stock have been reserved, and upon the conversion of the Promissory
Notes will be duly and validly issued, fully paid and nonassessable and will
be free and clear of all liens imposed by or through Dairy or Bion. Except
as set forth in the SEC Documents, the issuance, sale and clear delivery of
the Promissory Notes and the Bion Stock or Dairy Stock (as appropriate) that
will be issued to the Purchasers upon the conversion of the Promissory Notes
will not be subject to any preemptive right of shareholders of Dairy or Bion
or to any right of first refusal or other right in favor of any person.
5.4 Authorization; No Breach. Dairy has the full corporate power and
authority to execute, deliver and enter into this Agreement and to perform
its obligations hereunder, and the execution, delivery and performance of
this Agreement, the Promissory Notes and any related financing statement and
all other transactions contemplated hereby have been duly authorized by
Dairy, and this Agreement constitutes a legal, valid and binding obligation
of Dairy, enforceable in accordance with its terms except as the
enforceability hereof may be limited by bankruptcy, insolvency, moratorium
and similar laws affecting creditors' rights generally. To Dairy's
knowledge, the execution and delivery by Dairy of this Agreement, the
offering, sale and issuance of the Promissory Notes pursuant to this
Agreement, and the performance and fulfillment by Dairy of its obligations
under this Agreement, the Promissory Notes do not and will not (a) conflict
with or result in a breach of the terms, conditions or provisions of, (b)
constitute a default under, or event which, with notice or lapse of time or
both, would constitute a breach of or default under, (c) result in the
creation of any lien, security interest, adverse claim, charge or encumbrance
upon the capital stock or assets of Dairy pursuant to, (d) give any third
party the right to accelerate any obligation under or terminate, (e) result
in a violation of, (f) result in the loss of any license, certificate, legal
privilege or legal right enjoyed or possessed by Dairy under, or (g) except
for filings required to be made with the Securities and Exchange Commission,
require any authorization, consent, approval, exemption or other action by or
notice to any court or administrative or governmental body pursuant to or
require the consent of any other person under, the Articles of Incorporation
or By-Laws of Dairy or any law, statute, rule or regulation to which Dairy is
subject or by which any of its properties are bound, or any agreement,
instrument, order, judgment or decree to which Dairy is subject or by which
its properties are bound.
5.5 Financial Statements and SEC Documents.
(a) Dairy has conducted no operations, has no assets or
liabilities and has no financial statements. Incorporated by reference
herein are (i) the audited financial statements of Bion for the fiscal year
ended June 30, 2002, including the balance sheet as at the end of such fiscal
year and the related statements of operations, shareholders' equity (deficit)
and cash flows for such fiscal year, certified by BDO Xxxxxxx, LLP and (ii)
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the unaudited and unreviewed March 31,2003 Financial Statements (the
financial statements referred to in clauses (i) and (ii) if this paragraph
5.5 are referred to herein collectively as the "Financial Statements"). For
purposes of this Agreement, June 30, 2002 shall be hereinafter referred to as
the "Balance Sheet Date." The Financial Statements have been prepared in
accordance with the books and records of Bion and generally accepted
accounting principles, applied consistently with the past practices of Bion
(except as otherwise noted in such Financial Statements), reflect all
liabilities and obligations of Bion, as of their respective dates, and
present fairly the financial position of Bion and the results of its
operations as of the time and for the periods indicated therein.
Notwithstanding the foregoing, it should be noted that Bion is currently in
perilous financial condition.
(b) Incorporated by referenced herein are each report, schedule,
registration statement and definitive proxy statement filed by Bion with the
Securities and Exchange Commission since June 30, 2002 (as such documents
have since the time of their filing been amended, the "SEC Documents") which
are all the documents (other than preliminary material) that Bion was
required to file with the Securities and Exchange Commission since such date.
As of their respective dates, none of the SEC Documents contained any untrue
statement of a material fact or omitted to statement of material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of Bion included in the SEC Documents have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted
by Form 10-QSB of the Securities and Exchange Commission)(and except that the
unaudited financial statements in the Forms 10Q for the quarters ending
December 31, 2002 and March 31, 2003 which have not been reviewed by Bion's
auditors) and fairly present (subject, in the case of the unaudited
statements, to normal, recurring audit adjustments) the financial position of
Bion as at the dates thereof and the consolidated results of their operations
and cash flows for the periods then ended. As reflected in the SEC
Documents, Bion's condition has recently deteriorated rapidly and is not
likely to continue in existence unless it can obtain outside capital or
generate significant revenues from operations in the immediate future.
5.6 Material Adverse Changes. Since the Balance Sheet Date there have
been several material adverse changes in the financial condition, operating
results, business prospects, employee relations and customer relations of
Bion, all of which are generally described in the SEC Documents that have
been filed by Bion subsequent to the Balance Sheet Date.
5.7 Litigation. There are no actions, suits, proceedings, orders,
claims, or, to Dairy's knowledge, investigations pending or, to Dairy's
knowledge, threatened against Dairy, at law or in equity or before or by any
federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality; there are no arbitration
proceedings pending under collective bargaining agreements or otherwise.
There are, however, numerous actions currently being threatened against Bion.
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5.8 Compliance with Law. To Dairy's knowledge, Dairy has complied in
all material respects with all applicable statutes and regulations of the
United States and of all states, municipalities and applicable agencies and
foreign jurisdictions or bodies in respect of the conduct of its business and
operations, and the failure, if any, by Dairy to have fully complied with any
such statute or regulation does not and will not materially adversely affect
the business or operations of Dairy.
5.9 Undisclosed Liabilities. To Dairy's knowledge, Dairy has no
obligation or liability (whether accrued, absolute, contingent, unliquidated,
or otherwise, whether due or to become due) arising out of transactions
entered into at or prior to the Closing of this Agreement, or any action or
inaction at or prior to the Closing of this Agreement, or any state of facts
existing at or prior to the Closing of this Agreement. Bion, however, has
numerous unpaid creditors and is currently being threatened with litigation
on a variety of different fronts, any one of which could potentially cause it
to seek protection under applicable bankruptcy laws.
5.10 Disclosure. Neither this Agreement nor any of the schedules,
exhibits, written statements, documents or certificates prepared or supplied
by Dairy and Bion with respect to the transactions contemplated hereby
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which made.
5.11 Compliance with the Securities Laws. Assuming the accuracy and
truth of each of the Purchasers' representations set forth in Section 6 of
this Agreement, the Promissory Notes were offered and will be sold and
issued, in compliance with all applicable federal and state securities laws.
6. Representations and Warranties of Purchasers. Each of the Purchasers
hereby severally represents and warrants to Dairy as follows:
6.1 Investment Intent. Each of the Purchasers is an "Accredited
Investor" as such term is defined in Rule 501(a) of Regulation D promulgated
under the Securities Act. Each of the Purchasers has experience in making
investments in development stage technology companies and is acquiring the
Promissory Notes for its own account and not with a present view to, or for
sale in connection with, any distribution thereof in violation of the
registration requirements of the Securities Act. Each of the Purchasers
consents to the placing of a legend on the certificates representing the
Promissory Notes to the effect that the shares of Common Stock or other Stock
to be issued upon the conversion of the Promissory Notes have not been
registered under the Securities Act and may not be transferred except in
accordance with applicable securities laws.
6.2 Authorization. Each of the Purchasers has the full power and
authority to execute and deliver this Agreement and to perform all of its
obligations hereunder, having obtained all required consents, if any, and
this Agreement, when executed and delivered, will constitute a legal valid
and binding obligation of such Purchaser.
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6.3 Suitability. Each Purchaser acknowledges that he is a person who
is able to bear the economic risk of this investment and has adequate means
of providing for his current needs and possible personal contingencies with
no need for liquidity of this investment. In making this statement,
consideration has been given as to whether the Purchaser could afford to hold
his investment in Dairy for an indefinite period of time and, whether, at
this time, he could afford a complete loss of his investment, without such
loss affecting his ability to maintain his lifestyle.
6.4 Risks. Each Purchaser acknowledges that (a) this investment is
extremely speculative in nature and involves a high degree of risk, (b) the
Purchaser may not be able to liquidate this investment and (c)
transferability is extremely limited. The Purchasers are aware that Bion's
condition has recently deteriorated rapidly and that is not likely to
continue in existence unless it can obtain outside capital or generate
significant revenues from operations in the immediate future.
6.5 Due Inquiry. Each Purchaser acknowledges receipt of all
information regarding Dairy which he has requested or desired to know; that
all documents which could be reasonably provided have been made available for
his inspection and review; and that the Purchaser has been afforded the
opportunity to ask questions of and receive answers from duly authorized
officers or other representatives of Dairy concerning Dairy and an investment
therein, and any additional information which he has requested.
7. Covenants of Dairy. For as long as the Promissory Notes remain
outstanding, Dairy covenants and agrees with Purchasers as follows:
7.1 Books and Accounts. Dairy will make and keep books, records and
accounts, which, in reasonable detail, accurately and fairly reflect its
transactions, including without limitation, dispositions of its assets.
