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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: December 11, 1999
(Date of earliest event reported)
Bion Environmental Technologies, Inc.
(Exact Name of Registrant as Specified in its Charter
Colorado 0-19333 84-1176672
(State of (Commission (I.R.S. Employer
Incorporation) File No.) Identification No.)
555 17th Street, Suite 3310, Denver, Colorado 80202
(Address and Zip Code of Principal Executive Offices)
Registrant's telephone number including area code: (303) 294-0750
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT;
ITEM 2. ACQUISITION OF ASSETS; and/or
ITEM 5. OTHER EVENTS
1. On December 23, 1999, Bion Environmental Technologies, Inc. ("Bion")
entered into the following transactions with the D2 Co., LLC., a recently
formed Delaware Limited Liability Company, which was formerly unaffiliated
with Bion, ("D2"):
a) Bion entered into a three year Management Agreement with D2, (attached
as Exhibit 10.1 hereto), pursuant to which D2 will provide Bion specific
management and consulting services. A principal of D2, David J. Mitchell has
been appointed to the following positions with Bion: Director, Chief Executive
Officer, and Chairman of Executive Committee. Additionally, D2 has engaged
Summerwind Restructuring, Inc. to provide consulting services to Bion's
management and operations personnel. Jon Northrop will serve as President and
will continue as a director and Chief Financial Officer; Mark A. Smith will
continue as Chairman of Bion's Board; Jere Northrop will continue as a
Director and Chief Technical Officer; and Ronald G. Cullis will continue as a
director. The compensation to D2 for such services are as follows:
i) $240,000 per year payable in Bion common stock or cash; and
ii) 2,500,000 warrants exercisable at $2.50 expiring on December 31,
2004.
See Exhibit 10.1 for details.
b) As part of the Management Agreement with D2, Bion has agreed to fill
three vacant director seats with nominees of D2. The first two nominees are
David J. Mitchell and Salvatore J. Zizza (biographies of Mr. Mitchell and Mr.
Zizza attached in Exhibit 99.1), who have been appointed directors of Bion.
c) Bion entered into a Warrant Purchase Agreement and other agreements
with D2, pursuant to which D2 purchased 2,500,000 warrants for $1,000,000
($500,000 in cash and $500,000 in a non-recourse promissory note to Bion that
is secured by the subject warrants). See Exhibit 10.2 hereto.
d) Additionally, a Shareholders' Agreement was executed by, between and
among D2, Mark A. Smith, Jere Northrop, Jon Northrop, LoTayLingKyur, Inc., and
Dublin Holding, Ltd. See Exhibit 10.3 hereto.
e) The transactions set forth at paragraphs 2 through 4 below were
entered into to meet conditions set by D2.
2. Effective December 20, 1999, pursuant to an agreement by, between and
among Bion, LoTayLingKyur, Inc., LTLK Defined Benefit Plan, LoTayLingKyur
Foundation, Dublin Holding Ltd. and Mark A. Smith (collectively "First
Parties"): i) First Parties exchanged certain convertible promissory notes of
Bion for new convertible promissory notes with aggregate principal of
$3,075,797.85 due at December 31, 2002; ii) Bion received the right to convert
such new notes to common stock under specific conditions; iii) First Parties'
Class X Warrants were exchanged for 0.3 restricted common shares plus 0.7
Class Z Warrants for each Class X Warrant (in aggregate, 1,172,426 restricted
shares of common stock and 2,735,660 Class Z Warrants were issued and
exchanged for 3,908,084 Class X Warrants); and iv) First Parties agreed to
participate in and support a future registered warrant exchange on specified
terms and conditions. See Exhibit 10.4 for details.
3. During the period from December 11, 1999 through December 15, 1999, Bion
entered into agreements with each of its current employees who had in the past
received Bion warrants (of various classes) as compensation ("Employee
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Warrants") to exchange the Employee Warrants for non-qualified options with
identical exercise prices, expiration dates and vesting dates issued pursuant
to Bion's 1994 Incentive Plan. In aggregate, 303,925 Employee Warrants were
exchanged for 303,925 non-qualified options. See Exhibit 10.5 for form of
agreement executed by Bion's employees.
4. Effective December 15, 1999, Bion entered into agreements with 8 holders
of outstanding promissory notes of Bion(Jon Northrop, Jere Northrop, Northrop
Family Trust, M. Duane Stutzman, Harley Northrop, Edward Hennig, William
Crossetta, and Craig Scott), pursuant to which each note holder agreed to
exercise either outstanding Bion options or warrants owned by the note holder
by cancellation of the promissory note owned by the holder under certain
specified conditions. Additionally, each note holder agreed to participate in
and support a future registered warrant exchange under specified terms and
conditions. See Exhibits 10.5, 10.6, 10.7, 10.8, 10.9, 10.10, 10.11, and
10.12 hereto for details.
5. As a result of the transactions set forth at paragraphs 1 through 4 above
(and the exhibits thereto), Bion's capital structure has undergone material
changes. Exhibit 10.13 hereto outlines Bion's capital structure as of
December 20, 1999.
6. Interest of Named Experts and Counsel in filing of Form S-8 dated December
11, 1999. Stanley F. Freedman, the sole owner of an entity which is a member
of the law firm which serves as Bion's outside legal counsel, is the owner of
7,091 shares of common stock of the Company and the holder of a currently
exercisable option to purchase an additional 40,000 shares at an exercise
price of $2.50 per share. The subject option will expire on December 31,
2001. In addition, Mr. Freedman is the owner of a Z warrant to purchase 6,636
additional shares at an exercise price of $13.50 per share during the period
commencing on January 1, 2000 and ending on December 31, 2001.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
10.1 Management Agreement and Management Compensation
Warrant.
10.2 Warrant Purchase Agreement; Promissory Note; Warrant;
and Pledge Agreement.
10.3 Shareholder Agreement.
10.4 First Parties' Agreement.
10.5 Agreement between Jon Northrop and Bion.
10.6 Agreement between Jere Northrop and Bion.
10.7 Agreement between Northrop Family Trust and Bion.
10.8 Agreement between M. Duane Stutzman and Bion.
10.9 Agreement between Harley Northrop and Bion.
10.10 Agreement between Edward Hennig and Bion.
10.11 Agreement between William Crossetta and Bion.
10.12 Agreement between S. Craig Scott and Bion.
10.13 Bion's Capital Structure as of December 23, 1999.
99.1 Biographies of Messrs. Mitchell and Zizza.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BION ENVIRONMENTAL TECHNOLOGIES,INC.
Date: December 23, 1999 By: /s/ Jon Northrop
Jon Northrop, Chief Financial Officer
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MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made and entered into as
of this 23rd day of December, 1999 between Bion Environmental Technologies,
Inc. (the "Company"), a Colorado corporation, having its principal address at
555 17th Street, Suite 3310, Denver, Colorado 80202 and D2 Co., LLC, a
Delaware limited liability company ("D2"), having its principal address at 5
East 59th Street, 3rd Floor, New York, New York 10022.
W I T N E S S E T H:
WHEREAS, the Company is the sole shareholder of Bion Technologies, Inc.,
a Colorado corporation, Bion Soil, Inc., a Colorado corporation and two
inactive corporations, Bion Municipal, Inc., a Colorado corporation, and Bion
International, Inc., a Colorado corporation (all of which are collectively
referred to herein as the "Subsidiaries"); and
WHEREAS, the Company desires the benefit of the experience, supervision
and services of D2 and desires to employ it upon the terms and conditions
hereinafter set forth, and D2 is willing and able to accept such employment on
such terms and conditions;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein contained, the Company and D2 agree as follows:
1. Employment. The Company agrees to employ, and D2 agrees to serve the
Company, in the management capacity and upon the other terms and conditions
hereinafter set forth.
2. Term. The employment of D2 shall continue for a period of three
years, unless terminated sooner, as hereinafter provided (the "Term"). The
Term shall be automatically extended for additional one-year periods unless
either the company or D2 shall give written notice of non-renewal at least 60
days prior to the end of the initial or any renewed Term.
3. Termination for Cause.
(a) The Company may terminate this Agreement for Cause. For
purposes of this Agreement, termination for "Cause" shall mean (i) D2 or the
persons referred to in Section 4(a) personally engaging in illegal conduct
that is materially detrimental to the Company; (ii) D2 or the person referred
to in Section 4(a)(i) (the "D2 Designee") being convicted of a felony; or
(iii) D2 's or the D2 Designee's willful and continued failure to use
reasonable business efforts to attempt to substantially perform their
respective duties hereunder (other than such failure resulting from incapacity
due to a physical or mental illness) after demand for substantial performance
is delivered by the Company in writing that specifically identifies the manner
in which the Company believes any of D2 or the D2 Designee has not used
reasonable business efforts to attempt to substantially perform its or his
duties. In the event the D2 Designee becomes incapacitated due to a physical
or mental illness and after due notice from the Company D2 has failed to
appoint a successor "D2 Designee," then the Company shall be entitled to
appoint a designee to fill such position until such failure has been cured by
D2. For purposes of this Section 3(a), in addition to the other legal
requirements to be "willful," no act, or failure to act, shall be considered
"willful" unless committed in bad faith and without a reasonable belief that
the act or omission was in the best interests of the Company. In addition, no
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action or inaction shall give rise to a right of the Company to terminate this
Agreement for Cause unless the Company has delivered to D2 a copy of a
resolution duly adopted by a majority of the members of the Board of Directors
(other then the three members designated by D2) at a meeting of the Board
called and held for such purpose (after reasonable (but in no event less than
thirty (30) days) notice to D2 an opportunity for D2, together with its
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, D2 or the D2 Designee were guilty of any conduct set forth above
and specifying the particulars thereof in detail. This Section 3(a) shall not
prevent D2 from challenging in any court of competent jurisdiction the Board's
determination that Cause exists or that D2 or the D2 Designee has failed to
cure any act (or failure to act) that purportedly formed the basis for the
Board's determination. If the Company reasonably determines that D2 has
violated the terms of this Agreement, it shall give written notice thereof
describing the default and granting thirty (30) days in which to cure the
default. If D2 fails or refuses to cure the default within thirty (30) days of
the receipt of such notice, the Company may terminate this Agreement at the
end of the thirty (30) day period.
(b) D2 may terminate this Agreement if the Company fails to pay
amounts owing to D2. If D2 reasonably determines that the Company has failed
to pay amounts owing under this Agreement, it shall give written notice
thereof describing the amount owing and granting thirty (30) days in which to
cure such failure. If the Company fails or refuses to pay amounts owing to D2
within thirty (30) days of the receipt of such notice, D2 may terminate this
Agreement at the end of the thirty (30) day period.
4. Duties. D2 shall perform (or supervise the performance of) certain
executive and administrative activities relating to the internal operation of
the Company and its Subsidiaries, subject always to the general control and
direction of the Board of Directors of the Company. D2's duties shall consist
of the following:
(a) D2 shall provide (i) certain executive level employee services
to the Company and its Subsidiaries, initially consisting of the provision of
the services of Mr. David Mitchell (or his successor in office) as Chief
Executive Officer and Chairman of the Executive Committee and (ii) the
services of Summerwind Restructuring, Inc. (or its successor) as a consultant
to the Company. Notwithstanding anything in this Agreement to the contrary,
D2 shall not be obligated to provide executive level services to the Company
in the nature of those generally performed by a Chief Financial Officer and/or
Controller;
(b) D2 shall provide (or supervise the provision by a third party
hired at the Company's expense) certain financial advisory, research and
consulting services in the nature of those generally provided by investment
banking firms and management consulting firms;
(c) D2 shall supervise office systems, filing systems, accounting
systems, and bookkeeping systems for the Company and its Subsidiaries;
(d) D2 shall consult with and advise the other officers, directors,
agents and employees of either the Company, regarding the internal operations
of the Company or the Subsidiaries;
(e) D2 shall assist the Company to prepare a business plan and
annual operating budgets for the Company and its Subsidiaries; and
(f) The Board of Directors shall periodically review the
performance of the D2 Designee based on the plans and projections relating to
the Company developed by him.
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In the event that D2 provides services to the Company or its
Subsidiaries that exceed those described above (including but not limited to
consultation, negotiation, review and analysis in connection with joint
ventures, mergers and acquisitions or bank financings involving or
transactions with respect to the sale or disposition of, the Company or any
of its Subsidiaries), D2 shall be entitled to negotiate with the Company for
the receipt of additional fees.
5. Powers. So that it may properly perform its duties, D2, through the
D2 Designee in his capacity as an executive officer of the Company, shall have
the power to take all action and do all things necessary and proper to bring
about the efficient operation of the Company and its Subsidiaries, subject to
the overall direction and control of the Board of Directors of the Company.
D2, through the D2 Designee in his capacity as an executive officer of the
Company, shall have the power to employ, supervise and discharge all employees
of the Company and its Subsidiaries and to fix their compensation, subject to
the overall direction and control of the Board of Directors of the Company.
6. Directors. (a) For the Term, D2 shall be entitled to designate
three of the seven Directors of the Company. If necessary, the Directors of
the Company will elect each such person to the Board of Directors of the
Company by creating a new position on the Board of Directors promptly
following such person's nomination by D2 and shall nominate such person for
election in connection with any shareholder vote for Directors, and the
Company will use its best efforts to ensure that the shareholders of the
Company agree to vote all their securities in favor of such person's election.
The Company agrees to vote all voting securities for which the Company holds
proxies, granting it voting discretion, or is otherwise entitled to vote, in
favor of, and to use its best efforts in all respect to cause, the election of
each such individual proposed by D2. In the event that a vacancy is created
on the Board of Directors at any time by the death, disability, resignation or
removal (with or without cause) of any such individual proposed and nominated
by D2, pursuant to this Agreement, the Company will, and will use its best
efforts to ensure that the shareholders of the Company, vote all its voting
securities to elect each individual proposed by D2 and approved by the Company
and nominated for election by D2 to fill such vacancy and serve as a voting
Director.
(b) Upon the successful competition of the funding set forth in the
Company's interim Business Plan, which is estimated to be $3,000,000, D2 shall
have the right to nominate for election at the next annual meeting one
additional Director out of the seven Directors, who shall be "independent" and
not affiliated with either the Company or D2,the Company agrees that it will
not unreasonably withhold or deny its vote (of all voting securities for which
the Company holds proxies granting it voting discretion, or is otherwise
entitled to vote) in favor of the election of each such individual proposed by
D2.
(c) If D2 gives notice to the Company that it desires to remove a
Director proposed by it pursuant to Subsection 6(a) of this Agreement, the
Company shall, and shall use its best effort to ensure that the shareholders
of the Company shall, vote all its voting securities in favor of removing such
Director if a vote of holders of such securities shall be required to remove
the Director, and the Company agrees to take any action necessary to
facilitate such removal.
(d) Each Director nominated by D2 shall be entitled to the same
type and an amount of compensation at least equal to the highest amount
payable to any other Director for serving in such capacity.
(e) Concurrently herewith, if requested by D2, but in no event
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later than January 30, 2000, the Company shall have caused the appointment of
the initial Directors nominated by D2 to its Board of Directors in accordance
with the provisions of this Section 6, which individuals shall be identified
in writing to the Company by such time.
(f) At any time that a designee or designees of D2 serve on the
Company's Board of Directors, D2 shall be entitled to representation on any
committee of the Board of Directors proportionate with their representation of
the Board as a whole.
(g) The Company shall promptly reimburse each director of the
Company designated by D2 who is not an employee of the Company for all of his
reasonable expenses incurred in attending each meeting of the Board of
Directors of the Company or any committee thereof.
(h) The Company shall at all times maintain provisions in its
By-laws and/or Certificate of Incorporation indemnifying all directors against
liability and absolving all directors from liability to the Company and its
shareholders to the maximum extent permitted under the laws of the State of
Colorado.
(i) The By-laws of the Company shall always contain provisions
consistent with the provisions of this Section 6.
(j) The Company shall use its best efforts to assist the Executives
in procuring and maintaining, for so long as any designee of D2 is a director
of the Company, Director and Officer Liability Insurance on terms and
conditions reasonably satisfactory to D2.
7. Liabilities and Expenses. All reasonable costs, expenses, losses,
and damages incurred by D2 in the provision of the services to the Company or
its Subsidiaries provided for hereunder shall be paid by the Company, or if
paid for by D2, shall be reimbursed by the Company upon provision of a written
record of said costs. However, D2 shall not be reimbursed for, and shall
itself pay for the cost of its offices, equipment, management personnel
(either employees or independent contractors, including the Executives) and
facilities and supplies necessary to enable it to fully perform the management
duties to be performed by it hereunder.
8. Compensation.
(a) As compensation for its' services performed hereunder, D2 shall
be entitled to the following compensation from the Company:
(i) a $240,000 annual base fee (the "Fee"), payable by the
Company in monthly installments on the first day of each calendar month,
commencing January 2, 2000. Until January 1, 2002, all or a portion of the
Fee may be paid in shares of the Common Stock of the Company. The number of
shares to be issued in payment of the Fee shall be equal to the portion of the
Fee to be paid in Common Stock, divided by the average Closing Bid Price of
the Common Stock over the 30 days prior to the date on which an installment
shall be paid. For purposes hereof, the "Closing Bid Price" for each trading
day shall be the reported per share closing bid price of the Common Stock
regular way on the Stock Market on such trading day, and "Stock Market" shall
mean the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, shall mean NASDAQ or,
if the Common Stock is not quoted on Nasdaq, shall mean the OTC Bulletin Board
or, if the Common Stock is not quoted on the OTC Bulletin Board, shall mean
the over-the-counter market as furnished by any NASD member firm selected from
time to time by the Company for that purpose.
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(ii) in addition, the Company shall, on January 1, 2000,
issue to D2 warrants to purchase 2,500,000 shares of its Common Stock, no par
value per share ("Common Stock"), all of which shall be immediately
exercisable at a price of $2.50 per share and which shall expire on June 30,
2004.
9. Covenant of D2. D2 covenants and agrees that it will maintain (or
will otherwise have available to it) facilities and staff necessary and
adequate in all material respects to perform properly its obligations
hereunder.
10. Notices. All notices and other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
duly given if delivered or mailed first class mail postage prepaid to the
address of the Company and D2 set forth above.
11. Construction. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
12. Benefit. This Agreement shall bind and inure to the benefit of the
parties and their legal representatives, successors and assigns, including,
without limitation, a successor by merger.
13. Assignment. No party hereto may assign or transfer its rights or
obligations arising under this Agreement without the prior written consent of
the other party hereto, which consent shall not be unreasonably withheld.
14. Entire Agreement. The parties hereto agree that this Agreement
constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements and understandings
between them as to such subject matter; and there are no restrictions,
agreements, arrangements, oral or written, between the parties relating to the
subject matter hereof which are not fully expressed or referred to herein.
15. Waivers and Further Agreements. Any waiver of any terms or
conditions of this Agreement shall not operate as a waiver of any other breach
of such terms or conditions or any other term or condition, nor shall any
failure to enforce any provision hereof operate as a waiver of such provision
or of any other provision hereof; provided, however, that no such waiver
unless it by its own terms explicitly provides as to the contrary, shall be
construed to effect a continuing waiver of the provision being waived and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such
waiver is claimed in all other instances or for all other purposes to require
full compliance with such provision. Each of the parties hereto agrees to
execute all such further instruments and documents and to take all such
further action as the other party may reasonably require in order to
effectuate the terms and purposes of this Agreement.
16. Amendments. This Agreement may not be amended nor shall any waiver,
change, modification, consent or discharge be effected except by an instrument
in writing executed by or on behalf of the party or parties against whom
enforcement of any amendment, waiver, change, modification, consent or
discharge is sought, subject to the terms of any outstanding loans of the
Company.
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17. Severability. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with
any constitution or statute or rule of public policy or for any other reason,
such circumstance shall not have the effect of rendering the provision or
provisions in question, invalid, inoperative or unenforceable in any other
jurisdiction or in any other case or circumstance or of rendering any other
provision or provisions herein contained invalid, inoperative or unenforceable
to the extent that such other provisions are not themselves actually in
conflict with such constitution, statute or rule of public policy, but this
Agreement shall be reformed and construed in any such jurisdiction or case as
if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
18. Section Headings. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
BION ENVIRONMENTAL TECHNOLOGIES, INC., a
Colorado corporation
By: /s/ Jon Northrop
Title: CEO
D2 CO., LLC, a Delaware limited liability
company
By: /s/ David J. Mitchell
Title: President
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THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF THE HOLDER
THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARDS
THE RESALE OR OTHER DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
Warrant
Warrant to Subscribe January 1, 2000
for 2,500,000 shares
Void After June 30, 2004
THIS CERTIFIES that, for value received, D2 Co., LLC, a Delaware limited
liability company, or its registered assigns ("D2"), is entitled to subscribe
for and purchase from Bion Environmental Technologies, Inc., a Colorado
corporation (hereinafter called the "Company"), at the price of $2.50 per
share (such price as from time to time adjusted as hereinafter provided being
hereinafter called the "Warrant Price"), at any time prior to June 30, 2004
(the "Warrant Expiration Date"), up to 2,500,000 (subject to adjustment as
hereinafter provided) fully paid and nonassessable shares of Common Stock, no
par value per share, of the Company (hereinafter called the "Common Stock"),
subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. This Warrant was issued pursuant to a certain
Management Agreement, dated as of December 23, 1999 (the "Management
Agreement"), between the Company and D2 and the rights and benefits contained
therein shall inure to the benefit of all subsequent holders of this Warrant.
The Warrants issued pursuant to the Management Agreement and any warrant or
warrants subsequently issued upon exchange or transfer thereof are hereinafter
collectively called the "Warrants." "Registered Holder" shall mean, as to any
Warrant and as of any particular date the person in whose name the certificate
representing the Warrant shall be registered on that date on the books
maintained by the Company pursuant to Section 3(b).
Section 1. Exercise of Warrant.
(a) Method of Exercise. The rights represented by this Warrant
may be exercised by the holder hereof, in whole at any time or from time to
time in part, but not as to a fractional share of Common Stock, by the
surrender of this Warrant (properly endorsed) at the office of the Company as
it may designate by notice in writing to the holder hereof at the address of
such holder appearing on the books of the Company, and as further provided
below in this Section 1 by payment to the Company of the Warrant Price in cash
or by certified or official bank check, for each share being purchased.
