-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VRMD4Ikow2svXijhvVEjcsDqfjbeFpqb9atFPAbNZnMkFxASB4X9r8iptAH7xdNa FPHBoVSR/XV4fTQYaRB3dA== /in/edgar/work/0000948830-00-000482/0000948830-00-000482.txt : 20000929 0000948830-00-000482.hdr.sgml : 20000929 ACCESSION NUMBER: 0000948830-00-000482 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000810 ITEM INFORMATION: FILED AS OF DATE: 20000927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BION ENVIRONMENTAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000875729 STANDARD INDUSTRIAL CLASSIFICATION: [3590 ] IRS NUMBER: 841176672 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-19333 FILM NUMBER: 729768 BUSINESS ADDRESS: STREET 1: 7921 SOUTHPARK PLACE SUITE 200 CITY: LITTLETON STATE: CO ZIP: 80120 BUSINESS PHONE: 3032940750 MAIL ADDRESS: STREET 1: 7921 SOUTHPARK PLACE SUITE 200 CITY: LITTLETON STATE: CO ZIP: 80120 FORMER COMPANY: FORMER CONFORMED NAME: RSTS CORP DATE OF NAME CHANGE: 19930328 8-K 1 0001.txt 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: August 10, 2000 --------------------------------- (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 Incorporation) (Commission File No.) (I.R.S. Employer Identification No.) 7921 Southpark Place, Suite 200, Littleton, Colorado 80120 ---------------------------------------------------------- (Address and Zip Code of Principal Executive Offices) Registrant's telephone number including area code: (303) 738-0845 -------------- ITEM 5. OTHER EVENTS 1. On August 31, 2000, we completed the exchange offer with holders (current and former employees and consultants) of certain classes of registered, incentive stock options (see Item 9 and Exhibit 99.9, Form 8-K dated August 3, 2000). With 100% participation from the holders, 404,107 new options exercisable at $2.00 per share until December 31, 2002 have been issued in exchange for 775,772 options with various exercise prices and expiration dates. 2. The proposal we made to holders of our Convertible Bridge Notes (see Item 8 and Exhibit 99.8, Form 8-K dated August 3, 2000) was amended by a new proposal dated August 24, 2000 (see Exhibit 99.1 hereto). On or before September 15, 2000, we received acceptance of the amendment from a majority of the note holders and, as per the terms of the new proposal, deemed all notes amended. As a result, conversion terms for the Note were clarified and the exercise price of our Class J warrants was reduced to $2.00. For details, see Exhibit 99.3 hereto. 3. On August 23, 2000, certain holders of our Class X Warrants and Class Z Warrants, including without limitation, Jon Northrop, Director and President, and Jere Northrop, Director and Chief Technology Officer (and their extended families) completed their exchange of 471,545 Class X Warrants and 855,696 Class Z Warrants for 269,831 restricted shares of our common stock. For details see Item 5 and Exhibit 99.5 of Form 8-K dated August 3, 2000 and Exhibit 99.2 hereto. 4. On August 28, 2000, we entered an agreement with Pan Am Equities, Inc. as agent for Pamela Equities Corp., a New York corporation, for an eleven year lease of the tenth floor at 18th East 50th Street in New York City as office space, for an aggregate cost of $2,881,982. We are negotiating sub- leases of up to fifty percent of the space at a pro-rata share of the costs which, if successful, will reduce the net cost to us proportionately over time. Currently, we have executed one sub-lease with an unrelated party, for an eleven year total of $576,397. 5. On August 10, 2000, our Board of Directors, without the participation of director Ron Cullis, approved the issuance of 10,000 registered, incentive stock options at $2.25 per share exercisable until December 31, 2003, to Ron Cullis in exchange for his continued role as a director. 6. On August 10, 2000, our Board of Directors approved the creation of a Compensation Committee comprised of Ronald Cullis and Salvatore Zizza, our outside directors, for the purpose of reviewing and recommending compensation of executive officers, consultants, key employees and such other employees as might be directed by the Board of Directors. 7. On August 10, 2000, our Board of Directors approved the creation of an Audit Committee of the Board of Directors, and the adoption of its Charter, to be comprised of Ron Cullis and Sal Zizza, the Company's outside directors, for the purpose of oversight responsibility, authority and specific duties as outlined in the Charter. For details, see Exhibit 99.3 hereto. 8. Exhibit 99.4 sets forth our capital structure as of September 20, 2000, reflecting events since our last 10-QSB dated March 31, 2000, including without limitation the events set forth herein and in Form 8-K dated August 3, 2000. 2 9. On September 7, 2000, we announced that we will begin testing our new Nutrient Management System (NMS) with an integrated monitoring and control system within thirty days at Dream Maker Dairy in upstate New York. The new system uses computerized, real-time monitoring and control that can be remotely accessed for both reporting requirements and control functions and is designed to reduce the size of the systems by up to 80% while maintaining the same processing capacity. For details, see Exhibit 99.6 hereto. 10. In connection with the audit of our fiscal 2000 financial statements, our independent auditors have advised us to restate the unaudited financial statements contained in our quarterly reports on Form 10-QSB for the quarters ended September 30, 1999, December 31, 1999 and April 30, 2000. Accordingly, we intend to restate the subject financial statements and file amendments to the appropriate quarterly reports as soon as is reasonably practicable after the filing of our annual report on Form 10-KSB (which is due to be filed on September 28, 2000). The restatements are material in amount and generally pertain to the non-cash values and amortization schedules recorded for certain warrants issued in connection with services performed for us by various parties, and the recording of non-cash expenses in that regard. Of the aggregate amount, approximately $180,000, $2.4 million and $390,000 relate to the first, second and third quarters, respectively. The following summarizes the effect of the changes on earning (loss) per share as previously reported: Previously Reported Restated Three months ended September 30, 1999 $(.12) (.13) Three months ended December 31, 1999 (.09) (.32) Six months ended December 31, 1999 (.12) (.46) Three months ended March 31, 2000 (.11) (.14) Nine months ended March 31, 2000 (.32) (.60) 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. Listed below are the financial statement, pro forma financial information and exhibits filed as a part of this report. EXHIBITS: Exhibit Number Description Location - ------- ----------- -------- 99.1 Convertible Bridge Note Amendment Filed herewith electronically Document - August 24, 2000 99.2 Documents regarding Class X and Filed herewith electronically Class Z Warrant Exchanges effective August 23, 2000 99.3 Audit Committee Charter Filed herewith electronically 99.4 Capital Structure Filed herewith electronically 99.5 2000 Incentive Plan Filed herewith electronically 99.6 Monitoring and Control System Filed herewith electronically Initiative Press Release 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: September 27, 2000 By: /s/ Mark A. Smith ------------------------------------- Mark A. Smith, Chairman and Secretary 4 EX-99.1 2 0002.txt 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. (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 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 EX-99.2 3 0003.txt Jere Northrop 1961 Tonawanda Creek Road Amherst, New York 14228 August 23, 2000 Bion Environmental Technologies, Inc. 7921 Southpark Place, Suite 200 Littleton, CO 80202-3936 Dear Bion: Pursuant to my letter of August 3, 2000 regarding the exchange of Class X and Class Z warrants, please accept this letter as authorization to proceed with the exchange as of this date. If the this is agreeable to BION, please cancel the submitted warrants, issue the stock, and deliver to me. Very truly yours, /s/ Jere Northrop Jere Northrop Jon Northrop 1922 West Sanibel Court Littleton, Colorado 80120 August 23, 2000 Bion Environmental Technologies, Inc. 7921 Southpark Plaza, Suite 200 Littleton, CO 80120 Dear Bion: Pursuant to my letter of August 3, 2000 regarding the exchange of Class X and Class Z warrants, please accept this letter as authorization to proceed with the exchange as of this date. If this is agreeable to BION, please cancel the submitted warrants and issue the stock as shown in Exhibit A attached hereto and deliver the certificates to me. Very truly yours, /s/ Jon Northrop Jon Northrop Exhibit A Z Warrants X Warrants Shares to be Issued Jon Northrop 389,507 125,074 95,950 Nancy Northrop 800 240 Hallie Northrop 8,848 10,802 4,569 Stephanie Northrop 8,848 10,802 4,569 Family Trust U/A 3rd U/W Catherine Northrop 2,887 866 Harley E. Northrop P.O. Box 188, Sherman Road Westfield, New York 14787 August 23, 2000 Bion Environmental Technologies, Inc. 7921 Southpark Plaza, Suite 200 Littleton, CO 80120 Dear Bion: Pursuant to my letter August 3, 2000 regarding the exchange of Class X and Class Z warrants, please accept this letter as authorization to proceed with the exchange as of this date. If this is agreeable to BION, please cancel the submitted warrants and issue the stock and deliver to me. Very truly yours, /s/ Harley E. Northrop Harley E. Northrop EX-99.3 4 0004.txt BION ENVIRONMENTAL TECHNOLOGIES, INC. AUDIT COMMITTEE CHARTER The Audit Committee ("the Committee"), of the Board of Directors ("the Board") of Bion Environmental Technologies, Inc. ("the Company"), will have the oversight responsibility, authority and specific duties as described below. COMPOSITION The Committee will be comprised of two or more directors as determined by the Board. The members of the Committee will meet the independence and experience requirements of the Nasdaq Stock Market (Nasdaq) then in effect. The members of the Committee will be elected annually at the annual meeting of the full Board and will be listed in the annual report to shareholders. One of the members of the Committee will be elected Committee Chair by the Board. RESPONSIBILITY The Committee is a part of the Board. Its primary function is to assist the Board in fulfilling its oversight responsibilities with respect to (i) the annual financial information to be provided to shareholders and the Securities and Exchange Commission (SEC); (ii) the system of internal controls that management has established; and (iii) the audit process. In addition, the Committee provides an avenue for communication between the independent accountants, financial management and the Board. The Committee should have a clear understanding with the independent accountants that they must maintain an open and transparent relationship with the Committee, and that the ultimate accountability of the independent accountants is to the Board and the Committee. The Committee will make regular reports to the Board concerning its activities. While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor. Nor is it the duty of the Audit Committee to conduct investigations, to resolve disagreements, if any, between management and the independent auditor or to assure compliance with laws and regulations and the Company's business conduct guidelines. AUTHORITY Subject to the prior approval of the Board, the Committee is granted the authority to investigate any matter or activity involving financial accounting and financial reporting, as well as the internal controls of the Company. In that regard, the Committee will have the authority to approve the retention of external professionals to render advice and counsel in such matters. All employees will be directed to cooperate with respect thereto as requested by members of the Committee. MEETINGS The Committee is to meet at least once annually and as many additional times as the Committee deems necessary. Content of the agenda for each meeting should be cleared by the Committee Chair. The Committee is to meet in separate executive sessions with the chief financial officer and independent accountants at least once each year and at other times when considered appropriate. ATTENDANCE Committee members will strive to be present at all meetings. As necessary or desirable, the Committee Chair may request that members of management and representatives of the independent accountants be present at Committee meetings. SPECIFIC DUTIES In carrying out its oversight responsibilities, the Committee will: 1. Review and reassess the adequacy of this charter annually and recommend any proposed changes to the Board for approval. This should be done in compliance with applicable Nasdaq Audit Committee Requirements. 