7.2 Use of Proceeds. Dairy shall use the net proceeds from the sale of
the Promissory Notes as set forth in Schedule 7.2 attached hereto.
7.3 Corporate Existence, Licenses and Permits; Maintenance of
Properties; New Businesses. Dairy will at all times conduct its business in
the ordinary course and cause to be done all things necessary to maintain,
preserve and renew its existence and will preserve and keep in force and
effect, all licenses, permits and authorizations necessary to the conduct of
its business. Dairy will also maintain and keep its properties in good
repair, working order and condition, and from time to time, to make all
needful and proper repairs, renewals and replacements, so that the business
carried on in connection therewith may be properly conducted at all times.
7.4 Other Material Obligations. Dairy will comply with (a) all
material obligations which it is subject to, or becomes subject to, pursuant
to any contract or agreement, whether oral or written, as such obligations
are required to be observed or performed, unless and to the extent that the
same are being contested in good faith and by appropriate proceedings and
Dairy has set aside on its books adequate reserves with respect thereto, and
(b) all applicable laws, rules, and regulations of all governmental
authorities, the violation of which could have a material adverse effect upon
the business of Dairy.
10
7.5 Amendment to the Articles of Incorporation and the By-Laws Dairy
will perform and be in compliance with and observe all of the provisions set
forth in its Articles of Incorporation and By-Laws to the extent that the
performance of such obligations is legally permissible; provided that the
fact that performance is not legally permissible will not prevent such
nonperformance from constituting an event of default under this Agreement.
Dairy will not amend its Articles of Incorporation or By-Laws so as to
adversely affect the rights of the Purchasers under this Agreement, the
Articles of Incorporation, the By-Laws or the Promissory Notes.
7.6 Dividends; Distributions; Repurchases of Common Stock; Treasury
Stock. Dairy shall not declare or pay any dividends on, or make any other
distribution with respect to, its capital stock, whether now or hereafter
outstanding, or purchase, acquire, redeem or retire any shares of its capital
stock, without the prior written consent of the Purchasers, provided,
however, the foregoing shall not prohibit Dairy issuing shares of its capital
stock in exchange for extinguishing debt owed to any person, or from
repurchasing any shares of its Common Stock from any present or former
officer, Director or employee of Dairy, or from repurchasing any outstanding
warrants.
7.7 Taxes and Liens. Dairy will duly pay and discharge when payable,
all taxes, assessments and governmental charges imposed upon or against Dairy
or its properties, or any part thereof or upon the income or profits
therefrom, in each case before the same become delinquent and before
penalties accrue thereon, as well as all claims for labor, materials or
supplies which if unpaid might by law become a lien upon any of its property,
unless and to the extent that the same are being contested in good faith and
by appropriate proceedings and Dairy has set aside on its books adequate
reserves with respect thereto.
7.8 Restrictive Agreement. Dairy covenants and agrees that subsequent
to the Closing, it will not be a party to any agreement or instrument which
by its terms would restrict Dairy's performance of its obligations pursuant
to this Agreement, the Articles of Incorporation, By-laws or the Promissory
Note.
8. Certain Definitions. For the purposes of this Agreement the following
terms have the respective meanings set forth below:
8.1 "Affiliate" means any person, corporation, firm or entity which
directly or indirectly controls, is controlled by, or is under common control
with the indicated person, corporation, firm or entity.
8.2 "Bion Stock" means any shares of capital stock issued by Bion upon
conversion of the Promissory Notes.
8.3 "Dairy Stock" means any shares of capital stock issued by Dairy
upon conversion of the Promissory Notes.
11
8.4 "Generally Accepted Accounting Principles" means generally accepted
accounting principles consistently applied.
8.5 "Officers' Certificate" means a certificate executed on behalf of
Dairy by its President, Chairman of the Board, Chief Executive Officer, Chief
Financial Officer, Secretary and/or one of its other Vice-Presidents.
8.6 "Securities" means the Promissory Notes and any other capital stock
or Common Stock underlying the foregoing whether issued at the Closing or
thereafter.
8.7 "Securities Act" means, as of any given time, the Securities Act of
1933, as amended, or any similar federal law then in force.
8.8 "Securities Exchange Act" means, as of any given time, the
Securities Exchange Act of 1934, as amended, or any similar federal law then
in force.
8.9 "Securities and Exchange Commission" includes any governmental body
or agency succeeding to the functions thereof.
8.11 "Subsidiary" means any person, corporation, firm or entity at least
the majority of the equity securities (or equivalent interest) of which are,
at the time as of which any determination is being made, owned of record or
beneficially by Dairy, directly or indirectly, through any Subsidiary or
otherwise.
9. Miscellaneous.
9.1 Termination; Survival of Representations, Warranties and Covenants.
Except as otherwise provided for in this Agreement all representations,
warranties, covenants and agreements contained in this Agreement, or in any
document, exhibit, schedule or certificate by any party delivered in
connection herewith shall survive the execution and delivery of this
Agreement and the Closing Date and the consummation of the transactions
contemplated hereby, regardless of any investigation made by the Purchasers
or on their behalf.
9.2 Expenses. Dairy shall pay all its own expenses in connection with
this Agreement and the transactions contemplated herein (the "Promissory Loan
Costs").
9.3 Amendments; Waivers and Forbearance from Suit. This Agreement and
all exhibits and schedules hereto set forth the entire agreement and
understanding among the parties as to the subject matter hereof and merges
and supersedes all prior discussions, agreements and understandings of any
and every nature among them. This Agreement may be amended only by mutual
written agreement of Dairy and the holders of a majority of principal amount
of the Promissory Notes, and Dairy may take any action herein prohibited or
omit to take any action herein required to be performed by it, and any breach
of any covenant, agreement, warranty or representation may be waived, only if
Dairy has obtained the written consent or waiver of the holders of a majority
of principal value of the Promissory Notes. No course of dealing between or
among any persons having any interest in this Agreement will be deemed
12
effective to modify, amend or discharge any part of this Agreement or any
rights or obligations of any person under or by reason of this Agreement. In
addition, Purchaser shall institute any suit or proceeding for the
enforcement of the payment of principal or interest under the Promissory
Notes or for the enforcement of any other provision of this Agreement, the
Promissory Notes unless the holders of at least a majority in principal
amount of all of the outstanding Promissory Notes join in such suit or
proceeding
9.4 Successors and Assigns. This Agreement may not be assigned by Dairy
except with the prior written consent of the holders of a majority of
principal value of the Promissory Notes. This Agreement shall be binding
upon and inure to the benefit of Dairy and its permitted successors and
assigns and Purchasers and their successors and assigns. The provisions
hereof which are for Purchasers' benefit as purchasers or holders of the
Promissory Notes are also for the benefit of, and enforceable by, any
subsequent holder of such Promissory Notes.
9.5 Notices All notices, demands and other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be
in writing and shall be deemed to have been given personally or when mailed
by certified or registered mail, return receipt requested and postage
prepaid, and addressed to the addresses of the respective parties set forth
below or to such changed addresses as such parties may have fixed by notice;
provided, however, that any notice of change of address shall be effective
only upon receipt:
If to Dairy:
Bion Dairy Corporation
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
With copies to:
Xxxx Xxxxx, P.C.
000 00xx Xxxxxx, Xxxxx 0000 Xxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq. and
Xxxx X. Xxxxx, President
X.X. Xxx 000
Xxxxxxxx, XX 00000
e-fax: 000-000-0000
If to Bion:
Bion Environmental Technologies, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
13
With copies to:
Xxxx Xxxxx, P.C.
000 00xx Xxxxxx, Xxxxx 0000 Xxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
and
Xxxx X. Xxxxx, President
X.X. Xxx 000
Xxxxxxxx, XX 00000
e-fax: 000-000-0000
If to the Purchasers:
At the address specified on their signature page hereto.
9.6 Governing Law. The validity, performance, construction and effect
of this Agreement shall be governed by the internal laws of the State of New
York without giving effect to such State's principles of conflict of laws.
9.7 Counterparts. This Agreement may be executed in any number of
counterparts and, notwithstanding that any of the parties did not execute the
same counterpart, each of such counterparts shall, for all purposes, be
deemed an original, and all such counterparts shall constitute one and the
same instrument binding on all of the parties thereto. Any signature received
by facsimile transmission shall, for all purposes, be deemed an original
signature.
9.8 Headings. The headings of the Sections hereof are inserted as a
matter of convenience and for reference only and in no way define, limit or
describe the scope of this Agreement or the meaning of any provision hereof.
9.9 Severability. In the event that any provision of this Agreement or
the application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder
of this Agreement shall not be affected except to the extent necessary to
delete such illegal, invalid or unenforceable provision unless the provision
held invalid shall substantially impair the benefit of the remaining portion
of this Agreement.