(b) Delivery of Certificates. Etc. In the event of any exercise
of the rights represented by this Warrant, a certificate or certificates for
the shares of Common Stock so purchased, registered in the name of the holder,
shall be delivered to the holder hereof within a reasonable time, not
exceeding ten days, after the rights represented by this Warrant shall have
been so exercised; and, unless this Warrant has expired, a new Warrant
representing the number of shares (except a remaining fractional share), if
any, with respect to which this Warrant shall not then have been exercised
shall also be issued to the holder hereof within such time. The person in
whose name any certificate for shares of Common Stock is issued upon exercise
of this Warrant shall for all purposes be deemed to have become the holder of
record of such shares on the date on which the Warrant was surrendered and
payment of the Warrant Price and any applicable taxes was made, except that,
if the date of such surrender and payment is a date on which the stock
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transfer books of the Company are closed, such person shall be deemed to have
become the holder of such shares at the close of business on the next
succeeding date on which the stock transfer books are open.
2. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrant, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrant. The Company
covenants that all shares of Common Stock which shall be issuable upon
exercise of the Warrant shall, at the time of delivery (assuming full payment
of the purchase price thereof), be duly and validly issued, fully paid,
nonassessable and free from all issuance taxes, liens and charges with respect
to the issue thereof including, without limitation, adverse claims whatsoever
(with the exception of claims arising through the acts of the Registered
Holders themselves and except as arising from applicable Federal and state
securities laws), that the Company shall have paid all taxes, if any, in
respect of the original issuance thereof and that upon issuance such shares,
to the extent applicable, shall be listed on, or included in, the Stock
Market. As used herein, "Stock Market" shall mean the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange, shall mean NASDAQ or, if the Common Stock is not quoted
on Nasdaq, shall mean the OTC Bulletin Board or, if the Common Stock is not
quoted on the OTC Bulletin Board, shall mean the over-the-counter market as
furnished by any NASD member firm selected from time to time by the Company
for that purpose.
(b) The Company covenants that if any securities to be reserved for
the purpose of exercise of the Warrant hereunder require registration with, or
the approval of, any governmental authority under any federal securities law
before such securities may be validly issued or delivered upon such exercise,
then the Company will in good faith and as expeditiously as reasonably
possible, endeavor to secure such registration or approval. The Company will
use reasonable efforts to obtain appropriate approvals or registrations under
state "blue sky" securities laws; provided, that the Company shall not be
required to qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdictions or make any changes in
its capital structure or any other aspects of its business or enter into any
agreements with blue sky commissions, including any agreement to escrow shares
of its capital stock. With respect to any such securities, however, Warrants
may not be exercised by, or shares of Common Stock issued to, any Registered
Holder in any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes
and other similar governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares upon exercise
of the Warrants; provided, however, that if the shares of Common Stock are to
be delivered in a name other than the name of the Registered Holder on any
Warrant being exercised, then no such delivery shall be made unless the person
requesting the same has paid to the Company the amount of transfer taxes or
charges incident thereto, if any.
3. Exchange and Registration of Transfer.
(a) This Warrant may be exchanged for another Warrant representing
an equal aggregate number of Warrants of the same class or may be transferred
in whole or in part, by surrendering it to the Company at its corporate
office. Upon satisfaction of the terms and provisions hereof, the Company
shall execute, and the Company shall sign, issue and deliver in exchange
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<PAGE>
therefor, such new Warrant or Warrants that the Registered Holder making the
exchange shall be entitled to receive.
(b) The Company shall keep at its office books in which, subject to
such reasonable regulations as it may prescribe, it shall register Warrants
and any transfers thereof in accordance with its regular practice. Upon due
presentment for registration of transfer of any Warrant at such office, the
Company shall execute and the Company shall issue and deliver to the
transferee or transferees a new Warrant or Warrants representing an equal
aggregate number of Warrants.
(c) With respect to all Warrants presented for registration or
transfer, or for exchange or exercise, the subscription form attached hereto
shall be duly endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory to the Company,
duly executed by the Registered Holder or his attorney-in-fact duly authorized
in writing.
(d) Prior to due presentment for registration of transfer thereof,
the Company may deem and treat the Registered Holder of any Warrant as the
absolute owner thereof (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company)
for all purposes and shall not be affected by any notice to the contrary.
4. Loss or Mutilation. Upon receipt by the Company of evidence
satisfactory to it of the ownership of and loss, theft, destruction or
mutilation of any Warrant and (in case of loss, theft or destruction) of
indemnity satisfactory to it, and (in the case of mutilation) upon surrender
and cancellation thereof, the Company shall execute, sign and deliver to the
Registered Holder in lieu thereof a new Warrant of like tenor representing an
equal aggregate number of Warrants.
5. Adjustment of Warrant Price and Number of Shares of Common Stock or
Warrants. Upon each adjustment of the Warrant Price pursuant to this Section
5, the total number of shares of Common Stock purchasable upon the exercise of
each Warrant shall (subject to the provisions contained in Subsection 5(c)) be
such number of shares (calculated to the nearest tenth) purchasable at the
Warrant Price in effect immediately prior to such adjustment multiplied by a
fraction, the numerator of which shall be the Warrant Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price in effect immediately after such adjustment.
(a) Except as otherwise provided herein, in the event the Company
shall, at any time or from time to time after the date hereof, (i) sell or
issue any shares of Common Stock for a consideration per share less than the
Warrant Price in effect on the date of such sale or issuance, (ii) issue any
shares of Common Stock as a stock dividend to the holders of Common Stock, or
(iii) subdivide or combine the outstanding shares of Common Stock into a
greater or fewer number of shares (any such sale, issuance, subdivision or
combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Warrant Price in effect immediately
prior to such Change of Shares shall be changed to a price (rounded to the
nearest cent) determined by multiplying the Warrant Price in effect
immediately prior thereto by a fraction, the numerator of which shall be (x)
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to the sale or issuance of such additional shares or such subdivision or
combination plus (B) the number of shares of Common Stock that the aggregate
consideration received (determined as provided in Paragraph 5(g)(v)) for the
issuance of such additional shares would purchase at the Warrant Price in
effect on the date of such issuance and the denominator of which shall be (y)
the number of shares of Common Stock outstanding immediately after the sale or
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<PAGE>
issuance of such additional shares or such subdivision or combination. Such
adjustment shall be made successively whenever any such issuance is made.
(b) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another entity (other than
a consolidation or merger in which the Company is the continuing entity and
which does not result in any reclassification, capital reorganization or other
change of outstanding shares of Common Stock other than the number thereof),
or in case of any sale or conveyance to another entity of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by exercising such Warrant, upon the terms and
conditions specified in the Warrant and in lieu of the shares of Common Stock
immediately theretofore purchasable upon exercise of the Warrant, to purchase
the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock that might have been purchased upon exercise
of such Warrant immediately prior to such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance.
Any such provision shall include provision for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 5. The Company shall not effect any such consolidation, merger
or sale unless prior to, or simultaneously with, the consummation thereof the
successor (if other than the Company) resulting from such consolidation or
merger or the entity purchasing assets or other appropriate entity shall
assume, by written instrument executed and delivered to the Company, the
obligation to deliver to the holder of each Warrant such shares of stock,
securities or assets s, in accordance with the foregoing provisions, such
holders may be entitled to purchase and the other obligations under this
Warrant. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of outstanding
shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.
(c) If, at any time or from time to time, the Company shall issue
or distribute to the holders of shares of Common Stock evidence of its
indebtedness, any other securities of the Company or any cash, property or
other assets (excluding an issuance or distribution governed by one of the
preceding Subsections of this Section 5 and also excluding cash dividends or
cash distributions paid out of net profits legally available therefor in the
full amount thereof (any such non-excluded event being herein called a
"Special Dividend")), then in each case the Registered Holders of the Warrants
shall be entitled to a proportionate share of any such Special Dividend as
though they were the holders of the number of shares of Common Stock of the
Company for which their Warrants are exercisable as of the record date fixed
for the determination of the holders of Common Stock of the Company entitled
to receive such Special Dividend.
(d) The Company may elect, upon any adjustment of the Warrant Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Warrant held of record prior to such adjustment
of the number of Warrants shall become that number of Warrants (calculated to
the nearest tenth) determined by multiplying the number one by a fraction, the
numerator of which shall be the Warrant Price in effect immediately prior to
such adjustment and the denominator of which shall be the Warrant Price in
4
<PAGE>
effect immediately after such adjustment. Upon each adjustment of the number
of Warrants pursuant to this Section 5, the Company shall, as promptly as
practicable, cause to be distributed to each Registered Holder of Warrants on
the date of such adjustment Warrants evidencing, subject to Section 6, the
number of additional Warrants to which such Holder shall be entitled as a
result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrants
held by him prior to the date of adjustment (and upon surrender thereof, if
required by the Company) new Warrants evidencing the number of Warrants to
which such Holder shall be entitled after such adjustment.
(e) Irrespective of any adjustments or changes in the Warrant Price
or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrants theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue new Warrants pursuant to Subsection
3(a), continue to express the same Warrant Price per share, number of shares
purchasable thereunder and Redemption Price therefor as when the same were
originally issued.
(f) After each adjustment of the Warrant Price pursuant to this
Section 5, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Warrant Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants pursuant to
Subsection 5(d), the number of Warrants to which the registered holder of each
Warrant shall then be entitled, and the adjustment in Redemption Price
resulting therefrom, and (iii) a brief statement of the facts accounting for
such adjustment. The Company will cause a brief summary thereof to be sent by
ordinary first class mail to each Registered Holder of Warrants at his or her
last address as it shall appear on the registry books. No failure to mail
such notice nor any defect therein or in the mailing thereof shall affect the
validity of such adjustment. The affidavit the Secretary or an Assistant
Secretary of the Company that such notice has been mailed shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
(g) For purposes of Subsections 5(a) and 5(d), the following
provisions (i) to (v) shall also be applicable:
(i) the number of shares of Common Stock deemed outstanding at
any given time shall include all shares of capital stock convertible into, or
exchangeable for, Common Stock (on an as converted basis) as well as all
shares of Common Stock issuable upon the exercise of (x) any convertible debt,
(y) warrants outstanding on the date hereof and (z) options outstanding on the
date hereof.
(ii) No adjustment of the Warrant Price shall be made unless
such adjustment would require an increase or decrease of at least $.01 in such
price; provided that any adjustments which by reason of this Paragraph (ii)
are not required to be made shall be carried forward and shall be made at the
time of and together with the next subsequent adjustment which, together with
adjustments so carried forward, shall require an increase or decrease of at
least $.01 in the Warrant Price then in effect hereunder.
(iii) In case of (1) the sale by the Company (including as a
component of a unit) of any rights or warrants to subscribe for or purchase,
or any options for the purchase of, Common Stock or any securities convertible
into or exchangeable for Common Stock (such securities convertible,
exercisable or exchangeable into Common Stock being herein called "Convertible
Securities"), or (2) the issuance by the Company, without the receipt by the
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<PAGE>
Company of any consideration therefor, of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, whether or not such rights, warrants or options, or
the right to convert or exchange such Convertible Securities, are immediately
exercisable, and the consideration per share for which Common Stock is
issuable upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(x) the minimum aggregate consideration, as set forth in the instrument
relating thereto without regard to any antidilution or similar provisions
contained therein for a subsequent adjustment of such amount, payable to the
Company upon the exercise of such rights, warrants or options, plus the
consideration received by the Company for the issuance or sale of such rights,
warrants or options, plus, in the case of such Convertible Securities, the
minimum aggregate amount, as set forth in the instrument relating thereto
without regard to any antidilution or similar provisions contained therein for
a subsequent adjustment of such amount, of additional consideration, if any,
other than such Convertible Securities, payable upon the conversion or
exchange thereof, by (y) the total maximum number, as set forth in the
instrument relating thereto without regard to any antidilution or similar
provisions contained therein for a subsequent adjustment of such amount, of
shares of Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchage of such Convertible Securities
issuable upon the exercise of such rights, warrants or options) is less than
the Warrant Price of the Common Stock as of the date of the issuance or sale
of such rights, warrants or options, then such total maximum number of shares
of Common Stock issuable upon the exercise of such rights, warrants or options
or upon the conversion or exchange of such Convertible Securities (as of the
date of the issuance or sale of such rights, warrants or options) shall be
deemed to be "Common Stock" for purposes of Subsections 5(a) and 5(d) and
shall be deemed to have been sold for an amount equal to such consideration
per share and shall cause an adjustment to be made in accordance with
Subsections 5(a) and 5(d).
(iv) In case of the sale or other issuance by the Company of
any Convertible Securities, whether or not the right of conversion or exchange
thereunder is immediately exercisable, and the price per share for which
Common Stock is issuable upon the conversion or exchange of such Convertible
Securities (determined by dividing (x) the total amount of consideration
received by the Company for the sale of such Convertible Securities, plus the
minimum aggregate amount, as set forth in the instrument relating thereto
without regard to any antidilution or similar provisions contained therein for
a subsequent adjustment of such amount, of additional consideration, if any,
other than such Convertible Securities, payable upon the conversion or
exchange thereof, by (y) the total maximum number, as set forth in the
instrument relating thereto without regard to any antidilution or similar
provisions contained therein for a subsequent adjustment of such amount, of
shares of Common Stock issuable upon the conversion or exchange of such
Convertible Securities) is less than the Warrant Price of the Common Stock as
of the date of the sale of such Convertible Securities, then such total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities (as of the date of the sale of such
Convertible Securities) shall be deemed to be "Common Stock" for purposes of
Subsections 5(a) and 5(d) and shall be deemed to have been sold for an amount
equal to such consideration per share and shall cause an adjustment to be made
in accordance with Subsections 5(a) and 5(d).
(v) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in Paragraphs (iii)
or (iv) of this Subsection 5(g) or any other securities of the Company
convertible, exchangeable or exercisable for shares of Common Stock, for any
reason other than an event that would require adjustment to prevent dilution,
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<PAGE>
so that the consideration per share received by the Company after such
modification is less than the Warrant Price as of the date prior to such
modification, then such securities, to the extent not theretofore exercised,
converted or exchanged, shall be deemed to have expired or terminated
immediately prior to the date of such modification and the Company shall be
deemed, for purposes of calculating any adjustments pursuant to this Section
5, to have issued such new securities upon such new terms on the date of
modification. Such adjustment shall become effective as of the date upon
which such modification shall take effect. On the expiration or cancellation
of any such right, warrant or option or the termination or cancellation of any
such right to convert or exchange any such Convertible Securities, the Warrant
Price then in effect hereunder shall forthwith be readjusted to such Warrant
Price as would have obtained (a) had the adjustments made upon the issuance or
sale of such rights, warrants, options or Convertible Securities been made
upon the basis of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received therefor)
upon the exercise of such rights, warrants or options or upon the conversion
or exchange of such Convertible Securities and (b) had adjustments been made
on the basis of the Warrant Price as adjusted under clause (a) of this
sentence for all transactions (which would have affected such adjusted Warrant
Price) made after the issuance or sale of such rights, warrants, options or
Convertible Securities.
(vi) In case of the sale of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or purchase,
or any options for the purchase of, Common Stock or Convertible Securities,
the consideration received by the Company therefor shall be deemed to be the
gross sales price therefor without deducting therefrom any expense paid or
incurred by the Company or any underwriting discounts or commissions or
concessions paid or allowed by the Company in connection therewith. In the
event that any securities shall be issued in connection with any other
securities of the Company, together comprising one integral transaction in
which no specific consideration is allocated among the securities, then each
of such securities shall be deemed to have been issued for such consideration
as the Board of Directors of the Company determines in good faith; provided,
however that if holders of more than of 10% of the then outstanding Warrants
disagree with such determination, the Company shall retain an independent
investment banking firm for the purpose of obtaining an appraisal.
(h) Notwithstanding any other provision hereof, no adjustment to
the Warrant Price of the Warrants or to the number of shares of Common Stock
purchasable upon the exercise of each Warrant will be made:
(i) upon the exercise of any of the options outstanding on the
date hereof under the Company's existing stock option plans; or
(ii) upon the issuance or exercise of options which may
hereafter be granted with the approval of the Board of Directors, or
exercised, under any employee benefit plan of the Company to officers,
directors, consultants or employees, but only with respect to such options as
are exercisable at prices no lower than the Closing Bid Price (or, if the
price referenced in the definition of Closing Bid Price cannot be determined,
the Fair Market Value (as defined below)) of the Common Stock as of the date
of grant thereof; or
(iii) upon issuance or exercise of the warrants issued to D2
in connection with the Management Agreement between D2 Co., LLC and the
Company, dated December 23, 1999 or upon the conversion of the notes or the
exercise of the warrants included in the units issued pursuant to a bridge
financing of the Company being effected concurrently herewith; or
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<PAGE>
(iv) upon the issuance or sale of Common Stock or Convertible
Securities pursuant to the exercise of any rights, options or warrants to
receive, subscribe for or purchase, or any options for the purchase of, Common
Stock or Convertible Securities, whether or not such rights, warrants or
options were outstanding on the date of the original sale of the Warrants or
were thereafter issued or sold, provided that an adjustment was either made or
not required to be made in accordance with Subsections 5(a) and 5(d) in
connection with the issuance or sale of such securities or any modification of
the terms thereof; or
(v) upon the issuance or sale of Common Stock upon conversion
or exchange of any Convertible Securities, provided that any adjustments
required to be made upon the issuance or sale of such Convertible Securities
or any modification of the terms thereof were so made, and whether or not such
Convertible Securities were outstanding on the date of the original sale of
the Warrants or were thereafter issued or sold.
Paragraph 5(g)(v) shall nevertheless apply to any modification of the rights
of conversion, exchange or exercise of any of the securities referred to in
Paragraphs (i), (ii) and (iii) of this Subsection 5(h). For purposes hereof,
"Fair Market Value" shall mean the average Closing Bid Price for twenty (20)
consecutive trading days, ending with the trading day prior to the date as of
which the Fair Market Value is being determined, (with appropriate adjustments
for subdivisions or combinations of shares effected during such period)
provided that if the prices referred to in the definition of Closing Bid Price
cannot be determined for such period, "Fair Market Value" shall be the fair
market value as determined by the Board of Directors in good faith.
(i) As used in this Section 5, the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the date of the original
issue of the Warrants and shall also include any capital stock of any class of
the Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation, as amended, as
Common Stock on the date of the original issue of the Warrants or (i), in the
case of any reclassification, change, consolidation, merger, sale or
conveyance of the character referred to in Subsection 5(c), the stock,
securities or property provided for in such section or (ii), in the case of
any reclassification or change in the outstanding shares of Common Stock
issuable upon exercise of the Warrants as a result of a subdivision or
combination or consisting of a change in par value, or from par value to no
par value, or from no par value to par value, such shares of Common Stock as
so reclassified or changed.
(j) Any determination as to whether an adjustment in the Warrant
Price in effect hereunder is required pursuant to Section 5, or as to the
amount of any such adjustment, if required, shall be binding upon the holders
of the Warrants and the Company if made in good faith by the Board of
Directors of the Company.
(k) If and whenever the Company shall grant to the holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into
or exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company may at its option elect concurrently therewith to grant to
each Registered Holder as of the record date for such transaction of the
Warrants then outstanding, the rights, warrants or options to which each
Registered Holder would have been entitled if, on the record date used to
8
<PAGE>
determine the shareholders entitled to the rights, warrants or options being
granted by the Company, the Registered Holder were the holder of record of the
number of whole shares of Common Stock then issuable upon exercise of his or
her Warrant. If the Company shall so elect under this Subsection 5(k), then
such grant by the Company to the holders of the Warrants shall be in lieu of
any adjustment which otherwise might be called for pursuant to this Section 5.
6. Fractional Warrants and Fractional Shares. If the number of shares
of Common Stock purchasable upon the exercise of each Warrant is adjusted
pursuant to Section 5, the Company nevertheless shall not be required to issue
fractions of shares, upon exercise of the Warrant or otherwise, nor to
distribute certificates that evidence fractional shares. With respect to any
fraction of a share called for upon any exercise hereof, the Company shall pay
to the Registered Holder an amount in cash equal to such fraction multiplied
by the Fair Market Value of one share of Common Stock as of the date of
exercise.
7. Warrant Holders Not Deemed Shareholders. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of
a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.
8. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the holder of any
other Warrant, may, in his own behalf and for his own benefit, enforce against
the Company his right to exercise his Warrant for the purchase of shares of
Common Stock in the manner provided herein.
9. Agreement of Warrant Holders. Every holder of any Warrant, by his
acceptance thereof, consents and agrees with the Company and every other
holder of any Warrant that:
(i) The Warrants are transferable only on the registry books
of the Company by the Registered Holder thereof in person or by his or her
attorney duly authorized in writing and only if such Warrants are surrendered
at the office of the Company, duly endorsed or accompanied by a proper
instrument of transfer satisfactory to the Company, in its sole discretion,
together with payment of any applicable transfer taxes; and
(ii) The Company may deem and treat the person in whose name
the Warrant is registered as the holder and as the absolute, true and lawful
owner thereof for all purposes, and the Company shall not be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 3.
10. Investment Representation and Legend. The holder, by acceptance of
the Warrants, represents and warrants to the Company that it is acquiring the
Warrants and the shares of Common Stock (or other securities) issuable upon
the exercise hereof for investment purposes only and not with a view towards
the resale or other distribution thereof and agrees that the Company may affix
upon this Warrant the following legend:
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<PAGE>
"This Warrant has been issued in reliance upon the representation of
the holder that it has been acquired for investment purposes and not
with a view towards the resale or other distribution thereof.
Neither this Warrant nor the shares issuable upon the exercise of
this Warrant have been registered under the Securities Act of 1933,
as amended."
The holder, by acceptance of this Warrant, further agrees that the Company may
affix the following legend to certificates for shares of Common Stock issued
upon exercise of this Warrant:
"The securities represented by this certificate have been issued in
reliance upon the representation of the holder that they have been
acquired for investment and not with a view toward the resale or other
distribution thereof, and have not been registered under the Securities
Act of 1933, as amended. Neither the securities evidenced hereby, nor
any interest therein, may be offered, sold, transferred, encumbered or
otherwise disposed of unless either (i) there is an effective
registration statement under said Act relating thereto or (ii) the
Company has received an opinion of counsel, reasonably satisfactory in
form and substance to the Company, stating that such registration is not
required."
