EXHIBIT 10.31
▇.▇. ▇▇▇▇▇▇▇▇▇▇ & CO. INC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
November 9, 2006
Bion Environmental Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, President
Re: Engagement Letter - Placement Agent, Financial Advisor and Arranger
This letter confirms the agreement between ▇.▇. ▇▇▇▇▇▇▇▇▇▇ & Co., Inc.
("RWP" or "we" or "us") and Bion Environmental Technologies, Inc. (the
"Company" or "you" or "Bion") as follows:
1. Engagement. The Company hereby engages RWP to act as its sole and
exclusive (except as provided in Section 11 hereof) placement agent,
financial advisor and arranger in connection with: (i) proposed offerings by
private placements ("Placements") of equity, equity-linked or debt securities
(and equity-kickers, if any) issued by the Company or any of its subsidiaries
or affiliates (including any special purpose vehicles (each such entity, an
"SPV") created for the purpose of holding and/or financing projects,
including, without limitation, promissory notes issued by an SPV which are
exchangeable for shares of the Company's common stock ("Common Stock") or
other equity securities of the Company, and shares of preferred stock of the
Company or an SPV which provide for pay-in-kind dividends and are convertible
into or exchangeable for shares of Common Stock (collectively, the
"Securities"), and (ii) subject to the successful completion of the Initial
Placements (as hereinafter defined), Project (as hereinafter defined)
financing facilities, including, without limitation, the entering into by the
Company or any of its subsidiaries or affiliates or SPVs of project finance
credit facilities or other financing arrangements for the purpose of
providing project financing (collectively, "Facilities") for Bion integrated
projects ("Project" or "Projects").
We accept this engagement ("Engagement") upon the terms and conditions
set forth in this engagement letter ("Agreement"). During the term of our
Engagement, we will, as appropriate to the Engagement:
* consult with you in planning and implementing Placements, and the
negotiations for, the entering into of and arranging Facilities
(and/or commitments therefor);
* review the business and operations of the Company and its historical
and projected financial condition;
* assist you in preparing and distributing relevant documents we
mutually agree are beneficial or necessary to the consummation of
the Placements or the entering into of Facilities (and/or commitments
therefor), including documents describing the Company, the
Securities, and the terms of the Placements and/or the Facilities
(collectively, the "Offering Materials");
Bion Environmental Technologies, Inc.
November 9, 2006
Page 2
* assist you in preparing for due diligence conducted by prospective
purchasers of the Securities and/or lenders or agents (collectively,
"Lenders") for the Facilities;
* assist you in identifying and contacting prospective purchasers of
the Securities and Lenders for Facilities;
* consult with you as to the structure and timing of the Placements
and for the Facilities;
* assist you in negotiating definitive documentation with prospective
purchasers of the Securities and with prospective Lenders for the
Facilities and, if requested by you, participate in such
negotiations; and
* render such other financial advisory and investment banking services
as may from time to time be agreed upon by RWP and the Company.
You acknowledge and agree that our Engagement pursuant to this Agreement
does not constitute an agreement or a commitment, express or implied, by us
or any of our affiliates to underwrite, purchase or place any Securities or
otherwise provide any financing, or to provide loans (or commitments
therefor) or serve as an agent under any Facility, nor an agreement by you to
issue and sell any Securities. The Placements and services rendered in
connection with the Facilities (and any commitments therefor) will be made by
RWP, if at all, on a "best efforts" basis.
You further acknowledge and agree that our services hereunder shall be
subject to, among other things, satisfactory completion of due diligence by
RWP, market conditions, the absence of adverse changes to the Company's
business or financial condition and other conditions that RWP may deem
appropriate for placements and engagements of such nature. During the term of
this Engagement, you will not make any commitment with any other person to
sell Securities or enter into Facilities (or commitments therefor) without
our prior written consent, except as permitted hereunder.
2. Term.
(a) Our engagement for one or more Placements shall automatically
expire one hundred twenty (120) days after the date of this Agreement, unless
extended in writing by RWP and the Company (the "Initial Term"); provided,
however, that upon the successful completion of not less than U.S. $10
million in aggregate gross proceeds of Placements on terms and conditions
acceptable to the Company (as set forth at Annex B hereto unless agreed
otherwise in writing) during the Initial Term (the "Initial Placements"), the
expiration date of the term of our engagement for Placements of Securities
shall be extended to the five (5) year anniversary of the date of this
Agreement, unless extended in writing by RWP and the Company. From and after
the date of the successful completion of the Initial Placements, you or we
may terminate our engagement under this Agreement, with or without cause,
upon sixty (60) days' written notice to the other party; provided, however,
Bion Environmental Technologies, Inc.
