BION ENVIRONMENTAL TECHNOLOGIES, INC.
18 East 50th Street, 10th Floor
New York, New York 10022
(212) 758-6622
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 4, 2002
TO THE SHAREHOLDERS OF BION ENVIRONMENTAL TECHNOLOGIES, INC.:
NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders of Bion
Environmental Technologies, Inc., a Colorado corporation (the "Company"), will
be held at the Company's headquarters at 18 East 50th Street, 10th Floor, New
York, New York, on Thursday, April 4, 2002, at 10:00 a.m., Eastern Time, and
at any and all adjournments thereof, for the purpose of considering and acting
upon the following matters.
1. The election of five (5) Directors of the Company to serve until the
next Annual Meeting of Shareholders and until their successors have been duly
elected and qualified;
2. The ratification of the appointment of BDO Seidman, LLP as the
Company's independent auditors;
3. The approval of the Company's 2002 Incentive Plan;
4. The approval of a proposed 1 for 3.5 reverse split of the
outstanding shares of the Company's common stock; and
5. The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
Only holders of the no par value common stock of the Company of record at
the close of business on February 25, 2002, will be entitled to notice of and
to vote at the Meeting or at any adjournment or adjournments thereof. The
proxies are being solicited by the Board of Directors of the Company.
All shareholders, whether or not they expect to attend the Annual Meeting
of Shareholders in person, are urged to sign and date the enclosed Proxy and
return it promptly in the enclosed postage-paid envelope which requires no
additional postage if mailed in the United States. The giving of a proxy will
not affect your right to vote in person if you attend the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
DAVID J. MITCHELL, PRESIDENT
New York, New York
March 5, 2002
BION ENVIRONMENTAL TECHNOLOGIES, INC.
18 East 50th Street, 10th Floor
New York, New York 10022
(212) 758-6622
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 4, 2002
GENERAL INFORMATION
The enclosed Proxy is solicited by and on behalf of the Board of
Directors of Bion Environmental Technologies, Inc., a Colorado corporation
(the "Company," "we," "us" or "our"), for use at the Company's Annual Meeting
of Shareholders to be held at the Company's headquarters at 18 East 50th
Street, 10th Floor, New York, New York, on Thursday, April 4, 2002, at 10:00
a.m., Eastern Time, and at any and all adjournments thereof. It is
anticipated that this Proxy Statement and the accompanying Proxy will be
mailed to the Company's shareholders on or about March 8, 2002.
Any person signing and returning the enclosed Proxy may revoke it at any
time before it is voted by giving written notice of such revocation to the
Company, or by voting in person at the Meeting. The expense of soliciting
proxies, including the cost of preparing, assembling and mailing this proxy
material to shareholders, will be borne by the Company. It is anticipated
that solicitations of proxies for the Meeting will be made only by use of the
mails; however, the Company may use the services of its Directors, Officers
and employees to solicit proxies personally or by telephone, without
additional salary or compensation to them. Brokerage houses, custodians,
nominees and fiduciaries will be requested to forward the proxy soliciting
materials to the beneficial owners of the Company's shares held of record by
such persons, and the Company will reimburse such persons for their reasonable
out-of-pocket expenses incurred by them in that connection.
All shares represented by valid proxies will be voted in accordance
therewith at the Meeting.
The Company's Annual Report on Form 10-KSB for the year ended June 30,
2001, is being simultaneously mailed to the Company's shareholders, but does
not constitute part of these proxy soliciting materials.
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the Company's
no par value common stock, with each share entitled to one vote. Only
shareholders of record at the close of business on February 25, 2002, are
entitled to notice of and to vote at the Meeting or any adjournment thereof.
On February 25, 2002, the Company had 52,671,128 shares of its no par value
common stock outstanding. Centerpoint Corporation, a majority-owned
subsidiary, holds 19,000,000 of the shares outstanding. Under Section
7-107-202(2) of the Colorado Business Corporation Act these shares are not
entitled to vote at the Meeting. As a result, 33,671,128 shares of common
stock are entitled to vote at the Meeting, each of which is entitled to one
vote on all matters to be voted upon at the Meeting, including the election
of Directors. Cumulative voting in the election of Directors is not
permitted.
A majority of the Company's common stock entitled to vote at the Meeting
represented in person or by proxy shall constitute a quorum at the Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of
the Company's no par value common stock owned beneficially, as of February 25,
2002, by any person, who is known to the Company to be the beneficial owner of
5% or more of such common stock, and, in addition, by each Director of the
Company, Nominee for Director, and Executive Officer and by all Directors,
Nominees for Director and Executive Officers of the Company as a group.
Information as to beneficial ownership is based upon statements furnished to
the Company by such persons.
Percent of Class
----------------------
Name and Address of Amount and Nature of Entitled
Beneficial Owner Beneficial Ownership Outstanding to Vote
------------------- -------------------- ----------- --------
David J. Mitchell 18,706,663(1) 29.7% 41.4%
18 E. 50th Street
10th Floor
New York, NY 10022
Centerpoint Corporation 19,000,000(2) 36.1% --
18 E. 60th Street
10th Floor
New York, NY 10022
Mark A. Smith 7,186,075(3) 13.6% 21.3%
409 Spruce Street
Boulder, CO 80302
Jere Northrop 1,639,792(4) 3.1% 4.9%
1961 Tonawanda Creek Rd.
Amherst, NY 14228
Atlantic Partners LLC 10,373,427(5) 16.5% 23.6%
18 E. 50th Street
10th Floor
New York, NY 10022
LoTayLingKyur Foundation 2,716,186 5.2% 8.1%
409 Spruce Street
Boulder, CO 80302
Dublin Holding, Ltd. 2,805,653 5.3% 8.3%
C/O Amerilawyer, Ltd.
Attn: Lloyd Rodney, Esq.
Harbor House
P.O. Box 120, Grand Turk
Turks & Caicos Isl., B.W.I.
Salvatore J. Zizza 438,003(6) 0.8% 1.3%
810 Seventh Ave., 27th Floor
New York, NY 10019
2
Andrew G. Gould 88,497(7) 0.2% 0.3%
c/o Bion Environmental
Technologies
18 E. 50th Street, 10th Floor
New York, NY 10022
Howard E. Chase -0- -- --
44 Holland Brook Road
Whitehouse Station, NJ 08889
David Fuller 19,167(8) * *
18 E. 50th Street, 10th Floor
New York, NY 10022
All Directors, Nominees 23,608,308(9) 37.3% 53.2%
for Director and Executive
Officers as a Group (6
persons)
__________________
* Less than 0.1%
(1) Includes 557,326 shares held by D2 Co., LLC, which is wholly owned by
David Mitchell; 594,835 shares held by a trust for the benefit of D2
Co., LLC; warrants owned by Atlantic Partners LLC, which is wholly
owned by David Mitchell, to purchase 10,373,427 shares of Common stock
exercisable until February 16, 2006; and 30,000 shares underlying bridge
warrants held by D2 Co., LLC. Also includes 20,000 shares held by a
minor child of David Mitchell. Also includes 7,161,075 shares over
which David Mitchell (through D2 Co., LLC) holds voting control through
a voting agreement involving shares beneficially owned by Mark A. Smith
including LoTayLingKyur, Inc. (owned by Mr. Smith and his wife), the
LoTayLingKyur Foundation (operated by Mr. Smith) and Dublin Holding,
Ltd. (voted by Mr. Smith).
(2) Centerpoint Corporation is currently majority-owned by the Company.
Under Colorado law, the shares held by Centerpoint Corporation are not
entitled to vote at the Meeting.
(3) Includes 476,226 shares held jointly by Mark Smith with his wife;
596,822 shares held by Mark A. Smith IRA Rollover; 509,036 shares held
by Kelly Smith IRA Rollover; 2,716,186 shares held by LoTayLingKyur
Foundation which is controlled by Mark Smith; 57,152 shares held by
LoTayLingKyur, Inc. which is owned by Mark A. Smith and his wife;
and 2,805,653 shares held by Dublin Holding, Ltd. ("DHL"). Also
includes 25,000 shares underlying currently exercisable options held
by Mark A. Smith. Mr. Smith disclaims beneficial ownership of the
shares held by DHL. The DHL shares are currently subject to a voting
agreement with D2 Co., LLC, which is owned by David Mitchell. Mr.
Smith acts as agent of DHL for various purposes, including voting the
shares on limited matters not covered by the voting agreement.
(4) Includes 1,053,952 shares held directly by Jere Northrop; 359,010 shares
held by his wife; and 201,830 shares held by a family trust; and options
to purchase 25,000 shares held by Mr. Northrop. Does not include shares
owned by an adult child of Jere Northrop, 15,080 shares owned by the
Jere and Lynn Northrop Family Foundation, and 79,052 shares owned by the
Jere Northrop Family trust, for each of which Mr. Northrop disclaims
beneficial ownership.
3
(5) Atlantic Partners LLC, which is wholly owned by David Mitchell, owns
warrants to purchase 10,373,427 shares of Common stock at $.75 per
share through February 16, 2006.
(6) Includes 218,453 shares held by Mr. Zizza; options held by Mr. Zizza to
purchase 175,000 shares of Common stock at $1.10 per share until
December 31, 2003; shares underlying J1 bridge warrants to purchase
15,000 shares of Common stock at $.60 per share until December 31,
2004; and shares underlying an underlying J1B bridge warrant to purchase
29,550 shares of Common stock at $.75 per share until December 31, 2004.