9.10 Rights of Holders Inter Se Each Holder of securities shall have
the absolute right to exercise or refrain from exercising any right or rights
which such Holder may have by reason of this Agreement or any security
including, without limitation, the right to consent to the waiver of any
obligation of Dairy under this Agreement and to enter into an agreement with
Dairy for the purpose of modifying this Agreement or any agreement effecting
such modification, and such Holder shall not incur any liability to any other
Holder or Holders of securities with respect to exercising or refraining from
exercising any such right or rights.
14
9.11 Exculpation Among Purchasers and Holders. Purchaser acknowledges
and agrees that it is not relying upon any other Purchaser, or any officer,
director, employee partner or affiliate of any such other Purchaser, in
making its investment or decision to invest in Dairy or in monitoring such
investment. Each Purchaser agrees that no Purchaser nor any controlling
person, officer, director, shareholder, partner, agent or employee of any
Purchaser shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them relating to or in connection with Dairy or
the securities, or both.
9.12 Actions by Purchasers. Any actions permitted to be taken by
holders or Purchasers of Promissory Notes and any consents required to be
obtained from the same under this Agreement, may be taken or given only by,
in the case of consents or actions requiring approval of the Purchasers, by
the Purchasers, and in all other cases, only by holders of a majority of the
face amount of the principal, and if such holders constituting a majority the
("Majority Holders") as set forth in (i) or (ii) above or the Purchasers take
any action or grant any consent, such action or consent shall be deemed given
or taken by all holders or Purchasers' who shall be bound by the decision or
action taken by the Majority Holders or the Purchasers without any liability
on the part of the Majority Holders or the Purchasers to any other holder of
securities hereto.
9.13 Consent to Jurisdiction. The parties hereto irrevocably consent
to the jurisdiction of the courts of the State of New York and of any federal
court located in such State in connection with any action or proceeding
arising out of or relating to this Agreement, any document or instrument
delivered pursuant to, in connection with or simultaneously with this
Agreement, or a breach of this Agreement or any such document or instrument.
In any such action or proceeding, each party hereto waives personal service
of any summons, complaint or other process and agrees that service thereof
may be made in accordance with Section 10.5. Within 30 days after such
service, or such other time as may be mutually agreed upon in writing by the
attorneys for the parties to such action or proceeding, the party so served
shall appear or answer such summons, complaint or other process.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BION DAIRY CORPORATION
By:____________________________________
Xxxx Xxxxx, President
BION ENVIRONMENTAL TECHNOLOGIES, INC.
By:____________________________________
Xxxx Xxxxx, President
15
BION TECHNOLOGIES, INC.
By:____________________________________
Xxxx Xxxxx, President
BIONSOIL , INC.
By:____________________________________
Xxxx Xxxxx, President
16
PURCHASER SIGNATURE PAGE
Promissory Notes Subscribed For: ___________________________________
PURCHASER NAME
______________________
Address:
___________________________________
___________________________________
___________________________________
Aggregate Purchase Price: By: X______________________________
Name:
________________________ Title:
17
SCHEDULE 7.2
USE OF PROCEEDS ($thousands)*:
MINIMUM STAGE II
TEXAS INSTALLATION $ 400
FRESNO INSTALLATION $ 450
UNALLOCATED WORKING CAPITAL $ 550**
SUB-TOTAL $ 400 $1000
ADVANCED TO DATE*** $ 665
TOTAL OFFERING $1065 $2065
*All sums are our current best estimates. Actual costs in each category may
be higher or lower and Dairy reserves the right to reallocate the funds as
required among the categories set forth above to accomplish the purposes set
forth in the Note Purchase Agreement.
**Includes funds which may be used for additional expenses related to the
installations, for costs associated with intellectual property, for overhead
and additional personnel, and for other unanticipated contingencies plus
funds which may be allocated for use as advances to Bion for a) payments to
its creditors in the context of a satisfactory workout with creditors, b)
expenses related to bring Bion's SEC filings current and related matters,
and/or removal of certain contractual impediments. No funds will be used for
these purposes unless the Texas installation meets or exceeds the applicable
"Technical Conditions". Working
*** Advances from Bright Capital, Ltd. ($600,000) and prior management which
will be converted into Notes . All such advances have been used for the
purposes set forth above over the last 7 months.
THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF BION
DAIRY CORPORATION ("DAIRY"). THE SECURITIES REPRESENTED BY THIS NOTE OR TO BE
ISSUED IN CONVERSION OF 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 DAIRY CORPORATION
No. 2003A- __
2003 Series A Convertible Promissory Note
$_______.00 _______ 2003
Bion Dairy Corporation, a Colorado corporation ("Dairy") which is a
wholly-owned subsidiary of Bion Environmental Technologies, Inc., also a
Colorado corporation ("Bion"), for value received, hereby promises to pay to
____________ or registered assigns (the "Holder"), the principal sum of
_______________ dollars ($__________), with interest from the original date
of issuance of this 2003 Series A Convertible Promissory Note on the unpaid
principal balance at a rate equal to eight percent (8%) per annum, on
December 31,, 2004 (the "Maturity Date"); provided, however, that in the
event the amount due under this Note has not yet been converted on such date,
the Maturity Date shall be automatically extended for a period of six months
after the date on which the Holders are notified in writing by Dairy that the
Technical Conditions (as defined below) were not met. Payment shall be made
at such place as designated by the Holder upon surrender of this Convertible
Promissory 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 2003 Series A Convertible Promissory Note is one of a multiple
series of duly authorized issues of Bion Dairy Corporation 2003 Convertible
Promissory Notes. The conversion prices of the various series of 2003
Convertible Promissory Notes may be different from each other, but all of the
amounts due under all of the series of the 2003 Convertible Promissory Notes
are intended to be secured by the same identical collateral which is to be
shared in pari pasu by all of the holders of all of the 2003 Convertible
Promissory Notes, irrespective of the date of issuance. The Holder of this
Note hereby specifically consents to the granting of a security interest in
the collateral for this Note to the holders of additional series of 2003
Convertible Promissory Notes after the date hereof. The maximum aggregate
principal amount of the 2003 Series A Convertible Promissory Notes combined
is $2,065,000. The aggregate principal amount of all of the various series
of 2003 Convertible Promissory Notes will be a maximum of $6,000,000.
Each 2003 Series A Convertible Promissory Note is individually referred
to herein as a "Note" and collectively as the "Notes." Each of the 2003
Series A Convertible Promissory Notes will be issued pursuant to a Note
Purchase Agreement among Dairy, Bion, the Holder and the other parties
thereto (the "Purchase Agreement").
SECTION 1. Prepayment.
This Note (including interest accrued on the principal hereof) may not
be prepaid in cash by Dairy without the written consent of the holders of a
majority in principal amount of outstanding Notes of this issue, but may be
converted to equity at any time during its term in accordance with the
provisions of Section 2 below.
SECTION 2. Mandatory Conversion.
(a) Conditions for Conversion.
If the first of the Bion Conditions set forth at Schedule D to this Note
has been satisfied, upon the happening of the earliest to occur of the events
set forth at paragraph 1.4 of the Purchase Agreement (which events are
based, in whole or part, on the conditions set forth in Schedule B attached
hereto (the "Technical Conditions')) on or before the Maturity Date, then
(unless otherwise agreed by a majority vote of the Holders as set forth
below) all of the amounts due under this Note shall be mandatorily and
automatically converted into shares of Dairy common stock ("Dairy Stock") and
each of the Holders shall be entitled to receive one share of Dairy Stock for
each $1.00 that is due and owing to such Holder under the terms of this Note
(and Bion shall continue to own 4,000,000 shares of Dairy Stock); provided,
however, that not later than the date of such conversion, Bion, Bion
Technologies, Inc. and BionSoil, Inc. shall have each granted to Dairy an
automatically renewable license for the worldwide exclusive use of its
intellectual property in the dairy business with the terms set forth at
Schedule C hereto(>License') which License shall be executed and placed in
escrow for the benefit of Dairy upon the termination of the offering of Notes
; and provided further, that in the event that all of the conditions set
forth in Schedule D to this Note (the "Bion Conditions") have been met, and
the holders of a majority in principal amount of outstanding Notes of this
issue elect to receive Bion Stock (as defined below) rather than Dairy Stock,
then instead of converting to Dairy Stock as set forth above, all of the
amounts due under this Note shall be mandatorily and automatically converted
into one share of common stock of Bion ("Bion Stock")for each share of Dairy
Stock which the Holder would have been entitled to receive had the majority
of Holders not elected to convert into Bion Stock (which number of shares
shall be subject to adjustment as provided in paragraph 1.7 of the Purchase
Agreement) as is equal to the Conversion Amount (as defined below) divided by
the then current Bion Conversion Price (as defined below).
(c) Conversion Procedures.