November 9, 2006
Page 3
no such notice may be given by you prior to one hundred eighty (180) days
after the closing of the Initial Placements; further provided, however, that
the Company shall not exercise this right to terminate RWP's engagement under
this Agreement so long as RWP has obtained firm commitments from qualified
investors to fund each Facility within the period (from thirty (30) to ninety
(90) days, said period being agreed upon by Bion and RWP) from the date on
which Bion presents RWP with a Project and seeks a financing Facility for
such Project and RWP agrees to begin marketing the Project financing. If RWP
does not agree to begin marketing the Project financing, RWP must specify the
reasons that the marketing can not commence and communicate such reasons to
the Company in writing within five (5) business days.
(b) Our engagement and right to serve as the exclusive financial
advisor, arranger and placement agent for Facilities (or commitments
therefor) shall commence upon the successful completion of the Initial
Placements and shall automatically expire upon the earlier of (i) five (5)
years from the date of this Agreement or (ii) the consummation of at least
fifteen (15) Facilities with aggregate commitments under all such facilities
of not less than U.S. $2,000,000,000, in each case unless extended in writing
by RWP and the Company. You or we may terminate our engagement under this
Agreement, with or without cause, upon ten (10) days' written notice to the
other party; provided, however, no such notice may be given by you prior to
one hundred eighty (180) after the closing of the Initial Placements, further
provided, however, that the Company shall not exercise this right to
terminate RWP's engagement under this Agreement so long as RWP has obtained
firm commitments from qualified investors to fund each Facility within the
period (from thirty (30) to ninety (90) days, said period being agreed upon
by ▇▇▇▇ and RWP) from the date on which Bion presents RWP with a Project and
seeks a financing Facility for such Project and RWP agrees to begin marketing
the Project financing. If RWP does not agree to begin marketing the Project
financing, RWP must specify the reasons that the marketing can not commence
and communicate such reasons to the Company in writing within five (5)
business days.
(c) Upon termination or expiration, this Agreement shall have no
further force or effect, except that the provisions concerning the
obligations provided in Annex A, the Company's obligation to pay RWP fees and
expenses as described in this Agreement, the confidentiality provisions of
Section 8, the status of RWP as an independent contractor, your
representations, warranties and agreements, the limitation on to whom RWP
shall owe any duties, governing law, choice of forum, successors and assigns,
and waiver of the right to trial by jury shall survive any such termination
or expiration of this Agreement. A "Tail Period" shall extend for eighteen
(18) months from the date of termination pursuant to this Section 2 or
automatic expiration of this Agreement; provided, however, to the extent that
Bion (without the services of another broker or agent) completes a Project
financing or Facility during the Tail Period, RWP shall receive a sum equal
to twenty percent (20%) of the fees which RWP would have received had RWP
provided the Facility for the Project pursuant to this Agreement.
3. Fees. For our services under this Agreement, you agree to pay us the
following fees:
Bion Environmental Technologies, Inc.
November 9, 2006
Page 4
* Placement Fee. A placement fee payable at the closing of the Initial
Placements and subsequent Placements consisting of: (i) seven
percent (7%) of the gross proceeds of all Securities sold in a
Placement (including sales to any entity affiliated or associated
with RWP) with: (A) fifty percent (50%) of such fee shall be
payable in cash and (B) fifty percent (50%) of such fee shall be
payable in shares of Common Stock, which stock shall be valued at
the implied price per share of Common Stock sold in the Placement
(assuming the conversion, exercise and/or exchange of all
Convertible Securities (as hereinafter defined) into the maximum
number of shares of Common Stock into which the Securities shall be
convertible); provided, however, that in the event that the
Securities issued in the Placement consist solely of Securities
which do not include Common Stock or Convertible Securities, the
portion of the placement fee due under this clause (i)(B) shall be
payable, at the option of RWP, in (x) cash or (y) in shares of
Common Stock at a price per share equal to the fair market value
thereof as reasonably determined in good faith by the board of
directors of the Company; and (ii) warrants to purchase up to (A)
five percent (5%) of the Securities sold in the Placement, if the
Securities are Common Stock, and/or (B) that number of shares of
Common Stock equal to five percent (5%) of the number of shares
of Common Stock into which the Securities shall be convertible,
exercisable and/or exchangeable into or for, if the Securities
are Convertible Securities. Such warrants shall have a five (5)
year term, an exercise price equal to one hundred twenty percent
(120%) of the price per share of the Securities sold in the
Placement, cashless exercise provisions and otherwise be of like
tenor as the other warrants, if any, issued in such Placement.
As used in this Agreement, the term "Convertible Securities" means
Securities, other than Common Stock, that are convertible,
exercisable or exchangeable into or for shares of Common Stock,
including, without limitation, warrants, rights, options,
convertible preferred stock, convertible notes, exchangeable
preferred stock and exchangeable notes, whether or not such
Securities are issued by the Company or any subsidiary, affiliate or
SPV of the Company.
