EXHIBIT 10.3

AGREEMENT

It is agreed by and between Bion Environmental Technologies, Inc. ("Bion"), and Centerpoint Corporation, ("CPTX"), effective February 12, 2003 as follows:

1. Bion shall:

a) cancel all sums owed to Bion by CPTX including those evidenced by the promissory note attached hereto as Exhibit A;

b) return 1,000,000 warrants of CPTX, attached hereto as Exhibit B, for cancellation

c) use its best efforts to process the registration statement regarding distribution of Bion common stock owned by CPTX (the "Shares") to CPTX's shareholders

d) provide the services of Larry Danziger (and office staff), together with office space, through a date no earlier than 90 days after distribution of the Shares to CPTX's shareholders at no cost to CPTX; and

e) upon closing of Bion's financing, provide to CPTX such sums as are reasonably needed to pay direct expenses related to registration/ distribution of the Shares and CPTX's share of costs related to necessary tax filings.

2. a) CPTX shall immediately cancel all "ratchet" and "penalty" provisions in existing agreements between Bion and CPTX (see Exhibit C); and

b) to the extent that CPTX acquires any Bion securities from OAM S.p.A., CPTX agrees to cancel all "ratchet" and "penalty" provisions related to such securities; and

c) use its best efforts to distribute the Shares to its shareholders upon effectiveness of a registration statement.

3. Bion and CPTX each agrees to take all necessary actions, including, without limitation, execution of additional documents, as may be reasonably needed to carry out the purposes of this agreement.

Bion Environmental Technologies, Inc     Centerpoint Corporation


/s/ David Mitchell                        /s/ Mark A. Smith
------------------------------            --------------------------------
By: David Mitchell                        By: Mark A. Smith

Dated: 2/12/03                            Dated: 2/11/03

EXHIBIT 10.4

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND IS A "RESTRICTED SECURITY" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE NOTE MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF BION ENVIRONMENTAL TECHNOLOGIES, INC.

SECURED PROMISSORY NOTE

$42,500.00 March 28, 2003

Bion Environmental Technologies, Inc. ("Debtor"), for value received, hereby promises to pay to the order of Bright Capital Limited ("Lender"), in lawful money of the United States at the address of Lender set forth below, the initial principal sum of Forty Two Thousand Five Hundred Dollars ($42,500.00) plus any amounts that may be loaned by Lender to Debtor pursuant to this Note after the date hereof , together with interest on the unpaid principal at the simple rate of six percent (6%) per annum. Such principal and accrued interest shall be payable at Maturity on March 28, 2004.

This Note is secured by a security interest in certain assets of the Debtor pursuant to that certain Security Agreement of even date herewith between Debtor and Lender.

This Note may be prepaid, in whole or in part, at any time without permission or penalty. Interest shall be computed on the basis of a 360-day year and actual days elapsed.

If a payment on this Note shall become due on a Saturday, Sunday or public holiday under the laws of the State of New York, such payment shall be made on the next succeeding business day and such extension of time shall be included in computing interest in connection with such payment.

Immediately upon the occurrence of an "Event of Default" (as defined below), Lender may, at its option, declare immediately due and payable the entire unpaid principal amount of this Note, together with all interest thereon, plus any other amounts payable at the time of such declaration pursuant to this Note. An Event of Default shall be defined as each of the following: (i) failure of Debtor to make any payment of interest and/or principal within ten (10) days after the due date; (ii) Debtor shall admit in writing its inability to pay its debts as they become due, shall make a general assignment for the benefit of creditors or shall file any petition for action for relief under any bankruptcy, reorganization, insolvency or moratorium law, or any other law or laws for the relief of, or relating to, debtors; or (iii) an involuntary petition shall be filed against Debtor under any bankruptcy, reorganization, insolvency or moratorium law, or any other law or laws for the relief of, or relating to, debtors unless such petition shall be dismissed or vacated within thirty (30) days of the date of the filing thereof.

Debtor hereby waives diligence, presentment, protest and demand and also notice of protest, demand, dishonor and nonpayment of this Note and expressly agrees that this Note, or any payment hereunder, may be extended from time to time, all without in any way affecting the liability of Debtor.

If Lender should institute collection efforts, of any nature whatsoever, to attempt to collect any and all amounts due hereunder upon the default of Debtor, Debtor shall be liable to pay to holder immediately and without demand all reasonable costs and expenses of collection incurred by Lender, including, without limitation, reasonable attorney fees, whether or not suit or other action or proceeding be instituted and specifically including but not limited to collection efforts that may be made through a bankruptcy court.

Any notice or other communication, except for payment hereunder, required or permitted hereunder shall be in writing and shall be deemed to have been given upon delivery if personally delivered or one day after deposit if deposited in the United States mail for mailing by certified mail, postage prepaid, and addressed as follows:

If to Debtor:          Bion Environmental Technologies, Inc.
                       18 East 50th Street, 10th Floor
                       New York, New York 10022

If to Lender:          Bright Capital Limited
                       64 Village Hill Drive
                       Dix Hills New York 11746-8337

Any payment shall be deemed made upon receipt by Lender. Lender or Debtor may change its address for purposes of this paragraph by giving to the other party notice in conformance with this paragraph of such new address.

This Note may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Note as of the day and year first above written.

"Debtor"
BION ENVIRONMENTAL TECHNOLOGIES, INC.

                              By: /s/ Mark Smith
                                  Authorized Officer

ACKNOWLEDGED AND AGREED TO:

"Lender"
BRIGHT CAPITAL LIMITED

By: /s/ Dominic Bassani
    Authorized Officer

STATE OF COLORADO
UNIFORM COMMERCIAL CODE-SECURITY AGREEMENT

Debtor:

Name: Bion Environmental Technologies, Inc.
(Exact Legal Name Required)

Address:
Residence: _________________________________________________________ No. Street City State

Business: 18 East 50th Street - 10th Floor New York New York No. Street City State

Secured Party:
Name: Bright Capital Limited

Address: 64 Village Hill Drive Dix Hills New York No. Street City State

Debtor, for consideration, hereby grants to Secured Party a security interest in the following property and any and all additions, accessions and substitutions thereto or therefor (hereinafter called the "COLLATERAL"):

All of Debtor's tangible assets of any kind, including, without limitation, computers, office furniture, file cabinets and all of the equipment and inventory listed on Exhibit A attached hereto and incorporated herein by reference.

To secure payment of the indebtedness evidenced by that certain promissory note of even date herewith, payable to the Secured Party, or order, as set forth herein.

DEBTOR EXPRESSLY WARRANTS AND COVENANTS:

1. That except for the security interest granted hereby Debtor is, or to the extent that this agreement states that the Collateral is to be acquired after the date hereof, will be, the owner of the Collateral free from any adverse lien, security interest or encumbrances; and that Debtor will defend the Collateral against all claims and demands of all persons at anytime claiming the same or any interest therein.

2. The Collateral is used or bought primarily for:

___ Personal, family or household purposes; ___ Use in farming operations;
X Use in business.

3. That Debtor's residence, state of organization or chief executive office is as stated herein, and the Collateral will be kept at the location set forth on Exhibit A attached hereto and incorporated herein by reference.

4. If any of the Collateral is oil, gas, or minerals to be extracted or timber to be cut, or goods which are or are to become fixtures, said Collateral concerns the following described real estate situate in the _____________ County of and State of Colorado, to wit: N/A

5. Promptly to notify Secured Party of any change in the location of the Collateral.

6. To pay all taxes and assessments of every nature which may be levied or assessed against the Collateral.

7. Not to permnit or allow any adverse lien, security interest or encumbrance whatsoever upon the Collateral and not to permit the same to be attached or replevined.

8. That the Collateral is in good condition, and that Debtor will, at Debtor's own expense, keep the same in good condition and from time to time, forthwith, replace and repair all such parts of the Collateral as may be broken, worn out, or damaged without allowing any lien to be created upon the Collateral on account of such replacement or repairs, and that the Secured Party may examine and inspect the Collateral at any time, wherever located.

9. That Debtor will not use the Collateral in violation of any applicable statutes, regulations or ordinances.

10. The Debtor will keep the Collateral at all times insured against risks of loss or damage by fire (including so-called extended coverage), theft and such other casualties as the Secured Party may reasonably require, including collision in the case of any motor vehicle, all in such amounts, under such forms of policies, upon such terms, for such periods, and written by such companies or underwriters as the Secured Party may approve, losses in all cases to be payable to the Secured Party and the Debtor as their interest may appear. All policies of insurance shall provide for at least ten days' prior written notice of cancellation to the Secured Party; and the Debtor shall furnish the Secured Party with certificates of such insurance or other evidence satisfactory to the Secured Party as to compliance with the provisions of this paragraph. The Secured Party may act as attorney for the Debtor in making, adjusting and settling claims under or cancelling such insurance and endorsing the Debtor's name on any drafts drawn by insurers of the Collateral.

UNTIL DEFAULT Debtor may have possession of the Collateral and use it in any lawful manner, and upon default Secured Party shall have the immediate right to the possession of the Collateral.

DEBTOR SHALL BE IN DEFAULT under this agreement upon the happening of any of the following events or conditions:

(a) default in the payment or performance of any obligation, covenant or liability contained or referred to herein or in any note evidencing the same;

(b) the making or furnishing of any warranty, representation or statement to Secured Party by or on behalf of Debtor which proves to have been false in any material respect when made or furnished;

(c) loss, theft, damage, destruction, sale or encumbrance to or of any of the Collateral, or the making of any levy seizure or attachment thereof or thereon;

(d) death, dissolution, termination of existence, insolvency, business failure, appointment of a receiver of any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency laws of, by or against Debtor or any guarantor or surety for Debtor.

UPON SUCH DEFAULT and at any time thereafter, or if it deems itself insecure, Secured Party may declare all Obligations secured hereby immediately due and payable and shall have the remedies of a secured party under Article 9 of the Colorado Uniform Commercial Code. Secured Party may require Debtor to assemble the Collateral and deliver or make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient to both

parties. Expenses of retaking, holding, preparing for sale, selling or the like shall include Secured Party's reasonable attorney's fees and legal expenses (including the allocated fees and expenses of in-house counsel) and such portion of the Secured Party's overhead as it may in its reasonable judgment deem allocable to and includable in such expenses.

No waiver by Secured Party of any default shall operate as a waiver of any other default or of the same default on a future occasion. The taking of this Security Agreement shall not waive or impair any other security Secured Party may have or hereafter acquire for the payment of the above indebtedness, nor shall the taking of any such additional security waive or impair this Security Agreement; but Secured Party may resort to any security it may have in the order it may deem proper, and notwithstanding any collateral security, Secured Party shall retain its rights of set-off against Debtor.

All rights of Secured Party hereunder shall inure to the benefit of its successors and assigns; and all promises and duties of Debtor shall bind Debtor's heirs, executors or administrators or Debtor's successors or assigns. If there be more than one Debtor, their liabilities hereunder shall be joint and several.

Dated: March 28, 2003

Debtor:

Bion Environmental Technologies, Inc.    Colorado
-------------------------------------    ------------------------------------
                                         Debtor's state of organization,
                                         or if not a registered organization,
                                         chief executive officer

By:  /s/ Mark Smith                      19871767435
   ----------------------------------    ------------------------------------
    Authorized Officer                   Debtor's State Identification No.

DATE:                         March 1, 2003

LANDLORD:                     PAN AM EQUITIES, INC.
                              As agent for PAMELA EQUITIES CORP.

ADDRESS OF LANDLORD:          3 New York Plaza
                              New York, New York 10004

TENANT:                       BION ENVIRONMENTAL TECHNOLOGIES, INC.

ADDRESS OF TENANT:            18 East 50th Street, Tenth Floor
                              New York, New York 10023

LEASE DATE:                   August 8, 2000

NEW COMMENCEMENT DATE:        January 1, 2003

DATE OF PRIOR
 AMENDMENTS OR AGREEMENT:     NONE

BUILDING:                     18 East 50th Street
                              New York, New York 10023

CURRENT PREMISES:             Tenth Floor

SECURITY DEPOSIT
OR LETTER OF CREDIT:          $120,561.00


EXPIRATION DATE:              December 31, 2010

NEW EXPIRATION DATE:          December 31, 2003

RECITALS

WHEREAS, Landlord and Tenant entered into a lease agreement dated August 8, 2000 (the "Original Lease") wherein Tenant leased premises known as the Tenth (10th) floor of the Building ("Original Premises");

WHEREAS, the parties have agreed to shorten the term of the Lease; and

WHEREAS, the parties have agreed to further modify the terms of the Original Lease.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, it is hereby agreed as follows:

1. The Lease. For the purposes of this First Lease Amendment, the term "Lease" shall be defined as the Original Lease. Unless defined herein the capitalized word shall have the meaning ascribed to them in the lease.

2. Arrearages. As of February 24, 2003, Tenant acknowledges it is currently in arrears for the sum of $48,533.92 ("Arrearages"). Said Arrearages are due and owing to the Landlord and must be paid immediately.

3. Drawdown of Letter of Credit. Immediately upon the execution of this Amendment by Tenant, Landlord shall draw down on the Letter of Credit and the full amount of $120,561.00 shall be released to Landlord. As necessary, Tenant shall cooperate with Landlord to facilitate the release of the Letter of Credit.

Landlord shall utilize the Letter of Credit to pay the Arrearages. Once the Arrearages have been satisfied, there shall remain the sum of $72,027.08 ("Remaining Sum"). Landlord shall utilize the Remaining Sum to pay Rent due under the Lease. Once the Remaining Sum has been utilized, then the Tenant shall continue to pay the Rent due under the Lease.

4. New Expiration Date. The parties agree that the Lease shall now terminate on December 31, 2003 ("New Expiration Date"). Tenant shall now vacate on the New Expiration Date in accordance with the Lease.

5. Personal Guaranty. To ensure performance by Tenant as to its obligations under the Lease, as amended herein, David Mitchell and Salvatore Zizza shall enter into the form of personal guaranty attached hereto as Exhibit "A".

6. Successor-in-Interest. The First Amendment of the Lease shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives, successors and permitted assigns.

7. No Broker. Landlord and Tenant represent and warrant to each other that no broker brought about this transaction and Landlord and Tenant agree to indemnify and hold each other harmless from any and all claims of any broker arising out of or in connection with the negotiations of or the entering into of this First Amendment of Lease by the parties hereto. If such claim arises out of a breach of the foregoing warranty to that end Landlord or Tenant shall indemnify the other party for all loss, costs or damage including reasonable attorney=s fees arising therefrom. These representations and warranties shall survive the termination of the Original Lease and this First Amendment.

8. Ratification of Original Lease. Except as expressly modified and amended by this First Amendment of Lease, all of the terms, provisions and conditions of the Original Lease are hereby ratified and confirmed by Landlord and Tenant. Tenant hereby releases and discharges Landlord from any and all claims or liability now arising out of the Lease prior to the date hereof, including, but in no way limited to, any and all changes as billed by Landlord to Tenant pursuant to the terms of the Original Lease. In the event of a conflict between the terms of the Original Lease and the terms of the First Amendment, then the terms of this First Amendment shall control.

ATTEST:                                LANDLORD:
                                       PAN AM EQUITIES, INC.
                                       As agent for PAMELA EQUITIES CORP.


By:______________________               By: /s/
Name:____________________               Name:_______________________
Title:___________________               Title:______________________


ATTEST:                                 TENANT:
                                        BION ENVIRONMENTAL TECHNOLOGIES, INC.


By:______________________               By:/s/ David Mitchell
Name:____________________               Name:_______________________
Title:___________________               Title:  CEO

E X H I B I T "A"

PERSONAL GUARANTY

FOR VALUE RECEIVED, and as an essential inducement to cause PAN AM EQUITIES, INC., as agent for PAMELA EQUITIES CORP., as landlord ("Landlord"), to enter into that certain agreement of lease (the "Lease") dated August 8, 2000 and amended by a First Amendment being executed simultaneously, between Landlord and BION ENVIRONMENTAL TECHNOLOGIES, INC., as tenant ("Tenant") for certain premises in the building owned by Landlord known as 18 East 50th Street, New York, New York 10022 as more particularly described therein (the "Premises"), the undersigned, DAVID MITCHELL AND SALVATORE ZIZZA (collectively, the "Undersigned") all having an office at 18 East 50th Street, New York, New York 10022 hereby agree as follows:

1. Effective after a default and termination of the Lease, the undersigned hereby unconditionally guarantees to Landlord: (a) the full and timely payment of rent and additional rent under the Lease; and (b) the payment by Tenant of any legal fees expended by Landlord in obtaining possession of the Premises after a default by Tenant under the Lease and termination of the Lease or in enforcing the provisions of this Guaranty. The Undersigned hereby waives notice of acceptance of this Guaranty, notice of any action taken or omitted in reliance herein, notice of default, notice of non-payment, notice of non-performance, notice of non-observance, presentment, protest or other proof or notice or demand, or promptness in making any claim or demand hereunder, whereby to charge the Undersigned. The Undersigned hereby expressly agrees that the validity of this Guaranty shall in no way be terminated, affected or impaired by reason of the assertion of, or failure to assert, against Tenant or any other person any of the rights or remedies reserved pursuant to the provisions of the Lease.

2. INTENTIONALLY OMITTED.

3. The Undersigned agrees that the Landlord shall have the right, in Landlord's discretion, to proceed against the Undersigned, or any of them upon any default of Tenant in the performance of Tenant's obligations to pay rent and additional rent in accordance with the provisions of the Lease, without first instituting action or proceeding against Tenant, or Landlord may also take all available action for redress against Tenant alone or jointly by reasons of any such default, against both Tenant and the Undersigned, or any of them

4. The undersigned further agrees that if it shall be necessary to institute action against the Undersigned in order to enforce this Guaranty, the Undersigned shall pay to Landlord the reasonable fees and expenses of Landlord=s attorneys in connection with the enforcement of this Guaranty.

5. In any action of proceeding brought hereunder against the Undersigned, the Supreme Court of the State of New York for the County of New York, or in case of diversity of citizenship, the United States District Court for the Southern District of New York shall have jurisdiction.

6. The provisions of this Guaranty shall continue to be effective or shall be reinstated, as the case may be, if payment or any part hereof, or any of the obligations guaranteed hereunder up to the date of surrender is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy or reorganization of Tenant, whether by order of any court, by any settlement approved by any court, or otherwise, all as though such payment had not been made.

7. To the extent permitted by law, the Undersigned hereby, waives trial by jury of any and all issues arising in any action or proceeding between the parties upon, under, or connected with this Limited Guaranty, or any of its provisions, or the breach thereof, directly or indirectly, or any and all negotiations in connection therewith.

8. In case of any agreement between Landlord and Tenant extending the time of performance or modifying or waiving of any of the terms, provisions or conditions of the Lease, or in case of any failure of Landlord to enforce any of the terms or provision of the Lease, the Undersigned nevertheless shall continue to be jointly and severally liable under this Guaranty according to the tenor hereof and no extension, modification, waiver or failure to enforce Landlord's rights under the Lease shall impair the obligations of the Undersigned herein to Landlord, and this obligation shall be and shall remain in full force and effect, the Undersigned expressly waiving any notice of such extension, modification, waiver or failure to enforce the Lease.

9. Any payments required to be made by the Undersigned hereunder shall become due on demand in accordance with the terms hereof immediately upon the happening of a default by Tenant under the Lease and the expiration of the time period for curing same as provided under the Lease and termination thereof, if any, and the Undersigned expressly waives and relinquishes all rights and remedies accorded by applicable law to guarantors, except the right to cure promptly.

l0. The validity of this Guaranty and the obligations of the Undersigned hereunder shall in no way be terminated, affected or impaired by reason of any action which Landlord may take or fail to take against Tenant or by reason of any failure to enforce any of the rights or remedies reserved to Landlord in the Lease, or otherwise. No delay on Landlord's part in exercising any right, power or privilege under the Lease, this Guaranty, or any other document which may be executed by the Undersigned, shall operate as a waiver of any such right, power or privilege.

11. This Guaranty shall remain in full force and effect, notwithstanding the institution by or against Tenant or the Undersigned, of bankruptcy, reorganization, readjust, receivership or insolvency proceedings of any nature or disaffirmance of the Lease in any such proceedings, or otherwise.

12. This Guaranty shall continue and remain in full force and effect and be binding upon the Undersigned and Landlord as to any modifications or extensions of the Lease; but not as to permitted assignments provided assignee's principals execute a Guaranty in substantially identical form to this Guaranty; but shall be so binding as to any permitted sale or sales of

the stock of Tenant, or of partnership or joint venture interest in Tenant, as the case may be, and also after any termination of the Lease for any cause whatsoever.

13. This Guaranty shall be binding upon and inure to the benefit of Landlord and its respective heirs, executors, administrators, legal representatives, successors and assigns, and shall be binding upon each of the Undersigned and its respective heirs, executors, administrator, legal representatives and assigns.

14. Guarantor acknowledges that this Guaranty is an absolute and unconditional guaranty of payment and not merely of collection.

IN WITNESS WHEREOF, the Undersigned has executed this Guaranty this 3 day of March 2003.

/s/ David Mitchell
--------------------------
Guarantor

Address:

18 East 50th Street
New York, New York 10023

14. Guarantor acknowledges that this Guaranty is an absolute and unconditional guaranty of payment and not merely of collection.

IN WITNESS WHEREOF, the Undersigned has executed this Guaranty this 3 day of March 2003.

/s/ Salvatore Zizza
--------------------------
Guarantor

Address:

18 East 50th Street
New York, New York 10023

EXHIBIT 10.6

AGREEMENT

This Agreement is made effective as of March 1, 2003, by and between Bion Environmental Technologies, Inc. ("Bion") and Bergen Cove.

Bion desires to have the following services provided by Bergen Cove.

Therefore, the parties agree as follows:

1. DESCRIPTION OF SERVICES. Beginning on March 1, 2003, Bergen Cove will provide the following services (collectively, the "Services"):

Collect monthly rent from the Undertenants, David J. Mitchell, Salvatore J. Zizza, Lazam Properties, Ltd. (Louis Perlman) and Verus Support Services for occupancy of the 10th floor of 18 East 50th Street, New York, NY 10022.

Pay monthly rent to the Overtenant, Pan Am Equitites.

2. PERFORMANCE OF SERVICES. The manner in which the Services are to be performed shall be determined by Bergen Cove. Bion will rely on Bergen Cove to fulfill its obligations under this Agreement.

3. TERM/TERMINATION. This Agreement shall terminate automatically at the time all rents are collected from the Undertenants and paid to the Overtenant.

4. ASSIGNMENT. Bergen Cove=s obligations under this Agreement may not be assigned or transferred to any other person, firm, or corporation without the prior written consent of Bion.

5. NOTICES. All notices required or permitted under this Agreement shall be in writing and shall be deemed delivered when delivered in person or deposited in the United States mail, postage prepaid, addressed as follows:

If for the Company:

Bion Environmental Technologies, Inc. Larry Danziger
Chief Financial Officer
18 East 50th Street, 10th Floor
New York, New York 10022

If for Bergen Cove:

Salvatore Zizza
18 East 50th Street, 10th Floor
New York, New York 10022

Such address may be changed from time to time by either party by providing written notice to the other in the manner set forth above.

6. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties and there are no other promises or conditions in any other agreement whether oral or written. This Agreement supersedes any prior written or oral agreements between the parties.

7. AMENDMENT. This Agreement may be modified or amended if the amendment is made in writing and is signed by both parties.

8. SEVERABILITY. If any provision of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited.

9. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement.

10. APPLICABLE LAW. This Agreement shall be governed by the laws of the State of New York.

Party receiving services:
Bion Environmental Technologies, Inc.

By: /s/ David J. Mitchell
David J. Mitchell
Chief Executive Officer

Party providing services:
Bergen Cove

By: /s/ Salvatore Zizza

EXHIBIT 10.7

From: Mark A. Smith
Sent: Monday, April 07, 2003 3:05 PM To: Mark A. Smith; dmitchell at biontech.com Cc: Brightcap
Subject: resignation/termination and amendment of agreements (with changes)

The outline below contains the changes that have been discussed. Please confirm the following (as we are preparing Form 8k filing):

1 - your resignation was effective as to all positions with Bion and its subsidiaries;

2 - all agreements (except as specified herein) between D2 and Bion (including those also involving 3rd parties) terminated effective upon your resignation (including without limitation management agreement (as amended), voting agreement, and shareholder agreement);

3 - you, in conjunction with Mr. Zizza, will provide Bion/Cptx with cubicle office space, file and storage space and use of the conference room at their prior corporate headquarters at 18 E. 50th St., 10th floor, NYC, at no cost to Bion/Cptx thru the end of the amended lease term (currently 12/31/03);

4 - the D2 Deferred Comp Trust shall remain in existence until mutually agreed otherwise and the 'payable' balance of $450,000 owed by Bion to the Trust shall be converted into Bion common stock upon the earlier of: a) a $5,000,000 (or greater) equity financing(s) by Bion, in which case it shall be converted at the equity price of such financing (or, in the event that the $5,000,000 was reached in a series of more than one financing, the price of the equity financing which pushed the aggregate total of the financings above $5,000,000), or b) March 31, 2005 (at the then market price of Bion's common stock, unless agreed otherwise in writing).

Yours,

Mark A. Smith, President
Bion Environmental Technologies, Inc. (Bion) and Centerpoint Corporation (Cptx)

/s/ David Mitchell
    April 7, 2003

EXHIBIT 10.8

Dominic Bassani
Bright Capital Ltd.

Dear Dominic:

As you know, Bion Environmental Technologies, Inc. ("Bion," "we," "us" or "our") is currently experiencing a severe working capital deficit and is in the process of attempting to obtain additional capital that will be necessary to continue in business. You have informed us that you are currently engaged in discussions with potential investors on our behalf to help us obtain additional capital through a debt financing, but that it currently appears unlikely that the final terms of this financing will be negotiated and financing available this week. In the meantime, the Texas Devries Dairy Project, which we all agree is critical to establishing the credibility necessary for Bion to commence sales and generate revenues, has commenced and requires funding immediately. Additionally, funds are also needed by us for international patent filings, payroll and other pressing matters.

Since the Devries Dairy Project, international patent filings, payroll, etc. cannot be delayed and Bion does not have the funds necessary to pay the associated expenses, you have agreed to lend us the money that we need to pay for the Devries Dairy Project, etc. as an additional loan on an as-needed basis ("Brightcap Bridge Loan"), and that you will convert all of the amounts due under the terms of the Brightcap Bridge Loan (which are set forth in this letter agreement) to amounts that will be due under the same identical terms that the investors will receive in the first of a series of anticipated financings consisting of mandatorily convertible debt which are intended to be accomplished in 2003 through Bion Dairy Corporation, one of Bion's wholly- owned subsidiaries (the "Bion Dairy Financing")during the next 30 days.

You have lent us money in the past pursuant to a Secured Promissory Note dated March 28, 2003 (the Secured Note"), and in connection with that loan we have granted you a security interest in certain of our tangible assets pursuant to a related Security Agreement (the "Security Agreement"). All of the amounts provided to us under the Brightcap Bridge Loan (plus prior advances from Brightcap (directly and/or through D2 LLC) since January 1, 2003 which have not been previously included in the Secured Note) will be added as principal due under the existing Secured Note. All of the obligations due under the Secured Note will automatically and mandatorily convert to being an obligation under the Bion Dairy Financing contemporaneously with the issuance of the first convertible note under the Bion Dairy Financing; provided, however, that to the extent any funds are realized from the disposition of tangible assets under the existing Security Agreement, such funds will be utilized to reduce the amount due under the Secured Note and will not be converted( or, if received after the Secured Note has already been converted, such funds will be paid to Brightcap and applied to reduce the principal of the convetible notes received in the Bion Dairy Financing).

As collateral for the Brightcap Bridge Loan, Bion and its subsidiaries will grant you an additional security interest in all of their intellectual property, including without limitation, patents, patent applications, trade secrets and technical know-how (the "Intellectual Property Collateral") pursuant to an amendment to the existing Security Agreement, but you acknowledge that this is exactly the same collateral that is anticipated to be granted as security to note holders in connection with the Bion Dairy Financing. Accordingly, you agree that: (a) even though you are being granted a security interest in the Intellectual Property Collateral under the Brightcap Bridge Loan, you specifically consent to the granting of a security interest in the same collateral to the holders of notes under the Bion Dairy Financing after the date of the Brightcap Bridge Loan, (b) you will share your security interest in the Intellectual Property Collateral in pari pasu with the holders of the notes issued pursuant to the Bion Dairy Financing as such notes are issued in the future, (c) your security interest in the Intellectual Property Collateral will not be senior to the security interest granted to the holders of the notes under the Bion Dairy Financing, irrespective of the date of filing and (d) you will execute and deliver any documents reasonably requested by investors in that regard.

Please acknowledge your agreement to the terms set forth in this letter, by executing your signature in the space provided below.

Sincerely,

BION ENVIRONMENTAL TECHNOLOGIES, INC.

By: /s/ Mark Smith
    Mark Smith, President

AGREED AND ACCEPTED BY:

BRIGHT CAPITAL, LTD.

By: /s/ Dominic Bassani
    Dominic Bassani

EXHIBIT 10.9

AGREEMENT

This Agreement is made and entered into effective the __ day of May, 2003 by and among Bion Environmental Technologies, Inc., a Colorado corporation ("Bion"), Centerpoint Corporation, a majority-owned subsidiary of Bion which is a Delaware corporation ("Centerpoint") and OAM, S.p.A., an Italian corporation ("OAM").

WHEREAS, OAM is the former parent of Centerpoint and sold Bion its majority ownership interest in Centerpoint on January 10, 2002 pursuant to a series of agreements dated as of that date by and among Bion, OAM, Centerpoint and others (hereinafter collectively referred to as the "Transaction Documents"); and

WHEREAS, the Transaction Documents contain certain "Post-Closing Adjustment" provisions that have made it economically undesirable for outside investors to provide capital to Bion;

WHEREAS, Bion has received verbal commitments for investment of at least $700,000 to finance its opening an operating test facility in Texas, subject to the waiver of the Post-Closing Adjustment provisions (the "Financing");

WHEREAS, Bion is fairly confident of having arranged additional funding of $1.25 million expected to close during November 2003, subject to successful completion of systems testing at the Texas facility and publication of the results therefrom;

WHEREAS, subject to the representations, warranties, terms and conditions set forth herein, the parties hereto believe that it is in their respective and collective best interests to enter into this Agreement in order to facilitate Bion's efforts to obtain necessary capital under current market conditions;

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

(1) Subject to paragraphs 2 and 5 below, and to the receipt by OAM of full and final payment of $25,000 under that certain Stock Transfer Agreement, dated as of May 27, 2003, between OAM and Anthony Orphanos (the "STA"),
Section 1.2 of that certain Stock Purchase Agreement dated as of January 10, 2002 by and between OAM and Bion (the "OAM Stock Purchase Agreement") is hereby waived as it would apply to the Financing and any financings or other transactions or issuances thereafter. Without limiting the foregoing and for avoidance of doubt, Bion acknowledges and agrees that in the event full and final payment under the STA is not made pursuant to its terms, Bion shall be required to honor Section 1.2 of the OAM Stock Purchase Agreement as it applies to the Financing, including any closing of the Financing that may then have already occurred, in addition to any other rights OAM may have under such provision.

(2) Bion represents and warrants that on or before closing of the Financing, all other existing holders of Bion securities as of such date shall have agreed to waive the applicability to the Financing and any future financing of any anti-dilution, penalty or post-closing adjustment rights or similar protections which might otherwise be applicable to the Financing. If and to the extent Bion directly or indirectly extends to any such holders any

protection against dilution, Bion shall make such adjustment to the Bion securities held by OAM or issue to OAM such additional shares, or undertake obligations to do so, such that on an equitable basis OAM is accorded anti- dilution protection no less favorable than that accorded such other holder. The representations, warrantees and covenants in this paragraph shall be deemed a condition to the effectiveness of paragraph 1 above.

(3) The parties acknowledge that (a) under Section 3(1) of that certain Assignment of Assignment of Claims Agreement and Section 2(1) of that certain Assignment of Assignment of Escrow Agreement, both of which agreements are dated January 10, 2002 and are by and between Bion and OAM and which are binding on Centerpoint in certain respects (together, the "Assignment Agreements"), OAM is entitled to reimbursement of 35% of certain fees and expenses, and (b) that OAM is entitled to reimbursement of 100% of certain other fees accrued by OAM or its parent companies for the benefit of Centerpoint (together, the reimbursable amounts under clauses (a) and (b) being, the "Legal Reimbursements"). The parties agree that the amount of the accrued and unpaid Legal Reimbursements through the date hereof is as set forth on Exhibit A attached hereto. Additionally, the parties acknowledge that Deloitte & Touche is owed by OAM $25,000, towards which Centerpoint Corporation will pay OAM $12,500 (such amount being the "Outstanding Accounting Accrual") as provided below. Centerpoint acknowledges that such amount is separate and distinct from, and agrees that it will not use payment of the Outstanding Accounting Accrual as a defense to or set-off against, any other sums which Deloitte & Touche may claim are owed to it by Centerpoint. The parties agree that OAM shall be entitled to have disbursed to it, rather than Centerpoint Corporation, any settlement proceeds or other proceeds otherwise payable to Centerpoint based upon its thirty-five percent ownership of the claims subject of the Assignment Agreements, until such time as the amount of such disbursements equals the sum of the Legal Reimbursements accrued through such date and the Outstanding Accounting Accrual. The parties acknowledge that payment of Legal Reimbursements thereafter shall continue to be governed by the terms of the Assignment Agreements.

(4) Bion and Centerpoint hereby agree to use their respective and collective best efforts to cause Centerpoint to hold a special meeting of its stockholders in New York City within sixty days after the date on which this Agreement is executed by all of the parties hereto for the purpose of seeking formal stockholder ratification of that certain Agreement between Bion and Centerpoint dated February 12, 2003, a copy of which is attached hereto as Exhibit B (the "Centerpoint Agreement"). OAM hereby agrees that it will not vote its shares against such ratification at the special meeting. For purposes of clarification, Bion agrees that Paragraph 2a) of the Centerpoint Agreement shall only be deemed to apply to: a) Section 2.4 of the Subscription Agreement between Centerpoint and Bion, and b) Section 1.2 of the Registration Rights Agreement between Centerpoint and Bion; and not to any other agreement between or among them.

(5) Bion shall pay (i) to OAM the sum of $80,000, and (ii) on behalf of OAM, to Kramer Levin Naftalis & Frankel LLP the sum of $10,000 (towards legal fees incurred from March 2003 through the date hereof in connection with the negotiations of the parties), by wire transfer of immediately available funds in accordance with the wire transfer instructions set forth in Exhibit B attached hereto within two business days after formal ratification of the Centerpoint Agreement by a majority of the Centerpoint stockholders that are present (in person or by proxy) at the Centerpoint stockholder meeting other

than Bion. Full and final payment of such amounts in accordance with the requirements of this paragraph 5, shall be a condition precedent to effectiveness of paragraph 1 above.

(6) The parties may not amend this Agreement except in a written instrument that is executed by an authorized officer of each of the parties hereto.

(7) This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

(8) This Agreement and the rights and obligations of the parties under this Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York, without regard to its statutes relating to conflicts of laws.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written.

Bion Environmental Technologies, Inc., a Colorado corporation

By: /s/ Mark A. Smith
    -------------------------------------
    Authorized Officer

Centerpoint Corporation, a Delaware corporation

By: /s/ Mark A. Smith
    -------------------------------------
    Authorized Officer

OAM, S.p.A., an Italian corporation

By: /s/ Mark S. Hauser
    -------------------------------------
    Authorized Officer

Exhibit A
Legal Reimbursements

Advances to date in respect of which OAM is entitled to 100% reimbursement:

Traverso (Perotto) Euro 15,230

Accrued and unpaid to date, to which OAM is entitled to 35% reimbursement:

Traverso (Perotto) Euro 14,970

Total "Legal Reimbursements" to date:

15,230 + (14,970 X 35%) = Euro 20,469.5

                               Exhibit B
                      Wire Transfer Instructions

OAM
ABA #:          031207607
Account #:      80-2136-7019
Account Name:   Trident Rowan Group Inc OAM
Contact:        Maria Quintana

To:             Citibank, N.A.
            Citicorp Center 153 E. 53rd Street NY, N.Y. 10043
ABA #:      021000089
Account:    Kramer Levin Naftalis & Frankel LLP Money Market A\C 37613572
Contact:    Margaret King (212) 559-0030

EXHIBIT 10.10

AMENDED AGREEMENT

It is agreed by and between Bion Environmental Technologies, Inc. ("Bion") and Centerpoint Corporation ("CPTX"), effective as of February 12, 2003, that the prior agreement dated February 12, 2003 (which was not ratified by the Board of Directors of either of Bion and CPTX) be amended to read as follows:

1. Bion shall:

a) cancel all sums owed to Bion by CPTX as of February 12, 2003;
b) return 1,000,000 warrants of CPTX for cancellation;
c) use its best efforts to assist CPTX in the distribution of Bion common stock owned by CPTX (the "Shares") to CPTX's shareholders;
d) provide (pursuant to existing agreements) the services of Bion's management personnel and staff, together with office space, through a date no earlier than 30 days after distribution of the Shares to CPTX's shareholders ; and
e) advance to CPTX such sums as are reasonably needed to pay direct expenses related to distribution of the Shares and the holding of a CPTX shareholders' meeting.

2. a) CPTX shall cancel all "ratchet" and "penalty" provisions in existing agreements between Bion and CPTX ; and
b) to the extent that CPTX acquires any Bion securities from OAM S.p.A., CPTX agrees to cancel all "ratchet" and "penalty" provisions related to such securities; and
c) use its best efforts to distribute the Shares to its shareholders.

3. Bion and CPTX each agrees to take all necessary actions, including, without limitation, execution of additional documents, as may be reasonably needed to carry out the purposes of this Amended Agreement.

Bion Environmental Technologies, Inc.     Centerpoint Corporation


By: /s/ Mark Smith, President             By: /s/ Mark Smith, President
    ---------------------------------         ------------------------------
      Authorized Officer                        Authorized Officer

Dated: April 23, 2003                     Dated: April 23, 2003

EXHIBIT 10.11

THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF BION DAIRY CORPORATION ("DAIRY"). THE SECURITIES REPRESENTED BY THIS NOTE OR TO BE ISSUED IN CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.

BION DAIRY CORPORATION

No. 2003A- __

2003 Series A Convertible Promissory Note

$_______.00 _______ 2003

Bion Dairy Corporation, a Colorado corporation ("Dairy") which is a wholly-owned subsidiary of Bion Environmental Technologies, Inc., also a Colorado corporation ("Bion"), for value received, hereby promises to pay to ____________ or registered assigns (the "Holder"), the principal sum of _______________ dollars ($__________), with interest from the original date of issuance of this 2003 Series A Convertible Promissory Note on the unpaid principal balance at a rate equal to eight percent (8%) per annum, on December 31,, 2004 (the "Maturity Date"); provided, however, that in the event the amount due under this Note has not yet been converted on such date, the Maturity Date shall be automatically extended for a period of six months after the date on which the Holders are notified in writing by Dairy that the Technical Conditions (as defined below) were not met. Payment shall be made at such place as designated by the Holder upon surrender of this Convertible Promissory Note, and shall be in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest shall be computed on the basis of a 360- day year of twelve 30-day months.

This 2003 Series A Convertible Promissory Note is one of a multiple series of duly authorized issues of Bion Dairy Corporation 2003 Convertible Promissory Notes. The conversion prices of the various series of 2003 Convertible Promissory Notes may be different from each other, but all of the amounts due under all of the series of the 2003 Convertible Promissory Notes are intended to be secured by the same identical collateral which is to be shared in pari pasu by all of the holders of all of the 2003 Convertible Promissory Notes, irrespective of the date of issuance. The Holder of this Note hereby specifically consents to the granting of a security interest in the collateral for this Note to the holders of additional series of 2003 Convertible Promissory Notes after the date hereof. The maximum aggregate principal amount of the 2003 Series A Convertible Promissory Notes combined is $2,065,000. The aggregate principal amount of all of the various series of 2003 Convertible Promissory Notes will be a maximum of $6,000,000.

Each 2003 Series A Convertible Promissory Note is individually referred to herein as a "Note" and collectively as the "Notes." Each of the 2003 Series A Convertible Promissory Notes will be issued pursuant to a Note Purchase Agreement among Dairy, Bion, the Holder and the other parties thereto (the "Purchase Agreement").

SECTION 1. Prepayment.

This Note (including interest accrued on the principal hereof) may not be prepaid in cash by Dairy without the written consent of the holders of a majority in principal amount of outstanding Notes of this issue, but may be converted to equity at any time during its term in accordance with the provisions of Section 2 below.

SECTION 2. Mandatory Conversion.

(a) Conditions for Conversion.

If the first of the Bion Conditions set forth at Schedule D to this Note has been satisfied, upon the happening of the earliest to occur of the events set forth at paragraph 1.4 of the Purchase Agreement (which events are based, in whole or part, on the conditions set forth in Schedule B attached hereto (the " Technical Conditions')) on or before the Maturity Date, then (unless otherwise agreed by a majority vote of the Holders as set forth below) all of the amounts due under this Note shall be mandatorily and automatically converted into shares of Dairy common stock ("Dairy Stock") and each of the Holders shall be entitled to receive one share of Dairy Stock for each $1.00 that is due and owing to such Holder under the terms of this Note (and Bion shall continue to own 4,000,000 shares of Dairy Stock); provided, however, that not later than the date of such conversion, Bion, Bion Technologies, Inc. and BionSoil, Inc. shall have each granted to Dairy an automatically renewable license for the worldwide exclusive use of its intellectual property in the dairy business with the terms set forth at Schedule C hereto('License') which License shall be executed and placed in escrow for the benefit of Dairy upon the termination of the offering of Notes; and provided further, that in the event that all of the conditions set forth in Schedule D to this Note (the "Bion Conditions") have been met, and the holders of a majority in principal amount of outstanding Notes of this issue elect to receive Bion Stock (as defined below) rather than Dairy Stock, then instead of converting to Dairy Stock as set forth above, all of the amounts due under this Note shall be mandatorily and automatically converted into one share of common stock of Bion ("Bion Stock")for each share of Dairy Stock which the Holder would have been entitled to receive had the majority of Holders not elected to convert into Bion Stock (which number of shares shall be subject to adjustment as provided in paragraph 1.7 of the Purchase Agreement) as is equal to the Conversion Amount (as defined below) divided by the then current Bion Conversion Price (as defined below).

(b) Conversion Procedures.

(i) In the event that the Notes are converted into Dairy Stock, Dairy's debt obligation under this Note shall cease but Dairy shall not be required to deliver stock certificates to any Holder until such time as such Holder surrenders the Notes at Dairy's offices together with irrevocable

written notice to Dairy specifying the name or names (with address) in which a certificate or certificates evidencing shares of Dairy Stock are to be issued. Dairy shall thereupon deliver to the holder of the Notes, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Dairy Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Dairy stock certificates, such conversion shall be deemed to have occurred as of Dairy's record date of the conversion and the person or persons entitled to receive Dairy Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Dairy Stock on such date.

(ii) In the event that the Notes are converted into Bion Stock, Dairy's debt obligation under this Note shall cease but Bion shall not be required to deliver stock certificates to any Holder until such time as such Holder surrenders the Notes at Bion's offices together with irrevocable written notice to Bion specifying the name or names (with address) in which a certificate or certificates evidencing shares of Bion Stock are to be issued. Bion shall thereupon deliver to the holder of the Notes, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Bion Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Bion stock certificates, such conversion shall be deemed to have occurred as of Bion's record date of the conversion and the person or persons entitled to receive Bion Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Bion Stock on such date.

(iii) In the event that the Notes are converted into Dairy Stock or Bion Stock as set forth above, either Dairy or Bion, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of their stock on such conversion. Neither Dairy nor Bion, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of their stock (or other securities or assets) in a name other than that in which the Notes so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to Dairy or Bion, as appropriate, the amount of such tax or has established, to the satisfaction of Dairy or Bion, that such tax has been paid.

(c) Protection in Case of a Merger of Dairy. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Dairy is a party other than a merger or consolidation in which Dairy is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Dairy as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Dairy Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Dairy Common

Stock immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (c)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Dairy shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Dairy for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Dairy, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Dairy.

(d) Protection in Case of a Merger of Bion. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Bion is a party other than a merger or consolidation in which Bion is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Bion as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Bion Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Bion Common Stock immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter

correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (d)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Bion shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Bion for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Bion, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Bion.

(e) Reservation of Shares; Transfer Taxes; Etc. Both Dairy and Bion shall at all times reserve and keep available, out of their respective authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Notes, such number of shares of its Common Stock as shall be sufficient to effect the conversion of all Notes from time to time outstanding. Both Dairy and Bion shall use their respective best efforts from time to time, in accordance with the laws of the State of Colorado, to increase the authorized number of shares of Common Stock if at any time the number of shares of Common Stock not outstanding shall not be sufficient to permit the conversion of all the then-outstanding Notes. In the event that either Dairy or Bion intends to offer Stock other than Common Stock, they shall authorize the issuance of sufficient shares of such stock to permit the conversion of all the then-outstanding Notes.

Bion or Dairy, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Stock on conversion of the Notes into Bion Stock or Dairy Stock. Neither Bion nor Dairy, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of Bion Stock or Dairy Stock, as appropriate (or other securities or assets), in a name other than that in which the Notes so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to either Bion or Dairy, as appropriate, the amount of

such tax or has established, to the satisfaction of Bion or Dairy, as appropriate, that such tax has been paid.

(f) Release of Collateral. Immediately upon conversion to equity under this Section 2 all amounts due under this Note shall be deemed to have been paid in full and all of the collateral for the performance of obligations hereunder shall be deemed to have been fully, finally and completely released as of such date.

SECTION 3. Fractional Shares

Neither Dairy nor Bion shall be required to issue fractions of shares of Common Stock or other stock upon the conversion of the Note. If any fraction of a share would be issuable on the Conversion of the Note, Dairy or Bion, as appropriate, shall purchase such fraction for an amount in cash equal to its fair market value, as determined in good faith by the Board of Directors of either Dairy or Bion, as appropriate.

SECTION 4. Affirmative Covenants of Dairy and Bion

Each of Dairy and Bion covenants and agrees that until the payment in full of this Note, it shall:

(a) Existence; Business. (i) Preserve, renew and keep in full force and effect its legal existence and (ii) obtain, preserve, renew, extend and keep in full force and effect the licenses, permits, authorizations, patents, trademarks and trade names material to its business.

(b) Use of Proceeds. Use the proceeds of the Notes of this issue solely as set forth in Section 7.2 of the Purchase Agreement.

(c) Notice of Events of Default. Furnish to the Holder prompt written notice of any Event of Default, specifying the nature and extent thereof and corrective action, if any, proposed to be taken with respect thereto.

(d) Authorization of Stock Issuable Upon Conversion. Authorize and reserve a sufficient number of its shares of Stock and Common Stock for issuance upon conversion of the Note.

(e) Execution and Delivery of Security Agreement. Execute and deliver the Security Agreement in substantially the form attached as Exhibit 1 hereto, and Bion shall cause each of its wholly-owned subsidiaries, Bion Technologies, Inc. and BionSoil, Inc., to execute and deliver the Security Agreement in substantially the same form.

SECTION 5. Negative Covenants of Dairy and Bion.

Each of Dairy and Bion covenants and agrees with the Holder that until the payment in full of this Note, it shall not:

(a) Dividends and Distributions. Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its capital stock.

(b) No Impairment. By amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Note against impairment.

SECTION 6. Events of Default Defined.

The following shall each constitute an "Event of Default" hereunder:

(a) the failure of Dairy to make any payment of principal of or interest on this Note when due and payable;

(b) the failure of Dairy or Bion to observe or perform any covenant in this Note or in the Purchase Agreement, and such failure shall have continued unremedied for a period of sixty (60) days;

(c) if Dairy shall:

(1) admit in writing its inability to pay its debts generally as they become due,

(2) file a petition in bankruptcy or a petition to take advantage of any insolvency act,

(3) make an assignment for the benefit of its creditors,

(4) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property,

(5) on a petition in bankruptcy filed against, be adjudicated a bankrupt, or

(6) file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof;

(d) if a court of competent jurisdiction shall enter an order, judgment or decree appointing, without the consent of Dairy, a receiver of Dairy or of the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of Dairy under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any State thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within thirty (30) days from the date of entry thereof;

(e) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of Dairy or the whole or any substantial part of its property and such custody or control shall not be terminated or stayed within thirty (30) days from the date of assumption of such custody or control;

(f) the liquidation, dissolution or winding up of Dairy; or

(g) a final judgment or judgments for the payment of money in excess of $100,000 in the aggregate shall be rendered by one or more courts, administrative or arbitral tribunals or other bodies having jurisdiction against Dairy and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and Dairy shall not, within such 30-day period, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal.

SECTION 7. Remedies Upon Event of Default.

(a) Upon the occurrence of an Event of Default, (i) the entire principal amount of, and all accrued and unpaid interest on, this Note shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Dairy. In addition, the Holder may take any action available to it under the Purchase Agreement or at law or in equity or by statute or otherwise.

(b) No remedy herein conferred upon the Holder of this Note is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

SECTION 8. Miscellaneous.

(a) Amendments and Waivers. The holders of a majority in principal amount of outstanding Notes of this issue may waive or otherwise consent to the amendment of any of the provisions hereof.

(b) Restrictions on Transferability. The securities represented by this Note have been acquired for investment and have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction. Without such registration, such securities may not be sold, pledged, hypothecated or otherwise transferred, except pursuant to exemptions from the Securities Act of 1933, and the securities laws of any state or other jurisdiction.

(c) Forbearance from Suit. No holder of Notes of this issue shall institute any suit or proceeding for the enforcement of the payment of principal or interest unless the holders of at least a majority in principal amount of all of the outstanding Notes of this issue join in such suit or proceeding.

(d) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, excluding the body of law relating to conflict of laws. Notwithstanding anything to the contrary contained herein, in no event may the effective rate of interest collected or

received by the Holder exceed that which may be charged, collected or received by the Holder under applicable law.

(e) Interpretation. If any term or provision of this Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby.

(f) Successors and Assigns. This Note shall be binding upon Dairy and Bion and each of their respective successors and assigns and shall inure to the benefit of the Holder and its successors and assigns.

(g) Notices. All notices, requests, consents and demands shall be made in writing and shall be mailed postage prepaid, or delivered by hand, to Dairy or to the Holder thereof at their respective addresses set forth below or to such other address as may be furnished in writing to the other party hereto:

If to the Holder:      At the address shown on Schedule A
                       attached hereto.

If to Dairy:           Bion Dairy Corporation
                       c/o Bion Environmental Technologies, Inc.
                       18 East 50th Street, 10th Floor
                       New York, New York 10022
                       Attention: Chief Executive Officer

With a copy to:        Mark A. Smith, President
                       P.O. Box 566
                       Crestone, Colorado 81131
                       e-fax  425-984-9702

If to Bion:            Bion Environmental Technologies, Inc.
                       18 East 50th Street, 10th Floor
                       New York, New York 10022
                       Attention: Chief Executive Officer

With a copy to:        Mark A. Smith, President
                       P.O. Box 566
                       Crestone, Colorado 81131
                       e-fax  425-984-9702

(h) Saturdays, Sundays, Holidays. If any date that may at any time be specified in this Note as a date for the making of any payment of principal or interest under this Note shall fall on Saturday, Sunday or on a day which in New York shall be a legal holiday, then the date for the making of that payment shall be the next subsequent day which is not a Saturday, Sunday or legal holiday.

(i) Purchase Agreement. This Note is subject to the terms contained in the Purchase Agreement dated the date hereof among Bion, Dairy and the purchasers of the Notes and the holder of this Note is entitled to the benefits of such Purchase Agreement and may, in addition to any rights hereunder, enforce the agreements of Dairy and Bion contained therein and

exercise the remedies provided for thereby or otherwise available in respect thereof.

IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed instrument on the date first above written by the duly authorized representative of Dairy.

ATTEST:                    BION DAIRY CORPORATION


                           By: ____________________________________
                               Name:  Mark Smith
                               Its:   President


                           BION ENVIRONMENTAL TECHNOLOGIES, INC.


                           By: ____________________________________
                               Name:  Mark Smith
                               Its:   President

Schedule A

EXHIBIT 10.12

NOTE PURCHASE AGREEMENT

NOTE PURCHASE AGREEMENT (this "Agreement") dated as of______ __, 2003, by and among BION DAIRY CORPORATION, a Colorado corporation ("Dairy"), BION TECHNOLOGIES, INC. a Colorado corporation ("BionTech"), BIONSOIL INC., a Colorado corporation ("BionSoil"), BION ENVIRONMENTAL TECHNOLOGIES, INC., a publicly-held Colorado corporation ("Bion") and the other parties executing signature pages hereto (collectively, the "Purchasers"). Dairy, BionTech and BionSoil are all wholly owned subsidiaries of Bion.

WHEREAS, in a series of transactions and upon and subject to the terms and conditions hereinafter set forth, Bion and Dairy will use their best efforts raise funds for their operations, and, for such purpose, Dairy desires to issue and sell to the Purchasers, and the Purchasers desire to purchase from Dairy a maximum of $2,065,000 aggregate face amount of 2003 Series A Convertible Promissory Notes (the "Promissory Notes" or "Notes") in the form attached hereto as Exhibit A;

WHEREAS, these Promissory Notes are part of a multiple series of duly authorized issues of Bion Dairy Corporation 2003 Convertible Promissory Notes in which the conversion prices of the various series may be different from each other, but all of the amounts due under all of the series of the 2003 Convertible Promissory Notes are intended to be secured by the same identical collateral which is to be shared in pari pasu by all of the holders of all of the 2003 Convertible Promissory Notes, irrespective of the dates of issuance of any of the underlying promissory notes and irrespective of the dates of any related lien filings.

NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the Purchasers and Dairy hereby agree as follows:

1. The Transaction.

1.1 Purchase and Sale of the Promissory Notes; Minimum Offering Amount. Subject to the terms and conditions set forth herein, Dairy hereby agrees to issue and sell to the Purchasers, and each Purchaser, hereby agrees to purchase from Dairy, such number of Promissory Notes (as defined below) at the Closing (as such term is defined in Section 2.1 hereof) as is listed on its signature page. Closing will only take place if Purchasers, in the aggregate, agree to purchase a minimum of $1,065,000 in principal amount of Promissory Notes. See paragraphs 1.5 and 2.1 below.

1.2 Collateral. Bion shall execute and deliver a Pledge Agreement, and Dairy, BionTech, BionSoil and Bion shall each execute and deliver a Security Agreement, all in substantially the forms attached hereto, pursuant to which Bion will pledge all of its stock in Dairy and Centerpoint Corporation ("CPTX") and each of Dairy, BionTech, BionSoil and Bion will pledge all of their right, title and interest in and to their respective and collective intellectual property rights, patents, copyrights, trade secrets and know-how (collectively, "Bion Intellectual Property") as collateral for the repayment of the Promissory Notes; provided, however, that the Purchasers hereby

specifically consent to the granting of a security interest in the collateral for the Promissory Notes to the purchasers of additional series of 2003 Convertible Promissory Notes after the date hereof. In connection with the Bion Intellectual Property, Dairy shall be responsible for the costs of: (a) the 2003 Biobalance license payment, which payment shall be based on a renegotiated license that is acceptable in form and substance to Dairy (unless Dairy elects to make the payment pursuant to the existing Biobalance license), (b) filings for patent protection in such foreign jurisdictions as shall be mutually agreed to by Bion and Dairy, and (c) normal maintenance of the Intellectual Property. Bion shall be responsible for all other costs related to the Bion Intellectual Property, unless otherwise agreed.

1.3 Maximum Amount of 2003 Series Debt. The maximum aggregate principal amount of the 2003 Series A Convertible Promissory Notes combined shall not exceed $2,065,000. The aggregate principal amount of all of the various series of 2003 Convertible Promissory Notes shall not exceed $6,000,000.

1.4 Repayment and Conversion. If the first of the Bion Conditions as set forth at Schedule D to the Promissory Notes has been satisfied, upon the happening of the earliest to occur of: a) one year after the meeting of the Technical Conditions for the Texas/DeVries Dairy Installation as set forth in Schedule B to the 2003 Convertible Promissory Notes; or b) meeting all of the Technical Conditions (both Texas/DeVries Dairy installation and the California/Fresno State installation) set forth in Schedule B to the 2003 Convertible Promissory Note; or c) meeting the Technical Conditions for the Texas/DeVries Dairy installation and Dairy having sufficient funds to cover its next 12 month operating budget, all amounts due under the Promissory Notes will be mandatorily and automatically converted into equity securities of Dairy in accordance with the terms and conditions of the Promissory Notes, unless the holders of a majority in principal amount of the outstanding Promissory Notes elect to convert the amounts due under the Promissory Notes into equity securities of Bion, in which case, all amounts due under the Promissory Notes will be mandatorily and automatically converted into equity securities of Bion.

1.5 Purpose; Use of Proceeds; Disbursement Procedures; Risks to Bion. The primary purposes of this transaction (including the subsequent sale of the Promissory Notes) are: first, to finance the Devries dairy installation in Texas and preliminary work in preparation for the Fresno State dairy installation in California (including the cost of Bion's current employees and related operating overhead necessary for these installations); next, to fund the extension, protection and commercialization of the Bion Intellectual Property; and finally, to provide funds to Bion to allow Bion to: (a)obtain release of an existing contractual restriction, (b) work out its existing problems with creditors, and (c) become current in its SEC filings and related matters, provided , however, if at the date of the initial Closing of this offering Bright Capital, Ltd. (and others connected with Bion's prior management) has advanced in excess of $665,000 to Bion for the purposes set forth above, it may elect to convert only $665,000 of such advances into Promissory Notes and to receive reimbursement of the excess, unconverted advances in cash from the proceeds of this offering .See paragraph 2.1 below.. The proceeds from the sale of the Promissory Notes shall be

segregated by Dairy into a separate account for disbursement solely pursuant to requests from the designated General Manager of Dairy (see paragraph 1.9 below) to the officers of Dairy for the purposes set forth herein consistent with the Use of Proceeds as set forth in Schedule 7.2 attached hereto. Purchasers acknowledge that if substantially less than the maximum amount of Promissory Notes is sold, there will be significant risks to Bion which will result from the limited funds available for it to use in resolving its problems with its creditors and to become current in its SEC filings and related matters.

1.6 Corporate Governance. Immediately upon the conversion of the 2003 Convertible Promissory Notes into Dairy Stock, Bion shall cause the board of directors of Dairy to consist of three members, one of whom shall be designated by Bion and the remaining two of whom shall be designated by a majority of the shareholders of Dairy other than Bion (the former Holders of the Promissory Notes). Until the earlier to occur of the conversion of the Promissory Notes into shares of Bion or the effective date of a registration statement allowing Bion to distribute its Dairy shares, Bion agrees to vote its shares to maintain this Dairy board composition and to vote in agreement with such Dairy board of directors, except as to the sale by Dairy of a material portion of its assets or stock, or a merger of Dairy (or transactions of similar type and magnitude). Upon conversion of the Promissory Notes into Dairy stock, Dairy shall have the right for a period of two years to nominate a majority of Bion's Board of Directors and Bion and its Board of Directors shall make such filings with the Securities and Exchange Commission and take such actions as are necessary and appropriate to appoint or support the election of such nominees, provided, however, that in regard to transactions, if any, between Bion and Dairy, the Directors nominated by Dairy shall abstain from voting.

1.7 Subsequent Tax Free Exchange By a date which is the earlier of two years after the initial conversion into shares of Dairy Stock (if such conversion takes place) or 36 months from the initial Closing of this Offering, Dairy (and/or its shareholders) shall use their best efforts to either: (a) enter into an agreed upon tax- free exchange transaction with Bion at a ratio of one share of Dairy Stock for one share of Bion stock (with equivalent exchange/reissuance for outstanding options/warrants of Dairy, if any) (this ratio is based upon Bion's capital structure consisting of: (i) 4,800,000 shares of its common stock (reflecting "cancellation" of Bion's prorata shares of its common stock held in CPTX, if any), (ii) 2,000,000 warrants and options (in aggregate)(with exercise prices of $7.50 or below)(which number of options/warrants shall be adjusted upward for any options/warrants issued in connection with the compensation by Bion and/or Dairy of additional (and/or existing) management and/or consulting personnel between the date hereof and the date of the tax-free exchange transaction), and (iii) no debt (other than (aa) D2 debt( and/or other obligations to affiliates of management personnel/consultants including without limitation Dominic Bassani and Mark A. Smith), (bb) debt owed to Dairy, and (cc) normal trade creditor obligations(all of which #s may be adjusted upward by mutual agreement of Bion and Dairy subsequent to the conversion of the Notes into Dairy Stock). In the event that the capitalization of Bion differs materially from the structure described herein (whether in favor of Bion or Dairy), the exchange ratio shall be equitably adjusted to reflect such

material variance); or (b) Dairy shall cause to become effective, at its own cost, a registration statement which allows Bion to distribute its shares of Dairy Stock to its shareholders and/or creditors.

1.8 Right of First Refusal. Upon conversion of the Promissory Notes into Dairy common stock, Bion, BionTech and BionSoil shall jointly grant to Dairy the first right of refusal to license all of the Bion Intellectual Property for uses outside of the dairy industry for a period of two years from the date of conversion of the Notes into Dairy Stock.

1.9 Operations; Personnel.

(a) Upon initial Closing, Mr. Dominic Bassani shall serve as the initial designated General Manager of Dairy on a consulting basis and shall serve Bion as a consultant, pursuant to an agreement between each of Bion and Dairy and Bright Capital, Ltd. Mr. Bassani will coordinate and supervise the activities of Dairy, and assist Bion in connection with the matters set forth in paragraph 1.5 above and such other matters as shall be requested from time to time by the officers of Dairy and/or Bion.

(b) It is currently anticipated that initially most of the activities of Dairy will be carried out by Bion's core technical and engineering staff (including, without limitation, Jere Northrop, Technical Director, James Morris, Chief Technical Officer, and George Bloom, the Chief Operating Officer of BionTech) and third party contractors; provided, however, that in the event that the Bion Conditions (set forth at Schedule D to the Promissory Notes) have not been satisfied by December 31, 2003, i) all of Bion's key employees/consultants shall become direct employees/consultants of Dairy (on identical compensation terms as each had with Bion), ii) all of the Bion options of each employee/consultant shall be cancelled and Dairy shall grant/issue to each employee/consultant (effective January 1, 2004) Dairy options for a number of shares of Dairy Stock equal to the cancelled Bion options with equivalent terms as to exercise price, exercise term, etc., and iii) the number of options/warrants at paragraph 1.7
a) ii) shall be reduced by the number of such cancelled Bion options which had been granted as of the Initial Closing Date.