(i) In the event that the Notes are converted into Dairy Stock,
Dairy's debt obligation under this Note shall cease but Dairy shall not be
required to deliver stock certificates to any Holder until such time as such
Holder surrenders the Notes at Dairy's offices together with irrevocable
written notice to Dairy specifying the name or names (with address) in which
a certificate or certificates evidencing shares of Dairy Stock are to be
issued. Dairy shall thereupon deliver to the holder of the Notes, or to the
nominee or nominees of such person, certificates evidencing the number of
full shares of Dairy Stock to which such person shall be entitled as
2
aforesaid, together with a cash adjustment of any fraction of a share as
hereinafter provided. Irrespective of the date of delivery of Dairy stock
certificates, such conversion shall be deemed to have occurred as of Dairy's
record date of the conversion and the person or persons entitled to receive
Dairy Stock deliverable upon conversion of such Notes shall be treated for
all purposes as the record holder or holders of such Dairy Stock on such
date.
(ii) In the event that the Notes are converted into Bion Stock,
Dairy's debt obligation under this Note shall cease but Bion shall not be
required to deliver stock certificates to any Holder until such time as such
Holder surrenders the Notes at Bion's offices together with irrevocable
written notice to Bion specifying the name or names (with address) in which a
certificate or certificates evidencing shares of Bion Stock are to be issued.
Bion shall thereupon deliver to the holder of the Notes, or to the nominee or
nominees of such person, certificates evidencing the number of full shares of
Bion Stock to which such person shall be entitled as aforesaid, together with
a cash adjustment of any fraction of a share as hereinafter provided.
Irrespective of the date of delivery of Bion stock certificates, such
conversion shall be deemed to have occurred as of Bion's record date of the
conversion and the person or persons entitled to receive Bion Stock
deliverable upon conversion of such Notes shall be treated for all purposes
as the record holder or holders of such Bion Stock on such date.
(iii) In the event that the Notes are converted into Dairy Stock
or Bion Stock as set forth above, either Dairy or Bion, as appropriate, shall
pay any and all issue or other taxes that may be payable in respect of any
issue or delivery of shares of their stock on such conversion. Neither Dairy
nor Bion, however, shall be required to pay any tax which may be payable in
respect of any transfer involved in the issue or delivery of their 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 Dairy or Bion, as
appropriate, the amount of such tax or has established, to the satisfaction
of Dairy or Bion, that such tax has been paid.
(c) Protection in Case of a Merger of Dairy. (i) In case of any capital
reorganization or reclassification, or any consolidation or merger to which
Dairy is a party other than a merger or consolidation in which Dairy is the
continuing corporation, or in case of any sale or conveyance to another
entity of the property of Dairy 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 Bion), the Holder of this Note shall have the right
thereafter to receive on the conversion of this Note into Dairy Stock 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 Dairy 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
3
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. Dairy
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 Bion 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
Dairy 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 Dairy, 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, Bion 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
Dairy.
(d) Protection in Case of a Merger of Bion. (i) In case of any capital
reorganization or reclassification, or any consolidation or merger to which
Bion is a party other than a merger or consolidation in which Bion is the
continuing corporation, or in case of any sale or conveyance to another
entity of the property of Bion 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 Bion), the Holder of this Note shall have the right
thereafter to receive on the conversion of this Note into Bion Stock 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 Bion 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 (d)(i) shall
similarly apply to successive reorganizations, reclassifications,
4
consolidations, mergers, statutory exchanges, sales or conveyances. Bion
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 Bion 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 Bion
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 Bion, 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, Bion 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
Bion.
(e) Reservation of Shares; Transfer Taxes; Etc. Both Dairy and Bion
shall at all times reserve and keep available, out of their respective
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. Both Dairy and Bion shall use their respective 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 that either Dairy or Bion intends to offer Stock other than Common
Stock, they shall authorize the issuance of sufficient shares of such stock
to permit the conversion of all the then-outstanding Notes.
Bion or Dairy, as appropriate, 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 into Bion Stock or Dairy Stock. Neither
Bion nor Dairy, however, shall be required to pay any tax which may be
payable in respect of any transfer involved in the issue or delivery of Bion
Stock or Dairy Stock, as appropriate (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 either Bion or Dairy, as appropriate, the amount of
such tax or has established, to the satisfaction of Bion or Dairy, as
appropriate, that such tax has been paid.
(e) Release of Collateral. Immediately upon conversion to equity under
this Section 2 all amounts due under this Note shall be deemed to have been
5
paid in full and all of the collateral for the performance of obligations
hereunder shall be deemed to have been fully, finally and completely released
as of such date.
SECTION 3. Fractional Shares
Neither Dairy nor Bion shall be required to issue fractions of shares of
Common Stock or other stock upon the conversion of the Note. If any fraction
of a share would be issuable on the Conversion of the Note, Dairy or Bion, as
appropriate, shall purchase such fraction for an amount in cash equal to its
fair market value, as determined in good faith by the Board of Directors of
either Dairy or Bion, as appropriate.
SECTION 4. Affirmative Covenants of Dairy and Bion
Each of Dairy and Bion covenants and agrees that until the payment in
full of this Note, it 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 7.2 of the Purchase Agreement.
(c) 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.
(d) 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.
(e) Execution and Delivery of Security Agreement. Execute and deliver
the Security Agreement in substantially the form attached as Exhibit 1
hereto, and Bion shall cause each of its wholly-owned subsidiaries, Bion
Technologies, Inc. and BionSoil, Inc., to execute and deliver the Security
Agreement in substantially the same form.
SECTION 5. Negative Covenants of Dairy and Bion.
Each of Dairy and Bion covenants and agrees with the Holder that until
the payment in full of this Note, it 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.
6
(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 Dairy to make any payment of principal of or
interest on this Note when due and payable;
(b) the failure of Dairy or Bion 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 sixty (60) days;
(c) if Dairy 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 Dairy, a receiver of Dairy or of
the whole or any substantial part of its property, or approving a petition
filed against it seeking reorganization or arrangement of Dairy 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 Dairy 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;
7
(f) the liquidation, dissolution or winding up of Dairy; or
(g) 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 Dairy 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 Dairy 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 Dairy. 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. 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.
(b) Restrictions on Transferability. 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.
(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.
8
(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 Dairy and
Bion and each of their respective 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
Dairy 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 Dairy: Bion Dairy Corporation
c/o Bion Environmental Technologies, Inc.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
With a copy to: Xxxx X. Xxxxx, President
X.X. Xxx 000
Xxxxxxxx, Xxxxxxxx 00000
e-fax 000-000-0000
If to Bion: Bion Environmental Technologies, Inc.
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Executive Officer
With a copy to: Xxxx X. Xxxxx, President
X.X. Xxx 000
Xxxxxxxx, Xxxxxxxx 00000
e-fax 000-000-0000
(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 among Bion, Dairy 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 Dairy and Bion contained therein and
exercise the remedies provided for thereby or otherwise available in respect
thereof.
9
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 Dairy.
ATTEST: BION DAIRY CORPORATION
By: ____________________________________
Name: Xxxx Xxxxx
Its: President
BION ENVIRONMENTAL TECHNOLOGIES, INC.
By: ____________________________________
Name: Xxxx Xxxxx
Its: President
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SCHEDULE A
Holder: _______________________
_______________________
SCHEDULE B
A: XXXXXXX (TEXAS INSTALLATION):
Treatment goals for the XxXxxxx system address nutrients only. The final
liquid effluent for land application shall have a reduction of 70-90% of each
of nitrogen and phosphorus mass compared to the mass of nutrients received
and treated by the system based on Bion protocol.
B: CSU-FRESNO (CALIFORNIA INSTALLATION) TECHNICAL CONDITIONS:
Treatment goals for the CSU-FRESNO system address both nutrients and
atmospheric emissions.
Nutrients:
A final liquid effluent for land application with between 70% and 90% of the
nitrogen and phosphorus mass removed compared to the mass of these nutrients
received and treated by the system based on Bion protocol.
Atmospheric emissions:
Using published ranges from USEPA and California regulations for normal dairy
operations as a baseline for comparison, reduction of gaseous releases
(note that there is no general consensus or acceptance of a set of baseline
emission values)(based on defined protocols) as follows:
methane (CH4) 90-95%+
nitrous oxides (NOX) 90-98%+
non-methane volatile organic compounds (nmVOC) 85-90%+
sulfur dioxide (SO2) 90-97%+
ammonia (NH3) 90-99%+
hydrogen sulfide (H2S) 90-97%+
SCHEDULE C
LICENSE TERMS
1 - licensors:
a - Bion Environmental Technologies, Inc.
b - Bion Technologies, Inc.(owns all patents), and
c - BionSoil, Inc.
2 - licensee: Bion Dairy Corporation
3 - IP to be covered is all IP owned by licensors as per exhibit to
Security Agreement
4 - Scope: world-wide exclusive for use in dairy industry
5 - Terms:
a - perpetual(or as close as can be done)
b - royalty free/ fully paid-up
6 - Licensor will continue to own IP & all improvements (whether made by
Licensor or Licensee) and all Improvements will be added to license
at no cost.