You will also pay us the same commission (cash, shares of Common
Stock and warrants) on any financing by you or any of your
affiliates involving the issuance of Securities consummated pursuant
to any agreement, commitment or understanding which is entered into
within the Tail Period; provided, however, in the case of
termination pursuant to Section 2 hereof, such commission only
extends to Securities sold to investors with whom you have had
contact through introduction by RWP prior to such termination;
further provided, however, to the extent that Bion (without the
services of another broker or agent) completes a Project financing
or Facility during the Tail Period, RWP shall receive a sum equal to
twenty percent (20%) of the fees which RWP would have received had
RWP provided the Facility for the Project pursuant to this
Agreement. We will deliver to you, reasonably promptly following the
date of termination, a schedule listing the investors with whom you
or we had contact prior to termination.
Bion Environmental Technologies, Inc.
November 9, 2006
Page 5
* Placement Expenses. Upon receipt of an invoice, you agree to
promptly reimburse us for our reasonable out-of-pocket expenses
incurred in preparing to market and marketing the Securities,
including, but not limited to, travel, reasonable fees and
disbursements of our legal counsel, and printing and distribution of
Offering Materials, whether or not a closing occurs, but such
reimbursement will not exceed $50,000 in the aggregate in connection
with a Placement, without your approval which approval shall not be
unreasonably withheld or delayed.
* Facility Fees. The fees to be charged in connection with a Facility
shall be paid in cash, stock warrants or a combination thereof on
the closing date of a Facility and shall be deemed to be earned upon
the closing of such Facility (or any other project financing
facility or arrangements entered into between a Lender (or any
affiliate thereof) within six (6) months after the termination of
our engagement pursuant to Section 2(b) hereof), in an amount to be
reasonably agreed to by the parties prior to the entering into of
any such Facility (or commitment therefor), which amount shall
reflect the then-current market rate for performing services of such
type and tenor.
* Facility Expenses. The expenses incurred in connection with a
Facility shall be in accord, and paid in a time and manner
consistent with, the then-current market provisions for performing
services of such type and tenor.
4. Indemnification and Contribution. The Company and RWP agree to the
provisions with respect to the Company's indemnity of RWP and RWP's indemnity
of the Company and other matters set forth on Annex A attached hereto, the
terms of which are hereby incorporated into this Agreement by reference in
their entirety and made a part of this Agreement.
5. Representations, Warranties and Agreements of the Company. You
represent and warrant to, and agree with us, that:
(a) The Company has not taken, and will not take, any action,
directly or indirectly, that may cause a Placement to fail to be entitled to
an exemption from registration under the U.S. federal securities laws, or
applicable state securities or "blue sky" laws. The Company shall be
responsible for any costs and expenses associated with filings, applications
or registrations with any governmental or regulatory body, including, without
limitation, those associated with any sales pursuant to Regulation D under
the Securities Act of 1933, as amended (the "1933 Act"), and "blue sky" laws;
(b) The Company hereby warrants that the Offering Materials, and
any other information relating to the Company or a Placement, will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements contained therein, in the light of
circumstances under which they were made, not misleading. The Company agrees
to provide RWP with (i) prompt notice of any material development affecting
the Company or the occurrence of any event or other change known to the
Bion Environmental Technologies, Inc.
November 9, 2006
Page 6
Company that could result in the Offering Materials containing an untrue
statement of a material fact or omitting to state any material fact necessary
to make the statements contained therein, in the light of the circumstances
under which they were made, not misleading, (ii) copies of any financial
reports as soon as reasonably practicable and (iii) such other information
concerning the business and financial condition of the Company as RWP may
from time to time reasonably request. RWP will have the right to approve the
Offering Materials and other written communications furnished by or on behalf
of the Company in connection with a Placement and/or the Facilities. The
Company will comply with Securities and Exchange Commission Regulation FD;
(c) The Company acknowledges that RWP will be using information
provided by others, including, without limitation, information provided by or
on behalf of the Company, and that RWP does not assume responsibility for and
may rely, without independent verification, on the accuracy and completeness
of any such information; and
(d) At each closing, you will permit us to rely on the
representations and warranties of the Company. The Company will cause to be
furnished to RWP and the purchasers of the Securities, on each closing date
of a Placement, copies of such opinions of counsel and such other documents,
letters, certificates and opinions as RWP or the purchasers may reasonably
request in form and substance reasonably satisfactory to RWP and its counsel
and the purchasers and their counsel. To the extent the Company's counsel
shall deliver a legal opinion in connection with a Placement to the
purchasers of the Securities, such opinion shall also be addressed to RWP and
be in form and substance satisfactory to the purchasers of the Securities and
RWP. Such opinion of counsel will be modified as appropriate to also address
any warrants or other securities of the Company issued to us in connection
with the Placement and the shares of Common Stock issuable upon exercise of
such warrants.