2. Closing.

2.1 Closing. The initial Closing and each additional Closing of the purchase and sale of the Promissory Notes will take place at the offices of Bion. Such closings (each, a "Closing" and collectively, the "Closings") will take place at 10:00 A.M., local time, on such dates as may be mutually agreed upon by Dairy and the Purchasers. The initial Closing shall take place when Bion has received commitments for the purchase of not less than $1,065,000 of Promissory Notes. The date of each Closing is referred to herein as a "Closing Date." The date of the first Closing shall hereafter be referred to as the "Initial Closing Date" and the date of the final Closing shall hereafter be referred to as the "Final Closing Date." At each Closing, Dairy will deliver to the Purchasers the Promissory Notes as set forth in
Section 1 hereof, against payment of the Purchase Price, by wire transfer payable to Dairy; provided , however, that in such Initial Closing it is anticipated that Promissory Notes totaling approximately $665,000 will be

issued in exchange for advances made by Bion's former management to Bion through D2, LLC. and/or Bright Capital, Ltd. which advances have already been applied to the purposes set forth at paragraph 1.5 above (and such issuances shall count toward the commitments needed for the initial Closing). The Promissory Notes shall be registered in each Purchaser's name or the name of its nominee(s) in such denominations as the Purchaser shall request pursuant to instructions delivered to Dairy not less than two days prior to such Closing Date.

3. Conditions to the Obligations of Purchasers at the Closing The obligation of each Purchaser to purchase and pay for the Promissory Notes to be purchased by it at a Closing is subject to the satisfaction on or prior to the Closing Date of the following conditions, which may only be waived by written consent of Purchasers:

3.1 Representations and Warranties. All of the representations and warranties of Dairy contained in this Agreement shall be true and correct at and as of such Closing Date, except for changes caused by the transactions contemplated hereby.

3.2 Performance of Covenants. All of the covenants and agreements of Dairy contained in this Agreement and required to be performed on or prior to the Closing Date shall have been performed in a manner satisfactory in all respects to Purchasers.

3.3 Legal Action. No injunction, order, investigation, claim, action or proceeding before any court or governmental body shall be pending or threatened wherein an unfavorable judgment, decree or order would restrain, impair or prevent the carrying out of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement or cause any such transaction to be rescinded.

3.4 Consents. Each of Dairy, Bion, BionSoil, and BionTech shall have obtained in writing or made all consents, waivers, approvals, orders, permits, licenses and authorizations of, and registrations, declarations, notices to and filings and applications with, any governmental authority or any other person or entity required to be obtained or made in order to enable Bion and each of its subsidiaries to observe and comply with all its obligations under this Agreement and to consummate the transactions contemplated hereby.

4. Conditions to the Obligations of Dairy at the Closing. The obligation of Dairy to issue and sell the Promissory Notes to the Purchasers at a Closing is subject to the satisfaction on or prior to the Closing Date of the following conditions, any of which may be waived by Dairy:

4.1 Representations and Warranties. The representations and warranties of the Purchasers contained in this Agreement shall be true and correct at and as of the Closing Date.

4.2 Legal Action. No injunction, order, investigation, claim, action or proceeding before any court or governmental body shall be pending or threatened wherein an unfavorable judgment, decree or order would restrain, impair or prevent the carrying out of this Agreement or any of the

transactions contemplated hereby, declare unlawful the transactions contemplated by this Agreement or cause any such transaction to be rescinded.

5. Representations and Warranties of Dairy. Dairy hereby represents and warrants to the Purchasers that:

5.1 Organization. Dairy is a corporation duly organized, validly existing and in good standing under the laws of the State of Colorado. Dairy has all requisite corporate power and authority, and holds all licenses, permits and other required authorizations from governmental authorities, necessary to conduct its business as it is now being conducted or proposed to be conducted and to own or lease the properties and assets it now owns or holds under lease. Except where such failure to qualify could not reasonably be deemed to have a material adverse effect on Dairy, Dairy is duly qualified or licensed and in good standing as a foreign corporation in each jurisdiction wherein the character of its properties or the nature of the activities conducted by it makes such qualification or licensing necessary.

5.2 Capitalization. Dairy currently has authorized capital of 20,000,000 Common Shares and 100,000 Preferred Shares, of which 4,000,000 Common Shares are currently issued and outstanding (all of which are currently owned by Bion). No shares of preferred stock are currently issued and outstanding. Bion's authorized capitalization is set forth in the SEC Documents (as defined below). All outstanding securities of both Bion and Dairy are validly issued, fully paid and nonassessable. No shareholder of either Bion or Dairy is entitled to any preemptive rights with respect to the purchase or sale of any securities by Dairy or Bion, as the case may be. There are no outstanding options, warrants or other rights, commitments or arrangements, written or oral, to purchase or otherwise acquire any authorized but unissued shares of capital stock of Dairy or any security directly or indirectly convertible into or exchangeable for any capital stock of Dairy or under which any such option, warrant or convertible security may be issued in the future, and there are no voting trusts or agreements, shareholders' agreements, pledge agreements, buy-sell, rights of first offer, negotiation or refusal or proxies or similar arrangements relating to any securities of Dairy to which Dairy is a party, and to the best knowledge of Dairy after due investigation there are no such trusts, agreement, rights, proxies or similar arrangements as to which Dairy is not a party. Except as has been set forth in the SEC Documents, there are no outstanding options, warrants or other rights, commitments or arrangements, written or oral, to purchase or otherwise acquire any authorized but unissued shares of capital stock of Bion or any security directly or indirectly convertible into or exchangeable for any capital stock of Bion under which any such option, warrant or convertible security may be issued in the future, and there are no voting trusts or agreements, shareholders' agreements, pledge agreements, buy-sell, rights of first offer, negotiation or refusal or proxies or similar arrangements relating to any securities of Bion to which Bion is a party, and to the best knowledge of Dairy after due investigation there are no such trusts, agreement, rights, proxies or similar arrangements as to which Bion is not a party. Except as set forth in the SEC Documents, no antidilution adjustments with respect to the outstanding securities of Bion will be triggered by the issuance or conversion of the securities contemplated hereby.

5.3 Due Authorization, Valid Issuance, Etc. The Promissory Notes have been duly authorized and, when issued in accordance with this Agreement upon the Closing Date, will be free and clear of all liens imposed by or through Dairy. The shares of capital stock to be issued by Dairy and/or Bion upon conversion of the Promissory Notes have been duly authorized and shares of Common Stock have been reserved, and upon the conversion of the Promissory Notes will be duly and validly issued, fully paid and nonassessable and will be free and clear of all liens imposed by or through Dairy or Bion. Except as set forth in the SEC Documents, the issuance, sale and clear delivery of the Promissory Notes and the Bion Stock or Dairy Stock (as appropriate) that will be issued to the Purchasers upon the conversion of the Promissory Notes will not be subject to any preemptive right of shareholders of Dairy or Bion or to any right of first refusal or other right in favor of any person.

5.4 Authorization; No Breach. Dairy has the full corporate power and authority to execute, deliver and enter into this Agreement and to perform its obligations hereunder, and the execution, delivery and performance of this Agreement, the Promissory Notes and any related financing statement and all other transactions contemplated hereby have been duly authorized by Dairy, and this Agreement constitutes a legal, valid and binding obligation of Dairy, enforceable in accordance with its terms except as the enforceability hereof may be limited by bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights generally. To Dairy's knowledge, the execution and delivery by Dairy of this Agreement, the offering, sale and issuance of the Promissory Notes pursuant to this Agreement, and the performance and fulfillment by Dairy of its obligations under this Agreement, the Promissory Notes do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under, or event which, with notice or lapse of time or both, would constitute a breach of or default under, (c) result in the creation of any lien, security interest, adverse claim, charge or encumbrance upon the capital stock or assets of Dairy pursuant to, (d) give any third party the right to accelerate any obligation under or terminate, (e) result in a violation of, (f) result in the loss of any license, certificate, legal privilege or legal right enjoyed or possessed by Dairy under, or (g) except for filings required to be made with the Securities and Exchange Commission, require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body pursuant to or require the consent of any other person under, the Articles of Incorporation or By-Laws of Dairy or any law, statute, rule or regulation to which Dairy is subject or by which any of its properties are bound, or any agreement, instrument, order, judgment or decree to which Dairy is subject or by which its properties are bound.

5.5 Financial Statements and SEC Documents.

(a) Dairy has conducted no operations, has no assets or liabilities and has no financial statements. Incorporated by reference herein are (i) the audited financial statements of Bion for the fiscal year ended June 30, 2002, including the balance sheet as at the end of such fiscal year and the related statements of operations, shareholders' equity (deficit) and cash flows for such fiscal year, certified by BDO Seidman, LLP and (ii)

the unaudited and unreviewed March 31,2003 Financial Statements (the financial statements referred to in clauses (i) and (ii) if this paragraph 5.5 are referred to herein collectively as the "Financial Statements"). For purposes of this Agreement, June 30, 2002 shall be hereinafter referred to as the "Balance Sheet Date." The Financial Statements have been prepared in accordance with the books and records of Bion and generally accepted accounting principles, applied consistently with the past practices of Bion (except as otherwise noted in such Financial Statements), reflect all liabilities and obligations of Bion, as of their respective dates, and present fairly the financial position of Bion and the results of its operations as of the time and for the periods indicated therein. Notwithstanding the foregoing, it should be noted that Bion is currently in perilous financial condition.

(b) Incorporated by referenced herein are each report, schedule, registration statement and definitive proxy statement filed by Bion with the Securities and Exchange Commission since June 30, 2002 (as such documents have since the time of their filing been amended, the "SEC Documents") which are all the documents (other than preliminary material) that Bion was required to file with the Securities and Exchange Commission since such date. As of their respective dates, none of the SEC Documents contained any untrue statement of a material fact or omitted to statement of material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of Bion included in the SEC Documents have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Form 10-QSB of the Securities and Exchange Commission)(and except that the unaudited financial statements in the Forms 10Q for the quarters ending December 31, 2002 and March 31, 2003 which have not been reviewed by Bion's auditors) and fairly present (subject, in the case of the unaudited statements, to normal, recurring audit adjustments) the financial position of Bion as at the dates thereof and the consolidated results of their operations and cash flows for the periods then ended. As reflected in the SEC Documents, Bion's condition has recently deteriorated rapidly and is not likely to continue in existence unless it can obtain outside capital or generate significant revenues from operations in the immediate future.

5.6 Material Adverse Changes. Since the Balance Sheet Date there have been several material adverse changes in the financial condition, operating results, business prospects, employee relations and customer relations of Bion, all of which are generally described in the SEC Documents that have been filed by Bion subsequent to the Balance Sheet Date.

5.7 Litigation. There are no actions, suits, proceedings, orders, claims, or, to Dairy's knowledge, investigations pending or, to Dairy's knowledge, threatened against Dairy, at law or in equity or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality; there are no arbitration proceedings pending under collective bargaining agreements or otherwise. There are, however, numerous actions currently being threatened against Bion.

5.8 Compliance with Law. To Dairy's knowledge, Dairy has complied in all material respects with all applicable statutes and regulations of the United States and of all states, municipalities and applicable agencies and foreign jurisdictions or bodies in respect of the conduct of its business and operations, and the failure, if any, by Dairy to have fully complied with any such statute or regulation does not and will not materially adversely affect the business or operations of Dairy.

5.9 Undisclosed Liabilities. To Dairy's knowledge, Dairy has no obligation or liability (whether accrued, absolute, contingent, unliquidated, or otherwise, whether due or to become due) arising out of transactions entered into at or prior to the Closing of this Agreement, or any action or inaction at or prior to the Closing of this Agreement, or any state of facts existing at or prior to the Closing of this Agreement. Bion, however, has numerous unpaid creditors and is currently being threatened with litigation on a variety of different fronts, any one of which could potentially cause it to seek protection under applicable bankruptcy laws.

5.10 Disclosure. Neither this Agreement nor any of the schedules, exhibits, written statements, documents or certificates prepared or supplied by Dairy and Bion with respect to the transactions contemplated hereby contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which made.

5.11 Compliance with the Securities Laws. Assuming the accuracy and truth of each of the Purchasers' representations set forth in Section 6 of this Agreement, the Promissory Notes were offered and will be sold and issued, in compliance with all applicable federal and state securities laws.

6. Representations and Warranties of Purchasers. Each of the Purchasers hereby severally represents and warrants to Dairy as follows:

6.1 Investment Intent. Each of the Purchasers is an "Accredited Investor" as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act. Each of the Purchasers has experience in making investments in development stage technology companies and is acquiring the Promissory Notes for its own account and not with a present view to, or for sale in connection with, any distribution thereof in violation of the registration requirements of the Securities Act. Each of the Purchasers consents to the placing of a legend on the certificates representing the Promissory Notes to the effect that the shares of Common Stock or other Stock to be issued upon the conversion of the Promissory Notes have not been registered under the Securities Act and may not be transferred except in accordance with applicable securities laws.

6.2 Authorization. Each of the Purchasers has the full power and authority to execute and deliver this Agreement and to perform all of its obligations hereunder, having obtained all required consents, if any, and this Agreement, when executed and delivered, will constitute a legal valid and binding obligation of such Purchaser.

6.3 Suitability. Each Purchaser acknowledges that he is a person who is able to bear the economic risk of this investment and has adequate means of providing for his current needs and possible personal contingencies with no need for liquidity of this investment. In making this statement, consideration has been given as to whether the Purchaser could afford to hold his investment in Dairy for an indefinite period of time and, whether, at this time, he could afford a complete loss of his investment, without such loss affecting his ability to maintain his lifestyle.

6.4 Risks. Each Purchaser acknowledges that (a) this investment is extremely speculative in nature and involves a high degree of risk, (b) the Purchaser may not be able to liquidate this investment and (c) transferability is extremely limited. The Purchasers are aware that Bion's condition has recently deteriorated rapidly and that is not likely to continue in existence unless it can obtain outside capital or generate significant revenues from operations in the immediate future.

6.5 Due Inquiry. Each Purchaser acknowledges receipt of all information regarding Dairy which he has requested or desired to know; that all documents which could be reasonably provided have been made available for his inspection and review; and that the Purchaser has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of Dairy concerning Dairy and an investment therein, and any additional information which he has requested.

7. Covenants of Dairy. For as long as the Promissory Notes remain outstanding, Dairy covenants and agrees with Purchasers as follows:

7.1 Books and Accounts. Dairy will make and keep books, records and accounts, which, in reasonable detail, accurately and fairly reflect its transactions, including without limitation, dispositions of its assets.

7.2 Use of Proceeds. Dairy shall use the net proceeds from the sale of the Promissory Notes as set forth in Schedule 7.2 attached hereto.

7.3 Corporate Existence, Licenses and Permits; Maintenance of Properties; New Businesses. Dairy will at all times conduct its business in the ordinary course and cause to be done all things necessary to maintain, preserve and renew its existence and will preserve and keep in force and effect, all licenses, permits and authorizations necessary to the conduct of its business. Dairy will also maintain and keep its properties in good repair, working order and condition, and from time to time, to make all needful and proper repairs, renewals and replacements, so that the business carried on in connection therewith may be properly conducted at all times.

7.4 Other Material Obligations. Dairy will comply with (a) all material obligations which it is subject to, or becomes subject to, pursuant to any contract or agreement, whether oral or written, as such obligations are required to be observed or performed, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and Dairy has set aside on its books adequate reserves with respect thereto, and
(b) all applicable laws, rules, and regulations of all governmental authorities, the violation of which could have a material adverse effect upon the business of Dairy.

7.5 Amendment to the Articles of Incorporation and the By-Laws Dairy will perform and be in compliance with and observe all of the provisions set forth in its Articles of Incorporation and By-Laws to the extent that the performance of such obligations is legally permissible; provided that the fact that performance is not legally permissible will not prevent such nonperformance from constituting an event of default under this Agreement. Dairy will not amend its Articles of Incorporation or By-Laws so as to adversely affect the rights of the Purchasers under this Agreement, the Articles of Incorporation, the By-Laws or the Promissory Notes.

7.6 Dividends; Distributions; Repurchases of Common Stock; Treasury Stock. Dairy shall not declare or pay any dividends on, or make any other distribution with respect to, its capital stock, whether now or hereafter outstanding, or purchase, acquire, redeem or retire any shares of its capital stock, without the prior written consent of the Purchasers, provided, however, the foregoing shall not prohibit Dairy issuing shares of its capital stock in exchange for extinguishing debt owed to any person, or from repurchasing any shares of its Common Stock from any present or former officer, Director or employee of Dairy, or from repurchasing any outstanding warrants.

7.7 Taxes and Liens. Dairy will duly pay and discharge when payable, all taxes, assessments and governmental charges imposed upon or against Dairy or its properties, or any part thereof or upon the income or profits therefrom, in each case before the same become delinquent and before penalties accrue thereon, as well as all claims for labor, materials or supplies which if unpaid might by law become a lien upon any of its property, unless and to the extent that the same are being contested in good faith and by appropriate proceedings and Dairy has set aside on its books adequate reserves with respect thereto.

7.8 Restrictive Agreement. Dairy covenants and agrees that subsequent to the Closing, it will not be a party to any agreement or instrument which by its terms would restrict Dairy's performance of its obligations pursuant to this Agreement, the Articles of Incorporation, By-laws or the Promissory Note.

8. Certain Definitions. For the purposes of this Agreement the following terms have the respective meanings set forth below:

8.1 "Affiliate" means any person, corporation, firm or entity which directly or indirectly controls, is controlled by, or is under common control with the indicated person, corporation, firm or entity.

8.2 "Bion Stock" means any shares of capital stock issued by Bion upon conversion of the Promissory Notes.

8.3 "Dairy Stock" means any shares of capital stock issued by Dairy upon conversion of the Promissory Notes.

8.4 "Generally Accepted Accounting Principles" means generally accepted accounting principles consistently applied.

8.5 "Officers' Certificate" means a certificate executed on behalf of Dairy by its President, Chairman of the Board, Chief Executive Officer, Chief Financial Officer, Secretary and/or one of its other Vice-Presidents.

8.6 "Securities" means the Promissory Notes and any other capital stock or Common Stock underlying the foregoing whether issued at the Closing or thereafter.

8.7 "Securities Act" means, as of any given time, the Securities Act of 1933, as amended, or any similar federal law then in force.

8.8 "Securities Exchange Act" means, as of any given time, the Securities Exchange Act of 1934, as amended, or any similar federal law then in force.

8.9 "Securities and Exchange Commission" includes any governmental body or agency succeeding to the functions thereof.

8.11 "Subsidiary" means any person, corporation, firm or entity at least the majority of the equity securities (or equivalent interest) of which are, at the time as of which any determination is being made, owned of record or beneficially by Dairy, directly or indirectly, through any Subsidiary or otherwise.

9. Miscellaneous.

9.1 Termination; Survival of Representations, Warranties and Covenants. Except as otherwise provided for in this Agreement all representations, warranties, covenants and agreements contained in this Agreement, or in any document, exhibit, schedule or certificate by any party delivered in connection herewith shall survive the execution and delivery of this Agreement and the Closing Date and the consummation of the transactions contemplated hereby, regardless of any investigation made by the Purchasers or on their behalf.

9.2 Expenses. Dairy shall pay all its own expenses in connection with this Agreement and the transactions contemplated herein (the "Promissory Loan Costs").

9.3 Amendments; Waivers and Forbearance from Suit. This Agreement and all exhibits and schedules hereto set forth the entire agreement and understanding among the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. This Agreement may be amended only by mutual written agreement of Dairy and the holders of a majority of principal amount of the Promissory Notes, and Dairy may take any action herein prohibited or omit to take any action herein required to be performed by it, and any breach of any covenant, agreement, warranty or representation may be waived, only if Dairy has obtained the written consent or waiver of the holders of a majority of principal value of the Promissory Notes. No course of dealing between or among any persons having any interest in this Agreement will be deemed

effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person under or by reason of this Agreement. In addition, Purchaser shall institute any suit or proceeding for the enforcement of the payment of principal or interest under the Promissory Notes or for the enforcement of any other provision of this Agreement, the Promissory Notes unless the holders of at least a majority in principal amount of all of the outstanding Promissory Notes join in such suit or proceeding

9.4 Successors and Assigns. This Agreement may not be assigned by Dairy except with the prior written consent of the holders of a majority of principal value of the Promissory Notes. This Agreement shall be binding upon and inure to the benefit of Dairy and its permitted successors and assigns and Purchasers and their successors and assigns. The provisions hereof which are for Purchasers' benefit as purchasers or holders of the Promissory Notes are also for the benefit of, and enforceable by, any subsequent holder of such Promissory Notes.

9.5 Notices All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given personally or when mailed by certified or registered mail, return receipt requested and postage prepaid, and addressed to the addresses of the respective parties set forth below or to such changed addresses as such parties may have fixed by notice; provided, however, that any notice of change of address shall be effective only upon receipt:

If to Dairy:

Bion Dairy Corporation
18 East 50th Street
New York, NY 10022

With copies to:
Krys Boyle, P.C.
600 17th Street, Suite 2700 South Tower Denver, CO 80202
Attn: Stanley F. Freedman, Esq. and

Mark A. Smith, President
P.O. Box 566
Crestone, CO 81131
e-fax: 425-984-9702

If to Bion:

Bion Environmental Technologies, Inc. 18 East 50th Street
New York, NY 10022

With copies to:

Krys Boyle, P.C.
600 17th Street, Suite 2700 South Tower Denver, CO 80202
Attn: Stanley F. Freedman, Esq.

and

Mark A. Smith, President
P.O. Box 566
Crestone, CO 81131
e-fax: 425-984-9702

If to the Purchasers:

At the address specified on their signature page hereto.

9.6 Governing Law. The validity, performance, construction and effect of this Agreement shall be governed by the internal laws of the State of New York without giving effect to such State's principles of conflict of laws.

9.7 Counterparts. This Agreement may be executed in any number of counterparts and, notwithstanding that any of the parties did not execute the same counterpart, each of such counterparts shall, for all purposes, be deemed an original, and all such counterparts shall constitute one and the same instrument binding on all of the parties thereto. Any signature received by facsimile transmission shall, for all purposes, be deemed an original signature.

9.8 Headings. The headings of the Sections hereof are inserted as a matter of convenience and for reference only and in no way define, limit or describe the scope of this Agreement or the meaning of any provision hereof.

9.9 Severability. In the event that any provision of this Agreement or the application of any provision hereof is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall not be affected except to the extent necessary to delete such illegal, invalid or unenforceable provision unless the provision held invalid shall substantially impair the benefit of the remaining portion of this Agreement.

9.10 Rights of Holders Inter Se Each Holder of securities shall have the absolute right to exercise or refrain from exercising any right or rights which such Holder may have by reason of this Agreement or any security including, without limitation, the right to consent to the waiver of any obligation of Dairy under this Agreement and to enter into an agreement with Dairy for the purpose of modifying this Agreement or any agreement effecting such modification, and such Holder shall not incur any liability to any other Holder or Holders of securities with respect to exercising or refraining from exercising any such right or rights.

9.11 Exculpation Among Purchasers and Holders. Purchaser acknowledges and agrees that it is not relying upon any other Purchaser, or any officer, director, employee partner or affiliate of any such other Purchaser, in making its investment or decision to invest in Dairy or in monitoring such investment. Each Purchaser agrees that no Purchaser nor any controlling person, officer, director, shareholder, partner, agent or employee of any Purchaser shall be liable for any action heretofore or hereafter taken or omitted to be taken by any of them relating to or in connection with Dairy or the securities, or both.

9.12 Actions by Purchasers. Any actions permitted to be taken by holders or Purchasers of Promissory Notes and any consents required to be obtained from the same under this Agreement, may be taken or given only by, in the case of consents or actions requiring approval of the Purchasers, by the Purchasers, and in all other cases, only by holders of a majority of the face amount of the principal, and if such holders constituting a majority the ("Majority Holders") as set forth in (i) or (ii) above or the Purchasers take any action or grant any consent, such action or consent shall be deemed given or taken by all holders or Purchasers' who shall be bound by the decision or action taken by the Majority Holders or the Purchasers without any liability on the part of the Majority Holders or the Purchasers to any other holder of securities hereto.

9.13 Consent to Jurisdiction. The parties hereto irrevocably consent to the jurisdiction of the courts of the State of New York and of any federal court located in such State in connection with any action or proceeding arising out of or relating to this Agreement, any document or instrument delivered pursuant to, in connection with or simultaneously with this Agreement, or a breach of this Agreement or any such document or instrument. In any such action or proceeding, each party hereto waives personal service of any summons, complaint or other process and agrees that service thereof may be made in accordance with Section 10.5. Within 30 days after such service, or such other time as may be mutually agreed upon in writing by the attorneys for the parties to such action or proceeding, the party so served shall appear or answer such summons, complaint or other process.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

BION DAIRY CORPORATION

By:____________________________________
Mark Smith, President

BION ENVIRONMENTAL TECHNOLOGIES, INC.

By:____________________________________
Mark Smith, President

BION TECHNOLOGIES, INC.

By:____________________________________
Mark Smith, President

BIONSOIL , INC.

By:____________________________________
Mark Smith, President

Promissory Notes Subscribed For:          ___________________________________
                                                    PURCHASER NAME
______________________
                                          Address:
                                          ___________________________________
                                          ___________________________________
                                          ___________________________________

Aggregate Purchase Price:                By:  X______________________________
                                                 Name:

________________________ Title:

                              SCHEDULE 7.2

USE OF PROCEEDS ($thousands)*:

                                  MINIMUM       STAGE II

TEXAS INSTALLATION                $ 400

FRESNO INSTALLATION                              $ 450

UNALLOCATED WORKING CAPITAL                      $ 550**

SUB-TOTAL                         $ 400          $1000

ADVANCED TO DATE***               $ 665

TOTAL OFFERING                    $1065          $2065

*All sums are our current best estimates. Actual costs in each category may be higher or lower and Dairy reserves the right to reallocate the funds as required among the categories set forth above to accomplish the purposes set forth in the Note Purchase Agreement.

**Includes funds which may be used for additional expenses related to the installations, for costs associated with intellectual property, for overhead and additional personnel, and for other unanticipated contingencies plus funds which may be allocated for use as advances to Bion for a) payments to its creditors in the context of a satisfactory workout with creditors, b) expenses related to bring Bion's SEC filings current and related matters, and/or removal of certain contractual impediments. No funds will be used for these purposes unless the Texas installation meets or exceeds the applicable "Technical Conditions". Working

*** Advances from Bright Capital, Ltd. ($600,000) and prior management which will be converted into Notes . All such advances have been used for the purposes set forth above over the last 7 months.

THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF BION DAIRY CORPORATION ("DAIRY"). THE SECURITIES REPRESENTED BY THIS NOTE OR TO BE ISSUED IN CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.

BION DAIRY CORPORATION

No. 2003A- __

2003 Series A Convertible Promissory Note

$_______.00 _______ 2003

Bion Dairy Corporation, a Colorado corporation ("Dairy") which is a wholly-owned subsidiary of Bion Environmental Technologies, Inc., also a Colorado corporation ("Bion"), for value received, hereby promises to pay to ____________ or registered assigns (the "Holder"), the principal sum of _______________ dollars ($__________), with interest from the original date of issuance of this 2003 Series A Convertible Promissory Note on the unpaid principal balance at a rate equal to eight percent (8%) per annum, on December 31,, 2004 (the "Maturity Date"); provided, however, that in the event the amount due under this Note has not yet been converted on such date, the Maturity Date shall be automatically extended for a period of six months after the date on which the Holders are notified in writing by Dairy that the Technical Conditions (as defined below) were not met. Payment shall be made at such place as designated by the Holder upon surrender of this Convertible Promissory Note, and shall be in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest shall be computed on the basis of a 360- day year of twelve 30-day months.

This 2003 Series A Convertible Promissory Note is one of a multiple series of duly authorized issues of Bion Dairy Corporation 2003 Convertible Promissory Notes. The conversion prices of the various series of 2003 Convertible Promissory Notes may be different from each other, but all of the amounts due under all of the series of the 2003 Convertible Promissory Notes are intended to be secured by the same identical collateral which is to be shared in pari pasu by all of the holders of all of the 2003 Convertible Promissory Notes, irrespective of the date of issuance. The Holder of this Note hereby specifically consents to the granting of a security interest in the collateral for this Note to the holders of additional series of 2003 Convertible Promissory Notes after the date hereof. The maximum aggregate principal amount of the 2003 Series A Convertible Promissory Notes combined is $2,065,000. The aggregate principal amount of all of the various series of 2003 Convertible Promissory Notes will be a maximum of $6,000,000.

Each 2003 Series A Convertible Promissory Note is individually referred to herein as a "Note" and collectively as the "Notes." Each of the 2003 Series A Convertible Promissory Notes will be issued pursuant to a Note Purchase Agreement among Dairy, Bion, the Holder and the other parties thereto (the "Purchase Agreement").

SECTION 1. Prepayment.

This Note (including interest accrued on the principal hereof) may not be prepaid in cash by Dairy without the written consent of the holders of a majority in principal amount of outstanding Notes of this issue, but may be converted to equity at any time during its term in accordance with the provisions of Section 2 below.

SECTION 2. Mandatory Conversion.

(a) Conditions for Conversion.

If the first of the Bion Conditions set forth at Schedule D to this Note has been satisfied, upon the happening of the earliest to occur of the events set forth at paragraph 1.4 of the Purchase Agreement (which events are based, in whole or part, on the conditions set forth in Schedule B attached hereto (the "Technical Conditions')) on or before the Maturity Date, then (unless otherwise agreed by a majority vote of the Holders as set forth below) all of the amounts due under this Note shall be mandatorily and automatically converted into shares of Dairy common stock ("Dairy Stock") and each of the Holders shall be entitled to receive one share of Dairy Stock for each $1.00 that is due and owing to such Holder under the terms of this Note (and Bion shall continue to own 4,000,000 shares of Dairy Stock); provided, however, that not later than the date of such conversion, Bion, Bion Technologies, Inc. and BionSoil, Inc. shall have each granted to Dairy an automatically renewable license for the worldwide exclusive use of its intellectual property in the dairy business with the terms set forth at Schedule C hereto(>License') which License shall be executed and placed in escrow for the benefit of Dairy upon the termination of the offering of Notes ; and provided further, that in the event that all of the conditions set forth in Schedule D to this Note (the "Bion Conditions") have been met, and the holders of a majority in principal amount of outstanding Notes of this issue elect to receive Bion Stock (as defined below) rather than Dairy Stock, then instead of converting to Dairy Stock as set forth above, all of the amounts due under this Note shall be mandatorily and automatically converted into one share of common stock of Bion ("Bion Stock")for each share of Dairy Stock which the Holder would have been entitled to receive had the majority of Holders not elected to convert into Bion Stock (which number of shares shall be subject to adjustment as provided in paragraph 1.7 of the Purchase Agreement) as is equal to the Conversion Amount (as defined below) divided by the then current Bion Conversion Price (as defined below).

(c) Conversion Procedures.

(i) In the event that the Notes are converted into Dairy Stock, Dairy's debt obligation under this Note shall cease but Dairy shall not be required to deliver stock certificates to any Holder until such time as such Holder surrenders the Notes at Dairy's offices together with irrevocable written notice to Dairy specifying the name or names (with address) in which a certificate or certificates evidencing shares of Dairy Stock are to be issued. Dairy shall thereupon deliver to the holder of the Notes, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Dairy Stock to which such person shall be entitled as

aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Dairy stock certificates, such conversion shall be deemed to have occurred as of Dairy's record date of the conversion and the person or persons entitled to receive Dairy Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Dairy Stock on such date.

(ii) In the event that the Notes are converted into Bion Stock, Dairy's debt obligation under this Note shall cease but Bion shall not be required to deliver stock certificates to any Holder until such time as such Holder surrenders the Notes at Bion's offices together with irrevocable written notice to Bion specifying the name or names (with address) in which a certificate or certificates evidencing shares of Bion Stock are to be issued. Bion shall thereupon deliver to the holder of the Notes, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Bion Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Bion stock certificates, such conversion shall be deemed to have occurred as of Bion's record date of the conversion and the person or persons entitled to receive Bion Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Bion Stock on such date.

(iii) In the event that the Notes are converted into Dairy Stock or Bion Stock as set forth above, either Dairy or Bion, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of their stock on such conversion. Neither Dairy nor Bion, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of their stock (or other securities or assets) in a name other than that in which the Notes so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to Dairy or Bion, as appropriate, the amount of such tax or has established, to the satisfaction of Dairy or Bion, that such tax has been paid.

(c) Protection in Case of a Merger of Dairy. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Dairy is a party other than a merger or consolidation in which Dairy is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Dairy as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Dairy Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Dairy Common Stock immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with

respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (c)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Dairy shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Dairy for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Dairy, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Dairy.

(d) Protection in Case of a Merger of Bion. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Bion is a party other than a merger or consolidation in which Bion is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Bion as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Bion Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Bion Common Stock immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (d)(i) shall similarly apply to successive reorganizations, reclassifications,

consolidations, mergers, statutory exchanges, sales or conveyances. Bion shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Bion for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Bion, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Bion.

(e) Reservation of Shares; Transfer Taxes; Etc. Both Dairy and Bion shall at all times reserve and keep available, out of their respective authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Notes, such number of shares of its Common Stock as shall be sufficient to effect the conversion of all Notes from time to time outstanding. Both Dairy and Bion shall use their respective best efforts from time to time, in accordance with the laws of the State of Colorado, to increase the authorized number of shares of Common Stock if at any time the number of shares of Common Stock not outstanding shall not be sufficient to permit the conversion of all the then-outstanding Notes. In the event that either Dairy or Bion intends to offer Stock other than Common Stock, they shall authorize the issuance of sufficient shares of such stock to permit the conversion of all the then-outstanding Notes.

Bion or Dairy, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Stock on conversion of the Notes into Bion Stock or Dairy Stock. Neither Bion nor Dairy, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of Bion Stock or Dairy Stock, as appropriate (or other securities or assets), in a name other than that in which the Notes so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to either Bion or Dairy, as appropriate, the amount of such tax or has established, to the satisfaction of Bion or Dairy, as appropriate, that such tax has been paid.

(e) Release of Collateral. Immediately upon conversion to equity under this Section 2 all amounts due under this Note shall be deemed to have been

paid in full and all of the collateral for the performance of obligations hereunder shall be deemed to have been fully, finally and completely released as of such date.

SECTION 3. Fractional Shares

Neither Dairy nor Bion shall be required to issue fractions of shares of Common Stock or other stock upon the conversion of the Note. If any fraction of a share would be issuable on the Conversion of the Note, Dairy or Bion, as appropriate, shall purchase such fraction for an amount in cash equal to its fair market value, as determined in good faith by the Board of Directors of either Dairy or Bion, as appropriate.

SECTION 4. Affirmative Covenants of Dairy and Bion

Each of Dairy and Bion covenants and agrees that until the payment in full of this Note, it shall:

(a) Existence; Business. (i) Preserve, renew and keep in full force and effect its legal existence and (ii) obtain, preserve, renew, extend and keep in full force and effect the licenses, permits, authorizations, patents, trademarks and trade names material to its business.

(b) Use of Proceeds. Use the proceeds of the Notes of this issue solely as set forth in Section 7.2 of the Purchase Agreement.

(c) Notice of Events of Default. Furnish to the Holder prompt written notice of any Event of Default, specifying the nature and extent thereof and corrective action, if any, proposed to be taken with respect thereto.

(d) Authorization of Stock Issuable Upon Conversion. Authorize and reserve a sufficient number of its shares of Stock and Common Stock for issuance upon conversion of the Note.

(e) Execution and Delivery of Security Agreement. Execute and deliver the Security Agreement in substantially the form attached as Exhibit 1 hereto, and Bion shall cause each of its wholly-owned subsidiaries, Bion Technologies, Inc. and BionSoil, Inc., to execute and deliver the Security Agreement in substantially the same form.

SECTION 5. Negative Covenants of Dairy and Bion.

Each of Dairy and Bion covenants and agrees with the Holder that until the payment in full of this Note, it shall not:

(a) Dividends and Distributions. Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its capital stock.

(b) No Impairment. By amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Note against impairment.

SECTION 6. Events of Default Defined.

The following shall each constitute an "Event of Default" hereunder:

(a) the failure of Dairy to make any payment of principal of or interest on this Note when due and payable;

(b) the failure of Dairy or Bion to observe or perform any covenant in this Note or in the Purchase Agreement, and such failure shall have continued unremedied for a period of sixty (60) days;

(c) if Dairy shall:

(1) admit in writing its inability to pay its debts generally as they become due,

(2) file a petition in bankruptcy or a petition to take advantage of any insolvency act,

(3) make an assignment for the benefit of its creditors,

(4) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property,

(5) on a petition in bankruptcy filed against, be adjudicated a bankrupt, or

(6) file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof;

(d) if a court of competent jurisdiction shall enter an order, judgment or decree appointing, without the consent of Dairy, a receiver of Dairy or of the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of Dairy under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any State thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within thirty (30) days from the date of entry thereof;

(e) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of Dairy or the whole or any substantial part of its property and such custody or control shall not be terminated or stayed within thirty (30) days from the date of assumption of such custody or control;

(f) the liquidation, dissolution or winding up of Dairy; or

(g) a final judgment or judgments for the payment of money in excess of $100,000 in the aggregate shall be rendered by one or more courts, administrative or arbitral tribunals or other bodies having jurisdiction against Dairy and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and Dairy shall not, within such 30-day period, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal.

SECTION 7. Remedies Upon Event of Default.

(a) Upon the occurrence of an Event of Default, (i) the entire principal amount of, and all accrued and unpaid interest on, this Note shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Dairy. In addition, the Holder may take any action available to it under the Purchase Agreement or at law or in equity or by statute or otherwise.

(b) No remedy herein conferred upon the Holder of this Note is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

SECTION 8. Miscellaneous.

(a) Amendments and Waivers. The holders of a majority in principal amount of outstanding Notes of this issue may waive or otherwise consent to the amendment of any of the provisions hereof.

(b) Restrictions on Transferability. The securities represented by this Note have been acquired for investment and have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction. Without such registration, such securities may not be sold, pledged, hypothecated or otherwise transferred, except pursuant to exemptions from the Securities Act of 1933, and the securities laws of any state or other jurisdiction.

(c) Forbearance from Suit. No holder of Notes of this issue shall institute any suit or proceeding for the enforcement of the payment of principal or interest unless the holders of at least a majority in principal amount of all of the outstanding Notes of this issue join in such suit or proceeding.

(d) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, excluding the body of law relating to conflict of laws. Notwithstanding anything to the contrary contained herein, in no event may the effective rate of interest collected or received by the Holder exceed that which may be charged, collected or received by the Holder under applicable law.

(e) Interpretation. If any term or provision of this Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby.

(f) Successors and Assigns. This Note shall be binding upon Dairy and Bion and each of their respective successors and assigns and shall inure to the benefit of the Holder and its successors and assigns.

(g) Notices. All notices, requests, consents and demands shall be made in writing and shall be mailed postage prepaid, or delivered by hand, to Dairy or to the Holder thereof at their respective addresses set forth below or to such other address as may be furnished in writing to the other party hereto:

If to the Holder:      At the address shown on Schedule A
                       attached hereto.

If to Dairy:           Bion Dairy Corporation
                       c/o Bion Environmental Technologies, Inc.
                       18 East 50th Street, 10th Floor
                       New York, New York 10022
                       Attention: Chief Executive Officer

With a copy to:        Mark A. Smith, President
                       P.O. Box 566
                       Crestone, Colorado 81131
                       e-fax  425-984-9702

If to Bion:            Bion Environmental Technologies, Inc.
                       18 East 50th Street, 10th Floor
                       New York, New York 10022
                       Attention: Chief Executive Officer

With a copy to:        Mark A. Smith, President
                       P.O. Box 566
                       Crestone, Colorado 81131
                       e-fax  425-984-9702

(h) Saturdays, Sundays, Holidays. If any date that may at any time be specified in this Note as a date for the making of any payment of principal or interest under this Note shall fall on Saturday, Sunday or on a day which in New York shall be a legal holiday, then the date for the making of that payment shall be the next subsequent day which is not a Saturday, Sunday or legal holiday.

(i) Purchase Agreement. This Note is subject to the terms contained in the Purchase Agreement dated the date hereof among Bion, Dairy and the purchasers of the Notes and the holder of this Note is entitled to the benefits of such Purchase Agreement and may, in addition to any rights hereunder, enforce the agreements of Dairy and Bion contained therein and exercise the remedies provided for thereby or otherwise available in respect thereof.

IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed instrument on the date first above written by the duly authorized representative of Dairy.

ATTEST:                       BION DAIRY CORPORATION


                              By: ____________________________________
                                  Name:  Mark Smith
                                  Its:   President


                              BION ENVIRONMENTAL TECHNOLOGIES, INC.


                              By: ____________________________________
                                  Name:  Mark Smith
                                  Its:   President

SCHEDULE A

SCHEDULE B

A: DEVRIES (TEXAS INSTALLATION):

Treatment goals for the DeVries system address nutrients only. The final liquid effluent for land application shall have a reduction of 70-90% of each of nitrogen and phosphorus mass compared to the mass of nutrients received and treated by the system based on Bion protocol.

B: CSU-FRESNO (CALIFORNIA INSTALLATION) TECHNICAL CONDITIONS:

Treatment goals for the CSU-FRESNO system address both nutrients and atmospheric emissions.

Nutrients:
A final liquid effluent for land application with between 70% and 90% of the nitrogen and phosphorus mass removed compared to the mass of these nutrients received and treated by the system based on Bion protocol.

Atmospheric emissions:
Using published ranges from USEPA and California regulations for normal dairy operations as a baseline for comparison, reduction of gaseous releases (note that there is no general consensus or acceptance of a set of baseline emission values)(based on defined protocols) as follows:

methane (CH4)                                      90-95%+
nitrous oxides (NOX)                               90-98%+
non-methane volatile organic compounds (nmVOC)     85-90%+
sulfur dioxide (SO2)                               90-97%+
ammonia (NH3)                                      90-99%+
hydrogen sulfide (H2S)                             90-97%+

SCHEDULE C

LICENSE TERMS

1 - licensors:
a - Bion Environmental Technologies, Inc. b - Bion Technologies, Inc.(owns all patents), and c - BionSoil, Inc.

2 - licensee: Bion Dairy Corporation

3 - IP to be covered is all IP owned by licensors as per exhibit to Security Agreement

4 - Scope: world-wide exclusive for use in dairy industry

5 - Terms:
a - perpetual(or as close as can be done) b - royalty free/ fully paid-up

6 - Licensor will continue to own IP & all improvements (whether made by Licensor or Licensee) and all Improvements will be added to license at no cost.

7 - a - Patent maintenance, third party license fees (currently Biobalance), new IP filings & prosecution, patent enforcement, etc are all responsibility of Licensor;

b - Licensee responsible to pay all costs for first year of License related to patent maintenance, the 2003 Biobalance fee on a renegotiated basis (unless licensee agrees to be bound by existing Biobalance terms), IP filings and prosecution

SCHEDULE D

Bion Conditions

1 - Bion shall have obtained contractual waivers of:

a) Section 1.2 of that certain Stock Purchase Agreement dated as of January 10, 2002 by and between Bion, OAM, S.p.A.; and

b) Section 2.4 of that certain Subscription Agreement dated as of January 10, 2002 by and between Bion and Centerpoint Corporation ( which waiver shall be ratified by the shareholders of Centerpoint Corporation).

2 - Bion shall have reached a work-out with its creditors satisfactory to the majority of the holders of the outstanding Notes of Dairy. Specific criteria for the 'work-out' shall be established within 90 days after the initial closing of the sale of the Notes. If such criteria are met, the work-out shall be deemed satisfactory.

SECURITY AGREEMENT

THIS SECURITY AGREEMENT dated as of August 26,, 2003, by and among BION DAIRY CORPORATION, a Colorado corporation ("Dairy"), BION TECHNOLOGIES, INC. a Colorado corporation ("BionTech"), BIONSOIL INC., a Colorado corporation ("BionSoil"), BION ENVIRONMENTAL TECHNOLOGIES, INC., a publicly held Colorado corporation ("Bion") and the purchasers of those certain Bion Dairy Corporation Series 2003 Convertible Promissory Notes (collectively, the "Purchasers"). Dairy, BionTech and BionSoil are all wholly owned subsidiaries of Bion and are collectively with Bion referred to in this Agreement as the "Debtors" and this Agreement is being executed and delivered by the Debtors for the benefit of the Purchasers.

WHEREAS, Dairy is the issuer of those certain 2003 Series A Convertible Promissory Notes, which series is one of a multiple series of duly authorized issues of Bion Dairy Corporation 2003 Convertible Promissory Notes (the "Indebtedness");

WHEREAS, the conversion prices of the various series of 2003 Convertible Promissory Notes may be different from each other, but all of the amounts due under all of the series of the 2003 Convertible Promissory Notes are intended to be secured by the same identical collateral which is to be shared in pari pasu by all of the holders of all of the 2003 Convertible Promissory Notes, irrespective of the date of issuance;

WHEREAS, by execution of the Purchase Agreement each Holder has expressly consented to the granting of a security interest in the Collateral to the holders of additional series of 2003 Convertible Promissory Notes after the date hereof;

WHEREAS, the maximum aggregate principal amount of the 2003 Series A Convertible Promissory Notes combined is $2,065,000 and the aggregate principal amount of all of the various series of 2003 Convertible Promissory Notes will be a maximum of $6,000,000;

WHEREAS, all of the Debtors will realize a financial benefit from the proceeds of the 2003 Convertible Promissory Notes; and

WHEREAS, in order to induce the Purchasers to enter into the Promissory Notes, and as security for the obligations arising under the Promissory Notes, the Debtors have agreed to execute and deliver this Agreement and to grant the security interests provided for herein.

NOW, THEREFORE, the parties hereto hereby agree as follows:

Each 2003 Convertible Promissory Note is individually referred to herein as a "Promissory Note" and collectively as the "Promissory Notes." Each of the 2003 Series A Convertible Promissory Notes will be issued pursuant to a Note Purchase Agreement among Dairy, Bion, the Holder and the other parties thereto (the "Purchase Agreement").

1. Definitions. All terms used herein, unless otherwise defined herein, shall have the same meanings that such terms have in the Promissory Note and the related Note Purchase Agreement as in effect on the date hereof.

2. Grant of Security Interest. As collateral security for (i) the prompt and complete payment and performance by the Debtors when due (whether at stated maturity, by acceleration or otherwise) of the principal of, premium, if any, and interest on the Promissory Note, (ii) any and all other amounts payable from time to time by the Debtors to the Purchasers under the Promissory Note, including, without limitation, increases in the amounts of or refinancings of or other changes to the Promissory Note and any other loans or other indebtedness that may be created by any amendment, supplement or other modification to, or restatement of, the Promissory Note, and (iii) the due and punctual performance of all of the obligations of the Debtors under this Agreement (all of the foregoing obligations are hereinafter collectively referred to as the "Obligations"):

Each of the Debtors hereby grants, sells, assigns, conveys, mortgages, pledges, hypothecates and transfers to the Purchasers a security interest in the Debtors' respective and collective right, title and interest in, to and under the following items and types of property described or referred to below, whether now owned or hereafter acquired (all of which being hereinafter collectively referred to herein as the "Collateral"):

(a) 4,000,000 shares of common stock of Bion Dairy Corporation owned by Bion which shares constitute all of the issued and outstanding stock of Dairy;

(b) 3,459,997 shares of the common stock of Centerpoint Corporation ("Centerpoint"), which shares constitute in excess of 57% of the issued and outstanding shares of Centerpoint; and

(c) All of the right, title and interest of the Debtors in and to their respective and collective intellectual property rights, patents, copyrights, trade secrets and know how, including without limitation the patents and other items listed on Schedule 1 attached hereto.

3. General Covenants of the Debtors.

(a) Upon the written request of the Purchasers, the Debtors will:

(i) during the continuance of an Event of Default, if and to the extent determined by the Purchasers to be desirable and to protect the interests of the Purchasers, notify and serve a copy of this Agreement upon each obligor upon any credit or other obligation at any time owing to the Debtors in such manner as the Purchasers may specify;

(ii) permit the Purchasers or their representatives, during normal business hours and upon reasonable prior notice, to inspect and make abstracts from its books and records pertaining to the Collateral;

(iii) furnish the Purchasers, from time to time at the request of the Purchasers, with written statements and schedules further identifying and describing the Collateral in such detail as the Purchasers may reasonably require;

(iv) advise the Purchasers promptly, in sufficient detail, of any substantial change in the Collateral, and of the occurrence of any event which would have a material adverse effect on the value of the Collateral or on the Purchasers' security interest therein;

(v) comply in all respects with all acts, rules, regulations and orders of any legislative, administrative or judicial body or official, applicable to the Collateral or any part thereof or to the operation of the Debtors' business by the Debtors, the noncompliance with which could have a material adverse effect on the Collateral or the operation of such business, provided that the Debtors may contest any acts, rules, regulations, orders and directions of such bodies or officials in any reasonable manner which will not, in the Purchasers' opinion, adversely affect its rights to the priority of their security interest in the Collateral; and

(vi) perform and observe all covenants, restrictions and conditions contained herein providing for payment of taxes and otherwise relating to the Collateral.

(b) For purposes of this Agreement, any of the following shall be considered to be an "Event of Default":

(i) Any representation or warranty in this Agreement or in the Promissory Note, or in any certificate, statement or other document made or furnished to the Purchasers hereunder shall prove to have been incorrect, or shall be breached, in any material respect; or

(ii) Default in the payment when due of the principal of, or any interest or fees on, the Promissory Note or any other amount payable to the Purchasers hereunder; or

(iii) Default by the Debtors in the performance or observance of any of their agreements and covenants contained herein which remains unremedied for 120 or more days; or

(iv) Any event of default or other event under any indenture, credit or loan agreement, note, or other agreement or instrument to which Dairy is a party and under which indebtedness an aggregate amount exceeding $250,000 is outstanding, or by which any such indebtedness is evidenced, shall have occurred which, with notice or lapse of time or both, would permit the holder or holders of any such indebtedness (or a trustee or bank on its or their behalf) to accelerate the maturity thereof or to enforce any lien provided for by any such indenture, agreement or instrument, as the case may be; or

(v) Dairy shall be terminated, dissolved or liquidated (as a matter of law or otherwise) or proceedings shall be commenced by any person (including Dairy) with the consent of Dairy seeking the termination, dissolution or liquidation of Dairy; or

(vi) Dairy shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or

(vii) Dairy shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect),
(iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in any involuntary case under the Bankruptcy Code, or

(viii) Dairy shall not take any action (corporate or otherwise) for the purpose of effecting any of the foregoing; or

(ix) A proceeding or case shall be commenced, without the application or consent of Dairy, in any court of competent jurisdiction seeking with respect to Dairy (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts,
(ii) the appointment of a trustee, receiver, custodian, liquidator or the like of Dairy or of all or any substantial part of the assets thereof, or
(iii) similar relief in respect of any of Dairy under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 days, or an order for relief against Dairy shall be entered in an involuntary case under the Bankruptcy Code; or

(x) A final judgment or judgments for the payment of money in excess of $250,000 in the aggregate shall be rendered by a court of record against Dairy, and Dairy shall not (i) be adequately bonded or insured against such judgment or judgments, or (ii) discharge the same or provide for its discharge in accordance with its terms, or procure a stay of execution thereof within 10 days from the date of entry thereof and within said period of 10 days, or such longer period during which execution of such judgment shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal.

"Default" shall mean an Event of Default or an event which with notice or lapse of time or both would become an Event of Default.

c) The Debtors will not, without the prior written consent of the Purchasers:

(i) permit any of the Collateral to be levied upon under legal process or to fall under any other Lien or encumbrance of whatever nature unless promptly discharged; or

(ii) cause, permit or fail to take any action which may impair the security interests herein granted and/or intended to be granted hereby;

(iii) sell, lease, transfer, assign (including by virtue of assignments by operation of law), mortgage, pledge or otherwise dispose of or encumber any of the Collateral except for dispositions or encumbrances in accordance with the terms hereof and except for dispositions in a non- material amount in the ordinary course of business, or permit any party other than the Purchasers to perfect any security interest in such Collateral, whether for purchase money or otherwise, except as permitted hereby; or

(iv) permit any change in control of the ownership of the outstanding equity securities of Debtors, except for the issuance of shares to the Purchasers or its designee(s). For the purposes of this Agreement, the term "change in control" shall mean any change in the record or beneficial ownership of fifty percent or more of any class of the then issued and outstanding equity securities of the Debtors during any twelve month period.

(d) Each of the Debtors will maintain its respective books and records at its chief place of business, and will not change its name, or the name under which it conducts its business, or its address without giving the Purchasers written notice thereof.

(e) Dairy will preserve and maintain its legal existence and all of its rights and privileges material to its operation in the normal conduct of its business.

(f) Dairy will comply with the requirements of all applicable laws, rules, regulations and orders (including, without limitation, environmental laws and regulations) of any governmental body or regulatory authority, a breach of which could have a material adverse effect on its financial condition or the business or prospects, except where contested in good faith and by proper proceedings if adequate reserves are maintained with respect to any liability (contingent or otherwise) which might arise in connection therewith.

(g) Dairy will promptly give to the Purchasers notice in writing of all litigation and of all proceedings before any courts, arbitrators or governmental or regulatory agencies affecting the Collateral. Following the initial notice of each such litigation or proceeding, supplementary notices of all material developments in respect thereof shall be given from time to time in like manner.

(h) Dairy will not create, incur or suffer to exist on a consolidated basis any indebtedness except: (a) the Obligations under this Agreement and the Promissory Notes; (b) amounts due as accounts payable (c) capital lease obligations and indebtedness secured by purchase money security interests; and (d) bank debt in any amount deemed reasonable and/or necessary by Dairy.

(i) Dairy will operate all property owned or leased by it such that no obligation, including a clean-up obligation, shall arise or continue to exist under any environmental law or regulation, which obligation would constitute a lien or charge (prior to that in favor of the Purchasers) on any property of Dairy.

4. Further Assurances.

(a) Each of the Debtors will, from time to time and at its own expense, promptly execute, acknowledge, witness and deliver and file and/or record, or cause the execution, acknowledgment, witnessing and delivery and the filing and/or recordation of, such specific and further assignments of Collateral and such other documents or instruments, and shall take or cause to be taken such other actions as shall be necessary or as the Purchasers may otherwise reasonably request, for the perfection against the Debtors and all third parties whomsoever of the security interest created hereby in the Collateral, in the properties covered thereby for the continuation and protection thereof, and promptly give to the Purchasers evidence satisfactory to the Purchasers of such action. Without limiting the generality of the foregoing, each of the Debtors shall, promptly upon the execution and delivery of this Agreement, and at any time or from time to time thereafter upon the request of the Purchasers, execute, acknowledge, witness and deliver such financing and continuation statements, notices and additional security agreements, make such notations on its records and take such other action as shall be necessary, or as the Purchasers may otherwise reasonably request, for the purpose of perfecting, maintaining or protecting such security interest of the Purchasers, and shall cause this Agreement, any amendment or supplement hereto or thereto and each such financing and continuation statement notice and additional security agreements to be filed or recorded in such manner and in such places as may be required by applicable law or as the Purchasers may reasonably request for such purpose. The Debtors hereby authorize the Purchasers to effect any filing or recording which the Purchasers have requested pursuant to this Section 4(a) without the signature of any of the Debtors, to the extent permitted by applicable law.

(b) Without in any manner or to any extent or degree qualifying the obligations of the Debtors under Section 4(a) hereof, at any time and from time to time, upon the written request of the Purchasers, the Debtors shall promptly and duly execute, acknowledge, witness and deliver, or cause to be duly executed, acknowledged, witnessed and delivered, any and all such further instruments and documents, and take such further actions, as the Purchasers may reasonably request, to obtain for the Purchasers the full benefit of this Agreement and any supplemental security agreement thereto and of the rights and powers herein or therein granted.

5. The Purchasers may, at any time and from time to time, at their option, after having given at least ten (10) days' prior notice of its intention to do so to the Debtors, perform any action which is undertaken by the Debtors to be performed by it hereunder but which the Debtors shall have failed to perform, and the Purchasers may take any other action which the Purchasers may deem reasonably necessary for the maintenance, preservation or protection of any of the Collateral or the security interests therein and the Purchasers is hereby irrevocably appointed attorney-in-fact of the Debtors for this purpose.

6. Representations and Warranties of the Debtors.

(a) The Debtors jointly and severally represent and warrant to the Purchasers that the Debtors have rights in and good title to the Collateral and each of the Debtors has full power and authority to grant to the Purchasers the lien and security interest in the Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than any consent or approval which has already been obtained.

(b) The Debtors further jointly and severally represent and warrant to the Purchasers that:

(i) Fully executed documents (including, without limitation, Uniform Commercial Code financing statements) containing descriptions of the Collateral will be properly filed, recorded or registered in those governmental, municipal or other offices that are necessary to establish a valid, legal and perfected first priority security interest in favor of the Purchasers in respect of all the Collateral, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration will be necessary in any such jurisdiction, except as provided under applicable law with respect to the filing of Uniform Commercial Code continuation statements.

(ii) The security interest created hereby constitutes a valid, legal and perfected first priority security interest in all the Collateral securing payment and performance of the Obligations, subject only to statutory liens and liens for taxes not yet due or payable.

(iii) Each of the Debtors has disclosed in writing to the Purchasers any trade names used to identify it in its business or in the ownership of its properties.

(b) All representations and warranties of the Debtors contained in this Agreement shall survive the execution, delivery and performance of this Agreement until the termination of this Agreement.

(c) The current chief place of business of the Debtors and the place where the Debtors currently keep books and records is 18 East 50th Street, 10th Floor, New York, New York 10022.

7. Remedies Upon an Event of Default.

(a) If any Event of Default shall have occurred and shall be continuing for a period of 120 days after written notice thereof from the Purchasers to the Debtors (except with respect to the occurrence of one or more of the events specified in subparagraphs 3(v), 3(vii) and 3(viii) hereof, in which case no notice or any continuance of an Event of Default for any period of time shall be necessary), the Purchasers shall, subject to the provisions of Section 19 of this Agreement, have all the rights and remedies of a secured party under the Uniform Commercial Code as in effect in the State of New York (the "UCC"), or other applicable law, including the power of sale upon notice, and all rights provided herein, all of which rights and remedies shall, to the fullest extent permitted by law, be cumulative.

(b) The Purchasers shall apply the proceeds from the sale or other disposition of the Collateral pursuant to the provisions of this Section 7(b) and any other amounts held by it as Collateral hereunder in the following order:

(i) FIRST, to the payment of its reasonable costs and expenses, if any (including, without limitation, reasonable attorneys' fees and expenses), in preserving their interests in such Collateral or in enforcing any remedies granted in or realizing against the security of, this Agreement or any disbursements by the Purchasers under Section 7 hereof and any other amounts owing to the Purchasers under this Agreement;

(ii) SECOND, to the payment to the Purchasers of accrued and unpaid interest due and payable on the Promissory Notes made by the Debtors (whether at stated maturity, by acceleration or otherwise);

(iii) THIRD, to the payment to the Purchasers of the outstanding principal amount due and payable on the Promissory Notes (whether at stated maturity, by acceleration or otherwise);

(iv) FOURTH, to the payment of any other Obligations of the Debtors due and payable to the Purchasers on the date of such application; and

(v) FIFTH, after the payment in full of all of the obligations (including those not due and payable at the time of the application referred to in clauses (i)-(iv) above), to the payment to the Debtors of any surplus then remaining from such proceeds or otherwise as a court of competent jurisdiction may direct.

(c) The realization, sale or other disposition of all or substantially all of the Collateral by the Purchasers pursuant to this
Section 7(c) shall be deemed to fully relieve and discharge each of the Debtors of all of their respective and collective Obligations hereunder and under the Promissory Notes and related Note Purchase Agreement.

8. Possession by the Debtors Until an Event of Default. Until an Event of Default shall occur and be continuing, except as otherwise provided in this Agreement or in the other documents referred to herein, the Debtors will have the right to the possession and enjoyment of the Collateral for the purpose of conducting the ordinary course of its business, subject to and upon the terms hereof.

9. Purchases by the Purchasers. At any sale pursuant to Section 7(c) hereof, the Purchasers or its agents may, to the extent permitted by applicable law, bid for and purchase the Collateral offered for sale, and, upon compliance in full with the terms of such sale, may hold, retain and dispose of such property without further accountability therefor to the Debtors or any other party.

10. Remedies Cumulative. Each right, power and remedy herein specifically granted to the Purchasers or otherwise available to it shall be cumulative, and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or otherwise; and each right, power and remedy, whether specifically granted herein or otherwise existing, may be exercised, at any time and from time to time as often and in such order as may be deemed expedient by the Purchasers in its sole and complete discretion; and the exercise or commencement or exercise of any right, power or remedy shall not be construed as a waiver of the right to exercise, at the same time or thereafter, the same or any other right, power or remedy. No delay or omission by the Purchasers in exercising any such right or power, or in pursuing any such remedy, shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Debtors or an acquiescence therein. No waiver by the Purchasers of any breach or default of or by the Debtors hereunder shall be deemed to be a waiver of any other or similar, previous or subsequent, breach or default.

11. No Impairment. The terms of this Agreement and the obligations of the Debtors arising hereunder shall not be affected, modified or impaired in any manner or to any extent by: (i) the validity or enforceability of any of the other instruments or documents executed by the parties with respect hereto; (ii) any exercise or non-exercise of any right, power or remedy of the Purchasers under any of such instruments or documents referred to in clause (i) above or arising at law; (iii) any waiver, consent, release, indulgence, extension, renewal, modification, delay or other action, inaction or omission with respect to the Promissory Notes or any of the instruments or documents referred to in clause (i) above; or (iv) any waiver by the Purchasers of any rights under this Agreement, whether or not the Debtors shall have had notice or knowledge of any of the foregoing and whether or not the Debtors shall have consented thereto.