2. Review with the Company's management and independent accountants the Company's accounting and financial reporting controls. Obtain annually in writing from the independent accountants their letter as to the adequacy of such controls. 3. Review with the Company's management and independent accountants significant accounting and reporting principles, practices and procedures applied by the Company in preparing its financial statements. Discuss with the independent accountants their judgements about the quality, not just the acceptability, of the Company's accounting principles used in financial reporting. 4. Review the scope and general extent of the independent accountants' annual audit. The Committee's review should include an explanation from the independent accountants of the factors considered by the accountants in determining the audit scope, including the major risk factors. The independent accountants should confirm to the Committee that no limitations have been placed on the scope or nature of their audit procedures. The Committee will review annually with management the fee arrangement with the independent accountants. 5. Inquire as to the independence of the independent accountants and obtain from the independent accountants, at least annually, a formal written statement delineating all relationships between the independent accountants and the Company as contemplated by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees. 6. Have a predetermined arrangement with the independent accountants that they will advise the Committee through its Chair and management of the Company of any matters identified through procedures followed for interim quarterly financial statements, and that such notification is to be made prior to the related press release or, if not practicable, prior to filing Forms 10-QSB. Also receive a written confirmation provided by the independent accountants at the end of each of the first three quarters of the year that they have nothing to report to the Committee, if that is the case, or the written enumeration of required reporting issues. 7. At the completion of the annual audit, review with management and the independent accountants the following: - The annual financial statements and related footnotes and financial information to be included in the Company's annual report to shareholders and on Form 10-KSB. - Results of the audit of the financial statements and the related report thereon and, if applicable, a report on changes during the year in accounting principles and their application. - Significant changes to the audit plan, if any, and any serious disputes or difficulties with management encountered during the audit. Inquire about the cooperation received by the independent accountants during their audit, including access to all requested records, data and information. Inquire of the independent accountants whether there have been any disagreements with management which, if not satisfactorily resolved, would have caused them to issue a nonstandard report on the Company's financial statements. - Other communications as required to be communicated by the independent accountants by Statement of Auditing Standards (SAS) 61 as amended by SAS 90 relating to the conduct of the audit. Further, receive a written communication provided by the independent accountants concerning their judgment about the quality of the Company's accounting principles, as outlined in SAS 61 as amended by SAS 90, and that they concur with management's representation concerning audit adjustments. If deemed appropriate after such review and discussion, recommend to the Board that the financial statements be included in the Company's annual report on Form 10-KSB. 8. After preparation by management and review by independent accountants, approve the report required under SEC rules to be included in the Company's annual proxy statement. The charter is to be published as an appendix to the proxy statement every three years. 9. Discuss with the independent accountants the quality of the Company's financial and accounting personnel. Also, elicit the comments of management regarding the responsiveness of the independent accountants to the Company's needs. 10. Meet with management and the independent accountants to discuss any relevant significant recommendations that the independent accountants may have, particularly those characterized as "material" or "serious". Typically, such recommendations will be presented by the independent accountants in the form of a Letter of Comments and Recommendations to the Committee. The Committee should review responses of management to the Letter of Comments and Recommendations from the independent accountants and receive follow-up reports on action taken concerning the aforementioned recommendations. 11. Recommend to the Board the selection, retention or termination of the Company's independent accountants. 12. Review with management and the independent accountants the methods used to establish and monitor the Company's policies with respect to unethical or illegal activities by Company employees that may have a material impact on the financial statements. 13. Generally as part of the review of the annual financial statements, receive an oral report(s), at least annually, from the Company's counsel concerning legal and regulatory matters that may have a material impact on the financial statements. 14. As the Committee may deem appropriate, obtain, weigh and consider expert advice as to Audit Committee-related rules of Nasdaq, Statements on Auditing Standards and other accounting, legal and regulatory provisions. EX-99.4 5 0005.txt Capital Structure - ----------------- Because we have a relatively complex capital structure the following capital structure details are set forth: Common Stock - ------------ As of September 20, 2000 we had 13,035,899 (1) shares of Bion Environmental Technologies, Inc. common stock (the "Common Stock") issued and outstanding. Capital Structure - ----------------- Options* Exercise Shares Expiration Price 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 $2.00 180,638 Vested 12/31/02 (Vested) $2.20 80,000 Vested 12/31/02 $2.25 469,000 (2) Vested 12/21/01 - 12/31/03 $2.25 165,000 Vested 12/31/02 - 12/31/03 $2.50 40,000 (3) Vested 12/31/01 $2.50 254,445 Vested 11/01/00 - 06/30/03 $2.70 55,556 Vested 12/31/02 $3.04 1,112 Vested 01/28/01 $4.05 1,112 Vested 11/30/00 --------- Total Employees (Vested) 1,246,863 Total Vested (Directors and Employees) 1,290,199 _________________ * Options have been issued under our 1996 Nonemployee Director Stock Plan (see Item 10 of Form 10-KSB dated June 30,1998), our 1994 Incentive Plan (see Item 10 of Form 10-KSB dated June 30, 1998) and our 2000 Incentive Plan (see Exhibit 99.5 herein). 1) Includes 27,000 shares not vested at September 18, 2000. 2) Each holder has agreed to exercise these options with outstanding promissory notes of Bion upon certain conditions. 3) Holder has agreed to exercise using outstanding long term notes payable of Bion upon certain conditions. Employees Exercise (non-vested) Price Shares Vesting Dates Expiration $2.00 239,719 11/19/00 - 10/31/02 12/31/02 $2.50 140,000 03/01/01 - 06/30/02 12/31/02 -06/30/03 Total Non-Vested 379,719 ======= Total Vested and Non-Vested 1,669,918 ========= Warrants - -------- As of September 18, 2000, we have 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 D2D 1,000,000 (4) $3.50 Class D2E 500,000 (5) $6.00 Class G-5.1 1,115 (6) $2.70 Class G-5.2 919 (7) $2.70 Class G-6 3,148 (8) $5.40 Class H-1 11,112 (9) $4.50 Class H-2 16,112 (10) $2.70 *Class H-16 38,000 (11) $2.25 Class J-1 1,404,450 (12) $2.00 Class J-2 165,000 (13) $2.375 Class X 479,269 (14) $8.00 Class Z 42,748 (15) $13.50 --------- ------ 8,676,873 $1.75 - 13.50 ========= ------------- *Holder has agreed to exercise by cancellation of promissory note of Bion on certain conditions. 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, 1999 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 D2D Warrants may be exercised to purchase 1,000,000 shares of Common Stock for a 60 month period beginning August 10, 2000 and ending August 10, 2005. 5. Class D2E Warrants may be exercised to purchase 500,000 shares of Common Stock for a 60 month period beginning August 10, 2000 and ending August 10, 2005. 6. 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. 7. 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. 8. 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. 9. 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. 10. 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. 11. Class H-16 Warrants 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. 12. Class J-1 Warrants may be exercised to purchase 1,404,450 shares of Common Stock for a 57 month period beginning March 31, 2000 and ending December 31, 2004. 13. Class J-2 Warrants may be exercised to purchase 165,000 shares of Common Stock for a 45 month period beginning March 31, 2000 and ending December 31, 2004. 14. Class X Warrants may be exercised to purchase 479,269 shares of Common Stock for a 24 month period beginning January 1, 2000 and ending December 31, 2001. 15. Class Z Warrants may be exercised to purchase 42,748 shares of Common Stock for a 24 month period beginning January 1, 2000 and ending December 31, 2001. At September 18, 2000, there were warrants exercisable to purchase 8,676,873 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 Underlying Shares Shares: if Held Amount of Stock To Maturity LTLK $1,222,610 679,228 915,497 LTLK Defined Benefit Plan $296,274 164,597 221,852 Dublin Holding, Ltd $1,757,723 976,513 1,316,192 H. Northrop $348,567 193,649 224,460 ---------- --------- --------- Total $3,625,174 2,013,987 2,678,001 Holders of the above convertible notes have agreed to convert under certain conditions. See our Forms 8-K and 8-K/A-1 dated December 11, 1999. We have $1,586,339 in long term notes due on December 31, 2001 (including the H. Northrop note above). Holders of $1,237,772 of the long term notes have agreed to exercise outstanding options/warrants under certain conditions. These notes are held by seven individuals, including Jon Northrop and Jere Northrop. See Forms 8-K and 8-K/A-1 dated December 11, 1999. A total of $3,276,607 in long-term convertible notes are due on December 31, 2002. (See above.) EX-99.5 6 0006.txt BION ENVIRONMENTAL TECHNOLOGIES, INC. ------------------------- 2000 INCENTIVE PLAN ------------------------------- 1. Purpose of the Plan The purpose of this Bion Environmental Technologies, Inc. 2000 Incentive Plan ("Plan") is to create shareholder value. To do so, the Plan provides incentives to selected employees and directors of the Company and its Subsidiaries, and selected non-employee consultants and advisors to the Company and its Subsidiaries, who contribute, and are expected to contribute, materially to its success. The Plan also provides a means of rewarding outstanding performance and enhances the interest of such persons in the Company's success and development by providing them a proprietary interest in the Company. Further, the Plan is designed to enhance the Company's ability to maintain a competitive position in attracting and retaining qualified personnel necessary for the success and development of the Company. 