6. Compliance with Law. It is understood that the Company intends the
Placements to take the form of private placements exempt from the
registration requirements of the 1933 Act. If a Placement takes such form,
the Company shall enter into agreements with the purchasers of the Securities
(the "Transaction Agreements") whereby (a) the Company prepares and delivers
a private placement memorandum which contains, among other things, a
description of the applicable Placement and the Securities offered therein,
all of the material information about the Company and its business, and all
of the financial statements and other financial information that, in each
case, would be required to be included in a registration statement filed with
the U.S. Securities and Exchange Commission ("SEC") for the registration of
such Securities on Form S 1, (b) the Company will file a Form D (pursuant to
Regulation D promulgated under the 1933 Act) with the SEC and in each state
where Securities are being placed with respect to each Placement and (c) the
Company will promptly notify the OTC Bulletin Board (or any stock exchange or
market on which the Common Stock is then quoted if the Common Stock is not
then quoted on the OTC Bulletin Board) (the "Quotation Market") that it
intends to offer and sell the Securities as contemplated in accordance with
the rules and regulations of the Quotation Market and the Company's (or the
market-maker's for the Common Stock, as the case may be) listing agreement
with that organization.
Bion Environmental Technologies, Inc.
November 9, 2006
Page 7
The Transaction Agreements shall (i) state, in substance, that the
Securities have not been registered with the SEC and may not be offered, sold
or otherwise transferred or disposed of except pursuant to an effective
registration statement under the 1933 Act and applicable state securities
laws or pursuant to an applicable exemption from the registration
requirements of the 1933 Act and such laws, and (ii) provide that any
certificates representing or evidencing Securities issued by the Company in a
Placement shall include a legend substantially in the form set forth below:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."
7. Registration Rights. The Company agrees to provide the registration
rights described below to RWP and investors in the Placements (and their
respective successors and permitted transferees), which will be on customary
terms and conditions for transactions of the types described below and will
include, among other things, indemnification provisions for the benefit of
RWP and the holders of Registrable Securities (as hereinafter defined) and
any agents, underwriters, managers or arrangers participating in such
registrations.
(a) Certain Definitions. For the purposes of this Section 7, (i)
"Effective Time" shall mean such time, if any, on or after the date hereof
that the Company shall become subject to the reporting requirements of
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as
amended; and (ii) "Registrable Securities" shall mean each share of Common
Stock issued to RWP or any investor in a Placement in connection herewith
(including each share of Common Stock to be issued upon the conversion,
exchange or exercise of any Convertible Security) until the two (2) year
anniversary of the issuance of such share of Common Stock (or the Security
convertible, exchangeable or exercisable into or for such share, as
applicable), which Security constitutes a "restricted security" within the
meaning of Rule 144(a)(3)(i) promulgated under the 1933 Act.
(b) Demand Registrations. At any time following the 180th day
after the Effective Time (i) the holders of a majority of Registrable
Securities may request one registration under the 1933 Act during any
consecutive twelve (12) month period (a "Demand Registration") of all or part
of their Registrable Securities on Form S-3 (except if the Company is not
then eligible to use Form S-3, then such registration shall be on Form S-1 or
Form SB-2 or on another appropriate form in accordance herewith permitting
registration of the Securities for resale by such holders in the manner or
manners designated by them), in which the Company will pay all registration
expenses. The Company will not be obligated to effect any Demand Registration
within six (6) months after the effective date of a registration in which the
holders of Registrable Securities were given piggyback rights pursuant to
Section 7(c) or within twelve (12) months after the closing a prior Demand
Registration. The Company will be required to file a registration within
sixty (60) days after a request for a Demand Registration and shall use
Bion Environmental Technologies, Inc.
November 9, 2006
Page 8
commercially reasonable efforts to have such registration declared effective
as soon as practicable thereafter; provided that the Company may postpone for
up to a total of sixty (60) days the filing or the effectiveness of a
registration statement for a Demand Registration if such Demand Registration
would reasonably be expected to have an adverse effect on any proposal or
plan by the Company to engage in any acquisition of assets (other than in the
ordinary course of business) or any merger, consolidation, tender offer or
other transaction or any material corporate development, including without
limitation, a Facility financing hereunder; provided, further, that in such
event, the holders of Registrable Securities initially requesting such Demand
Registration will be entitled to withdraw such request and, if such request
is withdrawn, such Demand Registration will not count as the one permitted
Demand Registration within the twelve (12) month period applicable thereto.
(c) Piggyback Registrations. If at any time following the
Effective Time the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities, including, without limitation, in connection with the
registration of the Company's securities in a subsequent financing, other
than on Form S-4 or Form S-8 (each as promulgated under the 1933 Act) or
their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans, then the Company shall include in such registration statement all of
the Registrable Securities requested to be so included by the holders
thereof, subject to the written approval of the underwriter, if any, for such
offering, with respect to any portion of the Registrable Securities to be
included in such registration which would exceed ten percent (10%) of the
total number shares of Common Stock to be included in such registration;
provided, however, that (i) if, at any time after giving written notice of is
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company determines for any reason not to proceed with such registration, the
Company shall be relieved of its obligation to register any Registrable
Securities in connection with such registration, and (ii) in case of a
determination by the Company to delay registration of its securities, the
Company will be permitted to delay the registration of Registrable Securities
for the same period as the delay in registering such other securities.