12. Successors and Assigns. This Agreement, and the terms and conditions hereof, shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns, provided that the Debtors may not assign any of its rights or obligations hereunder without the prior written consent of the Purchasers.

13. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of New York, provided that as to Collateral located in any jurisdiction other than the State of New York, the Purchasers shall have all the rights to which a secured party under the laws of such jurisdiction is entitled.

14. Severability. In case any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained here shall not in any way be affected or impaired.

15. Term. This Agreement shall continue in full force and effect until either (a) all the Obligations have been fully and indefeasibly paid in full and payment in full thereof has been acknowledged by the Purchasers or (b) the Purchasers realize ownership in and to the Collateral, whereupon this Agreement and the security interest granted hereunder shall terminate.

16. Applicability of Regulatory or Governmental Rules and Regulations. Any provision herein to the contrary notwithstanding, no action shall be taken hereunder by the Purchasers with respect to any item of the Collateral unless and until all material applicable requirements of all federal or state or local laws, or rules and regulations of regulatory or governmental bodies applicable to or having jurisdiction over the Debtors, have been fully satisfied with respect to such action and there have been obtained such consents, approvals and authorizations (if any) as may be required to be obtained from any governmental authority under the terms of any license or similar operating right held by the Debtors and included in the Collateral. It is the intention of the parties hereto that the security interests and liens of the Purchasers in and to the Collateral shall in all relevant aspects be subject to and governed by said statutes, rules and regulations and that nothing in this Agreement shall be construed so as to diminish the control exercised by the Debtors except in accordance with the provisions of such statutory requirements and rules and regulations. Each of the Debtors agrees that, upon request from time to time by the Purchasers, it will use its best efforts to obtain any governmental or regulatory consents, approvals or authorizations referred to in this Section 16.

17. Notices. All notices and other communications provided for herein shall be by telephone or telecopy or in writing and shall be telephoned, telecopied, mailed or delivered to the intended recipients at the telecopier numbers or addresses set forth underneath each party's name on the signature page hereto. Except as otherwise provided in this Agreement, all notices and other communications hereunder shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of mailed notices, when actually received by the intended recipients, in each case addressed as aforesaid. Telephoned notices shall be promptly confirmed by the sender by letter or telecopy, provided that failure to confirm any such telephoned notice shall not affect its validity.

18. Counterparts. This Agreement may be executed in any number of counterpart copies, each of which shall be deemed an original, but all of which together shall constitute a single instrument.

19. Amendments, Waivers, etc. This Agreement may not be amended orally, but may be amended, modified or supplemented only by a written instrument executed by all of the Debtors and the holders of a majority of principal value of the Promissory Notes.

20. Headings. Descriptive headings appearing herein are included solely for convenience of reference and are not intended to affect the meaning or construction of any of the provisions of this Agreement.

IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be duly executed as of the date and year first above written.

DEBTORS:

BION ENVIRONMENTAL TECHNOLOGIES, INC.,
a Colorado corporation

By:___________________________
Authorized Officer

BION DAIRY CORP0RATION
a Colorado corporation

By:___________________________
Authorized Officer

BION TECHNOLOGIES, INC.,
a Colorado corporation

By:___________________________
Authorized Officer

BIONSOIL, INC.,
a Colorado corporation

By:___________________________
Authorized Officer

Address for Notices to any of the Debtors:

18 East 50th Street, 10th Floor
New York, New York 10022

with copies to:

Krys Boyle, P.C.
Dominion Plaza, Suite 2700
South Tower
600 Seventeenth Street
Denver, Colorado 80202
Telecopier No.: (303) 893-2882
Attention: Stanley F. Freedman, Esq.

and

Mark A. Smith, President
P.O. Box 566
Crestone, Colorado 81131
e-fax: 1-425-984-9702

US Pat No     date issued     Title

4,721,569     1/26/88         Phosphorus Treatment Process

5,078,882     1/7/92          Bioconversion Reactor and System

5,472,472     12/5/95         Animal Waste Bioconversion System

5,538,529     7/23/96         Bioconverted Nutrient Rich Humus
                              CIP of A3

5,626,644     5/6/97          Storm Water Remediatory Bioconversion
                              System
                              CIP of A3

5,755,852     5/26/98         Bioconverted Nutrient Rich Humus
                              CIP of A4

Serial No.     date filed     Title

09/709,171     11/10/2000     Low Oxygen Organic Waste Bioconversion
                              System


PCT Applications

Application No.     date filed     Title

PCT/US01/46496      11/08/2001     Low Oxygen Organic Waste Bioconversion
System


Canadian Patents

C1     1,336,623     8/8/95        Aqueous Stream Treatment Process (Canada)

License Agreement

License Agreement dated January 31, 2002 between Biobalance A/S and Bion environmental Technologies, Inc. concerning U.S. Patent No. 5,906,746 owned by WTE Wassertechnik GmbH

General

All of the Debtors trade secrets, proprietary information and know-how.

All other intellectual property of the Debtors that is developed or acquired in the future.

PLEDGE AGREEMENT

This Pledge Agreement ("Agreement") is entered into this date by and between Bion Environmental Technologies, Inc. ("Pledgor") and the purchasers of those certain Bion Dairy Corporation Series 2003 Convertible Promissory Notes (collectively the "Purchasers");

WHEREAS the Pledgor is the owner of 4,000,000 shares (the "Dairy Shares") of the common stock of Bion Dairy Corporation, a Colorado corporation ("Dairy") and 3,459,997 shares (the "Centerpoint Shares") of the common stock of Centerpoint Corporation, a majority-owned subsidiary of Pledgor ("Centerpoint") (The Dairy Shares and the Centerpoint Shares are hereinafter collectively referred to as the "Shares");

WHEREAS Dairy is selling to Purchasers Series 2003 Convertible Promissory Notes ("Notes"); and

WHEREAS Pledgor has agreed to secure the payment of the Notes by the pledge of the Shares under the terms of this Agreement;

NOW THEREFORE, IT IS AGREED AS FOLLOWS:

Section 1. Grant of Security Interest. The Pledgor grants to the Purchasers a security interest in the Shares.

Section 2. Possession. Contemporaneously herewith, the Pledgor has delivered to Anthony Orphanos ("Agent") a certificate evidencing the Shares ("Certificate"), together with a stock power endorsed in blank, to hold subject to terms of this Agreement.

Section 3. Obligations of Agent. During the term of this Agreement, and for so long as Agent is in possession of the Certificate, Agent shall take reasonable care of the Certificate. Once the Pledgor has made payment in full on all of the principal and interest on the Notes and/or all of the Notes have been converted into common stock of Dairy, Agent shall re-deliver the Certificate to the Pledgor, together with the stock power endorsed by the Pledgor.

Section 4. Representations and Warranties of Pledgor. The Pledgor represents and warrants to the Purchasers that:

A. The Pledgor is the owner of the Shares, free and clear of liens, encumbrances, or other matters that might affect title to the Shares.

B. The Pledgor has the full power to transfer the Shares pursuant to this Agreement, and, upon such transfer, the transferee shall take good and marketable title to the Shares free and clear of any claims, liens, encumbrances, or security interests.

Section 5. Covenants of Pledgor. For as long as this Agreement is force and Agent is in possession of the Shares, the Pledgor agrees that:

A. Pledgor will not grant any other lien or security interest with respect to the Shares.

B. As long as the obligations secured by this Agreement remain outstanding, the Pledgor will not transfer, whether by sale, gift, or otherwise, any ownership interest in the Shares without Agent's prior written approval.

C. Upon the reasonable request of Agent, the Pledgor will take all action and will execute all documents and instruments necessary or desirable to consummate and give effect to this Agreement.

Section 6. Covenants of Pledgor Regarding Dairy and Centerpoint. Until the Notes are paid in full or converted into Common Stock, or unless otherwise directed in writing by the holders of a majority in principal amount of the outstanding Bion Dairy Corporation Series 2003 Convertible Promissory Notes, the Pledgor agrees to cause each of Dairy and Centerpoint to:

A. Not amend or restate its articles of incorporation or bylaws or adopt a plan of liquidation or dissolution.

B. Not declare or pay any dividend or distribution on any shares of its stock, make any other distribution on account of any shares of its stock or redeem, purchase or otherwise acquire, directly or indirectly, any shares of its stock; provided, however, that Pledgor and Centerpoint shall be permitted to cause all of the shares of Pledgor's Common Stock that are owned by Centerpoint to be distributed to the Centerpoint stockholders, at which time the shares of Pledgor's Common Stock that are distributed to Pledgor pursuant to such distribution shall be cancelled.

Section 7. Proxy. The Pledgor irrevocably appoints Agent as attorney- in-fact and grants Agent a proxy to do (but Agent shall not be obligated and shall incur no liability to the Pledgor or any third party for failure to do so), after and during the continuance of an Event of Default, any act that the Pledgor is obligated by this Agreement to do and to exercise such rights and powers as the Pledgor might exercise with respect to the Shares. With respect to voting the Shares, this Section constitutes an irrevocable appointment of a proxy, coupled with an interest, which shall continue until the Notes are paid in full and/or converted into common stock, in full.

Section 8. Voting Shares. Except as otherwise limited by this Agreement, as long as no Event of Default shall have occurred, the Pledgor shall be entitled to vote the Shares.

Section 9. Custody of Shares. If at any time with respect to the Shares, the Pledgor receives or becomes entitled to receive any dividend or any other distribution cash dividend, whether in securities or other property, by way of liquidation, stock split, spin-off, split-up or reclassification, combination of shares, or the like, or in case of any reorganization, consolidation, or merger, the Pledgor shall immediately deliver all such securities or property, in pledge, to Agent as security for the payment and performance of the obligations secured by this Agreement. The Pledgor shall immediately notify the Company to make all such payments directly to the Agent. The Agent may endorse, in Agent's name or in the name of the Pledgor, any and all instruments by which any payment on the Shares

may be made and may take such action as the Agent may deem appropriate from time to time, in the Agent's name or in the name of the Pledgor, to enforce collection of the Shares. For such purpose, the Pledgor appoints the Agent as the attorney-in-fact of the Pledgor, under a power coupled with an interest, with full power of substitution.

Section 10. Events of Default. For the purposes of his agreement, an "Event of Default" shall be as defined in the Security Agreement dated August 26, 2003 between the parties hereto.

Section 11. Remedies. Upon the occurrence of any Event of Default, Agent may, in Agent's sole discretion and with or without further notice to the Pledgor, exercise the remedies set forth in the Security Agreement dated August 26, 2003, with respect to the shares.

Section 12. Notices. Any notice under this Agreement shall be in writing and shall be effective when actually delivered in person or three days after being deposited in the U.S. mail, registered or certified, postage prepaid and addressed to the party at the address stated in this Agreement or such other address as either party may designate by written notice to the other.

Section 13. Waiver. The waiver by either party of the breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach.

Section 14. Assignment. Except as otherwise provided within this Agreement, neither party hereto may transfer or assign this Agreement without prior written consent of the other party.

IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be duly executed as of August 26, 2003.

BION ENVIRONMENTAL TECHNOLOGIES, INC.,
a Colorado corporation

By: __________________________________________ Authorized Officer

BION DAIRY CORPORATION,
a Colorado corporation

By: __________________________________________ Authorized Officer

AGENT

By:_______________________________________________ Anthony Orphanos

PURCHASERS:

1. Stifel Nicolaus (Jonathan Berg)
2. Anthony G. Orphanos
3. David Mitchell
4. Stephen Posner
5. Harvey Blitz
6. Jodi Kirsch
7. Dennis Rosen
8. David Mager
9. Podell Trust
10. George and Ann Levinger
11. Virgina Casadonte
12. Chris-Dan LLC (Dominic Bassani)

BION DAIRY CORPORATION
ACCREDITED INVESTOR QUESTIONNAIRE

TO: Bion Dairy Corporation

Ladies and Gentlemen:

In connection with the undersigned's proposed investment in 2003 Convertible Promissory Notes ("Notes") of Bion Dairy Corporation ("Company"), the undersigned hereby acknowledges, represents and warrants to the Company as follows:

(a) The undersigned understands that an investment in the Notes is available only to "Accredited Investors" as defined in Regulation D. The undersigned represents and warrants that he/she is an "Accredited Investor" because the undersigned is: (please initial the applicable category):

i. ______ A natural person (individual or married couple) whose individual net worth, or joint net worth with spouse, exceeds $1,000,000.

ii. ______ A natural person whose individual income (exclusive of spouse's income) was in excess of $200,000 in each of the two most recent years or whose joint income with the undersigned's spouse was in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year.

iii. _____ An employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974, the investment decisions for which are made by the undersigned as a plan fiduciary, as defined in Section 3(21) of such Act, and the undersigned is (_____) a bank, (_____) a savings and loan association, (_____) an insurance company, or (______) a registered investment advisor.

iv. _____ An employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 and either whose assets are in excess of $5,000,000 or which is a self-directed plan, with investment decisions made solely by an Accredited Investor.

v. _____ A corporation, business trust or partnership, not formed for the specific purpose of acquiring Notes in the Company, with total assets in excess of $5,000,000.

vi. ______ A trust, not formed for the specific purpose of acquiring Notes in the Company, which has total assets in excess of $5,000,000 whose purchase is directed by a "sophisticated person" as described in Regulation D
Section 230.506(b)(2)(ii).

vii. _____ An entity in which all of the equity owners are Accredited Investors as defined in Regulation D.

____________________________________     X___________________________________
Please Print Name                         Signature of Subscriber


                                         X___________________________________
Please Print Name                         Signature of Co-Owner

                             Class SV/DB-1 Warrant

Warrant to Subscribe                                        August 31, 2003
for 466,000 Shares

Void After July 31, 2013

THIS CERTIFIES that, for value received, The Danielle Christine Bassani Trust or its registered assigns ("Holder"), is entitled to subscribe for and purchase from Bion Environmental Technologies, Inc., a Colorado corporation (hereinafter called the "Company"), at the price of $3.00 per share (such price as from time to time adjusted as hereinafter provided being hereinafter called the "Warrant Price"), from August 31, 2003 until July 31, 2008 (the "Warrant Expiration Date")(provided, however, that the exercise period shall immediately commence upon a Change of Control of the Company), up to 466,000 (subject to adjustment as hereinafter provided)fully paid and nonassessable shares of Common Stock, no par value per share, of the Company (hereinafter called the "Common Stock"), subject, however, to the provisions and upon the terms and conditions hereinafter set forth. This Warrant and any warrant or warrants subsequently issued upon exchange or transfer thereof are hereinafter collectively called the "Warrants". "Registered Holder" shall mean, as to any Warrant and as of any particular date the person in whose name the certificate representing the Warrant shall be registered on that date on the books maintained by the Company pursuant to Section 3(b). A "Change of Control" shall be deemed to occur upon any person or persons, not equity holders on the date hereof, acquiring the ability to elect a majority of the Board of Directors of the Company.

1. Exercise of Warrant.

(a) Method of Exercise.

(i) The rights represented by this Warrant may be exercised by the holder hereof, in whole at any time or from time to time in part, but not as to a fractional share of Common Stock, by the surrender of this Warrant (properly endorsed) at the office of the Company as it may designate by notice in writing to the holder thereof at the address of such holder appearing on the books of the Company, and as further provided below in this
Section 1 by payment to the Company of the Warrant Price in cash or by certified or official bank check, for each share being purchased.

(ii) In lieu of exercising this Warrant via cash payment, the holder may effect a cashless exercise and receive Common Stock equal to the value of this Warrant (or the portion thereof being cancelled by means of a net issuance exercise, in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

Where X = the number of shares of Common Stock to be issued to the Holder.

Y = the number of shares purchasable under this Warrant or, if only a portion of the Warrant is being exercised (at the date of such calculation).

A = the current Market Price (as defined below) of one share of Common Stock (at the date of such calculation).

B = the exercise price (as adjusted to the date of calculation).

If the above calculation results in a negative number, then no Warrant shares of Common Stock shall be issued or issuable upon conversion of this Warrant pursuant to this Section 1 (b), and the Warrant shall not be deemed to have been exercised, notwithstanding the delivery of the notice of election.

(b) Delivery of Certificates. Etc. In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the shares of Common Stock so purchased, registered in the name of the holder, shall be delivered to the holder hereof within a reasonable time, not exceeding ten days, after the rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof within such time. The person in whose name any certificate for shares of Common Stock is issued upon exercise of this Warrant shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was surrendered and payment of the Warrant Price and any applicable taxes was made, except that, if the date of such surrender and payment is a date on which the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

2. Reservation of Shares; Listing; Payment of Taxes; etc.

(a) The Company covenants that it will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issue upon exercise of this Warrant, such number of shares of Common Stock as shall then be issuable upon the exercise of all outstanding Warrants. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of this Warrant shall, at the time of delivery (assuming full payment of the purchase price thereof), be duly and validly issued, fully paid, nonassessable and free from all issuance taxes, liens and charges with respect to the issue thereof including, without limitation, adverse claims whatsoever (with the exception of claims arising through the acts of the

Registered Holders themselves and except as arising from applicable Federal and state securities laws), that the Company shall have paid all taxes, if any, in respect of the original issuance thereof and that upon issuance such shares, to the extent applicable, shall be listed on, or included in, the Stock Market. As used herein, "Stock Market" shall mean the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, shall mean NASDAQ or, if the Common Stock is not quoted on NASDAQ, shall mean the OTC Bulletin Board or, if the Common Stock is not quoted on the OTC Bulletin Board, shall mean the over the counter market as furnished by any NASD member firm selected from time to time by the Company for that purpose.

(b) The Company covenants that if any securities to be reserved for the purpose of exercise of this Warrant hereunder require registration with, or the approval of, any governmental authority under any federal securities law before such securities may be validly issued or delivered upon such exercise, then the Company will in good faith and as expeditiously as reasonably possible, endeavor to secure such registration or approval. The Company will use reasonable efforts to obtain appropriate approvals or registrations under state "blue sky" securities laws; provided, that the Company shall not be required to qualify as a foreign corporation or file a general or limited consent to service of process in any such jurisdictions or make any changes in its capital structure or any other aspects of its business or enter into any agreements with blue sky commissions, including any agreement to escrow shares of its capital stock. With respect to any such securities, however, Warrants may not be exercised by, or shares of Common Stock issued to, any Registered Holder in any state in which such exercise would be unlawful.

(c) The Company shall pay all documentary, stamp or similar taxes and other similar governmental charges that may be imposed with respect to the issuance of this Warrant, or the issuance or delivery of any shares upon exercise of this Warrant; provided, however, that if the shares of Common Stock are to be delivered in a name other than the name of the Registered Holder on any Warrant being exercised, then no such delivery shall be made unless the person requesting the same has paid to the Company the amount of transfer taxes or charges incident thereto, if any.

3. Exchange and Registration of Transfer.

(a) This Warrant may be exchanged for another Warrant representing an equal aggregate number of Warrants of the same class or may be transferred in whole or in part, by surrendering it to the Company at its corporate office. Upon satisfaction of the terms and provisions hereof, the Company shall execute, and the Company shall sign, issue and deliver in exchange therefore, such new Warrant or Warrants that the Registered Holder making the exchange shall be entitled to receive.

(b) The Company shall keep at its office books in which, subject to such reasonable regulations as it may prescribe, it shall register Warrants and any transfers thereof in accordance with its regular practice. Upon due presentment for registration of transfer of any Warrant at such

office, the Company shall execute and the Company shall issue and deliver to the transferee or transferees a new Warrant or Warrants representing an equal aggregate number of Warrants.

(c) With respect to all Warrants presented for registration or transfer, or for exchange or exercise, the subscription form attached hereto shall be duly endorsed, or be accompanied by a written instrument or instruments of transfer and subscription, in form satisfactory to the Company, duly executed by the Registered Holder or his attorney in fact duly authorized in writing.

(d) Prior to due presentment for registration of transfer thereof, the Company may deem and treat the Registered Holder of any Warrant as the absolute owner thereof (notwithstanding any notations of ownership or writing thereon made by anyone other than a duly authorized officer of the Company) for all purposes and shall not be affected by any notice to the contrary.

4. Loss or Mutilation. Upon receipt by the Company of evidence satisfactory to it of the ownership of and loss, theft, destruction or mutilation of any Warrant and (in case of loss, theft or destruction) of indemnity satisfactory to it, and (in the case of mutilation) upon surrender and cancellation thereof, the Company shall execute, sign and deliver to the Registered Holder in lieu thereof a new Warrant of like tenor representing an equal aggregate number of Warrants.

5. Adjustment of Warrant Price and Number of Shares of Common Stock or Warrants. Upon each adjustment of the Warrant Price pursuant to this Section 5, the total number of shares of Common Stock purchasable upon the exercise of each Warrant shall (subject to the provisions contained in Subsection
5(c)) be such number of shares (calculated to the nearest tenth) purchasable at the Warrant Price in effect immediately prior to such adjustment multiplied by a fraction, the numerator of which shall be the Warrant Price in effect immediately prior to such adjustment and the denominator of which shall be the Warrant Price in effect immediately after such adjustment.

(a) Except as otherwise provided herein, in the event the Company shall, at any time or from time to time after the date hereof, (i) sell or issue any shares of Common Stock for a consideration per share less than the Warrant Price in effect on the date of such sale or issuance, (ii) issue any shares of Common Stock as a stock dividend to the holders of Common Stock, or (iii) subdivide or combine the outstanding shares of Common Stock into a greater or fewer number of shares (any such sale, issuance, subdivision or combination being herein called a "Change of Shares"), then, and thereafter upon each further Change of Shares, the Warrant Price in effect immediately prior to such Change of Shares shall be changed to a price (rounded to the nearest cent) determined by multiplying the Warrant Price in effect immediately prior thereto by a fraction, the numerator of which shall be (x) the sum of (A) the number of shares of Common Stock outstanding immediately prior to the sale or issuance of such additional shares or such subdivision or combination plus (B) the number of shares of Common Stock that the aggregate consideration received (determined as provided in Paragraph
5(g)(v)) for the issuance of such additional shares would purchase at the

Warrant Price in effect on the date of such issuance and the denominator of which shall be (y) the number of shares of Common Stock outstanding immediately after the sale or issuance of such additional shares or such subdivision or combination. Such adjustment shall be made successively whenever any such issuance is made.

(b) In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock, or in case of any consolidation or merger of the Company with or into another entity (other than a consolidation or merger in which the Company is the continuing entity and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock other than the number thereof), or in case of any sale or conveyance to another entity of the property of the Company as, or substantially as, an entirety (other than a sale/leaseback, mortgage or other financing transaction), the Company shall cause effective provision to be made so that each holder of a Warrant then outstanding shall have the right thereafter, by exercising such Warrant, upon the terms and conditions specified in the Warrant and in lieu of the shares of Common Stock immediately theretofore purchasable upon exercise of the Warrant, to purchase the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock that might have been purchased upon exercise of such Warrant immediately prior to such reclassification, capital reorganization or other change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5. The Company shall not effect any such consolidation, merger or sale unless prior to, or simultaneously with, the consummation thereof the successor (if other than the Company) resulting from such consolidation or merger or the entity purchasing assets or other appropriate entity shall assume, by written instrument executed and delivered to the Company, the obligation to deliver to the holder of each Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holders may be entitled to purchase and the other obligations under this Warrant. The foregoing provisions shall similarly apply to successive reclassifications, capital reorganizations and other changes of outstanding shares of Common Stock and to successive consolidations, mergers, sales or conveyances.

(c) If, at any time or from time to time, the Company shall issue or distribute to the holders of shares of Common Stock evidence of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding an issuance or distribution governed by one of the preceding Subsections of this Section 5 and also excluding cash dividends or cash distributions paid out of net profits legally available therefore in the full amount thereof (any such non excluded event being herein called a "Special Dividend")), then in each case the Registered Holders of the Warrants shall be entitled to a proportionate share of any such Special Dividend as though they were the holders of the number of shares of Common Stock of the Company for which their Warrants are exercisable as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such Special Dividend.

(d) The Company may elect, upon any adjustment of the Warrant Price hereunder, to adjust the number of Warrants outstanding, in lieu of the adjustment in the number of shares of Common Stock purchasable upon the exercise of each Warrant as hereinabove provided, so that each Warrant outstanding after such adjustment shall represent the right to purchase one share of Common Stock. Each Warrant held of record prior to such adjustment of the number of Warrants shall become that number of Warrants (calculated to the nearest tenth) determined by multiplying the number one by a fraction, the numerator of which shall be the Warrant Price in effect immediately prior to such adjustment and the denominator of which shall be the Warrant Price in effect immediately after such adjustment. Upon each adjustment of the number of Warrants pursuant to this Section 5, the Company shall, as promptly as practicable, cause to be distributed to each Registered Holder of Warrants on the date of such adjustment Warrants evidencing, subject to Section 6, the number of additional Warrants to which such Holder shall be entitled as a result of such adjustment or, at the option of the Company, cause to be distributed to such Holder in substitution and replacement for the Warrants held by him prior to the date of adjustment (and upon surrender thereof, if required by the Company) new Warrants evidencing the number of Warrants to which such Holder shall be entitled after such adjustment.

(e) Irrespective of any adjustments or changes in the Warrant Price or the number of shares of Common Stock purchasable upon exercise of this Warrant, the Warrants theretofore and thereafter issued shall, unless the Company shall exercise its option to issue new Warrants pursuant to Subsection 3(a), continue to express the same Warrant Price per share, number of shares purchasable thereunder and Redemption Price therefore as when the same were originally issued.

(f) After each adjustment of the Warrant Price pursuant to this
Section 5, the Company will promptly prepare a certificate signed by the Chairman or President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, of the Company setting forth: (i) the Warrant Price as so adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of each Warrant after such adjustment, and, if the Company shall have elected to adjust the number of Warrants pursuant to Subsection 5(d), the number of Warrants to which the registered holder of each Warrant shall then be entitled, and the adjustment in Redemption Price resulting there from, and (iii) a brief statement of the facts accounting for such adjustment. The Company will cause a brief summary thereof to be sent by ordinary first class mail to each Registered Holder of Warrants at his or her last address as it shall appear on the registry books. No failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of such adjustment. The affidavit the Secretary or an Assistant Secretary of the Company that such notice has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

(g) For purposes of Subsections 5(a) and 5(d), the following provisions (i) to (v) shall also be applicable:

(i) the number of shares of Common Stock deemed outstanding at any given time shall include all shares of capital stock convertible into, or exchangeable for, Common Stock (on an as converted

basis) as well as all shares of Common Stock issuable upon the exercise of
(x) any convertible debt, (y) warrants outstanding on the date hereof and (z) options outstanding on the date hereof.

(ii) No adjustment of the Warrant Price shall be made unless such adjustment would require an increase or decrease of at least $.01 in such price; provided that any adjustments which by reason of this Paragraph (ii) are not required to be made shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with adjustments so carried forward, shall require an increase or decrease of at least $.01 in the Warrant Price then in effect hereunder.

(iii) In case of (1) the sale by the Company (including as a component of a unit) of any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or any securities convertible into or exchangeable for Common Stock (such securities convertible, exercisable or exchangeable into Common Stock being herein called "Convertible Securities"), or (2) the issuance by the Company, without the receipt by the Company of any consideration therefore, of any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities, whether or not such rights, warrants or options, or the right to convert or exchange such Convertible Securities, are immediately exercisable, and the consideration per share for which Common Stock is issuable upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities (determined by dividing (x) the minimum aggregate consideration, as set forth in the instrument relating thereto without regard to any antidilution or similar provisions contained therein for a subsequent adjustment of such amount, payable to the Company upon the exercise of such rights, warrants or options, plus the consideration received by the Company for the issuance or sale of such rights, warrants or options, plus, in the case of such Convertible Securities, the minimum aggregate amount, as set forth in the instrument relating thereto without regard to any antidilution or similar provisions contained therein for a subsequent adjustment of such amount, of additional consideration, if any, other than such Convertible Securities, payable upon the conversion or exchange thereof, by (y) the total maximum number, as set forth in the instrument relating thereto without regard to any antidilution or similar provisions contained therein for a subsequent adjustment of such amount, of shares of Common Stock issuable upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities issuable upon the exercise of such rights, warrants or options) is less than the Warrant Price of the Common Stock as of the date of the issuance or sale of such rights, warrants or options, then such total maximum number of shares of Common Stock issuable upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities (as of the date of the issuance or sale of such rights, warrants or options) shall be deemed to be "Common Stock" for purposes of Subsections 5(a) and 5(d) and shall be deemed to have been sold for an amount equal to such consideration per share and shall cause an adjustment to be made in accordance with Subsections 5(a) and 5(d).

(iv) In case of the sale or other issuance by the Company of any Convertible Securities, whether or not the right of conversion or exchange thereunder is immediately exercisable, and the price per share for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities (determined by dividing (x) the total amount of consideration received by the Company for the sale of such Convertible Securities, plus the minimum aggregate amount, as set forth in the instrument relating thereto without regard to any antidilution or similar provisions contained therein for a subsequent adjustment of such amount, of additional consideration, if any, other than such Convertible Securities, payable upon the conversion or exchange thereof, by (y) the total maximum number, as set forth in the instrument relating thereto without regard to any antidilution or similar provisions contained therein for a subsequent adjustment of such amount, of shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities) is less than the Warrant Price of the Common Stock as of the date of the sale of such Convertible Securities, then such total maximum number of shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities (as of the date of the sale of such Convertible Securities) shall be deemed to be "Common Stock" for purposes of Subsections 5(a) and 5(d) and shall be deemed to have been sold for an amount equal to such consideration per share and shall cause an adjustment to be made in accordance with Subsections 5(a) and 5(d).

(v) In case the Company shall modify the rights of conversion, exchange or exercise of any of the securities referred to in Paragraphs (iii) or (iv) of this Subsection 5(g) or any other securities of the Company convertible, exchangeable or exercisable for shares of Common Stock, for any reason other than an event that would require adjustment to prevent dilution, so that the consideration per share received by the Company after such modification is less than the Warrant Price as of the date prior to such modification, then such securities, to the extent not theretofore exercised, converted or exchanged, shall be deemed to have expired or terminated immediately prior to the date of such modification and the Company shall be deemed, for purposes of calculating any adjustments pursuant to this
Section 5, to have issued such new securities upon such new terms on the date of modification. Such adjustment shall become effective as of the date upon which such modification shall take effect. On the expiration or cancellation of any such right, warrant or option or the termination or cancellation of any such right to convert or exchange any such Convertible Securities, the Warrant Price then in effect hereunder shall forthwith be readjusted to such Warrant Price as would have obtained (a) had the adjustments made upon the issuance or sale of such rights, warrants, options or Convertible Securities been made upon the basis of the issuance of only the number of shares of Common Stock theretofore actually delivered (and the total consideration received therefore) upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities and (b) had adjustments been made on the basis of the Warrant Price as adjusted under clause (a) of this sentence for all transactions (which would have affected such adjusted Warrant Price) made after the issuance or sale of such rights, warrants, options or Convertible Securities.

(vi) In case of the sale of any shares of Common Stock, any Convertible Securities, any rights or warrants to subscribe for or

purchase, or any options for the purchase of, Common Stock or Convertible Securities, the consideration received by the Company therefore shall be deemed to be the gross sales price therefore without deducting there from any expense paid or incurred by the Company or any underwriting discounts or commissions or concessions paid or allowed by the Company in connection therewith. In the event that any securities shall be issued in connection with any other securities of the Company, together comprising one integral transaction in which no specific consideration is allocated among the securities, then each of such securities shall be deemed to have been issued for such consideration as the Board of Directors of the Company determines in good faith; provided, however that if holders of more than of 10% of the then outstanding Warrants disagree with such determination, the Company shall retain an independent investment banking firm for the purpose of obtaining an appraisal.

(h) Notwithstanding any other provision hereof, no adjustment to the Warrant Price of the Warrants or to the number of shares of Common Stock purchasable upon the exercise of each Warrant will be made:

(i) upon the exercise of any of the options outstanding on the date hereof under the Company's existing stock option plans; or

(ii) upon the issuance or exercise of options which may hereafter be granted with the approval of the Board of Directors, or exercised, under any employee benefit plan of the Company to officers, directors, consultants or employees, but only with respect to such options as are exercisable at prices no lower than the Closing Bid Price (or, if the price referenced in the definition of Closing Bid Price cannot be determined, the Fair Market Value (as defined below)) of the Common Stock as of the date of grant thereof; or

(iii) upon the issuance or exercise of any options or warrants that are granted to or held by the "Holder" or any of its successors, assigns, affiliates and or agents; or

(iv) upon the issuance or sale of Common Stock or convertible securities for a consideration to the Company that is not less than the bid price of the Company's Common Stock on the date of issuance (as determined by quotations on the Stock Market); or

(v) upon the issuance or sale of Common Stock or Convertible Securities pursuant to the exercise of any rights, options or warrants to receive, subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities, whether or not such rights, warrants or options were outstanding on the date of the original sale of the Warrants or were thereafter issued or sold, provided that an adjustment was either made or not required to be made in accordance with Subsections 5(a) and 5(d) in connection with the issuance or sale of such securities or any modification of the terms thereof; or

(vi) upon the issuance or sale of Common Stock upon conversion or exchange of any Convertible Securities, provided that any adjustments required to be made upon the issuance or sale of such Convertible Securities or any modification of the terms thereof were so made, and whether or not such Convertible Securities were outstanding on the date of the original sale of the Warrants or were thereafter issued or sold. Paragraph 5(g)(v) shall nevertheless apply to any modification of the rights of conversion, exchange or exercise of any of the securities referred to in Paragraphs (i), (ii) and (iii) of this Subsection 5(h). For purposes hereof, "Fair Market Value" shall mean the average Closing Bid Price for twenty (20) consecutive trading days, ending with the trading day prior to the date as of which the Fair Market Value is being determined, (with appropriate adjustments for subdivisions or combinations of shares effected during such period) provided that if the prices referred to in the definition of Closing Bid Price cannot be determined for such period, "Fair Market Value" shall be the fair market value as determined by the Board of Directors in good faith.

(i) As used in this Section 5, the term "Common Stock" shall mean and include the Company's Common Stock authorized on the date of the original issue of the Warrants and shall also include any capital stock of any class of the Company thereafter authorized which shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary liquidation, dissolution or winding up of the Company; provided, however, that the shares issuable upon exercise of the Warrants shall include only shares of such class designated in the Company's Certificate of Incorporation, as amended, as Common Stock on the date of the original issue of the Warrants or (i), in the case of any reclassification, change, consolidation, merger, sale or conveyance of the character referred to in Subsection 5(c), the stock, securities or property provided for in such section or (ii), in the case of any reclassification or change in the outstanding shares of Common Stock issuable upon exercise of the Warrants as a result of a subdivision or combination or consisting of a change in par value, or from par value to no par value, or from no par value to par value, such shares of Common Stock as so reclassified or changed.

(j) Any determination as to whether an adjustment in the Warrant Price in effect hereunder is required pursuant to Section 5, or as to the amount of any such adjustment, if required, shall be binding upon the holders of the Warrants and the Company if made in good faith by the Board of Directors of the Company.

(k) If and whenever the Company shall grant to the holders of Common Stock, as such, rights or warrants to subscribe for or to purchase, or any options for the purchase of, Common Stock or securities convertible into or exchangeable for or carrying a right, warrant or option to purchase Common Stock, the Company may at its option elect concurrently therewith to grant to each Registered Holder as of the record date for such transaction of the Warrants then outstanding, the rights, warrants or options to which each Registered Holder would have been entitled if, on the record date used to determine the shareholders entitled to the rights, warrants or options being granted by the Company, the Registered Holder were the holder of record of the number of whole shares of Common Stock then issuable upon exercise of his

or her Warrant. If the Company shall so elect under this Subsection 5(k), then such grant by the Company to the holders of the Warrants shall be in lieu of any adjustment which otherwise might be called for pursuant to this
Section 5.

6. Fractional Warrants and Fractional Shares. If the number of shares of Common Stock purchasable upon the exercise of each Warrant is adjusted pursuant to Section 5, the Company nevertheless shall not be required to issue fractions of shares, upon exercise of the Warrant or otherwise, nor to distribute certificates that evidence fractional shares. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Registered Holder an amount in cash equal to such fraction multiplied by the Fair Market Value of one share of Common Stock as of the date of exercise.

7. Warrant Holders Not Deemed Shareholders. No holder of Warrants shall, as such, be entitled to vote or to receive dividends or be deemed the holder of Common Stock that may at any time be issuable upon exercise of such Warrants for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the holder of Warrants, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issue or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until such Holder shall have exercised such Warrants and been issued shares of Common Stock in accordance with the provisions hereof.

8. Rights of Action. All rights of action with respect to this Agreement are vested in the respective Registered Holders of the Warrants, and any Registered Holder of a Warrant, without consent of the holder of any other Warrant, may, in his own behalf and for his own benefit, enforce against the Company his right to exercise his Warrant for the purchase of shares of Common Stock in the manner provided herein.

9. Agreement of Warrant Holders. Every holder of any Warrant, by his acceptance thereof, consents and agrees with the Company and every other holder of any Warrant that:

(i) The Warrants are transferable only on the registry books of the Company by the Registered Holder thereof in person or by his or her attorney duly authorized in writing and only if such Warrants are surrendered at the office of the Company, duly endorsed or accompanied by a proper instrument of transfer satisfactory to the Company, in its sole discretion, together with payment of any applicable transfer taxes; and

(ii) The Company may deem and treat the person in whose name the Warrant is registered as the holder and as the absolute, true and lawful owner thereof for all purposes, and the Company shall not be affected by any notice or knowledge to the contrary, except as otherwise expressly provided in Section 3.

10. Investment Representation and Legend. The holder, by acceptance of the Warrants, represents and warrants to the Company that it is acquiring the Warrants and the shares of Common Stock (or other securities) issuable upon the exercise hereof for investment purposes only and not with a view towards the resale or other distribution thereof and agrees that the Company may affix upon this Warrant the following legend:

"This Warrant has been issued in reliance upon the representation of the holder that it has been acquired for investment purposes and not with a view towards the resale or other distribution thereof. Neither this Warrant nor the shares issuable upon the exercise of this Warrant have been registered under the Securities Act of 1933, as amended."

The holder, by acceptance of this Warrant, further agrees that the Company may affix the following legend to certificates for shares of Common Stock issued upon exercise of this Warrant:

"The securities represented by this certificate have been issued in reliance upon the representation of the holder that they have been acquired for investment and not with a view toward the resale or other distribution thereof, and have not been registered under the Securities Act of 1933, as amended. Neither the securities evidenced hereby, nor any interest therein, may be offered, sold, transferred, encumbered or otherwise disposed of unless either (i) there is an effective registration statement under said Act relating thereto or (ii) the Company has received an opinion of counsel, reasonably satisfactory in form and substance to the Company, stating that such registration is not required."

11. Cancellation of Warrants. If the Company shall purchase or acquire any Warrant or Warrants, by redemption or otherwise, each such Warrant shall thereupon be and canceled by it and retired. The Company shall also cancel the Warrant or Warrants following exercise of any or all thereof or delivered to it for transfer, split up, combination or exchange.

12. Modification of Warrant. The terms of the Warrants shall not be modified, supplemented or altered in any respect except with the consent in writing of the Registered Holders representing at least a majority of the Warrants then outstanding; provided, that, no change in the number or nature of the securities purchasable upon the exercise of any Warrant, or the Warrant Price therefore, or the acceleration of the Warrant Expiration Date, shall be made without the consent in writing of the Registered Holder of the Warrant, and in compliance with applicable law.

13. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been made when delivered or mailed by means of first class registered or certified mail, postage prepaid as follows: if to the Registered Holder of a Warrant, at the address of such holder as shown on the registry books maintained by the Company; if to the Company, at 18 East 50th Street, New York, New York 10022, or at such other address as may have been furnished to the Registered Holder in writing by the Company.

14. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without reference to principles of conflict of laws.

15. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company, the Registered Holder and their respective successors and assigns, and the holders from time to time of the Warrants. Nothing in this Warrant is intended nor shall be construed to confer upon any other person any right, remedy or claim, in equity or at law, or to impose upon any other person any duty, liability or obligation.

16. Registration Rights. Registration of Common Stock.

16.1. Registration.

(a) In the event that the Company files any registration statement for its Common Stock hereafter, the Registrable Securities (defined as the Common Stock Underlying the exercise of the Warrants ) shall have "piggy back" registration rights in such Registration Statement (one time only), subject to underwriter approval, with registration expenses allocated as set forth below.

(b) If the Registrable Securities have not been registered pursuant to 16.1 (a) above on or before August 31, 2005, the Company will, thereafter, upon the written request of a majority of the Holders of its outstanding Class SV warrants (aggregating all SV warrants) file a registration statement (the "Registration Statement") with respect to the resale of the Registrable Securities with the Securities and Exchange Commission. The Company will use commercially reasonable efforts to effect the registrations, qualifications or compliances (including, without limitation, the execution of any required undertaking to file post effective amendments, appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with applicable securities laws, requirements or regulations) as may be reasonably requested and as would permit or facilitate that sale and distribution of all Registrable Securities until the distribution thereof is complete.

16.2 Registration Procedures. In connection with the registration of any Registrable Securities under the Securities Act as provided in this Section 16, the Company will use its best efforts, as expeditiously as possible to:

(a) Prepare and file with the Securities and Exchange Commission the Registration Statement with respect to such Registrable Securities and use its best efforts to cause such Registration Statement to become effective;

(b) Prepare and file with the Securities and Exchange Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for a period of 12 months, unless agreed otherwise, and to comply with the provisions of the Securities Act (to the extent applicable to the Company)with respect thereto;

(c) Furnish to each seller of such Registrable Securities such number of copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such Registration Statement (including each preliminary prospectus), in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request, in order to facilitate the disposition of the Registrable Securities owned by such seller;

(d) Use its best efforts to register or qualify such Registrable Securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests, and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller, except that the Company will not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not, but for the requirements of this Section 16.2(d) be obligated to be qualified, to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction;

(e) Provide a transfer agent and registrar for all such Registrable Securities covered by such Registration Statement not later than the effective date of such Registration Statement;

(f) Notify each seller of such Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading;

(g) Cause all such Registrable Securities to be listed on each securities exchange or automated over the counter trading system on which similar securities issued by the Company are then listed;

(h) Enter into such customary agreements and take all such other actions as reasonably required in order to expedite or facilitate the disposition of such Registrable Securities; and

(i) Make available for inspection by any seller of Registrable Securities, all financial and other records, pertinent corporation documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such seller in connection with the Registration Statement pursuant to Section 16.1.

16.3 Registration and Selling Expenses.

(a) All expenses incurred by the Company in connection with the Company's performance of or compliance with this Section 16, including, without limitation (i) all registration and filing fees (including all expenses incident to filing with the National Association of Securities Dealers, Inc.), (ii) blue sky fees and expenses, (iii) all necessary printing and duplicating expenses and (iv) all fees and disbursements of counsel and accountants for the Company (including the expenses of any audit of financial statements), retained by the Company (all such expenses being herein called "Registration Expenses"), will be paid by the Company except as otherwise expressly provided in this Section 16.3. The term "Registration Expenses" shall not include any underwriting discounts or commissions incurred by the Purchaser, which shall be the responsibility of the Purchaser.

(b) The Company will, in any event, in connection with any registration statement, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal, accounting or other duties in connection therewith and expenses of audits of year end financial statements), the expense of liability insurance and the expenses and fees for listing the securities to be registered on one or more securities exchanges or automated over the counter trading systems on which similar securities issued by the Company are then listed.

(c) Nothing herein shall be construed to prevent any holder or holders of Registrable Securities from retaining such counsel as they shall choose, the expenses of one of which, as determined by the holder or holders, shall be borne by the holders.

16.4 [Intentionally Omitted]

16.5 Indemnification.

(a) The Company hereby agrees to indemnify, to the extent permitted by law, each holder of Registrable Securities, its officers and directors, if any, and each person, if any, who controls such holder within the meaning of the Securities Act, against all losses, claims, damages, liabilities and expenses (under the Securities Act or common law or otherwise) caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus (and as amended or supplemented if the Company has furnished any amendments or supplements thereto) or any preliminary prospectus, which registration statement, prospectus or preliminary prospectus shall be prepared in connection with the registration contemplated by this Section 16, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by any untrue statement or alleged untrue statement contained in or by any omission or alleged omission from information furnished in writing by such holder to the Company in connection with the registration contemplated by this Section 16, provided the Company will not be liable pursuant to this Section 16.5 if such losses, claims, damages, liabilities or expenses have been caused by any selling security holder's

failure to deliver a copy of the registration statement or prospectus, or any amendments or supplements thereto, after the Company has furnished such holder with the number of copies required by Section 16.2(c).

(b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder shall furnish to the Company in writing such information as is reasonably requested by the Company for use in any such registration statement or prospectus and shall severally, but not jointly, indemnify, to the extent permitted by law, the Company, its directors and officers and each person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages, liabilities and expenses resulting from any untrue statement or alleged untrue statement of a material fact or any omission or alleged omission of a material fact required to be stated in the registration statement or prospectus or any amendment thereof or supplement thereto or necessary to make the statements therein not misleading, but only to the extent such losses, claims, damages, liabilities or expenses are caused by an untrue statement or alleged untrue statement contained in or by an omission or alleged omission from information so furnished in writing by such holder in connection with the registration contemplated by this Section 16. If the offering pursuant to any such registration is made through underwriters, each such holder agrees to enter into an underwriting agreement in customary form with such underwriters and to indemnify such underwriters, their officers and directors, if any, and each person who controls such underwriters within the meaning of the Securities Act to the same extent as hereinabove provided with respect to indemnification by such holder of the Company. Notwithstanding the foregoing or any other provision of this Agreement, in no event shall a holder of Registrable Securities be liable for any such losses, claims, damages, liabilities or expenses in excess of the net proceeds received by such holder in the offering.

(c) Promptly after receipt by an indemnified party under Section
16.5 (a) or (b) of notice of the commencement of any action or proceeding, such indemnified party will, if a claim in respect thereof is made against the indemnifying party under such Section, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under such Section. In case any such action or proceeding is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and, to the extent that it wishes, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel approved by such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under such Section for any legal or any other expenses subsequently incurred by such indemnified party in connection with the defense thereof (other than reasonable costs of investigation) unless incurred at the written request of the indemnifying party. Notwithstanding the above, the indemnified party will have the right to employ counsel of its own choice in any such action or proceeding if the indemnified party has reasonably concluded that there may be defenses available to it which are different from or additional to those of the indemnifying party, or counsel to the indemnified party is of the opinion

that it would not be desirable for the same counsel to represent both the indemnifying party and the indemnified party because such representation might result in a conflict of interest (in either of which cases the indemnifying party will not have the right to assume the defense of any such action or proceeding on behalf of the indemnified party or parties and such legal and other expenses will be borne by the indemnifying party). An indemnifying party will not be liable to any indemnified party for any settlement of any such action or proceeding effected without the consent of such indemnifying party.

(d) If the indemnification provided for in Section 16.5(a) or
(b) is unavailable under applicable law to an indemnified party in respect of any losses, claims, damages or liabilities referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the holders of Registrable Securities on the other in connection with the statements or omissions which resulted in such losses, claims, damages, or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the holders of Registrable Securities on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company or by the holders of Registrable Securities and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages and liabilities referred to above shall be deemed to include, subject to the limitations set forth in Section 16.5(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation.

(e) Promptly after receipt by the Company or any holder of Securities of notice of the commencement of any action or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (the "contributing party"), notify the contributing party of the commencement thereof; but the omission so to notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit, or proceeding is brought against any party, and such party notifies a contributing party of the commencement thereof, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the date first above written.

BION ENVIRONMENTAL TECHNOLOGIES, INC.

By: _________________________________
Authorized Officer

SUBSCRIPTION FORM

To Be Executed by the Registered Holder in Order to Exercise Warrant

The undersigned Registered Holder hereby irrevocably elects to exercise ___________ Warrants represented by this certificate, and to purchase the securities issuable upon the exercise of such Warrants, and requests that certificates for such securities shall be issued in the name of

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

and if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.

The undersigned represents that the exercise of the within Warrant was solicited by a member of the National Association of Securities Dealers, Inc. If not solicited by an NASD member, please write "unsolicited" in the space below.

Dated:                                X   ___________________________________
                                          ___________________________________
                                          ___________________________________
                                                        Address

                                          ___________________________________
                                              Taxpayer Identification Number

                                          ___________________________________
                                                  Signature Guaranteed

ASSIGNMENT

To Be Executed by the Registered Holder In Order to Assign Warrant

FOR VALUE RECEIVED, ____________________________________ hereby sells, assigns
and transfers unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

___________________________ of the Warrants represented hereby, and hereby irrevocably constitutes and appoints

power
of substitution in the premises.

Dated: _____________________________ X    ___________________________________
                                                Signature Guaranteed


                                          ___________________________________

THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A MEMBER OF THE MEDALLION STAND PROGRAM.

                              Class SV-DM Warrant

Warrant to Subscribe                                        August 31, 2003
for 387,343 shares

Void After July 31, 2008

THIS CERTIFIES that, for value received, Mitchell Children's Trust dated September 6, 2002 or its registered assigns ("Holder"), is entitled to subscribe for and purchase from Bion Environmental Technologies, Inc., a Colorado corporation (hereinafter called the "Company"), at the price of $5.00 per share (such price as from time to time adjusted as hereinafter provided being hereinafter called the "Warrant Price"), from August 31, 2003 until July 31, 2008 (the "Warrant Expiration Date")(provided, however, that the exercise period shall immediately commence upon a Change of Control of the Company), up to 387,343(subject to adjustment as hereinafter provided)fully paid and nonassessable shares of Common Stock, no par value per share, of the Company (hereinafter called the "Common Stock"), subject, however, to the provisions and upon the terms and conditions hereinafter set forth. This Warrant and any warrant or warrants subsequently issued upon exchange or transfer thereof are hereinafter collectively called the "Warrants". "Registered Holder" shall mean, as to any Warrant and as of any particular date the person in whose name the certificate representing the Warrant shall be registered on that date on the books maintained by the Company pursuant to Section 3(b). A "Change of Control" shall be deemed to occur upon any person or persons, not equity holders on the date hereof, acquiring the ability to elect a majority of the Board of Directors of the Company.

1. Exercise of Warrant.

(a) Method of Exercise.

(i) The rights represented by this Warrant may be exercised by the holder hereof, in whole at any time or from time to time in part, but not as to a fractional share of Common Stock, by the surrender of this Warrant (properly endorsed) at the office of the Company as it may designate by notice in writing to the holder thereof at the address of such holder appearing on the books of the Company, and as further provided below in this
Section 1 by payment to the Company of the Warrant Price in cash or by certified or official bank check, for each share being purchased.

(ii) In lieu of exercising this Warrant via cash payment, the holder may effect a cashless exercise and receive Common Stock equal to the value of this Warrant (or the portion thereof being cancelled by means of a net issuance exercise, in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

Where X = the number of shares of Common Stock to be issued to the Holder.

Y = the number of shares purchasable under this Warrant or, if only a portion of the Warrant is being exercised (at the date of such calculation).

A = the current Market Price (as defined below) of one share of Common Stock (at the date of such calculation).

B = the exercise price (as adjusted to the date of calculation.

If the above calculation results in a negative number, then no Warrant shares of Common Stock shall be issued or issuable upon conversion of this Warrant pursuant to this Section 1 (b), and the Warrant shall not be deemed to have been exercised, notwithstanding the delivery of the notice of election.

(b) Delivery of Certificates. Etc. In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the shares of Common Stock so purchased, registered in the name of the holder, shall be delivered to the holder hereof within a reasonable time, not exceeding ten days, after the rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof within such time. The person in whose name any certificate for shares of Common Stock is issued upon exercise of this Warrant shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was surrendered and payment of the Warrant Price and any applicable taxes was made, except that, if the date of such surrender and payment is a date on which the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

2. Reservation of Shares; Listing; Payment of Taxes; etc.

(a) The Company covenants that it will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issue upon exercise of this Warrant, such number of shares of Common Stock as shall then be issuable upon the exercise of all outstanding Warrants. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of this Warrant shall, at the time of delivery (assuming full payment of the purchase price thereof), be duly and validly issued, fully paid, nonassessable and free from all issuance taxes, liens and charges with respect to the issue thereof including, without limitation, adverse claims whatsoever (with the exception of claims arising through the acts of the Registered Holders themselves and except as arising from applicable Federal

and state securities laws), that the Company shall have paid all taxes, if any, in respect of the original issuance thereof and that upon issuance such shares, to the extent applicable, shall be listed on, or included in, the Stock Market. As used herein, "Stock Market" shall mean the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, shall mean NASDAQ or, if the Common Stock is not quoted on NASDAQ, shall mean the OTC Bulletin Board or, if the Common Stock is not quoted on the OTC Bulletin Board, shall mean the over-the- counter market as furnished by any NASD member firm selected from time to time by the Company for that purpose.

(b) The Company covenants that if any securities to be reserved for the purpose of exercise of this Warrant hereunder require registration with, or the approval of, any governmental authority under any federal securities law before such securities may be validly issued or delivered upon such exercise, then the Company will in good faith and as expeditiously as reasonably possible, endeavor to secure such registration or approval. The Company will use reasonable efforts to obtain appropriate approvals or registrations under state "blue sky" securities laws; provided, that the Company shall not be required to qualify as a foreign corporation or file a general or limited consent to service of process in any such jurisdictions or make any changes in its capital structure or any other aspects of its business or enter into any agreements with blue sky commissions, including any agreement to escrow shares of its capital stock. With respect to any such securities, however, Warrants may not be exercised by, or shares of Common Stock issued to, any Registered Holder in any state in which such exercise would be unlawful.

(c) The Company shall pay all documentary, stamp or similar taxes and other similar governmental charges that may be imposed with respect to the issuance of this Warrant, or the issuance or delivery of any shares upon exercise of this Warrant; provided, however, that if the shares of Common Stock are to be delivered in a name other than the name of the Registered Holder on any Warrant being exercised, then no such delivery shall be made unless the person requesting the same has paid to the Company the amount of transfer taxes or charges incident thereto, if any.

3. Exchange and Registration of Transfer.

(a) This Warrant may be exchanged for another Warrant representing an equal aggregate number of Warrants of the same class or may be transferred in whole or in part, by surrendering it to the Company at its corporate office. Upon satisfaction of the terms and provisions hereof, the Company shall execute, and the Company shall sign, issue and deliver in exchange therefore, such new Warrant or Warrants that the Registered Holder making the exchange shall be entitled to receive.

(b) The Company shall keep at its office books in which, subject to such reasonable regulations as it may prescribe, it shall register Warrants and any transfers thereof in accordance with its regular practice. Upon due presentment for registration of transfer of any Warrant at such office, the Company shall execute and the Company shall issue and deliver to the transferee or transferees a new Warrant or Warrants representing an equal aggregate number of Warrants.

(c) With respect to all Warrants presented for registration or transfer, or for exchange or exercise, the subscription form attached hereto shall be duly endorsed, or be accompanied by a written instrument or instruments of transfer and subscription, in form satisfactory to the Company, duly executed by the Registered Holder or his attorney-in-fact duly authorized in writing.

(d) Prior to due presentment for registration of transfer thereof, the Company may deem and treat the Registered Holder of any Warrant as the absolute owner thereof (notwithstanding any notations of ownership or writing thereon made by anyone other than a duly authorized officer of the Company) for all purposes and shall not be affected by any notice to the contrary.

4. Loss or Mutilation. Upon receipt by the Company of evidence satisfactory to it of the ownership of and loss, theft, destruction or mutilation of any Warrant and (in case of loss, theft or destruction) of indemnity satisfactory to it, and (in the case of mutilation) upon surrender and cancellation thereof, the Company shall execute, sign and deliver to the Registered Holder in lieu thereof a new Warrant of like tenor representing an equal aggregate number of Warrants.

5. Adjustment of Warrant Price and Number of Shares of Common Stock or Warrants. Upon each adjustment of the Warrant Price pursuant to this Section 5, the total number of shares of Common Stock purchasable upon the exercise of each Warrant shall (subject to the provisions contained in Subsection
5(c)) be such number of shares (calculated to the nearest tenth) purchasable at the Warrant Price in effect immediately prior to such adjustment multiplied by a fraction, the numerator of which shall be the Warrant Price in effect immediately prior to such adjustment and the denominator of which shall be the Warrant Price in effect immediately after such adjustment.

(a) Except as otherwise provided herein, in the event the Company shall, at any time or from time to time after the date hereof, (i) sell or issue any shares of Common Stock for a consideration per share less than the Warrant Price in effect on the date of such sale or issuance, (ii) issue any shares of Common Stock as a stock dividend to the holders of Common Stock, or (iii) subdivide or combine the outstanding shares of Common Stock into a greater or fewer number of shares (any such sale, issuance, subdivision or combination being herein called a "Change of Shares"), then, and thereafter upon each further Change of Shares, the Warrant Price in effect immediately prior to such Change of Shares shall be changed to a price (rounded to the nearest cent) determined by multiplying the Warrant Price in effect immediately prior thereto by a fraction, the numerator of which shall be (x) the sum of (A) the number of shares of Common Stock outstanding immediately prior to the sale or issuance of such additional shares or such subdivision or combination plus (B) the number of shares of Common Stock that the aggregate consideration received (determined as provided in Paragraph
5(g)(v)) for the issuance of such additional shares would purchase at the Warrant Price in effect on the date of such issuance and the denominator of which shall be (y) the number of shares of Common Stock outstanding immediately after the sale or issuance of such additional shares or such subdivision or combination. Such adjustment shall be made successively whenever any such issuance is made.

(b) In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock, or in case of any consolidation or merger of the Company with or into another entity (other than a consolidation or merger in which the Company is the continuing entity and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock other than the number thereof), or in case of any sale or conveyance to another entity of the property of the Company as, or substantially as, an entirety (other than a sale/leaseback, mortgage or other financing transaction), the Company shall cause effective provision to be made so that each holder of a Warrant then outstanding shall have the right thereafter, by exercising such Warrant, upon the terms and conditions specified in the Warrant and in lieu of the shares of Common Stock immediately theretofore purchasable upon exercise of the Warrant, to purchase the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock that might have been purchased upon exercise of such Warrant immediately prior to such reclassification, capital reorganization or other change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5. The Company shall not effect any such consolidation, merger or sale unless prior to, or simultaneously with, the consummation thereof the successor (if other than the Company) resulting from such consolidation or merger or the entity purchasing assets or other appropriate entity shall assume, by written instrument executed and delivered to the Company, the obligation to deliver to the holder of each Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holders may be entitled to purchase and the other obligations under this Warrant. The foregoing provisions shall similarly apply to successive reclassifications, capital reorganizations and other changes of outstanding shares of Common Stock and to successive consolidations, mergers, sales or conveyances.

(c) If, at any time or from time to time, the Company shall issue or distribute to the holders of shares of Common Stock evidence of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding an issuance or distribution governed by one of the preceding Subsections of this Section 5 and also excluding cash dividends or cash distributions paid out of net profits legally available therefore in the full amount thereof (any such non-excluded event being herein called a "Special Dividend")), then in each case the Registered Holders of the Warrants shall be entitled to a proportionate share of any such Special Dividend as though they were the holders of the number of shares of Common Stock of the Company for which their Warrants are exercisable as of the record date fixed for the determination of the holders of Common Stock of the Company entitled to receive such Special Dividend.

(d) The Company may elect, upon any adjustment of the Warrant Price hereunder, to adjust the number of Warrants outstanding, in lieu of the adjustment in the number of shares of Common Stock purchasable upon the exercise of each Warrant as hereinabove provided, so that each Warrant outstanding after such adjustment shall represent the right to purchase one share of Common Stock. Each Warrant held of record prior to such adjustment

of the number of Warrants shall become that number of Warrants (calculated to the nearest tenth) determined by multiplying the number one by a fraction, the numerator of which shall be the Warrant Price in effect immediately prior to such adjustment and the denominator of which shall be the Warrant Price in effect immediately after such adjustment. Upon each adjustment of the number of Warrants pursuant to this Section 5, the Company shall, as promptly as practicable, cause to be distributed to each Registered Holder of Warrants on the date of such adjustment Warrants evidencing, subject to Section 6, the number of additional Warrants to which such Holder shall be entitled as a result of such adjustment or, at the option of the Company, cause to be distributed to such Holder in substitution and replacement for the Warrants held by him prior to the date of adjustment (and upon surrender thereof, if required by the Company) new Warrants evidencing the number of Warrants to which such Holder shall be entitled after such adjustment.

(e) Irrespective of any adjustments or changes in the Warrant Price or the number of shares of Common Stock purchasable upon exercise of this Warrant, the Warrants theretofore and thereafter issued shall, unless the Company shall exercise its option to issue new Warrants pursuant to Subsection 3(a), continue to express the same Warrant Price per share, number of shares purchasable thereunder and Redemption Price therefore as when the same were originally issued.

(f) After each adjustment of the Warrant Price pursuant to this
Section 5, the Company will promptly prepare a certificate signed by the Chairman or President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, of the Company setting forth: (i) the Warrant Price as so adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of each Warrant after such adjustment, and, if the Company shall have elected to adjust the number of Warrants pursuant to Subsection 5(d), the number of Warrants to which the registered holder of each Warrant shall then be entitled, and the adjustment in Redemption Price resulting there from, and (iii) a brief statement of the facts accounting for such adjustment. The Company will cause a brief summary thereof to be sent by ordinary first class mail to each Registered Holder of Warrants at his or her last address as it shall appear on the registry books. No failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of such adjustment. The affidavit the Secretary or an Assistant Secretary of the Company that such notice has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

(g) For purposes of Subsections 5(a) and 5(d), the following provisions (i) to (v) shall also be applicable:

(i) the number of shares of Common Stock deemed outstanding at any given time shall include all shares of capital stock convertible into, or exchangeable for, Common Stock (on an as converted basis) as well as all shares of Common Stock issuable upon the exercise of
(x) any convertible debt, (y) warrants outstanding on the date hereof and (z) options outstanding on the date hereof.

(ii) No adjustment of the Warrant Price shall be made unless such adjustment would require an increase or decrease of at least $.01 in such price; provided that any adjustments which by reason of this Paragraph

(ii) are not required to be made shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with adjustments so carried forward, shall require an increase or decrease of at least $.01 in the Warrant Price then in effect hereunder.