7 - a - Patent maintenance, third party license fees (currently
Biobalance), new IP filings & prosecution, patent enforcement, etc
are all responsibility of Licensor;
b - Licensee responsible to pay all costs for first year of License
related to patent maintenance, the 2003 Biobalance fee on a
renegotiated basis (unless licensee agrees to be bound by existing
Biobalance terms), IP filings and prosecution
SCHEDULE D
Bion Conditions
1 - Bion shall have obtained contractual waivers of:
a) Section 1.2 of that certain Stock Purchase Agreement dated as of
January 10, 2002 by and between Bion, OAM, S.p.A.; and
b) Section 2.4 of that certain Subscription Agreement dated as of
January 10, 2002 by and between Bion and Centerpoint Corporation ( which
waiver shall be ratified by the shareholders of Centerpoint Corporation).
2 - Bion shall have reached a work-out with its creditors satisfactory to the
majority of the holders of the outstanding Notes of Dairy. Specific criteria
for the 'work-out' shall be established within 90 days after the initial
closing of the sale of the Notes. If such criteria are met, the work-out
shall be deemed satisfactory.
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of August 26,, 2003, by and among BION
DAIRY CORPORATION, a Colorado corporation ("Dairy"), BION TECHNOLOGIES, INC.
a Colorado corporation ("BionTech"), BIONSOIL INC., a Colorado corporation
("BionSoil"), BION ENVIRONMENTAL TECHNOLOGIES, INC., a publicly held Colorado
corporation ("Bion") and the purchasers of those certain Bion Dairy
Corporation Series 2003 Convertible Promissory Notes (collectively, the
"Purchasers"). Dairy, BionTech and BionSoil are all wholly owned subsidiaries
of Bion and are collectively with Bion referred to in this Agreement as the
"Debtors" and this Agreement is being executed and delivered by the Debtors
for the benefit of the Purchasers.
WHEREAS, Dairy is the issuer of those certain 2003 Series A Convertible
Promissory Notes, which series is one of a multiple series of duly authorized
issues of Bion Dairy Corporation 2003 Convertible Promissory Notes (the
"Indebtedness");
WHEREAS, the conversion prices of the various series of 2003 Convertible
Promissory Notes may be different from each other, but all of the amounts due
under all of the series of the 2003 Convertible Promissory Notes are intended
to be secured by the same identical collateral which is to be shared in pari
pasu by all of the holders of all of the 2003 Convertible Promissory Notes,
irrespective of the date of issuance;
WHEREAS, by execution of the Purchase Agreement each Holder has
expressly consented to the granting of a security interest in the Collateral
to the holders of additional series of 2003 Convertible Promissory Notes
after the date hereof;
WHEREAS, the maximum aggregate principal amount of the 2003 Series A
Convertible Promissory Notes combined is $2,065,000 and the aggregate
principal amount of all of the various series of 2003 Convertible Promissory
Notes will be a maximum of $6,000,000;
WHEREAS, all of the Debtors will realize a financial benefit from the
proceeds of the 2003 Convertible Promissory Notes; and
WHEREAS, in order to induce the Purchasers to enter into the Promissory
Notes, and as security for the obligations arising under the Promissory
Notes, the Debtors have agreed to execute and deliver this Agreement and to
grant the security interests provided for herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
Each 2003 Convertible Promissory Note is individually referred to herein
as a "Promissory Note" and collectively as the "Promissory Notes." Each of
the 2003 Series A Convertible Promissory Notes will be issued pursuant to a
Note Purchase Agreement among Dairy, Bion, the Holder and the other parties
thereto (the "Purchase Agreement").
1. Definitions. All terms used herein, unless otherwise defined
herein, shall have the same meanings that such terms have in the Promissory
Note and the related Note Purchase Agreement as in effect on the date hereof.
2. Grant of Security Interest. As collateral security for (i) the
prompt and complete payment and performance by the Debtors when due (whether
at stated maturity, by acceleration or otherwise) of the principal of,
premium, if any, and interest on the Promissory Note, (ii) any and all other
amounts payable from time to time by the Debtors to the Purchasers under the
Promissory Note, including, without limitation, increases in the amounts of
or refinancings of or other changes to the Promissory Note and any other
loans or other indebtedness that may be created by any amendment, supplement
or other modification to, or restatement of, the Promissory Note, and (iii)
the due and punctual performance of all of the obligations of the Debtors
under this Agreement (all of the foregoing obligations are hereinafter
collectively referred to as the "Obligations"):
Each of the Debtors hereby grants, sells, assigns, conveys, mortgages,
pledges, hypothecates and transfers to the Purchasers a security interest in
the Debtors' respective and collective right, title and interest in, to and
under the following items and types of property described or referred to
below, whether now owned or hereafter acquired (all of which being
hereinafter collectively referred to herein as the "Collateral"):
(a) 4,000,000 shares of common stock of Bion Dairy Corporation
owned by Bion which shares constitute all of the issued and outstanding stock
of Dairy;
(b) 3,459,997 shares of the common stock of Centerpoint
Corporation ("Centerpoint"), which shares constitute in excess of 57% of the
issued and outstanding shares of Centerpoint; and
(c) All of the right, title and interest of the Debtors in and to
their respective and collective intellectual property rights, patents,
copyrights, trade secrets and know how, including without limitation the
patents and other items listed on Schedule 1 attached hereto.
3. General Covenants of the Debtors.
(a) Upon the written request of the Purchasers, the Debtors will:
(i) during the continuance of an Event of Default, if and to
the extent determined by the Purchasers to be desirable and to protect the
interests of the Purchasers, notify and serve a copy of this Agreement upon
each obligor upon any credit or other obligation at any time owing to the
Debtors in such manner as the Purchasers may specify;
(ii) permit the Purchasers or their representatives, during
normal business hours and upon reasonable prior notice, to inspect and make
abstracts from its books and records pertaining to the Collateral;
(iii) furnish the Purchasers, from time to time at the
request of the Purchasers, with written statements and schedules further
identifying and describing the Collateral in such detail as the Purchasers
may reasonably require;
2
(iv) advise the Purchasers promptly, in sufficient detail, of
any substantial change in the Collateral, and of the occurrence of any event
which would have a material adverse effect on the value of the Collateral or
on the Purchasers' security interest therein;
(v) comply in all respects with all acts, rules, regulations
and orders of any legislative, administrative or judicial body or official,
applicable to the Collateral or any part thereof or to the operation of the
Debtors' business by the Debtors, the noncompliance with which could have a
material adverse effect on the Collateral or the operation of such business,
provided that the Debtors may contest any acts, rules, regulations, orders
and directions of such bodies or officials in any reasonable manner which
will not, in the Purchasers' opinion, adversely affect its rights to the
priority of their security interest in the Collateral; and
(vi) perform and observe all covenants, restrictions and
conditions contained herein providing for payment of taxes and otherwise
relating to the Collateral.
(b) For purposes of this Agreement, any of the following shall be
considered to be an "Event of Default":
(i) Any representation or warranty in this Agreement or in
the Promissory Note, or in any certificate, statement or other document made
or furnished to the Purchasers hereunder shall prove to have been incorrect,
or shall be breached, in any material respect; or
(ii) Default in the payment when due of the principal of, or
any interest or fees on, the Promissory Note or any other amount payable to
the Purchasers hereunder; or
(iii) Default by the Debtors in the performance or observance
of any of their agreements and covenants contained herein which remains
unremedied for 120 or more days; or
(iv) Any event of default or other event under any indenture,
credit or loan agreement, note, or other agreement or instrument to which
Dairy is a party and under which indebtedness an aggregate amount exceeding
$250,000 is outstanding, or by which any such indebtedness is evidenced,
shall have occurred which, with notice or lapse of time or both, would permit
the holder or holders of any such indebtedness (or a trustee or bank on its
or their behalf) to accelerate the maturity thereof or to enforce any lien
provided for by any such indenture, agreement or instrument, as the case may
be; or
(v) Dairy shall be terminated, dissolved or liquidated (as a
matter of law or otherwise) or proceedings shall be commenced by any person
(including Dairy) with the consent of Dairy seeking the termination,
dissolution or liquidation of Dairy; or
(vi) Dairy shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
3
(vii) Dairy shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence a
voluntary case under the Bankruptcy Code (as now or hereafter in effect),
(iv) file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in any
involuntary case under the Bankruptcy Code, or
(viii) Dairy shall not take any action (corporate or
otherwise) for the purpose of effecting any of the foregoing; or
(ix) A proceeding or case shall be commenced, without the
application or consent of Dairy, in any court of competent jurisdiction
seeking with respect to Dairy (i) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its debts,
(ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of Dairy or of all or any substantial part of the assets thereof, or
(iii) similar relief in respect of any of Dairy under any law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, and such proceeding or case shall continue undismissed,
or an order, judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect, for a period of 60
days, or an order for relief against Dairy shall be entered in an involuntary
case under the Bankruptcy Code; or
(x) A final judgment or judgments for the payment of money in
excess of $250,000 in the aggregate shall be rendered by a court of record
against Dairy, and Dairy shall not (i) be adequately bonded or insured
against such judgment or judgments, or (ii) discharge the same or provide for
its discharge in accordance with its terms, or procure a stay of execution
thereof within 10 days from the date of entry thereof and within said period
of 10 days, or such longer period during which execution of such judgment
shall have been stayed, appeal therefrom and cause the execution thereof to
be stayed during such appeal.