(7) Includes 11,134 shares held by Mr. Gould; options held by Mr. Gould to
purchase 75,000 shares of Common stock at $.75 per share until December
31, 2003; and 2,363 shares underlying warrants.
(8) Includes 5,000 shares held by Mr. Fuller and options to purchase
14,167 shares of Common stock at $1.10 per share until December 31,
2003.
(9) Includes 10,725,340 shares underlying options and warrants exercisable
within sixty days.
ELECTION OF DIRECTORS
The Company's Bylaws have been amended to provide that effective at the
Annual Meeting of Shareholders that the Board of Directors will consist of
eight members. The Board of Directors recommends the election as Directors of
the five (5) nominees listed below, to hold office until the next Annual
Meeting of Shareholders and until their successors are elected and qualified
or until their earlier death, resignation or removal. Each of the five
current members of the present Board of Directors has been nominated for
re-election. The persons named as "Proxies" in the enclosed form of Proxy
will vote the shares represented by all valid returned proxies in accordance
with the specifications of the shareholders returning such proxies. If at
the time of the Meeting any of the nominees named below should be unable to
serve, which event is not expected to occur, the discretionary authority
provided in the Proxy will be exercised to vote for such substitute nominee
or nominees, if any, as shall be designated by the Board of Directors.
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company presently
held, and the period during which each person has served as a Director:
Period of Service
Name Age Position(s) as a Director
---- --- ----------- -----------------
David J. Mitchell 40 Chairman, Chief Executive December 23, 1999
Officer, President and to Present
Director
Jere Northrop 59 Director April 9, 1992 to
Present
Salvatore J. Zizza 55 Director and Secretary December 23, 1999
to Present
Andrew G. Gould 47 Director August 10, 2000
to Present
4
Howard E. Chase 65 Director January 21, 2002
to Present
There is currently no family relationship between any Director or
Executive Officer of the Company.
The Company has no Nominating Committee, but does have a Compensation
Committee, an Audit Committee and a Executive Committee.
The Compensation Committee presently consists of Salvatore J. Zizza. The
Compensation Committee reviews the compensation arrangements for each of the
Company's Executive Officers and makes recommendations to the Board of
Directors. During the fiscal year ended June 30, 2001, this committee held
one (1) meeting.
The Audit Committee presently consists solely of Salvatore J. Zizza.
Ronald G. Cullis was a member but resigned in September 2001. It is
anticipated that a new member will be appointed. The Audit Committee reviews
audit plans, reports on material changes in accounting principles and audit
reports. During the fiscal year ended June 30, 2001, the Audit Committee did
not have any formal meetings, but the Chair of the Audit Committee had four
(4) telephone meetings with the Company's Principal Accounting Officer and
independent auditors.
The Executive Committee currently consists solely of David J. Mitchell.
Mark Smith was a member but recently resigned. It is anticipated that a new
member will be appointed. The Executive Committee acts on behalf of the Board
of Directors on specific items as designated by the Board. During the fiscal
year ended June 30, 2001, the Executive Committee held eight (8) meetings.
Set forth below are the names of all directors, nominees for director and
executive officers of the Company, all positions and offices with the Company
held by each such person, the period during which he has served as such, and
the principal occupations and employment of such persons during at least the
last five years:
David J. Mitchell has been our Chairman since September 6, 2001, our
Chief Executive Officer and a Director since December 23, 1999 and our
President since August 10, 2000. Since January 1991, Mr. Mitchell has been
the President of Mitchell & Co., Ltd., a merchant banking company he founded.
Mr. Mitchell is the immediate past president of AmeriCash, a national network
of ATM machines. Over the last 10 years Mr. Mitchell has held various
executive positions primarily in investment banking and brokerage firms. He
currently serves as a director of Kellstrom Industries, Inc., a publicly-held
company in the business of selling jet engine parts. Mr. Mitchell is also a
director of Centerpoint Corporation. Mr. Mitchell also serves as a director
of several private companies and not-for-profit universities and foundations.
Jere Northrop has been a Director since April 9, 1992, and served as our
Chief Technology Officer from May 1999 to January 2002. Dr. Northrop is a
founder of Bion Technologies, Inc. and was its President from October 1989 to
July 23, 1999. Prior to founding Bion he had ten years experience in the
management of operations and process control at a large municipal advanced
wastewater treatment plant in Amherst, New York (1979-1989). He also has
twenty-five years of experimental research on both individual and complex
systems of microorganisms. Dr. Northrop has a bachelor's degree in biology
from Amherst College, Amherst, Massachusetts (1964), a doctorate degree in
biophysics from Syracuse University, Syracuse, New York, (1969), and has done
post doctoral work at both the University of California at Davis, Davis,
California and The Center for Theoretical Biology, State University of New
York at Buffalo, Buffalo, New York.
5
Salvatore J. Zizza has been a Director of Bion since December 23, 1999.
He has served as Chairman of the Board, President, Treasurer and a Director of
Hollis Eden Pharmaceuticals (f/k/a IAC), a NASDAQ listed company, since its
inception in November 1992. Mr. Zizza was also Chairman of the Board of
Directors of The Lehigh Group, Inc. (f/k/a The LVI Group Inc.) beginning in
1991, and was President and Chief Financial Officer of The Lehigh Group, Inc.
from 1985 to 1991. The Lehigh Group, Inc., a New York Stock Exchange listed
company, was engaged, through its subsidiary, in the distribution of
electrical products, and from 1985 until 1991 was one of the largest interior
construction and asbestos abatement firms in the United States. Mr. Zizza was
Chief Operating and Chief Financial Officer of NICO, Inc. from 1978 until its
acquisition in 1985 by Lehigh Valley Industries, Inc. (currently The Lehigh
Group, Inc.) NICO, Inc. was an interior construction firm. Mr. Zizza is a
director of The Gabelli Equity Trust, The Gabelli Asset Fund, The Gabelli
Growth Fund, The Gabelli Utility Fund and The Gabelli Convertible Securities
Fund.
Andrew G. Gould has been a Director of Bion since August 10, 2000. From
May 1998 to June 2000 Mr. Gould was Special Principal and New Business
Development Manager of DZ Israel Associates, Tel Aviv, Israel, a venture
banking and investment company. Since 1981, Mr. Gould has been a Managing
Director of Arthur P. Gould & Co., a merchant bank. Mr. Gould has a
bachelor's degree in philosophy from Yale University (1976), and an MBA in
finance and economics from New York University (1983). Mr. Gould is a
director of Storlogic Ltd., a privately-held Israeli/U.S. developer and
manufacturer of network-attached storage and other server hardware and
software, and Regency Stocks & Commodities Fund LP, a privately-held
investment partnership trading financial futures and equities using
proprietary, systems-based trading methods.
Howard E. Chase has served as a Director since January 21, 2002. Mr.
Chase was President and CEO of Carret Holdings, Inc. (formerly Matrix Global
Investments, Inc.) from June 1999 to December, 2001. Mr. Chase served as
President and CEO of Trident Rowan Group, Inc. ("TRGI") from September 1995 to
March 1998, and Chairman of the Board of TRGI from March 1998 to December
1999. From 1984 to August 1995, Mr. Chase was a partner in the law firm of
Morrison Cohen Singer & Weinstein, LLP in New York City. Mr. Chase also
serves as a member of the boards of directors of Trident Rowan Group, Inc. and
Thoratec Corporation, which are publicly-held companies.
David Fuller (age 45) has served as our Principal Accounting Officer since
April 2001. From January 2001 to April 2001, Mr. Fuller was a consultant to
several companies, including Bion. From March 1994 to December 2000, he was
the Chief Financial Officer of Hyman Beck & Company, Inc., an international
money management firm. From July 1991 to February 1994, Mr. Fuller was Senior
Financial Officer of Link Strategic Investors Inc. (and Bearbull Investment
Products (USA), its predecessor company), an international investment
management firm. From January 1989 to July 1991, he was Controller of Rayner
& Stonington, L.P., a commodity trading company and a registered commodity
trading advisor. From October 1984 to December 1988, Mr. Fuller was
Controller and Assistant Treasurer of Gill & Duffus Inc., members of the
Coffee, Sugar & Cocoa Exchange, Inc. Mr. Fuller began his career in 1978 in
public accounting and is a member of the American Institute of Certified
Public Accountants and the New York Society of Certified Public Accountants.
Mr. Fuller graduated from Lehigh University in May 1978 with a B.S. degree in
Accounting.
The Company's Board of Directors held seven (7) meetings and acted by
consent on four (4) additional occasions during the fiscal year ended June 30,
2001. Each Director attended at least 75% of the aggregate number of meetings
held by the Board of Directors and its Committees during the time each such
Director was a member of the Board or of any Committee of the Board.
6
The Company's Executive Officers hold office until the next annual
meeting of directors of the Company, which currently is scheduled for March
28, 2002. There are no known arrangements or understandings between any
Director or Executive Officer and any other person pursuant to which any of
the above-named Executive Officers or Directors was selected as an officer or
director of the Company.