(iii) In case of (1) the sale by the Company (including as a component of a unit) of any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or any securities convertible into or exchangeable for Common Stock (such securities convertible, exercisable or exchangeable into Common Stock being herein called "Convertible Securities"), or (2) the issuance by the Company, without the receipt by the Company of any consideration therefore, of any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities, whether or not such rights, warrants or options, or the right to convert or exchange such Convertible Securities, are immediately exercisable, and the consideration per share for which Common Stock is issuable upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities (determined by dividing (x) the minimum aggregate consideration, as set forth in the instrument relating thereto without regard to any antidilution or similar provisions contained therein for a subsequent adjustment of such amount, payable to the Company upon the exercise of such rights, warrants or options, plus the consideration received by the Company for the issuance or sale of such rights, warrants or options, plus, in the case of such Convertible Securities, the minimum aggregate amount, as set forth in the instrument relating thereto without regard to any antidilution or similar provisions contained therein for a subsequent adjustment of such amount, of additional consideration, if any, other than such Convertible Securities, payable upon the conversion or exchange thereof, by (y) the total maximum number, as set forth in the instrument relating thereto without regard to any antidilution or similar provisions contained therein for a subsequent adjustment of such amount, of shares of Common Stock issuable upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities issuable upon the exercise of such rights, warrants or options) is less than the Warrant Price of the Common Stock as of the date of the issuance or sale of such rights, warrants or options, then such total maximum number of shares of Common Stock issuable upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities (as of the date of the issuance or sale of such rights, warrants or options) shall be deemed to be "Common Stock" for purposes of Subsections 5(a) and 5(d) and shall be deemed to have been sold for an amount equal to such consideration per share and shall cause an adjustment to be made in accordance with Subsections 5(a) and 5(d).

(iv) In case of the sale or other issuance by the Company of any Convertible Securities, whether or not the right of conversion or exchange thereunder is immediately exercisable, and the price per share for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities (determined by dividing (x) the total amount of consideration received by the Company for the sale of such Convertible Securities, plus the minimum aggregate amount, as set forth in the instrument relating thereto without regard to any antidilution or similar provisions

contained therein for a subsequent adjustment of such amount, of additional consideration, if any, other than such Convertible Securities, payable upon the conversion or exchange thereof, by (y) the total maximum number, as set forth in the instrument relating thereto without regard to any antidilution or similar provisions contained therein for a subsequent adjustment of such amount, of shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities) is less than the Warrant Price of the Common Stock as of the date of the sale of such Convertible Securities, then such total maximum number of shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities (as of the date of the sale of such Convertible Securities) shall be deemed to be "Common Stock" for purposes of Subsections 5(a) and 5(d) and shall be deemed to have been sold for an amount equal to such consideration per share and shall cause an adjustment to be made in accordance with Subsections 5(a) and 5(d).

(v) In case the Company shall modify the rights of conversion, exchange or exercise of any of the securities referred to in Paragraphs (iii) or (iv) of this Subsection 5(g) or any other securities of the Company convertible, exchangeable or exercisable for shares of Common Stock, for any reason other than an event that would require adjustment to prevent dilution, so that the consideration per share received by the Company after such modification is less than the Warrant Price as of the date prior to such modification, then such securities, to the extent not theretofore exercised, converted or exchanged, shall be deemed to have expired or terminated immediately prior to the date of such modification and the Company shall be deemed, for purposes of calculating any adjustments pursuant to this
Section 5, to have issued such new securities upon such new terms on the date of modification. Such adjustment shall become effective as of the date upon which such modification shall take effect. On the expiration or cancellation of any such right, warrant or option or the termination or cancellation of any such right to convert or exchange any such Convertible Securities, the Warrant Price then in effect hereunder shall forthwith be readjusted to such Warrant Price as would have obtained (a) had the adjustments made upon the issuance or sale of such rights, warrants, options or Convertible Securities been made upon the basis of the issuance of only the number of shares of Common Stock theretofore actually delivered (and the total consideration received therefore) upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities and (b) had adjustments been made on the basis of the Warrant Price as adjusted under clause (a) of this sentence for all transactions (which would have affected such adjusted Warrant Price) made after the issuance or sale of such rights, warrants, options or Convertible Securities.

(vi) In case of the sale of any shares of Common Stock, any Convertible Securities, any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities, the consideration received by the Company therefore shall be deemed to be the gross sales price therefore without deducting there from any expense paid or incurred by the Company or any underwriting discounts or commissions or concessions paid or allowed by the Company in connection therewith. In the event that any securities shall be issued in connection with any other securities of the Company, together comprising one integral

transaction in which no specific consideration is allocated among the securities, then each of such securities shall be deemed to have been issued for such consideration as the Board of Directors of the Company determines in good faith; provided, however that if holders of more than of 10% of the then outstanding Warrants disagree with such determination, the Company shall retain an independent investment banking firm for the purpose of obtaining an appraisal.

(h) Notwithstanding any other provision hereof, no adjustment to the Warrant Price of the Warrants or to the number of shares of Common Stock purchasable upon the exercise of each Warrant will be made:

(i) upon the exercise of any of the options outstanding on the date hereof under the Company's existing stock option plans; or

(ii) upon the issuance or exercise of options which may hereafter be granted with the approval of the Board of Directors, or exercised, under any employee benefit plan of the Company to officers, directors, consultants or employees, but only with respect to such options as are exercisable at prices no lower than the Closing Bid Price (or, if the price referenced in the definition of Closing Bid Price cannot be determined, the Fair Market Value (as defined below)) of the Common Stock as of the date of grant thereof; or

(iii) upon the issuance or exercise of any options or warrants that are granted to or held by the "Holder" or any of its successors, assigns, affiliates and or agents; or

(iv) upon the issuance or sale of Common Stock or convertible securities for a consideration to the Company that is not less than the bid price of the Company's Common Stock on the date of issuance (as determined by quotations on the Stock Market); or

(v) upon the issuance or sale of Common Stock or Convertible Securities pursuant to the exercise of any rights, options or warrants to receive, subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities, whether or not such rights, warrants or options were outstanding on the date of the original sale of the Warrants or were thereafter issued or sold, provided that an adjustment was either made or not required to be made in accordance with Subsections 5(a) and 5(d) in connection with the issuance or sale of such securities or any modification of the terms thereof; or

(vi) upon the issuance or sale of Common Stock upon conversion or exchange of any Convertible Securities, provided that any adjustments required to be made upon the issuance or sale of such Convertible Securities or any modification of the terms thereof were so made, and whether or not such Convertible Securities were outstanding on the date of the original sale of the Warrants or were thereafter issued or sold. Paragraph 5(g)(v) shall nevertheless apply to any modification of the rights of conversion, exchange or exercise of any of the securities referred to in Paragraphs (i), (ii) and (iii) of this Subsection 5(h). For purposes hereof, "Fair Market Value" shall mean the average Closing Bid Price for twenty (20) consecutive trading days, ending with the trading day prior to the date as of

which the Fair Market Value is being determined, (with appropriate adjustments for subdivisions or combinations of shares effected during such period) provided that if the prices referred to in the definition of Closing Bid Price cannot be determined for such period, "Fair Market Value" shall be the fair market value as determined by the Board of Directors in good faith.

(i) As used in this Section 5, the term "Common Stock" shall mean and include the Company's Common Stock authorized on the date of the original issue of the Warrants and shall also include any capital stock of any class of the Company thereafter authorized which shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary liquidation, dissolution or winding up of the Company; provided, however, that the shares issuable upon exercise of the Warrants shall include only shares of such class designated in the Company's Certificate of Incorporation, as amended, as Common Stock on the date of the original issue of the Warrants or (i), in the case of any reclassification, change, consolidation, merger, sale or conveyance of the character referred to in Subsection 5(c), the stock, securities or property provided for in such section or (ii), in the case of any reclassification or change in the outstanding shares of Common Stock issuable upon exercise of the Warrants as a result of a subdivision or combination or consisting of a change in par value, or from par value to no par value, or from no par value to par value, such shares of Common Stock as so reclassified or changed.

(j) Any determination as to whether an adjustment in the Warrant Price in effect hereunder is required pursuant to Section 5, or as to the amount of any such adjustment, if required, shall be binding upon the holders of the Warrants and the Company if made in good faith by the Board of Directors of the Company.

(k) If and whenever the Company shall grant to the holders of Common Stock, as such, rights or warrants to subscribe for or to purchase, or any options for the purchase of, Common Stock or securities convertible into or exchangeable for or carrying a right, warrant or option to purchase Common Stock, the Company may at its option elect concurrently therewith to grant to each Registered Holder as of the record date for such transaction of the Warrants then outstanding, the rights, warrants or options to which each Registered Holder would have been entitled if, on the record date used to determine the shareholders entitled to the rights, warrants or options being granted by the Company, the Registered Holder were the holder of record of the number of whole shares of Common Stock then issuable upon exercise of his or her Warrant. If the Company shall so elect under this Subsection 5(k), then such grant by the Company to the holders of the Warrants shall be in lieu of any adjustment which otherwise might be called for pursuant to this
Section 5.

6. Fractional Warrants and Fractional Shares. If the number of shares of Common Stock purchasable upon the exercise of each Warrant is adjusted pursuant to Section 5, the Company nevertheless shall not be required to issue fractions of shares, upon exercise of the Warrant or otherwise, nor to distribute certificates that evidence fractional shares. With respect to any

fraction of a share called for upon any exercise hereof, the Company shall pay to the Registered Holder an amount in cash equal to such fraction multiplied by the Fair Market Value of one share of Common Stock as of the date of exercise.

7. Warrant Holders Not Deemed Shareholders. No holder of Warrants shall, as such, be entitled to vote or to receive dividends or be deemed the holder of Common Stock that may at any time be issuable upon exercise of such Warrants for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the holder of Warrants, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issue or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until such Holder shall have exercised such Warrants and been issued shares of Common Stock in accordance with the provisions hereof.

8. Rights of Action. All rights of action with respect to this Agreement are vested in the respective Registered Holders of the Warrants, and any Registered Holder of a Warrant, without consent of the holder of any other Warrant, may, in his own behalf and for his own benefit, enforce against the Company his right to exercise his Warrant for the purchase of shares of Common Stock in the manner provided herein.

9. Agreement of Warrant Holders. Every holder of any Warrant, by his acceptance thereof, consents and agrees with the Company and every other holder of any Warrant that:

(i) The Warrants are transferable only on the registry books of the Company by the Registered Holder thereof in person or by his or her attorney duly authorized in writing and only if such Warrants are surrendered at the office of the Company, duly endorsed or accompanied by a proper instrument of transfer satisfactory to the Company, in its sole discretion, together with payment of any applicable transfer taxes; and

(ii) The Company may deem and treat the person in whose name the Warrant is registered as the holder and as the absolute, true and lawful owner thereof for all purposes, and the Company shall not be affected by any notice or knowledge to the contrary, except as otherwise expressly provided in Section 3.

10. Investment Representation and Legend. The holder, by acceptance of the Warrants, represents and warrants to the Company that it is acquiring the Warrants and the shares of Common Stock (or other securities) issuable upon the exercise hereof for investment purposes only and not with a view towards the resale or other distribution thereof and agrees that the Company may affix upon this Warrant the following legend:

"This Warrant has been issued in reliance upon the representation of the holder that it has been acquired for investment purposes and not with a view towards the resale or other distribution thereof. Neither this Warrant nor the shares issuable upon the exercise of this Warrant have been registered under the Securities Act of 1933, as amended."

The holder, by acceptance of this Warrant, further agrees that the Company may affix the following legend to certificates for shares of Common Stock issued upon exercise of this Warrant:

"The securities represented by this certificate have been issued in reliance upon the representation of the holder that they have been acquired for investment and not with a view toward the resale or other distribution thereof, and have not been registered under the Securities Act of 1933, as amended. Neither the securities evidenced hereby, nor any interest therein, may be offered, sold, transferred, encumbered or otherwise disposed of unless either (i) there is an effective registration statement under said Act relating thereto or (ii) the Company has received an opinion of counsel, reasonably satisfactory in form and substance to the Company, stating that such registration is not required."

11. Cancellation of Warrants. If the Company shall purchase or acquire any Warrant or Warrants, by redemption or otherwise, each such Warrant shall thereupon be and canceled by it and retired. The Company shall also cancel the Warrant or Warrants following exercise of any or all thereof or delivered to it for transfer, split up, combination or exchange.

12. Modification of Warrant. The terms of the Warrants shall not be modified, supplemented or altered in any respect except with the consent in writing of the Registered Holders representing at least a majority of the Warrants then outstanding; provided, that, no change in the number or nature of the securities purchasable upon the exercise of any Warrant, or the Warrant Price therefore, or the acceleration of the Warrant Expiration Date, shall be made without the consent in writing of the Registered Holder of the Warrant, and in compliance with applicable law.

13. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been made when delivered or mailed by means of first class registered or certified mail, postage prepaid as follows: if to the Registered Holder of a Warrant, at the address of such holder as shown on the registry books maintained by the Company; if to the Company, at 18 East 50th Street, New York, New York 10022, or at such other address as may have been furnished to the Registered Holder in writing by the Company.

14. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without reference to principles of conflict of laws.

15. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company, the Registered Holder and their respective successors and assigns, and the holders from time to time of the Warrants.

Nothing in this Warrant is intended nor shall be construed to confer upon any other person any right, remedy or claim, in equity or at law, or to impose upon any other person any duty, liability or obligation.

16. Registration Rights. Registration of Common Stock.

16.1 Registration.

(a) In the event that the Company files any registration statement for its Common Stock hereafter, the Registrable Securities (defined as the Common Stock Underlying the exercise of the Warrants ) shall have "piggy- back" registration rights in such Registration Statement (one time only), subject to underwriter approval, with registration expenses allocated as set forth below.

(b) If the Registrable Securities have not been registered pursuant to 16.1 (a) above on or before August 31, 2005, the Company will, thereafter, upon the written request of a majority of the Holders of its outstanding Class SV warrants (aggregating all SV warrants) file a registration statement(the "Registration Statement") with respect to the resale of the Registrable Securities with the Securities and Exchange Commission. The Company will use commercially reasonable efforts to effect the registrations, qualifications or compliances (including, without limitation, the execution of any required undertaking to file post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with applicable securities laws, requirements or regulations) as may be reasonably requested and as would permit or facilitate that sale and distribution of all Registrable Securities until the distribution thereof is complete.

16.2 Registration Procedures. In connection with the registration of any Registrable Securities under the Securities Act as provided in this Section 16, the Company will use its best efforts, as expeditiously as possible to:

(a) Prepare and file with the Securities and Exchange Commission the Registration Statement with respect to such Registrable Securities and use its best efforts to cause such Registration Statement to become effective;

(b) Prepare and file with the Securities and Exchange Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for a period of 12 months, unless agreed otherwise, and to comply with the provisions of the Securities Act (to the extent applicable to the Company)with respect thereto;

(c) Furnish to each seller of such Registrable Securities such number of copies of such Registration Statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such Registration Statement (including each preliminary prospectus), in conformity with the requirements of the

Securities Act, and such other documents, as such seller may reasonably request, in order to facilitate the disposition of the Registrable Securities owned by such seller;

(d) Use its best efforts to register or qualify such Registrable Securities covered by such Registration Statement under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests, and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller, except that the Company will not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it would not, but for the requirements of this Section 16.2(d) be obligated to be qualified, to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction;

(e) Provide a transfer agent and registrar for all such Registrable Securities covered by such Registration Statement not later than the effective date of such Registration Statement;

(f) Notify each seller of such Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the ompany will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading;

(g) Cause all such Registrable Securities to be listed on each securities exchange or automated over-the-counter trading system on which similar securities issued by the Company are then listed;

(h) Enter into such customary agreements and take all such other actions as reasonably required in order to expedite or facilitate the disposition of such Registrable Securities; and

(i) Make available for inspection by any seller of Registrable Securities, all financial and other records, pertinent corporation documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such seller in connection with the Registration Statement pursuant to Section 16.1.

16.3 Registration and Selling Expenses.

(a) All expenses incurred by the Company in connection with the Company's performance of or compliance with this Section 16, including, without limitation (i) all registration and filing fees (including all expenses incident to filing with the National Association of Securities

Dealers, Inc.), (ii) blue sky fees and expenses, (iii) all necessary printing and duplicating expenses and (iv) all fees and disbursements of counsel and accountants for the Company (including the expenses of any audit of financial statements), retained by the Company (all such expenses being herein called "Registration Expenses"), will be paid by the Company except as otherwise expressly provided in this Section 16.3. The term "Registration Expenses" shall not include any underwriting discounts or commissions incurred by the Purchaser, which shall be the responsibility of the Purchaser.

(b) The Company will, in any event, in connection with any registration statement, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal, accounting or other duties in connection therewith and expenses of audits of year-end financial statements), the expense of liability insurance and the expenses and fees for listing the securities to be registered on one or more securities exchanges or automated over-the- counter trading systems on which similar securities issued by the Company are then listed.

(c) Nothing herein shall be construed to prevent any holder or holders of Registrable Securities from retaining such counsel as they shall choose, the expenses of one of which, as determined by the holder or holders, shall be borne by the holders.

16.4 [Intentionally Omitted]

16.5 Indemnification.

(a) The Company hereby agrees to indemnify, to the extent permitted by law, each holder of Registrable Securities, its officers and directors, if any, and each person, if any, who controls such holder within the meaning of the Securities Act, against all losses, claims, damages, liabilities and expenses (under the Securities Act or common law or otherwise) caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus (and as amended or supplemented if the Company has furnished any amendments or supplements thereto) or any preliminary prospectus, which registration statement, prospectus or preliminary prospectus shall be prepared in connection with the registration contemplated by this Section 16, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by any untrue statement or alleged untrue statement contained in or by any omission or alleged omission from information furnished in writing by such holder to the Company in connection with the registration contemplated by this Section 16, provided the Company will not be liable pursuant to this Section 16.5 if such losses, claims, damages, liabilities or expenses have been caused by any selling security holder's failure to deliver a copy of the registration statement or prospectus, or any amendments or supplements thereto, after the Company has furnished such holder with the number of copies required by Section 16.2(c).

(b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder shall furnish to the Company in writing such information as is reasonably requested

by the Company for use in any such registration statement or prospectus and shall severally, but not jointly, indemnify, to the extent permitted by law, the Company, its directors and officers and each person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages, liabilities and expenses resulting from any untrue statement or alleged untrue statement of a material fact or any omission or alleged omission of a material fact required to be stated in the registration statement or prospectus or any amendment thereof or supplement thereto or necessary to make the statements therein not misleading, but only to the extent such losses, claims, damages, liabilities or expenses are caused by an untrue statement or alleged untrue statement contained in or by an omission or alleged omission from information so furnished in writing by such holder in connection with the registration contemplated by this Section 16. If the offering pursuant to any such registration is made through underwriters, each such holder agrees to enter into an underwriting agreement in customary form with such underwriters and to indemnify such underwriters, their officers and directors, if any, and each person who controls such underwriters within the meaning of the Securities Act to the same extent as hereinabove provided with respect to indemnification by such holder of the Company. Notwithstanding the foregoing or any other provision of this Agreement, in no event shall a holder of Registrable Securities be liable for any such losses, claims, damages, liabilities or expenses in excess of the net proceeds received by such holder in the offering.

(c) Promptly after receipt by an indemnified party under Section
16.5 (a) or (b) of notice of the commencement of any action or proceeding, such indemnified party will, if a claim in respect thereof is made against the indemnifying party under such Section, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under such Section. In case any such action or proceeding is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and, to the extent that it wishes, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel approved by such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under such Section for any legal or any other expenses subsequently incurred by such indemnified party in connection with the defense thereof (other than reasonable costs of investigation) unless incurred at the written request of the indemnifying party. Notwithstanding the above, the indemnified party will have the right to employ counsel of its own choice in any such action or proceeding if the indemnified party has reasonably concluded that there may be defenses available to it which are different from or additional to those of the indemnifying party, or counsel to the indemnified party is of the opinion that it would not be desirable for the same counsel to represent both the indemnifying party and the indemnified party because such representation might result in a conflict of interest (in either of which cases the indemnifying party will not have the right to assume the defense of any such action or proceeding on behalf of the indemnified party or parties and such legal and other expenses will be borne by the indemnifying party). An

indemnifying party will not be liable to any indemnified party for any settlement of any such action or proceeding effected without the consent of such indemnifying party.

(d) If the indemnification provided for in Section 16.5(a) or
(b) is unavailable under applicable law to an indemnified party in respect of any losses, claims, damages or liabilities referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the holders of Registrable Securities on the other in connection with the statements or omissions which resulted in such losses, claims, damages, or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the holders of Registrable Securities on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Company or by the holders of Registrable Securities and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages and liabilities referred to above shall be deemed to include, subject to the limitations set forth in Section 16.5(c), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation.

(e) Promptly after receipt by the Company or any holder of Securities of notice of the commencement of any action or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (the "contributing party"), notify the contributing party of the commencement thereof; but the omission so to notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit, or proceeding is brought against any party, and such party notifies a contributing party of the commencement thereof, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified.

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the date first above written.

BION ENVIRONMENTAL TECHNOLOGIES, INC.

By: _________________________________
Authorized Officer

SUBSCRIPTION FORM

To Be Executed by the Registered Holder in Order to Exercise Warrant

The undersigned Registered Holder hereby irrevocably elects to exercise ___________ Warrants represented by this certificate, and to purchase the securities issuable upon the exercise of such Warrants, and requests that certificates for such securities shall be issued in the name of

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

and if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.

The undersigned represents that the exercise of the within Warrant was solicited by a member of the National Association of Securities Dealers, Inc. If not solicited by an NASD member, please write "unsolicited" in the space below.

Dated:                                X   ___________________________________
                                          ___________________________________
                                          ___________________________________
                                                        Address

                                          ___________________________________
                                              Taxpayer Identification Number

                                          ___________________________________
                                                  Signature Guaranteed

ASSIGNMENT

To Be Executed by the Registered Holder In Order to Assign Warrant

FOR VALUE RECEIVED, ___________________________________ hereby sells, assigns and transfers unto

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER

___________________________ of the Warrants represented hereby, and hereby irrevocably constitutes and appoints

power
of substitution in the premises.

Dated: _____________________________ X    ___________________________________
                                                Signature Guaranteed


                                          ___________________________________

THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A MEMBER OF THE MEDALLION STAND PROGRAM.

EXHIBIT 10.15

THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF BION DAIRY CORPORATION ("DAIRY"). THE SECURITIES REPRESENTED BY THIS NOTE OR TO BE ISSUED IN CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY

No. 2003A*-__

                 2003 Series A* Convertible Promissory Note

$_________________                                        November 10,2003

Bion Dairy Corporation, a Colorado corporation ("Dairy") which is a wholly-owned subsidiary of Bion Environmental Technologies, Inc., also a Colorado corporation ("Bion"), for value received, hereby promises to pay to _______________ or registered assigns (the "Holder"), the principal sum of _________________________, with interest from the original date of issuance of this 2003 Series A Convertible Promissory Note on the unpaid principal balance at a rate equal to eight percent (8%) per annum, on December 31,, 2004 (the "Maturity Date"); provided, however, that in the event the amount due under this Note has not yet been converted on such date, the Maturity Date shall be automatically extended for a period of six months after the date on which the Holders are notified in writing by Dairy that the Technical Conditions (as defined below) were not met. Payment shall be made at such place as designated by the Holder upon surrender of this Convertible Promissory Note, and shall be in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest shall be computed on the basis of a 360- day year of twelve 30-day months.

This 2003 Series A Convertible Promissory Note is one of a multiple series of duly authorized issues of Bion Dairy Corporation 2003 Convertible Promissory Notes. The conversion prices of the various series of 2003 Convertible Promissory Notes may be different from each other, but all of the amounts due under all of the series of the 2003 Convertible Promissory Notes are intended to be secured by the same identical collateral which is to be shared in pari pasu by all of the holders of all of the 2003 Convertible Promissory Notes, irrespective of the date of issuance. The Holder of this Note hereby specifically consents to the granting of a security interest in the collateral for this Note to the holders of additional series of 2003 Convertible Promissory Notes after the date hereof. The maximum aggregate principal amount of the 2003 Series A Convertible Promissory Notes combined is $2,065,000. The aggregate principal amount of all of the various series of 2003 Convertible Promissory Notes will be a maximum of $6,000,000.

Each 2003 Series A Convertible Promissory Note is individually referred to herein as a "Note" and collectively as the "Notes." Each of the 2003 Series A Convertible Promissory Notes will be issued pursuant to a Note Purchase Agreement among Dairy, Bion, the Holder and the other parties thereto (the "Purchase Agreement").

SECTION 1. Prepayment.

This Note (including interest accrued on the principal hereof) may not be prepaid in cash by Dairy without the written consent of the holders of a majority in principal amount of outstanding Notes of this issue, but may be converted to equity at any time during its term in accordance with the provisions of Section 2 below.

SECTION 2. Mandatory Conversion.

(a) Conditions for Conversion.

If the first of the Bion Conditions set forth at Schedule D to this Note has been satisfied, upon the happening of the earliest to occur of the events set forth at paragraph 1.4 of the Purchase Agreement (which events are based , in whole or part, on the conditions set forth in Schedule B attached hereto (the " Technical Conditions")) on or before the Maturity Date, then (unless otherwise agreed by a majority vote of the Holders as set forth below) all of the amounts due under this Note shall be mandatorily and automatically converted into shares of Dairy common stock ("Dairy Stock") and each of the Holders shall be entitled to receive one share of Dairy Stock for each $1.00 that is due and owing to such Holder under the terms of this Note (and Bion shall continue to own 4,000,000 shares of Dairy Stock); provided, however, that not later than the date of such conversion, Bion, Bion Technologies, Inc. and BionSoil, Inc. shall have each granted to Dairy an automatically renewable license for the worldwide exclusive use of its intellectual property in the dairy business with the terms set forth at Schedule C hereto ('License') which License shall be executed and placed in escrow for the benefit of Dairy upon the termination of the offering of Notes; and provided further, that in the event that all of the conditions set forth in Schedule D to this Note (the "Bion Conditions") have been met, and the holders of a majority in principal amount of outstanding Notes of this issue elect to receive Bion Stock (as defined below) rather than Dairy Stock, then instead of converting to Dairy Stock as set forth above, all of the amounts due under this Note shall be mandatorily and automatically converted into one share of common stock of Bion ("Bion Stock")for each share of Dairy Stock which the Holder would have been entitled to receive had the majority of Holders not elected to convert into Bion Stock (which number of shares shall be subject to adjustment as provided in paragraph 1.7 of the Purchase Agreement) as is equal to the Conversion Amount (as defined below) divided by the then current Bion Conversion Price (as defined below).

(c) Conversion Procedures.

(i) In the event that the Notes are converted into Dairy Stock, Dairy's debt obligation under this Note shall cease but Dairy shall not be required to deliver stock certificates to any Holder until such time as such Holder surrenders the Notes at Dairy's offices together with irrevocable written notice to Dairy specifying the name or names (with address) in which a certificate or certificates evidencing shares of Dairy Stock are to be issued. Dairy shall thereupon deliver to the holder of the Notes, or to the

nominee or nominees of such person, certificates evidencing the number of full shares of Dairy Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Dairy stock certificates, such conversion shall be deemed to have occurred as of Dairy's record date of the conversion and the person or persons entitled to receive Dairy Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Dairy Stock on such date.

(ii) In the event that the Notes are converted into Bion Stock, Dairy's debt obligation under this Note shall cease but Bion shall not be required to deliver stock certificates to any Holder until such time as such Holder surrenders the Notes at Bion's offices together with irrevocable written notice to Bion specifying the name or names (with address) in which a certificate or certificates evidencing shares of Bion Stock are to be issued. Bion shall thereupon deliver to the holder of the Notes, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Bion Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Bion stock certificates, such conversion shall be deemed to have occurred as of Bion's record date of the conversion and the person or persons entitled to receive Bion Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Bion Stock on such date.

(iii) In the event that the Notes are converted into Dairy Stock or Bion Stock as set forth above, either Dairy or Bion, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of their stock on such conversion. Neither Dairy nor Bion, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of their stock (or other securities or assets) in a name other than that in which the Notes so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to Dairy or Bion, as appropriate, the amount of such tax or has established, to the satisfaction of Dairy or Bion, that such tax has been paid.

(c) Protection in Case of a Merger of Dairy. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Dairy is a party other than a merger or consolidation in which Dairy is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Dairy as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Dairy Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Dairy Common Stock immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or

conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (c)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Dairy shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Dairy for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Dairy, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Dairy.

(d) Protection in Case of a Merger of Bion. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Bion is a party other than a merger or consolidation in which Bion is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Bion as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Bion Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Bion Common Stock immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in

relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (d)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Bion shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Bion for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Bion, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Bion.

(e) Reservation of Shares; Transfer Taxes; Etc. Both Dairy and Bion shall at all times reserve and keep available, out of their respective authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Notes, such number of shares of its Common Stock as shall be sufficient to effect the conversion of all Notes from time to time outstanding. Both Dairy and Bion shall use their respective best efforts from time to time, in accordance with the laws of the State of Colorado, to increase the authorized number of shares of Common Stock if at any time the number of shares of Common Stock not outstanding shall not be sufficient to permit the conversion of all the then-outstanding Notes. In the event that either Dairy or Bion intends to offer Stock other than Common Stock, they shall authorize the issuance of sufficient shares of such stock to permit the conversion of all the then-outstanding Notes.

Bion or Dairy, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Stock on conversion of the Notes into Bion Stock or Dairy Stock. Neither Bion nor Dairy, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of Bion Stock or Dairy Stock, as appropriate (or other securities or assets), in a name other than that in which the Notes so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to either Bion or Dairy, as appropriate, the amount of such tax or has established, to the satisfaction of Bion or Dairy, as appropriate, that such tax has been paid.

(e) Release of Collateral. Immediately upon conversion to equity under this Section 2 all amounts due under this Note shall be deemed to have been paid in full and all of the collateral for the performance of obligations hereunder shall be deemed to have been fully, finally and completely released as of such date.

SECTION 3. Fractional Shares

Neither Dairy nor Bion shall be required to issue fractions of shares of Common Stock or other stock upon the conversion of the Note. If any fraction of a share would be issuable on the Conversion of the Note, Dairy or Bion, as appropriate, shall purchase such fraction for an amount in cash equal to its fair market value, as determined in good faith by the Board of Directors of either Dairy or Bion, as appropriate.

SECTION 4. Affirmative Covenants of Dairy and Bion

Each of Dairy and Bion covenants and agrees that until the payment in full of this Note, it shall:

(a) Existence; Business. (i) Preserve, renew and keep in full force and effect its legal existence and (ii) obtain, preserve, renew, extend and keep in full force and effect the licenses, permits, authorizations, patents, trademarks and trade names material to its business.

(b) Use of Proceeds. Use the proceeds of the Notes of this issue solely as set forth in Section 7.2 of the Purchase Agreement.

(c) Notice of Events of Default. Furnish to the Holder prompt written notice of any Event of Default, specifying the nature and extent thereof and corrective action, if any, proposed to be taken with respect thereto.

(d) Authorization of Stock Issuable Upon Conversion. Authorize and reserve a sufficient number of its shares of Stock and Common Stock for issuance upon conversion of the Note.

(e) Execution and Delivery of Security Agreement. Execute and deliver the Security Agreement in substantially the form attached as Exhibit 1 hereto, and Bion shall cause each of its wholly-owned subsidiaries, Bion Technologies, Inc. and BionSoil, Inc., to execute and deliver the Security Agreement in substantially the same form.

SECTION 5. Negative Covenants of Dairy and Bion.

Each of Dairy and Bion covenants and agrees with the Holder that until the payment in full of this Note, it shall not:

(a) Dividends and Distributions. Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its capital stock.

(b) No Impairment. By amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Note against impairment.

SECTION 6. Events of Default Defined.

The following shall each constitute an "Event of Default" hereunder:

(a) the failure of Dairy to make any payment of principal of or interest on this Note when due and payable;

(b) the failure of Dairy or Bion to observe or perform any covenant in this Note or in the Purchase Agreement, and such failure shall have continued unremedied for a period of sixty (60) days;

(c) if Dairy shall:

(1) admit in writing its inability to pay its debts generally as they become due,

(2) file a petition in bankruptcy or a petition to take advantage of any insolvency act,

(3) make an assignment for the benefit of its creditors,

(4) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property,

(5) on a petition in bankruptcy filed against, be adjudicated a bankrupt, or

(6) file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof;

(d) if a court of competent jurisdiction shall enter an order, judgment or decree appointing, without the consent of Dairy, a receiver of Dairy or of the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of Dairy under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any State thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within thirty (30) days from the date of entry thereof;

(e) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of Dairy or the whole or any substantial part of its property and such custody or control shall not be terminated or stayed within thirty (30) days from the date of assumption of such custody or control;

(f) the liquidation, dissolution or winding up of Dairy; or

(g) a final judgment or judgments for the payment of money in excess of $100,000 in the aggregate shall be rendered by one or more courts, administrative or arbitral tribunals or other bodies having jurisdiction against Dairy and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and Dairy shall not, within such 30-day period, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal.

SECTION 7. Remedies Upon Event of Default.

(a) Upon the occurrence of an Event of Default, (i) the entire principal amount of, and all accrued and unpaid interest on, this Note shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Dairy. In addition, the Holder may take any action available to it under the Purchase Agreement or at law or in equity or by statute or otherwise.

(b) No remedy herein conferred upon the Holder of this Note is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

SECTION 8. Miscellaneous.

(a) Amendments and Waivers. The holders of a majority in principal amount of outstanding Notes of this issue may waive or otherwise consent to the amendment of any of the provisions hereof.

(b) Restrictions on Transferability. The securities represented by this Note have been acquired for investment and have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction. Without such registration, such securities may not be sold, pledged, hypothecated or otherwise transferred, except pursuant to exemptions from the Securities Act of 1933, and the securities laws of any state or other jurisdiction.

(c) Forbearance from Suit. No holder of Notes of this issue shall institute any suit or proceeding for the enforcement of the payment of principal or interest unless the holders of at least a majority in principal amount of all of the outstanding Notes of this issue join in such suit or proceeding.

(d) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, excluding the body of law relating to conflict of laws. Notwithstanding anything to the contrary contained herein, in no event may the effective rate of interest collected or received by the Holder exceed that which may be charged, collected or received by the Holder under applicable law.

(e) Interpretation. If any term or provision of this Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby.

(f) Successors and Assigns. This Note shall be binding upon Dairy and Bion and each of their respective successors and assigns and shall inure to the benefit of the Holder and its successors and assigns.

(g) Notices. All notices, requests, consents and demands shall be made in writing and shall be mailed postage prepaid, or delivered by hand, to Dairy or to the Holder thereof at their respective addresses set forth below or to such other address as may be furnished in writing to the other party hereto:

If to the Holder:      At the address shown on Schedule A
                       attached hereto.

If to Dairy:           Bion Dairy Corporation
                       c/o Bion Environmental Technologies, Inc.
                       18 East 50th Street, 10th Floor
                       New York, New York 10022
                       Attention: Chief Executive Officer

With a copy to:        Mark A. Smith, President
                       P.O. Box 566
                       Crestone, Colorado 81131
                       e-fax  425-984-9702

If to Bion:            Bion Environmental Technologies, Inc.
                       18 East 50th Street, 10th Floor
                       New York, New York 10022
                       Attention: Chief Executive Officer

With a copy to:        Mark A. Smith, President
                       P.O. Box 566
                       Crestone, Colorado 81131
                       e-fax  425-984-9702

(h) Saturdays, Sundays, Holidays. If any date that may at any time be specified in this Note as a date for the making of any payment of principal or interest under this Note shall fall on Saturday, Sunday or on a day which in New York shall be a legal holiday, then the date for the making of that payment shall be the next subsequent day which is not a Saturday, Sunday or legal holiday.

(i) Purchase Agreement. This Note is subject to the terms contained in the Purchase Agreement dated the date hereof among Bion, Dairy and the purchasers of the Notes and the holder of this Note is entitled to the benefits of such Purchase Agreement and may, in addition to any rights hereunder, enforce the agreements of Dairy and Bion contained therein and exercise the remedies provided for thereby or otherwise available in respect thereof.

IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed instrument on the date first above written by the duly authorized representative of Dairy.

ATTEST: BION DAIRY CORPORATION

By: ____________________________________
Name: Mark Smith
Its: President

BION ENVIRONMENTAL TECHNOLOGIES, INC.

By: ____________________________________
Name: Mark Smith
Its: President

Schedule A

Holder:

EXHIBIT 10.16

THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF BION DAIRY CORPORATION ("DAIRY"). THE SECURITIES REPRESENTED BY THIS NOTE OR TO BE ISSUED IN CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.

BION DAIRY CORPORATION

No. 2003B- __

2003 Series B Convertible Promissory Note

$_______.00 _______ 2004

Bion Dairy Corporation, a Colorado corporation ("Dairy") which is a wholly-owned subsidiary of Bion Environmental Technologies, Inc., also a Colorado corporation ("Bion"), for value received, hereby promises to pay to ____________ or registered assigns (the "Holder"), the principal sum of _______________ dollars ($__________), with interest from the original date of issuance of this 2003 Series B Convertible Promissory Note on the unpaid principal balance at a rate equal to eight percent (8%) per annum, on December 31, 2004 (the "Maturity Date"); provided, however, that in the event the amount due under this Note has not yet been converted on such date, the Maturity Date shall be automatically extended for a period of six months after the date on which the Holders are notified in writing by Dairy that the Technical Conditions (as defined below) were not met. Payment shall be made at such place as designated by the Holder upon surrender of this Convertible Promissory Note, and shall be in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest shall be computed on the basis of a 360- day year of twelve 30-day months.

This 2003 Series B Convertible Promissory Note is one of a multiple series of duly authorized issues of Bion Dairy Corporation 2003 Convertible Promissory Notes. The conversion prices of the various series of 2003 Convertible Promissory Notes may be different from each other, but all of the amounts due under all of the series of the 2003 Convertible Promissory Notes are intended to be secured by the same identical collateral which is to be shared in pari pasu by all of the holders of all of the 2003 Convertible Promissory Notes, irrespective of the date of issuance. The Holder of this Note hereby specifically consents to the granting of a security interest in the collateral for this Note to the holders of additional series of 2003 Convertible Promissory Notes after the date hereof. The maximum aggregate principal amount of the 2003 Series B Convertible Promissory Notes combined is $1,500,000. The aggregate principal amount of all of the various series of 2003 Convertible Promissory Notes will be a maximum of $6,000,000.

Each 2003 Series B Convertible Promissory Note is individually referred to herein as a "Note" and collectively as the "Notes." Each of the 2003 Series B Convertible Promissory Notes will be issued pursuant to a Note Purchase Agreement among Dairy, Bion, the Holder and the other parties thereto (the "Purchase Agreement").

SECTION 1. Prepayment.

This Note (including interest accrued on the principal hereof) may not be prepaid in cash by Dairy without the written consent of the holders of a majority in principal amount of outstanding Notes of this issue, but may be converted to equity at any time during its term in accordance with the provisions of Section 2 below.

SECTION 2. Mandatory Conversion.

(a) Conditions for Conversion.

If the first of the Bion Conditions set forth at Schedule D to this Note has been satisfied, upon the happening of the earliest to occur of the events set forth at paragraph 1.4 of the Purchase Agreement (which events are based, in whole or part, on the conditions set forth in Schedule B attached hereto (the "Technical Conditions")) on or before the Maturity Date, then (unless otherwise agreed by a majority vote of the Holders as set forth below) all of the amounts due under this Note shall be mandatorily and automatically converted into shares of Dairy common stock ("Dairy Stock") and each of the Holders shall be entitled to receive one share of Dairy Stock for each $1.50 that is due and owing to such Holder under the terms of this Note (and Bion shall continue to own 4,000,000 shares of Dairy Stock); provided, however, that not later than the date of such conversion, Bion, Bion Technologies, Inc. and BionSoil, Inc. shall have each granted to Dairy an automatically renewable license for the worldwide exclusive use of its intellectual property in the dairy business with the terms set forth at Schedule C hereto ("License") which License shall be executed and placed in escrow for the benefit of Dairy upon the termination of the offering of Notes ; and provided further, that in the event that all of the conditions set forth in Schedule D to this Note (the "Bion Conditions") have been met, and the holders of a majority in principal amount of outstanding Notes of this issue elect to receive Bion Stock (as defined below) rather than Dairy Stock, then instead of converting to Dairy Stock as set forth above, all of the amounts due under this Note shall be mandatorily and automatically converted into one share of common stock of Bion ("Bion Stock")for each share of Dairy Stock which the Holder would have been entitled to receive had the majority of Holders not elected to convert into Bion Stock (which number of shares shall be subject to adjustment as provided in paragraph 1.7 of the Purchase Agreement) as is equal to the Conversion Amount (as defined below) divided by the then current Bion Conversion Price (as defined below).

(b) Conversion Procedures.

(i) In the event that the Notes are converted into Dairy Stock, Dairy's debt obligation under this Note shall cease but Dairy shall not be required to deliver stock certificates to any Holder until such time as such Holder surrenders the Notes at Dairy's offices together with irrevocable written notice to Dairy specifying the name or names (with address) in which a certificate or certificates evidencing shares of Dairy Stock are to be issued. Dairy shall thereupon deliver to the holder of the Notes, or to the

nominee or nominees of such person, certificates evidencing the number of full shares of Dairy Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Dairy stock certificates, such conversion shall be deemed to have occurred as of Dairy's record date of the conversion and the person or persons entitled to receive Dairy Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Dairy Stock on such date.

(ii) In the event that the Notes are converted into Bion Stock, Dairy's debt obligation under this Note shall cease but Bion shall not be required to deliver stock certificates to any Holder until such time as such Holder surrenders the Notes at Bion's offices together with irrevocable written notice to Bion specifying the name or names (with address) in which a certificate or certificates evidencing shares of Bion Stock are to be issued. Bion shall thereupon deliver to the holder of the Notes, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Bion Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Bion stock certificates, such conversion shall be deemed to have occurred as of Bion's record date of the conversion and the person or persons entitled to receive Bion Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Bion Stock on such date.

(iii) In the event that the Notes are converted into Dairy Stock or Bion Stock as set forth above, either Dairy or Bion, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of their stock on such conversion. Neither Dairy nor Bion, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of their stock (or other securities or assets) in a name other than that in which the Notes so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to Dairy or Bion, as appropriate, the amount of such tax or has established, to the satisfaction of Dairy or Bion, that such tax has been paid.

(c) Protection in Case of a Merger of Dairy. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Dairy is a party other than a merger or consolidation in which Dairy is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Dairy as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Dairy Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Dairy Common Stock immediately prior to the effective date of such reorganization,

reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (c)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Dairy shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Dairy for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Dairy, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Dairy.

(d) Protection in Case of a Merger of Bion. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Bion is a party other than a merger or consolidation in which Bion is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Bion as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Bion Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Bion Common Stock immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter

deliverable on the Note. The above provisions of this Subsection (d)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Bion shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Bion for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Bion, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Bion.

(e) Reservation of Shares; Transfer Taxes; Etc. Both Dairy and Bion shall at all times reserve and keep available, out of their respective authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Notes, such number of shares of its Common Stock as shall be sufficient to effect the conversion of all Notes from time to time outstanding. Both Dairy and Bion shall use their respective best efforts from time to time, in accordance with the laws of the State of Colorado, to increase the authorized number of shares of Common Stock if at any time the number of shares of Common Stock not outstanding shall not be sufficient to permit the conversion of all the then-outstanding Notes. In the event that either Dairy or Bion intends to offer Stock other than Common Stock, they shall authorize the issuance of sufficient shares of such stock to permit the conversion of all the then-outstanding Notes.

Bion or Dairy, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Stock on conversion of the Notes into Bion Stock or Dairy Stock. Neither Bion nor Dairy, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of Bion Stock or Dairy Stock, as appropriate (or other securities or assets), in a name other than that in which the Notes so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to either Bion or Dairy, as appropriate, the amount of such tax or has established, to the satisfaction of Bion or Dairy, as appropriate, that such tax has been paid.

(e) Release of Collateral. Immediately upon conversion to equity under this Section 2 all amounts due under this Note shall be deemed to have been paid in full and all of the collateral for the performance of obligations hereunder shall be deemed to have been fully, finally and completely released as of such date.

SECTION 3. Fractional Shares

Neither Dairy nor Bion shall be required to issue fractions of shares of Common Stock or other stock upon the conversion of the Note. If any fraction of a share would be issuable on the Conversion of the Note, Dairy or Bion, as appropriate, shall purchase such fraction for an amount in cash equal to its fair market value, as determined in good faith by the Board of Directors of either Dairy or Bion, as appropriate.

SECTION 4. Affirmative Covenants of Dairy and Bion

Each of Dairy and Bion covenants and agrees that until the payment in full of this Note, it shall:

(a) Existence; Business. (i) Preserve, renew and keep in full force and effect its legal existence and (ii) obtain, preserve, renew, extend and keep in full force and effect the licenses, permits, authorizations, patents, trademarks and trade names material to its business.

(b) Use of Proceeds. Use the proceeds of the Notes of this issue solely as set forth in Section 7.2 of the Purchase Agreement.

(c) Notice of Events of Default. Furnish to the Holder prompt written notice of any Event of Default, specifying the nature and extent thereof and corrective action, if any, proposed to be taken with respect thereto.

(d) Authorization of Stock Issuable Upon Conversion. Authorize and reserve a sufficient number of its shares of Stock and Common Stock for issuance upon conversion of the Note.

(e) Execution and Delivery of Security Agreement. Execute and deliver the Security Agreement in substantially the form attached as Exhibit 1 hereto, and Bion shall cause each of its wholly-owned subsidiaries, Bion Technologies, Inc. and BionSoil, Inc., to execute and deliver the Security Agreement in substantially the same form.

SECTION 5. Negative Covenants of Dairy and Bion.

Each of Dairy and Bion covenants and agrees with the Holder that until the payment in full of this Note, it shall not:

(a) Dividends and Distributions. Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its capital stock.

(b) No Impairment. By amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Note against impairment.

SECTION 6. Events of Default Defined.

The following shall each constitute an "Event of Default" hereunder:

(a) the failure of Dairy to make any payment of principal of or interest on this Note when due and payable;

(b) the failure of Dairy or Bion to observe or perform any covenant in this Note or in the Purchase Agreement, and such failure shall have continued unremedied for a period of sixty (60) days;

(c) if Dairy shall:

(1) admit in writing its inability to pay its debts generally as they become due,

(2) file a petition in bankruptcy or a petition to take advantage of any insolvency act,

(3) make an assignment for the benefit of its creditors,

(4) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property,

(5) on a petition in bankruptcy filed against, be adjudicated a bankrupt, or

(6) file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof;

(d) if a court of competent jurisdiction shall enter an order, judgment or decree appointing, without the consent of Dairy, a receiver of Dairy or of the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of Dairy under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any State thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within thirty (30) days from the date of entry thereof;

(e) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of Dairy or the whole or any substantial part of its property and such custody or control shall not be terminated or stayed within thirty (30) days from the date of assumption of such custody or control;

(f) the liquidation, dissolution or winding up of Dairy; or

(g) a final judgment or judgments for the payment of money in excess of $100,000 in the aggregate shall be rendered by one or more courts, administrative or arbitral tribunals or other bodies having jurisdiction against Dairy and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and Dairy shall not, within such 30-day period, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal.

SECTION 7. Remedies Upon Event of Default.

(a) Upon the occurrence of an Event of Default, (i) the entire principal amount of, and all accrued and unpaid interest on, this Note shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Dairy. In addition, the Holder may take any action available to it under the Purchase Agreement or at law or in equity or by statute or otherwise.

(b) No remedy herein conferred upon the Holder of this Note is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

SECTION 8. Miscellaneous.

(a) Amendments and Waivers. The holders of a majority in principal amount of outstanding Notes of this issue may waive or otherwise consent to the amendment of any of the provisions hereof.

(b) Restrictions on Transferability. The securities represented by this Note have been acquired for investment and have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction. Without such registration, such securities may not be sold, pledged, hypothecated or otherwise transferred, except pursuant to exemptions from the Securities Act of 1933, and the securities laws of any state or other jurisdiction.

(c) Forbearance from Suit. No holder of Notes of this issue shall institute any suit or proceeding for the enforcement of the payment of principal or interest unless the holders of at least a majority in principal amount of all of the outstanding Notes of this issue join in such suit or proceeding.

(d) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, excluding the body of law relating to conflict of laws. Notwithstanding anything to the contrary contained herein, in no event may the effective rate of interest collected or received by the Holder exceed that which may be charged, collected or received by the Holder under applicable law.

(e) Interpretation. If any term or provision of this Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby.

(f) Successors and Assigns. This Note shall be binding upon Dairy and Bion and each of their respective successors and assigns and shall inure to the benefit of the Holder and its successors and assigns.

(g) Notices. All notices, requests, consents and demands shall be made in writing and shall be mailed postage prepaid, or delivered by hand, to Dairy or to the Holder thereof at their respective addresses set forth below or to such other address as may be furnished in writing to the other party hereto:

If to the Holder:      At the address shown on Schedule A
                       attached hereto.

If to Dairy:           Bion Dairy Corporation
                       c/o Bion Environmental Technologies, Inc.
                       18 East 50th Street, 10th Floor
                       New York, New York 10022
                       Attention: Chief Executive Officer

With a copy to:        Mark A. Smith, President
                       P.O. Box 566
                       Crestone, Colorado 81131
                       e-fax  425-984-9702

If to Bion:            Bion Environmental Technologies, Inc.
                       18 East 50th Street, 10th Floor
                       New York, New York 10022
                       Attention: Chief Executive Officer

With a copy to:        Mark A. Smith, President
                       P.O. Box 566
                       Crestone, Colorado 81131
                       e-fax  425-984-9702

(h) Saturdays, Sundays, Holidays. If any date that may at any time be specified in this Note as a date for the making of any payment of principal or interest under this Note shall fall on Saturday, Sunday or on a day which in New York shall be a legal holiday, then the date for the making of that payment shall be the next subsequent day which is not a Saturday, Sunday or legal holiday.

(i) Purchase Agreement. This Note is subject to the terms contained in the Purchase Agreement dated the date hereof among Bion, Dairy and the purchasers of the Notes and the holder of this Note is entitled to the benefits of such Purchase Agreement and may, in addition to any rights hereunder, enforce the agreements of Dairy and Bion contained therein and exercise the remedies provided for thereby or otherwise available in respect thereof.

IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed instrument on the date first above written by the duly authorized representative of Dairy.

ATTEST:                    BION DAIRY CORPORATION


                           By: ____________________________________
                               Name:  Mark Smith
                               Its:   President


                           BION ENVIRONMENTAL TECHNOLOGIES, INC.


                           By: ____________________________________

Name: Mark Smith Its: President

Schedule A

EXHIBIT 10.17

THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF BION DAIRY CORPORATION ("DAIRY"). THE SECURITIES REPRESENTED BY THIS NOTE OR TO BE ISSUED IN CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY

No. 2003B*-1

                     2003 Series B* Convertible Promissory Note

$_____________                                                June 30, 2004

Bion Dairy Corporation, a Colorado corporation ("Dairy") which is a wholly-owned subsidiary of Bion Environmental Technologies, Inc., also a Colorado corporation ("Bion"), for value received, hereby promises to pay to _________________________________ or registered assigns (the "Holder"), the principal sum of ______________________, with interest from the original date of issuance of this 2003 Series B* Convertible Promissory Note (the Series B* Notes are identical to the Series B Notes but were offered to affiliated and/or related persons/entities outside the Spencer Edwards offering) on the unpaid principal balance at a rate equal to eight percent (8%) per annum, on December 31, 2004 (the "Maturity Date"); provided, however, that in the event the amount due under this Note has not yet been converted on such date, the Maturity Date shall be automatically extended for a period of six months after the date on which the Holders are notified in writing by Dairy that the Technical Conditions (as defined below) were not met. Payment shall be made at such place as designated by the Holder upon surrender of this Convertible Promissory Note, and shall be in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest shall be computed on the basis of a 360- day year of twelve 30-day months.

This 2003 Series B* Convertible Promissory Note is one of a multiple series of duly authorized issues of Bion Dairy Corporation 2003 Convertible Promissory Notes. The conversion prices of the various series of 2003 Convertible Promissory Notes may be different from each other, but all of the amounts due under all of the series of the 2003 Convertible Promissory Notes are intended to be secured by the same identical collateral which is to be shared in pari pasu by all of the holders of all of the 2003 Convertible Promissory Notes, irrespective of the date of issuance. The Holder of this Note hereby specifically consents to the granting of a security interest in the collateral for this Note to the holders of additional series of 2003 Convertible Promissory Notes after the date hereof. The maximum aggregate principal amount of the 2003 Series B* Convertible Promissory Notes combined is $1,500,000. The aggregate principal amount of all of the various series of 2003 Convertible Promissory Notes will be a maximum of $6,000,000.

Each 2003 Series B* Convertible Promissory Note is individually referred to herein as a "Note" and collectively as the "Notes." Each of the 2003 Series B* Convertible Promissory Notes will be issued pursuant to a Note Purchase Agreement among Dairy, Bion, the Holder and the other parties thereto (the "Purchase Agreement").

SECTION 1. Prepayment.

This Note (including interest accrued on the principal hereof) may not be prepaid in cash by Dairy without the written consent of the holders of a majority in principal amount of outstanding Notes of this issue, but may be converted to equity at any time during its term in accordance with the provisions of Section 2 below.

SECTION 2. Mandatory Conversion.

(a) Conditions for Conversion.

Upon the happening of the events set forth at paragraph 1.4 of the Purchase Agreement (which events are based, in whole or part, on the conditions set forth in Schedule B attached hereto (the "Technical Conditions")) on or before the Maturity Date, then (unless otherwise agreed by a majority vote of the Holders as set forth below) all of the amounts due under this Note shall be mandatorily and automatically converted into shares of Dairy common stock ("Dairy Stock") and each of the Holders shall be entitled to receive one share of Dairy Stock for each $1.50 that is due and owing to such Holder under the terms of this Note (and Bion shall continue to own 4,000,000 shares of Dairy Stock); provided, however, that not later than the date of such conversion, Bion, Bion Technologies, Inc. and BionSoil, Inc. shall have each granted to Dairy an automatically renewable license for the worldwide exclusive use of its intellectual property in the dairy business with the terms set forth at Schedule C hereto('License') which License shall be executed and placed in escrow for the benefit of Dairy by June 30, 2004 (unless extended by consent of the holders of a majority in principal amount of all series of 2003 Convertible Promissory Notes) ; and provided further, that in the event that all of the conditions set forth in Schedule D to this Note (the "Bion Conditions") have been met, and the holders of a majority in principal amount of outstanding Notes elect to receive Bion Stock (as defined below) rather than Dairy Stock, then instead of converting to Dairy Stock as set forth above, all of the amounts due under this Note shall be mandatorily and automatically converted into one share of common stock of Bion ("Bion Stock")for each share of Dairy Stock which the Holder would have been entitled to receive had the majority of Holders not elected to convert into Bion Stock (which number of shares shall be subject to adjustment as provided in paragraph 1.7 of the Purchase Agreement) as is equal to the Conversion Amount (as defined below) divided by the then current Bion Conversion Price (as defined below).

(b) Conversion Procedures.

(i) In the event that the Notes are converted into Dairy Stock, Dairy's debt obligation under this Note shall cease, but Dairy shall not be required to deliver stock certificates to any Holder until such time as such Holder surrenders the Notes at Dairy's offices together with irrevocable written notice to Dairy specifying the name or names (with address) in which a certificate or certificates evidencing shares of Dairy Stock are to be

issued. Dairy shall thereupon deliver to the holder of the Notes, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Dairy Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Dairy or Bion stock certificates, such conversion shall be deemed to have occurred as of Dairy's record date of the conversion and the person or persons entitled to receive Dairy Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Dairy Stock on such date.

(ii) In the event that the Notes are converted into Bion Stock, Dairy's debt obligation under this Note shall cease but Bion shall not be required to deliver stock certificates to any Holder until such time as such Holder surrenders the Notes at Bion's offices together with irrevocable written notice to Bion specifying the name or names (with address) in which a certificate or certificates evidencing shares of Bion Stock are to be issued. Bion shall thereupon deliver to the holder of the Notes, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Bion Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Bion stock certificates, such conversion shall be deemed to have occurred as of Bion's record date of the conversion and the person or persons entitled to receive Bion Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Bion Stock on such date.

(iii) In the event that the Notes are converted into Dairy Stock or Bion Stock as set forth above, either Dairy or Bion, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of their stock on such conversion. Neither Dairy nor Bion, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of their stock (or other securities or assets) in a name other than that in which the Notes so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to Dairy or Bion, as appropriate, the amount of such tax or has established, to the satisfaction of Dairy or Bion, that such tax has been paid.

(c) Protection in Case of a Merger of Dairy. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Dairy is a party other than a merger or consolidation in which Dairy is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Dairy as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Dairy Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Dairy Common Stock immediately prior to the effective date of such reorganization,

reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (c)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Dairy shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Dairy for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Dairy, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Dairy.

(d) Protection in Case of a Merger of Bion. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Bion is a party other than a merger or consolidation in which Bion is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Bion as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Bion Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Bion Common Stock immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in

relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (d)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Bion shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Bion for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Bion, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Bion.

(e) Reservation of Shares; Transfer Taxes; Etc. Both Dairy and Bion shall at all times reserve and keep available, out of their respective authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Notes, such number of shares of its Common Stock as shall be sufficient to effect the conversion of all Notes from time to time outstanding. Both Dairy and Bion shall use their respective best efforts from time to time, in accordance with the laws of the State of Colorado, to increase the authorized number of shares of Common Stock if at any time the number of shares of Common Stock not outstanding shall not be sufficient to permit the conversion of all the then-outstanding Notes. In the event that either Dairy or Bion intends to offer Stock other than Common Stock, they shall authorize the issuance of sufficient shares of such stock to permit the conversion of all the then-outstanding Notes.

Bion or Dairy, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Stock on conversion of the Notes into Bion Stock or Dairy Stock. Neither Bion nor Dairy, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of Bion Stock or Dairy Stock, as appropriate (or other securities or assets), in a name other than that in which the Notes so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to either Bion or Dairy, as appropriate, the amount of such tax or has established, to the satisfaction of Bion or Dairy, as appropriate, that such tax has been paid.

(f) Release of Collateral. Immediately upon conversion to equity under this Section 2 all amounts due under this Note shall be deemed to have been paid in full and all of the collateral for the performance of obligations hereunder shall be deemed to have been fully, finally and completely released as of such date.

SECTION 3. Fractional Shares

Neither Dairy nor Bion shall be required to issue fractions of shares of Common Stock or other stock upon the conversion of the Note. If any fraction of a share would be issuable on the Conversion of the Note, Dairy or Bion, as appropriate, shall purchase such fraction for an amount in cash equal to its fair market value, as determined in good faith by the Board of Directors of either Dairy or Bion, as appropriate.

SECTION 4. Affirmative Covenants of Dairy and Bion.

Each of Dairy and Bion covenants and agrees that until the payment in full of this Note, it shall:

(a) Existence; Business. (i) Preserve, renew and keep in full force and effect its legal existence and (ii) obtain, preserve, renew, extend and keep in full force and effect the licenses, permits, authorizations, patents, trademarks and trade names material to its business.

(b) Use of Proceeds. Use the proceeds of the Notes of this issue solely as set forth in Section 7.2 of the Purchase Agreement.

(c) Notice of Events of Default. Furnish to the Holder prompt written notice of any Event of Default, specifying the nature and extent thereof and corrective action, if any, proposed to be taken with respect thereto.

(d) Authorization of Stock Issuable Upon Conversion. Authorize and reserve a sufficient number of its shares of Stock and Common Stock for issuance upon conversion of the Note.

(e) Execution and Delivery of Security Agreement. Execute and deliver the Security Agreement in substantially the form attached as Exhibit 1 hereto, and Bion shall cause each of its wholly-owned subsidiaries, Bion Technologies, Inc. and BionSoil, Inc., to execute and deliver the Security Agreement in substantially the same form.

SECTION 5. Negative Covenants of Dairy and Bion.

Each of Dairy and Bion covenants and agrees with the Holder that until the payment in full of this Note, it shall not:

(a) Dividends and Distributions. Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of it's capital stock.

(b) No Impairment. By amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance

of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Note against impairment.

SECTION 6. Events of Default Defined.

The following shall each constitute an "Event of Default" hereunder:

(a) the failure of Dairy to make any payment of principal of or interest on this Note when due and payable;

(b) the failure of Dairy or Bion to observe or perform any covenant in this Note or in the Purchase Agreement, and such failure shall have continued unremedied for a period of sixty (60) days after notice;

(c) if Dairy shall:

(1) admit in writing its inability to pay its debts generally as they become due,

(2) file a petition in bankruptcy or a petition to take advantage of any insolvency act,

(3) make an assignment for the benefit of its creditors,

(4) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property,

(5) on a petition in bankruptcy filed against, be adjudicated a bankrupt, or

(6) file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof;

(d) if a court of competent jurisdiction shall enter an order, judgment or decree appointing, without the consent of Dairy, a receiver of Dairy or of the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of Dairy under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any State thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within thirty (30) days from the date of entry thereof;

(e) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of Dairy or the whole or any substantial part of its property and such custody or control shall not be terminated or stayed within thirty (30) days from the date of assumption of such custody or control;

(f) the liquidation, dissolution or winding up of Dairy; or

(g) a final judgment or judgments for the payment of money in excess of $250,000 in the aggregate shall be rendered by one or more courts, administrative or arbitral tribunals or other bodies having jurisdiction against Dairy and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and Dairy shall not, within such 30-day period, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal.

SECTION 7. Remedies Upon Event of Default.

(a) Upon the occurrence of an Event of Default, (i) the entire principal amount of, and all accrued and unpaid interest on, this Note shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Dairy. In addition, the Holder may take any action available to it under the Purchase Agreement or at law or in equity or by statute or otherwise.

(b) No remedy herein conferred upon the Holder of this Note is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

SECTION 8. Miscellaneous.

(a) Amendments and Waivers. The holders of a majority in principal amount of outstanding Notes (all series in aggregate) may waive or otherwise consent to the amendment of any of the provisions hereof.

(b) Restrictions on Transferability. The securities represented by this Note have been acquired for investment and have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction. Without such registration, such securities may not be sold, pledged, hypothecated or otherwise transferred, except pursuant to exemptions from the Securities Act of 1933, and the securities laws of any state or other jurisdiction.