2. Definitions As used in the Plan, the following definitions apply to the terms indicated below: (a) "Board of Directors" shall mean the Board of Directors of Bion Environmental Technologies, Inc. (b) "Cause," when used in connection with the termination of a Participant's employment with the Company, for purposes of the Plan, shall mean the termination of the Participant's employment by the Company on account of (i) the willful and continued failure by the Participant substantially to perform his duties and obligations (other than any such failure resulting from his incapacity due to physical or mental illness) or (ii) the willful engaging by the Participant in an act or acts which could reasonably be expected to cause injury to the Company or are contrary to the best interests of the Company. For purposes of this Section 2(b), no act, or failure to act, on a Participant's part shall be considered "willful" unless done, or omitted to be done, by the Participant in bad faith and without reasonable belief that his action or omission was in the best interests of the Company. (c) "Cash Bonus" shall mean an award of a bonus payable in cash pursuant to Section 13 hereof. (d) "Change in Control" shall mean: (i) the acquisition at any time by a"person" or "group" (as that term is used in Sections 13(d)and 14(d)(2) of the Exchange Act) (excluding, for this purpose, the Company or any Subsidiary or any employee benefit plan of the Company or any Subsidiary) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly, of securities representing 20% or more of the combined voting power in the election of directors of the then-outstanding securities of the Company or any successor of the Company; (ii) the termination of service as directors, for any reason other than death, disability or retirement from the Board of Directors, during any period of two consecutive years or less, of individuals who at the beginning of such period constituted a majority of the Board of Directors, unless the election of or nomination for election of each new director during such period was approved by a vote of at least two-thirds of the directors still in office who were directors at the beginning of the period; (iii) approval by the shareholders of the Company of any merger or consolidation or statutory share exchange as a result of which the Common Shares shall be changed, converted or exchanged (other than a merger or share exchange with a wholly-owned Subsidiary of the Company), or liquidation of the Company, or any sale or disposition of 50% or more of the assets or earning power of the Company; or (iv) approval by the shareholders of the Company of any merger, consolidation or statutory share exchange to which the Company is a party as a result of which the persons who were shareholders of the Company immediately prior to the effective date of the merger, consolidation or statutory share exchange shall have beneficial ownership of less than 50% of the combined voting power in the election of directors of the surviving corporation following the effective date of such merger, consolidation or statutory share exchange; provided, however, that no change in control shall be deemed to have occurred if, prior to such time as a change in control would otherwise be deemed to have occurred, the Company's Board of Directors deems otherwise. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (f) "Committee" shall mean the committee appointed by the Board of Directors from time to time to administer the Plan. (g) "Common Shares" shall mean Bion Environmental Technologies, Inc. common shares, no par value per share. (h) "Company" shall mean Bion Environmental Technologies, Inc., a Colorado corporation, and each of its Subsidiaries. (i) "Disability" shall mean a Participant's inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. (j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (k) The "Fair Market Value" of Common Shares with respect to any day shall be (i) the closing sales price on the immediately preceding business day of Common Shares as reported on the principal securities exchange on which Common Shares are then listed or admitted to trading, or (ii) if not so reported, the average of the closing bid and ask prices on the immediately preceding business day as reported on the National Association of Securities Dealers Automated Quotation System, or (iii) if not so reported, as furnished by any member of the National Association of Securities Dealers, Inc. selected by the Committee. In the event that the price of Common Shares shall not be so reported, the Fair Market Value of Common Shares shall be determined by the Committee in its absolute discretion. (l) "Incentive Award" shall mean an Option, LSAR, Tandem SAR, Stand-Alone SAR, share of Phantom Stock, Stock Bonus or Cash Bonus granted pursuant to the terms of the Plan. (m) "Incentive Stock Option" shall mean an Option which is an "incentive stock option" within the meaning of Section 422 of the Code and which is identified as an Incentive Stock Option in the agreement by which it is evidenced. (n) "Issue Date" shall mean the date established by the Committee on which certificates representing shares of Restricted Stock shall be issued by Bion Environmental Technologies, Inc. pursuant to the terms of Section 10(d) hereof. (o) "LSAR" shall mean a limited stock appreciation right which is granted pursuant to the provisions of Section 7 hereof and which relates to an Option. Each LSAR shall be exercisable only upon the occurrence of a Change in Control and only in the alternative to the exercise of its related Option. (p) "Non-Employee Participant" shall mean a Participant who is not an employee of the Company. (q) "Non-Qualified Stock Option" shall mean an Option which is not an Incentive Stock Option and which is identified as a Non-Qualified Stock Option in the agreement by which it is evidenced. (r) "Option" shall mean an option to purchase Common Shares of Bion Environmental Technologies, Inc. granted pursuant to Section 6 hereof. Each Option shall be identified as either an Incentive Stock Option or a Non-Qualified Stock Option in the agreement by which it is evidenced. (s) "Participant" shall mean a person who is eligible to participate in the Plan and to whom an Incentive Award is granted pursuant to the Plan, and, upon his death, his successors, heirs, executors and administrators, as the case may be. (t) "Person" shall mean a "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act. (u) "Phantom Stock" shall mean the right to receive in cash the Fair Market Value of Common Shares of Bion Environmental Technologies, Inc., which right is granted pursuant to Section 11 hereof and subject to the terms and conditions contained therein. (v) "Plan" shall mean the Bion Environmental Technologies, Inc. 2000 Incentive Plan, as it may be amended from time to time. (w) "Restricted Stock" shall mean a Common Share which is granted pursuant to the terms of Section 10 hereof and which is subject to the restrictions set forth in Section 10(c) hereof for so long as such restrictions continue to apply to such share. (x) "Securities Act" shall mean the Securities Act of 1933, as amended. (y) "Stand-Alone SAR" shall mean a stock appreciation right granted pursuant to Section 9 hereof which is not related to any Option. (z) "Stock Bonus" shall mean a grant of a bonus payable in Common Shares pursuant to Section 12 hereof. (aa) "Subsidiary" shall mean any corporation in which at the time of reference Bion Environmental Technologies, Inc. owns, directly or indirectly, stock comprising more than fifty percent of the total combined voting power of all classes of stock of such corporation. (bb) "Tandem SAR" shall mean a stock appreciation right granted pursuant to Section 8 hereof which is related to an Option. Each Tandem SAR shall be exercisable only to the extent its related Option is exercisable and only in the alternative to the exercise of its related Option. (cc) "Vesting Date" shall mean the date established by the Committee on which a share of Restricted Stock or Phantom Stock may vest. (dd) "Bion Environmental Technologies, Inc." shall mean Bion Environmental Technologies, Inc., a Colorado corporation, and its successors. 3. Stock Subject to the Plan Under the Plan, the Committee may grant to Participants (i) Options, (ii) LSARs, (iii) Tandem SARs, (iv) Stand-Alone SARs, (v) shares of Restricted Stock, (vi) shares of Phantom Stock, (vii) Stock Bonuses and (viii) Cash Bonuses; provided, however, that grants under the Plan to non-employee directors of the Company shall be made by the Board of Directors. When referring to grants under the Plan to non-employee directors of the Company, any reference in this Plan to the Committee shall be deemed to refer to the Board of Directors. Subject to adjustment as provided in Section 14 hereof, the Committee may grant Options, Stand-Alone SARs, shares of Restricted Stock, shares of Phantom Stock and Stock Bonuses under the Plan with respect to a number of Common Shares that in the aggregate does not exceed 1,000,000 shares. The maximum number of Common Shares for which Incentive Awards, including Incentive Stock Options, may be granted to any one Participant shall not exceed 500,000 shares in any one calendar year; and the total of all cash payments to any one Participant pursuant to the Plan in any calendar year shall not exceed $500,000. The grant of an LSAR, Tandem SAR or Cash Bonus shall not reduce the number of Common Shares with respect to which Options, Stand-Alone SARs, shares of Restricted Stock, shares of Phantom Stock or Stock Bonuses may be granted pursuant to the Plan. In the event that any outstanding Option or Stand-Alone SAR expires, terminates or is canceled for any reason (other than pursuant to Paragraphs 7(b)(2) or 8(b)(3) hereof), the Common Shares subject to the unexercised portion of such Option or Stand-Alone SAR shall again be available for grants under the Plan. In the event that an outstanding Option is canceled pursuant to Paragraphs 7(b)(2) or 8(b)(3) hereof by reason of the exercise of an LSAR or a Tandem SAR, the Common Shares subject to the canceled portion of such Option shall not again be available for grants under the Plan. In the event that any shares of Restricted Stock or Phantom Stock, or any Common Shares granted in a Stock Bonus are forfeited or canceled for any reason, such shares shall again be available for grants under the Plan. Common Shares issued under the Plan may be either newly issued shares or treasury shares, at the discretion of the Committee, and Bion Environmental Technologies, Inc. hereby reserves 1,000,000 Common Shares for issuance pursuant to the Plan. 4. Administration of the Plan The Plan shall be administered by a Committee of the Board of Directors consisting of two or more persons, each of whom shall be a "non-employee director" within the meaning of Rule 16b-3(b)(3) promulgated under Section 16 of the