No event occurred during the past five years which is material to an
evaluation of the ability or integrity of any Director or person nominated to
be Director or Executive Officer of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year and certain representations, no persons who were either a
director, officer, or beneficial owner of more than 10% of the Company's
common stock, failed to file on a timely basis reports required by Section
16(a) of the Exchange Act during the most recent fiscal year, except David
Fuller, an Officer, filed a Form 3 and a Form 4 late; Andrew G. Gould, a
Director, filed a Form 4 late; and Salvatore J. Zizza, a Director, filed a
Form 4 late.
COMPENSATION
The following table shows the aggregate direct remuneration for the
fiscal years ended June 30, 2001, 2000, and 1999 to each Executive Officer and
two additional individuals:
Summary Compensation Table
--------------------------
Long Term Compensation
----------------------------------------
Annual Compensation Awards(12) Payouts
---------------------------------- ---------------------- ----------------
Securities All
Other Underlying Other
Annual Restricted Options/ LTIP Compen-
Name and Principal Salary(1) Compen- Stock SARs Payouts sation
Position Year ($) Bonus($) sation($) Award(s) (#) ($) ($)
------------------ ---- --------- -------- ------------ --------- ---------- ------- -------
David J. Mitchell(A) 2001 370,000(2) 0 2,230,000(4) 0 0 0 0
Chief Executive 2000 120,000(3) 0 3,811,057(5) 0 0 0 0
Officer and
President
Mark A. Smith(A) 2001 0 0 0 0 0 0 0
Chairman 2000 600,000(6) 0 0 0 0 0 0
Director 1999 26,667(7) 0 0 0 626,667 0 0
Jon Northrop(B) 2001 150,000 0 0 0 0 0 0
Executive V.P. 2000 150,000 0 0 0 0 0 0
Asst. Secretary 1999 150,000(8) 0 0 0 0 0 0
Director
Jere Northrop 2001 150,000 0 0 0 0 0 0
Chief Technology 2000 150,000 0 0 0 0 0 0
Officer 1999 150,000(8) 0 0 0 0 0 0
Craig Scott 2001 33,500(9) 0 0 0 0 0 0
2000 132,000 0 0 150,000 0 0 0
1999 132,000 0 0 10,000 0 0 0
7
M. Duane Stutzman 2001 120,000(10) 0 0 0 0 0 0
2000 120,000 0 0 75,000 0 0 0
1999 120,000(11) 0 0 227,452 0 0 0
------------------
(A) David Mitchell replaced Mark A. Smith as Chairman of the Company on
September 6, 2001.
(B) Jon Northrop resigned from the Company on August 31,2001.
(1) Includes compensation paid by Bion Technologies, Inc., our wholly owned
subsidiary.
(2) Includes compensation of $120,000 that has been added to the balance of
the 2000 D2 Convertible Bridge Note; compensation of $125,000 has been
added to the balance of the 2000 Convertible Bridge Note for the Trust
Under Deferred Compensation Plan for D2CO, LLC; and compensation of
$125,000 has been added to the balance of the 2001 Convertible Bridge
Note for the Trust Under Deferred Compensation Plan for D2CO, LLC.
(3) Compensation for the period January 1, 2000 (inception of agreement),
through June 30, 2000, which has been added to the balance of the D2
2000 Convertible Bridge Note.
(4) Represents the difference between the value of warrants to purchase
6,500,000 shares purchased by Southview, Inc., a company owned by
David J. Mitchell, and the amount paid therefor.
(5) Represents the difference between the value of warrants to purchase
5,000,000 shares purchased by D2 Co., LLC, a company owned by
David J. Mitchell, and the amount paid therefor.
(6) Consulting fees received according to the agreements between
LoTayLingKyur,Inc., Mark A. Smith, and Bion as reported in our Forms 8-K
dated December 11, 1999, (Item 10.4) and May 21, 1999, (Item 5.1).
(7) Compensation for the period May 21, 1999 (inception of agreement),
through June 30, 1999.
(8) Management deferred and accrued $50,000 of fiscal year 1999 salary as a
liability to conserve cash.
(9) The employment of Craig Scott was terminated on April 15, 2001.
(10) The employment of Duane Stutzman was terminated on December 31, 2000.
The salary amount for 2001 includes $60,000 in severance pay through
June 30, 2001.
(11) Management deferred and accrued $30,000 of fiscal year 1999 salary as
a liability to conserve cash.
(12) Does not include any options or warrants received in financing
transactions or otherwise purchased.
COMPENSATION OF DIRECTORS
Effective September 1, 1993, until December 31, 1999, outside directors
were compensated at a rate of $75 per month for their contributions. Members
of the Board of Directors do not currently receive any cash compensation for
their services as Directors, but are entitled to be reimbursed for their
reasonable expenses in attending meetings of the Board.
8
During the fiscal year ended June 30, 2001, we granted, pursuant to our
2000 Incentive Plan, the following options to our outside directors:
Number of Exercise Expiration
Name of Director Shares Price Date
---------------- --------- -------- ----------
Ronald G. Cullis* 10,000 $2.25 12/31/03
Andrew Gould 75,000 $2.25 12/31/03
Salvatore Zizza 75,000 $2.25 12/31/03
Joseph Wright** 20,000 $1.50 12/31/05
------------------
* Mr. Cullis resigned effective September 6, 2001.
** Mr. Wright resigned effective December 6, 2001.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN
CONTROL ARRANGEMENTS
On December 1, 1997, we entered into separate employment agreements with
Jon Northrop, Jere Northrop and M. Duane Stutzman pursuant to which Jon
Northrop and Jere Northrop were each entitled to receive an annual salary of
$150,000 and M. Duane Stutzman was entitled to receive an annual salary of
$120,000. All of the employment agreements were for the period beginning on
December 1, 1997, and ending on December 31, 2002. The employment agreement
with Duane Stutzman was terminated December 31, 2000. The employment
agreement with Jon Northrop was terminated August 31, 2001.
The remaining employment agreement provides that Jere Northrop's
compensation will be reviewed no less than once per year with a view to making
such increases in his salary or declaring such bonuses or other benefits as
may be merited and warranted in light of factors considered pertinent by our
Board of Directors. Mr. Northrop is entitled to receive free of cost parking
for his automobile, health, hospitalization and life insurance with coverage
exceeding or equal to that which was then in force through us, as well as such
other benefits as our Board may deem appropriate from time to time. The
subject agreement provides that in the event Mr. Northrop is terminated by us
for any reason other than "for cause," he will continue to be compensated by
us for the duration of the term of the agreement. The agreement also provides
that in the event that we have a change in control at any time during his
term, as a result of which the Board of Directors appoints any person other
than Mr. Northrop to serve in the capacity for which he is entitled to receive
compensation under his agreement, Mr. Northrop will nevertheless be entitled
to receive all of his compensation and benefits under his agreement regardless
of whether he continues to perform any services for us. In addition, the
agreement provides that in the event that Jere Northrop is terminated upon
death or disability, terminated without cause, or terminated upon change in
management, all warrants, options or shares issued but unvested at the date of
termination will become fully vested as of the date of termination.
On May 21, 1999, we also entered into a consulting agreement with Mark A.
Smith and LTLK to perform consulting services for us during the period
beginning on May 21, 1999, and ending on December 31, 2001. In accordance
with the consulting agreement, LTLK received compensation in the form of a
convertible promissory note in the amount of $626,667 and warrants to purchase
626,667 shares of our Common stock. The terms of the promissory note and
warrants were later modified when the transaction with D2 was consummated (see
"Certain Relationships and Related Transactions").
9
On December 23, 1999, we entered into a three year management agreement
with D2 pursuant to which D2 provides us with specific management and
consulting services and David J. Mitchell has been appointed to serve as our
Chief Executive Officer, Chairman of our Executive Committee and as one of our
Directors. In accordance with this agreement, D2 received warrants to
purchase 2,500,000 shares of our Common stock at an exercise price of $2.50
per share until December 31, 2004, and receives ongoing compensation of
$240,000 per year payable in shares of our Common stock or cash. Also in
accordance with this agreement, we added three members to our Board of
Directors (David J. Mitchell and Salvatore J. Zizza added December 23, 1999,
and Andrew G. Gould added August 10, 2000), and receive consulting services
from Summerwind Restructuring, Inc., which provides the services of consultant
Dominic Bassani, who is acting as Vice President of Operations of Bion
Technologies, Inc. and BionSoil, Inc. at present. We amended this agreement
on August 10, 2000, including (but not limited to) extending the term for one
additional year, issuing additional warrants to D2, and amending certain
provisions of the Shareholders Agreement.
Effective December 1, 2000, the Company amended the D2 management and
consulting agreement by extending the term of the agreement by 18 months,
canceling all outstanding warrants owned by D2 by agreeing to repay to D2
$1,000,000 with $500,000 cash and cancellation of the existing
$500,000 non-recourse promissory note receivable and accrued interest and
increasing the annual base consideration from $240,000 as follows: calendar
year 2001 - $500,000; calendar year 2002 - $600,000; and calendar year 2003 -
$750,000.
INCENTIVE COMPENSATION PLANS
On July 9, 1993, the Board of Directors adopted the Fiscal Year 1994
Incentive Plan ("Plan"), which was ratified by our shareholders on August 30,
1993. The maximum number of shares of Common stock that may be issued under
the Plan is the greater of 250,000 shares or 20% of our outstanding Common
stock.