11. Cancellation of Warrants. If the Company shall purchase or acquire
any Warrant or Warrants, by redemption or otherwise, each such Warrant shall
thereupon be and canceled by it and retired. The Company shall also cancel
the Warrant or Warrants following exercise of any or all thereof or delivered
to it for transfer, split up, combination or exchange.
12. Modification of Warrant. The terms of the Warrants shall not be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders representing at least a majority of the
Warrants then outstanding; provided, that, no change in the number or nature
of the securities purchasable upon the exercise of any Warrant, or the Warrant
Price therefor, or the acceleration of the Warrant Expiration Date, shall be
made without the consent in writing of the Registered Holder of the Warrant,
and in compliance with applicable law.
13. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed by means of first class registered or certified mail,
postage prepaid as follows: if to the Registered Holder of a Warrant, at the
address of such holder as shown on the registry books maintained by the
Company; if to the Company, at 555 17th St., Suite 3310, Denver, CO 80202, or
at such other address as may have been furnished to the Registered Holder in
writing by the Company.
14. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without reference to
principles of conflict of laws.
15. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company, the Registered Holder and their respective
successors and assigns, and the holders from time to time of the Warrants.
Nothing in this Warrant is intended nor shall be construed to confer upon any
other person any right, remedy or claim, in equity or at law, or to impose
upon any other person any duty, liability or obligation.
16. Registration Rights. The rights of the holder hereof with respect to
the registration under the Securities Act of 1933, as amended, of the shares
of Common Stock issuable upon the exercise of this Warrant are set forth in
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<PAGE>
that Warrant Purchase Agreement dated December 23, 1999, between the Company
and D2.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first above written.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
By: /s/ Jon Northrop
Authorized Officer
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SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
__________ Warrants represented by this certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
[please print or type name and address]
and be delivered to
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
The undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc.
If not solicited by an NASD member, please write "unsolicited" in the space
below.
(Name of NASD Member)
Dated: ______________________ X _______________________________________
_______________________________________
_______________________________________
Address
_______________________________________
Taxpayer Identification Number
_______________________________________
Signature Guaranteed
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ASSIGNMENT
To Be Executed by the Registered Holder
In Order to Assign Warrant
FOR VALUE RECEIVED, ______________________________________ hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
[please print or type name and address]
___________________________ of the Warrants represented hereby, and
hereby irrevocably constitutes and appoints
________________________________________________________________________
Attorney to transfer this Warrant on the books of the Company, with full
power of substitution in the premises.
Dated: _________________________ X_______________________________________
Signature Guaranteed
_______________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO
THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND
MUST BE GUARANTEED BY A MEMBER OF THE MEDALLION STAND PROGRAM.
13
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT (this "Agreement") dated as of December __,
1999, by and between BION ENVIRONMENTAL TECHNOLOGIES, INC., a Colorado
corporation (the "Company") and D2 CO., LLC, a Delaware limited liability
company (the "Purchaser").
WHEREAS, subject to the terms and conditions hereinafter set forth, the
Company desires to issue and sell to the Purchaser, and the Purchaser desires
to purchase from the Company, an aggregate of 2,500,000 Warrants (the
"Warrants") in the form attached as Exhibit A, each of which shall entitle the
holder thereof to purchase one share of the Common Stock of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the Purchaser and the Company hereby agree as
follows:
1. Purchase of Company Securities.
1.1. Purchase and Sale of the Warrants. Subject to the terms
and conditions set forth herein, the Company hereby agrees to issue and sell
to the Purchaser, and the Purchaser hereby agrees to purchase from the
Company, 2,500,000 Warrants, in exchange for $500,000 in cash and a note (the
"Note"), the form of which is attached hereto as Exhibit B, in the principal
amount of $500,000.
2. Closing.
2.1. Closing. The closing of the purchase and sale of the
Warrants will take place at the offices of Bion. Such closing (the "Closing")
will take place at 10:00 A.M., local time, on such date as may be mutually
agreed upon by the Company and the Purchaser. The date of the Closing is
referred to herein as a "Closing Date." At the Closing, the Company will
deliver to the Purchaser the Warrants purchased as set forth in Section 1
hereof, against payment of the Purchase Price, by wire transfer payable to the
Company and by delivery of the Note. The Warrants shall be registered in the
Purchaser's name or the name of its nominee(s) in such denominations as the
Purchaser shall request pursuant to instructions delivered to the Company not
less than one day prior to the Closing Date.
3. Conditions to the Obligations of Purchaser at the Closing.
The obligation of the Purchaser to purchase and pay for the Warrants 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 Purchaser:
3.1. Opinion of Counsel to the Company. Purchaser shall have
received from counsel for the Company, its opinion dated the Closing Date in
the form of Exhibit A hereto.
3.2. Representations and Warranties. All of the representations
and warranties of the Company contained in this Agreement shall be true and
correct at and as of the Closing Date, except for changes caused by the
transactions contemplated hereby.
3.3. Performance of Covenants. All of the covenants and
agreements of the Company contained in this Agreement and required to be
performed on or prior to the Closing Date shall have been performed in a
<PAGE>
manner satisfactory in all respects to Purchaser.
3.4. 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.
3.5. Consents. The Company 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
(including, without limitation, securityholders and creditors of the Company)
required to be obtained or made in order to enable the Company to observe and
comply with all its obligations under this Agreement and to consummate the
transactions contemplated hereby.
3.6. Closing Documents. The Company shall have delivered to the
Purchaser the following:
(a) a certificate executed by the President or Chief Executive
Officer of the Company, dated the Closing Date, stating that the conditions
set forth in Sections 3.2 through 3.5 have been satisfied;
(b) an incumbency certificate, dated the Closing Date, for the
officers of the Company executing this Agreement, the Warrants and any other
documents or instruments delivered in connection with this Agreement at the
Closing;
(c) a certificate of the Secretary or Assistant Secretary of the
Company, dated the Closing Date, as to the continued and valid existence of
the Company, certifying the attached copy of the By-laws of the Company, the
authorization of the execution, delivery and performance of this Agreement,
and the resolutions adopted by the Board of Directors of the Company
authorizing the actions to be taken by the Company under this Agreement;
(d) a certificate of the Secretary of State of the State of
Colorado, dated a recent date, to the effect that the Company is in good
standing in the State of Colorado and that all annual reports, if any, have
been filed as required and that all taxes and fees have been paid in
connection therewith;
(e) a certified copy of the Articles of Incorporation of the
Company as filed with the Secretary of State of the State of Colorado and any
amendments thereto;
(f) such certificates, other documents and instruments as
Purchaser and its counsel may reasonably request in connection with, and to
effect, the transactions contemplated by this Agreement.
3.7. Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby to be
consummated at the Closing and all documents incident thereto shall be
satisfactory in form and substance to Purchaser.
3.8. Due Diligence. Prior to the Closing Date, Purchaser and
its counsel shall have completed their due diligence and business review of
the Company, its business, assets, liabilities, corporate and legal status and
intellectual property, including patents, licenses and technical processes,
all of which shall be satisfactory in form and substance to Purchaser and its
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counsel in Purchaser's sole discretion.
3.9. Closing Financial Statements; Absence of Changes. (a)
Within 10 days of the Closing, the Company shall have provided to the
Purchaser (i) the unaudited balance sheet of the Company as of November 30,
1999, and the related unaudited statement of operations for the two-month
period then ended, as well as the related unaudited statements of
shareholders' equity (deficit) and cash flows for the two-month period then
ended, accompanied by the certification thereon of the Chief Financial Officer
of the Company (together with any notes thereto, the "November 30 Financial
Statements") and (ii) a "bring-down" certificate of the Chief Executive
Officer of the Company and the Chief Financial Officer of the Company with
respect to the financial position of the Company as of the Closing Date and as
to results for the period from the date of the September 30 Financial
Statements to the Closing Date, in form and substance satisfactory to
Purchaser and its counsel.
(b) Except as set forth on the Disclosure Schedule, there shall
have been no material adverse change in the financial condition, operating
results, employee or customer relations or prospects of, or otherwise with
respect to, the Company from the date of the financial statements as at and
for the period ended September 30, 1999, included in the Form 10-QSB filed
with the Securities and Exchange Commission to the Closing Date.
4. Conditions to the Obligations of the Company at the Closing.
The obligation of the Company to issue and sell the Warrants to the Purchaser
at the Closing is subject to the satisfaction on or prior to the Closing Date
of the following conditions, any of which may be waived by the Company:
4.1. Representations and Warranties. The representations and
warranties of the Purchaser 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
transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause any such transaction to be rescinded.
5. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchaser that except as set forth on
the schedule (the "Disclosure Schedule") attached hereto:
5.1. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado.
The Company 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 as set forth on the Disclosure Schedule
and except where such failure to qualify could not reasonably be deemed to
have a material adverse effect on the Company, the Company 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. The Company
further represents and warrants that it will immediately take any and all
reasonable action necessary in order to qualify or become in good standing in
the jurisdictions listed on the Disclosure Schedule.
5.2. Charter Documents. The Company has heretofore delivered to
3
<PAGE>
the Purchaser true, correct and complete copies of the Company's Articles of
Incorporation and By-Laws as in full force and effect on the date hereof.
5.3. Capitalization. As of the date hereof, the Company's
authorized capitalization consists of: 100,000,000 shares of Common Stock (of
which 11,779,670 shares are presently issued and outstanding); 10,000,000
shares of preferred stock, $.001 par value per share, of which 50,0000 shares
are designated Series A Preferred Stock (non of which are presently issued or
outstanding) and of which 200,000 shares are designated Series B Preferred
Stock (18,834 of which are issued and outstanding); and 12,765,262 shares of
Common Stock are reserved for issuance upon the conversion or exercise of
presently outstanding convertible securities, options, warrants or other
rights to purchase Common Stock. All outstanding securities of the Company
are validly issued, fully paid and nonassessable. Except as set forth in the
Disclosure Schedule, no shareholder of the Company is entitled to any
preemptive rights with respect to the purchase or sale of any securities by
the Company. Except as has been set forth in the Disclosure Schedule, 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 the Company or any security directly
or indirectly convertible into or exchangeable for any capital stock of the
Company 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 the Company to which the Company is a party, and to the best
knowledge of the Company after due investigation there are no such trusts,
agreement, rights, proxies or similar arrangements as to which the Company is
not a party. Except as set forth on the Disclosure Schedule and as
contemplated herein, none of the shares of capital stock of the Company is
reserved for any purpose, and the Company is neither subject to any obligation
(contingent or otherwise), nor has any option to repurchase or otherwise
acquire or retire any shares of its capital stock. The Disclosure Schedule
sets forth (i) the number of shares of Common Stock authorized for issuance
under the Company's Fiscal Year 1994 Incentive Plan and the Company's 1996
Non-employee Director Stock Plan; (ii) the number of shares of Common Stock as
to which options under such plan have been (a) reserved for issuance and (b)
exercised; and (iii) the exercise prices for all outstanding options under
such plan. Except as set forth on the Disclosure Schedule, no antidilution
adjustments with respect to the outstanding securities of the Company will be
triggered by the issuance of the securities contemplated hereby.
5.4. Due Authorization, Valid Issuance, Etc. The Warrants have
been duly authorized and, when issued in accordance with this Agreement upon
the Closing Date, will be validly issued and free and clear of all liens
imposed by or through the Company. The shares of Common Stock issuable upon
the exercise of the Warrants have been duly authorized and reserved, and upon
the exercise of the Warrants in accordance with the terms and conditions
thereof and this Agreement, will be validly issued, fully paid and
nonassessable shares of Common Stock and will be free and clear of all liens
imposed by or through the Company (except as contemplated by this
transaction). Except as set forth on the Disclosure Schedule, the issuance,
sale and clear delivery of the Warrants and the Common Stock or other capital
stock of the Company issuable upon the exercise of the Warrants will not be
subject to any preemptive right of shareholders of the Company or to any right
of first refusal or other right in favor of any person.
5.5. Authorization; No Breach. The Company 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 Warrants, and any related
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<PAGE>
financing statement and all other transactions contemplated hereby have been
duly authorized by the Company, and this Agreement constitutes a legal, valid
and binding obligation of the Company, enforceable in accordance with its
terms except as the enforceability hereof may be limited by (a) bankruptcy,
insolvency, moratorium and similar laws affecting creditors' rights generally
and (b) the availability of remedies under general equitable principles and
(c) to the extent the indemnification provisions contained in Section 8.5
hereof may be limited by applicable federal or state securities laws. The
execution and delivery by the Company of this Agreement, the offering, sale
and issuance of the Warrants pursuant to this Agreement, and the performance
and fulfillment of the Company of its obligations under this Agreement, and
the Warrants, do not and will not (i) conflict with or result in a breach of
the terms, conditions or provisions of, (ii) constitute a default under, or
event which, with notice or lapse of time or both, would constitute a breach
of or default under, (iii) except as contemplated by this transaction, result
in the creation of any lien, security interest, adverse claim, charge or
encumbrance upon the capital stock or assets of the Company pursuant to, (iv)
give any third party the right to accelerate any obligation under or
terminate, (v) result in a violation of, (vi) result in the loss of any
license, certificate, legal privilege or legal right enjoyed or possessed by
the Company under, or (vii) 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 the Company or
any law, statute, rule or regulation to which the Company is subject or by
which any of its properties are bound, or any agreement, instrument, order,
judgment or decree to which the Company is subject or by which its properties
are bound.
5.6. Financial Statements and SEC Documents. (a) Incorporated
by reference herein are (i) the audited financial statements of the Company
for the fiscal year ended June 30, 1999, 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 Ehrhardt Keefe Steiner & Hottman PC and (ii) the September 30 Financial
Statements (the financial statements referred to in clauses (i) and (ii) are
referred to herein collectively as the "Financial Statements"). For purposes
of this Agreement, September 30, 1999, shall be hereinafter referred to as the
"Balance Sheet Date." The Financial Statements have been prepared in
accordance with the books and records of the Company and generally accepted
accounting principles, applied consistently with the past practices of the
Company (except as otherwise noted in such Financial Statements), reflect all
liabilities and obligations of the Company, as of their respective dates, and
present fairly the financial position of the Company and the results of its
operations as of the time and for the periods indicated therein.
(b) Incorporated by referenced herein are each report, schedule,
registration statement and definitive proxy statement filed by the Company
with the Securities and Exchange Commission since May 15, 1996 (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
the Company was required to file with the Securities and Exchange Commission
since such date. As of their respective dates, the SEC Documents complied in
all respects with the requirements of the Securities Act (as defined in
Section 9.7) and/or the Securities Exchange Act (as defined in Section 9.8) as
the case may be, and the rules and regulations of the Securities and Exchange
Commission thereunder applicable to such SEC Documents and 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
5
<PAGE>
made, not misleading. The financial statements of the Company included in the
SEC Documents comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Securities and Exchange Commission with respect thereto, 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 fairly present
(subject, in the case of the unaudited statements, to normal, recurring audit
adjustments) the financial position of the Company as at the dates thereof and
the consolidated results of their operations and cash flows for the periods
then ended.
5.7. No Material Adverse Changes. Except as set forth on the
Disclosure Schedule, since the Balance Sheet Date there has not at any time
been (a) any material adverse change in the financial condition, operating
results, business prospects, employee relations or customer relations of the
Company, or (b) other adverse changes, which in the aggregate have been
materially adverse to the Company.
5.8. Litigation. Except as set forth on the Disclosure
Schedule, there are no actions, suits, proceedings, orders, claims, or, to the
Company's knowledge, investigations pending or, to the Company's knowledge,
threatened against or affecting the Company, 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; and, to the
knowledge of the Company, there is no basis for any of the foregoing.
5.9. Compliance with Law. The Company 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 the Company to have fully complied
with any such statute or regulation does not and will not materially adversely
affect the business or operations of the Company.
5.10. Undisclosed Liabilities. The Company has no obligation or
liability (whether accrued, absolute, contingent, unliquidated, or otherwise,
whether or not known to the Company, 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, except
(a) liabilities reflected on the Company Balance Sheet; (b) liabilities
incurred in the ordinary course of business since the Balance Sheet Date (none
of which is a liability for breach of contract, breach of warranty, torts,
infringements, claims or lawsuits); and (c) liabilities or obligations
disclosed in the SEC Documents on the schedules hereto.
5.11. Disclosure. Neither this Agreement nor any of the
schedules, exhibits, written statements, documents or certificates prepared or
supplied by the Company 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. Except as disclosed in the
Disclosure Schedule and except for matters effecting the industry of the
Company as a whole, there exists no fact or circumstance which, to the
knowledge of the Company upon due inquiry, materially adversely affects, or
which could reasonably be anticipated to have a material adverse effect on,
the existing or expected financial condition, operating results, assets,
customer relations, employee relations or business prospects of the Company.
6
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The Purchaser acknowledges that the industry of the Company is subject to
extensive regulation by national, state and local authorities and that a
change in any such regulations or the institution of any litigation effecting
the industry of the Company in general, could have a material adverse effect
on the Company.
5.12. Compliance with the Securities Laws. Neither the Company
nor anyone acting on its behalf has directly or indirectly offered the
Warrants or any part thereof or any similar security of the Company (or any
other securities convertible or exchangeable for the Warrants or any similar
security), for sale to, or solicited any offer to buy the same from, anyone
other than Purchaser. Assuming the accuracy and truth of the Purchaser's
representations set forth in Section 6 of this Agreement, all securities of
the Company heretofore sold and issued by it were sold and issued and the
Warrants were offered and will be sold and issued, in compliance with all
applicable federal and state securities laws.
5.13. Brokers. No finder, broker, agent, financial person or
other intermediary has acted on behalf of the Company in connection with the
offering of the Warrants or the consummation of this Agreement or any of the
transactions contemplated hereby.
6. Representations and Warranties of Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:
6.1. Investment Intent. The Purchaser is an "accredited
investor" within the meaning of Regulation D under the Securities Act. The
Purchaser has experience in making investments in development stage technology
companies and is acquiring the Warrants 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. The
Purchaser consents to the placing of a legend on the certificates representing
the Warrants to the effect that the shares of Common Stock or other Stock
issuable upon exercise or conversion, as the case may be, of the Warrants have
not been registered under the Securities Act and may not be transferred except
in accordance with applicable securities laws or an exception therefrom.
6.2. Authorization. The Purchaser has the power and authority
to execute and deliver this Agreement and to perform 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 the Purchaser.
6.3. Brokers. No finder, broker, agent, financial person or
other intermediary has acted on behalf of Purchaser in connection with the
offering of the Warrants or the consummation of this Agreement or any of the
transactions contemplated hereby.
6.4. Suitability. The 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 the Company 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.
6.5. Risks. The Purchaser acknowledges that this investment is
speculative in nature and involves a high degree of risk, that the Purchaser
may not be able to liquidate this investment and that transferability is
extremely limited.
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6.6. Due Inquiry. The Purchaser acknowledges receipt of all
information regarding the Company 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 the Company concerning the Company and an
investment therein, and any additional information which he has requested.
6.7. Organization. The Purchaser is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
7. Covenants of the Company and Purchaser. Until such time as
the Purchaser and its affiliates beneficially own less than one percent (1%)
of the Common Stock after giving effect to the conversion or exercise of all
securities of the Company beneficially owned by Purchaser and its affiliates,
the Company covenants and agrees with Purchaser as follows:
7.1. Books and Accounts. The Company 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. Reports. The Company will make such filings as may be
required under the Securities Act.
7.3. Use of Proceeds; Restriction on Payments. The Company
shall use the net proceeds from the sale of the Warrants to bridge its working
capital needs through such time as it can consummate an offering of its
securities. The Company covenants and agrees that it will not directly or
indirectly use any of the proceeds to redeem, repurchase or otherwise acquire
any equity security of the Company.
7.4. Corporate Existence, Licenses and Permits; Maintenance of
Properties; New Businesses. The Company 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. The Company 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.
7.5. Other Material Obligations. The Company 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 the Company 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 the Company.
7.6. Amendment to the Articles of Incorporation and the By-Laws.
The Company 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. The Company will not amend its Articles of Incorporation or
By-Laws so as to adversely affect the rights of the Purchaser under this
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Agreement, the Articles of Incorporation, the By-Laws or the Warrants.
7.7. Dividends; Distributions; Repurchases of Common Stock;
Treasury Stock. The Company 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 Purchaser,
provided, however, the foregoing shall not prohibit the Company 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 the Company, or from repurchasing any
outstanding warrants.
7.8. Taxes and Liens. The Company will duly pay and discharge
when payable, all taxes, assessments and governmental charges imposed upon or
against the Company 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 the Company has set aside on its books adequate
reserves with respect thereto.
7.9. Restrictive Agreement. The Company 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 the Company's performance of its
obligations pursuant to this Agreement, the Articles of Incorporation, By-laws
or the Warrants.
7.10 Post-Closing Certificate. The Purchaser agrees to provide
the Company with a certificate, in form reasonably satisfactory to the
Company, within 30 days of the Closing Date, certifying that certain
post-closing matters have been completed.
8. Registration of Common Stock.
8.1. Registration. Not later than one year following the Final
Closing Date, the Company will file a registration statement (the
"Registration Statement") with respect to the resale of the Registrable
Securities with the Securities and Exchange Commission. The Company will use
commercially reasonable efforts to effect the registrations, qualifications or
compliances (including, without limitation, the execution of any required
undertaking to file post-effective amendments, appropriate qualifications
under applicable blue sky or other state securities laws and appropriate
compliance with applicable securities laws, requirements or regulations) as
may be reasonably requested and as would permit or facilitate that sale and
distribution of all Registrable Securities until the distribution thereof is
complete.
