August 24, 2000
Investor Name
Investor Address
City, State Zip
Dear _________________,
Bion Environmental Technologies, Inc. (the "Company") is proposing to
amend Section 2(a) of the Bion Environmental Technologies, Inc. Convertible
Bridge Notes issued pursuant to the Private Placement Memorandum dated
December 29, 1999 (the "Notes"), as well as the introductory paragraph of the
Bion Environmental Technologies, Inc. Bridge Warrants (the "Warrants") issued
as part of the same offering. According to our records, you hold such Notes
and Warrants as set forth on the attached Exhibit A. Capitalized terms
utilized herein and not otherwise defined shall have the meanings given to
them in the Notes.
Section 2(a) of the Notes currently states as follows:
(a) Prepayment or Conversion In the event the Company shall
issue any capital stock (or instrument convertible into capital stock)
("Stock") of the Company subsequent to the issuance of at least $1,000,000 of
Convertible Bridge Notes pursuant to the offering in which this Note was
issued, for an aggregate purchase price of at least $5,000,000 (exclusive of
the sale of the Notes), pursuant to a public or private offering (an
"Offering"), then, at the Company's option, either (i) the Company shall
prepay the Notes, without penalty or premium, no later than 30 days following
the close of the Offering or (ii) the Notes shall be converted ("Conversion")
into such number of shares of the Stock of the Company as is equal to the
Conversion Amount (as defined below) divided by the then current Conversion
Price (as defined below). The Conversion Amount shall be the aggregate
principal value of the Notes held by such Holder plus any accrued and unpaid
interest. The Conversion Price shall be the price paid for one share of Stock
issued in the Offering, subject to adjustment as provided below.
This paragraph will be amended to read as follows:
(a) Prepayment or Conversion (i) In the event the Company
shall issue any capital stock (or instrument convertible into capital stock)
("Stock") of the Company subsequent to the issuance of at least $1,000,000 of
Convertible Bridge Notes pursuant to the offering in which this Note was
issued, for an aggregate purchase price of at least $5,000,000 (exclusive of
the sale of the Notes), pursuant to a public or private offering (an
"Offering"), then the Notes shall be converted ("Conversion") into such number
of shares of the Stock of the Company as is equal to the Conversion Amount (as
defined below) divided by the then current Conversion Price (as defined
below). The Conversion Amount shall be the aggregate principal value of the
Notes held by such Holder plus any accrued and unpaid interest. Subject to
the limitation that in no event shall the Conversion Price be greater than
$5.00 per share (irrespective of the price paid for one share of Stock in the
Offering), the Conversion Price shall be the price paid for one share of Stock
issued in the Offering, subject to adjustment as provided below.
<PAGE>
(ii) Should this Note not be converted into shares of Stock of
the Company pursuant to this Section 2(a) prior to one year from the date of
issuance of this Note, then the Note shall, at that time, be automatically
converted ("Conversion") on the date that occurs one year after the date of
issuance of this Note into such number of shares of Common Stock of the
Company as is equal to the Conversion Amount (as defined above) divided by the
then current Conversion Price (as defined below). Subject to the limitation
that in no event shall the Conversion Price be greater than $5.00 per share
(irrespective of the market price of the Company's Common Stock at the time of
conversion), the Conversion Price shall be an amount equal to the Market Price
of the Company's Common Stock. For the purposes hereof, Market Price shall
mean an amount not in excess of a maximum of $5 per share that is equal to the
average of the closing bid prices of the Company's Common Stock for the 20
business days immediately preceding the date of conversion as quoted for such
security on any licensed securities exchange or, if such security is not then
quoted on any licensed securities exchange, on the NASD electronic bulletin
board. In the event such calculation cannot be made and the Company and a
majority of the Holders are unable to agree upon the fair market value of the
Common Stock, then such dispute shall be resolved by an investment banking
firm mutually acceptable to the Company and a majority of the Holders, and any
fees and costs associated therewith shall be paid by the Company; provided,
however, that in no event shall the Conversion Price be greater than $5 per
share.
The introductory paragraph of the Warrants states that the Warrant
(exercise) Price of such Warrants is $2.375. As an inducement to Holders to
agree to the above-described amendment to the Notes, the Company agrees to
amend this paragraph in the Warrant of each Holder whose Note is amended as
set forth above to provide that the Warrant Price shall be $2.00 rather than
$2.375.
In order to amend your Warrant and Note, the Company must receive your
written approval of such amendments. Therefore, please sign a copy of this
letter in the space provided below and return it to the Company no later than
September 15, 2000. The Note and Warrant of every Holder whose consent to the
amendments is received by September 15, 2000 will be deemed amended. Any
consents received after that date will not be accepted. However, in
accordance with Section 10(a) of the Notes, should a majority of the Holders
consent to the amendments on or prior to September 15, 2000, then the Notes of
all Holders will be deemed amended.
It is important for you to note that you will be required to pay income
tax on the difference, if any, between the new exercise price of the Warrants
and the market price of the underlying shares on the date of the exchange to
the extent that the market price is greater than the exercise price.
If you have any questions, please contact me. Copies of the Company's
latest Form 10-KSB, Form 10-QSB and Form 8-K are available at the office of
the Company.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
By: ________________________________
Mark A. Smith, Chairman
<PAGE>
I have reviewed the proposed amendments to the Notes and Warrants and
agree to such amendments to my Notes and Warrants.
______________________________ _______________
date
____________________________________________
Please print or type name of signatory above