On June 14, 1996, the Board of Directors adopted the 1996 Nonemployee
Director Stock Plan ("Director Plan"). The maximum number of shares of Common
stock that may be issued under the Director Plan is 100,000 shares.
On May 16, 2000, the Board of Directors adopted the 2000 Incentive Plan
("2000 Plan"). The maximum number of shares of Common stock, that may be
issued under the 2000 Plan is 1,000,000 shares.
On June 5, 2001, the Board of Directors adopted the 2001 Incentive Plan
("2001 Plan"). The maximum number of shares of Common stock, that may be
issued under the 2001 Plan is 1,500,000 shares.
On January 21, 2002, the Board of Directors adopted the 2002 Incentive
Plan which will be submitted for ratification by our shareholders at the
Annual Meeting. The maximum number of shares of common stock that may be
issued under the 2002 Plan is 3,000,000 shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS IN PRIOR TWO YEARS
The following is a list of certain relationships and related party
transactions in the previous two fiscal years:
10
During the period beginning July 1, 1999, we entered into numerous
transactions with Mark A. Smith (our Chairman) and/or entities controlled hy
him: LoTayLingKyur, Inc. ("LTLK"), LTLK Defined Benefit Plan, LoTayLingKyur
Foundation, and Dublin Holding Ltd. (collectively "First Parties"), including
the following:
i) From July 1, 1999, to December 21, 1999, we received advances from
LTLK, aggregating $1,035,681, for which LTLK received convertible notes (plus
one Class X Warrant for each $1.00 advanced).
ii) Effective December 20, 1999, pursuant to an agreement between
First Parties and us,
(a) First Parties exchanged all the convertible promissory notes
for new convertible promissory notes with aggregate principal
of $3,075,797.85 (which amount equaled the principal plus
accrued interest of the prior promissory notes) due at
December 31, 2002;
(b) we received the right to convert such new notes to Common stock
under specific conditions;
(c) First Parties' Class X Warrants were exchanged for 0.3
restricted shares of Common stock plus 0.7 Class Z Warrants for
each Class X (in aggregate, 1,172,426 restricted shares of
Common stock and 2,735,660 Class Z Warrants were issued and
exchanged for 3,908,084 Class X Warrants); and
(d) First Parties agreed to participate in and support a future
registered warrant exchange on specified terms and conditions.
iii) Commencing August 3, 2000, and at various other effective dates
through the month of August 2000, the First Parties (and certain related
holders of our Class X Warrants and Class Z Warrants) exchanged, in aggregate,
165,198 Class X Warrants and 5,425,440 Class Z Warrants for 863,399 restricted
shares of our Common stock. This exchange occurred pursuant to an agreement
we had with the warrant holders dated December 20, 1999. Mark A. Smith,
Chairman, (and affiliates and extended family members of Mr. Smith)
participated in this warrant exchange agreement.
On December 23, 1999, we entered into the following transactions with D2
Co., LLC and Southview, Inc., which was formerly unaffiliated with us:
i) We entered into a three year Management Agreement with D2 Co., LLC
("D2") of which David Mitchell, Chairman, CEO and President of the Company, is
sole member, pursuant to which D2 agreed to provide us specific management and
consulting services; compensation to D2 for such services consists of:
$240,000 per year payable in our Common stock or cash; and 2,500,000 warrants
exercisable at $2.50 expiring on December 31, 2004.
ii) We entered into a Warrant Purchase Agreement and other agreements
with D2, pursuant to which D2 purchased 2,500,000 warrants, exercisable at
$1.75 expiring on December 31, 2004, for $1,000,000 ($500,000 in cash and
%500,000 in a non-recourse promissory note to us that is secured by the
subject warrants).
iii) On December 23, 1999, D2, Mark A. Smith, Jere Northrop, Jon
Northrop, LoTayLingKyur, Inc., and Dublin Holding, Ltd. entered into a
Shareholders' Agreement which, among other things, provides that D2 will
11
receive warrants to purchase additional shares of Common stock, allows D2 to
receive additional shares of Common stock in lieu of cash payments for its
fee, and grants D2 2,500,000 warrants to purchase additional shares of Common
stock for an aggregate purchase price of $1,000,000. Effective August 31,
2001 this agreement was amended to remove Jon Northrop as a party.
iv) On August 10, 2000, we amended the Management Agreement with D2
that we entered into on December 23, 1999, which amendment (1) extended the
agreement for D2's services for an additional year; and (2) issued D2
1,500,000 additional warrants (1,000,000 exercisable at $3.50 per share and
500,000 exercisable at $6.00 per share, both exercisable from January 1, 2002,
until August 10, 2005).
v) On December 1, 2000, the Company made additional amendments to the
D2 management and consulting agreement by extending the term of the agreement
by 18 months, canceling all outstanding warrants owned by D2 by agreeing to
repay to D2 $1,000,000 with $500,000 cash and cancellation of the existing
$500,000 non-recourse promissory note receivable and accrued interest and
increasing the annual base consideration from $240,000 as follows: calendar
year 2001 - $500,000; calendar year 2002 - $600,000; and calendar year 2003 -
$750,000.
vi) Effective January 1, 2001, the Company agreed to make the payments
due under the consulting agreement under a deferred compensation plan to a
"Rabbi Trust" (Trust Under Deferred Compensation Plan for D2CO, LLC) for the
benefit of D2. The payments to the trust for the six months ended June 30,
2001 totaling $250,000 were made in the form of 2000 and 2001 Convertible
Bridge Notes. Commencing July 1, 2001, payments are to be made by the
issuance to the trust of shares of Common stock on a quarterly basis, based on
the average closing price of the Common stock during the quarter.
vii) Effective January 8, 2001, Southview, Inc. ("Southview"), a
corporation wholly owned by David J. Mitchell, Chairman, CEO and President of
the Company, agreed to purchase warrants to purchase 6,500,000 shares of the
Company's common stock for the sum of $500,000 cash payable on or before
February 16, 2001. On February 16, 2001, Southview completed the purchase.
Warrants to purchase 3,250,000 shares of common stock are exercisable at $1.00
per share and warrants to purchase another 3,250,000 shares of common stock
are exercisable at varying prices between $1.00 and $2.00 per share, depending
on the market price of the Company's common stock. All warrants purchased are
exercisable from February 16, 2001 to February 16, 2006.
On May 21, 1999, we made agreements with five parties, including Jon
Northrop, CEO, Jere Northrop, CTO, M. Duane Stutzman, CFO, the Family Trust
U/A 3rd U/W Catherine Northrop and one other employee, whereby we issued long-
term promissory notes to each party in exchange for payables aggregating
$793,500 owed to such parties.
Effective December 15, 1999, we entered into agreements with eight
holders of outstanding promissory notes (Jon Northrop, Jere Northrop, Northrop
Family Trust, M. Duane Stutzman, Harley Northrop, Edward Hennig, William
Crossetta and Craig Scott), pursuant to which each note holder agreed to
exercise either outstanding options or warrants owned by the note holder by
cancellation of the promissory note owned by the holder under certain
specified conditions. Additionally, each note holder agreed to participate in
and support a future registered warrant exchange under specified terms and
conditions.
12
Effective August 29, 2001, we amended the above agreements with holders
of the outstanding promissory notes, pursuant to which each note holder agreed
extend the maturity date to April 30, 2002, cancel certain outstanding options
owned by the note holder, and change the terms of the note so that outstanding
principal and interest shall be completely converted to shares of the
Company's Common stock upon the earlier of April 29, 2002 or the conversion of
the Company's outstanding Convertible Bridge Notes which conversion shall take
place at the lower of: i) $2.25 per share, or ii) the conversion price of the
convertible bridge notes.
Effective August 23, 2000, certain holders of our Class X Warrants and
Class Z Warrants, including without limitation, Jon Northrop, who was then a
Director and President, and Jere Northrop, Director and Chief Technology
Officer (and their extended families), agreed to exchange, in aggregate,
471,545 Class X Warrants and 855,696 Class Z Warrants for 269,831 restricted
shares of our Common stock. This exchange occurred pursuant to the terms of
agreements dated December 20, 1999.
Andrew G. Gould joined our Board of Directors on August 10, 2000. In
addition to his duties as a director, Mr. Gould, through Arthur P. Gould &
Co., Inc., a company that he owns, will provide us with an average of
approximately ten (10) hours per month of technology consulting services
through August 31, 2002, at no cost to us. We have granted Mr. Gould options
to purchase 75,000 shares of our Common stock at a price of $2.25 per share,
exercisable until December 31, 2003.
Beginning August 10, 2000, Salvatore J. Zizza, one of our directors, has
served as our governmental affairs liaison and provide additional consulting
services through September 1, 2002 for which he receives no additional
compensation. We granted Mr. Zizza options to purchase 75,000 shares of our
Common stock at a price of $2.25 per share, exercisable until December 31,
2003, and issued him 100,000 Class J-2 warrants purchasing Common stock at a
price of $2.375 per share. We will provide Mr. Zizza with office space in our
New York City office.
Effective June 6, 2001, Joseph R. Wright, Jr. was elected to our Board of
Directors. Mr. Wright received options to purchase 20,000 shares of
unrestricted common stock at $1.50 per share, with 10,000 shares vesting on
June 6, 2002 and 10,000 shares vesting on June 6, 2003, and all shares are
exercisable until December 31, 2005.