8.2. Registration Procedures. In connection with the
registration of any Registrable Securities under the Securities Act as
provided in this Section 8, the Company will use its best efforts, as
expeditiously as possible to:
(a) Prepare and file with the Securities and Exchange Commission
the Registration Statement with respect to such Registrable Securities and use
its best efforts to cause such Registration Statement to become effective;
(b) Prepare and file with the Securities and Exchange Commission
such amendments and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary to keep such
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Registration Statement effective until December 31, 2004, and to comply with
the provisions of the Securities Act (to the extent applicable to the Company)
with respect thereto;
(c) Furnish to each seller of such Registrable Securities such
number of copies of such Registration Statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of
copies of the prospectus included in such Registration Statement (including
each preliminary prospectus), in conformity with the requirements of the
Securities Act, and such other documents, as such seller may reasonably
request, in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) Use its best efforts to register or qualify such Registrable
Securities covered by such Registration Statement under such other securities
or blue sky laws of such jurisdictions as any seller reasonably requests, and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller, except that
the Company will not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it would not,
but for the requirements of this Section 8.2(d) be obligated to be qualified,
to subject itself to taxation in any such jurisdiction, or to consent to
general service of process in any such jurisdiction;
(e) Provide a transfer agent and registrar for all such
Registrable Securities covered by such Registration Statement not later than
the effective date of such Registration Statement;
(f) Notify each seller of such Registrable Securities at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller, the
Company will prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
(g) Cause all such Registrable Securities to be listed on each
securities exchange or automated over-the-counter trading system on which
similar securities issued by the Company are then listed;
(h) Enter into such customary agreements and take all such other
actions as reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities; and
(i) Make available for inspection by any seller of Registrable
Securities, all financial and other records, pertinent corporation documents
and properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller in
connection with the Registration Statement pursuant to Section 8.1.
8.3. Registration and Selling Expenses. (a) All expenses
incurred by the Company in connection with the Company's performance of or
compliance with this Section 8, including, without limitation (i) all
registration and filing fees (including all expenses incident to filing with
the National Association of Securities Dealers, Inc.), (ii) blue sky fees and
expenses, (iii) all necessary printing and duplicating expenses and (iv) all
fees and disbursements of counsel and accountants for the Company (including
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<PAGE>
the expenses of any audit of financial statements), retained by the Company
(all such expenses being herein called "Registration Expenses"), will be paid
by the Company except as otherwise expressly provided in this Section 8.3. The
term "Registration Expenses" shall not include any underwriting discounts or
commissions incurred by the Purchaser, which shall be the responsibility of
the Purchaser.
(b) The Company will, in any event, in connection with any
registration statement, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal, accounting or other duties in connection therewith and expenses of
audits of year-end financial statements), the expense of liability insurance
and the expenses and fees for listing the securities to be registered on one
or more securities exchanges or automated over-the-counter trading systems on
which similar securities issued by the Company are then listed.
(c) Nothing herein shall be construed to prevent any holder or
holders of Registrable Securities from retaining such counsel as they shall
choose, the expenses of one of which, as determined by the holder or holders,
shall be borne by the Company.
8.4. [Intentionally Omitted]
8.5. Indemnification. (a) The Company hereby agrees to
indemnify, to the extent permitted by law, each holder of Registrable
Securities, its officers and directors, if any, and each person, if any, who
controls such holder within the meaning of the Securities Act, against all
losses, claims, damages, liabilities and expenses (under the Securities Act or
common law or otherwise) caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus (and as amended or supplemented if the Company has furnished any
amendments or supplements thereto) or any preliminary prospectus, which
registration statement, prospectus or preliminary prospectus shall be prepared
in connection with the registration contemplated by this Section 8, or caused
by any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any untrue statement or alleged untrue statement
contained in or by any omission or alleged omission from information furnished
in writing by such holder to the Company in connection with the registration
contemplated by this Section 8, provided the Company will not be liable
pursuant to this Section 8.5 if such losses, claims, damages, liabilities or
expenses have been caused by any selling security holder's failure to deliver
a copy of the registration statement or prospectus, or any amendments or
supplements thereto, after the Company has furnished such holder with the
number of copies required by Section 8.2(c).
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information as is reasonably requested
by the Company for use in any such registration statement or prospectus and
shall severally, but not jointly, indemnify, to the extent permitted by law,
the Company, its directors and officers and each person, if any, who controls
the Company within the meaning of the Securities Act, against any losses,
claims, damages, liabilities and expenses resulting from any untrue statement
or alleged untrue statement of a material fact or any omission or alleged
omission of a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the
extent such losses, claims, damages, liabilities or expenses are caused by an
untrue statement or alleged untrue statement contained in or by an omission or
11
<PAGE>
alleged omission from information so furnished in writing by such holder in
connection with the registration contemplated by this Section 8. If the
offering pursuant to any such registration is made through underwriters, each
such holder agrees to enter into an underwriting agreement in customary form
with such underwriters and to indemnify such underwriters, their officers and
directors, if any, and each person who controls such underwriters within the
meaning of the Securities Act to the same extent as hereinabove provided with
respect to indemnification by such holder of the Company. Notwithstanding the
foregoing or any other provision of this Agreement, in no event shall a holder
of Registrable Securities be liable for any such losses, claims, damages,
liabilities or expenses in excess of the net proceeds received by such holder
in the offering.
(c) Promptly after receipt by an indemnified party under Section
8.5 (a) or (b) of notice of the commencement of any action or proceeding, such
indemnified party will, if a claim in respect thereof is made against the
indemnifying party under such Section, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party otherwise than under such Section. In case any such
action or proceeding is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein, and, to the extent that it wishes,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel approved by such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under such Section for any legal or any other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof (other than reasonable costs of investigation) unless incurred at the
written request of the indemnifying party. Notwithstanding the above, the
indemnified party will have the right to employ counsel of its own choice in
any such action or proceeding if the indemnified party has reasonably
concluded that there may be defenses available to it which are different from
or additional to those of the indemnifying party, or counsel to the
indemnified party is of the opinion that it would not be desirable for the
same counsel to represent both the indemnifying party and the indemnified
party because such representation might result in a conflict of interest (in
either of which cases the indemnifying party will not have the right to assume
the defense of any such action or proceeding on behalf of the indemnified
party or parties an such legal and other expenses will be borne by the
indemnifying party). An indemnifying party will not be liable to any
indemnified party for any settlement of any such action or proceeding effected
without the consent of such indemnifying party.
(d) If the indemnification provided for in Section 8.5(a) or (b)
is unavailable under applicable law to an indemnified party in respect of any
losses, claims, damages or liabilities referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and
of the holders of Registrable Securities on the other in connection with the
statements or omissions which resulted in such losses, claims, damages, or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and of the holders of
Registrable Securities on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied
by the Company or by the holders of Registrable Securities and the parties'
relative intent, knowledge, access to information and opportunity to correct
12
<PAGE>
or prevent such statement or omission. The amount paid or payable by a party
as a result of the losses, claims, damages and liabilities referred to above
shall be deemed to include, subject to the limitations set forth in Section
8.5(c), any legal or other fees or expenses reasonably incurred by such party
in connection with investigating or defending any action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) will be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.
(e) Promptly after receipt by the Company or any holder of
Securities of notice of the commencement of any action or proceeding, such
party will, if a claim for contribution in respect thereof is to be made
against another party (the "contributing party"), notify the contributing
party of the commencement thereof; but the omission so to notify the
contributing party will not relieve it from any liability which it may have to
any other party other than for contribution hereunder. In case any such
action, suit, or proceeding is brought against any party, and such party
notifies a contributing party of the commencement thereof, the contributing
party will be entitled to participate therein with the notifying party and any
other contributing party similarly notified.
9. Certain Definitions. For the purposes of this Agreement the
following terms have the respective meanings set forth below:
9.1. "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.
9.2. "Common Stock" means the Company's no par value Common
Stock.
9.3. "Generally Accepted Accounting Principles" means generally
accepted accounting principles consistently applied.
9.4. "Officers' Certificate" means a certificate executed on
behalf of the Company by its President, Chairman of the Board, Chief Executive
Officer, Chief Financial Officer, Secretary and/or one of its other
Vice-Presidents.
9.5. "Registrable Securities" means (i) the Common Stock
issuable upon exercise of the Warrants purchased pursuant to Section 1.1 or
(ii) any other shares of Common Stock now owned or hereafter acquired by
Purchaser (whether Common Stock owned directly or underlying convertible
securities of the Company).
9.6. "Securities" means the Warrants and any other capital stock
or Common Stock underlying the foregoing whether issued at the Closing or
thereafter.
9.7 "Securities Act" means, as of any given time, the Securities
Act of 1933, as amended, or any similar federal law then in force.
9.8. "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.
9.9. "Securities and Exchange Commission" includes any
governmental body or agency succeeding to the functions thereof.
9.10. "Subsidiary" means any person, corporation, firm or entity
at least the majority of the equity securities (or equivalent interest) of
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<PAGE>
which are, at the time as of which any determination is being made, owned of
record or beneficially by the Company, directly or indirectly, through any
Subsidiary or otherwise.
10. Indemnities. (a) The Company agrees to indemnify, defend and
hold the Purchaser and its officers, directors, partners, employees,
consultants and agents (the "Purchaser's Indemnitees") harmless from and
against any liability, obligation, claim, cost, loss, judgment, damage or
expense (including reasonable legal fees and expenses) (collectively,
"Liabilities") incurred or suffered by any of the Purchaser's Indemnitees as a
result of or arising out of or in connection with the Company's breach of any
representation, warranty, covenant or agreement of the Company contained
herein.
(b) The Purchaser agrees to indemnify, defend and hold the Company and
its officers, directors, partners, employees, consultants and agents (the
"Company's Indemnitees") harmless from and against any Liabilities incurred or
suffered by any of the Company's Indemnitees as a result of or arising out of
or in connection with the Purchaser's breach of any representation, warranty,
covenant or agreement of the Purchaser contained herein.
11. Miscellaneous.
11.1. 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 Purchaser or
on its behalf.
11.2. Expenses. The Company shall pay all its own expenses in
connection with this Agreement and the transactions contemplated herein. The
Company agrees to pay promptly and save the Purchaser harmless against
liability for the payment all expenses incurred by the Company and the
Purchaser in connection with the preparation and consummation of the Agreement
and the transactions contemplated herein, including but not limited to: all
costs and expenses under Section 8, including without limitation, the costs of
preparing, printing and filing with the Securities and Exchange Commission the
Registration Statement and amendments, post-effective amendments, and
supplements thereto; preparing, printing and delivering exhibits thereto and
copies of the preliminary, final and supplemental prospectuses; preparing,
printing and delivering all selling documents, including but not limited to
the stock and warrant certificates; legal fees and disbursements of RubinBaum
LLP, D2's counsel (which amount, together with fees relating the concurrent
bridge financing of the Company, shall not exceed an aggregate of $30,000 and
which shall be paid on the Closing Date) in connection with the preparation
and consummation of this Agreement and the transactions contemplated herein,
including the legal fees and costs of negotiating and drafting any transaction
documents, due diligence and any necessary regulatory filings (including,
without limitation, the Registration Statement, Forms 3, 4 and 5 and Schedule
13-D filings) (the "Warrant Costs"). The "Warrant Costs" shall not include
any underwriting discounts or commissions incurred by a Purchaser or costs and
expenses under Section 8, including, without limitation, the Registration
Costs Exchange Commission the Registration Statement and amendments,
post-effective amendments, and supplements thereto and preparing, printing
and delivering exhibits thereto and copies of the preliminary, final and
supplemental prospectuses which such costs shall in all cases be paid by the
Company. The provisions of this Section shall survive any termination of this
Agreement in all instances, including without limitation, (i) if the
14
<PAGE>
transactions contemplated by this Agreement have not been consummated or (ii)
if the transactions have been terminated by the Purchaser for any reason.
11.3. Amendments and Waivers. 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 the
Company and the Purchaser, and the Company 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 the Company has obtained the written consent or waiver of the
Purchaser. No course of dealing between or among any persons having any
interest in this Agreement will be deemed 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.
11.4. Successors and Assigns. This Agreement may not be
assigned by the Company except with the prior written consent of the
Purchaser. This Agreement shall be binding upon and inure to the benefit of
the Company and its permitted successors and assigns and Purchaser and its
successors and assigns. The provisions hereof which are for Purchaser's
benefit as purchaser or holder of the Warrants are also for the benefit of,
and enforceable by, any subsequent holder of such Warrants.
11.5. 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 the Company:
Bion Environmental Technologies, Inc.
555 17th Street, Suite 3310
Denver, CO 80202
Attn: Jon Northrop
With a Copy to:
Krys Boyle Freedman & Sawyer, P.C.
600 17th Street
Suite 2700 South Tower
Denver, CO 80202
Attn: Stanley F. ("Ted") Freedman, Esq.
If to the Purchaser:
D2 Co., LLC
5 East 59th Street, 3rd Floor
New York, NY 10022
Attn: David Mitchell
With a Copies to:
Bright Capital, Ltd.
64 Village Hill Drive
Dix Hills, New York 11746
15
<PAGE>
and to
RubinBaum LLP
30 Rockefeller Plaza
New York, NY 10112
Attn: Michael J. Emont, Esq.
11.6. 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.
11.7. 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.
11.8. 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.
11.9. 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.
11.10. 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 the Company under this Agreement and to enter into an agreement
with the Company 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.
11.12. 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 11.5. 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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
By: /s/ Jon Northrop
Name: Jon Northrop
Title: CFO
D2 CO., LLC
By: /s/ David J. Mitchell
Name: David J. Mitchell
Title: President
17
<PAGE>
PROMISSORY NOTE
December 23, 1999
$500,000.00 New York, New York
FOR VALUE RECEIVED, the undersigned, D2 Co., LLC, a Delaware limited
liability company ("Payor") with an address at 5 East 59th Street, 3rd Floor,
New York, NY 10022, promises to pay to the order of Bion Environmental
Technologies, Inc. (the "Payee" or "the holder of this Note"), or registered
assigns, on December 31, 2004 (the "Maturity Date"), the principal amount of
Five Hundred Thousand Dollars and 00/100 ($500,000.00), 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 or private debts, together with
interest thereon at the rate of 8% per annum. Interest shall accrue and be
payable annually on each anniversary of the date hereof.
This Note is issued by the Payor as payment in connection with the
purchase of warrants to purchase 2,500,000 shares of the no par value common
stock of the Payee, at an exercise price of $1.75 per share (the "Warrants").
1. Events of Default.
(a) Upon the occurrence of any of the following events (herein
called "Events of Default") which shall have occurred and be continuing:
(i) The Payor shall default in the payment of the principal of
the Note after its Maturity Date; or
(ii) Payor shall fail to make any payment of interest which
shall be due and payable on the Note; or
(iii) (1) The Payor shall commence any proceeding or other
action relating to him in bankruptcy or seek readjustment of its debts,
receivership, composition or any other relief under the Bankruptcy Act, as
amended, or under any other insolvency, readjustment of debt or any other
similar act or law, of any jurisdiction, domestic or foreign, now or hereafter
existing; or (2) the Payor shall admit the material allegations of any
petition or pleading in connection with any such proceeding; or (3) the Payor
makes a general assignment for the benefit of creditors;
(iv) (1) Commencement of any proceedings or the taking of any
other action against the Payor in bankruptcy or seeking reorganization,
arrangement, readjustment of its debts, or any other relief under the
Bankruptcy Act, as amended, or under any other insolvency, readjustment of
debt or any other similar act or law of any jurisdiction, domestic or foreign,
now or hereafter existing and the continuance of any of such events for sixty
(60) days undismissed, unbonded or undischarged; or (2) the issuance of a
warrant of attachment, execution or similar process against substantially all
of the property of the Payor and the continuance of such event for thirty
(30) days undismissed, unbonded and undischarged; or
(v) The transfer by Payor of all or any portion of the shares
of Common Stock issued upon exercise of the Warrants prior to the Maturity
Date to any party other than an entity wholly owned by it at all times prior
to and following such transfer;
then, and in any such event, the holder of this Note may by written notice to
the Payor declare the entire unpaid principal amount of this Note, together
with accrued interest thereon, due and payable, and the same shall, unless
such default shall be cured within thirty (30) days after such notice,
<PAGE>
forthwith become due and payable upon the expiration of such 10 day period,
without presentment, demand, protest, or other notice of any kind, all of
which are expressly waived.
(b) Non-Waiver and Other Remedies. No course of dealing or delay
on the part of the holder of this Note in exercising any right hereunder shall
operate as a waiver thereof or otherwise prejudice the rights of the holder of
this Note. No remedy conferred hereby shall be exclusive of any other remedy
referred to herein or now or hereafter available at law, in equity, by statute
or otherwise.
2. Security.
(a) Pledge Agreement. This Note is secured by a Pledge Agreement
between the Payor and the holder of the Note, dated of even date herewith (the
"Pledge Agreement"), pursuant to which Payor has pledged the Warrants (and the
shares of common stock underlying the Warrants) as collateral for payment
hereunder.
(b) Recourse. No recourse under or upon any obligation, covenant or
agreement of this Note, or for any claim based hereon or otherwise in respect
hereof, shall be had against the Payor or its assigns.
3. Prepayment. This Note may be prepaid by the Payor at any time in
whole or in part from time to time, without penalty, at the principal amount
plus accrued but unpaid interest.
4. Holder Deemed Owner. The Payor may deem and treat the registered
holder hereof as the absolute owner of this Note (whether or not this Note
shall be overdue and notwithstanding any notice of ownership or writing hereon
made by anyone other than the Payor, for the purpose of receiving payment
hereof or thereof or on account hereof and for all other purposes) and the
Payor shall not be affected by notice to the contrary.
5. Lost Documents. Upon receipt by the Payor of evidence satisfactory
to him of the loss, theft, destruction or mutilation of this Note or any Note
exchanged for it, and (in the case of loss, theft or destruction) of indemnity
satisfactory to him, and upon reimbursement to the Payor of all reasonable
expenses incidental thereto, and upon surrender and cancellation of such Note,
if mutilated, the Payor will make and deliver in lieu of such Note a new Note
of like tenor and unpaid principal amount and dated as of the original date of
the Note.
6. No Presentment, etc. The Payor and any endorsers, sureties and
guarantors of this Note waive presentment for payment, demand, protest, notice
or protest and notice of dishonor hereof, and all other notices to which they
may be entitled.
7. Miscellaneous.
(a) Parties in Interest. All covenants, agreements and undertakings
in this Note by and on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective permitted successors and assigns of the
parties hereto whether so expressed or not.
(b) Notices. All notices, requests, consents and demands shall be
made in writing and shall be mailed first class, certified mail, return
receipt requested, to the Payor or to the holder of this Note at such
respective addresses as may be furnished in writing to the other party hereto.
(c) Waiver. The failure of the Payee to exercise any right or remedy
2
<PAGE>
granted to it hereunder on any one or more instances, shall not constitute a
waiver of any default by the Payee, and all such rights and remedies shall
remain continuously in force. No delay or omission in the exercise or
enforcement by the Payee of any rights or remedies shall be construed as a
waiver of any right or remedy of the Payee; and no exercise or enforcement of
any such right or remedy shall be held to exhaust any other right or remedy of
the Payee.
(d) Illegality. If any one or more of the provisions contained in
this Note shall for any reason be held to be invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Note and this Note shall be construed as
of such invalid, illegal or unenforceable provision had never been contained
herein.
(e) Amendment. This Note may not be changed orally, but only by an
instrument in writing duly executed by the parties against which enforcement
of any waiver, change, modification or discharge is sought.
(f) Construction. This Note shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York.
IN WITNESS WHEREOF, this Note has been executed and delivered on the date
specified above by the duly authorized representative of the Payor.
D2 CO, LLC
By: /s/ David J. Mitchell
Name: David J. Mitchell
Title: President
3
<PAGE>
THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON THE REPRESENTATION OF THE HOLDER
THAT IT HAS BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TOWARDS
THE RESALE OR OTHER DISTRIBUTION THEREOF. NEITHER THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
Warrant
Warrant to Subscribe December 23, 1999
for 2,500,000 shares
Void After December 31, 2004
THIS CERTIFIES that, for value received, D2 Co., LLC, a Delaware limited
liability company, or its registered assigns ("D2"), is entitled to subscribe
for and purchase from Bion Environmental Technologies, Inc., a Colorado
corporation (hereinafter called the "Company"), at the price of $1.75 per
share (such price as from time to time adjusted as hereinafter provided being
hereinafter called the "Warrant Price"), at any time prior to December 31,
2004 (the "Warrant Expiration Date"), up to 2,500,000 (subject to adjustment
as hereinafter provided) fully paid and nonassessable shares of Common Stock,
no par value per share, of the Company (hereinafter called the "Common
Stock"), subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. This Warrant was issued pursuant to a certain Warrant
Purchase Agreement, dated as of December 23, 1999 (the "Purchase Agreement"),
between the Company and D2 and the rights and benefits contained therein shall
inure to the benefit of all subsequent holders of this Warrant. The Warrants
issued pursuant to the Purchase Agreement and any warrant or warrants
subsequently issued upon exchange or transfer thereof are hereinafter
collectively called the "Warrants." "Registered Holder" shall mean, as to any
Warrant and as of any particular date the person in whose name the certificate
representing the Warrant shall be registered on that date on the books
maintained by the Company pursuant to Section 3(b).
Section 1. Exercise of Warrant.
(a) Method of Exercise. The rights represented by this Warrant
may be exercised by the holder hereof, in whole at any time or from time to
time in part, but not as to a fractional share of Common Stock, by the
surrender of this Warrant (properly endorsed) at the office of the Company as
it may designate by notice in writing to the holder hereof at the address of
such holder appearing on the books of the Company, and as further provided
below in this Section 1 by payment to the Company of the Warrant Price in cash
or by certified or official bank check, for each share being purchased.
(b) Delivery of Certificates. Etc. In the event of any exercise
of the rights represented by this Warrant, a certificate or certificates for
the shares of Common Stock so purchased, registered in the name of the holder,
shall be delivered to the holder hereof within a reasonable time, not
exceeding ten days, after the rights represented by this Warrant shall have
been so exercised; and, unless this Warrant has expired, a new Warrant
representing the number of shares (except a remaining fractional share), if
any, with respect to which this Warrant shall not then have been exercised
shall also be issued to the holder hereof within such time. The person in
whose name any certificate for shares of Common Stock is issued upon exercise
of this Warrant shall for all purposes be deemed to have become the holder of
record of such shares on the date on which the Warrant was surrendered and
payment of the Warrant Price and any applicable taxes was made, except that,
if the date of such surrender and payment is a date on which the stock
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transfer books of the Company are closed, such person shall be deemed to have
become the holder of such shares at the close of business on the next
succeeding date on which the stock transfer books are open.