(c) Forbearance from Suit. No holder of Notes of this issue shall institute any suit or proceeding for the enforcement of the payment of principal or interest unless the holders of at least a majority in principal amount of all of the outstanding Notes (all series in aggregate) join in such suit or proceeding.

(d) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, excluding the body of law relating to conflict of laws. Notwithstanding anything to the contrary contained herein, in no event may the effective rate of interest collected or received by the Holder exceed that which may be charged, collected or received by the Holder under applicable law.

(e) Interpretation. If any term or provision of this Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby.

(f) Successors and Assigns. This Note shall be binding upon Dairy and Bion and each of their respective successors and assigns and shall inure to the benefit of the Holder and its successors and assigns.

(g) Notices. All notices, requests, consents and demands shall be made in writing and shall be mailed postage prepaid, or delivered by hand, to Dairy or to the Holder thereof at their respective addresses set forth below or to such other address as may be furnished in writing to the other party hereto:

If to the Holder:      At the address shown on Schedule A
                       attached hereto.

If to Dairy:           Bion Dairy Corporation
                       c/o Bion Environmental Technologies, Inc.
                       P.O. Box 323
                       Old Bethpage, N.Y. 11804
                       Attention: Chief Executive Officer

With a copy to:        Mark A. Smith, President
                       P.O. Box 566
                       Crestone, Colorado 81131
                       e-fax  425-984-9702

If to Bion:            Bion Environmental Technologies, Inc.
                       P.O. Box 323
                       Old Bethpage, N.Y. 11804

With a copy to:        Mark A. Smith, President
                       P.O. Box 566
                       Crestone, Colorado 81131
                       e-fax  425-984-9702

(h) Saturdays, Sundays, Holidays. If any date that may at any time be specified in this Note as a date for the making of any payment of principal or interest under this Note shall fall on Saturday, Sunday or on a day which in New York shall be a legal holiday, then the date for the making of that payment shall be the next subsequent day which is not a Saturday, Sunday or legal holiday.

(i) Purchase Agreement. This Note is subject to the terms contained in the Purchase Agreement dated the date hereof among Bion, Dairy and the purchasers of the Notes and the holder of this Note is entitled to the benefits of such Purchase Agreement and may, in addition to any rights hereunder, enforce the agreements of Dairy and Bion contained therein and exercise the remedies provided for thereby or otherwise available in respect thereof.

IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed instrument on the date first above written by the duly authorized representative of Dairy.

ATTEST: BION DAIRY CORPORATION

By: ____________________________________
Name: Mark A. Smith
Its: President

BION ENVIRONMENTAL TECHNOLOGIES, INC.

By: ____________________________________
Name: Mark A. Smith
Its: President

Schedule A

Holder:

EXHIBIT 10.18

THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF BION DAIRY CORPORATION ("DAIRY"). THE SECURITIES REPRESENTED BY THIS NOTE OR TO BE ISSUED IN CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.

BION DAIRY CORPORATION

No. 2003C-

2003 Series C Convertible Promissory Note

$_____________ ___________,2005

Bion Dairy Corporation, a Colorado corporation ("Dairy") which is a wholly-owned subsidiary of Bion Environmental Technologies, Inc., also a Colorado corporation ("Bion"), for value received, hereby promises to pay to ________________________ or registered assigns (the "Holder"), the principal sum of __________________ dollars ($____), with interest from the original date of issuance of this 2003 Series C Convertible Promissory Note on the unpaid principal balance at a rate equal to eight percent (8%) per annum, on December 31, 2006 (the "Maturity Date"); provided, however, that in the event the amount due under this Note has not yet been converted on such date, the Maturity Date shall be automatically extended for a period of six months after the date on which the Holders are notified in writing by Dairy that the Technical Conditions (as defined below) were not met. Payment shall be made at such place as designated by the Holder upon surrender of this Convertible Promissory Note, and shall be in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest shall be computed on the basis of a 360- day year of twelve 30-day months.

This 2003 Series C Convertible Promissory Note is one of a multiple series of duly authorized issues of Bion Dairy Corporation 2003 Convertible Promissory Notes. The conversion prices of the various series of 2003 Convertible Promissory Notes may be different from each other, but all of the amounts due under all of the series of the 2003 Convertible Promissory Notes are intended to be secured by the same identical collateral which is to be shared in pari pasu by all of the holders of all of the 2003 Convertible Promissory Notes, irrespective of the date of issuance. The Holder of this Note hereby specifically consents to the granting of a security interest in the collateral for this Note to the holders of additional series of 2003 Convertible Promissory Notes after the date hereof. The maximum aggregate principal amount of the 2003 Series C Convertible Promissory Notes combined is $2,000,000. The aggregate principal amount of all of the various series of 2003 Convertible Promissory Notes will be a maximum of $6,000,000.

Each 2003 Series C Convertible Promissory Note is individually referred to herein as a "Note" and collectively as the "Notes." Each of the 2003 Series C Convertible Promissory Notes will be issued pursuant to a Note Purchase Agreement among Dairy, Bion, the Holder and the other parties thereto (the "Purchase Agreement").

SECTION 1. Prepayment.

This Note (including interest accrued on the principal hereof) may not be prepaid in cash by Dairy without the written consent of the holders of a majority in principal amount of outstanding Notes of this issue, but may be converted to equity at any time during its term in accordance with the provisions of Section 2 below.

SECTION 2. Mandatory Conversion.

(a) Conditions for Conversion.

Upon the happening of the event set forth at paragraph 1.4 of the Purchase Agreement (which events are based, in whole or part, on Dairy having already met the conditions set forth in Schedule B attached hereto (" Technical Conditions")), then (unless otherwise agreed by a majority vote of the Holders as set forth below) all of the amounts due under this Note shall be mandatorily and automatically converted into shares of Dairy common stock ("Dairy Stock") and each of the Holders shall be entitled to receive one share of Dairy Stock for each $2.00 that is due and owing to such Holder under the terms of this Note (and Bion shall continue to own 4,000,000 shares of Dairy Stock); provided, however, that not later than the date of such conversion, Bion, Bion Technologies, Inc. and BionSoil, Inc. shall have each granted to Dairy an automatically renewable license for the worldwide exclusive use of its intellectual property in the dairy business with the terms set forth at Schedule C hereto('License') which License shall be executed and delivered to Dairy within 30 days of the Conversion Date (unless extended by consent of the holders of a majority in principal amount of all series of 2003 Convertible Promissory Notes) ; and provided further, that in the event that all of the conditions set forth in Schedule D to this Note (the "Bion Conditions") have been met, and the holders of a majority in principal amount of outstanding Notes elect to receive Bion Stock (as defined below) rather than Dairy Stock, then instead of converting to Dairy Stock as set forth above, all of the amounts due under this Note shall be mandatorily and automatically converted into one share of common stock of Bion ("Bion Stock")for each share of Dairy Stock which the Holder would have been entitled to receive had the majority of Holders not elected to convert into Bion Stock (which number of shares shall be subject to adjustment as provided in paragraph 1.7 of the Purchase Agreement) as is equal to the Conversion Amount (as defined below) divided by the then current Bion Conversion Price (as defined below).

(b) Conversion Procedures.

(i) In the event that the Notes are converted into Dairy Stock, Dairy's debt obligation under this Note shall cease, but Dairy shall not be required to deliver stock certificates to any Holder until such time as such

Holder surrenders the Notes at Dairy's offices together with irrevocable written notice to Dairy specifying the name or names (with address) in which a certificate or certificates evidencing shares of Dairy Stock are to be issued. Dairy shall thereupon deliver to the holder of the Notes, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Dairy Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Dairy or Bion stock certificates, such conversion shall be deemed to have occurred as of Dairy's record date of the conversion and the person or persons entitled to receive Dairy Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Dairy Stock on such date.

(ii) In the event that the Notes are converted into Bion Stock, Dairy's debt obligation under this Note shall cease but Bion shall not be required to deliver stock certificates to any Holder until such time as such Holder surrenders the Notes at Bion's offices together with irrevocable written notice to Bion specifying the name or names (with address) in which a certificate or certificates evidencing shares of Bion Stock are to be issued. Bion shall thereupon deliver to the holder of the Notes, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Bion Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided. Irrespective of the date of delivery of Bion stock certificates, such conversion shall be deemed to have occurred as of Bion's record date of the conversion and the person or persons entitled to receive Bion Stock deliverable upon conversion of such Notes shall be treated for all purposes as the record holder or holders of such Bion Stock on such date.

(iii) In the event that the Notes are converted into Dairy Stock or Bion Stock as set forth above, either Dairy or Bion, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of their stock on such conversion. Neither Dairy nor Bion, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of their stock (or other securities or assets) in a name other than that in which the Notes so converted were registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to Dairy or Bion, as appropriate, the amount of such tax or has established, to the satisfaction of Dairy or Bion, that such tax has been paid.

(c) Protection in Case of a Merger of Dairy. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Dairy is a party other than a merger or consolidation in which Dairy is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Dairy as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Dairy Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such

reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Dairy Common Stock immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (c)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Dairy shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Dairy for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Dairy, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Dairy.

(d) Protection in Case of a Merger of Bion. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Bion is a party other than a merger or consolidation in which Bion is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Bion as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Bion Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Bion Common Stock immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall

be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (d)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Bion shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holders of the Notes not less than 30 days prior to such event. A sale of all or substantially all of the assets of Bion for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and principles hereof then, in each such case, the Holders of Notes may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Bion, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Bion.

(e) Reservation of Shares; Transfer Taxes; Etc. Both Dairy and Bion shall at all times reserve and keep available, out of their respective authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Notes, such number of shares of its Common Stock as shall be sufficient to effect the conversion of all Notes from time to time outstanding. Both Dairy and Bion shall use their respective best efforts from time to time, in accordance with the laws of the State of Colorado, to increase the authorized number of shares of Common Stock if at any time the number of shares of Common Stock not outstanding shall not be sufficient to permit the conversion of all the then-outstanding Notes. In the event that either Dairy or Bion intends to offer Stock other than Common Stock, they shall authorize the issuance of sufficient shares of such stock to permit the conversion of all the then-outstanding Notes.

Bion or Dairy, as appropriate, shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of Stock on conversion of the Notes into Bion Stock or Dairy Stock. Neither Bion nor Dairy, however, shall be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of Bion Stock or Dairy Stock, as appropriate (or other securities or assets), in a name other than that in which the Notes so converted were registered, and no

such issue or delivery shall be made unless and until the person requesting such issue has paid to either Bion or Dairy, as appropriate, the amount of such tax or has established, to the satisfaction of Bion or Dairy, as appropriate, that such tax has been paid.

(f) Release of Collateral. Immediately upon conversion to equity under this Section 2 all amounts due under this Note shall be deemed to have been paid in full and all of the collateral for the performance of obligations hereunder shall be deemed to have been fully, finally and completely released as of such date.

SECTION 3. Fractional Shares

Neither Dairy nor Bion shall be required to issue fractions of shares of Common Stock or other stock upon the conversion of the Note. If any fraction of a share would be issuable on the Conversion of the Note, Dairy or Bion, as appropriate, shall purchase such fraction for an amount in cash equal to its fair market value, as determined in good faith by the Board of Directors of either Dairy or Bion, as appropriate.

SECTION 4. Affirmative Covenants of Dairy and Bion.

Each of Dairy and Bion covenants and agrees that until the payment in full of this Note, it shall:

(a) Existence; Business. (i) Preserve, renew and keep in full force and effect its legal existence and (ii) obtain, preserve, renew, extend and keep in full force and effect the licenses, permits, authorizations, patents, trademarks and trade names material to its business.

(b) Use of Proceeds. Use the proceeds of the Notes of this issue solely as set forth in Section 7.2 of the Purchase Agreement.

(c) Notice of Events of Default. Furnish to the Holder prompt written notice of any Event of Default, specifying the nature and extent thereof and corrective action, if any, proposed to be taken with respect thereto.

(d) Authorization of Stock Issuable Upon Conversion. Authorize and reserve a sufficient number of its shares of Stock and Common Stock for issuance upon conversion of the Note.

(e) Execution and Delivery of Security Agreement. Execute and deliver the Security Agreement in substantially the form attached as Exhibit 1 hereto, and Bion shall cause each of its wholly-owned subsidiaries, Bion Technologies, Inc. and BionSoil, Inc., to execute and deliver the Security Agreement in substantially the same form.

SECTION 5. Negative Covenants of Dairy and Bion.

Each of Dairy and Bion covenants and agrees with the Holder that until the payment in full of this Note, it shall not:

(a) Dividends and Distributions. Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of it's capital stock.

(b) No Impairment. By amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Note against impairment.

SECTION 6. Events of Default Defined.

The following shall each constitute an "Event of Default" hereunder:

(a) the failure of Dairy to make any payment of principal or interest on this Note when due and payable;

(b) the failure of Dairy or Bion to observe or perform any covenant in this Note or in the Purchase Agreement, and such failure shall have continued unremedied for a period of sixty (60) days after notice;

(c) if Dairy shall:

(1) admit in writing its inability to pay its debts generally as they become due,

(2) file a petition in bankruptcy or a petition to take advantage of any insolvency act,

(3) make an assignment for the benefit of its creditors,

(4) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property,

(5) on a petition in bankruptcy filed against, be adjudicated a bankrupt, or

(6) file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof;

(d) if a court of competent jurisdiction shall enter an order, judgment or decree appointing, without the consent of Dairy, a receiver of Dairy or of the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of Dairy under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any State thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within thirty (30) days from the date of entry thereof;

(e) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of Dairy or the whole or any substantial part of its property and such custody or control shall not be terminated or stayed within thirty (30) days from the date of assumption of such custody or control;

(f) the liquidation, dissolution or winding up of Dairy; or

(g) a final judgment or judgments for the payment of money in excess of $250,000 in the aggregate shall be rendered by one or more courts, administrative or arbitral tribunals or other bodies having jurisdiction against Dairy and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and Dairy shall not, within such 30-day period, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal.

SECTION 7. Remedies Upon Event of Default.

(a) Upon the occurrence of an Event of Default, (i) the entire principal amount of, and all accrued and unpaid interest on, this Note shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Dairy. In addition, the Holder may take any action available to it under the Purchase Agreement or at law or in equity or by statute or otherwise.

(b) No remedy herein conferred upon the Holder of this Note is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

SECTION 8. Miscellaneous.

(a) Amendments and Waivers. The holders of a majority in principal amount of outstanding Notes (all series in aggregate) may waive or otherwise consent to the amendment of any of the provisions hereof.

(b) Restrictions on Transferability. The securities represented by this Note have been acquired for investment and have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction. Without such registration, such securities may not be sold, pledged, hypothecated or otherwise transferred, except pursuant to exemptions from the Securities Act of 1933, and the securities laws of any state or other jurisdiction.

(c) Forbearance from Suit. No holder of Notes of this issue shall institute any suit or proceeding for the enforcement of the payment of principal or interest unless the holders of at least a majority in principal amount of all of the outstanding Notes (all series in aggregate) join in such suit or proceeding.

(d) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York, excluding the body of law relating to conflict of laws. Notwithstanding anything to the contrary contained herein, in no event may the effective rate of interest collected or received by the Holder exceed that which may be charged, collected or received by the Holder under applicable law.

(e) Interpretation. If any term or provision of this Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby.

(f) Successors and Assigns. This Note shall be binding upon Dairy and Bion and each of their respective successors and assigns and shall inure to the benefit of the Holder and its successors and assigns.

(g) Notices. All notices, requests, consents and demands shall be made in writing and shall be mailed postage prepaid, or delivered by hand, to Dairy or to the Holder thereof at their respective addresses set forth below or to such other address as may be furnished in writing to the other party hereto:

If to the Holder:  At the address shown on Schedule A
                   attached hereto.

If to Dairy:       Bion Dairy Corporation
                   c/o Bion Environmental Technologies, Inc.
                   P.O. Box 323
                   Old Bethpage, N.Y. 11804
                   Attention: Chief Executive Officer

With a copy to:    Mark A. Smith, President
                   P.O. Box 566
                   Crestone, Colorado 81131
                   e-fax 425-984-9702

If to Bion:        Bion Environmental Technologies, Inc.
                   P.O. Box 323
                   Old Bethpage, N.Y. 11804

With a copy to:    Mark A. Smith, President
                   P.O. Box 566
                   Crestone, Colorado 81131
                   e-fax 425-984-9702

(h) Saturdays, Sundays, Holidays. If any date that may at any time be specified in this Note as a date for the making of any payment of principal or interest under this Note shall fall on Saturday, Sunday or on a day which in New York shall be a legal holiday, then the date for the making of that payment shall be the next subsequent day which is not a Saturday, Sunday or legal holiday.

(i) Purchase Agreement. This Note is subject to the terms contained in the Purchase Agreement dated the date hereof among Bion, Dairy and the purchasers of the Notes and the holder of this Note is entitled to the benefits of such Purchase Agreement and may, in addition to any rights hereunder, enforce the agreements of Dairy and Bion contained therein and exercise the remedies provided for thereby or otherwise available in respect thereof.

IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed instrument on the date first above written by the duly authorized representative of Dairy.

ATTEST:

BION DAIRY CORPORATION

By: ____________________________________ Name: Mark A. Smith
Its: President

BION ENVIRONMENTAL TECHNOLOGIES, INC.

By: ____________________________________ Name: Mark A. Smith
Its: President

EXHIBIT 10.19

THIS NOTE IS NOT TRANSFERABLE WITHOUT THE EXPRESS WRITTEN CONSENT OF BION ENVIRONMENTAL TECHNOLOGIES, INC. ("BION"). THE SECURITIES REPRESENTED BY THIS NOTE OR TO BE ISSUED IN CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION THEREFROM. ANY SUCH TRANSFER MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.

BION ENVIRONMENTAL TECHNOLOGIES, INC.

No. 2006A-_
2006 Series A Convertible Promissory Note

$__0,000.00 ______, 2006

Bion Environmental Technologies, Inc., a Colorado corporation ("Bion"), for value received, hereby promises to pay to ______________________ or registered assigns (the "Holder"), the principal sum of _______ Dollars ($__0,000.00), with interest from the original date of issuance of this 2006 Series A Convertible Promissory Note ('Note' or 'Notes') on the unpaid principal balance at a simple rate equal to six percent (6%) per annum, on May 31, 2008 (the "Maturity Date"). Interest shall be accrued. Payment shall be made at such place as designated by the Holder upon surrender of this Note, and shall be in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

This Note is the first of what may become a multiple series of duly authorized issues of Bion's 2006 Convertible Promissory Notes. The conversion prices and other terms of the various series of 2006 Convertible Promissory Notes may be different from each other, but all of the amounts due under all of the series of the 2006 Convertible Promissory Notes are intended to be of equal priority and seniority. The maximum aggregate principal amount of the 2006 Series A Convertible Promissory Notes combined is $3,000,000. The aggregate principal amount of all of the various series of 2006 Convertible Promissory Notes will be a maximum of $10,000,000.

Each 2006 Series A Convertible Promissory Note is individually referred to herein as a "Note" and collectively as the "Notes."

SECTION 1. Prepayment.

This Note (including interest accrued on the principal hereof) may not be prepaid in cash by Bion without the written consent of the holder of the Note except as expressly provided herein, but may be converted to equity by the Holder at any time during its term at the Conversion Price set forth in
Section 2 below.

SECTION 2. Conversion.

(a) Conditions for Mandatory Conversion and Elective Conversion.

i) Upon the happening of the events set forth below, all of the principal and accrued interest amount due under this Note shall be mandatorily and automatically converted into shares of Bion Stock ('Stock') and the Holder shall be entitled to receive one share of Stock for each $6.00 ('Conversion Price') that is due and owing to such Holder under the terms of this Note. The conditions for this mandatory conversion are as follows:

A) When Bion's closing market price has been at or above $7.20 per share (a 20% premium to Conversion Price) for 20 consecutive trading days; and

B) Provided, however, conversion shall not take place until the earlier of a date:

I) When there is an effective registration statement allowing public resale of the Stock to be received by the Holder upon mandatory conversion; or

II) One year the initial closing date of the offering pursuant to which this Note was issued;

III) Further provided, however, that no mandatory conversion without an effective registration statement shall take place until Bion has become an 'reporting company' with the Securities & Exchange Commission ('SEC') pursuant to the Securities & Exchange Act of 1934, as amended.

ii) This Note shall be convertible, in whole or in part, into Stock at the Conversion Price at any time at election of Holder.

(b) Conversion Procedures.

(i) In the event that this entire Note is converted into Stock, Bion's debt obligation under this Note shall cease, but Bion shall not be required to deliver stock certificates to the Holder until such time as such Holder surrenders the Note at Bion's offices together with irrevocable written notice to Bion specifying the name or names (with address) in which a certificate or certificates evidencing shares of Stock are to be issued. Bion shall thereupon deliver to the Holder of the Note, or to the nominee or nominees of such person, certificates evidencing the number of full shares of Stock to which such person shall be entitled as aforesaid, together with a cash adjustment of any fraction of a share as hereinafter provided, within three (3) business days of the date of conversion. In the event that less than all of this Note is converted, whether mandatory or elective conversion, into Stock, this Note shall remain outstanding with a reduced principal balance reflecting the partial conversion and Bion shall deliver to the Holder of the Note, or the nominee or nominees of such person, certificates evidencing the number of full shares of Stock to which such person is entitled as aforesaid, within three (3) business days of the date of conversion. Irrespective of the date of delivery of Bion stock certificates,

such conversion shall be deemed to have occurred as of Bion's record date of the conversion and the person or persons entitled to receive Stock deliverable upon conversion of such Note shall be treated for all purposes as the record holder or holders of such Stock on such date.

(ii) In the event that the Note is converted into Stock as set forth above, Bion shall pay any and all issue or other taxes that may be payable in respect of any issue or delivery of shares of their stock on such conversion. Bion, however, shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue or delivery of their stock (or other securities or assets) in a name other than that in which the Note so converted was registered, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to Bion, as appropriate, the amount of such tax or has established, to the satisfaction of Bion, that such tax has been paid.

(c) Protection in Case of a Merger of Bion. (i) In case of any capital reorganization or reclassification, or any consolidation or merger to which Bion is a party other than a merger or consolidation in which Bion is the continuing corporation, or in case of any sale or conveyance to another entity of the property of Bion as an entirety or substantially as a entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into Bion), the Holder of this Note shall have the right thereafter to receive on the conversion of this Note into Bion Stock the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had this Note been converted into shares of Bion Common Stock immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall be made in the application of the provisions set forth in this Section 2 with respect to the rights and interests thereafter of the Holder of this Note to the end that the provisions set forth in this Section 2 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the Note. The above provisions of this Subsection (c)(i) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. Bion shall require the issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Note to be responsible for all of the agreements and obligations of Bion hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provisions so proposed to be made, shall be mailed to the Holder of the Note not less than 10 days prior to such event. A sale of all or substantially all of the assets of Bion for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.

(ii) In case any event shall occur as to which the other provision of this Section 2 is not strictly applicable but as to which the failure to make any adjustment would not fairly protect the conversion rights represented by this Note in accordance with the essential intent and

principles hereof then, in each such case, the Holder of Note may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to Bion, which shall give their opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established herein, necessary to preserve the conversion rights. Upon receipt of such opinion, Bion will promptly mail a copy thereof to the Holder of this Note and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by Bion.

(d) Reservation of Shares; Transfer Taxes; Etc. Bion shall at all times reserve and keep available, out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Notes, such number of shares of its Common Stock as shall be sufficient to effect the conversion of all Notes from time to time outstanding. Bion shall use its best efforts from time to time, in accordance with the laws of the State of Colorado, to increase the authorized number of shares of Common Stock if at any time the number of shares of Common Stock not outstanding shall not be sufficient to permit the conversion of all the then-outstanding Notes. In the event that Bion intends to offer Stock other than Common Stock, they shall authorize the issuance of sufficient shares of such stock to permit the conversion of all the then-outstanding Notes.

SECTION 3. Fractional Shares

Bion shall not be required to issue fractions of shares of Common Stock or other stock upon the conversion of the Note. If any fraction of a share would be issuable on the Conversion of the Note, Bion shall purchase such fraction for an amount in cash equal to its fair market value, as determined in good faith by the Board of Directors of Bion.

SECTION 4. Affirmative Covenants of Bion.

Bion covenants and agrees that until the payment in full of this Note, it shall:

(a) Existence; Business. (i) Preserve, renew and keep in full force and effect its legal existence and (ii) obtain, preserve, renew, extend and keep in full force and effect the licenses, permits, authorizations, patents, trademarks and trade names material to its business.

(b) Use of Proceeds. Use the proceeds of the Notes of this issue solely to augment Bion's working capital and for valid business purposes.

(c) Notice of Events of Default. Furnish to the Holder prompt written notice of any Event of Default, specifying the nature and extent thereof and corrective action, if any, proposed to be taken with respect thereto.

(d) Authorization of Stock Issuable Upon Conversion. Authorize and reserve a sufficient number of its shares of Stock for issuance upon conversion of the Note.

SECTION 5. Negative Covenants of Bion.

Bion covenants and agrees with the Holder that until the payment in full of this Note, it shall not:

(a) Dividends and Distributions. Declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of it's capital stock.

(b) No Impairment. By amendment of its charter or through reorganization, consolidation, merger, dissolution, sale of assets or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder of this Note against impairment.

SECTION 6. Events of Default Defined.

The following shall each constitute an "Event of Default" hereunder:

(a) the failure of Bion to make any payment of principal or interest on this Note when due and payable;

(b) the failure of Bion to observe or perform any covenant in this Note, and such failure shall have continued unremedied for a period of sixty
(60) days after notice;

(c) if Bion shall:

(1) admit in writing its inability to pay its debts generally as they become due,

(2) file a petition in bankruptcy or a petition to take advantage of any insolvency act,

(3) make an assignment for the benefit of its creditors,

(4) consent to the appointment of a receiver of itself or of the whole or any substantial part of its property,

(5) on a petition in bankruptcy filed against, be adjudicated a bankrupt, or

(6) file a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law or statute of the United States of America or any state thereof;

(d) if a court of competent jurisdiction shall enter an order, judgment or decree appointing, without the consent of Bion, a receiver of Bion or of the whole or any substantial part of its property, or approving a petition filed against it seeking reorganization or arrangement of Bion under the

federal bankruptcy laws or any other applicable law or statute of the United States of America or any State thereof, and such order, judgment or decree shall not be vacated or set aside or stayed within thirty (30) days from the date of entry thereof;

(e) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of Bion or the whole or any substantial part of its property and such custody or control shall not be terminated or stayed within thirty (30) days from the date of assumption of such custody or control;

(f) the liquidation, dissolution or winding up of Bion; or

(g) a final judgment or judgments for the payment of money in excess of $500,000 in the aggregate shall be rendered by one or more courts, administrative or arbitral tribunals or other bodies having jurisdiction against Bion and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 60 days from the date of entry thereof and Bion shall not, within such 60-day period, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal.

SECTION 7. Remedies Upon Event of Default.

(a) Upon the occurrence of an Event of Default, (i) the entire principal amount of, and all accrued and unpaid interest on, this Note shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by Bion.

(b) No remedy herein conferred upon the Holder of this Note is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

SECTION 8. Miscellaneous.

(a) Rights of Holders Inter Se Each Holder shall have the absolute right to exercise or refrain from exercising any right or rights which such Holder may have by reason of this Note or any security received in conversion of the Note including, without limitation, the right to consent to the waiver of any obligation of Bion and to enter into an agreement with Bion for the purpose of modifying this Note or any agreement effecting such modification, and such Holder shall not incur any liability to any other Holder or Holders of the Notes with respect to exercising or refraining from exercising any such right or rights.

(b) Exculpation Among Holders. Holder acknowledges and agrees that it is not relying upon any other Holder, or any officer, director, employee partner or affiliate of any such other Holder, in making its investment or decision to invest in the Notes or in monitoring such investment. Each Holder agrees that no Holder nor any controlling person, officer, director,

shareholder, partner, agent or employee of any Holder shall be liable for any action heretofore or hereafter taken or omitted to be taken by any of them relating to or in connection with Bion or the Notes, or both.

(c) Actions by Holders. Any actions permitted to be taken by Holders of the Notes and any consents required to be obtained from the same under this Note, may be taken or given only by, in the case of consents or actions requiring approval of the Holders, by the Holders, and in all other cases, only by holders of a majority of the face amount of the principal of all series of Notes (treated as a single class), and if such Holders constituting a majority the ("Majority Holders") take any action or grant any consent, such action or consent shall be deemed given or taken by all Holders who shall be bound by the decision or action taken by the Majority Holders without any liability on the part of the Majority Holders to any other Holder of securities hereto

(d) Amendments and Waivers. The Holder of this Note may waive or otherwise consent to the amendment of any of the provisions hereof.

(e) Restrictions on Transferability. The securities represented by this Note (or to be issued in conversion of this Note) have been acquired for investment and have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction. Without such registration, such securities may not be sold, pledged, hypothecated or otherwise transferred, except pursuant to exemptions from the Securities Act of 1933, and the securities laws of any state or other jurisdiction.

(f) Forbearance from Suit. No Holder of Notes of this issue shall institute any suit or proceeding for the enforcement of the payment of principal or interest unless the Holders of at least a majority in principal amount of all of the outstanding Notes (all series in aggregate) join in such suit or proceeding.

(g) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Colorado, excluding the body of law relating to conflict of laws. Notwithstanding anything to the contrary contained herein, in no event may the effective rate of interest collected or received by the Holder exceed that which may be charged, collected or received by the Holder under applicable law.

(h) Consent to Jurisdiction. The parties hereto irrevocably consent to the jurisdiction of the courts of the State of Colorado and of any federal court located in such State in connection with any action or proceeding arising out of or relating to this Note, any document or instrument delivered pursuant to, in connection with or simultaneously with this Note, or a breach of this Note or any such document or instrument. Within 30 days after service, or such other time as may be mutually agreed upon in writing by the attorneys for the parties to such action or proceeding, the party so served shall appear or answer such summons, complaint or other process.

(i) Interpretation. If any term or provision of this Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions hereof shall in no way be affected thereby.

(j) Successors and Assigns. This Note shall be binding upon Bion and its successors and assigns and shall inure to the benefit of the Holder and its successors and assigns.

(k) Notices. All notices, requests, consents and demands shall be made in writing and shall be mailed postage prepaid, or delivered by hand, to Bion or to the Holder thereof at their respective addresses set forth below or to such other address as may be furnished in writing to the other party hereto:

If to the Holder:      At the address shown on Schedule A
                       Attached hereto.

If to Bion:            Bion Environmental Technologies, Inc.
                       c/o P.O. Box 323
                       Old Bethpage, N.Y. 11804

With a copy to:        Mark A. Smith, President
                       P.O. Box 566
                       Crestone, Colorado 81131
                       fax 425-984-9702
                       mas1@ctelco.net

(l) Saturdays, Sundays, Holidays. If any date that may at any time be specified in this Note as a date for the making of any payment of principal or interest under this Note shall fall on Saturday, Sunday or on a day which in Colorado shall be a legal holiday, then the date for the making of that payment shall be the next subsequent day which is not a Saturday, Sunday or legal holiday.

IN WITNESS WHEREOF, this Note has been executed and delivered as a sealed instrument on the date first above written by the duly authorized representative of Bion.

BION ENVIRONMENTAL TECHNOLOGIES, INC.

By: ____________________________________ Name: Mark A. Smith
Its: President

Schedule A

Holder:

Principal Amount: ________________

EXHIBIT 10.20

Confidentiality/Proprietary Information Agreement

Agreement dated this _____ day of ___________, by and between Bion Environmental Technologies, Inc., a Colorado corporation having a place of business at PO Box 323, Old Bethpage, New York 11804, and its subsidiaries (collectively "BION") and __________________, a corporation or entity having a place of business at ______________________________ (and it's employees and affiliates) (collectively "Recipient").

WHEREAS, BION is a technology based company which has developed and possesses pending and granted patent assets and certain confidential proprietary information, data and experience relating to systems for the treatment, monitoring, processing and management of environmental parameters and variables, including waste streams (including without limitation of animal waste streams for the production of organic soils, humus, fertilizers, remediated organics and mixtures with other materials) and relationships with third parties which are considered by BION to be secret and confidential and to constitute valuable commercial assets.

WHEREAS, BION is willing, subject to the terms and conditions hereof, and in reliance thereon, to disclose so much of such information, data and experience to Recipient as may be necessary for the purpose of enabling Recipient to evaluate said information, data and experience, for use in projects that Recipient may be evaluating for the application of said information, data and experience by BION and for no other use or purpose.

NOW, THEREFORE, the parties agree as follows:

1. The term "Confidential Information" as used herein means all information, data and experience of the type referred to above (and all portions and aspects thereof), whether of a technical, engineering, operational or economic nature, supplied to or obtained by Recipient in writing, in the form of drawings, orally or by observation, and all information, documents and materials derived there from or utilizing the same, whether supplied by or obtained from BION or prepared by Recipient, except only information which is now or hereafter becomes generally and conveniently available as part of the public domain through publication in the applicable trade through no act or omission of Recipient, or information which Recipient proves with tangible documentary evidence was in Recipient's possession at the time of receipt from BION, or which hereafter comes into Recipient's possession, and was not or is not acquired by Recipient directly or indirectly from BION, sources under obligation of secrecy to BION or sources which require Recipient to hold it in confidence, provided that Recipient gives advance written notice to BION justifying any exception or exclusion from Confidential Information prior to Recipient making any disclosure or unauthorized use thereof. Disclosures made under this agreement, which are specific, shall not be deemed to be within the foregoing exceptions merely because they are embraced by more general information in the public domain or in the prior possession of Recipient. In addition, any combination of features shall not be deemed to be within the foregoing exceptions merely because individual features are in the public domain or in the possession of Recipient, but only if the combination itself, including both its principle of operation and an appreciation of its relevance and usefulness in the applicable trade, are in the public domain or in the possession of Recipient without a further collecting, searching and/or combining effort for which those in the trade would be expected to pay.

2. In consideration of and as an inducement to BION's willingness to disclose Confidential Information to Recipient, Recipient agrees:

(a) Not to make any use whatsoever of Confidential Information except for the purposes specified herein and/or in other agreements with BION, and accordingly, without limiting the generality of the foregoing, not to use such information in connection with any other work performed by Recipient either for itself, for any client, or for any other person, firm or corporation.

(b) Not to reveal or disclose directly or indirectly any Confidential Information to third parties, and not to assist anyone else in so doing, and accordingly, without limiting the generality of the foregoing, not to supply any such information to any prospective customer of Recipient. For the purpose of this agreement, "third parties" shall be deemed to include any and all subsidiaries and affiliates of Recipient not directly performing services for BION.

(c) To keep all such Confidential Information strictly secret and confidential and to that end, without limiting the generality of the foregoing, to cause all written materials relating to or containing such information, including all sketches, drawings, reports and notes, and all copies, reproductions, reprints and translations, to be plainly marked to indicate the secret and confidential nature thereof and to prevent unauthorized use or reproduction.

(d) To take reasonable precautions in order that the secrecy of such information is preserved among Recipient's employees having access to any significant portion of such information, to permit access to such information only to those employees who need to know such information for the purposes specified above, and then only to the extent necessary for such employees to carry out their respective tasks, and to assume the responsibility that such employees will preserve the secrecy of such information with respect to third parties, and will observe the use limitations thereon. BION shall be deemed a third-party beneficiary of such employees' obligations to Recipient in this regard.

(e) To promptly and fully disclose to BION, and preserve as the sole property of and for the sole benefit of BION, any and all data, observations, discoveries, inventions, processes, improvements or devices derived in any part from Confidential Information ("Products"). Recipient agrees that it will not compete with BION in any markets (presently existing or developed in the future) based on the Confidential Information and/or the Products. Recipient further agrees that, at the request of BION, it will promptly prepare reports on activities undertaken by Recipient in accord with this agreement. Further, to the extent that any Product(s) may be capable of protection by patent, copyright or otherwise, all rights of any kind or nature in and to such Product(s) throughout the world, as between Recipient and BION, shall be the sole and exclusive property of BION. Recipient hereby transfers, conveys and assigns such rights to BION, and agrees never to claim

any adverse rights therein, and Recipient agrees to cooperate with BION in connection therewith, including taking all actions and executing all documents (including without limitation assignments and/or patent applications) requested by BION to confirm, perfect, secure and/or support BION's ownership thereof and BION's efforts to obtain rights therein.

(f) Upon request by BION, Recipient will promptly return all written materials of the type described in (c) and (e) to BION, within five
(5) days of such request, and Recipient shall thereafter make no further use thereof or of any Confidential Information.

(g) This agreement will be governed and construed in accordance with the laws of the State of New York. Recipient hereby submits to personal jurisdiction and consents to venue in the federal and state courts of New York for any action involving this Agreement.

(h) Without the prior written consent of BION, Recipient will not disclose to any person either (i) the fact that discussions or negotiations are taking place concerning a possible transaction, or (ii) any of the terms, conditions or other facts with respect to any such possible transaction, including the status thereof.

(i) For a period on one (1) year from the date hereof Recipient shall not, without BION's prior written consent, employ any employee of BION, or solicit any of the employees of BION whom Recipient meets or learns about in connection with its evaluation of BION. The foregoing restrictions shall not apply to employees whose employment was terminated by BION.

3. Recipient's receipt of Confidential Information from BION is at the request of Recipient, and is subject to all the obligations and restrictions hereinabove set forth. Recipient shall be solely responsible for any and all liability arising from use of all Confidential Information and other information provided to Recipient by BION and shall hold BION harmless and indemnify BION for any claims, liability or obligations asserted against BION as the result of Recipient's use of any such information. BION makes no representations or warranties respecting the information provided to Recipient.

4. Recipient agrees that money damages would not be readily calculable and would not be a sufficient remedy for any breach or threatened breach of this Agreement by Recipient, that BION will suffer irreparable harm from any such breach and that, in addition to all other remedies which may be available, BION shall be entitled to specific performance and preliminary injunctive or other equitable relief as a remedy for any such breach or threatened breach, and Recipient further agrees to waive any requirement for the securing or posting of any bond in connection with any such remedy.

5. Recipient shall promptly notify BION in writing of any facts that may come to Recipient's attention indicating or suggesting that any unauthorized person may have obtained access to, may be attempting to acquire or may be using the Confidential Information.

6. Recipient acknowledges that this Agreement does not grant to Recipient any license or other rights to utilize the Confidential Information and does not grant any license under any patents or other rights which BION may now have or may hereafter obtain therein, other than as expressly set forth herein, and there is no implied obligation of BION to grant Recipient any such right or license.

7. Recipient agrees that BION shall not be obligated to pay any fees on Recipient's behalf to any broker, finder or other party claiming to represent Recipient in any transaction. Without limiting the generality of the nondisclosure agreements set forth above, Recipient further acknowledges that Recipient is strictly prohibited from acting as a broker or agent using any of the Confidential Information provided by BION.

8. Recipient acknowledges that the US securities laws prohibit any person whom has material nonpublic information concerning an issuer of publicly held securities from purchasing or selling such securities.

 BION ENVIRONMENTAL                      RECIPIENT:
 TECHNOLOGIES, INC.                      NAME OF ENTITY

By: ________________________________     By: ______________________________
    James W. Morris, Ph.D., P.E.             (type name)

Title:  Chief Technology Officer         Title: ___________________________

Date:   May 24, 2005                     Date: ________________________

EXHIBIT 10.21

CONVERTIBLE PROMISSORY NOTE ("NOTE")

FOR VALUE RECEIVED, the undersigned, Bion Environmental Technologies, Inc., a Colorado corporation ("MAKER"), hereby promises to pay to the order of Mark A. Smith ("HOLDER"), and its successors and assigns, c/o PO Box 566, Crestone, Colorado 81131, or at such other place as the HOLDER of this Note may from time to time designate in writing, all sums due under this Note (plus interest) in lawful and immediately available money of the United States. The initial principal of this Note is $373,455.69. Interest shall be accrued and added to principal at a simple rate of six percent (6.0%) per annum from date owed by Maker. All outstanding principal and interest shall be due and payable on or before January 1, 2009, if not previously paid. If this Note or interest due hereunder is not paid when due or declared due hereunder, the principal shall draw interest at the rate of one and one half percent (1.5%) per month.

Upon default by the MAKER of the timely payment of principal or interest due hereunder or upon any Event of Default as hereinafter defined, the HOLDER may, in its sole discretion, withhold any payments due and payable to MAKER and apply same to the MAKER's obligations hereunder. In addition, upon any Event of Default, the HOLDER may declare the full amount of this Note due and payable.

If any one or more of the following events ("Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law, pursuant to or in compliance with any judgment, decree of order of any court, or any order, rule or regulation of any administrative or governmental body, or otherwise) the HOLDER of this Note may, at its option, upon written notice to MAKER, declare this Note and any other promissory note issued by MAKER to HOLDER (whether or not then due in accordance with its terms) to be due and payable, whereupon the entire balance of this Note shall forthwith become and be due and payable:

(a) MAKER fails to make payment of principal or of interest on this Note or any other obligation of MAKER when such shall become due and payable, whether at the stated maturity thereof or by acceleration or otherwise;

(b) MAKER (1) admits its inability to pay its debts as they become due;
(2) files a petition in bankruptcy or makes a petition to take advantage of an insolvency act; (3) makes an assignment for the benefit of creditors; (4) commences a proceeding for the appointment of a receiver, trustee, liquidator, or conservator of itself or of the whole or any substantial part of its properties; (5) files a petition or answer seeking reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute or the United States or any State;

(c) MAKER (1) is adjudged as bankrupt, (2) a court enters an order, judgment or decree, appointing a receiver, trustee, liquidator or conservator of MAKER or of the whole or any substantial part of its properties, or approve a petition filed against MAKER seeking reorganization or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States or any state; (3) under the provisions of any other law for the relief or aid of debtors, a court assumes custody or control of MAKER or the whole or any substantial part of its properties; (4) there is commenced against MAKER any proceeding for any of the foregoing relief; (5) a petition in bankruptcy is filed against MAKER; or (6) MAKER by any act indicates its consent to approval of or acquiescence in any such proceeding or petition.

Except as otherwise hereinabove expressly provided, MAKER hereby waives diligence, demand, protest, presentment and all notices (whether of nonpayment, dishonor, protest, acceleration or otherwise) and consents to acceleration of the time of payment, surrender or substitution of security or forbearance, or other indulgence, without notice.

Jurisdiction and venue shall be in a court of general jurisdiction located in the State of Colorado. In the event that litigation is necessary to collect the principal (and interest) of the Note, HOLDER shall be entitled to reasonable attorneys' fees and litigation costs associated therewith.

BION ENVIRONMENTAL TECHNOLOGIES, INC.

By: ________________________________________
Authorized Officer

Date: April 4, 2006

Initial principal: $373,455.69

Date Due: January 1, 2009

CONVERSION AGREEMENT

IT IS AGREED effective this 4th day of April 2006 by and between Bion Environmental Technologies, Inc. ("Maker") and Mark A. Smith ("Holder") as follows:

1) The outstanding principal and interest due to Holder from Maker pursuant to the promissory note dated April 4, 2006 ("Note") which is attached hereto as Exhibit A shall be convertible, in whole or in part, into shares of MAKER's common stock ("Shares") at a price of $2.00 per share (equitably adjusted for subsequent stock splits, dividends, mergers, etc.) as follows: a) by HOLDER at any time after July 1, 2007; b) by MAKER any time after July 1, 2008; c) by MAKER and HOLDER by mutual agreement at any time prior to payment by MAKER of such principal and interest.

2) MAKER shall not prepay the NOTE without permission of HOLDER.

3) Upon issuance, MAKER represents that all Shares received as a result of conversion of the Note shall be fully-paid and non-assessable.

4) Any interest accrued to the Note after July 1, 2008 shall not be convertible into Shares but shall rather be payable in cash by Maker upon conversion of the Note into Shares.

MAKER:

By: _____________________________

HOLDER:

By: ______________________________

EXHIBIT 10.22

CONVERTIBLE PROMISSORY NOTE ("NOTE")

FOR VALUE RECEIVED, the undersigned, Bion Environmental Technologies, Inc., a Colorado corporation ("MAKER"), hereby promises to pay to the order of Bright Capital, Ltd. ("HOLDER"), and its successors and assigns, c/o 64 Village Hill Drive, Dix Hills, NY 11746, or at such other place as the HOLDER of this Note may from time to time designate in writing, all sums due under this Note (plus interest) in lawful and immediately available money of the United States. The initial principal of this Note is $503,418.91. Interest shall be accrued and added to principal at a simple rate of six percent (6.0%) per annum from date owed by Maker. All outstanding principal and interest shall be due and payable on or before January 1, 2009, if not previously paid. If this Note or interest due hereunder is not paid when due or declared due hereunder, the principal shall draw interest at the rate of one and one half percent (1.5%) per month.

Upon default by the MAKER of the timely payment of principal or interest due hereunder or upon any Event of Default as hereinafter defined, the HOLDER may, in its sole discretion, withhold any payments due and payable to MAKER and apply same to the MAKER's obligations hereunder. In addition, upon any Event of Default, the HOLDER may declare the full amount of this Note due and payable.

If any one or more of the following events ("Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law, pursuant to or in compliance with any judgment, decree of order of any court, or any order, rule or regulation of any administrative or governmental body, or otherwise) the HOLDER of this Note may, at its option, upon written notice to MAKER, declare this Note and any other promissory note issued by MAKER to HOLDER (whether or not then due in accordance with its terms) to be due and payable, whereupon the entire balance of this Note shall forthwith become and be due and payable:

(a) MAKER fails to make payment of principal or of interest on this Note or any other obligation of MAKER when such shall become due and payable, whether at the stated maturity thereof or by acceleration or otherwise;

(b) MAKER (1) admits its inability to pay its debts as they become due; (2) files a petition in bankruptcy or makes a petition to take advantage of an insolvency act; (3) makes an assignment for the benefit of creditors; (4) commences a proceeding for the appointment of a receiver, trustee, liquidator, or conservator of itself or of the whole or any substantial part of its properties; (5) files a petition or answer seeking reorganization or arrangement or similar relief under the federal bankruptcy laws or any other applicable law or statute or the United States or any State;

(c) MAKER (1) is adjudged as bankrupt, (2) a court enters an order, judgment or decree, appointing a receiver, trustee, liquidator or conservator of MAKER or of the whole or any substantial part of its properties, or approve a petition filed against MAKER seeking reorganization or similar relief under the federal bankruptcy laws or any other applicable law or statute of the United States or any state;
(3) under the provisions of any other law for the relief or aid of debtors, a court assumes custody or control of MAKER or the whole or any substantial part of its properties; (4) there is commenced against MAKER any proceeding for any of the foregoing relief; (5) a petition in bankruptcy is filed against MAKER; or (6) MAKER by any act indicates its consent to approval of or acquiescence in any such proceeding or petition.

Except as otherwise hereinabove expressly provided, MAKER hereby waives diligence, demand, protest, presentment and all notices (whether of nonpayment, dishonor, protest, acceleration or otherwise) and consents to acceleration of the time of payment, surrender or substitution of security or forbearance, or other indulgence, without notice.

Jurisdiction and venue shall be in a court of general jurisdiction located in the State of New York. In the event that litigation is necessary to collect the principal (and interest) of the Note, HOLDER shall be entitled to reasonable attorneys' fees and litigation costs associated therewith.

BION ENVIRONMENTAL TECHNOLOGIES, INC.

By: ________________________________________
Authorized Officer

Date: December 31, 2005

Initial principal: $503,418.91

Date Due: January 1, 2010

CONVERSION AGREEMENT

IT IS AGREED effective this 31st day of December 2005 by and between Bion Environmental Technologies, Inc. ("Maker") and Bright Capital, Ltd. ("Holder") as follows:

1) The outstanding principal and interest due to Holder from Maker pursuant to the promissory note dated December 31, 2005 ("Note") which is attached hereto as Exhibit A shall be convertible, in whole or in part, at the option of the HOLDER, into shares of MAKER's common stock ("Shares") at a price of $2.00 per share (equitably adjusted for subsequent stock splits, dividends, mergers, etc.) as follows: a) by HOLDER at any time after July 1, 2007; b) by MAKER any time after July 1, 2008; c) by MAKER and HOLDER by mutual agreement at any time prior to payment by MAKER of such principal and interest.

2) MAKER shall not prepay the NOTE without permission of HOLDER.

3) Upon issuance, MAKER represents that all Shares received as a result of conversion of the Note shall be fully-paid and non- assessable.

4) Any interest accrued to the Note after July 1, 2007 shall not be convertible into Shares but shall rather be payable in cash by Maker upon conversion of the Note into Shares.

MAKER:

By: _____________________________

HOLDER:

By: ______________________________

EXHIBIT 10.23

AGREEMENT

THIS AGREEMENT is made effective the 29th day of December 2005 by and between Bion Environmental Technologies, Inc. ('Bion') (collectively Bion, together with the other subsidiaries of Bion, are sometimes referred to as the 'Bion Companies') and Mark A. Smith ('MAS').

WHEREAS Bion desires that the services of MAS to the Bion Companies continue on the terms and conditions set forth in this Agreement;

AND WHEREAS MAS desires to provide to the Bion Companies his services on the terms and conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth, Bion does hereby agree to engage/employ MAS upon the terms and conditions set forth in the following paragraphs:

1) Term: The Term of MAS's services to the Bion Companies as extended by this Agreement shall run through March 31, 2007 ('Term') during which Term MAS's services to the Bion Companies shall be the primary employment of MAS as set forth in the following provisions:

a) MAS shall continue to provide his services to the Bion Companies on a consulting basis through March 31,2006;

b) Commencing April 1, 2006, MAS shall provide his services to the Bion Companies as an employee of Bion;

c) During the Term, MAS shall continue to serve as Director, President and General Counsel of Bion (and each of the Bion Companies), which positions may be altered as the Bion Companies engage/hire additional senior management personnel.

2) Compensation:

a) Compensation from Bion to MAS for his consulting services through March 31, 2006 shall continue on the same deferred/accrued convertible basis as has existed to date;

b) Commencing April 1, 2006, MAS shall be compensated for his services as an employee of Bion on a 'cash' salary basis (with normal withholding, etc.) at the rate of $12,500 per month for the balance of the Term; provided however, that until the Bion Companies complete their next financing, such salary shall be accrued and deferred pending closing of such financing;

c) As to the deferred compensation owed to MAS by Bion for past services and services through March 31, 2006 ('DComp'), DComp shall continue to be deferred and: I) MAS has the right to convert DComp, in whole or in part, into the common stock of Bion at market price (but with a cap to the conversion price of $2.00 per share (equitably adjusted) in the event that

market price is greater than $2.00 per share on the date of conversion) at any date subsequent to July 1, 2007; II) Bion has the right to convert the DComp, in whole or in part, to its common stock on the same terms on any date after January 1, 2008; III) Bion and MAS may agree to convert the DComp, in whole or in part, on the same terms at any date; IV)MAS and Bion hereby agree to convert $_0,000 of the currently accrued DComp; to _0,000 shares of Bion's common stock effective December 31, 2005; V) any partial conversion of DComp shall be deemed to represent the earliest remaining accrued portion of the Dcomp; & VI) the DComp shall accrue interest at 6% per annum;

d) MAS shall receive a bonus of $12,500 in consideration of his agreement to the extension set forth herein (Mark A. Smith);

e) Bion shall reimburse MAS for expenses on a regular basis;

f) Bion shall purchase, or reimburse MAS for the expense of, health insurance for a period of 18 months commencing during January 2006.

3) Warrants: Bion shall sell to MAS, in aggregate, 125,000 warrants at a price of $.10 per warrant, each of which Warrants may be exercised to purchase one share of Bion common stock for a period commencing January 1, 2007 and ending December 31, 2010 at an exercise price of $4.25 per share.

4) Confidentiality/Proprietary Information: MAS will abide by the terms and provisions of existing confidentiality/proprietary information agreements and shall execute and abide by the terms and provisions of any additional Confidentiality/Proprietary Information Agreement reasonably requested by Bion .

5) Miscellaneous:

a) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns and any person acquiring, whether by merger, consolidation, liquidation, purchase of assets or otherwise, all or substantially all of a party's equity or assets and business.

b) It is the intention of the parties hereto that this Agreement and the performance hereunder and all suits and special proceedings connected herewith be construed in accordance with and pursuant to the laws of the State of Colorado and that in any action, special proceeding or other proceeding that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of Colorado shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which any action or special proceeding may be instituted.

c) Any claim or controversy, which arises out of or relates to this Agreement, or breach of it, shall be settled by arbitration.

d) Should any party hereto waive breach of any provision of this Agreement, that waiver shall not operate or be construed as a waiver of any further breach of this Agreement.

e) In the event that any one or more of the provisions of this Agreement or any portions there under is determined to be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

f) This Agreement shall constitute the entire agreement between the parties hereto oral modifications of the Agreement shall have no effect. This Agreement may be altered only by a written agreement signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

Bion Environmental Technologies, Inc.

By: /s/ Mark A. Smith

    /s/ Mark A. Smith
    Mark A. Smith

EXHIBIT 10.24

AGREEMENT

THIS AGREEMENT is made effective the 30th day of April 2005 by, between and among Bion Environmental Technologies, Inc. ('Bion') (collectively Bion, together with the other subsidiaries of Bion, are sometimes referred to as the 'Bion Companies') and Salvatore Zizza ('SZ').

WHEREAS the Bion Companies desire to receive the services of SZ upon the terms and conditions set forth in this Agreement;

AND WHEREAS SZ desires to provide to the Bion Companies the services of SZ upon the terms and conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth, the Bion Companies do hereby agree to engage the services of SZ upon the terms and conditions set forth in the following paragraphs:

1) Term: The Term of this Agreement shall run from May 1, 2005 ('Commencement Date') through a date four years after the date on which SZ begins full-time employment with the Bion Companies ('Transition Date') (the period from Commencement Date through a date 4 years after the Transition Date shall be the 'Term') during which Term SZ shall provide to the Bion Companies ongoing services as set forth in the following provisions:

a) SZ shall provide to the Bion Companies (initially through Dairy) part-time consulting services during a transition period, not to exceed a period of eight months, from the Commencement Date to the Transition Date ('Transition Period'), during which Transition Period SZ shall perform senior officer management functions for Dairy on a consulting basis; on the Transition Date SZ will formally assume the full-time position of a Chief Executive Officer/Senior Management Officer/Director ('SMO') of Dairy, which Transition Date shall be mutually agreed upon by, between and among the Bion Companies and SZ;

b) During the Term, SZ shall, at the request of Bion, serve as SMO of Bion provided that Bion has D&O insurance in place and Bion has recommenced filing with the U.S. Securities & Exchange Commission;

c) After the Transition Date, SZ, as SMO, will be part of a small senior management cadre of the Bion Companies among whom will be divided all of the necessary management duties of the Bion Companies under the direction of SZ; SZ shall report to the Boards of Directors of the Bion Companies, who will also be responsible for evaluation of his performance.

2) Compensation:

a) Compensation from the Bion Companies to SZ for services shall be based on a $300,000 per year rate, of which $150,000 shall be deferred and payable by the Bion Companies, for up to one year or until Bion has secured sufficient financing to commence paying on a current basis; the remaining $150,000 shall be deferred compensation that is due and payable starting September 2007 and paid in full by Feb 2009 in equal quarterly installments;

during the Transition Period and the entire Term, compensation to SZ shall be pro-rated to the extent that SZ works for the Bion Companies on less than a full-time basis (which pro-ration shall be reviewed monthly during the Transition period and quarterly thereafter); PROVIDED, HOWEVER, that SZ shall receive not less than $60,000 in fees during the Transition Period ('Minimum Fee'), which minimum fees shall be due to SZ upon execution of this Agreement.

b) Bion shall sell to SZ, in aggregate, 600,000 warrants at a price of $.10 per warrant, each of which Warrants may be exercised to purchase one share of Bion common stock for a period of 10 years from the Commencement Date at an exercise price of $2.50 per share (collectively, 'Warrants') which Warrants shall be purchased by SZ by use of the Minimum Fee described above; if SZ fails to provide the services to the Bion Companies for the entire Term (except if this is the result of the Bion Companies terminating SZ other than for cause), Bion shall have the right to repurchase a percentage of 300,000 Warrants at a price of $.25 per share, which percentage shall equal the percentage of the final two years of the Term for which the Bion Companies do not receive the services of SZ; termination for cause shall include, without limitation, any of the events listed below,

A) SZ's conviction of any criminal act including, without limitation, misappropriation of funds or property of the Bion Companies or any other felony criminal act;

B) SZ;s misfeasance or malfeasance in office, which shall mean fraud, dishonesty, willful misconduct or substantial neglect of duties; and

C) Breach of SZ of any material provision of this Agreement.

c) SZ shall receive a bonus, in a deferred compensation plan (with other employees/consultants to the Bion Companies) of 100,000 shares of Bion common stock, if Bion common stock trades at or above $10.00/share (equitably adjusted for splits, dividends, mergers, etc.) for 20 consecutive trading days during the Term; and, SZ shall receive a bonus of an additional 50,000 shares of Bion common stock if Bion common stock trades at or above $20.00 per share (equitably adjusted for splits, dividends, mergers, etc.) for 20 consecutive trading days during the Term; provided, however, that such bonuses shall only be paid if SZ is providing full-time services to the Bion Companies on the date the bonus would be earned.

3) Confidentiality/Proprietary Information: SZ will abide by the terms and provisions of a Confidentiality/Proprietary Information Agreement (copy attached hereto as an Exhibit A) and further agrees that, unless expressly waived by the Bion Companies in writing, SZ will require any and all persons who have access to confidential information of the Bion Companies to execute copies of agreements substantially similar to Exhibit A and that notwithstanding any other terms herein; Exhibit A remains in full force and effect; and SZ expressly agree that: a) at no time during the term or during a two (2) year period following the end of the Term (including any extensions thereto) shall SZ compete with the Bion Companies; b) all work product, inventions, etc. of SZ pursuant to this Agreement shall be the sole property

of the Bion Companies and SZ, as applicable, shall execute such assignments and/or other documents as may be required to fully vest such ownership in the Bion Companies; and c) all proprietary information and other information concerning the Bion Companies acquired pursuant to the service of SZ to the Bion Companies shall at all times be and remain the sole property of the Bion Companies regardless of how such proprietary information is stored and upon termination of this Agreement (w/o retaining copies), SZ shall return all such proprietary information to the Bion Companies on whatever medium it is evidenced (including w/o limitation paper files, computer memory media, etc.).

4) Miscellaneous:

a) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns and any person acquiring, whether by merger, consolidation, liquidation, purchase of assets or otherwise, all or substantially all of a party's equity or assets and business.

b) It is the intention of the parties hereto that this Agreement and the performance hereunder and all suits and special proceedings connected herewith be construed in accordance with and pursuant to the laws of the State of New York and that in any action, special proceeding or other proceeding that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of New York shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which any action or special proceeding may be instituted.

c) Any claim or controversy, which arises out of or relates to this Agreement, or breach of it, shall be settled by arbitration.

d) Should any party hereto waive breach of any provision of this Agreement, that waiver shall not operate or be construed as a waiver of any further breach of this Agreement.

e) In the event that any one or more of the provisions of this Agreement or any portions there under is determined to be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

f) This Agreement shall constitute the entire agreement between the parties hereto oral modifications of the Agreement shall have no effect. This Agreement may be altered only by a written agreement signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

Bion Dairy Corporation

By:  /s/ Mark A. Smith


Bion Environmental Technologies, Inc.



By:  /s/ Mark A. Smith

By:  /s/ Salvatore Zizza
       Salvatore Zizza

EXHIBIT 10.25

AGREEMENT

THIS AGREEMENT is made effective the 31st day of March 2005 by, between and among Bion Environmental Technologies, Inc. ('Bion') (collectively Bion, together with the other subsidiaries of Bion, are sometimes referred to as the 'Bion Companies') and Bright Capital, Ltd. ('BC') and Dominic Bassani ('DB').

WHEREAS the Bion Companies desire that BC's provision of services of DB to the Bion Companies continue upon the terms and conditions set forth in this Agreement; and

WHEREAS BC is willing to make certain advances to Bion Dairy Corporation ('Dairy') and exchange a portion of such advances for participation in Dairy's upcoming Series C Note Offering ('Offering')';

AND WHEREAS BC and DB desire to provide to the Bion Companies the services of DB upon the terms and conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth, the Bion Companies do hereby agree to engage BC to provide the services of DB upon the terms and conditions set forth in the following paragraphs:

1) Term: The Term of this Agreement shall run from April 1, 2005 ('Commencement Date') for a period of four years ('Term') during which Term BC shall provide the full-time services of DB to the Bion Companies as set forth in the following provisions:

a) BC shall provide to the Bion Companies (initially through Dairy) the full-time consulting services of DB on a consulting basis; DB will continue in his full-time position as General Manager of Dairy ('GM');

b) During the Term, DB shall, at the request of Bion, provide consulting services to Bion and serve in such positions with Bion as may be reasonably requested by Bion's senior management;

c) DB, as GM and as consultant, shall report to the senior management of the Bion Companies, who will also be responsible for evaluation of his performance.

2) Compensation:

a) Compensation from the Bion Companies to BC for the services of DB provided by BC shall be based on a $300,000 per year rate, of which $150,000 shall be deferred for up to one year or until Bion has secured sufficient financing to commence paying on a current basis; the remaining $150,000 shall be deferred compensation that is due and payable starting September 2007 and paid in full by February 2009 in equal quarterly installments.

b) As to the outstanding deferred compensation presently owed to BC by Bion for past services ('Dcomp'), Dcomp shall continue to be deferred

and shall be payable starting in September 2007 and paid in full by February 2009 in equal quarterly installments. BC has the right to convert its deferred compensation, in whole or in part, into the common stock of Bion at market price (but with a cap to the conversion price of $2.00 per share in the event that market price is greater than $2.00 per share on the date of conversion); the deferred amount shall accrue interest at 6% per annum.

c) Bion shall sell to BC, in aggregate, 200,000 warrants at a price of $.10 per warrant, each of which Warrants may be exercised to purchase one share of Bion common stock for a period of 10 years from the Commencement Date at an exercise price of $2.50 per share (collectively, 'Warrants').

d) BC shall receive a bonus, in a deferred compensation plan (with other employees/consultants to the Bion Companies) of 200,000 shares of Bion common stock, if Bion common stock trades at or above $10.00/share (equitably adjusted for splits, dividends, mergers, etc.) for 20 consecutive trading days during the Term; and, BC shall receive a bonus of an additional 50,000 shares of Bion common stock if Bion common stock trades at or above $20.00 per share (equitably adjusted for splits, dividends, mergers, etc.) for 20 consecutive trading days during the Term;

3) Advances/Investment/Warrants:

a) BC shall advance to Dairy up to approximately $300,000 on an 'as needed basis' to fund operating expenses of Dairy during the spring of 2005;

b) BC agrees to convert/exchange $150,000 of such advances for participation in Dairy's Offering; and

c) To compensate BC for its agreement to make these advances and investments, Bion shall issue to BC 400,000 additional Warrants (see terms above) at a value of $40,000 ($.10 per Warrant).