On April 13, 2000, we completed a private placement offering of
$4,156,425 consisting of $4,095,000 in long term convertible bridge debt and
$61,425 for the purchase of 1,213,500 warrants exercisable at $2.375 per share
until December 31, 2004. D2 and Salvatore Zizza participated in this offering
on the same terms as unaffiliated third parties. D2 purchased four units
($100,00 convertible debt and 30,000 warrants) and Mr. Zizza purchased two
units ($50,000 convertible debt and 15,000 warrants). Effective September 15,
2000, we amended certain terms of the convertible bridge notes upon approval
of the holders of a majority of the notes concerning changes to the conversion
procedure and amended exercise prices on the Bridge Warrants. Effective
February 24, 2001, we further amended certain terms of the convertible bridge
notes upon approval of the holders of a majority of the notes concerning
changes to the conversion procedure and maturity date and amended the call
price and exercise prices on the Bridge Warrants.
On June 8, 2001, we completed private placement offerings of $2,565,125
consisting of $2,527,218 in short term convertible debt and $37,906 for the
purchase of 758,138 warrants exercisable at $1.50 per share until December 31,
13
2005. Salvatore Zizza, Andrew Gould and Joseph Wright each participated in
this offering on the same terms as unaffiliated third parties. Messrs. Zizza
and Wright each purchased convertible notes of $98,552 and 29,550 warrants.
Mr. Gould purchased a convertible note of $7,882 and 2,363 warrants.
Directors and officers were issued options and warrants as disclosed in
Executive Compensation, above.
TRANSACTIONS EFFECTIVE SEPTEMBER 6, 2001
The following transactions occurred effective on September 6, 2001:
(a) Severance Agreements. We entered into severance agreements with Jon
Northrop and the only other employee that remained in our Denver, Colorado
office. As a result, we no longer have any employees in Denver and
substantially all of our business operations are conducted out of our office
in New York City, although we will continue to have a small office in Denver
which will be used by Mr. Northrop in his capacity as our consultant.
(b) Restructuring of Notes to Related Parties and Cancellation of
Options and Warrants. We have amended the terms of certain notes that we owe
to certain related parties and have cancelled certain outstanding options and
warrants held by them. The accrued amounts due under notes that we amended
are as follows:
Amount of Accrued Debt
Holder (Accrued to November 1, 2001)
------ -----------------------------
Jon Northrop $ 337,466
Jere Northrop $ 297,531
Harley Northrop $ 397,865
Northrop Family Trust $ 136,150
Edward A. Hennig $ 159,173
M. Duane Stutzman $ 181,106
William J. Crossetta $ 279,000
S. Craig Scott $ 49,804
Dublin Holding Ltd. $3,682,944
Mark Smith Rollover IRA $ 393,556
Kelly Smith Rollover IRA $ 339,870
----------
TOTAL $6,254,465
The provisions of the agreements vary for each debt holder, with
cancellations of certain options and warrants. All of the subject debt is
convertible to shares of our Common stock or before April 29, 2002, subject to
certain conditions precedent.
(c) Mark Smith Agreements.
- Mark Smith and certain entities related to him which own shares
of our Common stock (the "Smith Shares") entered into a voting
agreement that gives David Mitchell, our President and CEO, the
power to vote all of the Smith Shares as to most matters, but Mr.
Smith will still have the right to vote the Smith Shares with
respect to a sale of substantially all of our assets or a merger.
The voting agreement is purely contractual and is not a formal
voting trust.
14
- In addition, Mr. Smith and certain entities that he controls
entered into a separate agreement with us which imposes certain
restrictions on the sale and transfer of the Smith Shares and
amends the respective terms of five convertible promissory notes
payable to Dublin Holding, Ltd, the Mark A. Smith Rollover IRA
and the Kelly Smith Rollover IRA to provide that all five of
these notes will be automatically and fully converted (with all
principal and accrued interest calculated as if they had been
held to maturity) into shares of our Common stock upon the
conversion of our outstanding Convertible Bridge Notes and 2001
Convertible Notes at a conversion rate equal to the lesser of (i)
$1.80 per share or (ii) the conversion price of our outstanding
Convertible Bridge Notes and 2001 Convertible Notes.
(d) D2CO, LLC Agreements.
We entered into an agreement with D2CO, LLC, Southview, Inc. and Atlantic
Partners, LLC, all of which are affiliates of David Mitchell, our President
and CEO (collectively, "D2") in which, among other things, we agreed to:
- provide that certain compensation to D2 be paid in a deferred
manner as set forth in an exhibit to the agreement;
- be a party to the voting agreement that gives David Mitchell the
power to vote all of the Smith Shares as to most matters;
- release Jon Northrop from the restrictions related to the sale of
shares of our Common stock owned by him that are contained in the
Shareholders Agreement dated December 23, 1999, as amended; and
- amend the SV1 and SV2 Warrants held by D2 so that upon earlier of
(i) completion of financing or series of financings large enough
to "trigger" the conversion of Bion's outstanding Bridge Notes
and 2001 Convertible Notes (collectively "CV Notes") into Bion
Common stock; or (ii) conversion of the CV Notes into Bion Common
Stock on April 29, 2002, the outstanding Class SV1 and SV2
Warrants owned by D2 will be adjusted ("Adjusted Warrants") so
that D2 owns Adjusted Warrants to purchase a number of shares of
Bion Common stock equal to 20% of the "fully-diluted" outstanding
shares, calculated by including (i) the Adjusted Warrants, (ii)
the securities issued in the conversion of the CV Notes and other
notes, (iii) the securities issued in connection with the subject
financing, and (iv) other outstanding options, warrants and/or
convertible promissory notes which are exercisable or
convertible, as applicable, at a price equal to or lower than the
exercise price of the Adjusted Warrants, which Adjusted Warrants
will have the same expiration date as the current SV1 and SV2
Warrants and will have an exercise price equal to the lower of
$1.00 per share or the conversion price of the CV Notes;
provided, however, that for purposes of calculating the number of
Adjusted Warrants, no securities outstanding related to any
portion of a financing aggregating greater than $10,000,000 will
be included in the calculation. As partial consideration for our
agreeing to the adjustment to the warrants, Southview agreed to
extend the term of the outstanding promissory note (with an
accrued balance of $521,039.81 as of July 31, 2001)so that such
promissory note could be repaid from the proceeds of a new
financing.
15
TRANSACTIONS EFFECTIVE JANUARY 15, 2002
The following transactions occurred effective January 15, 2002 or shortly
thereafter:
(a) Acquisition of Centerpoint. On January 15, 2002, Bion issued
19,000,000 shares of our restricted common stock to Centerpoint Corporation, a
publicly held Delaware corporation ("Centerpoint"), that has not been current
in its filings with the Securities and Exchange Commission since it ceased
business activities after the sale of its motorcycle business approximately
two years ago, in exchange for approximately $8.5 million in cash and the
assignment of certain claims and other rights owned by Centerpoint. The
19,000,000 shares currently held by Centerpoint represent approximately 36.2%
of our currently outstanding common stock. Immediately upon consummation of
the transaction with Centerpoint, we purchased a 57.7% majority interest in
Centerpoint from its Italian parent, OAM, S.p.A. ("OAM") by issuing 1,000,000
additional shares to OAM, a warrant to purchase an additional 1,000,000
shares, paying $3.7 million of the cash and reassigning all of the other
assets that we obtained from Centerpoint.
As a net result of these two transactions, we obtained $4.8 million in
cash and own a majority of Centerpoint's currently issued and outstanding
shares. During 2002, we intend to file a registration statement to allow
Centerpoint to distribute to its stockholders the 19 million shares that we
issued to it in connection with the financing. We expect the distribution to
occur during the second half of calendar 2002. When that distribution occurs,
approximately 11 million of our shares will be distributed back to us and
cancelled. After we cancel these shares, the two transactions will have
resulted in a net increase of approximately 9 million of our issued and
outstanding shares, which includes one million shares issued by us to OAM as
partial consideration for our obtaining control of Centerpoint.
Centerpoint had owned the Moto Guzzi motorcycle business which it sold in
August 2000. Since that time it had been seeking an investment opportunity
for the cash it received from the sale.
Other than seeking an investment opportunity, Centerpoint has been
inactive since August 2000. After giving effect to the January 15, 2002
transactions, Centerpoint's primary asset is 19,000,000 shares of our common
stock. Centerpoint plans to distribute the 19,000,000 shares to its
shareholders upon effectiveness of a registration statement to be filed with
the Securities and Exchange Commission. Centerpoint currently has only
minimal cash, no other significant assets and no business operations.
Centerpoint does continue to hold 35% of the rights to a litigation claim and
an escrow account which are carried on Centerpoint's books at no value.
David J. Mitchell, our CEO and a Director, is also a founder, stockholder
and option holder of Centerpoint, and currently serves as its President and a
director. Bill Speir, who was a director of Centerpoint prior to January 25,
2002, also serves on our advisory board. Prior to this transaction, Howard
Chase, who became a director of Bion on January 21, 2002, served on the board
of directors of Centerpoint. Effective January 15, 2002, however, he resigned
his position as a director of Centerpoint.