2. Reservation of Shares; Listing; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrant, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrant. The Company
covenants that all shares of Common Stock which shall be issuable upon
exercise of the Warrant shall, at the time of delivery (assuming full payment
of the purchase price thereof), be duly and validly issued, fully paid,
nonassessable and free from all issuance taxes, liens and charges with respect
to the issue thereof including, without limitation, adverse claims whatsoever
(with the exception of claims arising through the acts of the Registered
Holders themselves and except as arising from applicable Federal and state
securities laws), that the Company shall have paid all taxes, if any, in
respect of the original issuance thereof and that upon issuance such shares,
to the extent applicable, shall be listed on, or included in, the Stock
Market. As used herein, "Stock Market" shall mean the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange, shall mean NASDAQ or, if the Common Stock is not quoted
on Nasdaq, shall mean the OTC Bulletin Board or, if the Common Stock is not
quoted on the OTC Bulletin Board, shall mean the over-the-counter market as
furnished by any NASD member firm selected from time to time by the Company
for that purpose.
(b) The Company covenants that if any securities to be reserved for
the purpose of exercise of the Warrant hereunder require registration with, or
the approval of, any governmental authority under any federal securities law
before such securities may be validly issued or delivered upon such exercise,
then the Company will in good faith and as expeditiously as reasonably
possible, endeavor to secure such registration or approval. The Company will
use reasonable efforts to obtain appropriate approvals or registrations under
state "blue sky" securities laws; provided, that the Company shall not be
required to qualify as a foreign corporation or file a general or limited
consent to service of process in any such jurisdictions or make any changes in
its capital structure or any other aspects of its business or enter into any
agreements with blue sky commissions, including any agreement to escrow shares
of its capital stock. With respect to any such securities, however, Warrants
may not be exercised by, or shares of Common Stock issued to, any Registered
Holder in any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes
and other similar governmental charges that may be imposed with respect to the
issuance of Warrants, or the issuance or delivery of any shares upon exercise
of the Warrants; provided, however, that if the shares of Common Stock are to
be delivered in a name other than the name of the Registered Holder on any
Warrant being exercised, then no such delivery shall be made unless the person
requesting the same has paid to the Company the amount of transfer taxes or
charges incident thereto, if any.
3. Exchange and Registration of Transfer.
(a) This Warrant may be exchanged for another Warrant representing
an equal aggregate number of Warrants of the same class or may be transferred
in whole or in part, by surrendering it to the Company at its corporate
office. Upon satisfaction of the terms and provisions hereof, the Company
shall execute, and the Company shall sign, issue and deliver in exchange
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therefor, such new Warrant or Warrants that the Registered Holder making the
exchange shall be entitled to receive.
(b) The Company shall keep at its office books in which, subject to
such reasonable regulations as it may prescribe, it shall register Warrants
and any transfers thereof in accordance with its regular practice. Upon due
presentment for registration of transfer of any Warrant at such office, the
Company shall execute and the Company shall issue and deliver to the
transferee or transferees a new Warrant or Warrants representing an equal
aggregate number of Warrants.
(c) With respect to all Warrants presented for registration or
transfer, or for exchange or exercise, the subscription form attached hereto
shall be duly endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory to the Company,
duly executed by the Registered Holder or his attorney-in-fact duly authorized
in writing.
(d) Prior to due presentment for registration of transfer thereof,
the Company may deem and treat the Registered Holder of any Warrant as the
absolute owner thereof (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company)
for all purposes and shall not be affected by any notice to the contrary.
4. Loss or Mutilation. Upon receipt by the Company of evidence
satisfactory to it of the ownership of and loss, theft, destruction or
mutilation of any Warrant and (in case of loss, theft or destruction) of
indemnity satisfactory to it, and (in the case of mutilation) upon surrender
and cancellation thereof, the Company shall execute, sign and deliver to the
Registered Holder in lieu thereof a new Warrant of like tenor representing an
equal aggregate number of Warrants.
5. Adjustment of Warrant Price and Number of Shares of Common Stock or
Warrants. Upon each adjustment of the Warrant Price pursuant to this Section
5, the total number of shares of Common Stock purchasable upon the exercise of
each Warrant shall (subject to the provisions contained in Subsection 5(c)) be
such number of shares (calculated to the nearest tenth) purchasable at the
Warrant Price in effect immediately prior to such adjustment multiplied by a
fraction, the numerator of which shall be the Warrant Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price in effect immediately after such adjustment.
(a) Except as otherwise provided herein, in the event the Company
shall, at any time or from time to time after the date hereof, (i) sell or
issue any shares of Common Stock for a consideration per share less than the
Warrant Price in effect on the date of such sale or issuance, (ii) issue any
shares of Common Stock as a stock dividend to the holders of Common Stock, or
(iii) subdivide or combine the outstanding shares of Common Stock into a
greater or fewer number of shares (any such sale, issuance, subdivision or
combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the Warrant Price in effect immediately
prior to such Change of Shares shall be changed to a price (rounded to the
nearest cent) determined by multiplying the Warrant Price in effect
immediately prior thereto by a fraction, the numerator of which shall be (x)
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to the sale or issuance of such additional shares or such subdivision or
combination plus (B) the number of shares of Common Stock that the aggregate
consideration received (determined as provided in Paragraph 5(g)(v)) for the
issuance of such additional shares would purchase at the Warrant Price in
effect on the date of such issuance and the denominator of which shall be (y)
the number of shares of Common Stock outstanding immediately after the sale or
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issuance of such additional shares or such subdivision or combination. Such
adjustment shall be made successively whenever any such issuance is made.
(b) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another entity (other than
a consolidation or merger in which the Company is the continuing entity and
which does not result in any reclassification, capital reorganization or other
change of outstanding shares of Common Stock other than the number thereof),
or in case of any sale or conveyance to another entity of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by exercising such Warrant, upon the terms and
conditions specified in the Warrant and in lieu of the shares of Common Stock
immediately theretofore purchasable upon exercise of the Warrant, to purchase
the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock that might have been purchased upon exercise
of such Warrant immediately prior to such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance.
Any such provision shall include provision for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in
this Section 5. The Company shall not effect any such consolidation, merger
or sale unless prior to, or simultaneously with, the consummation thereof the
successor (if other than the Company) resulting from such consolidation or
merger or the entity purchasing assets or other appropriate entity shall
assume, by written instrument executed and delivered to the Company, the
obligation to deliver to the holder of each Warrant such shares of stock,
securities or assets s, in accordance with the foregoing provisions, such
holders may be entitled to purchase and the other obligations under this
Warrant. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of outstanding
shares of Common Stock and to successive consolidations, mergers, sales or
conveyances.
(c) If, at any time or from time to time, the Company shall issue
or distribute to the holders of shares of Common Stock evidence of its
indebtedness, any other securities of the Company or any cash, property or
other assets (excluding an issuance or distribution governed by one of the
preceding Subsections of this Section 5 and also excluding cash dividends or
cash distributions paid out of net profits legally available therefor in the
full amount thereof (any such non-excluded event being herein called a
"Special Dividend")), then in each case the Registered Holders of the Warrants
shall be entitled to a proportionate share of any such Special Dividend as
though they were the holders of the number of shares of Common Stock of the
Company for which their Warrants are exercisable as of the record date fixed
for the determination of the holders of Common Stock of the Company entitled
to receive such Special Dividend.
(d) The Company may elect, upon any adjustment of the Warrant Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the
exercise of each Warrant as hereinabove provided, so that each Warrant
outstanding after such adjustment shall represent the right to purchase one
share of Common Stock. Each Warrant held of record prior to such adjustment
of the number of Warrants shall become that number of Warrants (calculated to
the nearest tenth) determined by multiplying the number one by a fraction, the
numerator of which shall be the Warrant Price in effect immediately prior to
such adjustment and the denominator of which shall be the Warrant Price in
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<PAGE>
effect immediately after such adjustment. Upon each adjustment of the number
of Warrants pursuant to this Section 5, the Company shall, as promptly as
practicable, cause to be distributed to each Registered Holder of Warrants on
the date of such adjustment Warrants evidencing, subject to Section 6, the
number of additional Warrants to which such Holder shall be entitled as a
result of such adjustment or, at the option of the Company, cause to be
distributed to such Holder in substitution and replacement for the Warrants
held by him prior to the date of adjustment (and upon surrender thereof, if
required by the Company) new Warrants evidencing the number of Warrants to
which such Holder shall be entitled afer such adjustment.
(e) Irrespective of any adjustments or changes in the Warrant Price
or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrants theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue new Warrants pursuant to Subsection
3(a), continue to express the same Warrant Price per share, number of shares
purchasable thereunder and Redemption Price therefor as when the same were
originally issued.
(f) After each adjustment of the Warrant Price pursuant to this
Section 5, the Company will promptly prepare a certificate signed by the
Chairman or President, and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, of the Company setting forth: (i) the
Warrant Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants pursuant to
Subsection 5(d), the number of Warrants to which the registered holder of each
Warrant shall then be entitled, and the adjustment in Redemption Price
resulting therefrom, and (iii) a brief statement of the facts accounting for
such adjustment. The Company will cause a brief summary thereof to be sent by
ordinary first class mail to each Registered Holder of Warrants at his or her
last address as it shall appear on the registry books. No failure to mail
such notice nor any defect therein or in the mailing thereof shall affect the
validity of such adjustment. The affidavit the Secretary or an Assistant
Secretary of the Company that such notice has been mailed shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
(g) For purposes of Subsections 5(a) and 5(d), the following
provisions (i) to (v) shall also be applicable:
(i) the number of shares of Common Stock deemed outstanding at
any given time shall include all shares of capital stock convertible into, or
exchangeable for, Common Stock (on an as converted basis) as well as all
shares of Common Stock issuable upon the exercise of (x) any convertible debt,
(y) warrants outstanding on the date hereof and (z) options outstanding on the
date hereof.
(ii) No adjustment of the Warrant Price shall be made unless
such adjustment would require an increase or decrease of at least $.01 in such
price; provided that any adjustments which by reason of this Paragraph (ii)
are not required to be made shall be carried forward and shall be made at the
time of and together with the next subsequent adjustment which, together with
adjustments so carried forward, shall require an increase or decrease of at
least $.01 in the Warrant Price then in effect hereunder.
(iii) In case of (1) the sale by the Company (including as a
component of a unit) of any rights or warrants to subscribe for or purchase,
or any options for the purchase of, Common Stock or any securities convertible
into or exchangeable for Common Stock (such securities convertible,
exercisable or exchangeable into Common Stock being herein called "Convertible
Securities"), or (2) the issuance by the Company, without the receipt by the
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Company of any consideration therefor, of any rights or warrants to subscribe
for or purchase, or any options for the purchase of, Common Stock or
Convertible Securities, whether or not such rights, warrants or options, or
the right to convert or exchange such Convertible Securities, are immediately
exercisable, and the consideration per share for which Common Stock is
issuable upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(x) the minimum aggregate consideration, as set forth in the instrument
relating thereto without regard to any antidilution or similar provisions
contained therein for a subsequent adjustment of such amount, payable to the
Company upon the exercise of such rights, warrants or options, plus the
consideration received by the Company for the issuance or sale of such rights,
warrants or options, plus, in the case of such Convertible Securities, the
minimum aggregate amount, as set forth in the instrument relating thereto
without regard to any antidilution or similar provisions contained therein for
a subsequent adjustment of such amount, of additional consideration, if any,
other than such Convertible Securities, payable upon the conversion or
exchange thereof, by (y) the total maximum number, as set forth in the
instrument relating thereto without regard to any antidilution or similar
provisions contained therein for a subsequent adjustment of such amount, of
shares of Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchage of such Convertible Securities
issuable upon the exercise of such rights, warrants or options) is less than
the Warrant Price of the Common Stock as of the date of the issuance or sale
of such rights, warrants or options, then such total maximum number of shares
of Common Stock issuable upon the exercise of such rights, warrants or options
or upon the conversion or exchange of such Convertible Securities (as of the
date of the issuance or sale of such rights, warrants or options) shall be
deemed to be "Common Stock" for purposes of Subsections 5(a) and 5(d) and
shall be deemed to have been sold for an amount equal to such consideration
per share and shall cause an adjustment to be made in accordance with
Subsections 5(a) and 5(d).
(iv) In case of the sale or other issuance by the Company of
any Convertible Securities, whether or not the right of conversion or exchange
thereunder is immediately exercisable, and the price per share for which
Common Stock is issuable upon the conversion or exchange of such Convertible
Securities (determined by dividing (x) the total amount of consideration
received by the Company for the sale of such Convertible Securities, plus the
minimum aggregate amount, as set forth in the instrument relating thereto
without regard to any antidilution or similar provisions contained therein for
a subsequent adjustment of such amount, of additional consideration, if any,
other than such Convertible Securities, payable upon the conversion or
exchange thereof, by (y) the total maximum number, as set forth in the
instrument relating thereto without regard to any antidilution or similar
provisions contained therein for a subsequent adjustment of such amount, of
shares of Common Stock issuable upon the conversion or exchange of such
Convertible Securities) is less than the Warrant Price of the Common Stock as
of the date of the sale of such Convertible Securities, then such total
maximum number of shares of Common Stock issuable upon the conversion or
exchange of such Convertible Securities (as of the date of the sale of such
Convertible Securities) shall be deemed to be "Common Stock" for purposes of
Subsections 5(a) and 5(d) and shall be deemed to have been sold for an amount
equal to such consideration per share and shall cause an adjustment to be made
in accordance with Subsections 5(a) and 5(d).
(v) In case the Company shall modify the rights of conversion,
exchange or exercise of any of the securities referred to in Paragraphs (iii)
or (iv) of this Subsection 5(g) or any other securities of the Company
convertible, exchangeable or exercisable for shares of Common Stock, for any
reason other than an event that would require adjustment to prevent dilution,
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so that the consideration per share received by the Company after such
modification is less than the Warrant Price as of the date prior to such
modification, then such securities, to the extent not theretofore exercised,
converted or exchanged, shall be deemed to have expired or terminated
immediately prior to the date of such modification and the Company shall be
deemed, for purposes of calculating any adjustments pursuant to this Section
5, to have issued such new securities upon such new terms on the date of
modification. Such adjustment shall become effective as of the date upon
which such modification shall take effect. On the expiration or cancellation
of any such right, warrant or option or the termination or cancellation of any
such right to convert or exchange any such Convertible Securities, the Warrant
Price then in effect hereunder shall forthwith be readjusted to such Warrant
Price as would have obtained (a) had the adjustments made upon the issuance or
sale of such rights, warrants, options or Convertible Securities been made
upon the basis of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received therefor)
upon the exercise of such rights, warrants or options or upon the conversion
or exchange of such Convertible Securities and (b) had adjustments been made
on the basis of the Warrant Price as adjusted under clause (a) of this
sentence for all transactions (which would have affected such adjusted Warrant
Price) made after the issuance or sale of such rights, warrants, options or
Convertible Securities.
(vi) In case of the sale of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or purchase,
or any options for the purchase of, Common Stock or Convertible Securities,
the consideration received by the Company therefor shall be deemed to be the
gross sales price therefor without deducting therefrom any expense paid or
incurred by the Company or any underwriting discounts or commissions or
concessions paid or allowed by the Company in connection therewith. In the
event that any securities shall be issued in connection with any other
securities of the Company, together comprising one integral transaction in
which no specific consideration is allocated among the securities, then each
of such securities shall be deemed to have been issued for such consideration
as the Board of Directors of the Company determines in good faith; provided,
however that if holders of more than of 10% of the then outstanding Warrants
disagree with such determination, the Company shall retain an independent
investment banking firm for the purpose of obtaining an appraisal.
(h) Notwithstanding any other provision hereof, no adjustment to
the Warrant Price of the Warrants or to the number of shares of Common Stock
purchasable upon the exercise of each Warrant will be made:
(i) upon the exercise of any of the options outstanding on the
date hereof under the Company's existing stock option plans; or
(ii) upon the issuance or exercise of options which may
hereafter be granted with the approval of the Board of Directors, or
exercised, under any employee benefit plan of the Company to officers,
directors, consultants or employees, but only with respect to such options as
are exercisable at prices no lower than the Closing Bid Price (or, if the
price referenced in the definition of Closing Bid Price cannot be determined,
the Fair Market Value (as defined below)) of the Common Stock as of the date
of grant thereof; or
(iii) upon issuance or exercise of the warrants issued to D2
in connection with the Management Agreement between D2 Co., LLC and the
Company, dated December 23, 1999 or upon the conversion of the notes or the
exercise of the warrants included in the units issued pursuant to a bridge
financing of the Company being effected concurrently herewith; or
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(iv) upon the issuance or sale of Common Stock or Convertible
Securities pursuant to the exercise of any rights, options or warrants to
receive, subscribe for or purchase, or any options for the purchase of, Common
Stock or Convertible Securities, whether or not such rights, warrants or
options were outstanding on the date of the original sale of the Warrants or
were thereafter issued or sold, provided that an adjustment was either made or
not required to be made in accordance with Subsections 5(a) and 5(d) in
connection with the issuance or sale of such securities or any modification of
the terms thereof; or
(v) upon the issuance or sale of Common Stock upon conversion
or exchange of any Convertible Securities, provided that any adjustments
required to be made upon the issuance or sale of such Convertible Securities
or any modification of the terms thereof were so made, and whether or not such
Convertible Securities were outstanding on the date of the original sale of
the Warrants or were thereafter issued or sold.
Paragraph 5(g)(v) shall nevertheless apply to any modification of the rights
of conversion, exchange or exercise of any of the securities referred to in
Paragraphs (i), (ii) and (iii) of this Subsection 5(h). For purposes hereof,
"Fair Market Value" shall mean the average Closing Bid Price for twenty (20)
consecutive trading days, ending with the trading day prior to the date as of
which the Fair Market Value is being determined, (with appropriate adjustments
for subdivisions or combinations of shares effected during such period)
provided that if the prices referred to in the definition of Closing Bid Price
cannot be determined for such period, "Fair Market Value" shall be the fair
market value as determined by the Board of Directors in good faith.
(i) As used in this Section 5, the term "Common Stock" shall mean
and include the Company's Common Stock authorized on the date of the original
issue of the Warrants and shall also include any capital stock of any class of
the Company thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Company; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Company's Certificate of Incorporation, as amended, as
Common Stock on the date of the original issue of the Warrants or (i), in the
case of any reclassification, change, consolidation, merger, sale or
conveyance of the character referred to in Subsection 5(c), the stock,
securities or property provided for in such section or (ii), in the case of
any reclassification or change in the outstanding shares of Common Stock
issuable upon exercise of the Warrants as a result of a subdivision or
combination or consisting of a change in par value, or from par value to no
par value, or from no par value to par value, such shares of Common Stock as
so reclassified or changed.
(j) Any determination as to whether an adjustment in the Warrant
Price in effect hereunder is required pursuant to Section 5, or as to the
amount of any such adjustment, if required, shall be binding upon the holders
of the Warrants and the Company if made in good faith by the Board of
Directors of the Company.
(k) If and whenever the Company shall grant to the holders of
Common Stock, as such, rights or warrants to subscribe for or to purchase, or
any options for the purchase of, Common Stock or securities convertible into
or exchangeable for or carrying a right, warrant or option to purchase Common
Stock, the Company may at its option elect concurrently therewith to grant to
each Registered Holder as of the record date for such transaction of the
Warrants then outstanding, the rights, warrants or options to which each
Registered Holder would have been entitled if, on the record date used to
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determine the shareholders entitled to the rights, warrants or options being
granted by the Company, the Registered Holder were the holder of record of the
number of whole shares of Common Stock then issuable upon exercise of his or
her Warrant. If the Company shall so elect under this Subsection 5(k), then
such grant by the Company to the holders of the Warrants shall be in lieu of
any adjustment which otherwise might be called for pursuant to this Section 5.
6. Fractional Warrants and Fractional Shares. If the number of shares
of Common Stock purchasable upon the exercise of each Warrant is adjusted
pursuant to Section 5, the Company nevertheless shall not be required to issue
fractions of shares, upon exercise of the Warrant or otherwise, nor to
distribute certificates that evidence fractional shares. With respect to any
fraction of a share called for upon any exercise hereof, the Company shall pay
to the Registered Holder an amount in cash equal to such fraction multiplied
by the Fair Market Value of one share of Common Stock as of the date of
exercise.
7. Warrant Holders Not Deemed Shareholders. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of
a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.
8. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the holder of any
other Warrant, may, in his own behalf and for his own benefit, enforce against
the Company his right to exercise his Warrant for the purchase of shares of
Common Stock in the manner provided herein.
9. Agreement of Warrant Holders. Every holder of any Warrant, by his
acceptance thereof, consents and agrees with the Company and every other
holder of any Warrant that:
(i) The Warrants are transferable only on the registry books
of the Company by the Registered Holder thereof in person or by his or her
attorney duly authorized in writing and only if such Warrants are surrendered
at the office of the Company, duly endorsed or accompanied by a proper
instrument of transfer satisfactory to the Company, in its sole discretion,
together with payment of any applicable transfer taxes; and
(ii) The Company may deem and treat the person in whose name
the Warrant is registered as the holder and as the absolute, true and lawful
owner thereof for all purposes, and the Company shall not be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 3.
10. Investment Representation and Legend. The holder, by acceptance of
the Warrants, represents and warrants to the Company that it is acquiring the
Warrants and the shares of Common Stock (or other securities) issuable upon
the exercise hereof for investment purposes only and not with a view towards
the resale or other distribution thereof and agrees that the Company may affix
upon this Warrant the following legend:
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"This Warrant has been issued in reliance upon the representation
of the holder that it has been acquired for investment purposes and
not with a view towards the resale or other distribution thereof.
Neither this Warrant nor the shares issuable upon the exercise of
this Warrant have been registered under the Securities Act of 1933,
as amended."
The holder, by acceptance of this Warrant, further agrees that the Company may
affix the following legend to certificates for shares of Common Stock issued
upon exercise of this Warrant:
"The securities represented by this certificate have been issued in
reliance upon the representation of the holder that they have been acquired
for investment and not with a view toward the resale or other distribution
thereof, and have not been registered under the Securities Act of 1933, as
amended. Neither the securities evidenced hereby, nor any interest therein,
may be offered, sold, transferred, encumbered or otherwise disposed of unless
either (i) there is an effective registration statement under said Act
relating thereto or (ii) the Company has received an opinion of counsel,
reasonably satisfactory in form and substance to the Company, stating that
such registration is not required."