"Default" shall mean an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default.
c) The Debtors will not, without the prior written consent of the
Purchasers:
(i) permit any of the Collateral to be levied upon under
legal process or to fall under any other Lien or encumbrance of whatever
nature unless promptly discharged; or
(ii) cause, permit or fail to take any action which may
impair the security interests herein granted and/or intended to be granted
hereby;
4
(iii) sell, lease, transfer, assign (including by virtue of
assignments by operation of law), mortgage, pledge or otherwise dispose of or
encumber any of the Collateral except for dispositions or encumbrances in
accordance with the terms hereof and except for dispositions in a non-
material amount in the ordinary course of business, or permit any party other
than the Purchasers to perfect any security interest in such Collateral,
whether for purchase money or otherwise, except as permitted hereby; or
(iv) permit any change in control of the ownership of the
outstanding equity securities of Debtors, except for the issuance of shares
to the Purchasers or its designee(s). For the purposes of this Agreement,
the term "change in control" shall mean any change in the record or
beneficial ownership of fifty percent or more of any class of the then issued
and outstanding equity securities of the Debtors during any twelve month
period.
(d) Each of the Debtors will maintain its respective books and
records at its chief place of business, and will not change its name, or the
name under which it conducts its business, or its address without giving the
Purchasers written notice thereof.
(e) Dairy will preserve and maintain its legal existence and all
of its rights and privileges material to its operation in the normal conduct
of its business.
(f) Dairy will comply with the requirements of all applicable
laws, rules, regulations and orders (including, without limitation,
environmental laws and regulations) of any governmental body or regulatory
authority, a breach of which could have a material adverse effect on its
financial condition or the business or prospects, except where contested in
good faith and by proper proceedings if adequate reserves are maintained with
respect to any liability (contingent or otherwise) which might arise in
connection therewith.
(g) Dairy will promptly give to the Purchasers notice in writing
of all litigation and of all proceedings before any courts, arbitrators or
governmental or regulatory agencies affecting the Collateral. Following the
initial notice of each such litigation or proceeding, supplementary notices
of all material developments in respect thereof shall be given from time to
time in like manner.
(h) Dairy will not create, incur or suffer to exist on a
consolidated basis any indebtedness except: (a) the Obligations under this
Agreement and the Promissory Notes; (b) amounts due as accounts payable (c)
capital lease obligations and indebtedness secured by purchase money security
interests; and (d) bank debt in any amount deemed reasonable and/or necessary
by Dairy.
(i) Dairy will operate all property owned or leased by it such
that no obligation, including a clean-up obligation, shall arise or continue
to exist under any environmental law or regulation, which obligation would
constitute a lien or charge (prior to that in favor of the Purchasers) on any
property of Dairy.
5
4. Further Assurances.
(a) Each of the Debtors will, from time to time and at its own
expense, promptly execute, acknowledge, witness and deliver and file and/or
record, or cause the execution, acknowledgment, witnessing and delivery and
the filing and/or recordation of, such specific and further assignments of
Collateral and such other documents or instruments, and shall take or cause
to be taken such other actions as shall be necessary or as the Purchasers may
otherwise reasonably request, for the perfection against the Debtors and all
third parties whomsoever of the security interest created hereby in the
Collateral, in the properties covered thereby for the continuation and
protection thereof, and promptly give to the Purchasers evidence satisfactory
to the Purchasers of such action. Without limiting the generality of the
foregoing, each of the Debtors shall, promptly upon the execution and
delivery of this Agreement, and at any time or from time to time thereafter
upon the request of the Purchasers, execute, acknowledge, witness and deliver
such financing and continuation statements, notices and additional security
agreements, make such notations on its records and take such other action as
shall be necessary, or as the Purchasers may otherwise reasonably request,
for the purpose of perfecting, maintaining or protecting such security
interest of the Purchasers, and shall cause this Agreement, any amendment or
supplement hereto or thereto and each such financing and continuation
statement notice and additional security agreements to be filed or recorded
in such manner and in such places as may be required by applicable law or as
the Purchasers may reasonably request for such purpose. The Debtors hereby
authorize the Purchasers to effect any filing or recording which the
Purchasers have requested pursuant to this Section 4(a) without the signature
of any of the Debtors, to the extent permitted by applicable law.
(b) Without in any manner or to any extent or degree qualifying
the obligations of the Debtors under Section 4(a) hereof, at any time and
from time to time, upon the written request of the Purchasers, the Debtors
shall promptly and duly execute, acknowledge, witness and deliver, or cause
to be duly executed, acknowledged, witnessed and delivered, any and all such
further instruments and documents, and take such further actions, as the
Purchasers may reasonably request, to obtain for the Purchasers the full
benefit of this Agreement and any supplemental security agreement thereto and
of the rights and powers herein or therein granted.
5. The Purchasers may, at any time and from time to time, at their
option, after having given at least ten (10) days' prior notice of its
intention to do so to the Debtors, perform any action which is undertaken by
the Debtors to be performed by it hereunder but which the Debtors shall have
failed to perform, and the Purchasers may take any other action which the
Purchasers may deem reasonably necessary for the maintenance, preservation or
protection of any of the Collateral or the security interests therein and the
Purchasers is hereby irrevocably appointed attorney-in-fact of the Debtors
for this purpose.
6
6. Representations and Warranties of the Debtors.
(a) The Debtors jointly and severally represent and warrant to the
Purchasers that the Debtors have rights in and good title to the Collateral
and each of the Debtors has full power and authority to grant to the
Purchasers the lien and security interest in the Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the
terms of this Agreement, without the consent or approval of any other person
other than any consent or approval which has already been obtained.
(b) The Debtors further jointly and severally represent and
warrant to the Purchasers that:
(i) Fully executed documents (including, without limitation,
Uniform Commercial Code financing statements) containing descriptions of the
Collateral will be properly filed, recorded or registered in those
governmental, municipal or other offices that are necessary to establish a
valid, legal and perfected first priority security interest in favor of the
Purchasers in respect of all the Collateral, and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration will
be necessary in any such jurisdiction, except as provided under applicable
law with respect to the filing of Uniform Commercial Code continuation
statements.
(ii) The security interest created hereby constitutes a
valid, legal and perfected first priority security interest in all the
Collateral securing payment and performance of the Obligations, subject only
to statutory liens and liens for taxes not yet due or payable.
(iii) Each of the Debtors has disclosed in writing to the
Purchasers any trade names used to identify it in its business or in the
ownership of its properties.
(b) All representations and warranties of the Debtors contained in
this Agreement shall survive the execution, delivery and performance of this
Agreement until the termination of this Agreement.
(c) The current chief place of business of the Debtors and the
place where the Debtors currently keep books and records is 00 Xxxx 00xx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000.
7. Remedies Upon an Event of Default.
(a) If any Event of Default shall have occurred and shall be
continuing for a period of 120 days after written notice thereof from the
Purchasers to the Debtors (except with respect to the occurrence of one or
more of the events specified in subparagraphs 3(v), 3(vii) and 3(viii)
hereof, in which case no notice or any continuance of an Event of Default for
any period of time shall be necessary), the Purchasers shall, subject to the
provisions of Section 19 of this Agreement, have all the rights and remedies
of a secured party under the Uniform Commercial Code as in effect in the
State of New York (the "UCC"), or other applicable law, including the power
of sale upon notice, and all rights provided herein, all of which rights and
remedies shall, to the fullest extent permitted by law, be cumulative.
7
(b) The Purchasers shall apply the proceeds from the sale or other
disposition of the Collateral pursuant to the provisions of this Section 7(b)
and any other amounts held by it as Collateral hereunder in the following
order:
(i) FIRST, to the payment of its reasonable costs and
expenses, if any (including, without limitation, reasonable attorneys' fees
and expenses), in preserving their interests in such Collateral or in
enforcing any remedies granted in or realizing against the security of, this
Agreement or any disbursements by the Purchasers under Section 7 hereof and
any other amounts owing to the Purchasers under this Agreement;
(ii) SECOND, to the payment to the Purchasers of accrued and
unpaid interest due and payable on the Promissory Notes made by the Debtors
(whether at stated maturity, by acceleration or otherwise);
(iii) THIRD, to the payment to the Purchasers of the
outstanding principal amount due and payable on the Promissory Notes (whether
at stated maturity, by acceleration or otherwise);
(iv) FOURTH, to the payment of any other Obligations of the
Debtors due and payable to the Purchasers on the date of such application;
and
(v) FIFTH, after the payment in full of all of the
obligations (including those not due and payable at the time of the
application referred to in clauses (i)-(iv) above), to the payment to the
Debtors of any surplus then remaining from such proceeds or otherwise as a
court of competent jurisdiction may direct.