4) Confidentiality/Proprietary Information: BC and DB will abide by the terms and provisions of existing confidentiality/proprietary information agreements and shall execute and abide by the terms and provisions of an additional Confidentiality/Proprietary Information Agreement (copy attached hereto as an Exhibit A) and further agree that, unless expressly waived by the Bion Companies in writing, BC and DB will require any and all persons who have access to confidential information of the Bion Companies to execute copies of agreements substantially similar to Exhibit A and that notwithstanding any other terms herein; Exhibit A remains in full force and effect; and BC and DB expressly agree that: a) at no time during the term or during a two (2) year period following the end of the Term (including any extensions thereto) shall BC and/or DB compete with the Bion Companies; b) all work product, inventions, etc. of BC and DB pursuant to this Agreement shall be the sole property of the Bion Companies and BC and DB, as applicable, shall execute such assignments and/or other documents as may be required to fully vest such ownership in the Bion Companies; and c) all proprietary information and other information concerning the Bion Companies

acquired pursuant to the service of BC and DB to the Bion Companies shall at all times be and remain the sole property of the Bion Companies regardless of how such proprietary information is stored and upon termination of this Agreement (w/o retaining copies), BC and DBshall return all such proprietary information to the Bion Companies on whatever medium it is evidenced (including w/o limitation paper files, computer memory media, etc.).
5) Miscellaneous:

a) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns and any person acquiring, whether by merger, consolidation, liquidation, purchase of assets or otherwise, all or substantially all of a party's equity or assets and business.

b) It is the intention of the parties hereto that this Agreement and the performance hereunder and all suits and special proceedings connected herewith be construed in accordance with and pursuant to the laws of the State of New York and that in any action, special proceeding or other proceeding that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of New York shall be applicable and shall govern to the exclusion of the law of any other forum, without regard to the jurisdiction in which any action or special proceeding may be instituted.

c) Any claim or controversy, which arises out of or relates to this Agreement, or breach of it, shall be settled by arbitration.

d) Should any party hereto waive breach of any provision of this Agreement, that waiver shall not operate or be construed as a waiver of any further breach of this Agreement.

e) In the event that any one or more of the provisions of this Agreement or any portions there under is determined to be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

f) This Agreement shall constitute the entire agreement between the parties hereto oral modifications of the Agreement shall have no effect. This Agreement may be altered only by a written agreement signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

Bion Dairy Corporation

By:  /s/ Mark A. Smith


Bion Environmental Technologies, Inc.


By:  /s/ Mark A. Smith


By:  /s/ Dominic Bassani
     Dominic Bassani

Bright Capital, Ltd.



By:  /s/ Dominic Bassani
     Dominic Bassani, President

EXHIBIT 10.26

AGREEMENT

THIS AGREEMENT is made effective the 30th day of April 2005 by, between and among Bion Environmental Technologies, Inc. ('Bion'), Bion Dairy Corporation ('Dairy'), a subsidiary of Bion, (collectively Bion & Dairy, together with the other wholly-owned subsidiaries of Bion, are sometimes referred to as the ('Bion Companies') and Jeff Kapell ('JK').

WHEREAS the Bion Companies desire to receive the services of JK upon the terms and conditions set forth in this Agreement;

AND WHEREAS JK desires to provide to the Bion Companies the services of JK upon the terms and conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth, the Bion Companies do hereby agree to engage the services of JK, and (with the express consent of JK as evidenced by his signature below), upon the terms and conditions set forth in the following paragraphs:

1) For a period of not more than one year (the 'Transition Period'), commencing on May 1, 2005 (the 'Commencement Date'):

a) Dairy will pay JK fees of $2,500 per month in exchange for a base level of service that will not cumulatively exceed 10 hours per week, or otherwise the rough equivalent of 'quarter-time';

b) During the Transition Period, for services requested and provided in excess of the base service covered in 1) a) above, Dairy will pay JK additional fees of $60 per hour, with a maximum daily fee of $480;

c) During the transition period, JK will provide services as requested by Dairy.

2) The Term of this Agreement shall run from the Commencement Date through a date four years after the date on which JK begins full-time employment for Bion ('Term') during which Term JK shall provide to the Bion Companies ongoing services as set forth in the following provisions:

a) JK shall provide to the Bion Companies (initially through Dairy) part-time consulting services during a transition period, not to exceed a period of one year as described in paragraph 1) (performing senior officer management functions) and will formally assume the full-time position of a senior management officer ('SMO') of Dairy at a date to be determined by Dairy management, but within the period of one year of the signing of this agreement and with a minimum of 45 days advance notice, and on a date within the period of one year on which Dairy has in place D&O insurance (unless agreed otherwise based on Dairy's status as a 'private' company;) for all purposes herein, 'full time' shall take into account that JK may be limited in his ability to travel on behalf of the Bion Companies for approximately three week period each October during cranberry harvest;

b) JK shall, at the request of Bion serve as a SMO of Bion provided that Bion has D&O insurance in place and Bion has recommenced filing with the U.S. Securities & Exchange Commission ('SEC');

c) JK, as a SMO, will be part of a small senior management cadre which will divide among them all of the necessary management duties of the Bion Companies; JK shall report to the senior management of the Bion Companies, who will also be responsible for evaluation of his performance;

d) JK and senior management shall work out a mutually acceptable manner of handling office costs, business expenses, travel expenses, etc. which is consistent with the current treatment by the Bion Companies in relation to other senior technical employees.

3) Compensation within the Term of this Agreement but after the transition period at which time JK will assume the full-time SMO position (all compensations items herein and this entire Agreement presume that Bion is receiving and JK is providing the services as set forth above):

a) Cash compensation from the Bion Companies to JK for services provided by JK shall be initially $120,000 per year, which shall be payable in monthly installments of $10,000 commencing with the first month of full- time service (unless other senior technical employees have received increases by such date in which case the annual salary shall be increased in line with such increases);

b) Bion shall sell to JK, in aggregate, 100,000 warrants at a price of $.10 per warrant, each of which Warrants may be exercised to purchase one share of Bion common stock for a period of 10 years from the Commencement Date at an exercise price of $2.50 per share (collectively, 'Warrants'); if JK fails to provide the services to the Bion Companies for the entire Term (except if this is the result of the Bion Companies terminating JK for other than cause), Bion shall have the right to repurchase a percentage of the Warrants at a price of $.25 per Warrant, which percentage shall equal the percentage of the Term for which the Bion Companies do not receive the services of JK; for the purposes of these provisions, termination for cause shall include, without limitation, any of the events listed below,

A) JK's conviction of any criminal act including, without limitation, misappropriation of funds or property of the Bion Companies or any other felony criminal act;

B) JK's misfeasance or malfeasance in office, which shall mean fraud, dishonesty, willful misconduct or substantial neglect of duties; and

C) Breach by JK of any material provision of this Agreement.

c) Further, while the Bion Companies and JK have discussed the Bion companies' 'goal' of being able to justify the declaration/payment of substantial cash bonuses (in a range up to 100% of annual cash compensation) to senior management (and consultants performing senior management functions) once initial projects have been completed, JK understands that the Bion Companies are making no commitments related to such bonuses to JK (or any

other officer, director, employee or consultant) other than that JK will be treated/evaluated in the same manner as all other senior management personnel (including consultants). Any such bonuses will be declared/paid only when and if the then existing Boards of Directors of the Bion Companies determines that such bonuses have been earned and are in the best interests of their respective shareholders.

d) Additionally, to the extent that Bion develops policies regarding vesting of Options and/or bonuses in the event of a 'change of control' in the future, JK will be treated in the same manner as all other SMO's, directors, employees & consultants pursuant to such policies.

4) JK will abide by the terms and provisions of a Confidentiality/ Proprietary Information Agreement (copy attached hereto as an Exhibit A) and further agrees that, unless expressly waived by the Bion Companies in writing, JK will require any and all persons who have access to confidential information of the Bion Companies to execute copies of agreements substantially similar to Exhibit A and that notwithstanding any other terms herein; Exhibit A remains in full force and effect; and JK expressly agree that: a) at no time during the Term or during a two (2) year period following the end of the Term (including any extensions thereto) shall JK compete with the Bion Companies; b) All work product, inventions, etc. of JK pursuant to this Agreement shall be the sole property of the Bion Companies and JK, as applicable, shall execute such assignments and /or other documents as may be required to fully vest such ownership in the Bion Companies; and c) all proprietary information and other information concerning the Bion Companies acquired pursuant to the service of JK to the Bion Companies shall at all times be and remain the sole property of the Bion Companies regardless of how such proprietary information is stored and upon termination of this Agreement (w/o retaining copies), JK shall return all such proprietary information to the Bion Companies on whatever medium it is evidenced (including w/o limitation paper files, computer memory media, etc.)

5) JK expressly agrees to indemnify and hold harmless Bion from any and all responsibility, costs, expenses and or liability, direct or indirect, arising from and/or involving issues between JK and his former employer SJH & Company.

6) a) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns and any person acquiring, whether by merger, consolidation, liquidation, purchase of assets or otherwise, all or substantially all of a party's equity or assets and business.

b) It is the intention of the parties hereto that this Agreement and the performance hereunder and all suits and special proceedings connected herewith be construed in accordance with and pursuant to the laws of the State of New York and that in any action, special proceeding or other proceeding that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of New York shall be applicable and shall govern to the exclusion of the law of any other forum, with regard to the jurisdiction in which any action or special proceeding may be instituted.

c) Any claim or controversy, which arises out of or relates to this Agreement, or breach of it, shall be settled by arbitration.

d) Should any party hereto waive breach of any provision of this Agreement, that waiver shall not operate or be construed as a waiver of any further breach of this Agreement.

e) In the event that any one or more of the provisions of this Agreement or any portions there under is determined to be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

f) This Agreement shall constitute the entire agreement between the parties hereto Oral modifications of the Agreement shall have no effect. This Agreement may be altered only by a written agreement signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

Bion Dairy Corporation

By:  /s/ Mark A. Smith


Bion Environmental Technologies, Inc.



By: /s/ Mark A. Smith


By:  /s/ Jeffrey H. Kapell
       Jeff Kapell

EXHIBIT 10.27

AGREEMENT

THIS AGREEMENT is executed as set forth below, pursuant to a term sheet agreed upon as of the 15th day of December 2005 (on which date the parties agreed to all material terms except Commencement Date), by, between and among Bion Environmental Technologies, Inc. ("Bion"), Bion Dairy Corporation ("Dairy"), a subsidiary of Bion, (collectively Bion & Dairy, together with the other wholly-owned subsidiaries of Bion, are sometimes referred to as the ("Bion Companies") and Jeremy Rowland ("JR").

WHEREAS the Bion Companies desire to receive the services of JR upon the terms and conditions set forth in this Agreement;

AND WHEREAS JR desires to provide to the Bion Companies with his services upon the terms and conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the mutual covenants and conditions hereinafter set forth, the Bion Companies do hereby agree to engage the services of JR, and (with the express consent of JR as evidenced by his signature below), upon the terms and conditions set forth in the following paragraphs:

1) The Term of this Agreement shall run from September 18, 2006 (or another mutually agreed upon date during September 2006) ("Commencement Date"), through a date four years after the Commencement Date ("Term"), during which Term JR shall provide to the Bion Companies his full-time services as set forth in the following provisions:

a) JR shall provide his full-time services to the Bion Companies (initially through Dairy) as Chief Operating Officer ("COO") of Dairy, with duties per discussions to date;

b) JR shall, at the request of Bion, also serve as COO (or in another senior management officer ("SMO") position) of Bion provided that Bion has D&O insurance in place and Bion has recommenced filing with the U.S. Securities & Exchange Commission ("SEC");

c) JR, as COO and/or SMO, of Bion and/or Dairy will be part of a small senior management cadre which will divide among themselves all of the necessary management duties of the Bion Companies; JR shall report to the senior management of the Bion Companies (Chairman, CEO and /or President, as applicable), who will also be responsible for evaluation of his performance;

d) JR and the Bion Companies shall work out a mutually acceptable manner of handling office costs, business expenses, travel expenses, etc. which is consistent with the current treatment by the Bion Companies in relation to other senior management and senior technical employees; in addition, JR shall be eligible for reimbursement for reasonable medical insurance premiums for his family and shall have the right to participate in existing or subsequently adopted 401(k) plans;

e) JR shall initially have not less than 3 weeks of paid vacation per year which vacation time shall be scheduled with the senior management of the Bion Companies in a manner consistent with JR"s duties.

2) Compensation during the Term of this Agreement (all compensations items herein and this entire Agreement presume that Bion is receiving and JR is providing the services as set forth above):

a) Cash compensation from the Bion Companies to JR for services provided by JR shall be initially $150,000 per year, which shall be payable in twice monthly installments of $6,250 commencing with the first month of full-time service;

b) Bion shall grant to JR on the Commencement Date of this Agreement, in aggregate, 150,000 options, each of which Options may be exercised to purchase one share of Bion common stock for a period ending December 15, 2015 at an exercise price of $4.00 per share (collectively, "Options"), 25% (37,500) of which Options shall vest on the Commencement Date and an additional 25% (37,500) shall vest on each of the next three anniversaries of the Commencement Date; PROVIDED, HOWEVER, if JR fails to provide the services to the Bion Companies for the entire Term (except if this is the result of the Bion Companies terminating JR for other than cause), all unvested Options on the date on which JR"s termination takes place shall be automatically cancelled on such termination date; for the purposes of these provisions, termination for cause shall include, without limitation, any of the events listed below:

A) JR"s conviction of any criminal act including, without limitation, misappropriation of funds or property of the Bion Companies or any other felony criminal act;

B) JR"s misfeasance or malfeasance in office, which shall mean fraud, dishonesty, willful misconduct or substantial neglect of duties; and

C) Breach by JR of any material provision of this Agreement.

c) In the event that the Bion Companies elect to terminate JR without cause, the Bion Companies shall pay JR his full salary and benefits (subject to reasonable mitigation by JR) for the lesser of the balance of the Term or six (6) months.

d) Further, while the Bion Companies and JR have discussed the Bion Companies" "goal" of being able to justify the declaration/payment of substantial cash bonuses (in a range of up to 50-100% of annual cash compensation) to senior management (and consultants performing senior management functions) once initial major projects (initial Integrated Projects, Dairy Parks and/or Central Processing Facilities with integrated ethanol plants) have been completed, JR understands that the Bion Companies are making no commitments related to such bonuses to JR (or any other officer, director, employee or consultant) other than that JR will be treated/evaluated in the same manner as all other senior management personnel (including consultants). Any such bonuses will be declared/paid only when and if the then existing Boards of Directors of the Bion Companies determines that such bonuses have been earned and are in the best interests of their respective shareholders.

e) Additionally, to the extent that Bion develops policies regarding vesting of Options and/or bonuses in the event of a "change of control" in the future, JR will be treated in the same manner as all other SMO"s, directors, employees & consultants pursuant to such policies.

3) JR will abide by the terms and provisions of a Confidentiality/ Proprietary Information Agreement (copy attached hereto as an Exhibit A) and further agrees that, unless expressly waived by the Bion Companies in writing, JR will require any and all persons who have access to confidential information of the Bion Companies to execute copies of agreements substantially similar to Exhibit A and that notwithstanding any other terms herein, Exhibit A shall remain in full force and effect; and JR expressly agree that: a) at no time during the Term or during a two (2) year period following the end of the Term (including any extensions thereto) shall JR compete with the Bion Companies; b) all work product, inventions, etc. of JR made during JR"s employment pursuant to this Agreement shall be the sole property of the Bion Companies and JR, as applicable, shall execute such assignments and /or other documents as may be required to fully vest such ownership in the Bion Companies; and c) all proprietary information and other information concerning the Bion Companies acquired pursuant to the service of JR to the Bion Companies shall at all times be and remain the sole property of the Bion Companies regardless of how such proprietary information is stored and upon termination of this Agreement (w/o retaining copies), JR shall return all such proprietary information to the Bion Companies on whatever medium it is evidenced (including w/o limitation paper files, computer memory media, etc.)

4) a) The Bion Companies shall reimburse JR for purchase of basic equipment (computer/cell phone/etc) which equipment will be owned by the Bion Companies.

b) JR shall initially work in the Denver, Colorado metropolitan area and the Bion Companies shall provide JR with appropriate office space if office space other than JR"s home office is needed.

c) This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns and any person acquiring, whether by merger, consolidation, liquidation, purchase of assets or otherwise, all or substantially all of a party"s equity or assets and business.

d) It is the intention of the parties hereto that this Agreement and the performance hereunder and all suits and special proceedings connected herewith be construed in accordance with and pursuant to the laws of the State of Colorado and that in any action, special proceeding or other proceeding that may be brought arising out of, in connection with, or by reason of this Agreement, the laws of the State of Colorado shall be applicable and shall govern to the exclusion of the law of any other forum, with regard to the jurisdiction in which any action or special proceeding may be instituted.

e) Any claim or controversy, which arises out of or relates to this Agreement, or breach of it, shall be settled by arbitration.

f) Should any party hereto waive breach of any provision of this Agreement, that waiver shall not operate or be construed as a waiver of any further breach of this Agreement.

g) In the event that any one or more of the provisions of this Agreement or any portions there under is determined to be invalid, illegal, or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

h) This Agreement shall constitute the entire agreement between the parties hereto Oral modifications of the Agreement shall have no effect. This Agreement may be altered only by a written agreement signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought.

Bion Dairy Corporation

By:  /s/ Mark A. Smith

Bion Environmental Technologies, Inc.


By: /s/ Mark A. Smith




/s/ Jeremy Rowland       August 28, 2006
Jeremy Rowland

EXHIBIT 10.28

AGREEMENT OF LEASE

Between

FIRST LEXINGTON CORPORATION,

Owner

and

BION ENVIRONMENTAL TECHNOLOGIES, INC.,

Tenant

Premises

Portion Seventeenth (17th) Floor
641 Lexington Avenue
New York, New York

Dated as of June ___, 2006

TABLE OF CONTENTS

ARTICLE 1          Demised Premises, Term, Rents
ARTICLE 2          Use and Occupancy
ARTICLE 3          Alterations
ARTICLE 4          Ownership of Improvements
ARTICLE 5          Repairs
ARTICLE 6          Compliance With Laws
ARTICLE 7          Subordination, Attornment, Etc.
ARTICLE 8          Property Loss, Etc.
ARTICLE 9          Destruction-Fire or Other Casualty
ARTICLE 10         Eminent Domain
ARTICLE 11         Assignment and Subletting
ARTICLE 12         Existing Conditions
ARTICLE 13         Access to Demised Premises
ARTICLE 14         Vault Space
ARTICLE 15         Certificate of Occupancy
ARTICLE 16         Default
ARTICLE 17         Remedies
ARTICLE 18         Damages
ARTICLE 19         Fees and Expenses; Indemnity
ARTICLE 20         Entire Agreement
ARTICLE 21         End of Term
ARTICLE 22         Quiet Enjoyment
ARTICLE 23         Escalation
ARTICLE 24         No Waiver
ARTICLE 25         Mutual Waiver of Trial by Jury
ARTICLE 26         Inability to Perform
ARTICLE 27         Notices
ARTICLE 28         Partnership Tenant
ARTICLE 29         Utilities and Services
ARTICLE 30         Table of Contents, Etc.
ARTICLE 31         Miscellaneous Definitions, Severability and Interpretation
                     Provisions
ARTICLE 32         Adjacent Excavation
ARTICLE 33         Building Rules
ARTICLE 34         Broker
ARTICLE 35         Security
ARTICLE 36         Arbitration, Etc.
ARTICLE 37         Parties Bound
SCHEDULE A         Building Rules
EXHIBIT 1          Plan of Demised Premises
EXHIBIT 2          Form of Letter of Credit

LEASE dated as of the ___ day of June, 2006, between FIRST LEXINGTON CORPORATION, a New York corporation having its principal office at 345 Park Avenue, Borough of Manhattan, City, County, and State of New York, 10154, as landlord (referred to as "Owner"), and BION

ENVIRONMENTAL TECHNOLOGIES, INC., a _____________ corporation, having its principal office at 14 East 60th Street, New York, New York, as tenant (referred to as "Tenant").

W I T N E S S E T H:

Owner and Tenant hereby covenant and agree as follows:

ARTICLE 1
DEMISED PREMISES, TERM, RENTS

Section 1.01. Demised Premises: Owner hereby leases to Tenant and Tenant hereby hires from Owner a portion of seventeenth (17th) floor, as more particularly delineated by outlining and diagonal markings on the floor plan annexed hereto and made a part hereof as Exhibit "1," in the building known as 641 Lexington Avenue, in the Borough of Manhattan, City of New York (said building is referred to as the "Building", and the Building together with the plot of land upon which it stands is referred to as the "Real Property"), at the annual rental rate or rates set forth in Section 1.03, and upon and subject to all of the terms, covenants and conditions contained in this Lease. The premises leased to Tenant, together with all appurtenances, fixtures, improvements, additions and other property attached thereto or installed therein at the commencement of, or at any time during, the term of this Lease, other than Tenant's Personal Property (as defined in Article 4), are referred to, collectively, as the "Demised Premises".

Section 1.02. Demised Term: A. The Demised Premises are leased for a term (referred to as the "Demised Term") to commence on the date of this Lease and to end on the last day of calendar month in which the seven (7) year, four (4) month anniversary of the Commencement Date (as hereinafter defined) shall occur, unless the Demised Term shall sooner terminate pursuant to any of the terms, covenants or conditions of this Lease or pursuant to law.

B. The date upon which the Demised Term shall commence pursuant to Subsection A of this Section is referred to as the "Commencement Date", and the date fixed pursuant to said Subsection A as the date upon which the Demised Term shall end is referred to as the "Expiration Date".

C. Tenant waives any right to rescind this Lease under Section 223-a of the New York Real Property Law or any successor statute of similar import then in force and further waives the right to recover any damages which may result from Owner's failure to deliver possession of the Demised Premises on the date set forth in Subsection A of this Section, or in any notice given pursuant to Subsection B of this Section, for the commencement of the Demised Term.

D. After the determination of the Commencement Date, Tenant agrees, upon demand of Owner, to execute, acknowledge and deliver to Owner, an instrument, in form reasonably satisfactory to Owner, setting forth said Commencement Date and the Expiration Date.

Section 1.03. Fixed Rent: A. The Lease is made at the following annual rental rates (referred to as "Fixed Rent"):

1. ELEVEN THOUSAND FOUR HUNDRED SIXTY-THREE and 00/100 ($11,463.00) DOLLARS with respect to the period (referred to as the "First Rent Period") from the Commencement Date to and including the day immediately preceding the four (4) month anniversary of the Commencement Date; and

2. ONE HUNDRED SEVENTY-ONE THOUSAND NINE HUNDRED FORTYFIVE and 00/100 ($171,945.00) DOLLARS with respect to the next five (5) years of the Demised Term (referred to as the "Second Rent Period"); and

3. ONE HUNDRED EIGHTY-THREE THOUSAND FOUR HUNDRED EIGHT and 00/100 ($183,408.00) DOLLARS with respect to the remainder of the Demised Term (referred to as the "Third Rent Period").

B. The Fixed Rent, any increases in the Fixed Rent and any additional rent payable pursuant to the provisions of this Lease shall be payable by Tenant to Owner at its office (or at such other place as Owner may designate in a notice to Tenant) in lawful money of the United States which shall be legal tender in payment of all debts and dues, public and private, at the time of payment or by Tenant's good check drawn on a bank or trust company which is a member of The Clearing House Association L.L.C. without prior demand therefor and without any offset or deduction whatsoever except as otherwise specifically provided in this Lease. Notwithstanding the foregoing, Tenant may pay the monthly installments of Fixed Rent set forth in this Section 1.03B, and any increases in Fixed Rent pursuant to Article 23 which are billed to Tenant at the same time as such monthly installments of Fixed Rent, and any additional rent then due and payable by wire transfer to the account of Owner, provided that (a) Tenant shall give Owner thirty (30) days" prior written notice of Tenant's intent to pay such sums via wire transfer at the time Tenant first elects to do same, (b) Tenant shall give a confirmation of such wire transfer as soon as possible to Owner's e-mail address wireflag@rudin.com (or any other e-mail address of which Owner gives Tenant notice), and (c) such wire transfer shall be received by Owner no later than two (2) days after the date upon which such sums are due and payable. The Fixed Rent shall be payable in equal monthly installments in advance, on the first (1st) day of each month during the Demised Term (except as otherwise provided in Subsection C of this Section) as follows:

1. NINE HUNDRED FIFTY-FIVE and 00/100 ($955.00) DOLLARS with respect to the First Rent Period; and

2. FOURTEEN THOUSAND THREE HUNDRED TWENTY-EIGHT and 75/100 ($14,328.75) DOLLARS with respect to the Second Rent Period; and

3. FIFTEEN THOUSAND TWO HUNDRED EIGHTY-FOUR and 00/100 ($15,284.00) DOLLARS with respect to the Third Rent Period.

C. The sum of FOURTEEN THOUSAND THREE HUNDRED TWENTY-EIGHT and 75/100 ($14,328.75) DOLLARS, representing the installment of Fixed Rent for the first
(1st) full calendar month of the Second Rent Period is due and payable at the time of the execution and delivery of this Lease. In the event that the first day of the Second Rent Period shall occur on a date other than the first (1st) day of any calendar month, Tenant shall pay to Owner, on the first (1st) day of the month next succeeding the month during which the first day of the Second Rent Period shall occur, a sum equal to FOUR HUNDRED SEVENTY-SEVEN and 63/100 ($477.63) DOLLARS, multiplied by the number of calendar days in the period from the first day of the Second Rent Period to the last day of the month in which the first day of the Second Rent Period shall occur, both inclusive. Such payment, together with the sum paid by Tenant upon the execution of this Lease, shall constitute payment of the Fixed Rent for the period from the first day of the Second Rent Period to and including the last day of the next succeeding calendar month.

D. If Tenant shall use or occupy all or any part of the Demised Premises prior to the Commencement Date, such use or occupancy shall be deemed to be under all of the terms, covenants and conditions of this Lease, including, without limitation, the covenant to pay Fixed Rent for the period from the commencement of said use or occupancy to and including the date immediately preceding the Commencement Date, without, however, affecting the Expiration Date. The provisions of the foregoing sentence shall not be deemed to give to Tenant any right to use or occupy all or any part of the Demised Premises prior to the Commencement Date without the consent of Owner.

Section 1.04. Tenant's General Covenant: Tenant covenants (i) to pay the Fixed Rent, any increases in the Fixed Rent, and any additional rent payable pursuant to the provisions of this Lease, and (ii) to observe and perform, and to permit no violation of, the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed.

Section 1.05. Partial Rent Credit Amount: Tenant acknowledges that the Fixed Rent for the First Rent Period reflects an aggregate conditional rent credit in the sum of FIFTY-THREE THOUSAND FOUR HUNDRED NINETY-FOUR and 00/100 ($53,494.00) DOLLARS (i.e., $13,373.50 per month) (such aggregate rent credit referred to herein as the "Fixed Rent Credit Amount"), so that only an amount equal to the Electrical Inclusion Factor (as defined herein) is to be paid by Tenant during such First Rent Period as set forth in Section 1.03 hereof.

ARTICLE 2
USE AND OCCUPANCY

Section 2.01. General Covenant of Use: Tenant shall use and occupy the Demised Premises for the following purpose: general and executive offices and for no other purposes.

Section 2.02. No Adverse Use: Tenant shall not use or occupy, or permit the use or occupancy of, the Demised Premises or any part thereof, for any purpose other than the purpose specifically set forth in Section 2.01, or in any manner which, in Owner's reasonable judgment, (a) shall adversely affect or interfere with (i) any services required to be furnished by Owner to Tenant or to any other tenant or occupant of the Building, or (ii) the proper and economical rendition of any such service, or (iii) the use or enjoyment of any part of the Building by any other tenant or occupant, or (b) shall tend to impair the character or dignity of the Building.

Section 2.03. Pantry: Tenant may not undertake any "cooking" activities in the Demised Premises or have a kitchen therein, but Tenant may have a pantry in the Demised Premises and may use therein a dishwasher (provided the use of an ordinary kitchen grade type dishwasher shall be considered ordinary water consumption, but the use of an industrial or commercial type dishwasher shall not be considered ordinary water consumption) hot plates, refrigerators, freezers, sinks, toaster ovens and microwave ovens, provided that no such use shall require use of a flue or other means of venting, a rotoclone, or similar type equipment by reason of cooking, frying or otherwise and that Tenant also make such Alterations as are necessary in Owner's reasonable judgment to prevent noise, vibrations, water, or odors from such equipment from interfering with the Building systems or use or occupancy or enjoyment of the Building by Owner or other tenants.

ARTICLE 3
ALTERATIONS

Section 3.01. General Alteration Covenants: Tenant shall not make or perform, or permit the making or performance of, any alterations, installations, decorations, improvements, additions or other physical changes in or about the Demised Premises (referred to collectively, as "Alterations" and individually as an "Alteration") without Owner's prior consent in each instance. Owner agrees not unreasonably to withhold its consent to any non- structural Alterations proposed to be made by Tenant to adapt the Demised Premises for Tenant's business purposes. Notwithstanding the foregoing provisions of this Section or Owner's consent to any Alterations, all Alterations shall be made and performed in conformity with and subject to the following provisions:

A. All Alterations shall be made and performed at Tenant's sole cost and expense and at such time and in such manner as Owner may, from time to time, reasonably designate;

B. No Alteration shall adversely affect the structural integrity of the Building;

C. Alterations shall be made only by contractors or mechanics approved by Owner, such approval not unreasonably to be withheld (notwithstanding the foregoing, all Alterations requiring mechanics in trades with respect to which Owner has adopted or may hereafter adopt a list or lists of approved contractors shall be made only by contractors selected by Tenant from such list or lists and Owner shall have sole discretion with respect to the contractor performing connections to the Building Class E Fire Alarm and Communication system);

D. No Alteration shall affect any part of the Building other than the Demised Premises or adversely affect any service required to be furnished by Owner to Tenant or to any other tenant or occupant of the Building (including, without limitation, the Building-wide standard systems required to provide elevator, heat, ventilation, air-conditioning and electrical and plumbing services in the Building);

E. No Alteration shall reduce the value or utility of the Building or any portion thereof;

F. No Alteration shall affect the Certificate of Occupancy for the Building or the Demised Premises;

G. No Alteration shall affect the outside appearance of the Building or the color or style of any venetian blinds (except that Tenant may remove any venetian blinds provided that they are promptly replaced by Tenant with Building standard blinds);

H. All business machines and mechanical equipment shall be placed and maintained by Tenant in settings sufficient, in Owner's judgment, to absorb and prevent vibration, noise and annoyance to other tenants or occupants of the Building;

I. Tenant shall submit to Owner detailed plans and specifications stamped by Tenant's architect (including layout, architectural, mechanical and structural drawings) for each proposed Alteration and shall not commence any such Alteration without first obtaining Owner's approval of such plans and specifications and following the completion of each Alteration, Tenant shall submit to Owner a computerized "as built" drawing file for the Demised Premises (or if the Demised Premises comprise more than one (1) floor, for each floor of the Demised Premises being altered); such file will be in DXF format and contain, on a separate layer, all ceiling-height partitions and doors within the Demised Premises (or if the Demised Premises comprise more than one (1) floor, within each floor of the Demised Premises being altered);

J. Prior to the commencement of each proposed Alteration, Tenant shall have procured and paid for and exhibited to Owner, so far as the same may be required from time to time, all permits, approvals and authorizations of all Governmental Authorities (as defined in Section 6.01.) having or claiming jurisdiction;

K. Prior to the commencement of each proposed Alteration, Tenant shall furnish to Owner duplicate original policies of workmen's compensation insurance covering all persons to be employed in connection with such Alteration, including those to be employed by all contractors and subcontractors, and of comprehensive public liability insurance (including property damage coverage) in which Owner, its agents, the holder of any Mortgage (as defined in Section 7.01.) and any lessor under any Superior Lease (as defined in Section 7.01.) shall be named as parties insured, which policies shall be issued by companies, and shall be in form and amounts, satisfactory to Owner and shall be maintained by Tenant until the completion of such Alteration;

L. In the event Owner or its agents employ any independent architect or engineer to examine any plans or specifications submitted by Tenant to Owner in connection with any proposed Alteration, Tenant agrees to pay to Owner a sum equal to any reasonable fees incurred by Owner in connection therewith;

M. All fireproof wood test reports, electrical and air conditioning certificates, and all other permits, approvals and certificates required by all Governmental Authorities shall be timely obtained by Tenant and submitted to Owner;

N. All Alterations, once commenced, shall be made promptly and in a good and workmanlike manner;

O. Notwithstanding Owner's approval of plans and specifications for any Alteration, all Alterations shall be made and performed in full compliance with all Legal Requirements (as defined in Section 6.01.) and with all applicable rules, orders, regulations and requirements of the New York Board of Fire Underwriters and the New York Fire Insurance Rating Organization or any similar body;

P. All Alterations shall be made and performed in accordance with the Building Rules and Building Rules for Alterations;

Q. All materials and equipment to be installed, incorporated or located in the Demised Premises as a result of all Alterations shall be new and first quality;

R. No materials or equipment shall be subject to any lien, encumbrance, chattel mortgage or title retention or security agreement of any kind;

S. Tenant, before commencement of each Alteration, shall furnish to Owner a performance bond or other security satisfactory to Owner, in an amount at least equal to the estimated cost of such Alteration, guaranteeing the performance and payment thereof. The provisions of this Subsection S shall not apply to Tenant's Initial Installation or to the performance by Tenant of any Alterations constituting a single project and estimated to cost no more than SEVENTY-FIVE THOUSAND and 00/100 ($75,000.00) DOLLARS;

T. No Alteration shall be commenced unless any preceding Alteration shall have been fully paid for and proof of such payment furnished to Owner;

U. All Alterations in or to the electrical facilities in or serving the Demised Premises shall be subject to the provisions of Subsection C(1) of
Section 29.05 (relating to increases in the Fixed Rent);

V. Following the completion of each Alteration, Tenant, at Tenant's expense, shall obtain certificates of final approval of such Alteration required by any Governmental Authority and shall furnish Owner with copies thereof; and

W. Tenant agrees that Tenant will not install, affix, add or paint in or on, nor permit, any work of visual art (as defined in the Federal Visual Artists" Rights Act of 1990 or any successor law of similar import) or other Alteration to be installed in or on, or affixed, added to, or painted on, the interior or exterior of the Demised Premises, or any part thereof, including, but not limited to, the walls, floors, ceilings, doors, windows, fixtures and on land included as part of the Demised Premises, which work of visual art or other Alteration would, under the provisions of the Federal Visual Artists" Rights Act of 1990, or any successor law of similar import, require the consent of the author or artist of such work or Alteration before the same could be removed, modified, destroyed or demolished.

Section 3.02. No Consent to Contractor/No Mechanics Lien: Nothing in this Lease shall be deemed or construed in any way as constituting the consent or request of Owner, express or implied, by inference or otherwise, to any contractor, subcontractor, laborer or materialmen, for the performance of any labor or the furnishing of any material for any specific Alteration to, or repair of, the Demised Premises, the Building, or any part of either. Any mechanic's or other lien filed against the Demised Premises or the Building or the Real Property for work claimed to have been done for, or materials claimed to have been furnished to, Tenant or any person claiming through or under Tenant or based upon any act or omission or alleged act or omission of Tenant or any such person shall be discharged by Tenant, at Tenant's sole cost and expense, within thirty (30) days after the filing of such lien.

Section 3.03. Labor Harmony: Tenant shall not, at any time prior to or during the Demised Term, directly or indirectly employ, or permit the employment of, any contractor, mechanic or laborer in the Demised Premises, whether in connection with any Alteration or otherwise, if such employment will interfere or cause any conflict with other contractors, mechanics, or laborers engaged in the construction, maintenance or operation of the Building by Owner, Tenant or others. In the event of any such interference or conflict, Tenant, upon demand of Owner, shall cause all contractors, mechanics or laborers causing such interference or conflict to leave the Building immediately.

Section 3.04. Compliance with Fire Safety: Without in any way limiting the generality of the provisions of Section 3.01, all Alterations shall be made and performed in full compliance with all standards and practices adopted by Owner for fire safety in the Building. No Alteration shall affect all or any part of any Class E Fire Alarm and Communication system installed in the Demised Premises, except that in connection with any such Alteration Tenant may relocate certain components of such system, provided (i) such relocation shall be performed in a manner first approved y Owner, (ii) the new location of any such component shall be first approved by Owner, (iii) prior to any such relocation Tenant shall submit to Owner detailed plans and specifications therefor which shall be first approved by Owner and (iv) Owner shall have the election of relocating such components either by itself or by its contractors, in which event all expenses incurred by Owner shall be reimbursed by Tenant upon demand of Owner, as additional rent.

Section 3.05. Sprinklers: In the event that Tenant performs any Alterations in the Demised Premises, Tenant, as part of such Alterations, shall be required to (x) install a sprinkler system in the Demised Premises to the extent not theretofor installed and (y) make all modifications to any existing sprinkler system necessary in connection with such Alterations, and in connection with the foregoing the following provisions of this Section shall apply: (i) such sprinkler system and/or modifications thereto shall comply with all applicable laws, orders, rules and regulations; (ii) the supplying and installing of any such sprinkler system and/or modifications thereto shall be made in accordance with the provisions of this Lease, including but not limited to the provisions of this Article and Article 6 and the type, brand, location and manner of installation of such sprinkler system and/or modifications thereto shall be subject to Owner's prior approval; and
(iii) Tenant shall make all repairs and replacements, as and when necessary, to such sprinkler system including any modifications thereto and any replacements thereof. Notwithstanding the aforesaid provisions of this Section, Owner shall have the election of supplying and installing such sprinkler system and/or modifications thereto either by itself or by its agents or contractors, in which event all costs and expenses incurred by Owner in connection with supplying and installing such sprinkler system and/or modifications thereto and any repairs or replacements of such sprinkler system as the same may be modified and any replacements thereof made by Owner, at Owner's election, shall be paid by Tenant to Owner within ten (10) days next following the rendition of a statement thereof by Owner to Tenant. In addition to paying all costs and expenses in connection with the supplying, installing and modifying of such sprinkler system, Tenant shall pay to Owner, for each floor of the Building on which any portion of the Demised Premises is located, a fee equal to Tenant's pro rata share of all of the costs and expenses incurred by Owner, if any, in supplying and installing a "common sprinkler header" on such floor which pro rata share shall be a fraction in which the numerator shall be the number of rentable square feet of that portion of the Demised Premises located on such floor and the denominator shall be the number of rentable square feet on such floor, provided however, that notwithstanding anything contained in this Section to the contrary, Owner shall have no obligation to install such "common sprinkler header" on any floor of the Building which shall be entirely demised to Tenant. Such fee shall be payable to Owner within ten (10) days next following the rendition of a statement thereof by Owner to Tenant. Notwithstanding anything contained in this Lease to the contrary, such sprinkler system, or any replacement thereof and any modifications and/or installations in connection therewith, whether made by Tenant or Owner, shall upon expiration or sooner termination of the Demised Term be deemed the property of Owner. Notwithstanding anything contained in this Section 3.05 to the contrary, Owner has advised Tenant that the Demised Premises initially leased on the Commencement Date shall contain a sprinkler system which shall comply with all Legal Requirements in effect as of the date hereof.

Section 3.06 Asbestos or Other Asbestos Containing Materials:

A. In the event that, at any time during the Demised Term, in connection with any Alterations proposed to be performed by Tenant in the Demised Premises Tenant is unable to obtain a New York City Department of Environmental Protection Form ACP5 dated 2/01 (or any successor form), signed by a certified asbestos investigator, or any other form or approval required by Federal, State, County or Municipal authorities, indicating that said Alterations do not constitute an asbestos project, Owner agrees, upon notice from Tenant to such effect, to perform such work as shall be required to enable Tenant to obtain any such form or approval.

B. If any Legal Requirements (as defined in Section 6.01) require that any asbestos or other asbestos containing material contained in or about the Demised Premises be removed or dealt with in any particular manner, then it shall be Owner's obligation, at Owner's expense, to remove or so deal with such asbestos or other asbestos containing material in accordance with such Legal Requirements (as defined in Section 6.01).

C. Notwithstanding the provisions of Subsections A and B of this Section, in the event any work performed by Owner pursuant to the provisions of either or both of such Subsections is in any way disturbed or damaged by Tenant or any person claiming through or under Tenant, or asbestos or other asbestos containing material is installed in the Demised Premises by or on behalf of Tenant, or any person claiming through or under Tenant, Owner shall have no responsibility in connection therewith and no obligation to perform any work with respect thereto, but it shall be Tenant's obligation, at Tenant's expense, to (i) perform such work as shall be required to enable Tenant to obtain any form or approval referred to in Subsection A, and (ii) remove or so deal with such asbestos or other asbestos containing material in accordance with all such Legal Requirements (as defined in Section 6.01) referred to in Subsection B. Any work required to be performed by Tenant pursuant to the provisions of the foregoing sentence is referred to as the "Compliance Work". In the event Tenant is required to perform any Compliance Work then, notwithstanding anything to the contrary contained in this Subsection C, Owner, at Owner's election, shall have the option to itself perform any Compliance Work and, in such event, Tenant shall pay to Owner all of Owner's reasonable, out-of-pocket costs in connection therewith within thirty (30) days next following the rendition of a statement thereof by Owner to Tenant.

D. Since current Legal Requirements state that no New York City Department of Environmental Protection Form ACP-5 dated 2/01 (or any successor form) may be issued without plans and specifications for the Alterations in question, wherever in this Lease Owner has agreed to supply Tenant with a New York City Department of Environmental Protection form ACP-5 dated 2/01 (or any successor form), Owner's obligation to supply such form shall be conditioned on the requirement that Tenant has delivered to Owner such plans and specifications for the Alterations in question to enable Owner to obtain such form.

Section 3.07. Dispute Resolution: Any dispute with respect to the reasonability of any failure or refusal of Owner to grant its consent or approval to any request for such consent or approval pursuant to the provisions of Section 3.01 with respect to which request Owner has agreed, in such Section not unreasonably to withhold such consent or approval, shall be determined by arbitration in accordance with the provisions of Article 36.

Section 3.08. Tenant's Initial Installation/ Owner's Work Contribution:

A. Promptly after the Commencement Date, Tenant shall, at Tenant's cost and expense, perform various Alterations in the Demised Premises required to prepare the Demised Premises for Tenant's initial occupancy and use and conduct of its business therein. Such Alterations (referred to as "Tenant's Initial Installation") shall be made and performed in accordance with the provisions of this Lease, including, without limitation, the provisions of Articles 3 and 6 hereof. Tenant shall prosecute Tenant's Initial Installation to completion with all reasonable diligence.

B. Subject to the provisions and requirements of this Section 3.08, and provided that Tenant is not then in default under any of the terms, covenants or conditions of this Lease on the part of Tenant to be observed or performed, Owner shall contribute the sum of not more than SEVENTY-SIX THOUSAND FOUR HUNDRED TWENTY and 00/100 ($76,420.00) DOLLARS in the aggregate toward the cost and expense actually incurred by Tenant with respect to Tenant's Initial Installation. Owner's contribution on account of Tenant's Initial Installation is referred to as "Owner's Work Contribution". Irrespective of the actual cost and expense of Tenant's Initial Installation, in no event shall Owner's Work Contribution exceed the aggregate sum of SEVENTY-SIX THOUSAND FOUR HUNDRED TWENTY and 00/100 ($76,420.00) DOLLARS.

C. Provided that Tenant is not then in default under any of the terms, covenants or conditions of this Lease on Tenant's part to be observed and performed, Owner shall distribute Owner's Work Contribution on account of Tenant's Initial Installation upon the date Tenant shall occupy the Demised Premises for the conduct of business, provided that Tenant shall have submitted to Owner (i) paid receipts and cancelled checks or other evidence of payment, in form reasonably acceptable to Owner, for the total cost and expense of Tenant's Initial Installation, (ii) proof reasonably satisfactory to Owner that all consents, approvals, or signoffs to be obtained by Tenant under any Legal Requirements or as required by any Governmental Authority have been obtained, and (iii) final waivers of mechanic's liens from all contractors, subcontractors, materialmen and laborers who were hired to perform any services or deliver any materials in connection with Tenant's Initial Installation, along with a certificate executed by an officer of Tenant stating that such lien waivers are on account of all such costs and expenses incurred with respect to Tenant's Initial Installation, provided however, that Owner shall not be required to pay more than the cost of the work in place plus any Soft Costs (as hereinafter defined) incurred by Tenant nor make payment prior to the completion of Tenant's Initial Installation, and provided further that any such work shall substantially comply with any plans and specifications previously approved by Owner and shall otherwise comply with the requirements of this Lease and Tenant's request for distribution shall be accompanied by a certification of Tenant's architect or designer stating that such work so substantially complies with such plans and specifications (which certification may be provided on AIA Form G704 Certificate of Substantial Completion). For purposes of the immediately preceding sentence, "Soft Costs" shall mean those so-called "soft" costs and expenses incurred by Tenant in connection with Tenant's Initial Installation, including, without limitation, the cost of all consultant, architectural, engineering and designers fees and all permit fees and moving expenses (as opposed to so-called "hard costs" of Tenant's Initial Installation that shall become permanently affixed to the Demised Premises). Notwithstanding anything to the contrary herein, the distribution of Owner's Work Contribution shall be made within thirty (30) days following the date of Tenant's required submissions hereunder and compliance with the terms and conditions of this Subsection C. Tenant's request for the disbursement of Owner's Work Contribution shall also include written information in reasonable detail provided on AIA Form G702 Application for Payment with Continuation Sheet AIA Form 703 attached, so that Owner can readily determine the type, class and respective amounts of the expenditures made with such sums requested (ie: the type of "hard costs" or "soft costs" etc.), and Tenant shall reasonably cooperate with Owner to provide Owner with further information in the event that Owner has any inquiries with respect to the same.

D. The making of the Owner's Work Contribution by Owner shall constitute a single nonrecurring obligation on the part of Owner. In the event this Lease is renewed or extended for a further term by agreement or operation of law, Owner's obligation to give Owner's Work Contribution or any part thereof shall not apply to any such renewal or extension.

E. Tenant acknowledges and agrees that Owner is merely acting on behalf of Tenant in connection with the disbursement of the Owner's Work Contribution in accordance with the provisions of this Section 3.08 to Tenant for the contractors, suppliers and materialmen employed in connection with Tenant's Initial Installation, and that Owner shall have no obligation, liability or responsibility to any of the contractors, suppliers or materialmen seeking any of the Owner's Work Contribution pursuant to any of the aforesaid contracts or agreements with such contractors, suppliers or materialmen or otherwise, provided that Owner shall be obligated to disburse such Owner's Work Contribution only as expressly provided by the provisions of this Section
3.08. Nothing contained in this Section 3.08 shall relieve Tenant of any obligations or liabilities to such contractors, suppliers or materialmen under such contracts, agreements or otherwise. Nothing contained in this Section 3.08 shall relieve any obligations of Tenant under Sections 3.02 or 3.03 of this Lease. Tenant shall indemnify Owner and Owner's Indemnitees from all loss, cost, liability and expense, including but not limited to reasonable counsel fees, incurred in connection with, or arising from, any claims or actions by any contractors, suppliers or materialmen employed in connection with Tenant's Initial Installation.

ARTICLE 4
OWNERSHIP OF IMPROVEMENTS

Section 4.01. General Rights of Owner and Tenant: All appurtenances, fixtures, improvements, additions and other property attached to or installed in the Demised Premises, whether by Owner or Tenant or others, and whether at Owner's expense, or Tenant's expense, or the joint expense of Owner and Tenant, shall be and remain the property of Owner, except that any such fixtures, improvements, additions and other property installed at the sole expense of Tenant with respect to which Tenant has not been granted any credit or allowance by Owner, and which are removable without material damage to the Demised Premises shall be and remain the property of Tenant and are referred to as "Tenant's Personal Property". Any replacements of any property of Owner, whether made at Tenant's expense or otherwise, shall be and remain the property of Owner.

ARTICLE 5
REPAIRS

Section 5.01. Tenant's Repair Obligations: Tenant shall take good care of the Demised Premises (including, but not limited to, any Class E Fire Alarm and Communication system and any sprinkler system installed therein and any installations made or equipment installed therein as a result of any requirement of New York City Local Law #16 of 1984 or any successor law or like import) and, at Tenant's sole cost and expense, shall make all repairs and replacements, structural and otherwise, ordinary and extraordinary, foreseen and unforeseen as and when needed to preserve the Demised Premises (including, but not limited to, any Class E Fire Alarm and Communication system and any sprinkler system installed therein and any installations made or equipment installed therein as a result of any requirement of New York City Local Law #16 of 1984 or any successor law of like import) in good and safe working order and in first class repair and condition, except that Tenant shall not be required to make any structural repairs or structural replacements to the Demised Premises unless necessitated or occasioned by the acts, omissions or negligence of Tenant or any person claiming through or under Tenant or any of their servants, employees, contractors, agents, visitors or licensees, or by the manner of use or occupancy of the Demised Premises by Tenant or any such person (in contradistinction to the mere use of the Demised Premises as "offices"). For the purposes of this Article, the installation, maintenance, repair and replacement of a sprinkler system or part thereof or any work pertaining to such sprinkler system or any repairs or work involving asbestos or other hazardous materials or involving compliance with Local Laws #5 of 1973, #16 of 1984, #58 of 1987 and the Americans With Disabilities Act and any successor laws of like import shall be deemed to be non-structural repairs or replacements. Without affecting Tenant's obligations set forth in the preceding sentence, Tenant, at Tenant's sole cost and expense, shall also (i) make all repairs and replacements, and perform all maintenance as and when necessary, to the lamps, tubes, ballasts, and starters in the lighting fixtures installed in the Demised Premises, (ii) make all repairs and replacements, as and when necessary, to Tenant's Personal Property and to any Alterations made or performed by or on behalf of Tenant or any person claiming through or under Tenant, and (iii) if the Demised Premises shall include any space on any ground, street, mezzanine or basement floor in the Building, make all replacements, as and when necessary, to all windows and plate and other glass in, on or about such space, and obtain and maintain, throughout the Demised Term, plate glass insurance policies issued by companies, and in form and amounts, satisfactory to Owner, in which Owner, its agents and any lessor under any ground or underlying lease shall be named as parties insured, and (iv) perform all maintenance and make all repairs and replacements, as and when necessary, to any air conditioning equipment, private elevators, escalators, conveyors or mechanical systems (other than the Building's standard equipment and systems) which may be installed in the Demised Premises by Owner, Tenant or others. However, the provisions of the foregoing sentence shall not be deemed to give to Tenant any right to install air conditioning equipment, elevators, escalators, conveyors or mechanical systems. All repairs and replacements made by or on behalf of Tenant or any person claiming through or under Tenant shall be made and performed in conformity with, and subject to the provisions of Article 3 and shall be at least equal in quality and class to the original work or installation. The necessity for, and adequacy of, repairs and replacements pursuant to this Article 5 shall be measured by the standard which is appropriate for first class office buildings of similar construction and class in the Borough of Manhattan, City of New York.

ARTICLE 6
COMPLIANCE WITH LAWS

Section 6.01. General Tenant Covenants: Tenant, at Tenant's sole cost and expense, shall comply with all Legal Requirements (hereinafter defined) which shall impose any duty upon Owner or Tenant with respect to the Demised Premises or the use or occupation thereof, including, but not limited to, the installation of, modification to and/or maintenance of a sprinkler system to serve the Demised Premises or any part thereof and any requirement that asbestos or other hazardous material be removed or dealt with in any particular manner, except that Tenant shall not be required to make any structural Alterations in order so to comply unless such Alterations shall be necessitated or occasioned, in whole or in part, by the acts, omissions, or negligence of Tenant or any person claiming through or under Tenant, or any of their servants, employees, contractors, agents, visitors or licensees, or by the use or occupancy or manner of use or occupancy of the Demised Premises by Tenant or by any such person. For all purposes of this Lease the term "Legal Requirements" shall mean all present and future laws, codes, ordinances, statutes, requirements, orders and regulations, ordinary and extraordinary, foreseen and unforeseen (including, but not limited to, the New York State Energy Conservation Construction Code, New York City Local Laws #5 of 1973, #16 of 1984 and #58 of 1987 and the Americans with Disabilities Act, and any successor laws of like import) of any Governmental Authority (hereinafter defined) and all directions, requirements, orders and notices of violations thereof. For all purposes of this Lease, the term "Governmental Authority" shall mean the United States of America, the State of New York, the County of New York, the Borough of Manhattan, the City of New York, any political subdivision thereof and any agency, department, commission, board, bureau or instrumentality of any of the foregoing, now existing or hereafter created, having jurisdiction over Owner, Tenant, this Lease or the Real Property or any portion thereof. Any work or installations made or performed by or on behalf of Tenant or any person claiming through or under Tenant pursuant to the provisions of this Article shall be made in conformity with, and subject to the provisions of Article 3. For the purposes of this Article, the installation and maintenance of a sprinkler system or part thereof or any work pertaining to such sprinkler system or any requirement that any asbestos or other hazardous material be removed or dealt with in any particular manner or any Alterations required to comply with Local Law #5 of 1973, #16 of 1984, #58 of 1987 and the Americans With Disabilities Act and any successor laws of like import shall be deemed to be a nonstructural Alteration. Any work with respect to a sprinkler system shall be made in conformity with the provisions of
Section 3.05. Compliance with any requirement regarding asbestos or other asbestos containing material shall be made in conformity with the provisions of Section 3.06. Tenant's obligations under this Section 6.01 and Section 6.02 below shall be subject to Owner's obligations under Section 3.06.

Section 6.02. Tenant's Compliance with Owner's Fire Insurance: Tenant shall not do anything, or permit anything to be done, in or about the Demised Premises which shall (i) invalidate or be in conflict with the provisions of any fire and/or other insurance policies covering the Building or any property located therein, or (ii) result in a refusal by fire insurance companies of good standing to insure the Building or any such property in amounts reasonably satisfactory to Owner, or (iii) subject Owner to any liability or responsibility for injury to any person or property by reason of any business operation being conducted in the Demised Premises, or (iv) cause any increase in the fire insurance rates applicable to the Building or property located therein at the beginning of the Demised Term or at any time thereafter. Tenant, at Tenant's expense, shall comply with all present and future rules, orders, regulations and/or requirements of the New York Board of Fire Underwriters and the New York Fire Insurance Rating Organization or any similar body and the issuer of any insurance obtained by Owner covering the Building and/or the Real Property, whether ordinary or extraordinary, foreseen or unforeseen, including, but not limited to, the installation and maintenance of, or any other work pertaining to, any sprinkler system to serve the Demised Premises or any part thereof, any requirement that asbestos or other hazardous material be removed or dealt with in any particular manner and any requirement of New York City Local Law #5 of 1973, #16 of 1984, #58 of 1987 and the Americans With Disabilities Act or any successor laws of like import.

Section 6.03. Fire Insurance Rates: In any action or proceeding wherein Owner and Tenant are parties, a schedule or "make up" of rates applicable to the Building or property located therein issued by the New York Fire Insurance Rating Organization, or other similar body fixing such fire insurance rates, shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to the Building or property located therein.

ARTICLE 7
SUBORDINATION, ATTORNMENT, ETC.

Section 7.01. Lease Subordination: This Lease and all rights of Tenant under this Lease are, and shall remain, unconditionally subject and subordinate in all respects to all ground and underlying leases now or hereafter in effect affecting the Real Property or any portion thereof, and to all mortgages which may now or hereafter affect such leases or the Real Property, and to all advances made or hereafter to be made under such mortgages, and to all renewals, modifications, consolidations, correlations, replacements and extensions of, and substitutions for, such leases and mortgages (such leases as above described are referred to herein collectively as the "Superior Lease" and such mortgages as above described are referred to herein collectively as the "Mortgage"). The foregoing provisions of this
Section shall be self-operative and no further instrument of subordination shall be required. In confirmation of such subordination, Tenant shall execute and deliver promptly any certificate or other instrument which Owner, or any lessor under any Superior Lease, or any holder of any Mortgage may request, and Tenant hereby, irrevocably constitutes and appoints Owner and all such lessors and holders, acting jointly or severally, as Tenant's agent and attorney-in-fact to execute any such certificate or other instrument for or on behalf of Tenant. If, in connection with obtaining financing with respect to the Building, the Real Property, or the interest of the lessee under any Superior Lease, any recognized lending institution shall request reasonable modifications of this Lease as a condition of such financing, Tenant covenants not unreasonably to withhold or delay its agreement to such modifications, provided that such modifications do not materially increase the obligations, or materially and adversely affect the rights, of Tenant under this Lease. No act or failure to act on the part of Owner which would entitle Tenant under the terms of this Lease, or by law, to be relieved of Tenant's obligations hereunder or to terminate this Lease shall result in a release or termination of such obligations or a termination of this Lease unless (i) Tenant shall have first given written notice of Owner's act or failure to act to the holder or holders of any Mortgage and/or the lessor under any Superior Lease of whom Tenant has been given written notice, specifying the act or failure to act on the part of Owner which could or would give basis to Tenant's rights; and (ii) the holder or holders of such Mortgage and/or the lessors under any Superior Lease, after receipt of such notice, have failed or refused to correct or cure the condition complained of within a reasonable time thereafter, but nothing contained in this sentence shall be deemed to impose any obligation on any such holder or lessor to correct or cure any such condition. "Reasonable time" as used above means and includes a reasonable time to obtain possession of the Building if any such holder or lessor elects to do so (provided such holder or lessor institutes proceedings to obtain possession within a reasonable time after notice from Tenant pursuant to the foregoing provisions and conducts such proceedings with reasonable diligence) and a reasonable time after so obtaining possession to correct or cure the condition if such condition is determined to exist (provided such holder or lessor commences said cure within ten (10) days after obtaining possession and prosecutes the work required to cure with reasonable diligence).

Section 7.02. Tenant Attornment: If, at any time prior to the expiration of the Demised Term, any Superior Lease under which Owner then shall be the lessee shall terminate or be terminated for any reason, or the holder of any Mortgage comes into possession of the Real Property or the Building or the estate created by any Superior Lease by a receiver or otherwise, Tenant agrees, at the election and upon demand of any owner of the Real Property, or of the holder of any Mortgage so in possession, or of any lessor under any Superior Lease covering the premises which include the Demised Premises, to attorn, from time to time, to any such owner, holder, or lessor, upon the then executory terms and conditions of this Lease, for the remainder of the term originally demised in this Lease, provided that such owner, holder or lessor, as the case may be, shall then be entitled to possession of the Demised Premises. The provisions of this Section shall enure to the benefit of any such owner, holder, or lessor, shall apply notwithstanding that, as a matter of law, this Lease may terminate upon the termination of any Superior Lease, shall be self-operative upon any such demand, and no further instrument shall be required to give effect to said provisions. Tenant, however, upon demand of any such owner, holder, or lessor, agrees to execute, from time to time, instruments in confirmation of the foregoing provisions of this Section, satisfactory to any such owner, holder, or lessor, acknowledging such attornment and setting forth the terms and conditions of its tenancy. Nothing contained in this Section shall be construed to impair any right otherwise exercisable by any such owner, holder, or lessor. Notwithstanding anything to the contrary set forth in this Article no such owner, holder or lessor shall be bound by (i) any payment of any installment of Fixed Rent or increases therein or any additional rent which may have been made more than thirty (30) days before the due date of such installment, or (ii) any amendment or modification to this Lease which is made without its consent, except for any amendment or modification for which such holder's or lessor's consent is not required under the applicable Mortgage or Superior Lease.

Section 7.03. Tenant Estoppel Certificate: From time to time, within fifteen (15) days next following Owner's request, Tenant shall deliver to Owner a written statement executed and acknowledged by Tenant, in form satisfactory to Owner, (i) stating that this Lease is then in full force and effect and has not been modified (or if modified, setting forth the specific nature of all modifications), and (ii) setting forth the date to which the Fixed Rent has been paid, and (iii) stating whether or not, to the best knowledge of Tenant, Owner is in default under this Lease, and, if Owner is in default, setting forth the specific nature of all such defaults and (iv) stating that Tenant has accepted and occupied the Demised Premises and all improvements required to be made by Owner pursuant to the provisions of this Lease, have been made, if such be the case. Tenant acknowledges that any statement delivered pursuant to this Section may be relied upon by any purchaser or owner of the Building, or of the Real Property, or any part thereof, or of Owner's interest in the Building or the Real Property or any Superior Lease, or by the holder of any Mortgage, or by any assignee of the holder of any Mortgage, or by any lessor under any Superior Lease.

Section 7.04. Owner Assignment of Lease and Rents: If Owner assigns its interest in this Lease, or the rents payable hereunder, to the holder of any Mortgage or the lessor under any Superior Lease, whether the assignment shall be conditional in nature or otherwise, Tenant agrees that (a) the execution thereof by Owner and the acceptance by such holder or lessor shall not be deemed an assumption by such holder or lessor of any of the obligations of the Owner under this Lease unless such holder or lessor shall, by written notice sent to Tenant, specifically otherwise elect; and (b) except as aforesaid, such holder or lessor shall be treated as having assumed Owner's obligations hereunder only upon the foreclosure of such holder's Mortgage or the termination of such lessor's Superior Lease and the taking of possession of the Demised Premises by such holder or lessor, as the case may be.

ARTICLE 8
PROPERTY LOSS, ETC.