11. Cancellation of Warrants. If the Company shall purchase or acquire
any Warrant or Warrants, by redemption or otherwise, each such Warrant shall
thereupon be and canceled by it and retired. The Company shall also cancel
the Warrant or Warrants following exercise of any or all thereof or delivered
to it for transfer, split up, combination or exchange.
12. Modification of Warrant. The terms of the Warrants shall not be
modified, supplemented or altered in any respect except with the consent in
writing of the Registered Holders representing at least a majority of the
Warrants then outstanding; provided, that, no change in the number or nature
of the securities purchasable upon the exercise of any Warrant, or the Warrant
Price therefor, or the acceleration of the Warrant Expiration Date, shall be
made without the consent in writing of the Registered Holder of the Warrant,
and in compliance with applicable law.
13. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed by means of first class registered or certified mail,
postage prepaid as follows: if to the Registered Holder of a Warrant, at the
address of such holder as shown on the registry books maintained by the
Company; if to the Company, at 555 17th St., Suite 3310, Denver, CO 80202, or
at such other address as may have been furnished to the Registered Holder in
writing by the Company.
14. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without reference to
principles of conflict of laws.
15. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company, the Registered Holder and their respective
successors and assigns, and the holders from time to time of the Warrants.
Nothing in this Warrant is intended nor shall be construed to confer upon any
other person any right, remedy or claim, in equity or at law, or to impose
upon any other person any duty, liability or obligation.
16. Registration Rights. The rights of the holder hereof with respect to
the registration under the Securities Act of 1933, as amended, of the shares
of Common Stock issuable upon the exercise of this Warrant are set forth in
the Purchase Agreement.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of the date first above written.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
By: /s/ Jon Northrop
Authorized Officer
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SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrant
The undersigned Registered Holder hereby irrevocably elects to exercise
__________ Warrants represented by this certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
[please print or type name and address]
and be delivered to
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
The undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc.
If not solicited by an NASD member, please write "unsolicited" in the space
below.
________________________________________
(Name of NASD Member)
Dated: ______________________ X ________________________________________
________________________________________
________________________________________
Address
________________________________________
Taxpayer Identification Number
________________________________________
Signature Guaranteed
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<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
In Order to Assign Warrant
FOR VALUE RECEIVED,_____________________________________ hereby sells, assigns
and transfers unto __________________________________________________
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________________________________________
______________________________________________________
______________________________________________________
______________________________________________________
[please print or type name and address]
___________________________ of the Warrants represented hereby, and
hereby irrevocably constitutes and appoints
__________________________________________________________________________
Attorney to transfer this Warrant on the books of the Company, with full
power of substitution in the premises.
Dated:__________________________ X _______________________________________
Signature Guaranteed
_______________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO
THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND
MUST BE GUARANTEED BY A MEMBER OF THE MEDALLION STAND PROGRAM.
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PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated December 23, 1999 by and between D2 Co., LLC, a
Delaware limited liability company, with offices at 5 East 59th Street, 3rd
Floor, New York, NY 10022 (the "Pledgor") and Bion Environmental Technologies,
Inc., a Colorado corporation, as Secured Party ( the "Secured Party").
W I T N E S S E T H:
In consideration of the covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
1. Pledge. As security for the prompt payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of all indebtedness
and all other liabilities and obligations (collectively, the "Obligations"),
whether now existing or hereafter arising, of the Pledgor to the Secured Party
under, arising out of, or in any way connected with, the Pledgor's Promissory
Note, of even date herewith (the "Note"), issued by the Pledgor to the Secured
Party, Pledgor hereby delivers, pledges and assigns to Secured Party and
creates in Secured Party a perfected first security interest in all of its
right, title and interest in, to and under (i) those warrants to purchase
2,500,000 shares of the common stock of the Pledgor at an exercise price of
$1.75 per share purchased by Pledgor in part with the Note and (ii) the shares
of common stock underlying such warrants (these warrants and shares of common
stock being collectively referred to herein as the "Pledged Warrants"),
together with all rights and privileges of Pledgor with respect thereto, all
proceeds, income and profits thereof and all property received in addition
thereto, in exchange thereof or in substitution therefor and in any other
property or assets of equal value as may from time to time be substituted by
mutual agreement of the parties hereto as collateral security hereunder (all
such property of Pledgor being hereinafter referred to as the "Collateral").
2. Stock Dividends, Options or Other Adjustments. Prior to the full
payment and satisfaction by Pledgor of all of the Obligations, Secured Party
shall receive, as additional Collateral, any and all additional shares of
stock or any other property of any kind distributable on or by reason of the
Collateral pledged hereunder, whether in the form of or by way of stock
dividends, warrants, total or partial liquidation, conversion, exchange,
prepayments or redemptions (in whole or in part) or otherwise, except for cash
distributions which shall be retained by the Pledgor to the extent provided in
Section 1 hereof. If any additional shares of capital stock, instruments, or
other property, against which a security interest can only be perfected by
possession by Secured Party, are distributed on or by reason of the Collateral
pledged hereunder and shall come into the possession or control of Pledgor,
Pledgor shall hold or control and forthwith transfer and deliver the same to
Secured Party subject to the provisions hereof.
3. Delivery of Warrant Certificates; Assignment. Pledgor is delivering
herewith to Secured Party all instruments and certificates representing the
Collateral, together with an assignment duly executed in blank. If at any
time Secured Party notifies Pledgor that additional assignments or stock
powers are required, Pledgor shall promptly execute and deliver such
assignments or stock powers as Secured Party may request.
4. Power of Attorney. Pledgor hereby constitutes and irrevocably
appoints Secured Party with full power of substitution and revocation, as
Pledgor's true and lawful attorney-in-fact, to the full extent permitted by
law, to affix to certificates and documents representing the Collateral, the
assignments or stock powers delivered with respect thereto, to transfer or
cause the transfer of the Collateral, or any part thereof on the books of the
Secured Party, to the name of Secured Party or Secured Party's nominee and
<PAGE>
thereafter exercise as to such Collateral all the rights, power and remedies
of an owner. The power of attorney granted pursuant to this Agreement and all
authority hereby conferred are granted and conferred solely to protect the
Secured Party's interest in the Collateral and shall not impose any duty upon
the Secured Party to exercise any such power. This power of attorney shall be
irrevocable as one coupled with an interest prior to the full payment and
satisfaction by Pledgor of all of the Obligations to Secured Party.
5. Rights of Pledgor. So long as no Event of Default has occurred and
is continuing (as used herein "Event of Default" shall mean and include (i)
the failure of Pledgor to perform any of its Obligations or the breach by
Pledgor of any covenant under this Agreement or the Note, (ii) any
misrepresentation by Pledgor in or with respect to any provision of this
Agreement or the Note, (iii) any attachment of the Collateral at any time
pursuant to any court order or other legal process, or (iv) an Event of
Default as defined in the Note), Pledgor shall be entitled to vote or consent
with respect to the Collateral in any manner not inconsistent with this
Agreement or the Note.
6. Rights of Secured Party. Secured Party may:
(a) Upon the occurrence and during the continuance of an Event of
Default, cause the Collateral to be transferred to its name or to the name of
any nominee or nominees and thereafter exercise as to such Collateral all of
the rights, powers and remedies of an owner;
(b) Upon the occurrence and during the continuance of an Event of
Default, collect by legal proceedings or otherwise, all dividends, interest,
principal payments, capital distributions and other sums now or hereafter
payable on account of said Collateral, and hold the same as part of the
Collateral, or apply the same to any of the Obligations in such manner and
order as Secured Party may decide in their sole discretion;
(c) Upon the occurrence and continuance of an Event of Default,
enter into any extension, subordination, reorganization, deposit, merger, or
consolidation agreement, or any other agreement relating to or affecting the
Collateral, and in connection therewith deposit or surrender control of such
Collateral thereunder, and accept other property in exchange therefor and hold
and apply such property or money so received in accordance with the provisions
hereof; and
(d) At any time and without notice, discharge any taxes, liens,
security interests or other encumbrances levied or placed on the Collateral or
pay for the maintenance and preservation of the Collateral; the amount of such
payments, plus any and all fees, costs and expenses of Secured Party
(including reasonable attorneys' fees and disbursements), in connection
therewith, shall, at Secured Party's option, be reimbursed by Pledgor on
demand from the date paid, or be added to the Obligations.
7. Event of Default; Remedies. Upon the occurrence and during the
continuance of an Event of Default as defined in Section 4 above:
(a) In addition to all the rights and remedies of a secured party
under the Uniform Commercial Code, Secured Party shall have the right, and
without demand of performance or other demand, advertisement or notice of any
kind, except as specified below, to or upon Pledgor or any other person (all
and each of which demands, notices or advertisements are hereby expressly
waived to the extent permitted by law), to proceed forthwith to collect,
receive, appropriate and realize upon the Collateral, or any part thereof and
to proceed forthwith to sell, assign, give an option or options to purchase,
contract to sell, or otherwise dispose of and deliver the Collateral or any
2
<PAGE>
part thereof in one or more parcels at public or private sale or sales at any
stock exchange, broker's board or elsewhere at such prices and on such terms
(including, without limitation, a requirement that any purchaser of all or any
part of the Collateral shall be required to purchase any securities
constituting the Collateral solely for investment and without any intention to
make a distribution thereof) as Secured Party, in its sole and absolute
discretion deems appropriate, without any liability for any loss due to
decrease in the market value of the Collateral during the period held. If any
notification of intended disposition of the Collateral is required by law,
such notification shall be deemed reasonable and properly given if mailed at
least twenty-one (21) days before any such disposition. Any disposition of
the Collateral or any part thereof may be for cash or on credit or for future
delivery without assumption of any credit risk, with the right to Secured
Party to purchase all or any part of the Collateral so sold at any such sale
or sales, public or private, free of any equity or right of redemption in the
Pledgor, which right or equity is, to extent permitted by applicable law,
hereby expressly waived or released by the Pledgor.
(b) Secured Party may elect to obtain the advice of any investment
banking firm or other consultant with respect to the method and manner of sale
or other disposition of any of the Collateral, the best price reasonably
obtainable therefor, the consideration of cash or credit terms, or any other
details concerning such sale or disposition. Secured Party, in its sole
discretion, may elect to sell on such credit terms which it deems reasonable.
The sale of any of the Collateral on credit terms shall not relieve Pledgor of
any of the Obligations until the full purchase price for the Collateral has
been paid in full. All payments received by Secured Party in respect of a
sale of Collateral shall be applied to the Obligations in the manner provided
below, as and when such payments are received.
(c) Pledgor recognizes that Secured Party may be unable to effect
a public sale of all or a part of the Collateral by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the "Act"),
and may be compelled to resort to private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire the
Collateral for its own account, for investment and not with a view for the
distribution or resale thereof. Pledgor acknowledges and agrees that private
sales so made may be at prices and on other terms less favorable to the seller
than if the Collateral were sold at public sale, and that Secured Party has
any obligation to delay the sale of any Collateral for the period of time
necessary to permit the registration of the Collateral for public sale under
the Act. Pledgor agrees that a private sale or sales made under the foregoing
circumstances shall be deemed to have been made in a commercially reasonable
manner.
(d) If any consent, approval or authorization of any state,
municipal or other governmental department, agency or authority should be
necessary to effectuate any sale or other disposition of the Collateral, or
any partial disposition of the Collateral, Pledgor agrees to execute all such
applications and other instruments as may be required in connection with
securing any such consent, approval or authorization, and will otherwise use
its best efforts to secure the same. Pledgor further agrees to use its best
efforts to secure such sale or other disposition of the Collateral as Secured
Party may deem necessary pursuant to the terms of this Agreement.
(e) Upon any sale or other disposition, Secured Party shall have
the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold or disposed of. Each purchaser at any such sale or other
disposition (including Secured Party) shall hold the Collateral free from any
claim or right of any kind whatsoever, including any equity or right of
redemption of Pledgor. Pledgor specifically waives, to the extent permitted
3
<PAGE>
by applicable law, all rights of redemption, stay or appraisal which he had or
may have under any rule of law or statute now existing or hereafter adopted.
(f) Secured Party shall not be obligated to make any sale or other
disposition, unless the terms thereof shall be satisfactory to it. Secured
Party may, without notice or publication, adjourn any private or public sale,
and, upon twenty one (21) days' prior notice to Pledgor, hold such sale at any
time or place to which the same may be so adjourned. In case of any sale of
all or any part of the Collateral, on credit or future delivery, the
Collateral so sold may be retained by Secured Party until the selling price is
paid by the purchaser thereof, but Secured Party shall incur no liability in
case of the failure of such purchaser to take up and pay for the property so
sold and, in case of any such failure, such property may again be sold as
herein provided.
8. Application of Proceeds. The proceeds of any collection, recovery,
receipt, appropriation, realization or sale as aforesaid, shall be applied by
the Secured Party as follows:
FIRST, to the payment of the reasonable costs and expenses, if any
(including, without limitation, reasonable attorneys' fees and expenses),
incurred by the Secured Party in preserving its interests in the Collateral or
in enforcing any of the rights or remedies granted to it hereunder;
SECOND, to the payment to the Secured Party of accrued and unpaid
interest due and payable on the Note (whether at stated maturity, by
acceleration or otherwise);
THIRD, to the payment to the Secured Party of the outstanding principal
amount due and payable on the Note (whether at stated maturity, by
acceleration or otherwise);
FOURTH, to the payment to the Secured Party of any and all other
Obligations due and payable on the date of such application;
FIFTH, to the payment of any other amounts required by applicable law;
and
SIXTH, after payment in full of any and all Obligations, to the payment
to the Pledgor or to its successors or assigns, or to whomsoever may be
lawfully entitled to receive the same or as a court of competent jurisdiction
may direct, of any surplus then remaining from such proceeds. (As used in
this Pledge Agreement, "proceeds" of the Collateral shall mean cash,
securities and other property realized in respect of, and distributions in
kind of, the Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of the Pledgor or any issuer
of securities included in the Collateral).
9. Representations. The Pledgor represents and warrants to the Secured
Party that:
(a) The Pledgor is the record and beneficial owner of the Pledged
Warrants as of the date hereof;
(b) The Pledged Warrants are owned by the Pledgor, free and clear of
any pledge, mortgage, hypothecation, lien, charge, encumbrance or any security
interest in such Pledged Warrants or the proceeds thereof except for the
security interest granted to the Secured Party hereunder;
(c) No consent or approval of any Person, and no consent, license,
approval, authorization or declaration of any governmental authority, bureau
4
<PAGE>
or agency, is or will be required in connection with the execution, delivery,
performance, validity or enforcement of this Pledge Agreement as to the
Pledgor;
(d) The execution and delivery of this Pledge Agreement by the
Pledgor and its performance hereunder will not violate any provision of law
and will not conflict with or result in a breach of any material order, writ,
injunction, ordinance, resolution, decree, or other similar document or
instrument of any court or governmental authority, bureau or agency, or create
(with or without the giving of notice or lapse of time, or both) a default
under or breach of any material agreement, bond, note or indenture to which
the Pledgor is a party or by which the Pledgor is bound or any of the
Pledgor's properties or assets is affected, or result in the imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets owned by or used in connection with the business of the
Pledgor except as created by this Pledge Agreement; and
(e) This Pledge Agreement creates and grants a valid first priority
lien on and perfected security interest in the Pledged Stock and the proceeds
thereof, subject to no prior security interest, lien, charge or encumbrance,
or to any agreement purporting to grant to any third party a security interest
in the property or assets of the Pledgor which would include any of the
Pledged Warrants.
10. Covenants.
(a) The Pledgor hereby covenants and agrees that, so long as the
Obligations shall be outstanding and unpaid, in whole or in part, the Pledgor
will not sell, convey or otherwise dispose of any of the Pledged Warrants or
any interest therein to any other party unless such party expressly agrees in
writing to be bound by all of the terms of this Pledge Agreement and executes
and delivers to the Secured Party appropriate financing statements and such
other instruments and documents (all in form and substance satisfactory to
counsel to the Secured Party) as the Secured Party may reasonably request, nor
will the Pledgor create, incur or permit to exist any pledge, mortgage, lien,
charge, encumbrance or any security interest whatsoever with respect to any of
the Pledged Warrants or the proceeds thereof; and
(b) The Pledgor warrants and will defend the right, title, special
property and security interest in and to the Pledged Warrants of the Secured
Party against the claims of any person, firm, partnership, corporation or
other entity.
11. Termination. This Agreement shall continue in full force and effect
until all the Obligations shall have been fully and indefeasibly paid in full
and payment in full thereof has been acknowledged by the Secured Party.
Subject to any sale or other disposition by Secured Party of the Collateral or
any part thereof pursuant to this Agreement, the Collateral shall be returned
to Pledgor upon full payment, satisfaction and termination of all of the
Obligations.
12. No Impairment. The terms of this Pledge Agreement and the
obligations of the Pledgor arising hereunder shall not be affected, modified
or impaired in any manner or to any extent by: (a) any amendment or
modification of or supplement to the Note or any instrument or document
executed or delivered pursuant thereto or in connection therewith; (b) the
invalidity or unenforceability of any of such instruments or documents; (c)
any exercise or non-exercise of any right, power or remedy of the Secured
Party under any of such instruments or documents referred to in clause (a)
above or arising at law; (d) any waiver, consent, release, indulgence,
extension, renewal, modification, delay or other action, inaction or omission
5
<PAGE>
in respect of the Note or any of the instruments or documents referred to in
clause (a) above; or (e) any waiver by the Secured Party of any rights under
this Pledge Agreement, whether or not the Pledgor shall have had notice or
knowledge of any of the foregoing and whether or not the Pledgor shall have
consented thereto.
13. Remedies Cumulative. Each right, power and remedy herein
specifically granted to the Secured Party or otherwise available to them 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 Secured
Party in its sole and complete discretion; and the exercise or commencement of
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 Secured Party 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 Secured Party or an acquiescence therein. No
waiver by the Secured Party of any breach or default of or by the Pledgor
hereunder shall be deemed to be a waiver of any other or similar, previous or
subsequent, breach or default.
14. Amendment, Etc. This Pledge Agreement may not be amended orally,
but may be amended or modified only in writing, signed by the Pledgor and the
Secured Party. No waiver of any term or provision of this Pledge Agreement
shall be effective unless it is in writing, making specific reference to this
Pledge Agreement and signed by the party against whom such waiver is sought to
be enforced. This Pledge Agreement constitutes the entire agreement among the
Party hereto with respect to the subject matter hereof.
15. Benefits to Secured Party. The Secured Party agrees that the
rights, benefits and obligations conferred upon them pursuant to the terms of
this Agreement shall be shared among them on a pro rata basis, according to
the unpaid principal amount of the Note held by it.
16. Further Assurances. The Pledgor shall at any time and from time to
time upon the written request of the Secured Party, execute and deliver such
further documents and do such further acts and things as the Secured Party may
reasonably request in order to effect the purposes of this Pledge Agreement.
17. Course of Dealing. No course of dealing between the Pledgor and the
Secured Party, nor any failure to exercise, nor any delay in exercising, on
the part of the Secured Party of any right, power or privilege hereunder or
under the Note shall operate as a waiver thereof; nor shall any single or
partial exercise by the Secured Party of any right, power or privilege
hereunder or thereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
18. Severability. The provisions of this Pledge Agreement are
severable, and if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction and shall not in any manner affect such clause or
provision in any other jurisdiction, or any other clause or provision in this
Pledge Agreement in any jurisdiction.
19. Successors and Assigns. This Pledge Agreement, and the terms and
conditions hereof, shall be binding upon and shall inure to the benefit of the
Pledgor and its successors and assigns, and the Secured Party and its
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<PAGE>
successors and assigns; provided that the Pledgor may not assign its rights or
delegate its obligations hereunder without the prior written consent of the
Secured Party and any purported assignment or delegation by the Pledgor in the
absence of such written consent shall be void.
20. GOVERNING LAW. THIS PLEDGE 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 SECURED PARTY SHALL HAVE ALL THE RIGHTS TO WHICH SECURED PARTY
UNDER THE LAWS OF SUCH JURISDICTION ARE ENTITLED.
21. Term. This Pledge Agreement shall continue in full force and effect
until all the Obligations have been fully and indefeasibly paid in full,
whereupon this Pledge Agreement shall terminate.
22. Notices. All notices and other communications provided for herein
shall be by telephone (except where written notice is expressly required
hereby), or in writing and telephoned, telecopied, mailed or delivered by
overnight courier or by hand to the intended recipient at the telephone number
or "Address for Notices" specified below its name on the signature pages
hereof; or, as to either party, at such other telephone number or address as
shall be designated by such party in a notice to the other Party. Except as
otherwise provided in this Pledge Agreement, all notices and other
communications hereunder shall be deemed to have been duly given when
transmitted by telecopier or delivered to an overnight courier service, in
each case addressed as aforesaid or personally delivered or, in the case of a
mailed notice, when actually received by the intended recipient. Telephoned
notices shall be confirmed within three days by the sender by telecopy,
overnight courier or hand delivery, provided that failure to confirm any such
telephoned notice shall not affect its validity.
23. Counterparts. This Pledge Agreement may be executed in any number
of counterpart copies, each of which shall be deemed an original, but which
together shall constitute a single instrument.
24. 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 Pledge Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
D2 CO., LLC, as Pledgor
By: /s/ David J. Mitchell
Name: David J. Mitchell
Title: President
Address for Notices: 5 East 59th Street, 3rd Floor
New York, NY 10022
BION ENVIRONMENTAL
TECHNOLOGIES, INC., as Secured Party
By: /s/ Jon Northrop
Name: Jon Northrop
Title: CFO
Address for Notices: 555 17th Street, Suite 3310
Denver, CO 80202
7
BION ENVIRONMENTAL TECHNOLOGIES, INC.
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement"), is made and entered into
as of December 23, 1999 by and among the following shareholders of BION
ENVIRONMENTAL TECHNOLOGIES, INC., a Colorado corporation (the "Company"): D2
Co., LLC, a Delaware limited liability company ("D2 Co"), Mark A. Smith
("MAS"), Jere Northrop ("JN"), Jon Northrop ("JNN"), LoTayLingKyur, Inc., a
Nevada corporation ("LTLK"), LTLK Defined Benefit Plan (the "Plan") and Dublin
Holding, Ltd., a corporation organized under the laws of the Turks and Caicos
Islands, British West Indies ("Dublin") (each of D2 Co., MAS, JN, JNN, LTLK,
the Plan and Dublin is sometimes referred to as a "Shareholder" and
collectively they may be referred to as the "Shareholders").