(c) The realization, sale or other disposition of all or
substantially all of the Collateral by the Purchasers pursuant to this
Section 7(c) shall be deemed to fully relieve and discharge each of the
Debtors of all of their respective and collective Obligations hereunder and
under the Promissory Notes and related Note Purchase Agreement.
8. Possession by the Debtors Until an Event of Default. Until an Event
of Default shall occur and be continuing, except as otherwise provided in
this Agreement or in the other documents referred to herein, the Debtors will
have the right to the possession and enjoyment of the Collateral for the
purpose of conducting the ordinary course of its business, subject to and
upon the terms hereof.
9. Purchases by the Purchasers. At any sale pursuant to Section 7(c)
hereof, the Purchasers or its agents may, to the extent permitted by
applicable law, bid for and purchase the Collateral offered for sale, and,
upon compliance in full with the terms of such sale, may hold, retain and
dispose of such property without further accountability therefor to the
Debtors or any other party.
8
10. Remedies Cumulative. Each right, power and remedy herein
specifically granted to the Purchasers or otherwise available to it shall be
cumulative, and shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in equity or
otherwise; and each right, power and remedy, whether specifically granted
herein or otherwise existing, may be exercised, at any time and from time to
time as often and in such order as may be deemed expedient by the Purchasers
in its sole and complete discretion; and the exercise or commencement or
exercise of any right, power or remedy shall not be construed as a waiver of
the right to exercise, at the same time or thereafter, the same or any other
right, power or remedy. No delay or omission by the Purchasers in exercising
any such right or power, or in pursuing any such remedy, shall impair any
such right, power or remedy or be construed to be a waiver of any default on
the part of the Debtors or an acquiescence therein. No waiver by the
Purchasers of any breach or default of or by the Debtors hereunder shall be
deemed to be a waiver of any other or similar, previous or subsequent, breach
or default.
11. No Impairment. The terms of this Agreement and the obligations of
the Debtors arising hereunder shall not be affected, modified or impaired in
any manner or to any extent by: (i) the validity or enforceability of any of
the other instruments or documents executed by the parties with respect
hereto; (ii) any exercise or non-exercise of any right, power or remedy of
the Purchasers under any of such instruments or documents referred to in
clause (i) above or arising at law; (iii) any waiver, consent, release,
indulgence, extension, renewal, modification, delay or other action, inaction
or omission with respect to the Promissory Notes or any of the instruments or
documents referred to in clause (i) above; or (iv) any waiver by the
Purchasers of any rights under this Agreement, whether or not the Debtors
shall have had notice or knowledge of any of the foregoing and whether or not
the Debtors shall have consented thereto.
12. Successors and Assigns. This Agreement, and the terms and
conditions hereof, shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns, provided that
the Debtors may not assign any of its rights or obligations hereunder without
the prior written consent of the Purchasers.
13. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, provided that as to
Collateral located in any jurisdiction other than the State of New York, the
Purchasers shall have all the rights to which a secured party under the laws
of such jurisdiction is entitled.
14. Severability. In case any one or more of the provisions contained
in this Agreement shall be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained here shall not in any way be affected or impaired.
9
15. Term. This Agreement shall continue in full force and effect until
either (a) all the Obligations have been fully and indefeasibly paid in full
and payment in full thereof has been acknowledged by the Purchasers or (b)
the Purchasers realize ownership in and to the Collateral, whereupon this
Agreement and the security interest granted hereunder shall terminate.
16. Applicability of Regulatory or Governmental Rules and Regulations.
Any provision herein to the contrary notwithstanding, no action shall be
taken hereunder by the Purchasers with respect to any item of the Collateral
unless and until all material applicable requirements of all federal or state
or local laws, or rules and regulations of regulatory or governmental bodies
applicable to or having jurisdiction over the Debtors, have been fully
satisfied with respect to such action and there have been obtained such
consents, approvals and authorizations (if any) as may be required to be
obtained from any governmental authority under the terms of any license or
similar operating right held by the Debtors and included in the Collateral.
It is the intention of the parties hereto that the security interests and
liens of the Purchasers in and to the Collateral shall in all relevant
aspects be subject to and governed by said statutes, rules and regulations
and that nothing in this Agreement shall be construed so as to diminish the
control exercised by the Debtors except in accordance with the provisions of
such statutory requirements and rules and regulations. Each of the Debtors
agrees that, upon request from time to time by the Purchasers, it will use
its best efforts to obtain any governmental or regulatory consents, approvals
or authorizations referred to in this Section 16.
17. Notices. All notices and other communications provided for herein
shall be by telephone or telecopy or in writing and shall be telephoned,
telecopied, mailed or delivered to the intended recipients at the telecopier
numbers or addresses set forth underneath each party's name on the signature
page hereto. Except as otherwise provided in this Agreement, all notices and
other communications hereunder shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of mailed
notices, when actually received by the intended recipients, in each case
addressed as aforesaid. Telephoned notices shall be promptly confirmed by
the sender by letter or telecopy, provided that failure to confirm any such
telephoned notice shall not affect its validity.
18. Counterparts. This Agreement may be executed in any number of
counterpart copies, each of which shall be deemed an original, but all of
which together shall constitute a single instrument.
19. Amendments, Waivers, etc. This Agreement may not be amended
orally, but may be amended, modified or supplemented only by a written
instrument executed by all of the Debtors and the holders of a majority of
principal value of the Promissory Notes.
20. Headings. Descriptive headings appearing herein are included
solely for convenience of reference and are not intended to affect the
meaning or construction of any of the provisions of this Agreement.
10
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed as of the date and year first above written.
DEBTORS:
BION ENVIRONMENTAL TECHNOLOGIES, INC.,
a Colorado corporation
By:___________________________
Authorized Officer
BION DAIRY CORP0RATION
a Colorado corporation
By:___________________________
Authorized Officer
BION TECHNOLOGIES, INC.,
a Colorado corporation
By:___________________________
Authorized Officer
BIONSOIL, INC.,
a Colorado corporation
By:___________________________
Authorized Officer
Address for Notices to any of the Debtors:
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
with copies to:
Xxxx Xxxxx, P.C.
Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxxx
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Telecopier No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
and
Xxxx X. Xxxxx, President
X.X. Xxx 000
Xxxxxxxx, Xxxxxxxx 00000
e-fax: 0-000-000-0000
11
SCHEDULE 1
U.S. Patents
US Xxx No date issued Title
4,721,569 1/26/88 Phosphorus Treatment Process
5,078,882 1/7/92 Bioconversion Reactor and System
5,472,472 12/5/95 Animal Waste Bioconversion System
5,538,529 7/23/96 Bioconverted Nutrient Rich Humus
CIP of A3
5,626,644 5/6/97 Storm Water Remediatory Bioconversion
System
CIP of A3
5,755,852 5/26/98 Bioconverted Nutrient Rich Humus
CIP of A4
U.S. Patent Applications
Serial No. date filed Title
09/709,171 11/10/2000 Low Oxygen Organic Waste Bioconversion
System
PCT Applications
Application No. date filed Title
PCT/US01/46496 11/08/2001 Low Oxygen Organic Waste Bioconversion
System
Canadian Patents
C1 1,336,623 8/8/95 Aqueous Stream Treatment Process (Canada)
License Agreement
License Agreement dated January 31, 2002 between Biobalance A/S and Bion
environmental Technologies, Inc. concerning U.S. Patent No. 5,906,746 owned
by WTE Wassertechnik GmbH
General
All of the Debtors trade secrets, proprietary information and know-how.
All other intellectual property of the Debtors that is developed or acquired
in the future.
PLEDGE AGREEMENT
This Pledge Agreement ("Agreement") is entered into this date by and
between Bion Environmental Technologies, Inc. ("Pledgor") and the purchasers
of those certain Bion Dairy Corporation Series 2003 Convertible Promissory
Notes (collectively the "Purchasers");
WHEREAS the Pledgor is the owner of 4,000,000 shares (the "Dairy
Shares") of the common stock of Bion Dairy Corporation, a Colorado
corporation ("Dairy") and 3,459,997 shares (the "Centerpoint Shares") of the
common stock of Centerpoint Corporation, a majority-owned subsidiary of
Pledgor ("Centerpoint") (The Dairy Shares and the Centerpoint Shares are
hereinafter collectively referred to as the "Shares");
WHEREAS Dairy is selling to Purchasers Series 2003 Convertible
Promissory Notes ("Notes"); and
WHEREAS Pledgor has agreed to secure the payment of the Notes by the
pledge of the Shares under the terms of this Agreement;
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
Section 1. Grant of Security Interest. The Pledgor grants to the
Purchasers a security interest in the Shares.