(b) Changes in Capitalization as a Result of Centerpoint Transactions.
The transactions involving Centerpoint caused the automatic conversion of more
than $14.2 million in outstanding convertible debt which will result in our
issuance of slightly in excess of 19 million additional shares of our Common
stock. All of this debt was automatically converted into shares of our Common
16
stock in accordance with the terms of the various debt instruments at a
conversion rate of $0.75 per share, which is the same price for which we sold
shares to Centerpoint. Salvador Zizza (a Director), Andrew Gould (a
Director), Jere Northrop (a Director), Mark Smith, his wife and entities
related to him, D2 and D2 Trust(both of which entities are affiliates of David
Mitchell, our CEO and Director) owned convertible debt instruments that were
converted into shares of our Common stock as a result of the transaction with
Centerpoint. The following table sets forth the amounts of principal and
interest converted and the number of shares issued to these persons:
Amount of Prin- Number of
Name cipal and Interest of Shares
---- ------------------ ---------
Salvatore Zizza $ 163,839 218,453
Andrew Gould $ 8,350 11,134
Jere Northrop $ 504,461 672,616
Mark Smith:
Mark A. Smith Rollover IRA $ 393,567 524,743
Kelly Smith Rollover IRA $ 339,870 453,161
Dublin Holding $3,682,944 4,910,593
David Mitchell:
D2Co., LLC $ 395,493 527,326
Trust for D2Co., LLC $ 270,477 360,636
As a result of these transactions and the repayment of debt to our
affiliates from the proceeds, we are now debt-free (with the exception of
trade payables), have 52,671,128 shares outstanding (including the
approximately 11 million shares that will be returned to us for cancellation
as a Centerpoint stockholder when the shares we issued to Centerpoint are
distributed) and have in excess of $3.5 million in cash.
(c) Restructuring of Warrants. As a result of the transactions
involving Centerpoint, effective January 15, 2002 we amended the terms of our
J Warrants pursuant to existing agreements as follows:
- the exercise price was changed to $.60 and the call price was changed
to $1.40.
- the terms of the J Warrants issued to brokers as compensation in
connection with our 2000 Convertible Bridge Note private placement
were changed to an exercise price of $.75 with a call price of
$1.50.
Certain of our affiliates hold J Warrants. In particular, Salvatore Zizza (a
Director) holds J Warrants to purchase 44,550 shares; Andrew Gould (a
Director) holds J Warrants to purchase 2,363 shares; and D2Co., LLC (which is
controlled by David Mitchell, our CEO and a Director) holds J Warrants to
purchase 30,000 shares.
(d) D2 Co., LLC Agreements. As a result of the transactions involving
Centerpoint, effective January 15, 2002, in accordance with the terms of an
existing agreement with D2CO, LLC, Southview, Inc. and Atlantic Partners, LLC,
all of which are affiliates of David Mitchell, our President and CEO
(collectively, "D2"), we amended the SV1 and SV2 Warrants held by D2 so that
warrants now provide for the purchase, in the aggregate, of 10,373,427 shares
of our common stock at a purchase price of $.75. All other terms of the SV1
and SV2 Warrants remain the same.
17
(e) Modification of Certain Options Held by Employees and Directors.
Effective January 15, 2002, all of the options having an exercise price in
excess of $1.50 per share that are held by fourteen of our employees and two
of our Directors, Zizza and Gould, were reduced to $1.10 per share. As a
result, we reduced the exercise price of options to purchase an aggregate of
636,725 shares.
(f) New Options Issued to Directors and Shares Issued to Employees. On
January 21, 2002, we issued the following options to our Directors and shares
to our employees:
- Mark Smith (a former Director, received an option to purchase 25,000
shares at an exercise price of $1.10 per share until December 31,
2004;
- Jere Northrop, a Director, received an option to purchase 25,000
shares at an exercise price of $1.10 per share until December 31,
2003; and
- The 100,000 "J" Warrants held by Sal Zizza, a Director, were can-
celled and he was issued an option to purchase 100,000 shares under
our Incentive Plan at an exercise price of $1.10 until December 31,
2004.
- We granted employee bonuses to fifteen of our employees in the
aggregate amount of $112,650, all of which were paid in shares of our
Common stock valued at $1.25 per share.
All past and future and ongoing transactions with affiliates are and will
be on terms which our management believes are no less favorable than could be
obtained from non-affiliated parties. All future and ongoing loans to our
affiliates, officials and shareholders will be approved by the majority vote
of disinterested directors.
REPORT OF THE AUDIT COMMITTEE
The Company has a standing Audit Committee (the "Audit Committee") of the
Board of Directors. The Audit Committee presently consists of Salvatore J.
Zizza, who is independent (as defined in Section 121(A) of the American Stock
Exchange listing standards). The Audit Committee Charter is attached as
Exhibit A to this Proxy Statement. The Audit Committee, on behalf of the
Board, oversees the Company's financial reporting process. In fulfilling its
oversight responsibilities, the Audit Committee reviewed with Management the
audited financial statements and the footnotes thereto in the Company's Annual
Report on Form 10-KSB for the fiscal year ended June 30, 2001, and discussed
with management the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the clarity of the
disclosures in the financial statements. The Audit Committee did not have any
formal meetings in fiscal 2001, but the Chair of the Audit Committee had four
(4) telephone meetings with the Company's Principal Accounting Officer and
independent accountants.
The Company's outside independent public accountants, BDO Seidman, LLP,
are responsible for expressing an opinion on the conformity of the Company's
audited financial statements in all material respects, to accounting
principles generally accepted in the United States. The Audit Committee
reviewed and discussed with the independent public accountants their judgments
as to the quality, not just the acceptability, of the Company's accounting
principles and such other matters as are required to be discussed by the Audit
18
Committee with the Company's independent public accountants under Statement on
Auditing Standards 61, as amended by SAS 90. The Company's independent public
accountants have expressed the opinion that the Company's audited financial
statements conform, in all material respects, to accounting principles
generally accepted in the United States. The independent public accountants
have full and free access to the Audit Committee.
The Audit Committee discussed with the Company's independent public
accountants their independence from management and the Company, and received
from them the written disclosures and the letter concerning the independent
accountants' independence required by the Independence Standard Board Standard
No. 1.
The Audit Committee discussed with the Company's independent public
accountants the overall scope and plans of the audit. The Audit Committee met
with the independent public accountants to discuss the results of their audit,
their evaluations of the Company's internal controls and the overall quality
of the Company's financial reporting.
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Annual Report on Form 10-KSB for the year ended June 30, 2001,
for filing with the Securities and Exchange Commission. The Audit Committee
also recommended to the Board of Directors the selection of BDO Seidman, LLP
to serve as the Company's independent public accountants for the fiscal year
ending June 30, 2002.
MEMBERS OF THE AUDIT COMMITTEE
Salvatore J. Zizza
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The independent accounting firm of BDO Seidman, LLP, audited the
financial statements of the Company for the year ended June 30, 2001, and has
been selected in such capacity for the current fiscal year. At the direction
of the Board of Directors, this appointment is being presented to the
shareholders for ratification or rejection at the Annual Meeting of
Shareholders. If the shareholders do not ratify the appointment of BDO
Seidman, LLP, the appointment of auditors will be reconsidered by the Board of
Directors.
It is expected that representatives of BDO Seidman, LLP, will be present
at the meeting and will be given an opportunity to make a statement if they
desire to do so. It is also expected that the representatives will be
available to respond to appropriate questions from shareholders.
AUDIT FEES. The fees billed for professional services rendered by the
independent auditors for the audit of the Company's financial statements for
the year ended June 30, 2001, and for the reviews of the financial statements
included in the Company's Form 10-QSB's during the last fiscal year amounted
to $105,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. The
independent auditors did not provide professional services during the fiscal
year ended June 30, 2001 relating to financial information systems design and
implementation.
19
ALL OTHER FEES. The fees billed by the independent auditors during the
fiscal year ended June 30, 2001, for non-audit services rendered amounted to
$10,000. These services consisted of corporate income tax preparation. The
Audit Committee has considered the other fees paid to BDO Seidman, LLP and
concluded that they do not impair the independence of BDO Seidman, LLP.
APPROVAL OF 2002 INCENTIVE PLAN
The Board of Directors adopted the 2002 Incentive Plan (the "2002 Plan")
on January 21, 2002, subject to approval by the Company's shareholders at the
Annual Meeting.
PURPOSE OF THE 2002 PLAN
The purpose of the 2002 Plan is to enable the Company to attract officers
and other key employees and consultants and to provide them with appropriate
incentives and rewards for superior performance. The 2002 Plan affords the
Company the ability to respond to changes in the competitive and legal
environments by providing the Company with flexibility in key employee and
executive compensation. This plan is designed to be an omnibus plan allowing
the Company to grant a wide range of compensatory awards including stock
options, stock appreciation rights, phantom stock, restricted stock, stock
bonuses and cash bonuses. The 2002 Plan is intended to encourage stock
ownership by recipients by providing for or increasing their proprietary
interests in the Company, thereby encouraging them to remain in employment.