W I T N E S S E T H:
WHEREAS, MAS, JN and JNN, or affiliates of any thereof (including LTLK,
the Plan and Dublin) currently own in excess of 50% of the issued and
outstanding capital stock of the Company;
WHEREAS, pursuant to a management agreement dated the date hereof
("Management Agreement") between D2 Co. and the Company, D2 Co. will receive
warrants to purchase additional shares of Common Stock and may receive
additional shares of Common Stock in lieu of cash as payment of the Fee
provided for therein;
WHEREAS, pursuant to a warrant purchase agreement dated the date hereof
between D2 Co. and the Company, D2 Co. is purchasing warrants to purchase
additional shares of Common Stock for an aggregate purchase price of
$1,000,000;
WHEREAS, the Shareholders deem it desirable to enter into this Agreement
in order to set forth certain agreements among themselves granting certain
rights and imposing certain restrictions on themselves, the Company and the
shares of capital stock in the Company now or at any time held by the
Shareholders or issuable to the Shareholders upon the exercise of any options
or warrants now or at any time held by the Shareholders (collectively, the
"Shares").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Definitions. As used in this Agreement:
"Affiliate" as applied to any Person means any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. The term "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly, of the power to vote
10% or more of the Voting Stock (or in the case of a Person which is not a
corporation, 10% or more of the ownership interest, beneficial or otherwise)
of such Person or otherwise to direct or cause the direction of the management
and policies of that Person, whether through the ownership of Voting Stock or
other ownership interest, by contract or otherwise.
"Beneficially Own" or "Beneficial Ownership" shall, as to any Person, be
<PAGE>
determined or computed in the manner provided under Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended, but on a fully-diluted
and as converted basis.
"Closing Date" means the date hereof.
"Common Stock" means the no par value common stock of the Company.
"Exempt Transfer" as defined in Section 4 below.
"Immediate Family" means, as to any individual, (i) such individual's
spouse, children, parents or siblings, and (ii) the respective executors,
administrators, conservators, guardians or custodians during the minority of
such persons.
"Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity or any department, agency
or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Shareholder" means any Person who is a party to this Agreement or is a
successor or assign thereof contemplated by Section 8 below.
"Shares" as defined in the recitals hereto.
"Voting Stock" of any Person means securities of any class or classes of
such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to elect or vote for the election of the directors of
such Person.
2. Board of Directors.
(a) From and after the date of this Agreement and until the
provisions of this Section 2 cease to be effective, each Shareholder shall
vote or cause to be voted all Voting Stock and any other voting securities of
the Company over which such Shareholder has Beneficial Ownership or voting
control and shall take all other necessary or desirable actions within its
control (whether in its capacity as a shareholder, director, member of a
committee of the Board of Directors or officer of the Company or otherwise,
and including, without limitation, attendance at meetings in person or by
proxy for purposes of obtaining a quorum and execution of written consents in
lieu of meetings), so that:
(i) the number of directors constituting the entire Board of
Directors of the Company (the "Board") shall be seven;
(ii) the following persons shall at all times be members of
the Board and shall be elected to the Board at each annual meeting of the
shareholders of the Company:
(1) three persons to be designated by D2 Co. prior to
January 30, 2000 pursuant to the Management Agreement, who shall initially be
David Mitchell, Salvatore J. Zizza and an as yet unnamed individual;
(2) with the consent of the Company, the person nominated
by D2 pursuant to Section 6 of the Management Agreement;
(iii) the removal from the Board (with or without cause) of
2
<PAGE>
any representative designated hereunder by D2 Co. at any time while it shall
be entitled to designate a representative to serve on the Board under clause
(ii)(1) above, shall only be at D2 Co.'s written request (and at times when D2
Co. is not entitled to so designate representatives to the Board, such person
or representatives may be removed, with cause, by vote of the Board or the
Shareholders or without cause by a vote of the Shareholders); and
(iv) if any representative designated hereunder by D2 Co. for
any reason ceases to serve as a member of the Board during his term of office
at any time while D2 Co. shall be entitled to designate a representative to
serve on the Board under clause (ii) above, the resulting vacancy on the Board
shall be filled by a representative designated by D2 Co. as provided
hereunder.
(b) If D2 Co. fails to designate a representative to fill a
directorship or if any directorship remains unfilled following the designation
of persons pursuant to the terms of this Section 2, or if a party is no longer
entitled or available to serve as a director as provided in this Section 2,
the number of directors constituting the entire Board shall be reduced
accordingly.
3. Conflicting Agreements. Each Shareholder represents that he has not
granted and is not a party to any proxy, voting trust or other agreement which
is inconsistent with or conflicts with the provisions of this Agreement, and
no Shareholder shall grant any proxy or become party to any voting trust or
other agreement which is inconsistent with or conflicts with the provisions of
this Agreement. No Shareholder shall act, for any reason, as a member of a
group or in concert or enter into any agreement or arrangement with any other
person in connection with the acquisition, disposition or voting of Shares in
any manner which is inconsistent with the provisions of this Agreement. In
addition, each Shareholder shall, from time to time, grant such waivers and
execute such consents, proxies or other instruments, and make such filings
with and seek such consents and approvals from governmental authorities or
other Persons, as may be necessary to give effect to or carry out the
provisions of this Agreement.
4. Disposition of Shares. No Shareholder shall transfer, sell, convey,
exchange, pledge or otherwise dispose of ("Transfer") any Shares of the
Company except in connection with a sale of all or substantially all of the
outstanding stock of the Company or a merger of the Company with another
Person. Notwithstanding the foregoing, a Shareholder shall be entitled to
effect any of the following transfers (each an "Exempt Transfer"): (i)
Transfers by a Shareholder to an entity wholly owned by it at all times
following such Transfer; (ii) Transfers pursuant to applicable laws of descent
and distribution to members of such Shareholder's Immediate Family, or
Transfers during the lifetime of such Shareholder to such Shareholder's
spouse, adult children or to a trust whose beneficiaries are members of such
Shareholder's Immediate Family and (iii) Transfers of a number of Shares up to
the "Maximum Amount" (as defined below), computed cumulatively for all
Transfers made under this clause (iii) from and after the date hereof;
provided that, in the case of Exempt Transfers of the types referenced in
clauses (i) and (ii) above, the restrictions contained in this Section 4 will
continue to be applicable to Shares and the transferee of such Shares must
have agreed in writing to be bound by the terms and conditions of this
Agreement applicable to the Shareholder. For purposes hereof, the "Maximum
Amount" shall be equal to (a) with respect to MAS, shares with a gross sales
price of up to $1,000,000 sold prior to December 31, 2004, (b) with respect
to JN and JNN, shares with aggregate gross proceeds of up to $150,000 each,
sold prior to December 31, 2004, and (c) in the event the Transfers referred
to in both clauses (a) and (b) have occurred prior to December 31, 2004, then
(1) with respect to MAS, shares with aggregate gross proceeds of up to an
additional $1,000,000 and (2) with respect to D2 Co., shares with aggregate
gross proceeds of up to $1,000,000 each sold prior to December 31, 2004. In the
event of the Company desires to enter into a future financing transaction in
which an additional lock-up period on the Transfer of Shares has been
3
<PAGE>
requested, each Shareholder agrees to negotiate in good faith with the
Company with respect to the extent of any such additional Transfer restrictions.
5. Representations and Warranties.
(a) Each Shareholder represents and warrants the following with
respect to himself, herself or itself, as the case may be:
(i) Authorization. All corporate action on the part of each
Shareholder which is not an individual necessary for the authorization,
execution, delivery and performance by such Shareholder of this Agreement has
been taken. This Agreement is a legal, valid and binding obligation of each
Shareholder, enforceable against such Shareholder in accordance with its
terms.
(ii) No Violation. The execution and delivery of this Agreement
will not (with or without notice or passage of time or both) (a) conflict with
or result in a breach of any provision of the certificate of incorporation or
bylaws of a Shareholder which is not an individual, (b) result in a default,
give rise to any right of termination, cancellation or acceleration, or
require any consent or approval, under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, loan, factoring
arrangement, license, agreement, lease or other instrument or obligation to
which a Shareholder is a party or by which it or any of its assets may be
bound, or (c) violate any law, judgment, order, writ, injunction, decree,
statute, rule or regulation of any court, administrative agency, bureau,
board, commission, office, authority, department or other governmental entity
applicable to such Shareholder or any of its, his or her assets.
6. Termination. The provisions of this Agreement will terminate upon
the earlier to occur of (i) December 31, 2004, (ii) the closing of a sale of
all or substantially all of the assets of the Company or (iii) a merger or
consolidation in which the Company is not the surviving entity. In addition,
this Agreement, or any portion thereof, may be terminated with the written
agreement of the Shareholders Beneficially Owning more than 80% of the Shares
Beneficially Owned by all Shareholders.
7. Consent to Amendments; Waivers. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended or waived at
any time only by the written agreement of Shareholders holding more than
eighty percent (80%) of the Shares Beneficially Owned by all Shareholders.
Any waiver, permit, consent or approval of any kind or character on the part
of any such holder of any provisions or conditions of this Agreement must be
made in writing and shall be effective only to the extent specifically set
forth in such writing.
8. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto, whether so expressed
or not, provided, that in the case of an assignment, such assignment shall be
made in conjunction with a Transfer of Shares, such assignment shall
specifically provide that the assignee shall assume all obligations of the
assigning Shareholder, and such assignee shall execute and deliver to the
Company and the other Shareholders a counterpart of this Agreement.
Notwithstanding the foregoing, no purchaser of Shares sold pursuant to an
effective registration statement filed by the Company or in an unsolicited
open market transaction effected pursuant to Rule 144 shall be subject to the
provisions hereof or deemed a Shareholder hereunder.
9. Legend on Certificates. The Shareholders agree that all Common Stock
4
<PAGE>
and other stock of the Company now or hereafter owned by the parties to this
Agreement, shall be subject to the provisions of this Agreement and the
certificates representing said shares shall bear substantially the following
legends:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any State (the "Securities Laws"). These
securities may not be offered, sold, transferred, pledged or
hypothecated in the absence of registration under applicable
Securities Laws, or the availability of an exemption therefrom.
This certificate will not be transferred on the books of the
Company or any transfer agent acting on behalf of the Company
except upon the receipt of an opinion of counsel, satisfactory
to the Company, that the proposed transfer is exempt from the
registration requirements of all applicable Securities Laws,
or the receipt of evidence, satisfactory to the Company, that
the proposed transfer is the subject of an effective registration
statement under all applicable Securities Laws."
"The securities represented by this certificate are subject to the
terms of that certain Shareholders' Agreement dated as of December 23,
1999, among certain of its Shareholders, as the same may be amended from
time to time."
10. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
11. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not be utilized in interpreting this Agreement.
12. Notices. Any notices required or permitted to be sent hereunder
shall be delivered personally or mailed, certified mail, return receipt
requested, or delivered by overnight courier service to the addresses shown on
the signature pages hereof, and shall be deemed to have been given upon
delivery, if delivered personally, three days after mailing, if mailed, or one
business day after delivery to the courier, if delivered by overnight courier
service.
13. Governing Law. All questions concerning the construction, validity,
and interpretation of this Agreement, and the performance of the obligations
imposed by this Agreement, shall be governed by the laws of the State of New
York.
14. Final Agreement. This Agreement constitutes the complete agreement
of the parties concerning the matters referred to herein.
15. Execution in Counterparts. This Agreement may be executed in any
number of Counterparts, each of which when so executed and delivered shall be
deemed an original, and such counterparts together shall constitute one
instrument.
16. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be used against any party.
5
<PAGE>
17. Remedies. The parties hereto shall have all rights and remedies set
forth in this Agreement and all rights and remedies available under any
applicable law. The parties hereto agree and acknowledge that money may not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may, in its sole discretion, apply to any court of law or equity of
competent jurisdiction for specific performance or injunctive relief (without
posting bond or other security) in order to enforce, or prevent any violations
of, the provisions of this Agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the
date first set forth above.
D2 CO., LLC
By: /s/ David J. Mitchell
Title: President
Address: 5 East 59th Street, 3rd Floor
New York, NY 10022
/s/ Mark A. Smith
MARK A. SMITH
Address: 409 Spruce Street
Boulder, CO 80302
/s/ Jere Northrop
JERE NORTHROP
Address: 8899 Main Street
Williamsville, NY 14221
/s/ Jon Northrop
JON NORTHROP
Address: 555 17th Street, Suite 3310
Denver, CO 80202
LOTAYLINGKYUR, INC.
By: /s/ Mark A. Smith
Title: President
Address: 409 Spruce Street
Boulder, CO 80302
By: /s/ Mark A. Smith
Title: Trustee
Address: 409 Spruce Street
Boulder, CO 80302
DUBLIN HOLDING, LTD.
By: /s/ Mark A. Smith
Title: Authorized Agent
Address: 409 Spruce Street
Boulder, CO 80302
6
AGREEMENT
IT IS AGREED this 15 day of December, 1999, effective December 20, 1999, by,
between and among LoTayLingKyur, Inc. ("LTLK"), LTLK Defined Benefit Plan
("DBP"), Mark A. Smith ("MAS"), LoTayLingKyur Foundation ("F"), and Dublin
Holding, Ltd. ("DHL") (collectively "FIRST PARTIES") and Bion Environmental
Technologies, Inc. ("BION") as follows:
WHEREAS BION is entering into agreements ("D2 AGREEMENT") with D2 CO. ("D2")
concerning management, consulting and financing; and
WHEREAS D2 requires that BION and certain major shareholders and/or creditors
of BION, including FIRST PARTIES, agree to certain conditions as partial
consideration for the D2 AGREEMENT with BION; and
WHEREAS FIRST PARTIES consider the D2 AGREEMENT to be in the best interests of
BION and are willing to accept the following conditions;
NOW THEREFORE, IN CONSIDERATION of the mutual promises and covenants herein:
1) LTLK and DBP agree to exchange (on the effective date) existing convertible
promissory notes (with aggregate balance of $2,793,424.93 as of 11/30/99 plus
net advances and interest subsequent thereto) for new notes with a maturity
of 12/31/02, 1% interest per month (compounded), convertible into BION common
stock at $1.80 per share, in the form attached hereto as Exhibit A ("NEW
NOTES"). FIRST PARTIES agree that BION shall convert the NEW NOTES into the
number of shares which would be issued if NEW NOTES were held to maturity upon
the conclusion of not less than $10,000,000 aggregate financing of BION
subsequent hereto ("FINANCING"), on the condition that any senior instruments
issued by BION in the first $3,000,000 of financing arranged by D2 ("FIRST
FINANCING"), or any other financing arranged as part of FINANCING, convert (or
are used to exercise derivative securities of BION) into BION common stock at
the same time.
2) FIRST PARTIES agree to cancel and exchange each of the BION Class X
Warrants which each of FIRST PARTIES owns (or subsequently acquires) into 0.3
restricted shares of BION's common stock and 0.7 BION Class Z Warrants on the
effective date.
3) FIRST PARTIES agree to recommend, support and participate in, after or
contemporaneously with completion of FINANCING, a registered exchange
including BION Class X Warrants and BION Class Z Warrants with tentative
exchange ratios as follows:
1 Class X Warrant = 0.3 registered BION common shares; and
1 Class Z Warrant = 0.15 registered BION common shares;
provided, however, that based on events subsequent hereto the proposed
exchange ratios may need to be adjusted to insure fairness to all holders or
BION may elect to not proceed with the proposed exchange on any terms.
4) BION acknowledges that certain transactions may be made between and among
FIRST PARTIES in preparation for the transactions contemplated herein and BION
agrees to indemnify and hold harmless FIRST PARTIES from any and all "short
swing profit" liability which may arise under Section 16b of the Securities &
Exchange Act of 1934 as a result of matching with the transactions by FIRST
PARTIES herein and/or transactions made by FIRST PARTIES in preparation for
the transaction herein.
<PAGE>
5) LTLK, MAS and BION acknowledge that D2 AGREEMENT will entail material
management re-arrangement at all levels of BION, both immediately and over
time, which may alter the services required by BION from LTLK and/or MAS; and
BION, LTLK and MAS agree that upon conclusion of FIRST FINANCING, LTLK and MAS
will have completed all services required by existing agreements and will have
earned the fees specified therein; and LTLK and MAS agree to cooperate with
BION and D2 in all management transitions.
6) FIRST PARTIES agree to execute together with D2 and other parties, an
agreement which provides for reasonable limitations on resale by FIRST PARTIES
of BION securities currently owned or subsequently acquired.
Bion Environmental Technologies, Inc. LoTayLingKyur, Inc.
by:/s/ Jon Northrop by: /s/ Mark A. Smith
Authorized Officer Authorized Officer
LTLK Defined Benefit Plan
By: /s/ Mark A. Smith
Authorized Officer
By: /s/ Mark A. Smith
Mark A. Smith
LoTayLingKyur Foundation
By: /s/ Mark A. Smith
Authorized Officer
Dublin Holding, Ltd.
By: /s/ Mark A. Smith
Authorized Officer
2
AGREEMENT
IT IS AGREED this 11 day of December, 1999, effective December 15, 1999, by
and between Jon Northrop ("JN") and Bion Environmental Technologies, Inc.
("BION") as follows:
WHEREAS BION is entering into an agreement ("D2 AGREEMENT") with D2 CO. ("D2")
concerning management, consulting and financing; and
WHEREAS D2 requires that BION and certain major shareholders and/or creditors
of BION, including JN, agree to certain conditions as partial consideration
for the D2 AGREEMENT with BION; and
WHEREAS JN considers the D2 AGREEMENT to be in the best interests of BION and
is willing to accept the following conditions;
NOW THEREFORE, IN CONSIDERATION of the mutual promises and covenants herein:
1) JN agrees to exchange all $2.25 Warrants (153,000 as of 11/30/99) for $2.25
options under the 1994 Incentive Plan and to exercise the options by canceling
existing long term promissory note ($319,084.93 as of 11/30/99) subsequent to
$3,000,000 net additional funding of BION, provided that the agreement at
paragraph 5) below allows resale of a number of shares equal to at least 50%
of the shares received by exercise during the following six months. Any
excess to the promissory note balance will result in additional shares being
issued as if the number of options were greater, or will be paid in cash at
closing, at the option of Bion.
2) JN agrees to recommend and support a registered exchange including BION
Class X Warrants and BION Class Z Warrants with tentative exchange ratios as
follows:
1 Class X Warrant = 0.3 registered BION common shares; and
1 Class Z Warrant = 0.15 registered BION common shares;
provided, however, that based on events subsequent hereto the proposed
exchange ratios may need to be adjusted to insure fairness to all holders or
BION may elect to not proceed with the proposed exchange on any terms.
3) BION agrees to indemnify and hold harmless JN from any and all liability
which may arise under Section 16b of the Securities & Exchange Act of 1934 as
a result of matching with the transactions by JN herein and/or transactions
made by JN in preparation for the transactions herein.
4) JN acknowledges that D2 AGREEMENT will entail material management
re-arrangement at all levels of BION, both immediately and over time, which
may alter the services required by BION from JN; and JN agrees to cooperate
with BION and D2 in all transitions.
5) JN agrees to execute, together with D2 and other parties, an agreement
which provides for reasonable limitations on resale by JN of BION securities
currently owned or subsequently acquired.
Bion Environmental Technologies, Inc. Jon Northrop
By: /s/ Mark A. Smith by:/s/ Jon Northrop
Authorized Officer Jon Northrop
AGREEMENT
IT IS AGREED this 14 day of December, 1999, effective December 15, 1999, by
and between Jere Northrop ("JN") and Bion Environmental Technologies, Inc.
("BION") as follows:
WHEREAS BION is entering into an agreement ("D2 AGREEMENT") with D2 CO. ("D2")
concerning management, consulting and financing; and
WHEREAS D2 requires that BION and certain major shareholders and/or creditors
of BION, including JN, agree to certain conditions as partial consideration
for the D2 AGREEMENT with BION; and
WHEREAS JN considers the D2 AGREEMENT to be in the best interests of BION and
is willing to accept the following conditions;
NOW THEREFORE, IN CONSIDERATION of the mutual promises and covenants herein:
1) JN agrees to exchange all $2.25 Warrants (103,000 as of 11/30/99) for $2.25
options under the 1994 Incentive Plan and to exercise the options by canceling
existing long term promissory note ($244,631.78 as of 11/30/99) subsequent to
$3,000,000 net additional funding of BION, provided that the agreement at
paragraph 5) below allows resale of a number of shares equal to at least 50%
of the shares received by exercise during the following six months. Any
excess to the promissory note balance will result in additional shares being
issued as if the number of options were greater, or will be paid in cash at
closing, at the option of Bion.
2) JN agrees to recommend and support a registered exchange including BION
Class X Warrants and BION Class Z Warrants with tentative exchange ratios as
follows:
1 Class X Warrant = 0.3 registered BION common shares; and
1 Class Z Warrant = 0.15 registered BION common shares;
provided, however, that based on events subsequent hereto the proposed
exchange ratios may need to be adjusted to insure fairness to all holders or
BION may elect to not proceed with the proposed exchange on any terms.
3) BION agrees to indemnify and hold harmless JN from any and all liability
which may arise under Section 16b of the Securities & Exchange Act of 1934 as
a result of matching with the transactions by JN herein and/or transactions
made by JN in preparation for the transactions herein.
4) JN acknowledges that D2 AGREEMENT will entail material management
re-arrangement at all levels of BION, both immediately and over time, which
may alter the services required by BION from JN; and JN agrees to cooperate
with BION and D2 in all transitions.
5) JN agrees to execute, together with D2 and other parties, an agreement
which provides for reasonable limitations on resale by JN of BION securities
currently owned or subsequently acquired.