Exchange Act. The Committee shall from time to time designate the persons who shall be granted Incentive Awards and the amount and type of such Incentive Awards, provided, however that any Incentive Awards granted to non-employee directors of the Company shall be granted by the Board and not by the Committee. When referring to grants under the Plan to non-employee directors of the Company, any reference in this Plan to the Committee shall be deemed to refer to the Board of Directors. The Committee shall have full authority to administer the Plan, including authority to interpret and construe any provision of the Plan and the terms of any Incentive Award issued under it and to adopt such rules and regulations for administering the Plan as it may deem necessary. Decisions of the Committee shall be final and binding on all parties. The Committee may, in its absolute discretion (i) accelerate the date on which any Option or Stand-Alone SAR granted under the Plan becomes exercisable, (ii) accelerate the Vesting Date or Issue Date, or waive any condition imposed pursuant to Section 10(b) hereof, with respect to any share of Restricted Stock granted under the Plan and (iii) accelerate the Vesting Date or waive any condition imposed pursuant to Section 11 hereof, with respect to any share of Phantom Stock granted under the Plan. In addition, the Committee may, in its absolute discretion, grant Incentive Awards to Participants on the condition that such Participants surrender to the Committee for cancellation such other Incentive Awards (including, without limitation, Incentive Awards with higher exercise prices) as the Committee specifies. Notwithstanding Section 3 herein, prior to the surrender of such other Incentive Awards, Incentive Awards granted pursuant to the preceding sentence of this Section 4 shall not count against the limits set forth in such Section 3. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Committee. No member of the Committee shall be liable for any action, omission, or determination relating to the Plan, and Bion Environmental Technologies, Inc. shall indemnify and hold harmless each member of the Committee and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any action, omission or determination relating to the Plan, unless, in either case, such action, omission or determination was taken or made by such member, director or employee in bad faith and without reasonable belief that it was in the best interests of the Company. 5. Eligibility The persons who shall be eligible to receive Incentive Awards pursuant to the Plan shall be such persons, including employees, officers, and directors of the Company and non-employee consultants and advisors to the Company, as the Committee shall select from time to time. 6. Options Subject to the provisions of the Plan, the Committee may grant Options, which Options shall be evidenced by agreements in such form as the Committee shall from time to time approve. Options shall comply with and be subject to the following terms and conditions: (a) Identification of Options All Options granted under the Plan shall be clearly identified in the agreement evidencing such Options as either Incentive Stock Options or as Non-Qualified Stock Options. (b) Exercise Price The exercise price of any Non-Qualified Stock Option granted under the Plan shall be such price as the Committee shall determine on the date on which such Non-Qualified Stock Option is granted; provided, that such price may not be less than the minimum price required by applicable law. The exercise price of any Incentive Stock Option granted under the Plan shall be not less than 100% of the Fair Market Value of Common Shares on the date on which such Incentive Stock Option is granted. (c) Term and Exercise of Option (1) Each Option shall be exercisable on such date or dates, during such period and for such number of Common Shares as shall be determined by the Committee on the day on which such Option is granted and set forth in the Option agreement with respect to such Option; provided, however, that no Option shall be exercisable after the expiration of ten years from the date such Option was granted; and, provided, further, that each Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan. (2) Each Option shall be exercisable in whole or in part; provided, that no partial exercise of an Option shall be for an aggregate exercise price of less than $1,000, unless such partial exercise is for the last remaining unexercised portion of such Option. The partial exercise of an Option shall not cause the expiration, termination or cancellation of the remaining portion thereof. Upon the partial exercise of an Option, the agreements evidencing such Option and any related LSARs and Tandem SARs shall be returned to the Participant exercising such Option together with the delivery of the certificates described in Section 6(c)(5) hereof. (3) An Option shall be exercised by delivering notice to Bion Environmental Technologies, Inc.'s principal office, to the attention of its Secretary, no less than one business day in advance of the effective date of the proposed exercise. Such notice shall be accompanied by the agreements evidencing the Option and any related LSARs and Tandem SARs, shall specify the number of Common Shares with respect to which the Option is being exercised and the effective date of the proposed exercise and shall be signed by the Participant. The Participant may withdraw such notice at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise, in which case such agreements shall be returned to him. Payment for Common Shares purchased upon the exercise of an Option shall be made on the effective date of such exercise either (i) in cash, by certified check, bank cashier's check or wire transfer or (ii) subject to the approval of the Committee, in Common Shares owned by the Participant and valued at their Fair Market Value on the effective date of such exercise, or partly in Common Shares with the balance in cash, by certified check, bank cashier's check or wire transfer. Any payment in Common Shares shall be effected by the delivery of such shares to the Secretary of Bion Environmental Technologies, Inc., duly endorsed in blank or accompanied by stock powers duly executed in blank, together with any other documents and evidences as the Secretary of Bion Environmental Technologies, Inc. shall require from time to time. (4) Any Option granted under the Plan may be exercised by a broker-dealer acting on behalf of a Participant if (i) the broker-dealer has received from the Participant or the Company a fully-and-duly-endorsed agreement evidencing such Option and instructions signed by the Participant requesting Bion Environmental Technologies, Inc. to deliver the Common Shares subject to such Option to the broker-dealer on behalf of the Participant and specifying the account into which such shares should be deposited, (ii) adequate provision has been made with respect to the payment of any withholding taxes due upon such exercise and (iii) the broker-dealer and the Participant have otherwise complied with Section 220.3(e)(4) of Regulation T, 12 CFR Part 220. (5) Certificates for Common Shares purchased upon the exercise of an Option shall be issued in the name of the Participant and delivered to the Participant as soon as practicable following the effective date on which the Option is exercised. (d) Limitations on Grant of Incentive Stock Options (1) The aggregate Fair Market Value of Common Shares with respect to which "incentive stock options" (within the meaning of Section 422 of the Code) are exercisable for the first time by a Participant during any calendar year under the Plan and any other stock option plan of the Company (or any "subsidiary" of Bion Environmental Technologies, Inc. as such term is defined in Section 425 of the Code) shall not exceed $100,000. Such Fair Market Value shall be determined as of the date on which each such incentive stock option is granted. In the event that the aggregate Fair Market Value of Common Shares with respect to such incentive stock options exceeds $100,000, then Incentive Stock Options granted hereunder to such Participant shall, to the extent and in the order required by Regulations promulgated under the Code (or any other authority having the force of Regulations), automatically be deemed to be Non-Qualified Stock Options, but all other terms and provisions of such Incentive Stock Options shall remain unchanged. In the absence of such Regulations (and authority), or in the event such Regulations (or authority) require or permit a designation of the options which shall cease to constitute incentive stock options, Incentive Stock Options shall, to the extent of such excess and in the order in which they were granted, automatically be deemed to be Non-Qualified Stock Options, but all other terms and provisions of such Incentive Stock Options shall remain unchanged. (2) No Incentive Stock Option may be granted to an individual if, at the time of the proposed grant, such individual owns stock possessing more than ten percent of the total combined voting power of all classes of stock of Bion Environmental Technologies, Inc. or any of its "subsidiaries" (within the meaning of Section 425 of the Code), unless (i) the exercise price of such Incentive Stock Option is at least one hundred and ten percent of the Fair Market Value of a Common Share at the time such Incentive Stock Option is granted and (ii) such Incentive Stock Option is not exercisable after the expiration of five years from the date such Incentive Stock Option is granted. (e) Effect of Termination of Employment (1) In the event that the employment of a Participant with the Company shall terminate for any reason other than retirement at age 60 or later, Cause, Disability or death (i) Options granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the expiration of one month after such termination, on which date they shall expire, and (ii) Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination; provided, however, that no Option shall be exercisable after the expiration of its term. (2) In the event that the employment of a Participant with the Company shall terminate on account of the retirement at age 60 or later, Disability or death of the Participant (i) Options granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the expiration of one year after such termination, on which date they shall expire, and (ii) Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination; provided, however, that no Option shall be exercisable after the expiration of its term. (3) In the event of the termination of a Participant's employment for Cause, all outstanding Options granted to such Participant shall expire at the commencement of business on the date of such termination. (4) In the event that a Non-Employee Participant ceases to provide services to the Company, all Options granted to such Non-Employee Participant shall remain exercisable in accordance with their terms. (f) Acceleration of Exercise Date Upon Change in Control Upon the occurrence of a Change in Control, each Option granted under the Plan and outstanding at such time shall become fully and immediately exercisable and shall remain exercisable until its expiration, termination or cancellation pursuant to the terms of the Plan. 7. Limited Stock Appreciation Rights The Committee may grant in connection with any Option granted hereunder one or more LSARs relating to a number of Common Shares equal to or less than the number of Common Shares subject to the related Option. An LSAR may be granted at the same time as, or subsequent to the time that, its related Option is granted. Each LSAR