Section 2. Possession. Contemporaneously herewith, the Pledgor has
delivered to Xxxxxxx Xxxxxxxx ("Agent") a certificate evidencing the Shares
("Certificate"), together with a stock power endorsed in blank, to hold
subject to terms of this Agreement.
Section 3. Obligations of Agent. During the term of this Agreement,
and for so long as Agent is in possession of the Certificate, Agent shall
take reasonable care of the Certificate. Once the Pledgor has made payment
in full on all of the principal and interest on the Notes and/or all of the
Notes have been converted into common stock of Dairy, Agent shall re-deliver
the Certificate to the Pledgor, together with the stock power endorsed by the
Pledgor.
Section 4. Representations and Warranties of Pledgor. The Pledgor
represents and warrants to the Purchasers that:
A. The Pledgor is the owner of the Shares, free and clear of
liens, encumbrances, or other matters that might affect title to the Shares.
B. The Pledgor has the full power to transfer the Shares pursuant
to this Agreement, and, upon such transfer, the transferee shall take good
and marketable title to the Shares free and clear of any claims, liens,
encumbrances, or security interests.
Section 5. Covenants of Pledgor. For as long as this Agreement is
force and Agent is in possession of the Shares, the Pledgor agrees that:
A. Pledgor will not grant any other lien or security interest with
respect to the Shares.
B. As long as the obligations secured by this Agreement remain
outstanding, the Pledgor will not transfer, whether by sale, gift, or
otherwise, any ownership interest in the Shares without Agent's prior written
approval.
C. Upon the reasonable request of Agent, the Pledgor will take all
action and will execute all documents and instruments necessary or desirable
to consummate and give effect to this Agreement.
Section 6. Covenants of Pledgor Regarding Dairy and Centerpoint. Until
the Notes are paid in full or converted into Common Stock, or unless
otherwise directed in writing by the holders of a majority in principal
amount of the outstanding Bion Dairy Corporation Series 2003 Convertible
Promissory Notes, the Pledgor agrees to cause each of Dairy and Centerpoint
to:
A. Not amend or restate its articles of incorporation or bylaws or
adopt a plan of liquidation or dissolution.
B. Not declare or pay any dividend or distribution on any shares
of its stock, make any other distribution on account of any shares of its
stock or redeem, purchase or otherwise acquire, directly or indirectly, any
shares of its stock; provided, however, that Pledgor and Centerpoint shall be
permitted to cause all of the shares of Pledgor's Common Stock that are owned
by Centerpoint to be distributed to the Centerpoint stockholders, at which
time the shares of Pledgor's Common Stock that are distributed to Pledgor
pursuant to such distribution shall be cancelled.
Section 7. Proxy. The Pledgor irrevocably appoints Agent as attorney-
in-fact and grants Agent a proxy to do (but Agent shall not be obligated and
shall incur no liability to the Pledgor or any third party for failure to do
so), after and during the continuance of an Event of Default, any act that
the Pledgor is obligated by this Agreement to do and to exercise such rights
and powers as the Pledgor might exercise with respect to the Shares. With
respect to voting the Shares, this Section constitutes an irrevocable
appointment of a proxy, coupled with an interest, which shall continue until
the Notes are paid in full and/or converted into common stock, in full.
Section 8. Voting Shares. Except as otherwise limited by this
Agreement, as long as no Event of Default shall have occurred, the Pledgor
shall be entitled to vote the Shares.
Section 9. Custody of Shares. If at any time with respect to the
Shares, the Pledgor receives or becomes entitled to receive any dividend or
any other distribution cash dividend, whether in securities or other
property, by way of liquidation, stock split, spin-off, split-up or
reclassification, combination of shares, or the like, or in case of any
reorganization, consolidation, or merger, the Pledgor shall immediately
deliver all such securities or property, in pledge, to Agent as security for
the payment and performance of the obligations secured by this Agreement.
The Pledgor shall immediately notify the Company to make all such payments
directly to the Agent. The Agent may endorse, in Agent's name or in the name
of the Pledgor, any and all instruments by which any payment on the Shares
2
may be made and may take such action as the Agent may deem appropriate from
time to time, in the Agent's name or in the name of the Pledgor, to enforce
collection of the Shares. For such purpose, the Pledgor appoints the Agent
as the attorney-in-fact of the Pledgor, under a power coupled with an
interest, with full power of substitution.
Section 10. Events of Default. For the purposes of his agreement, an
"Event of Default" shall be as defined in the Security Agreement dated August
26, 2003 between the parties hereto.
Section 11. Remedies. Upon the occurrence of any Event of Default,
Agent may, in Agent's sole discretion and with or without further notice to
the Pledgor, exercise the remedies set forth in the Security Agreement dated
August 26, 2003, with respect to the shares.
Section 12. Notices. Any notice under this Agreement shall be in
writing and shall be effective when actually delivered in person or three
days after being deposited in the U.S. mail, registered or certified, postage
prepaid and addressed to the party at the address stated in this Agreement or
such other address as either party may designate by written notice to the
other.
Section 13. Waiver. The waiver by either party of the breach of any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach.
Section 14. Assignment. Except as otherwise provided within this
Agreement, neither party hereto may transfer or assign this Agreement without
prior written consent of the other party.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed as of August 26, 2003.
BION ENVIRONMENTAL TECHNOLOGIES, INC.,
a Colorado corporation
By: __________________________________________
Authorized Officer
BION DAIRY CORPORATION,
a Colorado corporation
By: __________________________________________
Authorized Officer
AGENT
By:_______________________________________________
Xxxxxxx Xxxxxxxx
3
PURCHASERS:
1. Xxxxxx Xxxxxxxx (Xxxxxxxx Xxxx)
2. Xxxxxxx X. Xxxxxxxx
3. Xxxxx Xxxxxxxx
4. Xxxxxxx Xxxxxx
5. Xxxxxx Xxxxx
6. Xxxx Xxxxxx
7. Xxxxxx Xxxxx
8. Xxxxx Xxxxx
9. Xxxxxx Trust
10. Xxxxxx and Xxx Xxxxxxxx
11. Xxxxxxx Xxxxxxxxx
12. Xxxxx-Xxx LLC (Xxxxxxx Xxxxxxx)
4
BION DAIRY CORPORATION
ACCREDITED INVESTOR QUESTIONNAIRE
TO: Bion Dairy Corporation
Ladies and Gentlemen:
In connection with the undersigned's proposed investment in 2003
Convertible Promissory Notes ("Notes") of Bion Dairy Corporation ("Company"),
the undersigned hereby acknowledges, represents and warrants to the Company
as follows:
(a) The undersigned understands that an investment in the Notes
is available only to "Accredited Investors" as defined in Regulation D. The
undersigned represents and warrants that he/she is an "Accredited Investor"
because the undersigned is: (please initial the applicable category):
i. ______ A natural person (individual or married couple) whose
individual net worth, or joint net worth with spouse, exceeds $1,000,000.
ii. ______ A natural person whose individual income (exclusive of
spouse's income) was in excess of $200,000 in each of the two most recent
years or whose joint income with the undersigned's spouse was in excess of
$300,000 in each of those years and has a reasonable expectation of reaching
the same income level in the current year.
iii. _____ An employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, the investment decisions for
which are made by the undersigned as a plan fiduciary, as defined in Section
3(21) of such Act, and the undersigned is (_____) a bank, (_____) a savings
and loan association, (_____) an insurance company, or (______) a registered
investment advisor.
iv. _____ An employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 and either whose assets are
in excess of $5,000,000 or which is a self-directed plan, with investment
decisions made solely by an Accredited Investor.
v. _____ A corporation, business trust or partnership, not formed for the
specific purpose of acquiring Notes in the Company, with total assets in
excess of $5,000,000.
vi. ______ A trust, not formed for the specific purpose of acquiring
Notes in the Company, which has total assets in excess of $5,000,000 whose
purchase is directed by a "sophisticated person" as described in Regulation D
Section 230.506(b)(2)(ii).
vii. _____ An entity in which all of the equity owners are Accredited
Investors as defined in Regulation D.
If the last blank in Item iii. was checked or if Item vi. was checked, list
the person or persons making all investment decisions. If Item vii. was
checked, list all equity owners of the entity:
_____________________________________________________________________
NOTE: IF ITEM iii., vi. or vii. WAS ANSWERED, THEN EACH OF THE INDIVIDUALS
RESPONSIBLE FOR MAKING THE INVESTMENT DECISION (AS TO ITEMS iii. or vi.) AND
EACH EQUITY OWNER OF THE ENTITY (AS TO ITEM vii.) MUST COMPLETE A SEPARATE
COPY OF THIS SUBSCRIPTION AGREEMENT IN HIS INDIVIDUAL CAPACITY.
IN WITNESS WHEREOF, the undersigned represent(s) that the foregoing
statements are true and correct and that he has (they have) executed this
Accredited Investor Questionnaire this __________ of __________, 2003.
____________________________________ X___________________________________
Please Print Name Signature of Subscriber
X___________________________________
Please Print Name Signature of Co-Owner
2