8. Confidentiality. We agree to use all material non-public information
provided to us by you or on your behalf solely for the purpose of providing
the services that are the subject of this Agreement and, except as otherwise
required by law, regulation or legal process, to treat all such information
confidentially and not disclose such information to any third party without
the Company's consent, other than to our affiliates and our respective
employees, legal counsel, independent auditors and other experts or agents
who need to know such information in connection with the Placement, the
Facilities or any other services provided by us or our affiliates to you and
your affiliates. We accept responsibility for compliance with the provisions
of this paragraph by the persons referred to above. This undertaking by us
will automatically terminate one year following the earlier of completion of
the Placement or termination of our engagement hereunder.
Bion Environmental Technologies, Inc.
November 9, 2006
Page 9
9. Disclosure. The Company agrees that any information or advice
rendered by RWP or its representatives in connection with this Agreement is
solely for the confidential use of the Company and, except as otherwise
required by applicable law, regulation or legal process, the Company will not
and will not permit any third party to disclose, reproduce, disseminate,
quote or otherwise refer to such advice or information in any manner without
RWP's prior written consent, which consent shall not be unreasonably
withheld.
10. No Third Party Beneficiaries. The Company acknowledges and agrees
that RWP has been retained to act as exclusive placement agent and financial
advisor to the Company, and not as an advisor to or agent of any other
person, and that the Company's engagement of RWP is not intended to confer
rights upon any person not a party to this Agreement (including shareholders,
employees or creditors of the Company) as against RWP or its affiliates, or
their respective directors, officers, employees or agents. Accordingly, no
other person (other than as set forth in Annex A attached hereto) will
acquire or have any rights by virtue of this Agreement.
11. Exclusivity. During the Term of this Agreement, the Company will not
permit any stockholder, employee, affiliate, advisor or representative of the
Company to engage any other person to perform any financial or similar
advisory services for the Company with respect to any potential Placement
and/or Facility. If the Company or any of their respective stockholders,
employees, affiliates or other advisors or representatives are contacted by
any person concerning a potential Placement and/or Facility, the Company will
inform RWP of such inquiry, and all relevant details thereof.
Notwithstanding the foregoing, the Company and RWP consent to the
participation of Ardour Capital Investments, LLC ("Ardour") as a co-placement
agent and/or participating dealer with respect to the Initial Placements and
subsequent Placements of equity securities (including Convertible
Securities); provided, however, that RWP shall serve as the lead and/or
managing agent for each such Placement; further provided, however, if Ardour
so participates in a Placement, Ardour will be entitled to not less than
fifty percent (50%) of the Placement Fees in connection with Securities sold
or placed by Ardour in each such Placement; further provided, however, ▇▇▇▇▇▇
will not have the right to participate as a placement agent in connection
with any Facility or any Placement of non-convertible debt securities without
the written consent of RWP; and provided, further, however, that as a
condition to ▇▇▇▇▇▇'s engagement with respect to any Placement of Securities,
Ardour must (i) be a broker dealer registered with the SEC, (ii) agree in
writing to contribute its proportionate share of any contribution requirement
RWP may have with respect to such Placement and (iii) enter into a mutually
acceptable agreement with RWP with respect to such Placement.
12. Independent Contractor. RWP shall act as an independent contractor
under this Agreement, and any duties arising out of its engagement shall be
owed solely to the Company. You acknowledge that nothing in this Agreement is
intended to create duties to you or your creditors or security holders beyond
those expressly provided for in this Agreement, and we and you specifically
disclaim the creation of any fiduciary relationship between, or the
imposition of any fiduciary duties on, either party.
Bion Environmental Technologies, Inc.
November 9, 2006
Page 10
13. Participation in Future Offerings. If, during the period RWP is
retained by the Company, the Company proposes to effect (as to itself or any
of its subsidiaries or SPVs) any public offerings or private placements
(including Rule 144A offerings or private placement not already the subject
of this Agreement) of debt securities (other than Convertible Securities) or
the refinancing of any Facility, the Company agrees to offer to engage RWP as
the Company's (or such subsidiary's or SPV's, as the case may be) lead
underwriter, initial purchaser, financial advisor, book-running manager or
placement agent, as the case may be, in connection with such transaction(s)
on terms and conditions customary to RWP for similar transactions; provided,
however, that RWP may decline such engagement in its sole and absolute
discretion at such time which decision shall be communicated to the Company
within five (5) business days after such offer. If we agree to act in such
capacity, the terms of such engagements shall be set forth in separate
agreements and may be subject to, among other things, satisfactory completion
of due diligence by RWP, market conditions, the absence of adverse changes to
the Company's business or financial condition and any other conditions that
RWP may deem appropriate for transactions of such nature. This Agreement is
neither an expressed nor implied commitment by us to act in any capacity in
any such transaction or to purchase any securities in connection therewith,
which commitment will only be set forth in a separate agreement.