DESCRIPTION OF THE 2002 PLAN
GENERAL. The following general description of certain features of the
2002 Plan is qualified in its entirety by reference to the 2002 Plan, which is
attached as Exhibit B. Subject to adjustment as provided in the 2002 Plan,
the number of shares of Common stock that may be issued or transferred, plus
the amount of shares of Common stock covered by outstanding awards granted
under the 2002 Plan, shall not in the aggregate exceed 3,000,000.
ELIGIBILITY. Officers, including officers who are members of the Board
of Directors, Directors and key employees of and consultants and advisors to
the Company may be selected by the Board of Directors to receive benefits
under the 2002 Plan.
TERMS OF OPTIONS AND OTHER POSSIBLE AWARDS. The 2002 Plan authorizes the
granting of options to purchase shares of Common stock, stock appreciation
rights ("SARs"), limited subscription rights ("LSARs"), phantom stock,
restricted shares, stock bonuses and cash bonuses. The terms applicable to
these various types of awards, including those terms that may be established
by the Board of Directors when making or administering particular awards, are
set forth in detail in the 2002 Plan.
TRANSFERABILITY OF AWARDS. Except as may be limited by the Board of
Directors at the time of grant, and except for Restricted Stock, awards
granted under the 2002 Plan may be transferred or assigned to others. The
transfer of options and other awards could have the effect of reducing the
incentive effect of the award to the extent that after a transfer the holder
may not have any direct relationship with us.
OPTIONS. The Board of Directors may grant Options that entitle the
optionee to purchase shares of Common stock at a price less than, equal to or
greater than market value on the date of grant. The option price is payable at
the time of exercise (i) in cash or cash equivalent, or (ii) by the transfer
20
to the Company of shares of Common stock that are already owned by the
optionee and have a value at the time of exercise equal to the option price.
In addition, at the time of grant the Board of Directors may provide that an
Option may be exercised in a "cashless" transaction in which the holder may
surrender all or a portion of the Option and receive the number of shares of
Common stock equal in value to the Fair Market Value per share at the date of
surrender less than the exercise price per share of the Option, multiplied by
the number of shares which may be purchased under the Option, or portion
thereof, being surrendered.
Options granted under the 2002 Plan may be Options that are intended to
qualify as incentive stock options ("ISOs") within the meaning of Section 422
of the Internal Revenue Code of 1986 ("Code") or Options that are not intended
to so qualify. The 2002 Plan permits the granting of incentive stock options
or nonqualified stock options at the discretion of the Board of Directors.
The exercise price for nonqualified stock options granted may not be less than
the fair market value per share of Common stock on the date of grant. The
exercise price for ISOs may not be less than the fair market value per share
of Common stock on the date of grant, and ISOs granted to persons owning more
than 10% of the Company's voting stock must have an exercise price of not less
than 110% of the fair market value per share of Common stock on the date of
grant. All ISOs granted must be exercised within ten years of grant, except
that ISOs granted to 10% or more shareholders must be exercised within five
years of grant. The aggregate market value (as determined as of the date of
grant) of the Common stock for which any optionee may be awarded ISOs which
are first exercisable by such optionee during any calendar year may not exceed
$100,000.
The Board of Directors may specify the conditions, including as and to
the extent determined by the Board of Directors, the period or periods of
continuous employment of the optionee by the Company or any subsidiary that
are necessary before the Options will become exercisable. The 2002 Plan also
provides that in the event of a change in control of the Company or other
similar transaction or event, each Option granted under the 2002 Plan shall
become fully and immediately exercisable.
STOCK APPRECIATION RIGHTS. Stock Appreciation Rights ("SARs")granted
under the 2002 Plan may be either freestanding or granted in tandem with an
Option. Limited Stock Appreciation Rights ("LSARs") may only be granted in
connection with the grant of an Option and may only be exercisable in the
event of a change in control in lieu of exercising the Option. SARs and LSARs
represent the right to receive from the Company the difference ("Spread"), or
a percentage thereof not in excess of 100 percent, between the base price per
share of Common stock in the case of a free-standing SAR, or the option price
of the related Options in the case of a tandem SAR or LSAR, and the market
value of the Common stock on the date of exercise of the SAR or LSAR. Tandem
SARs may only be exercised at a time when the related Option Right is
exercisable, and the exercise of a tandem SAR requires the surrender of the
related Option Right for cancellation. A free-standing SAR must specify the
conditions that must be met before the SAR becomes exercisable and may not be
exercised more than 10 years from the date of grant.
PHANTOM STOCK. The Board of Directors may grant shares of Phantom Stock
under the 2002 Plan pursuant to an agreement approved by the Board of
Directors which provides for vesting conditions it deems appropriate. Upon
vesting of a share of Phantom Stock the participant will receive in cash a sum
equal to the fair market value of a share of Common stock on the date of
vesting plus an amount of cash equal to the aggregate amount of cash dividends
paid on each share of the Company's Common stock commencing on the date of
21
grant of the Phantom Stock. In the event of a change in control, all shares
of unvested Phantom Stock outstanding shall become immediately vested.
RESTRICTED SHARES. An award of Restricted Shares involves the immediate
transfer by the Company to a participant of ownership of a specific number of
shares of Common stock in consideration of the performance of services or, as
and to the extent determined by the Board of Directors, the achievement of
certain performance criteria. The participant is entitled immediately to
voting, dividend and other ownership rights in the shares. The transfer may be
made without additional consideration from the participant or in consideration
of a payment by the participant that is less than the market value of the
shares on the date of grant, as the Board of Directors may determine. In the
event of a change in control, unvested Restricted Stock shall become
immediately vested.
STOCK BONUSES. The Board of Directors may grant Stock Bonuses under the
2002 Plan in such amounts as it shall determine from time to time. Stock
Bonuses shall be paid at such times and subject to the conditions the Board of
Directors determines at the time of the grant.
CASH BONUSES. Subject to the provisions of the Plan, the Board of
Directors may grant, in connection with any grant of Restricted Stock or Stock
Bonus or at any time thereafter, a cash bonus, payable after the date on which
a 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 Board of Directors shall determine. However, 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.
ADJUSTMENTS. The maximum number of shares of Common stock that may be
issued or transferred under the 2002 Plan, the number of shares covered by
outstanding awards and the option prices or base prices per share applicable
thereto, are subject to adjustment in the event of stock dividends, stock
splits, combinations of shares, recapitalizations, mergers, consolidations,
spin-offs, reorganizations, liquidations, issuances of rights or warrants, and
similar transactions or events.
ADMINISTRATION AND AMENDMENTS. The 2002 Plan is administered by the
Board of Directors. In connection with its administration of the 2002 Plan,
the Board of Directors is authorized to interpret the 2002 Plan and related
agreements and other documents. The Board of Directors may make grants to
participants under any or a combination of all of the various categories of
awards that are authorized under the 2002 Plan. The Board of Directors may,
with the concurrence of the affected participant, cancel any agreement
evidencing an award granted under the 2002 Plan. In the event of any such
cancellation, the Board of Directors may authorize the granting of a new award
under the 2002 Plan in such manner, at such price and subject to such other
terms, conditions and discretion as would have been applicable under the 2002
Plan had the canceled award not been granted.
The 2002 Plan may generally be amended from time to time by the Board of
Directors, but without further approval by the shareholders of the Company,
except that no such amendment (unless expressly allowed pursuant to the
adjustment provisions described above) may increase the aggregate number of
shares that may be issued under the 2002 Plan.
TAX CONSEQUENCES TO THE COMPANY. To the extent that a participant
recognizes ordinary income in the circumstance described above, the Company
will be entitled to a corresponding deduction provided that, among other
22
things, (i) the income meets the test of reasonableness, is an ordinary and
necessary business expense, is not subject to the annual compensation
limitation set forth in Section 162(m) of the Code and is not an "excess
parachute payment" within the meaning of Section 280G of the Code, and (ii)
any applicable withholding obligations are satisfied.
NEW PLAN BENEFITS
No options or awards have been granted under the 2002 Plan. The future
benefits or amounts that would be received under the 2002 Plan by Executive
Officers, Directors and non-executive officer employees are discretionary and
are therefore not determinable at this time.
VOTE REQUIRED FOR APPROVAL; BOARD RECOMMENDATION
The affirmative vote of a majority of the shares represented at the
meeting, in person or by proxy, will be required to approve the 2002 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSED REVERSE STOCK SPLIT
The Board of Directors has proposed, subject to shareholder approval, a 1
for 3.5 reverse split of the outstanding shares of the Company's Common stock.
There are presently 52,671,128 shares outstanding, and the reverse split would
therefore reduce this number to approximately 15,049,000 shares. No
fractional shares would be issued and instead a whole share would be issued to
any shareholder entitled to a fraction of a share.
The reverse stock split is being proposed in connection with the
Company's application to list its Common stock on the American Stock Exchange.
One of the requirements for listing on the American Stock Exchange is that the
stock be trading at a price of at least $3.00 per share. During the last six
months the Company's Common stock has been trading in the range of $.70 to
$1.75 per share.
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to pursue a listing on the American Stock
Exchange to provide greater exposure for the Company in the investment
community and to provide greater liquidity for the Company's shareholders.
In the event that the reverse stock split is not approved by the
Company's shareholders, it is likely that the Company's Common stock will not
be accepted for listing on the American Stock Exchange. Even if the reverse
stock split is approved, there can be no assurance that the Company's
application for listing will be accepted. If the application is not accepted,
it is expected that the Company's Common stock will continue to be quoted on
the OTC Bulletin Board.