Bion Environmental Technologies, Inc. Jere Northrop
By: /s/ Jon Northrop by: /s/ Jere Northrop
Authorized Officer Jere Northrop
AGREEMENT
IT IS AGREED this 13 day of December, 1999, effective December 15, 1999, by
and between Northrop Family Trust ("NFT") and Bion Environmental Technologies,
Inc. ("BION") as follows:
WHEREAS BION is entering into an agreement ("D2 AGREEMENT") with D2 CO. ("D2")
concerning management, consulting and financing; and
WHEREAS D2 requires that BION and certain major shareholders and/or creditors
of BION, including NFT, agree to certain conditions as partial consideration
for the D2 AGREEMENT with BION; and
WHEREAS NFT considers the D2 AGREEMENT to be in the best interests of BION and
is willing to accept the following conditions;
NOW THEREFORE, IN CONSIDERATION of the mutual promises and covenants herein:
1) NFT agrees to exercise all $2.25 Warrants (38,000 as of 11/30/99) by
canceling existing long term promissory note ($90,407.40 as of 11/30/99) in a
registered exchange offering subsequent not less than $3,000,000 net funding
of BION subsequent hereto ("FINANCING"). Any excess to the balance as of
11/30/99 will result in additional shares being issued, or will be paid in
cash at closing.
2) NFT agrees to recommend and support a registered exchange including BION
Class X Warrants and BION Class Z Warrants with tentative exchange ratios as
follows:
1 Class X Warrant = 0.3 registered BION common shares; and
1 Class Z Warrant = 0.15 registered BION common shares;
provided, however, that based on events subsequent hereto the proposed
exchange ratios may need to be adjusted to insure fairness to all holders or
BION may elect to not proceed with the proposed exchange on any terms.
Bion Environmental Technologies, Inc. Northrop Family Trust
By: /s/ Mark A. Smith by: /s/ Jon Northrop
Authorized Officer Authorized Officer
AGREEMENT
IT IS AGREED this 11 day of December, 1999, effective December 15, 1999, by
and between M. Duane Stutzman ("MDS") and Bion Environmental Technologies,
Inc. ("BION") as follows:
WHEREAS BION is entering into an agreement ("D2 AGREEMENT") with D2 CO. ("D2")
concerning management, consulting and financing; and
WHEREAS D2 requires that BION and certain major shareholders and/or creditors
of BION, including MDS, agree to certain conditions as partial consideration
for the D2 AGREEMENT with BION; and
WHEREAS MDS considers the D2 AGREEMENT to be in the best interests of BION and
is willing to accept the following conditions;
NOW THEREFORE, IN CONSIDERATION of the mutual promises and covenants herein:
1) MDS agrees to exchange all $2.25 Warrants (63,000 as of 11/30/99) for $2.25
options under the 1994 Incentive Plan and to exercise the options by canceling
existing long term promissory note ($148,906.30 as of 11/30/99) subsequent to
$3,000,000 net additional funding of BION. Any excess to the promissory note
balance will result in additional shares being issued as if the number of
options were greater, or will be paid in cash at closing at the option of
Bion.
2) MDS agrees to recommend and support a registered exchange including BION
Class X Warrants and BION Class Z Warrants with tentative exchange ratios as
follows:
1 Class X Warrant = 0.3 registered BION common shares; and
1 Class Z Warrant = 0.15 registered BION common shares;
provided, however, that based on events subsequent hereto the proposed
exchange ratios may need to be adjusted to insure fairness to all holders or
BION may elect to not proceed with the proposed exchange on any terms.
3) MDS acknowledges that D2 AGREEMENT will entail material management
re-arrangement at all levels of BION, both immediately and over time which may
alter the services required by BION from MDS; and MDS agrees to cooperate with
BION and D2 in all transitions.
Bion Environmental Technologies, Inc. M. Duane Stutzman
By: /s/ Mark A. Smith by: /s/ M. Duane Stutzman
Authorized Officer M. Duane Stutzman
AGREEMENT
IT IS AGREED this 14 day of December, 1999, effective December 15, 1999, by
and between Harley E. Northrop ("HEN") and Bion Environmental Technologies,
Inc. ("BION") as follows:
WHEREAS BION is entering into an agreement ("D2 AGREEMENT") with D2 CO. ("D2")
concerning management, consulting and financing; and
WHEREAS D2 requires that certain major shareholders and/or creditors of BION,
including HEN, agree to certain conditions as consideration for the D2
AGREEMENT with BION; and
WHEREAS HEN considers the D2 AGREEMENT to be in the best interests of BION and
is willing to accept the following conditions;
NOW THEREFORE, IN CONSIDERATION of the mutual promises and covenants herein:
1) HEN agrees to convert the total outstanding balance ($326,998.64 as of
11/30/99) of a long term note owned by HEN into shares at $1.80 per share in a
registered offering upon the conclusion of not less than $3,000,000 net
funding of BION subsequent hereto ("FINANCING").
2) HEN and BION agree to recommend and support, after or contemporaneously
with completion of FINANCING, a registered exchange of BION Class X and BION
Class Z Warrants with tentative exchange ratios as follows:
1 Class X Warrant = 0.3 registered BION common shares; and
1 Class Z Warrant = 0.15 registered BION common shares;
provided, however, that based on events subsequent hereto the proposed
exchange ratios may need to be adjusted to insure fairness to all holders or
BION may elect to not proceed with the proposed exchange on any terms.
Bion Environmental Technologies, Inc. Harley E. Northrop
By: /s/ Jon Northrop by: /s/ Harley E. Northrop
Authorized Officer Harley E. Northrop
AGREEMENT
IT IS AGREED this 11 day of December, 1999, effective December 15, 1999, by
and between Edward A. Hennig ("EAH") and Bion Environmental Technologies, Inc.
("BION") as follows:
WHEREAS BION is entering into an agreement ("D2 AGREEMENT") with D2 CO. ("D2")
concerning management, consulting and financing; and
WHEREAS D2 requires that BION and certain major shareholders and/or creditors
of BION, including EAH, agree to certain conditions as partial consideration
for the D2 AGREEMENT with BION; and
WHEREAS EAH considers the D2 AGREEMENT to be in the best interests of BION and
is willing to accept the following conditions;
NOW THEREFORE, IN CONSIDERATION of the mutual promises and covenants herein:
1) EAH agrees to exchange all $2.25 Warrants (56,000 as of 11/30/99) for $2.25
options under the 1994 Incentive Plan and to exercise the options by canceling
existing long term promissory note ($130,346.65 as of 11/30/99) subsequent to
$3,000,000 net additional funding of BION. Any excess to the promissory note
balance will result in additional shares being issued as if the number of
options were greater, or will be paid in cash at closing at the option of
Bion.
2) EAH agrees to recommend and support a registered exchange including BION
Class X Warrants and BION Class Z Warrants with tentative exchange ratios as
follows:
1 Class X Warrant = 0.3 registered BION common shares; and
1 Class Z Warrant = 0.15 registered BION common shares;
provided, however, that based on events subsequent hereto the proposed
exchange ratios may need to be adjusted to insure fairness to all holders or
BION may elect to not proceed with the proposed exchange on any terms.
3) EAH acknowledges that D2 AGREEMENT will entail material management
re-arrangement at all levels of BION, both immediately and over time which may
alter the services required by BION from EAH; and EAH agrees to cooperate with
BION and D2 in all transitions.
Bion Environmental Technologies, Inc. Edward A. Hennig
By: /s/ Mark A. Smith by: /s/ Edward A. Hennig
Authorized Officer Edward A. Hennig
AGREEMENT
IT IS AGREED this 14 day of December, 1999, effective December 15, 1999, by
and between William J. Crossetta, Jr. ("WJC") and Bion Environmental
Technologies, Inc. ("BION") as follows:
WHEREAS BION is entering into an agreement ("D2 AGREEMENT") with D2 CO. ("D2")
concerning management, consulting and financing; and
WHEREAS D2 requires that BION and certain major shareholders and/or creditors
of BION, including WJC, agree to certain conditions as partial consideration
for the D2 AGREEMENT with BION; and
WHEREAS WJC considers the D2 AGREEMENT to be in the best interests of BION and
is willing to accept the following conditions;
NOW THEREFORE, IN CONSIDERATION of the mutual promises and covenants herein:
1) WJC agrees to exchange all $2.25 Warrants (100,000 as of 11/30/99) for
$2.25 options under the 1994 Incentive Plan and to exercise the options by
canceling existing long term promissory note ($227,250.00 as of 11/30/99)
subsequent to $3,000,000 net additional funding of BION. Any excess to the
promissory note balance will result in additional shares being issued as if
the number of options were greater, or will be paid in cash at closing at the
option of Bion.
2) WJC agrees to recommend and support a registered exchange including BION
Class X Warrants and BION Class Z Warrants with tentative exchange ratios as
follows:
1 Class X Warrant = 0.3 registered BION common shares; and
1 Class Z Warrant = 0.15 registered BION common shares;
provided, however, that based on events subsequent hereto the proposed
exchange ratios may need to be adjusted to insure fairness to all holders or
BION may elect to not proceed with the proposed exchange on any terms.
Bion Environmental Technologies, Inc. William J. Crossetta, Jr.
By: /s/ Jon Northrop by: /s/ William J. Crossetta, Jr.
Authorized Officer William J. Crossetta, Jr.
AGREEMENT
IT IS AGREED this 11 day of December, 1999, effective December 15, 1999, by
and between S. Craig Scott ("SCS") and Bion Environmental Technologies, Inc.
("BION") as follows:
WHEREAS BION is entering into an agreement ("D2 AGREEMENT") with D2 CO. ("D2")
concerning management, consulting and financing; and
WHEREAS D2 requires that BION and certain major shareholders and/or creditors
of BION, including SCS, agree to certain conditions as partial consideration
for the D2 AGREEMENT with BION; and
WHEREAS SCS considers the D2 AGREEMENT to be in the best interests of BION and
is willing to accept the following conditions;
NOW THEREFORE, IN CONSIDERATION of the mutual promises and covenants herein:
1) SCS agrees to exchange all $2.25 Warrants (18,000 as of 11/30/99) for $2.25
options under the 1994 Incentive Plan and to exercise the options by canceling
existing long term promissory note ($40,949.23 as of 11/30/99) subsequent to
$3,000,000 net additional funding of BION. Any excess to the promissory note
balance will result in additional shares being issued as if the number of
options were greater, or will be paid in cash at closing at the option of
Bion.
2) SCS agrees to recommend and support a registered exchange including BION
Class X Warrants and BION Class Z Warrants with tentative exchange ratios as
follows:
1 Class X Warrant = 0.3 registered BION common shares; and
1 Class Z Warrant = 0.15 registered BION common shares;
provided, however, that based on events subsequent hereto the proposed
exchange ratios may need to be adjusted to insure fairness to all holders or
BION may elect to not proceed with the proposed exchange on any terms.
3) SCS acknowledges that D2 AGREEMENT will entail material management
re-arrangement at all levels of BION, both immediately and over time which may
alter the services required by BION from SCS; and SCS agrees to cooperate with
BION and D2 in all transitions.
Bion Environmental Technologies, Inc. S. Craig Scott
By: /s/ Mark A. Smith by: /s/ S. Craig Scott
Authorized Officer S. Craig Scott
CAPITAL STRUCTURE
Common Stock
- ------------
As of December 23, 1999 the Company had 11,779,670 (1) shares of Common Stock
issued and outstanding.
Options
- -------
Expiration
Directors
$1.55 11,112 Vested 08/19/02
$2.04 11,112 Vested 08/19/02
$2.91 11,112 Vested 11/17/03
$1.61 10,000 Vested 08/04/04
Total Directors 43,336
Employees (Vested) $2.25 474,000(2) Vested 12/21/01
$2.50 40,000(3) Vested 12/31/01
$2.50 19,445 Vested 08/01/00
$2.70 55,556 Vested 12/31/02
$3.04 1,112 Vested 01/28/01
$3.60 87,461 Vested 03/03/00-12/31/02
$3.72 1,112 Vested 08/31/00
$4.05 1,112 Vested 11/30/00
$5.40 33,200 Vested 03/03/00-12/31/01
$5.63 1,112 Vested 05/31/00
$7.20 38,523 Vested 12/31/01
$9.00 11,112 Vested 12/31/01
Total Employees (Vested) 763,745
Total Vested
(Directors and Employees) 807,081
(1) Includes 50,000 shares not vested at December 23, 1999.
(2) Exercisable January 1, 2000. Each holder has agreed to exercise these
options with outstanding promissory notes of Bion upon certain conditions.
See Exhibits 10.5 - 10.12 above.
(3) Holder has agreed to exercise using outstanding long term payable of Bion
upon certain conditions.
<PAGE>
Employees (Non-vested)
Vesting Dates Expiration
$2.50 340,000 01/01/00-06/30/02 12/31/01-06/30/03
$3.60 220,707 08/16/99-04/30/02 12/31/02
$5.40 16,134 02/03/00-09/01/00 12/31/02
$7.20 213,495 03/04/00-08/16/02 12/31/01-12/31/02
$13.50 176,988 04/30/00-04/30/02 12/31/02
Total Non-vested 967,324
Total Employees
and Directors 1,774,405
Warrants
- --------
As of December 23, 1999, the Company has the following warrants outstanding:
Warrant Shares Expiration Date Exercise Price
Class AA.01 15,000 (1) 5.40
Class D2P* 2,500,000 (2) 1.75
Class D2C** 2,500,000 (3) 2.50
Class G-5.1 1,115 (4) 2.70
Class G-5.2 919 (5) 2.70
Class G-6 3,148 (6) 5.40
Class G-8 27,779 (7) 5.40
Class H-1 11,112 (8) 4.50
Class H-2 16,112 (9) 2.70
Class H-9 11,112 (10) 9.00
Class H-9.1 11,112 (11) 11.25
Class H-9.2 11,112 (12) 7.20
Class H-9.3 11,112 (13) 13.50
Class H-9.4 11,112 (14) 5.40
Class H-10 18,519 (15) 3.60
Class H-16*** 38,000 (16) 2.25
Class I-1 4,167 (17) 5.40
Class X**** 1,116,012 (18) 8.00
Class Z***** 6,323,884 (19) 13.50
12,631,327 $ 1.75-13.50
* See Item 5, paragraph 1c) for a description of the transaction related to
this Class D2P Warrant and the actual warrant agreement at Exhibit 10.2 above.
** See Item 5, paragraph 1a) for a description of the transaction related to
this Class D2C Warrant and the actual warrant agreement at Exhibit 10.1 above.
Class D2C will be issued on 01/01/00.
*** Holders have agreed to exercise by cancellation of promissory notes of
Bion on certain conditions. See Exhibits 10.5 - 10.12 above.
**** Holders of 502,146 Class X Warrants have agreed to participate in a future
registered exchange offer subject to terms and conditions. See Exhibits 10.4
- - 10.12 above.
***** Holders of 5,937,823 Class Z Warrants have agreed to participate in a
future registered exchange offer subject to certain terms and conditions. See
Exhibits 10.4 - 10.12 above.
2
<PAGE>
(1) Class AA.01 warrants may be exercised to purchase 15,000 shares of common
stock for approximately a 28 month period beginning August 12, 19999 and
ending December 31, 2001.
(2) Class D2P warrants may be exercised to purchase 2,500,000 shares of common
stock for a 60 month period beginning December 23, 1999 and ending December
31, 2004.
(3) Class D2C warrants may be exercised to purchase 2,500,000 shares of common
stock for a 54 month period beginning January 1, 2000 and ending June 30,
2004.
(4) Class G-5.1 warrants may be exercised to purchase 1,115 shares of common
stock for a 60 month period beginning January 22, 1996 and ending January 21,
2001.
(5) Class G-5.2 warrants may be exercised to purchase 919 shares of common
stock for a 60 month period beginning September 13, 1996 and ending September
12, 2001.
(6) Class G-6 warrants may be exercised to purchase 3,148 shares of common
stock for a 60 month period beginning April 21, 1997 and ending April 20,
2002.
(7) Class G-8 warrants may be exercised to purchase 27,779 shares of common
stock for a 37 month period beginning June 5, 1997 and ending June 30, 2000.
(8) Class H-1 warrants may be exercised to purchase 11,112 shares of common
stock for a 60 month period beginning August 21, 1996 and ending August 20,
2001.
(9) Class H-2 warrants may be exercised to purchase 16,112 shares of common
stock for a 60 month period beginning August 21, 1996 and ending August 20,
2001.
(10) Class H-9 Warrants may be exercised to purchase 11,112 shares of common
stock for a 47 month period beginning February 1, 1997 and ending December 31,
2001.
(11) Class H-9.1 Warrants may be exercised to purchase 11,112 shares of common
stock for a 47 month period beginning February 1, 1997 and ending December 31,
2001.
(12) Class H-9.2 Warrants may be exercised to purchase 11,112 shares of common
stock for a 47 month period beginning February 1, 1997 and ending December 31,
2001.
(13) Class H-9.3 Warrants may be exercised to purchase 11,112 shares of common
stock for a 47 month period beginning February 1, 1997 and ending December 31,
2001.
(14) Class H-9.4 Warrants may be exercised to purchase 11,112 shares of common
stock for a 47 month period beginning February 1, 1997 and ending December 31,
2001.
(15) Class H-10 may be exercised to purchase 18,519 shares of common stock for
a 50 month period beginning November 2, 1998 and ending December 31, 2002.
(16) Class H16 may be exercised to purchase 38,000 shares of common stock for
a 24 month period beginning January 1, 2000 and ending December 31, 2002.
3
<PAGE>
<PAGE>
(17) Class I-1 warrants may be exercised to purchase 4,167 shares of common
stock for approximately a 42 month period beginning June 9, 1998 and ending
December 31, 2001.
(18) Class X may be exercised to purchase 1,116,012 shares of common stock for
a 24 month period beginning January 1, 2000 and ending December 31, 2001.
(19) Class Z warrants may be exercised to purchase 6,323,884 shares of common
stock for a 24 month period beginning January 1, 2000 and ending December 31,
2001.
At December 23, 1999, there were warrants exercisable to purchase 153,431
shares of common stock.
Convertible Notes
- -----------------
The following notes can be converted, in whole or in part, at the holders
option into shares of common stock at a price of $1.80 per share.
Note Amount Underlying Shares of Stock
(at 12/20/99)
*LoTayLingKyur, Inc. $1,147,681.72 637,601
*LTLK $278,116.13 154,509
Defined Benefit
Plan
*Dublin Holding, $1,650,000.00 916,667
Ltd.
*H. Northrop $328,986.47 182,771
TOTAL $3,404,784.32 1,891,488
*Holders of the notes have agreed to convert under certain conditions. See
Exhibits 10.4 and 10.9 above.
Long Term Notes
- ---------------
**The company has $1,208,955.80 in long term notes due on December 31, 2001.
**Holders have agreed to exercise outstanding options/warrants under certain
conditions in exchange for the notes. See Exhibits 10.5 - 10.12 above.
4
David Jan Mitchell
Since January 1991, Mr. Mitchell has been the President of Mitchell &
Co., Ltd., a merchant banking company he founded. Since March 1998, Mr.
Mitchell is also the Chairman of Direct Furniture and Empire Card MasterCard.
Mr. Mitchell is the immediate past president of AmeriCash, a national network
of ATM machines. From April 1988 to December 1990, Mr. Mitchell was a
Managing Principal and a Director of Rodman & Renshaw, Inc., a publicly held
investment banking and brokerage firm. From March 1985 to April 1988, he was
a Managing director of Laidlaw Adams & Peck Inc., also an investment banking
and brokerage firm. From April 1984 to March 1985, Mr. Mitchell was a Senior
Vice President of Cralin & Co., an investment banking and brokerage firm and,
from March 1981 to August 1984; he was a Vice President at Bear Sterns & Co.
From September 1979 to February 1981 he was employed at Oppenheimer & Co.
Mr. Mitchell currently serves as a Director of Kellstrom Industries,
Inc., a NASDQ listed company in the business of selling jet engine parts and
is also Director of Bogen Communications International, a NASDQ listed company
involved in digital voice processing peripheral products. Mr. Mitchell is
also a director of Moto Guzzi, a publicly traded Italian motor cycle
manufacturer. Mr. Mitchell serves as a Director of several private companies
among them is Madah-Com, an Israeli based company, involved in sound
transmission through spread spectrum frequency hopping, and SoftCom Inc., a
developer of interactive video technology to be used over the Internet.
Previously Mr. Mitchell served as a Director of Holmes Protection Group, a
public company, which was sold in February of 1998.
Mr. Mitchell has served as an Officer and/or Director of numerous
not-for-profit universities and foundations including the State of Israel
Bonds, Jerusalem College of Technology, Tel Aviv University, Bezalel Academy
of Arts and Design in Jerusalem, Hillel: The Foundation for Jewish Campus
Life, The American-Israel Friendship League, Love Heals, an AIDS education
organization and The American Friends of the Israel Museum. Mr. Mitchell also
serves as the Chairman of the Fiftieth Anniversary celebration for the Israel
Air Force.
<PAGE>
Salvatore J. Zizza
Salvatore J. Zizza has served as Chairman of the Board, President,
Treasurer and a director of IAC since its inception in November 1992. Mr.
Zizza has also been Chairman of the Board of Directors of The Lehigh Group
Inc. (f/k/a The LVI Group Inc.) since 1991 and was President of Chief
Financial Officer of The Lehigh Group Inc. from 1985 to 1991. The Lehigh
Group Inc., a New Your Stock Exchange listed company, is engaged, through its
subsidiary, in the distribution of electrical products, and from 1985 until
1991 was one of the largest interior construction and asbestos abatement firms
in the United States. Mr. Zizza was Chief Operating and Chief Financial
Officer of NICO, Inc. from 1978 until its acquisition in 1985 by Lehigh Valley
Industries, Inc. (currently The Lehigh Group Inc.) NICO Inc. was an interior
construction firm. Mr. Zizza is a director of The Gabelli Equity Trust, The
Gabelli Asset Fund, The Gabelli Growth Fund and The Gabelli Convertible
Securities Fund. In accordance with the terms of Mr. Zizza's employment by
The Lehigh Group Inc., Mr. Zizza may introduce potential Target Businesses
identified directly by him to IAC, but only after such potential Target
Businesses have been first presented to The Lehigh Group Inc. and its
subsidiaries and determined by them to be inappropriate. Mr. Zizza's
employment agreement with The Lehigh Group Inc. further provides that Mr.
Zizza may consider and approve in the ordinary course of business of IAC
investment and business opportunities introduces to IAC by Gruntal or others
and shall not be under any obligation to introduce such investment and
business opportunities to The Lehigh Group Inc. and its subsidiaries.