Section 8.01. Any Building employee to whom any property shall be entrusted by or on behalf of Tenant shall be deemed to be acting as Tenant's agent with respect to such property and neither Owner nor Owner's agents shall be liable for any loss of or damage to any such property by theft or otherwise. Neither (i) the performance by Owner, Tenant or others of any decorations, repairs, alterations, additions or improvements in or to the Building or the Demised Premises, nor (ii) the failure of Owner or others to make any such decorations, repairs, alterations, additions or improvements, nor (iii) any damage to the Demised Premises or to the property of Tenant, nor any injury to any persons, caused by other tenants or persons in the Building, or by operations in the construction of any private, public or quasi-public work, or by any other cause, nor (iv) any latent defect in the Building or in the Demised Premises, nor (v) any temporary or permanent closing, darkening or bricking up of any windows of the Demised Premises for any reason whatsoever including, but not limited to, Owner's own acts, nor (vi) any inconvenience or annoyance to Tenant or injury to or interruption of Tenant's business by reason of any of the events or occurrences referred to in the foregoing subdivisions (i) through (v), shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Owner, or its agents, or any lessor under any Superior Lease, other than such liability as may be imposed upon Owner by law for Owner's negligence or intentional misconduct or the negligence or intentional misconduct of Owner's agents, servants or employees in the operation or maintenance of the Building or for the breach by Owner of any express covenant of this Lease on Owner's part to be performed. Tenant's taking possession of the Demised Premises shall be conclusive evidence, as against Tenant, that, at the time such possession was so taken, the Demised Premises and the Building were in good and satisfactory condition.

ARTICLE 9
DESTRUCTION-FIRE OR OTHER CASUALTY

Section 9.01. Owner's Repair Obligations: If the Demised Premises shall be damaged by fire or other casualty and if Tenant shall give prompt notice to Owner of such damage, Owner, at Owner's expense, shall repair such damage. However, Owner shall have no obligation to repair any damage to, or to replace, Tenant's Personal Property, or any Alterations made to the Demised Premises by or on behalf of Tenant, including without limitation, any of Tenant's Alterations (whether or not paid for in whole or in part with an Owner's work contribution) or any other property or effects of Tenant (all of such Tenant's Personal Property, Alterations, and other property are further collectively referred to as "Tenant's Property Interest"). Except as otherwise provided in Section 9.03, if the entire Demised Premises shall be rendered untenantable by reason of any such damage, the Fixed Rent shall abate for the period from the date of such damage to the date when such damage shall have been repaired, and if only a part of the Demised Premises shall be so rendered untenantable, the Fixed Rent shall abate for such period in the proportion which the area of the part of the Demised Premises so rendered untenantable bears to the total area of the Demised Premises (except that with respect to any period(s) in which the Demised Premises shall be comprised of spaces which are then leased at different per square foot rental rates, then with respect to any such periods, the Fixed Rent shall abate equitably for such period(s) on the basis of the area of the part of the Demised Premises so rendered untenantable and the Fixed Rent applicable thereto). However, if, prior to the date when all of such damage shall have been repaired, any part of the Demised Premises so damaged shall be rendered tenantable and shall be used or occupied by Tenant or any person or persons claiming through or under Tenant, then the amount by which the Fixed Rent shall abate shall be equitably apportioned for the period from the date of any such use or occupancy to the date when all such damage shall have been repaired. Tenant hereby expressly waives the provisions of Section 227 of the New York Real Property Law, and of any successor law of like import then in force, and Tenant agrees that the provisions of this Article shall govern and control in lieu thereof. Notwithstanding the foregoing provisions of this Section, if, prior to or during the Demised Term, (i) the Demised Premises shall be totally damaged or rendered wholly untenantable by fire or other casualty, and if Owner shall decide not to restore the Demised Premises, or (ii) the Building shall be so damaged by fire or other casualty that, in Owner's opinion, substantial alteration, demolition, or reconstruction of the Building shall be required (whether or not the Demised Premises shall have been damaged or rendered untenantable), then, in any of such events, Owner, at Owner's option, may give to Tenant, within ninety (90) days after such fire or other casualty, a five
(5) days" notice of termination of this Lease and, in the event such notice is given, this Lease and the Demised Term shall come to an end and expire (whether or not said term shall have commenced) upon the expiration of said five (5) days with the same effect as if the date of expiration of said five
(5) days were the Expiration Date, the Fixed Rent shall be apportioned as of such date and any prepaid portion of Fixed Rent for any period after such date shall be refunded by Owner to Tenant.

Section 9.02. Owner's Subrogation Waiver Provisions: Owner shall attempt to obtain and maintain, throughout the Demised Term, in Owner's fire insurance policies covering the Building, provisions to the effect that such policies shall not be invalidated should the insured waive, in writing, prior to a loss, any or all right of recovery against any party for loss occurring to the Building. In the event that at any time Owner's fire insurance carriers shall exact an additional premium for the inclusion of such or similar provisions, Owner shall give Tenant notice thereof. In such event, if Tenant agrees, in writing, to reimburse Owner for such additional premium for the remainder of the Demised Term, Owner shall require the inclusion of such or similar provisions by Owner's fire insurance carriers. As long as such or similar provisions are included in Owner's fire insurance policies then in force, Owner hereby waives (i) any obligation on the part of Tenant to make repairs to the Demised Premises necessitated or occasioned by fire or other casualty that is an insured risk under such policies, and (ii) any right of recovery against Tenant, any other permitted occupant of the Demised Premises, and any of their servants, employees, agents or contractors, for any loss occasioned by fire or other casualty which is an insured risk under such policies. In the event that at any time Owner's fire insurance carriers shall not include such or similar provisions in Owner's fire insurance policies, the waivers set forth in the foregoing sentence shall, upon notice given by Owner to Tenant, be deemed of no further force or effect.

Section 9.03. Tenant Negligence: Except to the extent expressly provided in Section 9.02, nothing contained in this Lease shall relieve Tenant of any liability to Owner or to its insurance carriers which Tenant may have under law or the provisions of this Lease in connection with any damage to the Demised Premises or the Building caused by fire or other casualty. Notwithstanding the provisions of Section 9.01, if any such damage, occurring after any date when the waivers set forth in Section 9.02 are no longer in force and effect, is due to the fault or neglect of Tenant, any person claiming through or under Tenant, or any of their servants, employees, agents, contractors, visitors or licensees, then there shall be no abatement of Fixed Rent by reason of such damage. Supplementing the provisions of
Section 9.02, if any damage to the Demised Premises or the Building by fire or other casualty occurring after any date when the waivers set forth in Section 9.02 are no longer in force and effect, is due to the fault or negligence of Tenant, any person claiming through or under Tenant, or any of their servants, employees, agents, contractors, visitors or licensees, and if Owner shall have rent insurance policies in force at that time covering the loss of Fixed Rent for the Demised Premises, and if such policies shall not be affected by the following provisions of this Section, then notwithstanding anything contained in this Section 9.03 to the contrary, the Fixed Rent shall abate in accordance with the provisions of Section 9.01, but only to the extent of any proceeds received by Owner under such rent insurance policies with respect to the Demised Premises and the Demised Term.

Section 9.04. Tenant Subrogation Waiver Provisions: Tenant acknowledges that it has been advised that Owner's insurance policies do not cover Tenant's Property Interest; accordingly, it shall be Tenant's obligation to obtain and maintain insurance covering Tenant's Property Interest and loss of profits including, but not limited to, water damage coverage and business interruption insurance. Tenant shall attempt to obtain and maintain, throughout the Demised Term, in Tenant's fire and other insurance policies covering Tenant's Property Interest, and Tenant's use and occupancy of the Demised Premises, and/or Tenant's profits (and shall cause any other permitted occupants of the Demised Premises to attempt to obtain and maintain, in similar policies), provisions to the effect that such policies shall not be invalidated should the insured waive, in writing, prior to a loss, any or all right of recovery against any party for loss occasioned by fire or other casualty which is an insured risk under such policies. In the event that at any time the fire insurance carriers issuing such policies shall exact an additional premium for the inclusion of such or similar provisions, Tenant shall give Owner notice thereof. In such event, if Owner agrees, in writing, to reimburse Tenant or any person claiming through or under Tenant, as the case may be, for such additional premium for the remainder of the Demised Term, Tenant shall require the inclusion of such or similar provisions by such insurance carriers. As long as such or similar provisions are included in such insurance policies then in force, Tenant hereby waives (and agrees to cause any other permitted occupants of the Demised Premises to execute and deliver to Owner written instruments waiving) any right of recovery against Owner, any lessors under any Superior Leases, the holders of any Mortgage, and all other tenants or occupants of the Building, and any servants, employees, agents or contractors of Owner, or of any such lessor, or holder or of any such other tenants or occupants, for any loss occasioned by fire or other casualty which is an insured risk under such policies. In the event that at any time such insurance carriers shall not include such or similar provisions in any such insurance policy, the waiver set forth in the foregoing sentence (or in any written instrument executed by any other permitted occupant of the Demised Premises) shall, upon notice given by Tenant to Owner, be deemed of no further force or effect with respect to any insured risks under such policy from and after the giving of such notice. During any period while any such waiver of right of recovery is in effect, Tenant, or any other permitted occupant of the Demised Premises, as the case may be, shall look solely to the proceeds of such policies to compensate Tenant or such other permitted occupant for any loss occasioned by fire or other casualty which is an insured risk under such policies.

Section 9.05. Tenant's Casualty Termination Right:

A. Supplementing the provisions of Section 9.01(including, without limitation, Tenant's right to the abatement in Fixed Rent contemplated thereunder), in the event (a) the Demised Premises or Building shall be damaged by fire or other casualty and Tenant shall be unable to use the Demised Premises as a result of such damage and (b) Owner shall not exercise the right to terminate this Lease in accordance with the provisions of Section 9.01 and shall, accordingly, be obligated to repair any such damage, then, if such damage is not repaired within the Casualty Restoration Period (as defined herein), Tenant shall have the following options: (i) to give to Owner, within ten (10) days next following the expiration of the Casualty Restoration Period, a five (5) days" notice of termination of this Lease, or
(ii) to extend the Casualty Restoration Period for a further period of six (6) months by notice given to Owner within ten (10) days after the expiration of the initial Casualty Restoration Period. In the event Tenant shall have given such notice to Owner extending the initial Casualty Restoration Period and if such damage shall not have been repaired by Owner within any extended Casualty Restoration Period, Tenant shall have the options to (a) further extend the Casualty Restoration Period for further successive periods of six (6) months, by notice given to Owner within ten (10) days after the expiration of any extended Casualty Restoration Period or (b) to give Owner, within ten (10) days after the expiration of any such extended Casualty Restoration Period a five (5) days" notice of termination of this Lease. The term "Casualty Restoration Period" shall mean two (2) years after the date of such fire or other casualty.

B. Notwithstanding anything to the contrary contained in the provisions of Subsection A of this Section 9.05, in the event (a) the Demised Premises or Building shall be damaged by fire or other casualty and Tenant shall be unable to use the Demised Premises as a result of such damage and (b) Owner shall not exercise the right to terminate this Lease in accordance with the provisions of Section 9.01, and (c) Owner, in Owner's opinion, shall determine that the repair of such damage to the Demised Premises or Building will reasonably require a period longer than three (3) years, Owner may within one hundred twenty (120) days after the date of such fire or casualty, give a notice to Tenant extending the initial Casualty Restoration Period to the date upon which Owner estimates that such repair to the Demised Premises or Building shall be completed. In the event Owner shall give such a notice under this Subsection B, then, the initial Casualty Restoration Period set forth in Paragraph A of this Section 9.05, shall be so extended and (b) Tenant shall have the further option to give to Owner a five (5) days" notice of termination of this Lease within ten (10) days next following the giving of such notice under this Subsection B by Owner to Tenant extending the initial Casualty Restoration Period.

C. Time is of the essence with respect to the giving by Tenant to Owner of any notice in accordance with the provisions of Subsections A and B of this
Section 9.05 and in the event that Tenant shall fail to give any such notice within the time periods set forth therein, Tenant shall be deemed to have given to Owner a notice pursuant to subdivision (ii) of Subsection A of this
Section 9.05 extending the Casualty Restoration Period provided, however, that any five (5) days" notice of termination given by Tenant pursuant to the provisions of Subsection A or B of this Section 9.05 beyond the ten (10) day period provided therein shall be void and of no force and effect.

D. In the event that Tenant shall give to Owner within the applicable time periods set forth in the foregoing provisions of this Section a five (5) days" notice of termination of this Lease, this Lease and the Demised Term shall come to an end and expire upon the expiration of said five (5) days with the same effect as if the date of expiration of said five (5) days were the Expiration Date, the Fixed Rent and all increases thereof shall be apportioned as of such date, and any prepaid portion of Fixed Rent and increases thereof for any period after such date shall be refunded by Owner to Tenant.

E. Nothing contained in the foregoing provisions of this Section 9.05 shall be deemed to affect the rights of Owner to give to Tenant a five (5) days" notice of termination of this Lease in accordance with the provisions of Subdivision (i) of the last sentence of Section 9.01 and the provisions of Subdivision (ii) of the last sentence of Section 9.01.

ARTICLE 10
EMINENT DOMAIN

Section 10.01. Taking of the Demised Premises: If the whole of the Demised Premises shall be acquired for any public or quasi-public use or purpose, whether by condemnation or by deed in lieu of condemnation, this Lease and the Demised Term shall end as of the date of the vesting of title with the same effect as if said date were the Expiration Date. If only a part of the Demised Premises shall be so acquired or condemned then, except as otherwise provided in this Section, this Lease and the Demised Term shall continue in force and effect but, from and after the date of the vesting of title, the Fixed Rent shall be reduced in the proportion which the area of the part of the Demised Premises so acquired or condemned bears to the total area of the Demised Premises immediately prior to such acquisition or condemnation (except that with respect to any period(s) in which the Demised Premises shall be, or would have been, absent such acquisition or condemnation, comprised of spaces which are or would be then leased at different per square foot rental rates, then with respect to any such periods, the Fixed Rent shall be reduced equitably on the basis of the area of the Demised Premises so condemned and the Fixed Rent applicable thereto). If only a part of the Real Property shall be so acquired or condemned, then (i) whether or not the Demised Premises shall be affected thereby, Owner, at Owner's option, may give to Tenant, within sixty (60) days next following the date upon which Owner shall have received notice of vesting of title, a five (5) days" notice of termination of this Lease, and (ii) if the part of the Real Property so acquired or condemned shall contain more than ten (10%) percent of the total area of the Demised Premises immediately prior to such acquisition or condemnation, or if, by reason of such acquisition or condemnation, Tenant no longer has reasonable means of access to the Demised Premises, Tenant, at Tenant's option, may give to Owner, within sixty (60) days next following the date upon which Tenant shall have received notice of vesting of title, a five (5) days" notice of termination of this Lease. In the event any such five (5) days" notice of termination is given, by Owner or Tenant, this Lease and the Demised Term shall come to an end and expire upon the expiration of said five (5) days with the same effect as if the date of expiration of said five (5) days were the Expiration Date. If a part of the Demised Premises shall be so acquired or condemned and this Lease and the Demised Term shall not be terminated pursuant to the foregoing provisions of this Section, Owner, at Owner's expense, shall restore that part of the Demised Premises not so acquired or condemned to a self-contained rental unit. In the event of any termination of this Lease and the Demised Term pursuant to the provisions of this Section, the Fixed Rent shall be apportioned as of the date of such termination and any prepaid portion of Fixed Rent for any period after such date shall be refunded by Owner to Tenant.

Section 10.02. Condemnation Award or Claims: In the event of any such acquisition or condemnation of all or any part of the Real Property, Owner shall be entitled to receive the entire award for any such acquisition or condemnation, Tenant shall have no claim against Owner or the condemning authority for the value of any unexpired portion of the Demised Term and Tenant hereby expressly assigns to Owner all of its right in and to any such award. Nothing contained in this Section shall be deemed to prevent Tenant from making a claim in any condemnation proceedings for the value of any items of Tenant's Personal Property which are compensable, in law, as trade fixtures.

ARTICLE 11
ASSIGNMENT AND SUBLETTING

Section 11.01. General Covenant: Except as expressly provided in this Article 11, Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, covenants that, without the prior consent of Owner in each instance, it shall not (i) assign (whether by merger, consolidation or otherwise, except as expressly provided in Section 11.06), mortgage or encumber its interest in this Lease, in whole or in part, or (ii) sublet, or permit the subletting of, the Demised Premises or any part thereof, or (iii) permit the Demised Premises or any part thereof to be occupied, or used for desk space, mailing privileges or otherwise, by any person other than Tenant. The sale, pledge, transfer or other alienation of (a) a controlling interest in any of the issued and outstanding capital stock of any corporate Tenant (unless such stock is publicly traded on a recognized security exchange or over-the counter market) or (b) a controlling interest in any partnership, limited liability company or joint venture or other business entity comprising Tenant, however accomplished, directly or indirectly and whether in a single transaction or in a series of related and/or unrelated transactions, shall be deemed for the purposes of this
Section as an assignment of this Lease which shall require the prior consent of Owner in each instance. For purposes of this Section 11.01 and Section 11.03(D), the word "controlling" shall mean the possession of the power to direct or cause the direction of the management or policies of such corporation, partnership, limited liability company, joint venture or other business entity, whether through the ownership of voting securities or contract.

Section 11.02. Owner's Rights Upon Assignment: If Tenant's interest in this Lease is assigned, whether or not in violation of the provisions of this Article, Owner may collect rent from the assignee; if the Demised Premises or any part thereof are sublet to, or occupied by, or used by, any person other than Tenant, whether or not in violation of this Article, Owner, after default by Tenant under this Lease, may collect rent from the subtenant, user or occupant. In either case, Owner shall apply the net amount collected to the rents reserved in this Lease, but neither any such assignment, subletting, occupancy, or use, whether with or without Owner's prior consent, nor any such collection or application, shall be deemed a waiver of any term, covenant or condition of this Lease or the acceptance by Owner of such assignee, subtenant, occupant or user as tenant. The consent by Owner to any assignment, subletting, occupancy or use shall not relieve Tenant from its obligation to obtain the express prior consent of Owner to any further assignment, subletting, occupancy or use. If this Lease is assigned to any person or entity pursuant to any proceeding of the type referred to in Subsections 16.01(c) and 16.01(d), any and all monies or other consideration payable or otherwise to be delivered in connection with such assignment shall be paid or delivered to Owner, shall be and remain the exclusive property of Owner and shall not constitute property of Tenant or of the estate of Tenant within the meaning of any proceeding of the type referred to in Subsections 16.01(c) and
16.01(d). Any and all monies or other considerations constituting Owner's property under the preceding sentence not paid or delivered to Owner shall be held in trust for the benefit of Owner and shall be promptly paid to or turned over to Owner. Any person or entity to which this Lease is assigned pursuant to any proceeding of the type referred to in Subsections 16.01(c) and 16.01(d) shall be deemed without further act or deed to have assumed all of the obligations arising under this Lease on and after the date of such assignment. Any such assignee shall execute and deliver to Owner upon demand an instrument confirming such assumption. The listing of any name other than that of Tenant on any door of the Demised Premises or on any directory or in any elevator in the Building, or otherwise, shall not operate to vest in the person so named any right or interest in this Lease or in the Demised Premises, or the Building, or be deemed to constitute, or serve as a substitute for, any prior consent of Owner required under this Article, and it is understood that any such listing shall constitute a privilege extended by Owner which shall be revocable at Owner's will by notice to Tenant. Tenant agrees to pay to Owner reasonable counsel fees incurred by Owner in connection with any proposed assignment of Tenant's interest in this Lease or any proposed subletting of the Demised Premises or any part thereof. Neither any assignment of Tenant's interest in this Lease nor any subletting, occupancy or use of the Demised Premises or any part thereof by any person other than Tenant, nor any collection of rent by Owner from any person other than Tenant as provided in this Section, nor any application of any such rent as provided in this Section shall, in any circumstances, relieve Tenant of its obligation fully to observe and perform the terms, covenants and conditions of this Lease on Tenant's part to be observed or performed.

Section 11.03. Sublet Rights:

A. (1) As long as Tenant is not then in default (x) under any of the non- monetary terms, covenants or conditions of this Lease on Tenant's part to be observed or performed (beyond the applicable notice and grace periods set forth in this Lease or (y) of the monetary terms, covenants or conditions of this Lease, on Tenant's part to be observed or performed, Owner agrees not to unreasonably withhold Owner's prior consent to a subletting by Tenant of the entire Demised Premises to one (1) subtenant for undivided occupancy by such subtenant, for the use expressly permitted in this Lease.

(2) Without Owner's prior consent, Tenant shall not (a) negotiate or enter into a proposed subletting with any tenant, subtenant or occupant of any space in the Building or (b) list or otherwise publicly advertise the Demised Premises or any part thereof for subletting at a rental lower than the higher of (i) the Fixed Rent then in effect under this Lease, or (ii) the rental at which the Owner is then offering to rent comparable space in the Building.

(3) At least thirty (30) days prior to any proposed subletting, Tenant shall submit to Owner a statement (the "Proposed Sublet Statement") containing the name and address of the proposed subtenant, the nature of the proposed subTenant's business and its current financial status, if such status is obtained by Tenant, and all of the principal terms and conditions of the proposed subletting including, but not limited to, the proposed commencement and expiration dates of the term thereof.

(4) Owner may arbitrarily withhold consent to a proposed subletting if,
(a) in Owner's reasonable judgment, the occupancy of the proposed subtenant will tend to impair the character or dignity of the Building or impose any additional burden upon Owner in the operation of the Building, or (b) the proposed subtenant shall be a person or entity with whom Owner is then negotiating or discussing to lease space in the Building.

(5) In the event of any dispute between Owner and Tenant as to the reasonableness of Owner's failure or refusal to consent to any subletting, such dispute shall be submitted to arbitration in accordance with the provisions of Article 36.

(6) Any Sublease consented to by Owner must conform to the information contained in the Proposed Sublet Statement and shall expressly provide that
(a) the subtenant shall obtain the provisions in its insurance policies to the effect that such policies shall not be invalidated should the insured waive, in writing, prior to a loss, any or all right of recovery against any party for loss occasioned by fire or other casualty which is an insured risk under such policies, as set forth in Section 9.04, and (b) in the event of the termination, re-entry or dispossess of Tenant by Owner under this Lease, Owner may, at its option, take over all of the right, title and interest of Tenant, as sublessor under the sublease, and such subtenant shall, at Owner's option, attorn to Owner pursuant to the then executory provisions of such sublease, except that Owner shall not (i) be liable for any previous act or omission of Tenant under such sublease, (ii) be subject to any offset which accrued to such subtenant against Tenant, (iii) be bound by any previous modification of such sublease or by any previous prepayment of more than one month's rent unless such modification or prepayment was previously approved by Owner, (iv) be bound by any covenant to undertake or complete any construction of the premises, or any portion thereof, demised by such sublease and (v) be bound by any obligation to make any payment to or on behalf of the subtenant, except for services, repairs, maintenance and restoration provided for under the sublease to be performed after the date of such termination, re-entry or dispossess by Owner under this Lease and to which Owner is expressly required to perform under this Lease with respect to the subleased space at Owner's expense, it being expressly understood, however, that Owner shall not be bound by any obligation to make payment to or on behalf of a subtenant with respect to construction performed by or on behalf of such subtenant in the subleased premises. Tenant shall reimburse Owner on demand for any costs or expense that may be incurred by Owner's review of any Proposed Sublet Statement or in connection with any sublease consented to by Owner, including, without limitation, any reasonable processing fee, reasonable attorneys" fees and disbursements and the reasonable costs of making investigations as to the acceptability of the proposed subtenant.

B. Notwithstanding the foregoing provisions of this Section 11.03, Owner shall have the following rights with respect to each proposed subletting by Tenant:

(1) in the event Tenant proposes to sublet the Demised Premises, whether or not such subletting is for all or substantially all of the remainder of the Demised Term, Owner, at Owner's option, may give to Tenant, within thirty (30) days after the submission by Tenant to Owner of the Proposed Sublet Statement, a notice terminating this Lease on the date (referred to as the "Earlier Termination Date") immediately prior to the proposed commencement date of the term of the proposed subletting, as set forth in such Proposed Sublet Statement, and, in the event such notice is given, this Lease and the Demised Term shall come to an end and expire on the Earlier Termination Date with the same effect as if it were the Expiration Date, the Fixed Rent shall be apportioned as of said Earlier Termination Date and any prepaid portion of Fixed Rent for any period after such date shall be refunded by Owner to Tenant; or

(2) In the event Tenant proposes to sublet the Demised Premises for less than substantially all of the remainder of the Demised Term, Owner, at Owner's option, may give to Tenant, within sixty (60) days after the submission by Tenant to Owner, of the Proposed Sublet Statement required to be submitted in connection with such proposed subletting, a notice electing to recapture the Demised Premises during the period (referred to as the "Recapture Period") commencing on the date (referred to as "Recapture Date") immediately prior to the proposed commencement date of the term of the proposed subletting, as set forth in the Proposed Sublet Statement, and ending on the proposed expiration date of the term of the proposed subletting, as set forth in the Proposed Sublet Statement, and in the event such notice is given the following shall apply:

(a) The Demised Premises shall be recaptured by Owner during the Recapture Period;

(b) Tenant shall surrender the Demised Premises to Owner on or prior to the Recapture Date in the same manner as if said Date were the Expiration Date;

(c) During the Recapture Period Tenant shall have no rights with respect to the Demised Premises nor any obligations with respect to the Demised Premises, including, but not limited to, any obligations to pay Fixed Rent or any increases therein or any additional rent, and any prepaid portion of Fixed Rent allocable to the Recapture Period shall be refunded by Owner to Tenant;

(d) There shall be an equitable apportionment of any increase in the Fixed Rent pursuant to Article 23 for the Escalation Year and Tax Escalation Year (as defined in Article 23) in which said Recapture Date shall occur;

(e) Upon the expiration of the Recapture Period, the Demised Premises, in its then existing condition, shall be deemed restored to Tenant and Tenant shall have all rights with respect to the Demised Premises which are set forth in this Lease and all obligations with respect to the Demised Premises which are set forth in this Lease, including, but not limited to, the obligations for the payment of Fixed Rent and any increases therein and any additional rent (as they would have been adjusted if Tenant occupied the Demised Premises during the Recapture Period) during the period (referred to as the "Recapture Restoration Period") commencing on the date next following the expiration of the Recapture Period and ending on the Expiration Date, except in the event that Owner is unable to give Tenant possession of the Demised Premises at the expiration of the Recapture Period by reason of the holding over or retention of possession of any tenant or other occupant, in which event (x) the Recapture Restoration Period shall not commence and the Demised Premises shall not be deemed available for Tenant's occupancy and Tenant shall not be required to comply with the obligations of Tenant under this Lease until the date upon which Owner shall give Tenant possession of the Demised Premises free of occupancies, (y) neither the Expiration Date nor the validity of this Lease nor the obligations of Tenant under this Lease shall be affected thereby, and (z) Tenant waives any rights to rescind this Lease and to recover any damages which may result from the failure by Owner to deliver possession of the Demised Premises at the end of the Recapture Period; Owner agrees to institute, within thirty (30) days after the expiration of the Recapture Period, possession proceedings against any tenants and occupants who have not so vacated and surrendered all or any portions of the Demised Premises and agrees to prosecute such proceedings with reasonable diligence; and

(f) There shall be an equitable apportionment of any increase in the Fixed Rent pursuant to Article 23 for the Escalation Year and Tax Escalation Year in which the Recapture Restoration Period shall commence.

At the request of Owner, Tenant shall execute and deliver an instrument or instruments, in form satisfactory to Owner, setting forth any modifications to this Lease contemplated in or resulting from the operation of the foregoing provisions of this Subsection 11.03; however, neither Owner's failure to request any such instrument nor Tenant's failure to execute or deliver any such instrument shall vitiate the effect of the foregoing provisions of this Section. The failure by Owner to exercise any option under this Section 11.03 with respect to any subletting shall not be deemed a waiver of such option with respect to any extension of such subletting or any subsequent subletting of the premises affected thereby or any other portion of the Demised Premises. Tenant shall indemnify Owner from all loss, cost, liability, damage and expense, including, but not limited to, reasonable counsel fees and disbursements, arising from any claims against Owner by any broker or other person, for a brokerage commission or other similar compensation in connection with any such proposed subletting, in the event (a) Owner shall (i) fail or refuse to consent to any proposed subletting, or (ii) exercise any of its options under this Section 11.03, or (b) any proposed subletting shall fail to be consummated for any reason whatsoever.

C. Tenant agrees that if Owner shall fail to exercise its option to sooner terminate this Lease or its option to recapture the Demised Premises in connection with any proposed subletting by Tenant, or if any subtenant or other person claiming through or under Tenant shall sublet all or any portion of the Demised Premises, Tenant shall pay to Owner a sum equal to fifty (50%) percent of any Subletting Profit, as such term is hereinafter defined. All rentals and other sums (including, but not limited to, sums payable for the sale or rental of any fixtures, leasehold improvements, equipment, furniture or other personal property, less, in the case of the sale thereof, the then net unamortized [on a straight-line basis over the term of this Lease or, in the event of a further subletting, over the term of the initial sublease, as the case may be] cost thereof, which were provided and installed in the sublet premises at the sole cost and expense of Tenant or such subtenant or other person claiming through or under Tenant and for which no allowance or other credit has been given by Owner) payable by any subtenant to Tenant or to any subtenant or other person claiming through or under Tenant in connection with any subletting in excess of the Fixed Rent then payable by Tenant to Owner under this Lease are referred to, in the aggregate, as "Subletting Profit"; in computing any Subletting Profit it shall be deemed that the rental reserved under any such subletting shall commence to accrue as of the commencement of the term of such subletting even if such rental actually commences to accrue as of a date subsequent to such commencement and there shall be deducted a reasonable single brokerage commission, if any such commission shall be paid by Tenant or any such subtenant or other person claiming through or under Tenant in connection with such subletting, and reasonable attorneys" fees in connection with consummating the sublease, which deduction for such reasonable single brokerage commission and such reasonable attorneys" fees shall be amortized on a straight line basis over the entire term of such subletting. Owner and Tenant agree that if Tenant, or any subtenant or other person claiming through or under Tenant, shall assign or have assigned its interest as Tenant under this Lease or its interest as subtenant under any sublease as the case may be, whether or not such assignment shall be effected with court approval in a proceeding of the types described in Subsections 16.01(c) or
(d), or in any similar proceeding, or otherwise, Tenant shall pay to Owner a sum equal to any consideration paid to Tenant or any subtenant or other person claiming through or under Tenant for such assignment. All sums payable hereunder to Tenant shall be paid to Owner as additional rent immediately upon such sums being paid to Tenant or to any subtenant or other person claiming through or under Tenant and, if requested by Owner, Tenant shall promptly enter into a written agreement with Owner setting forth the amount of such sums to be paid to Owner, however, neither Owner's failure to request the execution of such agreement nor Tenant's failure to execute such agreement shall vitiate the provisions of this Section. For the purposes of this Section, a trustee, receiver or other representative of the Tenant's or any subTenant's estate under any federal or state bankruptcy act shall be deemed a person claiming through or under Tenant.

D. Neither Owner's consent to any subletting nor anything contained in this Section shall be deemed to grant to any subtenant or other person claiming through or under Tenant the right to sublet all or any portion of the Demised Premises or to permit the occupancy of all or any portion of the Demised Premises by others. Neither any subtenant referred to in this Section nor its heirs, distributees, executors, administrators, legal representatives, successors nor assigns, without the prior consent of Owner in each instance, shall (i) assign, whether by merger, consolidation or otherwise, mortgage or encumber its interest in any sublease, in whole or in part, or (ii) sublet, or permit the subletting of, that part of the Demised Premises affected by such subletting or any portion thereof, or (iii) permit such part of the Demised Premises affected by such subletting or any part thereof to be occupied or used for desk space, mailing privileges or otherwise, by any person other than such subtenant and any sublease shall provide that any violation of the foregoing provisions of this sentence shall be an event of default thereunder. The sale, pledge, transfer or other alienation of (a) a controlling interest in the issued and outstanding capital stock of any corporate subtenant (unless such stock is publicly traded on any recognized security exchange or over-the-counter market) or (b) a controlling interest in any partnership or joint venture subtenant, however accomplished, and whether in a single transaction or in a series of related or unrelated transactions, shall be deemed for the purposes of this Section to be an assignment of such sublease which shall require the prior consent of Owner in each instance and any sublease shall so provide.

Section 11.04. Owner's Rights Upon Lease Disaffirmance:

A. In the event that, at any time after Tenant may have assigned Tenant's interest in this Lease, this Lease shall be disaffirmed or rejected in any proceeding of the types described in Subsections 16.01(c) and (d), or in any similar proceeding, or in the event of termination of this Lease by reason of any such proceeding or by reason of lapse of time following notice of termination given pursuant to Section 16.01 based upon any of the Events of Default set forth in said Subsections, Tenant, upon request of Owner given within thirty (30) days next following any such disaffirmance, rejection or termination (and actual notice thereof to Owner in the event of a disaffirmance or rejection or in the event of termination other than by act of Owner), shall (i) pay to Owner all Fixed Rent, additional rent and other charges due and owing by the assignee to Owner under this Lease to and including the date of such disaffirmance, rejection or termination, and (ii) as "tenant", enter into a new lease with Owner of the Demised Premises for a term commencing on the effective date of such disaffirmance, rejection or termination and ending on the Expiration Date unless sooner terminated as in such lease provided, at the same Fixed Rent and then executory terms, covenants and conditions as are contained in this Lease, except that (a) Tenant's rights under the new lease shall be subject to the possessory rights of the assignee under this Lease and the possessory rights of any person claiming through or under such assignee or by virtue of any statute or of any order of any court, and (b) such new lease shall require all defaults existing under this Lease to be cured by Tenant with due diligence, and (c) such new lease shall require Tenant to pay all increases in the Fixed Rent reserved in this Lease which, had this Lease not been so disaffirmed, rejected or terminated, would have accrued under the provisions of Article 23 of this Lease after the date of such disaffirmance, rejection or termination with respect to any period prior thereto. In the event Tenant shall default in its obligation to enter into said new lease for a period of thirty (30) days next following Owner's request therefor, then, in addition to all other rights and remedies by reason of such default, either at law or in equity, Owner shall have the same rights and remedies against Tenant as if Tenant had entered into such new lease and such new lease had thereafter been terminated as at the commencement date thereof by reason of Tenant's default thereunder. Nothing contained in this Section shall be deemed to grant to Tenant any right to assign Tenant's interest in this Lease.

B. If Tenant assumes this Lease in any proceeding of the types described in Subsections 16.01(c) and (d), or in any similar proceeding and proposes to assign the same pursuant to said proceeding to any person or entity who shall have made a bona fide offer to accept an assignment of this Lease on terms acceptable to the Tenant, then notice of such proposed assignment shall be given to Owner by Tenant no later than twenty (20) days after receipt by Tenant of such offer, but in any event no later than ten (10) days prior to the date that Tenant shall make application to a court of competent jurisdiction for authority and approval to enter into such assignment and assumption. Such notice shall set forth (a) the name and address of such person, (b) all of the terms and conditions of such offer, and (c) adequate assurance of future performance by such person under the Lease, including, without limitation, the assurance referred to in Section 365(b)(3) of the United States Bankruptcy Code or any provisions in substitution thereof. Owner shall have the prior right and option, to be exercised by notice to Tenant given at any time prior to the effective date of such proposed assignment, to accept an assignment of this Lease upon the same terms and conditions and for the same consideration, if any, as the bona fide offer made by such person, less any brokerage commissions which would otherwise be payable by Tenant out of the consideration to be paid by such person in connection with the assignment of this Lease.

C. The term "adequate assurance of future performance" as used in this Lease shall mean that any proposed assignee shall, among other things, (a) deposit with Owner on the assumption of this Lease the sum of nine (9) months of the then Fixed Rent and increases therein pursuant to Article 23 as security for the faithful performance and observance by such assignee of the terms and obligations of this Lease, (b) furnish Owner with financial statements of such assignee for the prior three (3) fiscal years, as finally determined after an audit and certified as correct by a certified public accountant, which financial statements shall show a net worth of at least six
(6) times the Fixed Rent and increases therein pursuant to Article 23 then payable for each of such three (3) years, (c) grant to Owner a security interest in such property of the proposed assigned as Owner shall deem necessary to provide adequate assurance of the performance by such assignee of its obligations under the Lease.

Section 11.05. Subsidiaries/Affiliates:

A. As long as Tenant is not in default under any of the terms, covenants or conditions of this Lease on Tenant's part to be observed and performed, Bion Environmental Technologies, Inc., Tenant named herein, shall have the right, without the prior consent of Owner, to assign its interest in this Lease, for the use permitted in this Lease, to any subsidiary or affiliate of Tenant named herein, which is in the same general line of business as Tenant named herein and only for such period as it shall remain a subsidiary or affiliate of Tenant named herein and in such line of business. For the purposes of this Article: (a) a "subsidiary" of Tenant named herein shall mean any corporation not less than fifty-one (51%) percent of whose outstanding voting stock at the time shall be owned by Tenant named herein, and (b) an "affiliate" of Tenant named herein shall mean any corporation, partnership or other business entity which controls or is controlled by, or is under common control with Tenant. For the purpose of the definition of "affiliate" the word "control" (including, "controlled by" and "under common control with") as used with respect to any corporation, partnership or other business entity, shall mean the possession of the power to direct or cause the direction of the management and policies of such corporation, partnership or other business entity, whether through the ownership of voting securities or contract. No such assignment shall be valid or effective unless, within ten (10) days after the execution thereof, Tenant shall deliver to Owner all of the following: (I) a duplicate original instrument of assignment, in form and substance satisfactory to Owner, duly executed by Tenant, in which Tenant shall (a) waive all notices of default given to the assignee, and all other notices of every kind or description now or hereafter provided in this Lease, by statute or rule of law, and (b) acknowledge that Tenant's obligations with respect to this Lease shall not be discharged, released or impaired by (i) such assignment, (ii) any amendment or modification of this Lease, whether or not the obligations of Tenant are increased thereby, (iii) any further assignment or transfer of Tenant's interest in this Lease, (iv) any exercise, non- exercise or waiver by Owner of any right, remedy, power or privilege under or with respect to this Lease, (v) any waiver, consent, extension, indulgence or other act or omission with respect to any other obligations of Tenant under this Lease, (vi) any act or thing which, but for the provisions of such assignment, might be deemed a legal or equitable discharge of a surety or assignor, to all of which Tenant shall consent in advance, and (c) expressly waive and surrender any then existing defense to its liability hereunder it being the purpose and intent of Owner and Tenant that the obligations of Tenant hereunder as assignor shall be absolute and unconditional under any and all circumstances, and (II) an instrument, in form and substance satisfactory to Owner, duly executed by the assignee, in which such assignee shall assume the observance and performance of, and agree to be personally bound by, all of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed. The provisions of Subsection C of Section 11.03 relating to Owner's rights to assignment consideration shall not be applicable to any proposed assignment to any such subsidiary or affiliate of Tenant pursuant to the provisions of this Subsection A of Section 11.05.

B. As long as Tenant is not in default under any of the terms, covenants or conditions of this Lease on Tenant's part to be observed and performed, Bion Environmental Technologies, Inc., Tenant named herein, shall have the right, without the prior consent of Owner, to sublet to, or permit the use or occupancy of, all or any part of the Demised Premises by any subsidiary or affiliate (as said terms are defined in Subsection A above) of Tenant named herein for the use permitted in this Lease provided that such subsidiary or affiliate is in the same general line of business as the Tenant named herein and only for such period as it shall remain a subsidiary or affiliate of, and in the same general line of business as, the Tenant named herein. However, no such subletting shall be valid unless, prior to the execution thereof, Tenant shall give notice to Owner of the proposed subletting, and within ten (10) days prior the commencement of said subletting, Tenant shall deliver to Owner an agreement, in form and substance satisfactory to Owner, duly executed by Tenant and said subtenant, in which said subtenant shall assume performance of and agree to be personally bound by, all of the terms, covenants and conditions of this Lease which are applicable to said subtenant and such subletting. Tenant shall give prompt notice to Owner of any such use or occupancy of all or any part of the Demised Premises and such use or occupancy shall be subject and subordinate to all of the terms, covenants and conditions of this Lease. No such use or occupancy shall operate to vest in the user or occupant any right or interest in this Lease or the Demised Premises. For the purposes of determining the number of subtenants or occupants in the Demised Premises pursuant to Section 11.03, the occupancy of any such permitted subsidiary or affiliate of Tenant shall be deemed the occupancy of Tenant and such subsidiary or affiliate shall not be counted as a subtenant or occupant and the provisions of Subsection B of Section 11.03 relating to Owner's option to terminate this Lease or recapture the portions of the Demised Premises proposed to be sublet and the provisions of Subsection C of Section 11.03 relating to Owner's rights to Subletting Profits shall not be applicable to any proposed subletting to any such subsidiary or affiliate of Tenant pursuant to the provisions of this Subsection B of Section 11.05.

Section 11.06. Merger/Consolidation/ Asset Sale: As long as Tenant is not in default under any of the terms, covenants or conditions of this Lease on Tenant's part to be observed and performed, Bion Environmental Technologies, Inc., the Tenant named hereunder, shall have the right, without the prior consent of Owner, to assign Tenant's interest in this Lease to any person, corporation, partnership, or other business entity which is a successor of Tenant, either by (i) merger or consolidation or (ii) the purchase of all or substantially all of the (x) assets or stock, and (y) business and goodwill of Tenant, provided that said person, corporation, partnership or other business entity which shall be Tenant following such merger, consolidation or asset purchase or Tenant following the transfer of stock, as the case may be, (the "Proposed Assignee") shall have a tangible net worth, as determined in accordance with generally accepted accounting principles consistently applied following the consummation of such transaction, at least equal to the greater of (x) that of Tenant named hereunder as of the date of this Lease and (y) that of Tenant immediately prior to such transaction (such required net worth, the "Required Net Worth") and provided further that such Proposed Assignee shall continue to operate the same business conducted by Tenant in the Demised Premises immediately prior to the transaction and the interest of Tenant in this Lease is not the sole or principal asset of Tenant named herein and such assignment shall be for a bone fide business purpose and shall not be intended to circumvent the restrictions on assignment set forth in this Lease. At the time of said proposed assignment, Tenant shall deliver to Owner a reasonably detailed statement of the financial condition of the aforesaid Proposed Assignee, prepared in accordance with generally accepted accounting principles applied on a consistent basis, sworn to by an executive officer or principal or partner of Tenant and the Proposed Assignee, and certified without qualification by a firm of reputable independent certified public accountants which statement shall reflect the financial condition of the aforesaid proposed assignee at that time after taking into account the consummation of the assignment of this Lease and any other transactions related thereto. Notwithstanding anything contained in this Section to the contrary, such assignment shall not be valid if the Proposed Assignee shall not have a tangible net worth following the consummation of such transaction, consisting of assets and liabilities in types and amounts reasonably satisfactory to Owner, at least equal to the Required Net Worth or the interest of Tenant named herein in this Lease is the sole or principal asset of Tenant named herein or such assignment is not made for a bona fide business purpose. Furthermore, no such assignment in connection with an asset sale shall be valid, unless, within ten (10) days after the execution thereof, Tenant shall deliver to Owner (I) a duplicate original instrument of assignment in form and substance reasonably satisfactory to Owner duly executed by Tenant, acknowledged before a notary public, in which Tenant shall (a) waive all notices of default given to the assignee and all other notices of every kind or description, now or hereafter provided in this Lease, by statute or by rule of law; (b) acknowledge that Tenant's obligations with respect to this Lease shall not be discharged, released or impaired by (i) such assignment; (ii) any amendment or modification of this Lease (whether or not the obligations of Tenant are increased thereby); (iii) any further assignment or transfer of Tenant's interest in this Lease; (iv) any exercise, non- exercise or waiver by Owner of any right, remedy, power or privilege under or with respect to this Lease; (v) any waiver, consent, extension, indulgence or other act or omission with respect to any of the obligations of Tenant under this Lease; (vi) any act or thing which, but for the provisions of such assignment, might be deemed a legal or equitable discharge of a surety or assignor, to all of which Tenant shall consent in advance; and (c) expressly waive and surrender any then existing defense to its liability thereunder; it being the purpose and intent of Owner and Tenant that the obligations of Tenant hereunder as assignor shall be absolute and unconditional under any and all circumstances; and (II) an instrument in form and substance reasonably satisfactory to Owner, duly executed by the Proposed Assignee, acknowledged before a notary public, in which such Proposed Assignee shall assume observance and performance of, and agree to be personally bound by, all of the terms, covenants and conditions of this Lease on Tenant's part to be performed. In addition, no such assignment in connection with a merger, consolidation or sale of stock or other equity interests in Tenant shall be valid unless within ten (10) business days after the consummation thereof, Tenant shall deliver to Owner (xx) a copy of the certificate of merger or consolidation which was filed in the relevant jurisdiction, in the event the assignment was in connection with a merger or consolidation, or (yy) a statement identifying the purchaser(s) of the stock or other equity interests in Tenant, in the event the assignment was in connection with a sale of the stock or other equity interests in Tenant. The provisions of Subsection C of Section 11.03 relating to assignment consideration shall not be applicable to any proposed assignment of this Lease made in accordance with the provisions of this Section 11.06. In the event of any dispute between Owner and Tenant as to the validity of any such assignment such dispute shall be determined by arbitration in the City of New York in accordance with the provisions of Section 36.01. Any such determination shall be final and binding upon the parties whether or not a judgment shall be entered in any court. If the determination of any such arbitration shall be adverse to Owner, Owner, nevertheless, shall not be liable to Tenant and Tenant's sole remedy in such event shall be to have the proposed assignment deemed valid.

Section 11.07. Permitted Occupants: Supplementing the provisions of this Article 11 and notwithstanding anything contained herein to the contrary, Tenant shall have the right from time to time, without prior consent of Owner to permit undivided occupancy of various portions of the Demised Premises during the Demised Term by businesses owned by or affiliated with Salvatore Zizza and/or Richard Hochman (any such businesses referred to individually and collectively as "Permitted Occupants"), provided that no rent or use fee shall be paid with respect to such occupancy. The occupancy by any Permitted Occupant shall be conditioned upon the agreement that such arrangement will terminate automatically upon the termination of this Lease. No such use or occupancy by any such persons shall operate to give any such persons any right or interest in this Lease or the Demised Premises other than the right to occupy such portion of the Demised Premises during the Demised Term, and such use or occupancy shall be subject and subordinate to all of the terms, covenants and condition of this Lease. Tenant shall deliver to Owner a notice prior to any such occupancy advising Owner of the name of such Permitted Occupant and the character and nature of the business to be conducted by the Permitted Occupant in the Demised Premises and the expected duration of the same, and upon Owner's request, a copy of any executed license or use agreement with the Permitted Occupant with respect to the Demised Premises.

ARTICLE 12
EXISTING CONDITIONS

Section 12.01. "As Is": Tenant acknowledges that Owner has made no representations to Tenant with respect to the condition of the Demised Premises and Tenant agrees to accept possession of the Demised Premises in the condition which shall exist on the Commencement Date "as is" and further agrees that Owner shall have no obligation to perform any work or make any installations in order to prepare the Demised Premises for Tenant's occupancy, except that the Demised Premises shall be delivered to Tenant on the Commencement Date "broom clean."

ARTICLE 13
ACCESS TO DEMISED PREMISES

Section 13.01. Owner's Right to Enter: Owner and its agents shall have the following rights in and about the Demised Premises: (i) to enter the Demised Premises at all times to examine the Demised Premises or for any of the purposes set forth in this Article or for the purpose of performing any obligation of Owner under this Lease or exercising any right or remedy reserved to Owner in this Lease, or complying with any Legal Requirement which Owner is obligated to comply with hereunder, and if Tenant, its officers, partners, agents or employees shall not be personally present or shall not open and permit an entry into the Demised Premises at any time when such entry shall be necessary or permissible, to use a master key or to forcibly enter the Demised Premises; (ii) to erect, install, use and maintain pipes, ducts and conduits in and through the Demised Premises; (iii) to exhibit the Demised Premises to others; (iv) to make such decorations, repairs, alterations, improvements or additions, or to perform such maintenance, including, but not limited to, the maintenance of all heating, air conditioning, ventilating, elevator, plumbing, electrical, telecommunication and other mechanical facilities, as Owner may deem necessary or desirable; (v) to take all materials into and upon the Demised Premises that may be required in connection with any such decorations, repairs, alterations, improvements, additions or maintenance; and (vi) to alter, renovate and decorate the Demised Premises at any time during the Demised Term if Tenant shall have removed all or substantially all of Tenant's property from the Demised Premises. The lessors under any Superior Lease and the holders of any Mortgage shall have the right to enter the Demised Premises from time to time through their respective employees, agents, representatives and architects to inspect the same or to cure any default of Owner or Tenant relating thereto. Owner shall have the right, from time to time, to change the name, number or designation by which the Building is commonly known which right shall include, without limitation, the right to name the Building after any tenant of the Building.

Section 13.02. Owner's Reservation of Rights to Portions of the Building:
All parts (except surfaces facing the interior of the Demised Premises) of all walls, windows and doors bounding the Demised Premises (including exterior Building walls, core corridor walls, doors and entrances), all balconies, terraces and roofs adjacent to the Demised Premises, all space in or adjacent to the Demised Premises used for shafts, stacks, stairways, chutes, pipes, conduits, ducts, fan rooms, heating, air conditioning, ventilating, plumbing, electrical, telecommunication and other mechanical facilities, closets, service closets and other Building facilities, and the use thereof, as well as access thereto through the Demised Premises for the purposes of operation, maintenance, alteration and repair, are hereby reserved to Owner. Owner also reserves the right at any time to change the arrangement or location of entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets and other public parts of the Building, provided any such change does not permanently and unreasonably obstruct Tenant's access to the Demised Premises. Nothing contained in this Article shall impose any obligation upon Owner with respect to the operation, maintenance, alteration or repair of the Demised Premises or the Building.

Section 13.03. Access to Third Parties: Owner and its agents shall have the right to permit access to the Demised Premises, whether or not Tenant shall be present, to any receiver, trustee, assignee for the benefit of creditors, sheriff, marshal or court officer entitled to, or reasonably purporting to be entitled to, such access for the purpose of taking possession of, or removing, any property of Tenant or any other occupant of the Demised Premises, or for any other lawful purpose, or by any representative of the fire, police, building, sanitation or other department of the City, State or Federal Governments. Neither anything contained in this Section, nor any action taken by Owner under this Section, shall be deemed to constitute recognition by Owner that any person other than Tenant has any right or interest in this Lease or the Demised Premises.

Section 13.04. No Actual or Constructive Eviction: The exercise by Owner or its agents or by the lessor under any Superior Lease or by the holder of any Mortgage of any right reserved to Owner in this Article shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Owner, or its agents, or upon any lessor under any Superior Lease or upon the holder of any Mortgage, by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's business, or otherwise.

Section 13.05. Limitations on Owner's Right to Enter: Supplementing the provisions of Section 13.01, Owner agrees that except in cases of emergency, any entry upon the Demised Premises pursuant to the provisions of said Section shall be made at reasonable times, and only after reasonable advance notice (which may be oral, mailed, delivered or left at the Demised Premises notwithstanding any contrary provisions of Article 27) and any work performed or installation made pursuant to said Section shall be made with reasonable diligence and any such entry, work or installations shall be made in a manner designed to minimize interference with Tenant's normal business operations (however, nothing contained in this Section shall be deemed to impose upon Owner any obligation to employ contractors or labor at so-called overtime or other premium pay rates). Owner shall make all repairs to the Demised Premises required as a result of Owner or its agents failure to use reasonable care to protect the Demised Premises when exercising any right of entry pursuant to
Section 13.01 of this Lease.

ARTICLE 14
VAULT SPACE

Section 14.01. The Demised Premises do not contain any vaults, vault space or other space outside the boundaries of the Real Property, notwithstanding anything contained in this Lease or indicated on any sketch, blueprint or plan. Owner makes no representation as to the location of the boundaries of the Real Property. All vaults and vault space and all other space outside the boundaries of the Real Property which Tenant may be permitted to use or occupy are to be used or occupied under a revocable license, and if any such license shall be revoked, or if the amount of such space shall be diminished or required by any Federal, State or Municipal Authority or by any public utility company, such revocation, diminution or requisition shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Owner. Any fee, tax or charge imposed by any governmental authority for any such vault, vault space or other space shall be paid by Tenant.

ARTICLE 15
CERTIFICATE OF OCCUPANCY

Section 15.01. Tenant will not at any time use or occupy, or permit the use or occupancy of, the Demised Premises in violation of any Certificate(s) of Occupancy covering the Demised Premises. Owner agrees that a temporary or permanent Certificate(s) of Occupancy covering the Demised Premises will be in force on the Commencement Date permitting the Demised Premises to be used as "offices". However, neither such agreement, nor any other provision of this Lease, nor any act or omission of Owner, its agents or contractors, shall be deemed to constitute a representation or warranty that the Demised Premises, or any part thereof, may be lawfully used or occupied for any particular purpose or in any particular manner, in contradistinction to mere "office" use.

ARTICLE 16
DEFAULT

Section 16.01. Events of Default: Upon the occurrence, at any time prior to or during the Demised Term, of any one or more of the following events (referred to herein, singly, as an "Event of Default" and collectively as "Events of Default"):

(a) if Tenant shall default in the payment when due of any installment of Fixed Rent or any increase in the Fixed Rent or in the payment when due of any additional rent and such default shall continue for a period of five (5) days after notice by Owner to Tenant of such default; or

(b) if Tenant shall default in the observance or performance of any term, covenant or condition of this Lease on Tenant's part to be observed or performed (other than the covenants for the payment of Fixed Rent, any increase in the Fixed Rent and additional rent) and Tenant shall fail to remedy such default within twenty (20) days after notice by Owner to Tenant of such default, or if such default is of such a nature that it cannot be completely remedied within said period of twenty (20) days and Tenant shall not commence, promptly after receipt of such notice, or shall not thereafter diligently prosecute to completion, all steps necessary to remedy such default; or

(c) if Tenant shall file a voluntary petition in bankruptcy or insolvency, or shall be adjudicated a bankrupt or insolvent, or shall file any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy act or any other present or future applicable federal, state or other statute or law, or shall make an assignment for the benefit of creditors, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Tenant or of all or any part of Tenant's property; or

(d) if, within thirty (30) days after the commencement of any proceeding against Tenant, whether by the filing of a petition or otherwise, seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy act or any other present or future applicable federal, state or other statute or law, such proceeding shall not have been dismissed, or if, within thirty (30) days after the appointment of any trustee, receiver or liquidator of Tenant, or of all or any part of Tenant's property, without the consent or acquiescence of Tenant, such appointment shall not have been vacated or otherwise discharged, or if any execution or attachment shall be issued against Tenant or any of Tenant's property pursuant to which the Demised Premises shall be taken or occupied or attempted to be taken or occupied; or

(e) if Tenant shall default in the observance or performance of any term, covenant or condition on Tenant's part to be observed or performed under any other lease with Owner of space in the Building or under any other lease of space in a Rudin Building (as defined in Section 31.01), and such default shall continue beyond any grace period set forth in such other lease for the remedying of such default; or

(f) if the Demised Premises shall become vacant except in connection with a casualty, any permitted Alterations, or situation where Tenant is reasonably trying to sublease the same, or abandoned; or

(g) if (i) Tenant's interest in this Lease shall devolve upon or pass to any person, whether by operation of law or otherwise, or (ii) there shall be any sale, pledge, transfer or other alienation described in Section 11.01 of this Lease which is deemed an assignment of this Lease for purposes of said
Section 11.01, except as expressly permitted under Article 11; or

(h) any transfer of all or any substantial portion of the assets of Tenant (except as expressly permitted under Section 11.05 and 11.06), or the incurrence of a material obligation by Tenant other than in the ordinary course of business, which in either event would impair Tenant's ability to comply with its obligations under this Lease, unless such transfer or obligation is undertaken or incurred in good faith for equivalent consideration;

then, during such time as such Event(s) of Default is/are continuing (whether prior to or during the Demised Term), Owner may at any time, at Owner's option, give to Tenant a five (5) days" notice of termination of this Lease and, in the event such notice is given, this Lease and the Demised Term shall come to an end and expire (whether or not said term shall have commenced) upon the expiration of said five (5) days with the same effect as if the date of expiration of said five (5) days were the Expiration Date, but Tenant shall remain liable for damages and all other sums payable pursuant to the provisions of Article 18.

Section 16.02. "Tenant"/Moneys Received: If, at any time (i) Tenant shall be comprised of two (2) or more persons, or (ii) Tenant's obligations under this Lease shall have been guaranteed by any person other than Tenant, or
(iii) Tenant's interest in this Lease shall have been assigned, the word "Tenant", as used in Subsections (c) and (d) of Section 16.01, shall be deemed to mean any one or more of the persons primarily or secondarily liable for Tenant's obligations under this Lease. Any monies received by Owner from or on behalf of Tenant during the pendency of any proceeding of the types referred to in said Subsections (c) and (d) shall be deemed paid as compensation for the use and occupation of the Demised Premises and the acceptance of any such compensation by Owner shall not be deemed an acceptance of rent or a waiver on the part of Owner of any rights under Section 16.01.

ARTICLE 17
REMEDIES

Section 17.01. Owner's Right of Re-Entry and Right to Relet: If Tenant shall default beyond the expiration of the applicable notice and grace period set forth Section 16.01(a) of this Lease in the payment when due of any installment of Fixed Rent or in the payment when due of any increase in the Fixed Rent or any additional rent, or if this Lease and the Demised Term shall expire and come to an end as provided in Article 16:

(a) Owner and its agents and servants may immediately, or at any time after such default or after the date upon which this Lease and the Demised Term shall expire and come to an end, re-enter the Demised Premises or any part thereof, without notice, either by summary proceedings or by any other applicable action or proceeding, or by force or otherwise (without being liable to indictment, prosecution or damages therefor), and may repossess the Demised Premises and dispossess Tenant and any other persons from the Demised Premises and remove any and all of their property and effects from the Demised Premises; and

(b) Owner, at Owner's option, may relet the whole or any part or parts of the Demised Premises, from time to time, either in the name of Owner or otherwise, to such tenant or tenants, for such term or terms ending before, on or after the Expiration Date, at such rental or rentals and upon such other conditions, which may include concessions and free rent periods, as Owner, in its sole discretion, may determine. Owner shall have no obligation to relet the Demised Premises or any part thereof and shall in no event be liable for refusal or failure to relet the Demised Premises or any part thereof, or, in the event of any such reletting, for refusal or failure to collect any rent due upon any such reletting, and no such refusal or failure shall operate to relieve Tenant of any liability under this Lease or otherwise to affect any such liability; Owner, at Owner's option, may make such repairs, replacements, alterations, additions, improvements, decorations and other physical changes in and to the Demised Premises as Owner, in its sole discretion, considers advisable or necessary in connection with any such reletting or proposed reletting, without relieving Tenant of any liability under this Lease or otherwise affecting any such liability.

Section 17.02. Waiver of Right to Redeem, etc.: Tenant hereby waives the service of any notice of intention to re-enter or to institute legal proceedings to that end which may otherwise be required to be given under any present or future law. Tenant, on its own behalf and on behalf of all persons claiming through or under Tenant, including all creditors, does further hereby waive any and all rights which Tenant and all such persons might otherwise have under any present or future law to redeem the Demised Premises, or to re- enter or repossess the Demised Premises, or to restore the operation of this Lease, after (i) Tenant shall have been dispossessed by a judgment or by warrant of any court or judge, or (ii) any re-entry by Owner, or (iii) any expiration or termination of this Lease and the Demised Term, whether such dispossess, re-entry, expiration or termination shall be by operation of law or pursuant to the provisions of this Lease. The words "re-enter", "re-entry" and "re-entered" as used in this Lease shall not be deemed to be restricted to their technical legal meanings. In the event of a breach or threatened breach by Tenant, or any persons claiming through or under Tenant, of any term, covenant or condition of this Lease on Tenant's part to be observed or performed, Owner shall have the right to enjoin such breach and the right to invoke any other remedy allowed by law or in equity as if re-entry, summary proceedings and other special remedies were not provided in this Lease for such breach. The right to invoke the remedies hereinbefore set forth in this Lease is cumulative and shall not preclude Owner from invoking any other remedy allowed by law or in equity. Owner agrees that the first sentence of this Section 17.02 shall not be deemed a waiver of Tenant's right to be served with any notice of petition and petition in any summary proceedings under the provisions of the Real Property Actions and Proceedings Law of the State of New York and any successor law of like import then in force.

ARTICLE 18
DAMAGES

Section 18.01. Amount of Owner's Damages: If this Lease and the Demised Term shall expire and come to an end as provided in Article 16, or by or under any summary proceeding or any other action or proceeding, or if Owner shall re-enter the Demised Premises as provided in Article 17, or by or under any summary proceeding or any other action or proceeding, then, in any of said events:

(a) Tenant shall pay to Owner all Fixed Rent, additional rent and other charges payable under this Lease by Tenant to Owner to the date upon which this Lease and the Demised Term shall have expired and come to an end or to the date of re-entry upon the Demised Premises by Owner, as the case may be; and

(b) Tenant shall also be liable for and shall pay to Owner, as damages, any deficiency (referred to as a "Deficiency") between the Fixed Rent reserved in this Lease for the period which otherwise would have constituted the unexpired portion of the Demised Term and the net amount, if any, of rents collected under any reletting effected pursuant to the provisions of Section 17.01 for any part of such period (first deducting from the rents collected under any such reletting all of Owner's expenses in connection with the termination of this Lease or Owner's re-entry upon the Demised Premises and with such reletting including, but not limited to, all repossession costs, brokerage commissions, legal expenses, attorneys" fees, alteration costs and other expenses of preparing the Demised Premises for such reletting). Any such Deficiency shall be paid in monthly installments by Tenant on the days specified in this Lease for payment of installments of Fixed Rent, Owner shall be entitled to recover from Tenant each monthly Deficiency as the same shall arise, and no suit to collect the amount of the Deficiency for any month shall prejudice Owner's right to collect the Deficiency for any subsequent month by a similar proceeding. Solely for the purposes of this Subsection (b), the term "Fixed Rent" shall mean the Fixed Rent in effect immediately prior to the date upon which this Lease and the Demised Term shall have expired and come to an end, or the date of re-entry upon the Demised Premises by Owner, as the case may be, adjusted, from time to time, to reflect any increases which would have been payable pursuant to any of the provisions of this Lease including, but not limited to, the provisions of Article 23 of this Lease if the term hereof had not been terminated; and

(c) At any time after the Demised Term shall have expired and come to an end or Owner shall have re-entered upon the Demised Premises, as the case may be, whether or not Owner shall have collected any monthly Deficiencies as aforesaid, Owner shall be entitled to recover from Tenant, and Tenant shall pay to Owner, on demand, as and for liquidated and agreed final damages, a sum equal to the amount by which the Fixed Rent reserved in this Lease for the period which otherwise would have constituted the unexpired portion of the Demised Term exceeds the then fair and reasonable rental value of the Demised Premises for the same period, both discounted to present worth at the rate of four (4%) percent per annum. If, before presentation of proof of such liquidated damages to any court, commission or tribunal, the Demised Premises, or any part thereof, shall have been relet by Owner for the period which otherwise would have constituted the unexpired portion of the Demised Term, or any part thereof, the amount of rent reserved upon such reletting shall be deemed, prima facie, to be the fair and reasonable rental value for the part or the whole of the Demised Premises so relet during the term of the reletting. Solely for the purposes of this Subsection (c), the term "Fixed Rent" shall mean the Fixed Rent in effect immediately prior to the date upon which this Lease and the Demised Term shall have expired and come to an end, or the date of reentry upon the Demised Premises by Owner, as the case may be, adjusted to reflect any increases pursuant to the provisions of Article 23 for the Escalation Year and Tax Escalation Year immediately preceding such event.