shall be evidenced by an agreement in such form as the Committee shall from time to time approve. Each LSAR granted hereunder shall be subject to the following terms and conditions: (a) Benefit Upon Exercise (1) The exercise of an LSAR relating to a Non-Qualified Stock Option with respect to any number of Common Shares shall entitle the Participant to a cash payment, for each such share, equal to the excess of (i) the greater of (A) the highest price per Common Share paid in the Change in Control in connection with which such LSAR became exercisable and (B) the Fair Market Value of a Common Share on the date of such Change in Control over (ii) the exercise price of the related Option. Such payment shall be paid as soon as practical, but in no event later than the expiration of five business days, after the effective date of such exercise. (2) The exercise of an LSAR relating to an Incentive Stock Option with respect to any number of Common Shares shall entitle the Participant to a cash payment, for each such share, equal to the excess of (i) the Fair Market Value of a Common Share on the effective date of such exercise over (ii) the exercise price of the related Option. Such payment shall be paid as soon as practical, but in no event later than the expiration of five business days, after the effective date of such exercise. (b) Term and Exercise of LSARs (1) An LSAR shall be exercisable only during the period commencing on the first day following the occurrence of a Change in Control and terminating on the expiration of sixty days after such date. Notwithstanding the preceding sentence of this Section 7(b), in the event that an LSAR held by any Participant who is or may be subject to the provisions of Section 16(b) of the Exchange Act becomes exercisable prior to the expiration of six months following the date on which it is granted, then the LSAR shall also be exercisable during the period commencing on the first day immediately following the expiration of such six month period and terminating on the expiration of sixty days following such date. Notwithstanding anything else herein, an LSAR relating to an Incentive Stock Option may be exercised with respect to a Common Share only if the Fair Market Value of such share on the effective date of such exercise exceeds the exercise price relating to such share. Notwithstanding anything else herein, an LSAR may be exercised only if and to the extent that the Option to which it relates is exercisable. (2) The exercise of an LSAR with respect to a number of Common Shares shall cause the immediate and automatic cancellation of the Option to which it relates with respect to an equal number of shares. The exercise of an Option, or the cancellation, termination or expiration of an Option (other than pursuant to this Paragraph (2)), with respect to a number of Common Shares, shall cause the cancellation of the LSAR related to it with respect to an equal number of shares. (3) Each LSAR shall be exercisable in whole or in part; provided, that no partial exercise of an LSAR shall be for an aggregate exercise price of less than $1,000, unless such partial exercise is for the last remaining unexercised portion of such LSAR. The partial exercise of an LSAR shall not cause the expiration, termination or cancellation of the remaining portion thereof. Upon the partial exercise of an LSAR, the agreements evidencing the LSAR, the related Option and any Tandem SARs related to such Option shall be returned to the Participant exercising such LSAR together with the payment described in Paragraph 7(a)(1) or (2) hereof, as applicable. (4) An LSAR shall be exercised by delivering notice to Bion Environmental Technologies, Inc.'s principal office, to the attention of its Secretary, no less than one business day in advance of the effective date of the proposed exercise. Such notice shall be accompanied by the applicable agreements evidencing the LSAR, the related Option and any Tandem SARs relating to such Option, shall specify the number of Common Shares with respect to which the LSAR is being exercised and the effective date of the proposed exercise and shall be signed by the Participant. The Participant may withdraw such notice at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise, in which case such agreements shall be returned to him. 8. Tandem Stock Appreciation Rights The Committee may grant in connection with any Option granted hereunder one or more Tandem SARs relating to a number of Common Shares equal to or less than the number of Common Shares subject to the related Option. A Tandem SAR may be granted at the same time as, or subsequent to the time that, its related Option is granted. Each Tandem SAR shall be evidenced by an agreement in such form as the Committee shall from time to time approve. Tandem SARs shall comply with and be subject to the following terms and conditions: (a) Benefit Upon Exercise The exercise of a Tandem SAR with respect to any number of Common Shares shall entitle a Participant to a cash payment, for each such share, equal to the excess of (i) the Fair Market Value of a Common Share on the effective date of such exercise over (ii) the exercise price of the related Option. Such payment shall be paid as soon as practical, but in no event later than the expiration of five business days, after the effective date of such exercise. (b) Term and Exercise of Tandem SAR (1) A Tandem SAR shall be exercisable at the same time and to the same extent (on a proportional basis, with any fractional amount being rounded down to the immediately preceding whole number) as its related Option. Notwithstanding the first sentence of this Paragraph 8(b)(1), (i) a Tandem SAR shall not be exercisable at any time that an LSAR related to the Option to which the Tandem SAR is related is exercisable and (ii) a Tandem SAR relating to an Incentive Stock Option may be exercised with respect to a Common Share only if the Fair Market Value of such share on the effective date of such exercise exceeds the exercise price relating to such share. (2) Notwithstanding the first sentence of Paragraph 8(b)(1) hereof, the Committee may, in its absolute discretion, grant one or more Tandem SARs which shall not become exercisable unless and until the Participant to whom such Tandem SAR is granted is, in the determination of the Committee, subject to Section 16(b) of the Exchange Act and which shall cease to be exercisable if and at the time that the Participant ceases, in the determination of the Committee, to be subject to such Section 16(b). (3) The exercise of a Tandem SAR with respect to a number of Common Shares shall cause the immediate and automatic cancellation of its related Option with respect to an equal number of shares. The exercise of an Option, or the cancellation, termination or expiration of an Option (other than pursuant to this Paragraph (3)), with respect to a number of Common Shares shall cause the automatic and immediate cancellation of its related Tandem SARs to the extent that the number of Common Shares subject to such Option after such exercise, cancellation, termination or expiration is less than the number of shares subject to such Tandem SARs. Such Tandem SARs shall be canceled in the order in which they became exercisable. (4) Each Tandem SAR shall be exercisable in whole or in part; provided, that no partial exercise of a Tandem SAR shall be for an aggregate exercise price of less than $1,000, unless such partial exercise is for the last remaining unexercised portion of such Tandem SAR. The partial exercise of a Tandem SAR shall not cause the expiration, termination or cancellation of the remaining portion thereof. Upon the partial exercise of a Tandem SAR, the agreements evidencing such Tandem SAR, its related Option and LSARs relating to such Option shall be returned to the Participant exercising such Tandem SAR together with the payment described in Section 8(a) hereof. (5) A Tandem SAR shall be exercised by delivering notice to Bion Environmental Technologies, Inc.'s principal office, to the attention of its Secretary, no less than one business day in advance of the effective date of the proposed exercise. Such notice shall be accompanied by the applicable agreements evidencing the Tandem SAR, its related Option and any LSARs related to such Option, shall specify the number of Common Shares with respect to which the Tandem SAR is being exercised and the effective date of the proposed exercise and shall be signed by the Participant. The Participant may withdraw such notice at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise, in which case such agreements shall be returned to him. 9. Stand-Alone Stock Appreciation Rights Subject to the provisions of the Plan, the Committee may grant Stand-Alone SARs, which Stand-Alone SARs shall be evidenced by agreements in such form as the Committee shall from time to time approve. Stand-Alone SARs shall comply with and be subject to the following terms and conditions: (a) Exercise Price The exercise price of any Stand-Alone SAR granted under the Plan shall be determined by the Committee at the time of the grant of such Stand-Alone SAR. (b) Benefit Upon Exercise The exercise of a Stand-Alone SAR with respect to any number of Common Shares prior to the occurrence of a Change in Control shall entitle a Participant to a cash payment, for each such share, equal to the excess of (i) the Fair Market Value of a Common Share on the exercise date over (ii) the exercise price of the Stand-Alone SAR. The exercise of a Stand-Alone SAR with respect to any number of Common Shares upon or after the occurrence of a Change in Control shall entitle a Participant to a cash payment, for each such share, equal to the excess of (i) the greater of (A) the highest price per Common Share paid in connection with such Change in Control and (B) the Fair Market Value of a Common Share on the date of such Change in Control over (ii) the exercise price of the Stand-Alone SAR. Such payments shall be paid as soon as practical, but in no event later than five business days, after the effective date of the exercise. (c) Term and Exercise of Stand-Alone SARs (1) Each Stand-Alone SAR shall be exercisable on such date or dates, during such period and for such number of Common Shares as shall be determined by the Committee and set forth in the Stand-Alone SAR agreement with respect to such Stand-Alone SAR; provided, however, that no Stand-Alone SAR shall be exercisable after the expiration of ten years from the date such Stand-Alone SAR was granted; and, provided, further, that each Stand-Alone SAR shall be subject to earlier termination, expiration or cancellation as provided in the Plan. (2) Each Stand-Alone SAR may be exercised in whole or in part; provided, that no partial exercise of a Stand-Alone SAR shall be for an aggregate exercise price of less than $1,000, unless such partial exercise is for the last remaining unexercised portion of such Stand-Alone SAR. The partial exercise of a Stand-Alone SAR shall not cause the expiration, termination or cancellation of the remaining portion thereof. Upon the partial exercise of a Stand-Alone SAR, the agreement evidencing such Stand-Alone SAR shall be returned to the Participant exercising such Stand-Alone SAR together with the payment described in Section 9(b) hereof. (3) A Stand-Alone SAR shall be exercised by delivering notice to Bion Environmental Technologies, Inc.'s principal office, to the attention of its Secretary, no less than one business day in advance of the effective date of the proposed exercise. Such notice shall be accompanied by the applicable agreement evidencing the Stand-Alone SAR, shall specify the number of Common Shares with respect to