If the reverse stock split is approved, it will not occur until the
Company receives approval of its listing application by the American Stock
Exchange. If we are advised by the American Stock Exchange that the Company's
application for listing will not be approved, then the reverse stock split
will not occur.
It is anticipated that the reverse stock split would become effective
approximately ten days after the Company receives approval of its listing
application by the American Stock Exchange.
23
A reverse stock split has no federal income tax consequences in that it
is a non-taxable distribution of the Company's stock under Section 305 of the
Internal Revenue Code. A shareholder's basis in each 3.5 shares held before
the reverse split will become the basis in one share after the reverse split.
Shareholders who, after the reverse split, would hold less than 100
shares of the Company's Common Stock may have difficulty in selling their
shares, or have to pay additional expenses or commissions when selling their
shares.
VOTE REQUIRED FOR APPROVAL; BOARD RECOMMENDATION
The affirmative vote of a majority of the shares represented at the
meeting, in person or by proxy, will be required to approve the proposed
reverse stock split.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company was not
aware of any other matter to be presented at the Meeting other than as set
forth herein. However, if any other matters are properly brought before the
Meeting, the shares represented by valid proxies will be voted with respect to
such matters in accordance with the judgment of the persons voting them. A
majority vote of the shares represented at the meeting is necessary to approve
any such matters.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE ANNUAL MEETING TO BE HELD IN MARCH 2003
Any proposal by a shareholder intended to be presented at the Company's
Annual Meeting of Shareholders to be held in March 2003 must be received at
the offices of the Company, 18 East 50th Street, 10th Floor, New York, New
York 10022, a reasonable amount of time prior to the meeting in order to be
included in the Company's proxy statement and proxy relating to that meeting.
DAVID J. MITCHELL, PRESIDENT
New York, New York
March 5, 2002
24
EXHIBIT A
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. It's 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.
A-2
* 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.
A-3
EXHIBIT B
BION ENVIRONMENTAL TECHNOLOGIES, INC.
-------------------------------------
2002 INCENTIVE PLAN
-------------------
1. Purpose of the Plan
The purpose of this Bion Environmental Technologies, Inc. 2002 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 60% 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) "Common Shares" shall mean Bion Environmental Technologies, Inc.
common shares, no par value per share.
(g) "Company" shall mean Bion Environmental Technologies, Inc., a
Colorado corporation, and each of its Subsidiaries.
(h) "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.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) 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 Board of Directors. 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 Board of Directors in its absolute discretion.
(k) "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.
B-2
(l) "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.
(m) "Issue Date" shall mean the date established by the Board of
Directors 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.
(n) "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.
(o) "Non-Employee Participant" shall mean a Participant who is not an
employee of the Company.
(p) "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.
(q) "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.
(r) "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.
(s) "Person" shall mean a "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act.
(t) "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.
(u) "Plan" shall mean the Bion Environmental Technologies, Inc. 2002
Incentive Plan, as it may be amended from time to time.
(v) "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.
(w) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(x) "Stand-Alone SAR" shall mean a stock appreciation right granted
pursuant to Section 9 hereof which is not related to any Option.
(y) "Stock Bonus" shall mean a grant of a bonus payable in Common
Shares pursuant to Section 12 hereof.
B-3
(z) "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.
(aa) "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.
(bb) "Vesting Date" shall mean the date established by the Board of
Directors on which a share of Restricted Stock or Phantom Stock may vest.
(cc) "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 Board of Directors 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 Board of Directors shall be deemed to refer
to the Board of Directors.
Subject to adjustment as provided in Section 14 hereof, the Board of
Directors 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 3,000,000
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 Board of Directors, and Bion
Environmental Technologies, Inc. hereby reserves 3,000,000 Common Shares for
issuance pursuant to the Plan.
B-4
4. Administration of the Plan
The Plan shall be administered by the Board of Directors. The Board of
Directors shall from time to time designate the persons who shall be granted
Incentive Awards and the amount and type of such Incentive Awards.
The Board of Directors 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 Board of Directors shall be final and binding on all parties.
The Board of Directors 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 Board of Directors may, in its absolute discretion,
grant Incentive Awards to Participants on the condition that such Participants
surrender to the Board of Directors for cancellation such other Incentive
Awards (including, without limitation, Incentive Awards with higher exercise
prices) as the Board of Directors 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 Board of Directors.
No member of the Board of Directors 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 Board
of Directors 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 Board of Directors) 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 Board of Directors shall select from time to time.
6. Options
Subject to the provisions of the Plan, the Board of Directors may grant
Options, which Options shall be evidenced by agreements in such form as the
Board of Directors shall from time to time approve. Options shall comply with
and be subject to the following terms and conditions:
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(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 Board of Directors 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 Board of Directors 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 Board of Directors, 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.
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(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,
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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 Board of Directors 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 Board of Directors 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
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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.
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8. Tandem Stock Appreciation Rights
The Board of Directors 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 Board of Directors 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 Board of Directors 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
Board of Directors, 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 Board of Directors, 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
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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 Board of Directors may grant
Stand-Alone SARs, which Stand-Alone SARs shall be evidenced by agreements in
such form as the Board of Directors 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 Board of Directors 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 Board of Directors 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.
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(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.
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(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 Board of Directors may grant
shares of Restricted Stock. Each grant of shares of Restricted Stock shall be
evidenced by an agreement in such form as the Board of Directors 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 Board
of Directors shall establish an Issue Date or Issue Dates and a Vesting Date
or Vesting Dates with respect to such shares. The Board of Directors 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 Board
of Directors 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 Board of Directors 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
Board of Directors 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
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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. 2001 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 Board of Directors 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 Board of Directors 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.
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(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 Board of Directors may grant
shares of Phantom Stock. Each grant of shares of Phantom Stock shall be
evidenced by an agreement in such form as the Board of Directors 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 Board of
Directors shall establish a Vesting Date or Vesting Dates with respect to such
shares. The Board of Directors 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 Board of
Directors 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 Board of Directors 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
Board of Directors 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 Board of Directors at the time of the grant of such shares
B-15
of Phantom Stock and may be based on the achievement of any conditions imposed
by the Board of Directors 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 Board of Directors 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 Board
of Directors 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 Board of Directors 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
Board of Directors 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 Board of Directors 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 Board of Directors may grant Options, Stand-Alone SARs, shares of
Restricted Stock, shares of Phantom Stock and Stock Bonuses shall be
appropriately adjusted by the Board of Directors. In the event of any change
in the number of Common Shares outstanding by reason of any other event or
transaction, the Board of Directors 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 Board of Directors may deem appropriate.
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(b) Outstanding Restricted Stock and Phantom Stock
Unless the Board of Directors 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 Board of Directors 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 Board of Directors 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 Board of Directors 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 Board of Directors shall, in its absolute
discretion, have the power to:
B-17
(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 Board
of Directors 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 Board of Directors
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 Board of
Directors 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 Board of Directors 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.
B-18
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 Board of Directors' granting of an Incentive Award to a
Participant at any time shall neither require the Board of Directors to grant
an Incentive Award to such Participant or any other Participant or other
person at any time nor preclude the Board of Directors 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 Board of Directors 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 Board of
Directors, 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 Board of Directors fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Board of Directors.
B-19
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 Board of Directors, 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 Board of Directors
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 Board of Directors, 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 Board of Directors 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
B-20
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 Board of Directors 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 Board of Directors reasonably believes that a Participant has committed
an act of misconduct as described in this Section, the Board of Directors 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 Board of Directors,
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 the Board of Directors.
24. Code Section 162(m).
The Board of Directors, 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
B-21
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 January 21, 2002.
B-22
P R O X Y
BION ENVIRONMENTAL TECHNOLOGIES, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David J. Mitchell with the power to
appoint a substitute, and hereby authorizes him to represent and to vote as
designated below, all the shares of common stock of Bion Environmental
Technologies, Inc. (the "Company") held of record by the undersigned on
February 25, 2002, at the Annual Meeting of Shareholders to be held on April
4, 2002, or any adjournment thereof.
1. Election of Directors:
[ ] FOR all nominees listed below (except as marked to the contrary)
[ ] WITHHOLD authority to vote for all the nominees listed below:
David J. Mitchell Salvatore J. Zizza
Jere Northrop Andrew G. Gould
Howard E. Chase
[INSTRUCTION: To withhold authority to vote for any individual nominee, cross
out that nominee's name above.]
2. The ratification of the appointment of BDO Seidman, LLP, as the
Company's independent auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. The approval of the Company's 2002 Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. The approval of a 1 for 3.5 reverse split of the outstanding shares
of Common Stock of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To transact such other business as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN
ACCORDANCE WITH THE SHAREHOLDER'S SPECIFICATIONS ABOVE. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY WITH RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE
TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE
UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders, Proxy Statement and Annual Report.
Dated: _____________, 2002.
_________________________________________
_________________________________________
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s) stenciled hereon. Executors,
administrators, trustees, guardians and attorneys should indicate when
signing. Attorneys should submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BION
ENVIRONMENTAL TECHNOLOGIES, INC. PLEASE SIGN AND RETURN THIS PROXY IN THE
ENCLOSED PRE-ADDRESSED ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.