14. RWP Affiliates; Conflicts; Exculpation. At RWP's discretion, any
right set forth herein may be exercised, and any services to be provided by
RWP may be provided, by an affiliate of RWP. The Company hereby agrees that
RWP and/or any affiliate or employee of RWP will have the right, but not the
obligation, to purchase Securities or become a Lender for its own account and
that any such purchase or loan will not constitute a conflict of interest for
purposes of RWP's engagement hereunder; provided, however, that the right of
such person to participate in a Facility as a Lender is subject to such
person's ability to satisfy the reasonable eligibility requirements for a
Lender under such Facility. You acknowledge that we are a securities firm
engaged in securities trading and brokerage activities and providing
investment banking and financial advisory services. In the ordinary course of
business, we and our affiliates may at any time hold long or short positions,
and may trade or otherwise effect transactions, for our own account or the
accounts of customers, in your debt or equity securities, or the debt or
equity securities of your affiliates or other entities that may be involved
in the transactions contemplated by this Agreement.
In addition, we and our affiliates may from time to time perform various
investment banking and financial advisory services for other clients and
customers who may have conflicting interests with respect to you, the
Placement or the Facilities. You also acknowledge that we and our affiliates
have no obligation to use in connection with this engagement or to furnish
you confidential information obtained from other companies.
Furthermore, you acknowledge we may have fiduciary or other
relationships whereby we or our affiliates may exercise voting power over
securities of various persons, which securities may from time to time include
securities of the Company or of potential investors or others with interests
in respect of the Placement or the Facilities. You acknowledge that we or
such affiliates may exercise such powers and otherwise perform our functions
in connection with such fiduciary or other relationships without regard to
our relationship with you hereunder.
Bion Environmental Technologies, Inc.
November 9, 2006
Page 11
You acknowledge that we are not an advisor as to legal, tax, accounting
or regulatory matters in any jurisdiction. You should consult with your own
advisors concerning such matters and are responsible for making your own
independent investigation and appraisal of the transactions contemplated by
this Agreement, and we have no responsibility or liability to you with
respect to such matters.
15. Publicity. The Company acknowledges that upon completion of the
Placement or the entering into a binding agreement with respect to the
Facilities, RWP may, at its own expense, place an announcement in such
newspapers and periodicals as it may choose, stating that RWP has acted as
exclusive placement agent to the Company in connection with such Placement or
Facility.
16. Amendments and Successors. This Agreement may not be waived,
amended, modified or assigned, in any way, in whole or in part, including by
operation of law, without the prior written consent of the Company and RWP.
The provisions of this Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the Company and RWP. The invalidity or
unenforceability of any provision of this Agreement will not affect the
validity or enforceability of any other provisions of this Agreement, which
will remain in full force and effect.
17. Entire Agreement; Modifications. This Agreement constitutes the
entire agreement between RWP and the Company, and supersedes any prior
agreements and understandings, with respect to the subject matter of this
Agreement. No provision of this Agreement may be changed or terminated except
by a writing signed by the party or parties to be charged therewith.
18. Counterparts. This Agreement may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy or by
e-mail of a Portable Document Format (PDF) file shall be effective as
delivery of a manually executed counterpart of this Agreement.
19. No Brokers. The Company acknowledges and agrees that there are no
brokers, agents, representatives or other parties that have an interest in
compensation paid or payable to RWP hereunder.
20. Governing Law and Jurisdiction. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York
without regard to the conflicts of laws principles thereof. The parties
hereto hereby irrevocably agree that any suit or proceeding arising directly
and/or indirectly pursuant to or under this Agreement, shall be brought
solely and exclusively in a federal or state court located in The City,
County and State of New York. By its execution hereof, the Company and RWP
irrevocably submit to the in personam jurisdiction of the federal and state
courts located in The City, County and State of New York and agree that any
process in any such action may be served upon any of them personally, or by
certified mail or registered mail upon them or their agent, return receipt
requested, with the same full force and effect as if personally served upon
Bion Environmental Technologies, Inc.
November 9, 2006
Page 12
them in The City of New York. The parties hereto waive any claim that any
such jurisdiction is not a convenient forum for any such suit or proceeding
and any defense or lack of in personam jurisdiction with respect thereto. In
the event of any such action or proceeding, the party prevailing therein
shall be entitled to payment from the other party hereto of its reasonable
counsel fees and disbursements. You and we hereby waive all right to trial
by jury in any action, proceeding, or counterclaim (whether based upon
contract, tort or otherwise) in connection with any dispute arising out of
this Agreement or any matters contemplated by this Agreement.
[Signature Page Follows.]
Bion Environmental Technologies, Inc.