which the Stand-Alone SAR is being exercised and the effective date of the proposed exercise and shall be signed by the Participant. The Participant may withdraw such notice at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise, in which case the agreement evidencing the Stand-Alone SAR shall be returned to him. (d) Effect of Termination of Employment (1) In the event that the employment of a Participant with the Company shall terminate for any reason other than retirement at age 60 or later, Cause, Disability or death, (i) Stand-Alone SARs granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the expiration of one month after such termination, on which date they shall expire, and (ii) Stand-Alone SARs granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination; provided, however, that no Stand-Alone SAR shall be exercisable after the expiration of its term. (2) In the event that the employment of a Participant with the Company shall terminate on account of the retirement at age 60 or later, Disability or death of the Participant, (i) Stand-Alone SARs granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the expiration of one year after such termination, on which date they shall expire, and (ii) Stand-Alone SARs granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination; provided, however, that no Stand-Alone SAR shall be exercisable after the expiration of its term. (3) In the event of the termination of a Participant's employment for Cause, all outstanding Stand-Alone SARs granted to such Participant shall expire at the commencement of business on the date of such termination. (4) In the event that a Non-Employee Participant ceases to provide services to the Company, all Stand-Alone SARs granted to such Non-Employee Participant shall remain exercisable in accordance with their terms. (e) Acceleration of Exercise Date Upon Change in Control Upon the occurrence of a Change in Control, each Stand-Alone SAR granted under the Plan and outstanding at such time shall become fully and immediately exercisable and shall remain exercisable until its expiration, termination or cancellation pursuant to the terms of the Plan. 10. Restricted Stock Subject to the provisions of the Plan, the Committee may grant shares of Restricted Stock. Each grant of shares of Restricted Stock shall be evidenced by an agreement in such form as the Committee shall from time to time approve. Each grant of shares of Restricted Stock shall comply with and be subject to the following terms and conditions: (a) Issue Date and Vesting Date At the time of the grant of shares of Restricted Stock, the Committee shall establish an Issue Date or Issue Dates and a Vesting Date or Vesting Dates with respect to such shares. The Committee may divide such shares into classes and assign a different Issue Date and/or Vesting Date for each class. Except as provided in Sections 10(c) and 10(f) hereof, upon the occurrence of the Issue Date with respect to a share of Restricted Stock, a share of Restricted Stock shall be issued in accordance with the provisions of Section 10(d) hereof. Provided that all conditions to the vesting of a share of Restricted Stock imposed pursuant to Section 10(b) hereof are satisfied, and except as provided in Sections 10(c) and 10(f) hereof, upon the occurrence of the Vesting Date with respect to a share of Restricted Stock, such share shall vest and the restrictions of Section 10(c) hereof shall cease to apply to such share. (b) Conditions to Vesting At the time of the grant of shares of Restricted Stock, the Committee may impose such restrictions or conditions, not inconsistent with the provisions hereof, to the vesting of such shares as it, in its absolute discretion, deems appropriate. By way of example and not by way of limitation, the Committee may require, as a condition to the vesting of any class or classes of shares of Restricted Stock, that the Participant or the Company achieve certain performance criteria, such criteria to be specified by the Committee at the time of the grant of such shares. (c) Restrictions on Transfer Prior to Vesting Prior to the vesting of a share of Restricted Stock, no transfer of a Participant's rights with respect to such shares, whether voluntary or involuntary, by operation of law or otherwise, shall vest the transferee with any interest or right in or with respect to such share, but immediately upon any attempt to transfer such rights, such share, and all of the rights related thereto, shall be forfeited by the Participant and the transfer shall be of no force or effect. (d) Issuance of Certificates (1) Except as provided in Sections 10(c) or 10(f) hereof, reasonably promptly after the Issue Date with respect to shares of Restricted Stock, Bion Environmental Technologies, Inc. shall cause to be issued a stock certificate, registered in the name of the Participant to whom such shares were granted, evidencing such shares; provided, that Bion Environmental Technologies, Inc. shall not cause to be issued such a stock certificate unless it has received a stock power duly endorsed in blank with respect to such shares. Each such stock certificate shall bear the following legend: "The transferability of this certificate and the shares of stock represented hereby is subject to the restrictions, terms and conditions (including forfeiture and restrictions against transfer) contained in the Bion Environmental Technologies, Inc. 2000 Incentive Plan and an Agreement entered into between the registered owner of such shares and Bion Environmental Technologies, Inc. A copy of the Plan and Agreement is on file in the office of the Secretary of Bion Environmental Technologies, Inc. Such legend shall not be removed from the certificate evidencing such shares until such shares vest pursuant to the terms hereof." (2) Each certificate issued pursuant to Paragraph 10(d)(1) hereof, together with the stock powers relating to the shares of Restricted Stock evidenced by such certificate, shall be deposited by the Company with a custodian designated by the Company. The Company shall cause such custodian to issue to the Participant a receipt evidencing the certificates held by it which are registered in the name of the Participant. (e) Consequences Upon Vesting Upon the vesting of a share of Restricted Stock pursuant to the terms hereof, the restrictions of Section 10(c) hereof shall cease to apply to such share. Reasonably promptly after a share of Restricted Stock vests pursuant to the terms hereof, Bion Environmental Technologies, Inc. shall cause to be issued and delivered to the Participant to whom such shares were granted, a certificate evidencing such share, free of the legend set forth in Paragraph 10(d)(1) hereof, together with any other property of the Participant held by the custodian pursuant to Section 14(b) hereof. (f) Effect of Termination of Employment (1) In the event that the employment of a Participant with the Company shall terminate for any reason other than Cause prior to the vesting of shares of Restricted Stock granted to such Participant, a proportion of such shares, to the extent not forfeited or canceled on or prior to such termination pursuant to any provision hereof, shall vest on the date of such termination. The proportion referred to in the preceding sentence shall be determined by the Committee at the time of the grant of such shares of Restricted Stock and may be based on the achievement of any conditions imposed by the Committee with respect to such shares pursuant to Section 10(b). Such proportion may be equal to zero. (2) In the event of the termination of a Participant's employment for Cause, all shares of Restricted Stock granted to such Participant which have not vested as of the date of such termination shall immediately be forfeited. (3) In the event that a Non-Employee Participant ceases to provide services to the Company, all shares of Restricted Stock granted to such Non-Employee Participant shall vest in accordance with the terms of the grant. (g) Effect of Change in Control Upon the occurrence of a Change in Control, all shares of Restricted Stock which have not theretofore vested (including those with respect to which the Issue Date has not yet occurred), or been canceled or forfeited pursuant to any provision hereof, shall immediately vest. 11. Phantom Stock Subject to the provisions of the Plan, the Committee may grant shares of Phantom Stock. Each grant of shares of Phantom Stock shall be evidenced by an agreement in such form as the Committee shall from time to time approve. Each grant of shares of Phantom Stock shall comply with and be subject to the following terms and conditions: (a) Vesting Date At the time of the grant of shares of Phantom Stock, the Committee shall establish a Vesting Date or Vesting Dates with respect to such shares. The Committee may divide such shares into classes and assign a different Vesting Date for each class. Provided that all conditions to the vesting of a share of Phantom Stock imposed pursuant to Section 11(c) hereof are satisfied, and except as provided in Section 11(d) hereof, upon the occurrence of the Vesting Date with respect to a share of Phantom Stock, such share shall vest. (b) Benefit Upon Vesting Upon the vesting of a share of Phantom Stock, a Participant shall be entitled to receive in cash, within 30 days of the date on which such share vests, an amount in cash in a lump sum equal to the sum of (i) the Fair Market Value of a Common Share of the Company on the date on which such share of Phantom Stock vests and (ii) the aggregate amount of cash dividends paid with respect to a Common Share of the Company during the period commencing on the date on which the share of Phantom Stock was granted and terminating on the date on which such share vests. (c) Conditions to Vesting At the time of the grant of shares of Phantom Stock, the Committee may impose such restrictions or conditions, not inconsistent with the provisions hereof, to the vesting of such shares as it, in its absolute discretion, deems appropriate. By way of example and not by way of limitation, the Committee may require, as a condition to the vesting of any class or classes of shares of Phantom Stock, that the Participant or the Company achieve certain performance criteria, such criteria to be specified by the Committee at the time of the grant of such shares. (d) Effect of Termination of Employment (1) In the event that the employment of a Participant with the Company shall terminate for any reason other than Cause prior to the vesting of shares of Phantom Stock granted to such Participant, a proportion of such shares, to the extent not forfeited or canceled on or prior to such termination pursuant to any provision hereof, shall vest on the date of such termination. The proportion referred to in the preceding sentence shall be determined by the Committee at the time of the grant of such shares of Phantom Stock and may be based on the achievement of any conditions imposed by the Committee with respect to such shares pursuant to Section 11(c). Such proportion may be equal to zero. (2) In the event of the termination of a Participant's employment for Cause, all shares of Phantom Stock granted to such Participant which have not vested as of the date of such termination shall immediately be forfeited. (3) In the event that a Non-Employee Participant ceases to provide services to the Company, all shares of Phantom Stock granted to such Non-Employee Participant shall vest in accordance with the terms of the grant. (e) Effect of Change in Control Upon the occurrence of a Change in Control, all shares of Phantom Stock which have not theretofore vested, or been canceled or forfeited pursuant to any provision hereof, shall immediately vest. 12. Stock Bonuses Subject to the provisions of the Plan, the Committee may grant Stock Bonuses in such amounts as it shall determine from time to time. A Stock Bonus shall be paid at such time and subject to such conditions as the Committee shall determine at the time of the grant of such Stock Bonus. Certificates for Common Shares granted as a Stock Bonus shall be issued in the name of the Participant to whom such grant was made and delivered to such Participant as soon as practicable after the date on which such Stock Bonus is required to be paid. 13. Cash Bonuses Subject to the provisions of the Plan, the Committee may grant, in connection with any grant of Restricted Stock or Stock Bonus or at any time thereafter, a cash bonus, payable promptly after the date on which the Participant is required to recognize income for federal income tax purposes in connection with such Restricted Stock or Stock Bonus, in such amounts as the Committee shall determine from time to time; provided however, that in no event shall the amount of a Cash Bonus exceed 50% of the Fair Market Value of the related shares of Restricted Stock or Stock Bonus on such date. A Cash Bonus shall be subject to such conditions as the Committee shall determine at the time of the grant of such Cash Bonus. 