November 9, 2006
Page 13
We are pleased to accept this engagement and look forward to working
with the Company. Please confirm that the foregoing correctly and completely
sets forth our understanding by signing and returning to us the enclosed
duplicate of this Agreement, which shall thereupon constitute a binding
agreement.
Sincerely,
▇.▇. ▇▇▇▇▇▇▇▇▇▇ & CO., INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Managing Director
▇▇▇▇▇▇ and accepted as of the date first written above:
BION ENVIRONMENTAL TECHNOLOGIES, INC.
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
Annex A to Engagement Letter
You, Bion, agree to (i) indemnify and hold harmless us, our affiliates
(within the meaning of the 1933 Act), and each of our respective partners,
directors, officers, agents, consultants, employees and controlling persons
(within the meaning of the 1933 Act) (each of RWP and such other person or
entity is hereinafter referred to as an "Indemnified Person"), from and
against any and all losses, claims, damages, liabilities and expenses, joint
or several, and all actions, inquiries, proceedings and investigations in
respect thereof (and reasonable expenses incurred in investigation, defense,
etc. in relation thereto), to which any Indemnified Person may become subject
arising in any manner out of or in connection with our engagement or any
matter referred to in the agreement to which this Annex A is attached and of
which this Annex A forms a part (the "Agreement"), regardless of whether any
of such Indemnified Persons is a party thereto, and (ii) immediately upon
request reimburse an Indemnified Person for such person's legal and other
expenses as they are incurred in connection with investigating, preparing,
defending, paying, settling or compromising any such action, inquiry,
proceeding or investigation (including, without limitation, usual and
customary per diem compensation for any Indemnified Person's involvement in
discovery proceedings or testimony), whether or not such action, inquiry,
proceeding or investigation is initiated or brought by you, your creditors or
stockholders, or any other person.
If the indemnity or reimbursement referred to above is, for any reason
whatsoever, unenforceable, unavailable or otherwise insufficient to hold each
Indemnified Person harmless, you agree to pay to or on behalf of each
Indemnified Person contributions for losses, claims, damages, liabilities or
expenses so that each Indemnified Person ultimately bears only a portion of
such losses, claims, damages, liabilities or expenses as is appropriate (i)
to reflect the relative benefits received by each such Indemnified Person,
respectively, on the one hand and you and your stockholders on the other hand
in connection with any Placement or Facility, or (ii) if the allocation on
that basis is not permitted by applicable law, to reflect not only the
relative benefits referred to in clause (i) above, but also the relative
fault of each such Indemnified Person, respectively, and you as well as any
other relevant equitable considerations; provided, however, that in no event
will the aggregate contribution of all Indemnified Persons to all losses,
claims, expenses, damages, liabilities or expenses in connection with any
Placement or Facility exceed the amount of the fee actually received by us
pursuant to this Agreement. The respective relative benefits received by us
and you in connection with any Placement or Facility will be deemed to be in
the same proportion as the aggregate fee paid or proposed to be paid to RWP
in connection with any Placement or Facility bears to the aggregate
consideration paid or proposed to be paid in such Placement or Facility,
whether or not consummated.
Promptly after its receipt of notice of the commencement of any action or
proceeding, any Indemnified Person will, if a claim in respect thereof is to
be made against you pursuant to this letter, notify you in writing of the
commencement thereof; but omission so to notify you will not relieve you from
any liability which you may have to any Indemnified Person, except your
obligation to indemnify for losses, claims, damages, liabilities or expenses
to the extent that you suffer actual prejudice as a result of such failure,
but will not relieve you from your obligation to provide reimbursement of
expenses and any liability which you may have to an Indemnified Person
otherwise than hereunder. If you so elect, you may assume the defense of such
A-1
action or proceeding in a timely manner, including the employment of counsel
(reasonably satisfactory to us) and payment of expenses, provided you permit
an Indemnified Person and counsel retained by an Indemnified Person at its
expense to participate in such defense. Notwithstanding the foregoing, in the
event (i) you fail promptly to assume the defense and employ counsel
reasonably satisfactory to us, or (ii) the Indemnified Person has been
advised by counsel that there exist actual or potential conflicting interests
between you or your counsel and such Indemnified Person, an Indemnified
Person may employ separate counsel (in addition to any local counsel) to
represent or defend such Indemnified Person in such action or proceeding, and
you agree to pay the fees and disbursements of such separate counsel as
incurred; provided however, that you will not, in connection with any one
such action or proceeding, or separate but substantially similar actions or
proceedings arising out of the same general allegations, be liable for fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel).
You will not, without our prior written consent, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or
contribution may be sought under this Agreement, unless such settlement,
compromise or consent includes an express, complete and unconditional release
of us and each other Indemnified Person from all liability and obligations
arising therefrom. Without your prior written consent, which will not be
unreasonably withheld, delayed or conditioned, no Indemnified Person will
settle or compromise any claim for which indemnification or contribution may
be sought hereunder. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person requests that you reimburse the Indemnified Person for
fees and expenses as provided in this Agreement, you agree that you will be
liable for any settlement of any proceeding effected without your prior
written consent if (i) such settlement is entered into more than 30 days
after receipt by you of the request for reimbursement, and (ii) you will not
have reimbursed the Indemnified Person in accordance with such request prior
to the date of such settlement.
You also agree that no Indemnified Person will have any liability to you or
your affiliates, directors, officers, employees, agents, creditors or
stockholders, directly or indirectly, related to or arising out of the
Agreement or the services performed thereunder, except losses, claims,
damages, liabilities and expenses you incur which have been finally
judicially determined to have resulted primarily and directly from actions
taken or omitted to be taken by such Indemnified Person due to such person's
gross negligence or willful misconduct. In no event, regardless of the legal
theory advanced, will any Indemnified Person be liable for any consequential,
indirect, incidental or special damages of any nature. Your indemnification,
reimbursement, exculpation and contribution obligations in this Annex A will
be in addition to any rights that any Indemnified Person may have at common
law or otherwise.
You understand that in the event that you reimburse RWP pursuant to this
Annex A for the fees and expenses of its counsel, such reimbursement will be
made on the basis of counsel's generally applicable rates, which may be
higher than the rates that counsel charges RWP for other matters based on
arrangements that it has entered into with such counsel.
A-2
You acknowledge that the indemnity, reimbursement and contribution
obligations under this Annex A shall be in addition to, and shall no way
limit or otherwise adversely affect any rights that any Indemnified Person
may have at law or equity. You shall not responsible for any losses, claims,
damages, liabilities or expenses to the extent that such loss, claim, damage,
liability or expense has been finally judicially determined to have resulted
primarily and directly from actions taken or omitted to be taken by RWP
and/or any Indemnified Person due to such person's gross negligence or
willful misconduct. To the extent that any prior payment any Bion Party made
to RWP or any Indemnified Person is determined to have been improper by
reason of RWP's and/or such Indemnified Person's gross negligence or willful
misconduct, RWP and/or such Indemnified Person will promptly pay the
applicable Bion Party such amount.
Notwithstanding the limitations set forth above, RWP agrees to indemnify and
hold harmless Bion, its affiliates (within the meaning of the 1933 Act) and
their respective officers, directors, employees and agents and controlling
persons (within the meaning of the 1933 Act) (each of Bion and such other
person or entity is hereinafter referred to as a "Bion Party"), from any and
all losses, claims, damages or liabilities (and reasonable expenses incurred
in investigation, defense, etc. in relation thereto) related to, arising out
of or in connection with the Agreement to the extent and in the manner set
forth for above describing Bion's obligations to the Indemnified Persons,
that have resulted from the willful misconduct or gross negligence of RWP.
All procedures set forth in the prior paragraphs of this Annex A shall be
applicable in regard the indemnification and other rights provided in this
paragraph. RWP shall not be responsible for any losses, claims, damages,
liabilities or expenses to the extent that such loss, claim, damage,
liability or expense has been finally judicially determined to have resulted
primarily and directly from actions taken or omitted to be taken by any Bion
Party due to such person's gross negligence or willful misconduct. To the
extent that any prior payment RWP made to a Bion Party is determined to have
been improper by reason of such Bion Party's gross negligence or willful
misconduct, such Bion Party will promptly pay RWP such amount.
Capitalized terms used, but not defined in this Annex A, have the meanings
assigned to such terms in the Agreement.
A-3
Annex B to Engagement Letter
Unless agreed otherwise by RWP and Bion in writing, the Initial Placements
shall consist of a placement of a new series of Bion preferred stock ("PFD
Stock") in the amount of not less than $10.0 million gross proceeds with the
following terms (in addition to the registration rights set forth in Section
7 of the agreement to which this Annex B is attached and of which this Annex
B forms a part (the "Agreement")):
(a) cumulative dividend rate of 2.5% to 3.0% per annum (based on
prevailing market conditions at the time of such placement), which dividend
shall be earned quarterly (with no accrual for partial quarters) and payable
'in kind' or in cash at the sole option of Bion;
(b) convertible into shares of Common Stock at a price of $6.60 in
liquidation preference (principal plus accrued dividends) of PFD Stock per
share of Common Stock (subject to adjustment as described below, the
"Conversion Price");
(c) automatic conversion into shares of Common Stock at the Conversion
Price upon the effectiveness of a registration statement registering the
Common Stock underlying conversion of the PFD Stock; and
(d) customary anti-dilution adjustments in the event of stock splits,
stock dividends, reclassifications or other similar transactions and for
weighted average anti-dilution adjustments in the event of below fair market
value issuances of shares of Common Stock or Convertible Securities.
Capitalized terms used, but not defined in this Annex B, have the meanings
assigned to such terms in the Agreement.