14. Adjustment Upon Changes in Common Shares (a) Shares Available for Grants In the event of any change in the number of Common Shares outstanding by reason of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or similar corporate change, the maximum aggregate number of Common Shares with respect to which the Committee may grant Options, Stand-Alone SARs, shares of Restricted Stock, shares of Phantom Stock and Stock Bonuses shall be appropriately adjusted by the Committee. In the event of any change in the number of Common Shares outstanding by reason of any other event or transaction, the Committee may, but need not, make such adjustments in the number and class of Common Shares with respect to which Options, Stand-Alone SARs, shares of Restricted Stock, shares of Phantom Stock and Stock Bonuses may be granted as the Committee may deem appropriate. (b) Outstanding Restricted Stock and Phantom Stock Unless the Committee in its absolute discretion otherwise determines, any securities or other property (including dividends paid in cash) received by a Participant with respect to a share of Restricted Stock, the Issue Date with respect to which occurs prior to such event, but which has not vested as of the date of such event, as the result of any dividend, stock split, recapitalization, merger, consolidation, combination, exchange of shares or otherwise, will not vest until such share of Restricted Stock vests, and shall be promptly deposited with the custodian designated pursuant to Paragraph 10(d)(2) hereof. The Committee may, in its absolute discretion, adjust any grant of shares of Restricted Stock, the Issue Date with respect to which has not occurred as of the date of the occurrence of any of the following events, or any grant of shares of Phantom Stock, to reflect any dividend, stock split, recapitalization, merger, consolidation, combination, exchange of shares or similar corporate change as the Committee may deem appropriate to prevent the enlargement or dilution of rights of Participants under the grant. (c) Outstanding Options, LSARs, Tandem SARs and Stand-Alone SARs--Certain Increases or Decreases in Issued Shares Without Consideration Subject to any required action by the shareholders of Bion Environmental Technologies, Inc., in the event of any increase or decrease in the number of issued Common Shares resulting from a subdivision or consolidation of Common Shares or the payment of a stock dividend (but only on the Common Shares), the Committee shall proportionally adjust the number of Common Shares subject to each outstanding Option, LSAR, Tandem SAR and Stand-Alone SAR, and the exercise price per Common Share of each such Option, LSAR, Tandem SAR and Stand-Alone SAR. (d) Outstanding Options, LSARs, Tandem SARs and Stand-Alone SARs--Certain Mergers Subject to any required action by the shareholders of Bion Environmental Technologies, Inc., in the event that Bion Environmental Technologies, Inc. shall be the surviving corporation in any merger or consolidation (except a merger or consolidation as a result of which the holders of Common Shares receive securities of another corporation), each Option, LSAR, Tandem SAR and Stand-Alone SAR outstanding on the date of such merger or consolidation shall pertain to and apply to the securities which a holder of the number of Common Shares subject to such Option, LSAR, Tandem SAR or Stand-Alone SAR would have received in such merger or consolidation. (e) Outstanding Options, LSARs, Tandem SARs and Stand-Alone SARs--Certain Other Transactions In the event of (i) a dissolution or liquidation of Bion Environmental Technologies, Inc., (ii) a sale of all or substantially all of Bion Environmental Technologies, Inc.'s assets, (iii) a merger or consolidation involving Bion Environmental Technologies, Inc. in which Bion Environmental Technologies, Inc. is not the surviving corporation or (iv) a merger or consolidation involving Bion Environmental Technologies, Inc. in which Bion Environmental Technologies, Inc. is the surviving corporation but the holders of Common Shares receive securities of another corporation and/or other property, including cash, the Committee shall, in its absolute discretion, have the power to: (i) cancel, effective immediately prior to the occurrence of such event, each Option (including each LSAR and Tandem SAR related thereto) and Stand-Alone SAR outstanding immediately prior to such event (whether or not then exercisable), and, in full consideration of such cancellation, pay to the Participant to whom such Option or Stand-Alone SAR was granted an amount in cash, for each Common Share subject to such Option or Stand-Alone SAR, respectively, equal to the excess of (A) the value, as determined by the Committee in its absolute discretion, of the property (including cash) received by the holder of a Common Share as a result of such event over (B) the exercise price of such Option or Stand-Alone SAR; or (ii) provide for the exchange of each Option (including any related LSAR or Tandem SAR) and Stand-Alone SAR outstanding immediately prior to such event (whether or not then exercisable) for an option on or stock appreciation right with respect to, as appropriate, some or all of the property for which such Option or Stand-Alone SAR is exchanged and, incident thereto, make an equitable adjustment as determined by the Committee in its absolute discretion in the exercise price of the option or stock appreciation right, or the number of shares or amount of property subject to the option or stock appreciation right or, if appropriate, provide for a cash payment to the Participant to whom such Option or Stand-Alone SAR was granted in partial consideration for the exchange of the Option or Stand-Alone SAR. (f) Outstanding Options, LSARs, Tandem SARs and Stand-Alone SARs--Other Changes In the event of any change in the capitalization of Bion Environmental Technologies, Inc. or corporate change other than those specifically referred to in Section 14(c), (d) or (e) hereof, the Committee may, in its absolute discretion, make such adjustments in the number and class of shares subject to Options, LSARs, Tandem SARs or Stand-Alone SARs outstanding on the date on which such change occurs and in the per share exercise price of each such Option, LSAR, Tandem SAR and Stand-Alone SAR as the Committee may consider appropriate to prevent dilution or enlargement of rights. (g) No Other Rights Except as expressly provided in the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger or consolidation of Bion Environmental Technologies, Inc. or any other corporation. Except as expressly provided in the Plan, no issuance by Bion Environmental Technologies, Inc. of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to the number of Common Shares subject to an Incentive Award or the exercise price of any Option, LSAR, Tandem SAR or Stand-Alone SAR. 15. Rights as a Shareholder No person shall have any rights as a shareholder with respect to any Common Shares covered by or relating to any Incentive Award granted pursuant to this Plan until the date of the issuance of a stock certificate with respect to such shares. Except as otherwise expressly provided in Section 14 hereof, no adjustment to any Incentive Award shall be made for dividends or other rights for which the record date occurs prior to the date such stock certificate is issued. 16. No Special Employment Rights; No Right to Incentive Award Nothing contained in the Plan or any Incentive Award shall confer upon any Participant any right with respect to the continuation of his employment by the Company or interfere in any way with the right of the Company, subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Incentive Award. No person shall have any claim or right to receive an Incentive Award hereunder. The Committee's granting of an Incentive Award to a Participant at any time shall neither require the Committee to grant an Incentive Award to such Participant or any other Participant or other person at any time nor preclude the Committee from making subsequent grants to such Participant or any other Participant or other person. 17. Securities Matters (a) The Company shall be under no obligation to effect the registration pursuant to the Securities Act of any Common Shares to be issued hereunder or to effect similar compliance under any state laws. Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be issued or delivered any certificates evidencing Common Shares pursuant to the Plan unless and until the Company is advised by its counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which Common Shares are traded. The Committee may require, as a condition of the issuance and delivery of certificates evidencing Common Shares pursuant to the terms hereof, that the recipient of such shares make such covenants, agreements and representations, and that such certificates bear such legends, as the Committee, in its sole discretion, deems necessary or desirable. (b) The exercise of any Option granted hereunder shall only be effective at such time as counsel to the Company shall have determined that the issuance and delivery of Common Shares pursuant to such exercise is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which Common Shares are traded. The Company may, in its sole discretion, defer the effectiveness of any exercise of an Option granted hereunder in order to allow the issuance of shares of Common Stock pursuant thereto to be made pursuant to registration or an exemption from the registration or other methods for compliance available under federal or state securities laws. The Company shall inform the Participant in writing of its decision to defer the effectiveness of the exercise of an Option granted hereunder. During the period that the effectiveness of the exercise of an Option has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto. (c) With respect to persons subject to Section 16 of the Securities Exchange Act of 1934, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan, the grant of an Incentive Award, or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 18. Withholding Taxes (a) Cash Remittance Whenever Common Shares are to be issued upon the exercise of an Option, the occurrence of the Issue Date or Vesting Date with respect to a share of Restricted Stock or the payment of a Stock Bonus, the Company shall have the right to require the Participant to remit to the Company in cash an amount sufficient to satisfy federal, state and local withholding tax requirements, if any, attributable to such exercise, occurrence or payment prior to the delivery of any certificate or certificates for such shares. In addition, upon the exercise of an LSAR, Tandem SAR or Stand-Alone SAR, the grant of a Cash Bonus or the making of a payment with respect to a share of Phantom Stock, the Company shall have the right to withhold from any cash payment required to be made pursuant thereto an amount sufficient to satisfy the federal, state and local withholding tax requirements. (b) Stock Remittance At the election of the Participant, subject to the approval of the Committee, when Common Shares are to be issued upon the exercise of an Option, the occurrence of the Issue Date or the Vesting Date with respect to a share of Restricted Stock or the grant of a Stock Bonus, in lieu of the remittance required by Section 18(a) hereof, the Participant may tender to the Company a number of Common Shares determined by such Participant, the Fair Market Value of which at the tender date the Committee determines to be sufficient to satisfy the federal, state and local withholding tax requirements, if any, attributable to such exercise, occurrence or grant and not greater than the Participant's estimated total federal, state and local tax obligations associated with such exercise, occurrence or grant. (c) Stock Withholding At the election of the Participant, subject to the approval of the Committee, when Common Shares are to be issued upon the exercise of an Option, the occurrence of the Issue Date or the Vesting Date with respect to a share of Restricted Stock or the grant of a Stock Bonus, in lieu of the remittance required by Section 18(a) hereof, the Company shall withhold a number of such shares determined by such Participant, the Fair Market Value of which at the exercise date the Committee determines to be sufficient to satisfy the federal, state and local withholding tax requirements, if any, attributable to such exercise, occurrence or grant and is not greater than the Participant's estimated total federal, state and local tax obligations associated with such exercise, occurrence or grant. 19. Amendment of the Plan The Plan will have no fixed termination date, but may be terminated at any time by the Board of Directors. Incentive Awards outstanding as of the date of any such termination will not be affected or impaired by the termination of the Plan. The Board of Directors may amend, alter, or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would (i) impair the rights of a Participant without the Participant's consent, except such an amendment which is necessary to cause any Incentive Award or transaction under the Plan to qualify, or to continue to qualify, for the exemption provided by Rule 16b-3, or (ii) disqualify any Incentive Award or transaction under the Plan from the exemption provided by Rule 16b-3. In addition, no such amendment may be made without the approval of the Company's shareholders to the extent such approval is required by law or agreement. 20. No Obligation to Exercise The grant to a Participant of an Option, LSAR, Tandem SAR or Stand-Alone SAR shall impose no obligation upon such Participant to exercise such Option, LSAR, Tandem SAR or Stand-Alone SAR. 21. Nontransferability Unless the Committee provides otherwise, (i) no right or interest of a Participant in any Incentive Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary, and (ii) no Incentive Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution. 22. Expenses and Receipts The expenses of the Plan shall be paid by the Company. Any proceeds received by the Company in connection with any Incentive Award will be used for general corporate purposes. 23. Suspension or Termination of Incentive Award In addition to the remedies of the Company elsewhere provided for herein, if the Committee reasonably believes that a Participant has committed an act of misconduct as described in this Section, the Committee may suspend the Participant's rights to exercise any Incentive Award pending a determination by the Board of Directors. If the Board of Directors determines a Participant has committed an act of misconduct, including, but not limited to, embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the Company, breach of fiduciary duty or deliberate disregard of the Company's rules resulting in loss, damage or injury to the Company, or a Participant makes an unauthorized disclosure of any Company trade secret or confidential information, engages in any conduct constituting unfair competition, induces any Company customer to breach a contract with the Company, induces any principal for whom the Company acts as agent to terminate such agency relationship, or has failed to comply with the terms and conditions of the Plan or any agreement executed by such Participant evidencing an Incentive Award, unless such failure has been remedied by such Participant within 10 days after having been notified of such failure by the Committee, neither the Participant nor his or her estate, executors, administrators, or heirs, shall be entitled to exercise any Incentive Award whatsoever. In making such determination, the Board of Directors shall act fairly and shall give the Participant an opportunity to appear and present evidence on his or her behalf at a hearing before a committee of the Board of Directors. For any Participant who is an "Executive Officer" for the purposes of Section 16 of the Securities Exchange Act of 1934, as amended, a determination of the Board of Directors shall be subject to the approval of the Committee. 24. Code Section 162(m). The Committee, in its sole discretion, may require that one or more Incentive Awards contain provisions which provide that, in the event Section 162(m) of the Code, or any successor provision relating to excessive employee remuneration, would operate to disallow a deduction by the Company for all or part of any Incentive Award under the Plan, a Participant's receipt of the portion of such Incentive Award that would not be deductible by the Company shall be deferred until the next succeeding year or years in which the Participant's remuneration does not exceed the limit set forth in such provision of the Code. 25. Effective Date of Plan The Plan shall be effective as of April 15, 2000, subject to approval by the Company's Shareholders at their next Annual or Special Meeting. EX-99.6 7 0007.txt Bion Environmental Technologies, Inc. Announces Monitoring and Control System Initiative; Option on Dream Maker Dairy September 7, 2000. Littleton, CO. Bion Environmental Technologies, Inc. (OTCBB: BION) announced today that it expects to begin testing its new NMS (Nutrient Management System) with an integrated monitoring and control system within thirty days at Dream Maker Dairy in upstate New York. The initial monitoring system has been installed and in operation since late July, 2000. Construction modifications, as well as the installation of additional hardware and communication links for the control modules, are expected to be completed by mid-October. This next-generation system is being installed in parallel with an existing Bion NMS that has been processing Dream Maker's waste since 1996. The new system employs computerized, real-time monitoring and control that can be remotely accessed for both reporting requirements and control functions. The enhanced Bion NMS is designed to reduce the size of the systems by up to 80% over the current NMS technology while maintaining the same processing capacity; alternatively, the processing capacity of the current technology could be increased by a factor of up to five without a corresponding increase in size. According to Dr. Jere Northrop, Bion's Chief Technology Officer, "With the initial success of our monitoring system program, we are confident that we will have achieved a significant increase in efficiency in the next sixty days. In the near future, we anticipate reaching performance levels five to twenty times that of our current systems." Results of the monitoring and control initiative are anticipated to be available before the end of the calendar year. Dr. Northrop also noted that, "We expect to obtain similar results in applying this next-generation technology to our swine systems." Currently, there is a direct correlation between the number of animals on a farm and the land required to spread the waste. By converting the waste into a high value soil amendment, BionSoil, which is then sold, the enhanced NMS creates a nutrient removal mechanism - enabling producers to disassociate herd size from the land area required for manure application. As a result, capital requirements for both land and equipment are significantly reduced. David Mitchell, Bion's CEO, stated, "Using a dairy model, it is not hard to see that by separating the milk production from the less profitable farming operations needed for manure and nutrient management, the economics of the operation change dramatically. The successful implementation of the new Bion NMS will allow larger and more efficient operations with substantially improved margins but without the environmental liabilities associated with current nutrient management practices." Upon completion of the monitoring and control modifications, it is anticipated that Bion's next-generation system will enable Dream Maker Dairy to expand its existing operation from 350 dairy cows up to 3,000 cows on the same ninety- eight acres, while continuing to comply with New York State CAFO (Confined Animal Feeding Operation) nutrient management regulations. These regulations utilize a guideline of approximately two acres per dairy cow for the field application of nutrients. Without a technology solution, such a guideline would make Dream Maker's proposed expansion impractical by requiring an additional 6,000 acres for nutrient management. As part of an amended agreement with Dream Maker Dairy, Bion has acquired an option to purchase the dairy. Exercise of the option is contingent upon several conditions including the successful conclusion of Bion's monitoring and control system initiative, the arrangement of financing for the proposed expansion of Dream Maker from 350 dairy cows to eventually 3,000, and other final terms and conditions. (See Bion's 8-K dated August 3, 2000, Item 5.7 and Exhibit 99.7). - ---------------------------------------------------------------------------- Bion Environmental Technologies, Inc., designs and operates patented biological treatment systems that eliminate the odors and nutrient leaching from the waste produced on large hog and dairy farms. The systems, which can be monitored from remote locations, convert the waste into BionSoil, a nutrient-rich, soil enhancement or fertilizer material. The Company has offices in New York, Colorado, North Carolina, California and Florida. Inquiries may be directed to Craig Scott, Director of Investor Relations, at 800-769-7205 or 303-843-6191. This material includes forward-looking statements based on management's current reasonable business expectations. These statements are made in reliance on the Private Securities Litigation Reform Act, Section 27A of the Securities Act of 1933, as amended. There are numerous risks and uncertainties that could result in actual results differing materially from expected outcomes. This material should be read in conjunction with the Company's current annual and quarterly reports filed with the SEC, which contain discussions of currently known factors that could significantly impact the Company's future expectations. -----END PRIVACY-ENHANCED MESSAGE-----