Section 18.02. Rents Under Reletting: If the Demised Premises, or any part thereof, shall be relet together with other space in the Building, the rents collected or reserved under any such reletting and the expenses of any such reletting shall be equitably apportioned for the purposes of this Article
18. Tenant shall in no event be entitled to any rents collected or payable under any reletting, whether or not such rents shall exceed the Fixed Rent reserved in this Lease. Nothing contained in Articles 16, 17 or this Article shall be deemed to limit or preclude the recovery by Owner from Tenant of the maximum amount allowed to be obtained as damages by any statute or rule of law, or of any sums or damages to which Owner may be entitled in addition to the damages set forth in Section 18.01.

ARTICLE 19
FEES AND EXPENSES; INDEMNITY

Section 19.01. Owner's Right to Cure Tenant's Default: If Tenant shall default in the observance or performance of any term, covenant or condition of this Lease on Tenant's part to be observed or performed, Owner, at any time thereafter and without notice, may remedy such default for Tenant's account and at Tenant's expense, without thereby waiving any other rights or remedies of Owner with respect to such default.

Section 19.02. Tenant's Indemnity and Liability Insurance Obligations:

A. Tenant agrees to indemnify and save Owner and "Owner's Indemnitees" (as hereinafter defined) harmless of and from all loss, cost, liability, damage and expense including, but not limited to, reasonable counsel fees, penalties and fines, incurred in connection with or arising from (i) any default by Tenant in the observance or performance of any of the terms, covenants or conditions of this Lease on Tenant's part to be observed or performed, or (ii) the breach or failure of any representation or warranty made by Tenant in this Lease, or (iii) the use or occupancy or manner of use or occupancy of the Demised Premises by Tenant or any person claiming through or under Tenant, or (iv) any acts, omissions or negligence of Tenant or any such person, or the contractors, agents, servants, employees, visitors or licensees of Tenant or any such person, in or about the Demised Premises or the Building either prior to, during, or after the expiration of, the Demised Term, including, but not limited to, any acts omissions or negligence in the making or performing of any Alterations. Tenant further agrees to indemnify and save harmless Owner and Owner's Indemnitees of and from all loss, cost, liability, damage and expense, including, but not limited to, reasonable counsel fees and disbursements, incurred in connection with or arising from any claims by any persons by reason of injury to persons or damage to property occasioned by any use, occupancy, act, omission or negligence referred to in the preceding sentence. "Owner's Indemnitees" shall mean the Owner, the shareholders, members, or the partners comprising Owner and its and their partners, members, shareholders, officers, directors, employees, agents (including without limitation, any leasing and managing agents) and contractors together with the lessor under any Superior Lease and the holder of any Mortgage. If any action or proceeding shall be brought against Owner or Owner's Indemnitees based upon any such claim and if Tenant, upon notice from Owner, shall cause such action or proceeding to be defended at Tenant's expense by counsel acting for Tenant's insurance carriers in connection with such defense or by other counsel reasonably satisfactory to Owner, without any disclaimer of liability by Tenant or such insurance carriers in connection with such claim, Tenant shall not be required to indemnify Owner and Owner's Indemnitees for counsel fees in connection with such action or proceeding.

B. Throughout the Demised Term Tenant shall maintain commercial general liability insurance against any claims by reason of bodily and personal injury, death and property damage (including water damage)occurring in or about the Demised Premises covering, without limitation, the operation of any private air conditioning equipment and any private elevators, escalators or conveyors in or serving the Demised Premises or any part thereof, whether installed by Owner, Tenant or others, and shall furnish to Owner duplicate original policies of such insurance at least ten (10) days prior to the Commencement Date and at least ten (10) days prior to the expiration of the term of any such policy previously furnished by Tenant, in which policies Owner, and Owner's Indemnitees shall be named as parties insured, which policies shall be issued by companies, and shall be in form and amounts, reasonably satisfactory to Owner. Such policy or certificate shall initially have limits of liability of not less than Five Million ($5,000,000.00) Dollars combined single limit coverage on a per occurrence basis, including property damage. Owner may from time to time require such amount be increased provided such increased amounts required are reasonable for similar sized premises in firstclass office buildings in midtown Manhattan.

Section 19.03. Payments: Tenant shall pay to Owner, within thirty (30) days next following rendition by Owner to Tenant of bills or statements therefor: (i) sums equal to all expenditures made and monetary obligations incurred by Owner including, but not limited to, expenditures made and obligations incurred for reasonable counsel fees and disbursements, in connection with the remedying by Owner, for Tenant's account pursuant to the provisions of Section 19.01, of any default of Tenant, and (ii) sums equal to all losses, costs, liabilities, damages and expenses referred to in Section 19.02, and (iii) sums equal to all expenditures made and monetary obligations incurred by Owner including, but not limited to, expenditures made and obligations incurred for reasonable counsel fees and disbursements, in collecting or attempting to collect the Fixed Rent, any additional rent or any other sum of money accruing under this Lease or in enforcing or attempting to enforce any rights of Owner under this Lease or pursuant to law, whether by the institution and prosecution of summary proceedings or otherwise; and (iv) all other sums of money (other than Fixed Rent) accruing from Tenant to Owner under the provisions of this Lease. Any sum of money (other than Fixed Rent) accruing from Tenant to Owner pursuant to any provision of this Lease whether prior to or after the Commencement Date, may, at Owner's option, be deemed additional rent, and Owner shall have the same remedies for Tenant's failure to pay any item of additional rent when due as for Tenant's failure to pay any installment of Fixed Rent when due. Tenant's obligations under this Article shall survive the expiration or sooner termination of the Demised Term.

Section 19.04. Tenant's Late Payments - Late Charges: If Tenant shall fail to make payment of any installment of Fixed Rent or any increase in the Fixed Rent or any additional rent within ten (10) days after the date when such payment is due, Tenant shall pay to Owner, in addition to such installment of Fixed Rent or such increase in the Fixed Rent or such additional rent, as the case may be, as a late charge and as additional rent, a sum equal to three (3%) percent per annum above the then current prime rate (as the term "prime rate" is defined in Section 31.03) charged by JPMorgan Chase Bank or its successor of the amount unpaid computed from the date such payment was due to and including the date of payment.

ARTICLE 20
ENTIRE AGREEMENT

Section 20.01. Entire Agreement: This Lease contains the entire agreement between the parties and all prior negotiations and agreements are merged in this Lease. Neither Owner nor Owner's agents have made any representations or warranties with respect to the Demised Premises, the Building, the Real Property or this Lease except as expressly set forth in this Lease and no rights, easements or licenses are or shall be acquired by Tenant by implication or otherwise unless expressly set forth in this Lease. This Lease may not be changed, modified or discharged, in whole or in part, orally and no executory agreement shall be effective to change, modify or discharge, in whole or in part, this Lease or any provisions of this Lease, unless such agreement is set forth in a written instrument executed by the party against whom enforcement of the change, modification or discharge is sought. All references in this Lease to the consent or approval of Owner shall be deemed to mean the written consent of Owner, or the written approval of Owner, as the case may be, and no consent or approval of Owner shall be effective for any purpose unless such consent or approval is set forth in a written instrument executed by Owner.

ARTICLE 21
END OF TERM

Section 21.01. End of Term: On the date upon which the Demised Term shall expire and come to an end, whether pursuant to any of the provisions of this Lease or by operation of law, and whether on or prior to the Expiration Date, Tenant, at Tenant's sole cost and expense, (i) shall quit and surrender the Demised Premises to Owner, broom clean and in good order and condition, ordinary wear excepted, and (ii) shall remove all of Tenant's Personal Property and all other property and effects of Tenant and all persons claiming through or under Tenant (including, but not limited to, removal of all vertical wiring which extends into conduit and/or the Building risers and shafts regardless of at whose expense such vertical wiring was installed except as otherwise provided in Section 21.02) from the Demised Premises and the Building, and (iii) shall repair all damage to the Demised Premises occasioned by such removal and (iv) shall, at Owner's election, exercisable within six (6) months following the expiration or earlier termination of the Demised Term, remove any Specialty Alterations (as defined herein) and/or private interior staircases constructed by or on behalf of Tenant in the Demised Premises or connecting the Demised Premises or any part thereof with any other space (referred to herein as the "Other Space") in the Building occupied by Tenant, and restore those portions of the Demised Premises, the Other Space and the Building affected by any such Specialty Alterations and/or staircases (including, but not limited to, the slabbing over of any openings) to the condition of each which existed prior to the installation of any such Specialty Alterations and/or staircases, and repair any damage to the Demised Premises, Other Space and the Building occasioned by such removal. Notwithstanding the provisions of subdivision (iv) of the foregoing sentence, in the event Owner does not elect to have removed any such staircase or other Specialty Alteration referred to therein, any such staircase or other Specialty Alteration shall be and remain the property of Owner at no cost or expense to Owner. Owner shall have the right to retain any property and effects which shall remain in the Demised Premises after the expiration or sooner termination of the Demised Term, and any net proceeds from the sale thereof, without waiving Owner's rights with respect to any default by Tenant under the foregoing provisions of this Section. Tenant expressly waives, for itself and for any person claiming through or under Tenant, any rights which Tenant or any such person may have under the provisions of Section 2201 of the New York Civil Practice Law and Rules and of any successor law of like import then in force, in connection with any holdover summary proceedings which Owner may institute to enforce the foregoing provisions of this Article. If said date upon which the Demised Term shall expire and come to an end shall fall on a Sunday or holiday, then Tenant's obligations under the first sentence of this Section shall be performed on or prior to the Saturday or business day immediately preceding such Sunday or holiday. For purposes of this Section 21.01, the term "Specialty Alterations" shall mean Alterations consisting of any kitchens (but excluding any pantry), executive or private bathrooms, raised computer floors, vaults, any steel plates or reinforcement installed by Tenant (including without limitation, in connection with libraries or file systems), dumbwaiters, pneumatic tubes, horizontal transportation systems, and any other Alterations of a similar character to those enumerated in this sentence, and the installation of any equipment outside of the Demised Premises. Tenant's obligations under this Section shall survive the expiration or sooner termination of the Demised Term.

Section 21.02. Notwithstanding anything to the contrary set forth in
Section 21.01, Owner, at Owner's option, exercised by notice given (a) at least 30 days prior to the Expiration Date, or (b) on or prior to any sooner termination of the Demised Term, may require Tenant to leave all vertical wiring referred to in Section 21.01 in place, in which event all such vertical wiring shall remain in the Demised Premises and the Building and become the property of Owner, at no cost and expense to Owner.

ARTICLE 22
QUIET ENJOYMENT

Section 22.01. Quiet Enjoyment: Owner covenants and agrees with Tenant that upon Tenant paying the Fixed Rent and additional rent reserved in this Lease and observing and performing all of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the Demised Premises during the Demised Term, subject, however, to the terms, covenants and conditions of this Lease including, but not limited to, the provisions of Section 37.01, and subject to the Superior Lease and the Mortgage referred to in Section 7.01.

ARTICLE 23
ESCALATION

Section 23.01. Definitions: Owner and Tenant agree that the term "Demised Premises Area" shall mean 3,821square feet.

Section 23.02. Escalation Payments: A. For the purposes of this Article, the term "Escalation Year" shall mean the period from Commencement Date to and including the last day of the calendar month in which the day immediately preceding the first anniversary of the Commencement Date shall occur and each succeeding period of twelve (12) months thereafter. For the second (2nd) and each succeeding Escalation Year, Tenant shall pay to Owner, as additional rent, and in addition to any other sums payable pursuant to this Lease, an annual amount obtained by use of the following formula:

(X) multiplying (x) the sum of (i) the Fixed Rent set forth in Section 1.03 for the Escalation Year immediately preceding the applicable Escalation Year (subject to clause (Z) below, and as the same may be increased by virtue of Tenant leasing additional space and as the same may be adjusted pursuant to any of the terms and conditions of the Lease, including without limitation any option to renew the Lease, if any) plus (ii) the total amount owing in the previous Escalation Year pursuant to this Section 23.04 by (y) one hundred four percent (104%) and then

(Y) subtracting from such product the Fixed Rent set forth in Section
1.03 (as the same may be increased or adjusted as aforesaid, and which Fixed Rent shall be equal to the same Fixed Rent amount referred to in clause (x)
(i) above), with it understood that

(Z) the amount of the Fixed Rent used in the foresaid formula shall not include the portion thereof attributable to the Electrical Inclusion Factor, provided however that solely for purposes of determining the amounts payable pursuant to this Section 23.04, the Fixed Rent with respect to the first Escalation Year shall be deemed to be equal to the Fixed Rent payable for the Second Rent Period.

The sum to be paid by Tenant to Owner pursuant to this Subsection A of
Section 23.02, from time to time, is referred to as the "Additional Escalation Payment(s).

B. The parties agree that with respect to the leasing of the Demised Premises as initially constituted in this Lease for the original Demised Term set forth herein, the Additional Escalation Payment(s) during the original Demised Term which Tenant shall make pursuant to Subsection A above are equal to the amounts set forth below opposite the applicable period of time so listed:

Escalation Year            Amount Per Annum       Amount Per Month

2nd                        $6,419.28              $534.94
3rd                        $13,095.33             $1,091.28
4th                        $20,038.42             $1,669.87
5th                        $27,259.24             $2,271.60
6th                        $34,768.89             $2,897.41
7th                        $43,037.45             $3,586.45
8th                        $51,636.75             $4,303.06

C. Unless the Demised Term shall expire on the last day of a calendar month, the Additional Escalation Payment for such calendar month in which the Demised Term shall expire shall be apportioned in that percentage which the number of days in the period from the commencement of such calendar month to such date of expiration, both inclusive, bears to the total number of days in such calendar month.

D. The Additional Escalation Payments payable pursuant to the provisions of Subsection A of this Section 23.02, shall be payable in equal monthly installments in advance, as additional rent, together with the payment of the monthly installments of Fixed Rent, beginning with the first day of the first month of the applicable Escalation Year and the obligations of Tenant therefor shall survive the expiration or sooner termination of the Demised Term.

Section 23.03. Collection of Increases in Fixed Rent: The obligations of Owner and Tenant under the provisions of this Article with respect to any increase in the Fixed Rent, or any credit to which Tenant may be entitled, shall survive the expiration or any sooner termination of the Demised Term. All sums payable by Tenant under this Article shall be collectible by Owner in the same manner as Fixed Rent.

ARTICLE 24
NO WAIVER

Section 24.01. Owner's Termination Not Prevented: Neither any option granted to Tenant in this Lease or in any collateral instrument to renew or extend the Demised Term, nor the exercise of any such option by Tenant, shall prevent Owner from exercising any option or right granted or reserved to Owner in this Lease or in any collateral instrument or which Owner may have by virtue of any law, to terminate this Lease and the Demised Term or any renewal or extension of the Demised Term either during the original Demised Term or during the renewed or extended term. Any termination of this Lease and the Demised Term shall serve to terminate any such renewal or extension of the Demised Term and any right of Tenant to any such renewal or extension, whether or not Tenant shall have exercised any such option to renew or extend the Demised Term. Any such option or right on the part of Owner to terminate this Lease shall continue during any extension or renewal of the Demised Term. No option granted to Tenant to renew or extend the Demised Term shall be deemed to give Tenant any further option to renew or extend.

Section 24.02. No Termination by Tenant/No Waiver: No act or thing done by Owner or Owner's agents during the Demised Term shall constitute a valid acceptance of a surrender of the Demised Premises or any remaining portion of the Demised Term except a written instrument accepting such surrender, executed by Owner. No employee of Owner or of Owner's agents shall have any authority to accept the keys of the Demised Premises prior to the termination of this Lease and the Demised Term, and the delivery of such keys to any such employee shall not operate as a termination of this Lease or a surrender of the Demised Premises; however, if Tenant desires to have Owner sublet the Demised Premises for Tenant's account, Owner or Owner's agents are authorized to receive said keys for such purposes without releasing Tenant from any of its obligations under this Lease, and Tenant hereby relieves Owner of any liability for loss of, or damage to, any of Tenant's property or other effects in connection with such subletting. The failure by Owner to seek redress for breach or violation of, or to insist upon the strict performance of, any term, covenant or condition of this Lease on Tenant's part to be observed or performed, shall not prevent a subsequent act or omission which would have originally constituted a breach or violation of any such term, covenant or condition from having all the force and effect of an original breach or violation. The receipt by Owner of rent with knowledge of the breach or violation by Tenant of any term, covenant or condition of this Lease on Tenant's part to be observed or performed shall not be deemed a waiver of such breach or violation. Owner's failure to enforce any Building Rule against Tenant or against any other tenant or occupant of the Building shall not be deemed a waiver of any such Building Rule. No provision of this Lease shall be deemed to have been waived by Owner or Tenant unless such waiver shall be set forth in a written instrument executed by the waiving party. No payment by Tenant or receipt by Owner of a lesser amount than the aggregate of all Fixed Rent and additional rent then due under this Lease shall be deemed to be other than on account of the first accruing of all such items of Fixed Rent and additional rent then due, no endorsement or statement on any check and no letter accompanying any check or other rent payment in any such lesser amount and no acceptance of any such check or other such payment by Owner shall constitute an accord and satisfaction, and Owner may accept any such check or payment without prejudice to Owner's right to recover the balance of such rent or to pursue any other legal remedy.

ARTICLE 25
MUTUAL WAIVER OF TRIAL BY JURY

Section 25.01. Owner and Tenant hereby waive trial by jury in any action, proceeding or counterclaim brought by Owner or Tenant against the other on any matter whatsoever arising out of or in any way connected with this Lease, the relationship of landlord and tenant, the use or occupancy of the Demised Premises by Tenant or any person claiming through or under Tenant, any claim of injury or damage, and any emergency or other statutory remedy; however, the foregoing waiver shall not apply to any action for personal injury or property damage. The provisions of the foregoing sentence shall survive the expiration or any sooner termination of the Demised Term. If Owner commences any summary proceeding, or any other proceeding of like import, Tenant agrees: (i) not to interpose any counterclaim of whatever nature or description in any such summary proceeding, or any other proceeding of like import, unless failure to interpose such counterclaim would preclude Tenant from asserting such claim in a separate action or proceeding; and (ii) not to seek to remove to another court or jurisdiction or consolidate any such summary proceeding, or other proceeding of like import, with any action or proceeding which may have been, or will be, brought by Tenant. In the event that Tenant shall breach any of its obligations set forth in the immediately preceding sentence, Tenant agrees
(a) to pay all of Owner's attorneys" fees and disbursements in connection with Owner's enforcement of such obligations of Tenant and (b) in all events, to pay all accrued, present and future Fixed Rent and increases therein and additional rent payable pursuant to the provisions of this Lease.

Section 25.02.

A. Owner and Tenant each hereby submits itself to the jurisdiction of the State of New York in any action or proceeding arising out of or under this Lease, and Owner and Tenant each agrees that this Lease shall be governed, construed and interpreted in accordance with the laws of the State of New York which shall apply in any such action or proceeding.

B. All judicial actions, suits or proceedings brought by or against Tenant with respect to its obligations, liabilities or any other matter under or arising out of or in connection with this Lease or for recognition or enforcement of any judgment rendered in any such proceedings may be brought in any state or federal court of competent jurisdiction in the City of New York. By execution and delivery of this Lease, Owner and Tenant each accepts, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any final judgment rendered thereby in connection with this Lease from which no appeal has been taken or is available. Tenant hereby irrevocably waives any objection to the laying of venue or based on the grounds of forum non conveniens which it may now or hereafter have to the bringing of any such action or proceeding in any such jurisdiction. Nothing herein shall limit the right of Owner to bring any action, suit or proceeding against Tenant in any other court of competent jurisdiction. Tenant acknowledges that final, non-appealable judgment against it in any action, suit or proceeding referred to in this Article shall be conclusive and may be enforced in any other jurisdiction, by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and of the amount of any such judgment against Tenant.

ARTICLE 26
INABILITY TO PERFORM

Section 26.01. If, by reason of strikes or other labor disputes, fire or other casualty (or reasonable delays in adjustment of insurance), accidents, any Legal Requirements, any orders of any Governmental Authority or any other cause beyond Owner's reasonable control, whether or not such other cause shall be similar in nature to those hereinbefore enumerated, Owner is unable to furnish or is delayed in furnishing any utility or service required to be furnished by Owner under the provisions of Article 29 or any other Article of this Lease or any collateral instrument, or is unable to perform or make or is delayed in performing or making any installations, decorations, repairs, alterations, additions or improvements, whether or not required to be performed or made under this Lease or under any collateral instrument, or is unable to fulfill or is delayed in fulfilling any of Owner's other obligations under this Lease or any collateral instrument, no such inability or delay shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Owner or its agents by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's business, or otherwise.

ARTICLE 27
NOTICES

Section 27.01. Except as otherwise expressly provided in this Lease, any bills, statements, notices, demands, requests or other communications given or required to be given under this Lease (sometimes collectively referred to as a "Notice") shall be effective only if rendered or given in writing, sent by registered or certified mail (return receipt requested optional), or sent by nationally recognized courier service (e.g. Federal Express) providing dated evidence of receipt or refusal to accept delivery by the addressee, addressed as follows:

(a) To Tenant (i) at Tenant's address set forth in this Lease, Attention:
Salvatore J. Zizza, if mailed prior to Tenant's taking possession of the Demised Premises, or (ii) at the Building if mailed subsequent to Tenant's taking possession of the Demised Premises, or (iii) at any place where Tenant or any agent or employee of Tenant may be found if mailed subsequent to Tenant's vacating, deserting, abandoning or surrendering the Demised Premises, in each case with a copy to Robert A. Bruno, Esq., Jaffee, Ross &Light, LLP, 880 Third Avenue, 15th Floor, New York, New York 10022, or

(b) To Owner at Owner's address set forth in this Lease, Attention:
William C. Rudin with a copy to Goldfarb & Fleece, 345 Park Avenue, New York, New York 10154, Attention: Partner-in-Charge, Rudin Management, or

(c) addressed to such other address as either Owner or Tenant may designate as its new address for such purpose by notice given to the other in accordance with the provisions of this Section. Any such bill, statement, notice, demand, request or other communication shall be deemed to have been rendered or given (x) if mailed: on the date when it shall have been mailed or
(y) if sent by nationally recognized courier: on the date when it shall have been delivered by such courier service or when delivery by such courier service was refused by the addressee. Refusal to accept delivery of any Notice shall not limit or negate delivery of such Notice or limit, negate or render ineffective any such Notice.

Nothing contained in this Section 27.01 shall preclude, limit or modify Owner's service of any notice, statement, demand or other communication in the manner required by law, including, but not limited to, any demand for rent under Article 7 of the New York Real Property Actions and Proceedings Law or any successor laws of like import.

ARTICLE 28
PARTNERSHIP TENANT

Section 28.01. If Tenant is a partnership or professional corporation or limited liability company (or is comprised of two (2) or more persons, individually and as co-partners of a partnership or shareholders of a professional corporation or members of a limited liability company) or if Tenant's interest in this Lease shall be assigned to a partnership or professional corporation or limited liability company (or to two (2) or more persons, individually and as co-partners of a partnership or shareholders of a professional corporation or members of a limited liability company) pursuant to Article 11 (any such partnership, professional corporation, limited liability company and such persons are referred to in this Section as "Partnership Tenant"), the following provisions of this Section shall apply to such Partnership Tenant: (i) the liability of each of the persons comprising Partnership Tenant shall be joint and several, individually and as a partner or shareholder or member, with respect to all obligations of the Tenant under this Lease whether or not such obligations arose prior to, during, or after any period when any party comprising Partnership Tenant was a member or shareholder of Partnership Tenant, and (ii) each of the persons comprising Partnership Tenant, whether or not such person shall be one of the persons comprising Tenant at the time in question, hereby consents in advance to, and agrees to be bound by, any written instrument which may hereafter be executed, changing, modifying or discharging this Lease, in whole or in part, or surrendering all or any part of the Demised Premises to Owner, and by any notices, demands, requests or other communications which may hereafter be given by Partnership Tenant or by any of the persons comprising Partnership Tenant, and (iii) any bills, statements, notices, demands, requests or other communications given or rendered to Partnership Tenant or to any of the persons comprising Partnership Tenant shall be deemed given or rendered to Partnership Tenant and to all such persons and shall be binding upon Partnership Tenant and all such persons, and (iv) if Partnership Tenant shall admit new partners or shareholders or members, all of such new partners or shareholders or members, as the case may be, shall, by their admission to Partnership Tenant, be deemed to have assumed performance of all of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed, and shall be liable for such performance, together with all other parties, jointly or severally, individually and as a partner or shareholder or member, whether or not the obligation to comply with such terms, covenants or conditions arose prior to, during or after any period when any party comprising Partnership Tenant was a partner, member or shareholder of Partnership Tenant and (v) Partnership Tenant shall give prompt notice to Owner of the admission of any such new partners, or shareholders, or members, as the case may be, and, upon demand of Owner, shall cause each such new partner or shareholder or member to execute and deliver to Owner an agreement, in form satisfactory to Owner, wherein each such new partner or shareholder or member shall so assume performance of all of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed whether or not the obligation to comply with such terms, covenants or conditions arose prior to, during or after any period when any party comprising Partnership Tenant was a member or shareholder of Partnership Tenant (but neither Owner's failure to request any such agreement nor the failure of any such new partner, shareholder or member to execute or deliver any such agreement to Owner shall vitiate the provisions of subdivision (iv) or any other provision of this Section).

ARTICLE 29
UTILITIES AND SERVICES

Section 29.01. Elevators: As long as this Lease is in full force and effect, Owner, at Owner's expense, shall furnish necessary passenger elevator facilities on business days (as defined in Section 31.01) from 8:00 A.M. to 6:00 P.M. and on Saturdays from 8:00 A.M. to 1:00 P.M. and shall have a passenger elevator subject to call at all other times. Tenant shall be entitled to the non-exclusive use of the freight elevator in common with other tenants and occupants of the Building from 8:00 A.M. to 6:00 P.M. on business days, subject to such reasonable rules as Owner may adopt for the use of the freight elevator. At any time or times all or any of the elevators in the Building may, at Owner's option, be automatic elevators, and Owner shall not be required to furnish any operator service for automatic elevators. If Owner shall, at any time, elect to furnish operator service for any automatic elevators, Owner shall have the right to discontinue furnishing such service with the same effect as if Owner had never elected to furnish such service.

Section 29.02. Heat: As long as this Lease is in full force and effect, Owner, at Owner's expense, shall furnish heat to the Demised Premises, as and when required by law, on business days from 8:00 A.M. to 6:00 P.M. and on Saturdays from 8:00 A.M. to 1:00 P.M.

Section 29.03. Air Conditioning and Ventilation: As long as this Lease is in full force and effect, Owner, at Owner's expense, shall furnish and distribute to the Demised Premises (i) conditioned air at reasonable temperatures, pressures and degrees of humidity and in reasonable volumes and velocities, on business days from 8:00 A.M. to 6:00 P.M. and on Saturdays from 8:00 A.M. to 1:00 P.M., when required for the comfortable occupancy of the Demised Premises during the months of April, May, June, July, August, September, October and the period from November 1st to November 15th; and (ii) except when conditioned air or heat is being furnished, mechanical ventilation only through the Building air conditioning system on business days from 8:00
A.M. to 6:00 P.M. and on Saturdays from 8:00 A.M. to 1:00 P.M. throughout the year. Notwithstanding the foregoing provisions of this Section, Owner shall not be responsible if the normal operation of the Building air conditioning system shall fail to provide conditioned air at reasonable temperatures, pressures or degrees of humidity or in reasonable volumes or velocities in any portions of the Demised Premises (a) which, by reason of any machinery or equipment installed by or on behalf of Tenant or any person claiming through or under Tenant, shall have an electrical load in excess of four (4) watts per square foot of usable area for all purposes (including lighting and power), or which shall have a human occupancy factor in excess of one person per 100 square feet of usable area (the average electrical load and human occupancy factors for which the Building air conditioning system is designed) or (b) because of any rearrangement of partitioning or other Alterations made or performed by or on behalf of Tenant or any person claiming through or under Tenant. Whenever said air conditioning system is in operation, Tenant agrees to cause all the windows in the Demised Premises to be kept closed and to cause the venetian blinds in the Demised Premises to be kept closed if necessary because of the position of the sun. Tenant agrees to cause all the windows in the Demised Premises to be closed whenever the Demised Premises are not occupied. Tenant shall cooperate fully with Owner at all times and abide by all regulations and requirements which Owner may reasonably prescribe for the proper functioning and protection of the air conditioning, ventilation and heating systems. In addition to any and all other rights and remedies which Owner may invoke for a violation or breach of any of the foregoing provisions of this Section, Owner may discontinue heating, air conditioning and ventilation service during the period of such violation or breach, and such discontinuance shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Owner, or its agents, by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's business, or otherwise.

Section 29.04. Cleaning:

A. As long as this Lease is in full force and effect, and provided Tenant shall keep the Demised Premises in order, Owner, at Owner's expense, shall cause the office areas of the Demised Premises to be cleaned and shall cause Tenant's ordinary office waste paper refuse to be removed, all at regular intervals in accordance with standards and practices adopted by Owner for the Building. Tenant shall cooperate with any waste and garbage recycling program of the Building and shall comply with all reasonable rules and regulations of Owner with respect thereto. Tenant acknowledges that Owner's obligation to cause the office areas of the Demised Premises to be cleaned excludes any portion of the Demised Premises not used as office areas (e.g., storage, mail and computer areas, private lavatories and areas used for the storage, preparation, service or consumption of food or beverages). Tenant shall pay Owner at Building standard rates or, if there are no such rates, at reasonable rates, for the removal of any of Tenant's refuse or rubbish, other than ordinary office waste paper refuse, from the Building, and Tenant, at Tenant's expense, shall cause all portions of the Demised Premises used for the storage, preparation, service or consumption of food or beverages to be cleaned daily in a manner satisfactory to Owner, and to be exterminated against infestation by vermin, roaches or rodents regularly and, in addition, whenever there shall be evidence of any infestation.

B. Tenant acknowledges and is aware that the cleaning services required to be furnished by Owner pursuant to this Section may be furnished by a contractor or contractors employed by Owner and agrees that Owner shall not be deemed in default of any of its obligations under this Section 29.04 unless such default shall continue for an unreasonable period of time after notice from Tenant to Owner setting forth the specific nature of such default.

C. Notwithstanding the provisions of Subsection A of this Section, Tenant shall have the option to contract independently for the removal of such other refuse and rubbish and for office cleaning services in addition to those furnished by Owner. In the event Tenant exercises such option, the removal of such other refuse and rubbish and the furnishing of office cleaning services to Tenant by persons other than Owner and its contractors shall be performed in accordance with such regulations and requirements as, in Owner's judgment, are necessary for the proper operation of the Building, and Tenant agrees that Tenant will not permit any person to enter the Demised Premises or the Building for such purposes, or for the purpose of providing extermination services required to be performed by Tenant pursuant to Subsection A of this Section, other than persons first approved by Owner, such approval not unreasonably to be withheld.

Section 29.05. Electricity: A. As long as this Lease is in full force and effect, Owner, at Owner's expense, shall redistribute or furnish electrical energy, on a demand load basis, to or for the use of Tenant in the Demised Premises for the operation of the lighting fixtures and the electrical receptacles installed in the Demised Premises on the Commencement Date. There shall be no specific charge by way of measuring such electrical energy on any meter or otherwise, as the charge for the service of redistributing or furnishing such electrical energy has been included in the Fixed Rent on a socalled "rent inclusion" basis. The parties agree that although the charge for the service of redistributing or furnishing electrical energy is included in the Fixed Rent on a so-called "rent inclusion" basis, the value to Tenant of such service may not be fully reflected in the Fixed Rent. Accordingly, Tenant agrees that Owner may cause an independent electrical engineer or electrical consulting firm, selected by Owner and approved by Tenant, such approval not to be unreasonably withheld, to make a determination, following the commencement of Tenant's normal business activities in the Demised Premises, of the full value to Tenant of such services supplied by Owner, to wit: the potential electrical energy supplied to Tenant annually based upon the estimated capacity of the electrical feeders, risers and wiring and other electrical facilities serving the Demised Premises. Such engineer or consulting firm shall certify such determination in writing to Owner and Tenant. If it shall be determined that the full value to Tenant of such service is in excess of ELEVEN THOUSAND FOUR HUNDRED SIXTY-THREE and 00/100 ($11,463.00) DOLLARS per annum (such sum is referred to as the "Electrical Inclusion Factor"), the parties shall enter into a written supplementary agreement, in form satisfactory to Owner, modifying this Lease as of the Commencement Date by increasing the Fixed Rent and the Electrical Inclusion Factor for the entire Demised Term by an annual amount equal to such excess. However, if it shall be so determined that the full value to Tenant of such service does not exceed the Electrical Inclusion Factor, no such agreement shall be executed and there shall be no increase or decrease in the Fixed Rent or the Electrical Inclusion Factor by reason of such determination. If either the quantity or character of electrical service is changed by the corporation(s) and/or other entity(ies) selected by Owner to supply electrical service to the Building or is no longer available or suitable for Tenant's requirements, no such change, unavailability or unsuitability shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Owner, or its agents, by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's business, or otherwise.

B. Owner represents that the electrical feeder or riser capacity serving the Demised Premises on the Commencement Date shall be adequate to serve the lighting fixtures and electrical receptacles installed in the Demised Premises on the Commencement Date. Subject to the provisions of Subsection C(1) of this
Section 29.05, any additional feeders or risers to supply Tenant's additional electrical requirements, and all other equipment proper and necessary in connection with such feeders or risers, shall be installed by Owner or, at Owner's election, by Tenant upon Tenant's request, at the sole cost and expense of Tenant, provided that, in Owner's judgment, such additional feeders or risers are necessary and are permissible under applicable laws (including, but not limited to, the New York State Energy Conservation Construction Code) and insurance regulations and the installation of such feeders or risers will not cause permanent damage or injury to the Building or the Demised Premises or cause or create a dangerous or hazardous condition or entail excessive or unreasonable alterations or repairs or interfere with or disturb other tenants or occupants of the Building. Tenant covenants that at no time shall the use of electrical energy in the Demised Premises exceed the capacity of the existing feeders or wiring installations then serving the Demised Premises. Tenant shall not make or perform, or permit the making or performance of, any Alterations to wiring installations or other electrical facilities in or serving the Demised Premises or any additions to the business machines, office equipment or other appliances in the Demised Premises which utilize electrical energy without the prior consent of Owner in each instance. Any such Alterations, additions or consent by Owner shall be subject to the provisions of Subsection C(1) of this Section 29.05, as well as to the other provisions of this Lease including, but not limited to, the provisions of Article 3.

C. (1) If, at any time or times prior to or during the Demised Term, electrical feeders, risers, wiring or other electrical facilities serving the Demised Premises shall be installed by Owner, Tenant or others, on behalf of Tenant or any person claiming through or under Tenant in addition to feeders, risers, wiring or other electrical facilities necessary to serve the lighting fixtures and electrical receptacles installed in the Demised Premises on the Commencement Date, the Fixed Rent and the Electrical Inclusion Factor shall be increased in an annual amount which shall reflect the value to Tenant of the additional service to be furnished by Owner, to wit: the potential additional electrical energy made available to Tenant annually based upon the estimated capacity of such additional electrical feeders, risers, wiring or other electrical facilities. The amount of any such increase in the Fixed Rent and the Electrical Inclusion Factor shall be finally determined by an independent electrical engineer or consulting firm selected by Owner and approved by Tenant, such approval not to be unreasonably withheld, who shall certify such determination in writing to Owner and Tenant. Following such determination, Owner and Tenant shall enter into a written supplementary agreement, in form satisfactory to Owner, modifying this Lease by increasing the Fixed Rent and the Electrical Inclusion Factor for the remainder of the Demised Term in an annual amount equal to the value of such additional service as so determined. Any such increase shall be effective as of the date of the first availability to Tenant of such additional service and shall be retroactive to such date if necessary.

(2) If, at any time or times after April 14, 2006, the rates at which Owner purchases electrical energy from the corporation(s) and/or other entity(ies) Owner has selected to supply electrical service to the Building or any charges incurred or taxes payable by Owner in connection therewith shall be increased or decreased, the Fixed Rent and the Electrical Inclusion Factor shall be increased or decreased, as the case may be, upon demand of either party, in an annual amount which shall fairly and proportionately reflect the estimated increase or decrease, as the case may be, in the annual cost to Owner of purchasing electrical energy for the Building provided that notwithstanding anything to the contrary contained in the provisions of this
Section 29.05 in no event shall (a) the Electrical Inclusion Factor ever be decreased below the original amount thereof set forth in Subsection A of this
Section and (b) the Fixed Rent ever be decreased by more than such decrease in the Electrical Inclusion Factor as so limited by the provisions of the aforesaid Subdivision (a) of this Subsection C.(2). If, within ten (10) days after any such demand, Owner and Tenant shall fail to agree upon the amount of such increase or decrease, as the case may be, in the Fixed Rent and the Electrical Inclusion Factor then, in lieu of such agreement, such estimated increase or decrease, as the case may be, shall be finally determined by an independent electrical engineer or consulting firm selected by Owner who shall certify such determination in writing to Owner and Tenant. Any such increase or decrease in the Fixed Rent and the Electrical Inclusion Factor shall be effective as of the effective date of such increase or decrease, and shall be retroactive to such date if necessary.

(3) Any increase in the Fixed Rent pursuant to the provisions of Subsection A of this Section or this Subsection C with respect to the period from the effective date of such increase to the last day of the month in which such increase shall be fixed by agreement or determination shall be payable by Tenant within twenty (20) days following demand of Owner. Any decrease in the Fixed Rent pursuant to the provisions of this Subsection C with respect to the period from the effective date of such decrease to the last day of the month in which such decrease shall be fixed by agreement or determination shall be credited to Tenant against the next monthly installment of the Fixed Rent. The monthly installments of the Fixed Rent payable after the date upon which any such increase or decrease is so fixed shall be proportionately adjusted to reflect such increase or decrease in the Fixed Rent.

D. Owner may, at any time, elect to discontinue the redistribution or furnishing of electrical energy. In the event of any such election by Owner,
(i) Owner agrees to give reasonable advance notice of any such discontinuance to Tenant, (ii) Owner agrees to permit Tenant to receive electrical service directly from the corporation(s) and/or other entity(ies) Owner has selected to supply electrical service to the Building and to permit the existing feeders, risers, wiring and other electrical facilities serving the Demised Premises to be used by Tenant for such purpose to the extent they are suitable and safely capable, (iii) Owner agrees to pay such charges and costs, if any, as such corporation(s) and/or other entity(ies) may impose in connection with the installation of Tenant's meters, (iv) the Fixed Rent shall be decreased, as of the date of such discontinuance, by an amount equal to the Electrical Inclusion Factor to reflect such discontinuance; and (v) this Lease shall remain in full force and effect and such discontinuance shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent except as expressly provided in subdivision (iv) of this Subsection D, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Owner or its agents by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's business, or otherwise.

E. The following method of computation shall be employed by any electrical engineer or electrical consulting firm selected by Owner pursuant to the provisions of Subsection C(2) of this Section 29.05 in finally determining any estimated increase or decrease in the Fixed Rent and the Electrical Inclusion Factor, under the provisions of this Section resulting from the corporation(s) and/or other entity(ies) Owner has selected to supply electrical service to the Building (referred to individually and collectively as "The Corporation") electrical rate and fuel charge changes and taxes (collectively "Electrical Changes") payable in connection therewith:

(1) Owner's bills from The Corporation for the Building for the twelve
(12) month period immediately preceding the Electrical Change in question shall be averaged for demand and consumption (Kw and Kwh) and the rate structure in effect immediately prior to the Electrical Change in question shall be applied to such average demand and consumption factors of Owner's billings for the Building for said twelve (12) month period resulting in an agreed determination of the cost to Owner of electricity for the Building immediately prior to the Electrical Change in question; and

(2) The new rate structure pursuant to which Owner is billed by The Corporation, i.e., the rate structure which includes the Electrical Change in question, shall be applied to the average demand and consumption factors of Owner's billings for the Building for said twelve (12) month period resulting in an agreed estimate of the cost to Owner by reason of the Electrical Change in question; and

(3) The difference in the costs determined pursuant to the foregoing subdivisions (1) and (2) shall be deemed to be the amount of the estimated annual change in cost and the amount of such estimated annual change in cost shall be divided by the cost determined pursuant to the foregoing subdivision (1); and

(4) The resulting quotient shall be applied to Tenant's then current Electrical Inclusion Factor to produce the increase or decrease in the Fixed Rent and Electrical Inclusion Factor.

(For example: Assume (1) an Electrical Change i.e. a rate increase; (2)
an application of the rate schedule in effect immediately prior to such Electrical Change to the averaged electrical demand and consumption factors shown on Owner's electrical bills for the twelve (12) month period immediately preceding such Electrical Change resulting in an estimated annual cost of $100,000.00; (3) an application of the new rate schedule to the averaged electrical demand and consumption factors shown on the bills in question resulting in an estimated annual cost of $110,000.00; (4) deduction of the sum of $100,000.00 referred to in step (2) from said sum of $110,000.00 referred to in step (3), resulting in a difference of $10,000.00; and (5) that Tenant's Electrical Inclusion Factor was $3,000.00. The $10,000.00 annual estimated increase for the Building, when divided by $100,000.00, the estimated annual cost to Owner of electricity for the Building prior to the Electrical Change in question, results in a quotient of 10% which, when applied to Tenant's Electrical Inclusion Factor increases the Fixed Rent and the Electrical Inclusion Factor by $300.00.)

F. Notwithstanding anything to the contrary set forth in this Lease, any sums payable or granted in any way by the corporation(s) and/or other entity(ies) Owner has selected to supply electricity to the Building resulting from the installation in the Demised Premises of energy efficient lamping, special supplemental heating, ventilation and air conditioning systems or any other Alterations, which sums are paid or given by way of rebate, direct payment, credit or otherwise, shall be and remain the property of Owner, and Tenant shall not be entitled to any portion thereof, unless such lamping, supplemental heating, ventilation and air conditioning systems or other Alterations were installed by Tenant, solely at Tenant's expense, without any contribution, credit or allowance by Owner, in accordance with all of the provisions of this Lease. Nothing contained in the foregoing sentence, however, shall be deemed to obligate Owner to supply or install in the Demised Premises any such lamping, supplemental heating, ventilation and air conditioning systems or other Alterations.

Section 29.06. Water: Owner shall provide reasonable quantities of water for ordinary lavatory, pantry and drinking purposes at no additional cost to Tenant. If Tenant requires, uses or consumes water for any purpose in addition to ordinary lavatory, pantry and drinking purposes, Owner may install a hot water meter and a cold water meter and thereby measure Tenant's consumption of water for all purposes. Tenant shall pay to Owner the cost of any such meters and their installation, and Tenant shall keep any such meters and any such installation equipment in good working order and repair, at Tenant's cost and expense. Tenant agrees to pay for water consumed as shown on said meters, and sewer charges, taxes and any other governmental charges thereon, as and when bills are rendered. In addition to any sums required to be paid by Tenant for hot water consumed and sewer charges, taxes and any other governmental charges thereon under the foregoing provisions of this Section, Tenant agrees to pay to Owner, for the heating of said hot water, an amount equal to three (3X) times the total of said sums required to be paid by Tenant for hot water and sewer charges thereon. For the purposes of determining the amount of any sums required to be paid by Tenant under this Section, all hot and cold water consumed during any period when said meters are not in good working order shall be deemed to have been consumed at the rate of consumption of such water during the most comparable period when such meters were in good working order.

Section 29.07. Overtime Periods: The Fixed Rent does not reflect or include any charge to Tenant for the furnishing or distributing of any necessary elevator facilities, heat, conditioned air or mechanical ventilation to the Demised Premises during periods (referred to as "Overtime Periods") other than the hours and days set forth above in this Article for the furnishing and distributing of such services. Accordingly, if Owner shall furnish any such elevator facilities, heat, conditioned air or mechanical ventilation to the Demised Premises at the request of Tenant during Overtime Periods, Tenant shall pay Owner for such services at the standard rates then fixed by Owner for the Building or, if no such rates are then fixed, at reasonable rates. Owner shall not be required to furnish any such services during Overtime Periods, unless Owner has received reasonable advance notice from Tenant requesting such services. If Tenant fails to give Owner reasonable advance notice requesting such services during any Overtime Periods, then, whether or not the Demised Premises are habitable during such Overtime Periods, failure by Owner to furnish or distribute any such services during such Overtime Periods shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Owner or its agents by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's business or otherwise. Subject to union requirements, there is a four (4) hour minimum for Tenant's request for overtime conditioned air, mechanical ventilation, heat, or freight elevator service unless such overtime conditioned air, mechanical ventilation, heat, or freight elevator service is requested for a period immediately following the normal operating hours set forth in Section 29.01, Section 29.02 and Section 29.03 in which event there is a one (1) hour minimum.

Section 29.08. Owner's Right to Stop Service: Owner reserves the right to stop the service of the heating, air conditioning, ventilating, elevator, plumbing, electrical or other mechanical systems or facilities in the Building when necessary by reason of accident or emergency, or for repairs, alterations, replacements or improvements, which, in the judgment of Owner are desirable or necessary, until said repairs, alterations, replacements or improvements shall have been completed. The exercise of such right by Owner shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Owner or its agents by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's business, or otherwise.

Section 29.09. Telecommunications: A. Owner shall have no obligation to provide Tenant with any telecommunication services or facilities to or for the Demised Premises or the use or occupancy thereof by Tenant or any person through or under Tenant. With respect to Tenant's telecommunications facilities and services, Tenant shall contract separately with all providers of Tenant's telecommunications facilities and services (each of which is referred to as a "Tenant's Telecommunications Service Provider") and pay each Tenant's Telecommunications Service Provider for all services provided by it to Tenant pursuant to a separate agreement between Tenant and Tenant's Telecommunications Service Provider. Neither Tenant nor Tenant's Telecommunications Service Provider shall use any portion of the Building, including any risers, shafts, conduits or other facilities, to bring such telecommunications services to the Demised Premises without the prior written consent of Owner in each instance. Any such use, if granted, shall (i) be subject to all of the rules and regulations imposed by Owner with respect to the Building's shafts or other telecommunications facilities and the installation, use, operation and maintenance of any telecommunications facilities, and (ii) shall not interfere with any other tenant or occupant of the Building.

B. Tenant acknowledges that Owner has installed a telecommunications cable distribution system in the Building (referred to herein as the "Building CDS System"). Accordingly, notwithstanding anything in Subsection A above to the contrary, Tenant and Tenant's Telecommunications Service Provider shall use such Building CDS System to bring telecommunication services to the Demised Premises and shall not be permitted to use any other portion of the Building, including any risers, shafts, conduits or other facilities, in connection with such telecommunication services without the prior written consent of Owner in each instance. To the extent that Owner shall as a matter of Building practice or procedure, cause telecommunication providers to enter into a license agreement with Owner for the use of such Building CDS System and pay fees with respect thereto, Tenant acknowledges and agrees that Tenant's Telecommunications Service Provider shall be required to enter into such license agreement with Owner and pay such fees. If the Building CDS System is owned or operated or managed by a separate cable distribution service company in the Building (referred to as the "Telecommunications Cable Distribution Company") for the supply, maintenance and distribution of facilities in such Building CDS System, Tenant's Telecommunications Service Provider shall also contract with such Telecommunications Cable Distribution Company for the use of the facilities provided by such Building CDS System and pay any fees with respect thereto. Owner shall have no obligation for Tenant to allow Tenant's Telecommunications Service Provider into the Building unless and until such Tenant's Telecommunications Provider shall execute said license agreement with Owner and, if applicable, contract with such Telecommunications Cable Distribution Company. If Tenant is unable to use a particular Tenant's Telecommunication Service Provider because it fails to enter into an agreement with Owner and/or the Telecommunications Cable Distribution Company and pay any fees in connection therewith, no such inability shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or release Tenant from any of its obligations under this Lease, or impose any liability upon Owner or Owner's Indemnitees by reason of inconvenience or annoyance to Tenant or interruption of Tenant's business or otherwise. Tenant and Tenant's Telecommunications Service Provider shall comply with all reasonable rules and regulations adopted by Owner and the Telecommunications Cable Distribution Company with respect to the use of the Building CDS System. Owner and "Owner's Indemnitees" (as defined in Article 19) shall not be liable to Tenant, or anyone claiming through or under Tenant, for any damages, including, but not limited to, special, incidental, remote or consequential damages, including, without limitation, lost revenue, lost profits and additional operating or personnel expenses arising from any acts, omissions or negligence of Tenant's Telecommunications Service Provider and the Telecommunications Cable Distribution Company. Nothing contained in this Subsection shall obligate Owner (x) to cause to be installed such Building CDS System or (y) to own such Building CDS System, which Tenant acknowledges may be owned by a person not affiliated with Owner.

ARTICLE 30
TABLE OF CONTENTS, ETC.

Section 30.01. Table of Contents/Captions: The Table of Contents and the captions following the Articles and Sections of this Lease have been inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provision of this Lease.

ARTICLE 31
MISCELLANEOUS DEFINITIONS, SEVERABILITY AND INTERPRETATION PROVISIONS

Section 31.01. The term "business days" as used in this Lease shall exclude Saturdays, Sundays and holidays, the term "Saturdays" as used in this Lease shall exclude holidays and the term "holidays" as used in this Lease shall mean all days observed as legal holidays by either the New ork State Government or the Federal Government. The term "Rudin Building" shall mean a building owned or managed by an entity of which at least fifty (50%) percent is owned or controlled, either by voting rights, contract or otherwise, by the families of Samuel Rudin, his brothers and sisters, the lineal descendants of any of the foregoing, including Jack Rudin, his children and the children of Lewis Rudin, deceased and/or the spouses of any such persons and/or any corporation, partnership, business entity or trust established for the benefit of or controlled by the foregoing persons.

Section 31.02. The terms "person" and "persons" as used in this Lease shall be deemed to include natural persons, firms, corporations, associations and any other private or public entities, whether any of the foregoing are acting on their own behalf or in a representative capacity. Section 31.03. The term "prime rate" shall mean the rate of interest announced publicly by JPMorgan Chase Bank, or its successor, from time to time, as JPMorgan Chase Bank's or such successor's base rate, or if there is no such base rate, then the rate of interest charged by JPMorgan Chase Bank or its successor to its most credit worthy customers on commercial loans having a ninety (90) day duration.

Section 31.04. If any term, covenant or condition of this Lease or any application thereof shall be invalid or unenforceable, the remainder of this Lease and any other application of such term, covenant or condition shall not be affected thereby.

Section 31.05. This Lease shall be construed without regard to any presumption or other rule requiring construction against the party causing this Lease to be drafted. In the event of any action, suit, dispute or proceeding affecting the terms of this Lease, no weight shall be given to any deletions or striking out of any of the terms of this Lease contained in any draft of this Lease and no such deletion or strike out shall be entered into evidence in any such action, suit or dispute or proceeding given any weight therein.

Section 31.06. Legal Event/Bankruptcy Event/Default Situation:

A. Notwithstanding anything contained in this Lease to the contrary, in each instance in this Lease where (i) any Owner's rights or Tenant's obligations arise or are applicable because of a Default Situation (as hereinafter defined), and/or (ii) any Tenant's rights are conditioned upon the absence of a Default Situation, then in each such instance, a Legal Event (as hereinafter defined) and a Bankruptcy Event (as hereinafter defined) shall also be considered a Default Situation upon which such Owner's rights or Tenant's obligations arise or are applicable or such rights of Tenant are conditioned, as the case may be.

B. As used herein, (i) the term "Legal Event" shall mean that at the relevant point in time there shall be (x) a default by Tenant in the payment of any Fixed Rent, any increases thereto, and any other additional rent or other sums and charges then due Owner under this Lease, or in the performance or observance of any of the non-monetary terms and conditions of this Lease on Tenant's part to be observed and performed, and (y) a prohibition on Owner, by virtue of Legal Requirements similar to or in the nature of the "automatic stay" provisions which are applicable to a Bankruptcy Event, which either prevents Owner from delivering a notice to Tenant demanding Tenant's performance under this Lease or prevents Owner from delivering a notice to Tenant stating that Tenant is in default of its obligations under this Lease,
(ii) the term "Bankruptcy Event" shall mean that at the relevant point in time Tenant shall be voluntarily seeking or involuntarily being required to seek any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy act or law or any other present or future applicable federal, state or other statute, and (iii) the term "Default Situation" shall mean (xx) an Event of Default (whether expressed as an Event of Default or as a default by Tenant under any of the terms, covenants or conditions of this Lease on Tenant's part to be observed or performed beyond the expiration of the applicable notice and grace period) and/or (yy) a default by Tenant under any of the terms, covenants or conditions of this Lease on Tenant's part to be observed or performed. The foregoing notwithstanding neither the occurrence of a Legal Event nor the occurrence of a Bankruptcy Event shall, in and of itself, entitle Owner to deliver a termination notice terminating this Lease pursuant to the terms and conditions of Section 16.01 of this Lease, unless Owner shall be entitled under Section 16.01 of this Lease (as opposed to under this Section 31.06) to deliver such notice.

Section 31.07. Authority of Managing Agent: A. Unless Owner shall render written notice to Tenant to the contrary in accordance with the provisions of Article 27 hereof, Rudin Management Company, Inc., acting as the agent of Owner shall have the following authority:

(i) Rudin Management Company, Inc., by anyone holding one of the "Specified Offices of Rudin Management Company, Inc."(as defined herein) is authorized on behalf of and as the agent of Owner to (x) execute and deliver any and all lease documents affecting the Real Property, including without limitation, all leases, licenses, lease and license modification agreements, amendments, consents, termination agreements, surrender agreements, stipulations and other like agreements and instruments regarding the use or occupancy of the Real Property (collectively, the "Lease Documents") and (y) commence and prosecute to completion, disposition or settlement any and all actions, causes of actions, claims or proceedings necessary to enforce the terms and provisions of any Lease Documents, including, without limitation, the execution of all pleadings, petitions and instruments in connection therewith (an "Enforcement Prosecution"); and

(ii) Rudin Management Company, Inc., by any officer thereof, is authorized on behalf of and as the agent of Owner to execute and deliver all notices (including, without limitation, commencement date notices, notices of default, notices of event of default and notices of termination) contemplated by this Lease or any other Lease Documents or in connection with any of the respective rights or obligations of the parties hereunder (collectively, the "Notices").

Any Lease Documents and Notices so executed by Rudin Management Company, Inc., in accordance with the foregoing provisions of this Section 31.07, or any such Enforcement Prosecution so conducted by Rudin Management Company, Inc. in accordance with the foregoing sentence, shall have the same force, effect and authority as if executed or conducted by Owner. Tenant acknowledges that Rudin Management Company, Inc. is acting solely as agent for Owner in connection with the foregoing and neither Rudin Management Company, Inc., nor any of its direct or indirect principals, officers, shareholders, directors or employees shall have any liability to Tenant, or any person or entities acting or claiming through or under Tenant, in connection with the performance of Owner's obligations under this Lease and Tenant, and such person or entity, waive any and all claims against any such parties arising out of, or in any way connected with, this Lease, the Real Property, any Lease Documents, any Enforcement Prosecution or any Notices.

B. The term 'specified Offices of Rudin Management Company, Inc." shall mean any of the following: (a) President, (b) Chief Executive Officer; (c) Executive Vice President; (d) Chief Operating Officer; (e) Chief Financial Officer; (f) Secretary; and (g) General Counsel.

C. All persons or entities to whom are delivered any such Lease Documents so executed by Rudin Management Company, Inc., or whom are subject to such Enforcement Prosecution by Rudin Management Company, Inc., in either case, by anyone holding one of the Specified Offices of Rudin Management Company, Inc. shall be entitled to rely on such Lease Documents as if such Lease Documents were executed by Owner or to recognize such Enforcement Prosecution as conducted directly by Owner. All persons or entities to whom any Notices so executed by Rudin Management Company, Inc, by an officer thereof, shall be entitled to rely on such Notices as if the same were executed by Owner.

Section 31.08 Execution Counterparts: This Agreement may be executed in one (1) or more multiple counterparts, each of which when taken together shall constitute one and the same instrument.

ARTICLE 32
ADJACENT EXCAVATION

Section 32.01. If an excavation shall be made upon land adjacent to the Real Property, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation license to enter upon the Demised Premises for the purpose of doing such work as said person shall deem necessary to preserve the walls and other portions of the Building from injury or damage and to support the same by proper foundations and no such entry shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Owner or said person.

ARTICLE 33
BUILDING RULES

Section 33.01. Tenant shall observe faithfully, and comply strictly with, and shall not permit the violation of, the Building Rules set forth in Schedule A annexed to and made a part of this Lease and such additional reasonable Building Rules as Owner may, from time to time, adopt. All of the terms, covenants and conditions of Schedule A are incorporated in this Lease by reference and shall be deemed part of this Lease as though fully set forth in the body of this Lease. The term "Building Rules" as used in this Lease shall include those set forth in Schedule A and those hereafter made or adopted as provided in this Section. In case Tenant disputes the reasonableness of any additional Building Rule hereafter adopted by Owner, the parties hereto agree to submit the question of the reasonableness of such Building Rule for decision to the Chairman of the Board of Directors of the Management Division of the Real Estate Board of New York, Inc., or its successor (the "Chairman"), or to such impartial person or persons as the Chairman may designate, whose determination shall be final and conclusive upon Owner and Tenant. Tenant's right to dispute the reasonableness of any additional Building Rule shall be deemed waived unless asserted by service of a notice upon Owner within thirty (30) days after the date upon which Owner shall give notice to Tenant of the adoption of any such additional Building Rule. Owner shall have no duty or obligation to enforce any Building Rule, or any term, covenant or condition of any other lease, against any other tenant or occupant of the Building, and Owner's failure or refusal to enforce any Building Rule or any term, covenant or condition of any other lease against any other tenant or occupant of the Building shall not constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of rent, or relieve Tenant from any of its obligations under this Lease, or impose any liability upon Owner or its agents by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant's business, or otherwise.

ARTICLE 34
BROKER

Section 34.01. Tenant represents and warrants to Owner that Bloom Real Estate Group LLC is the sole broker with whom Tenant has negotiated or otherwise dealt with in connection with the Demised Premises or in bringing about this Lease. Tenant shall indemnify Owner from all loss, cost, liability, damage and expenses, including, but not limited to, reasonable counsel fees and disbursements, arising from any breach of the foregoing representation and warranty.

ARTICLE 35
SECURITY

Section 35.01. Letter of Credit: (1) Tenant has deposited with Owner, at the time of the execution and delivery of this Lease, an unconditional, irrevocable letter of credit issued by a bank reasonably acceptable to Owner (referred to as the "Bank"), in favor of Owner, in the sum of ONE HUNDRED
SEVENTY-ONE THOUSAND NINE HUNDRED FORTY-FIVE and 00/100 ($171,945.00) DOLLARS (referred to as the "Security Amount") in funds available immediately or same day funds in the City of New York, as security for the faithful observance and performance by Tenant of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed. Such letter of credit is (x) for a term of not less than one (1) year which term shall be automatically renewed for successive one (1) year terms, unless the Bank gives not less than ninety
(90) days prior written notice that it will not so renew the letter of credit for such successive term and the last term of the letter of credit shall end not less than sixty (60) days after the Expiration Date and (y) in substantially the same form as Exhibit 2 or in a form reasonably acceptable to Owner, provided the same shall satisfy the requirements of this Article 35. If such letter of credit is not automatically renewed as aforesaid, Tenant agrees to cause the Bank to renew such letter of credit, from time to time, during the Demised Term, at least sixty (60) days prior to the expiration of said letter of credit or any renewal or replacement, upon the same terms and conditions. In the event of any transfer of said letter of credit pursuant to
Section 35.05, and notice of such transfer to Tenant, Tenant, within thirty
(30) days thereafter, shall cause a new letter of credit or an amendment to the existing letter of credit to be issued by said Bank to the transferee, upon the same terms and conditions, in replacement of, or amending, the letter of credit so transferred and Owner agrees that, in the event a new letter of credit is so issued, simultaneously with the delivery of such new letter of credit, it will return to said Bank the letter of credit being replaced. The letter of credit deposited hereunder, and all renewals and replacements, are referred to, collectively, as the "Letter of Credit". In amplification and not in limitation of the foregoing, the Letter of Credit shall expressly provide that (i) the Letter of Credit can be drawn down by presentation of a sight draft only without any other documents or statements, (ii) partial drawings are allowed and (iii) the Letter of Credit shall be transferable by Owner, as beneficiary thereof, without restriction or limitation and with all fees paid by Tenant.

(2) The Letter of Credit shall be held by Owner for the purposes set forth in this Article and shall not be transferred except for transfer (a) to an agent for collection, or (b) pursuant to the provisions of Section 35.05. In the event Tenant defaults in the performance of its obligations to timely issue a replacement Letter of Credit, or in the observance or performance of Tenant's agreement to cause the Bank to renew the Letter of Credit, Owner, in addition to all rights and remedies which Owner may have under this Lease or at law, shall have the right to require the Bank to make payment to Owner of the entire Security Amount or the undrawn portion thereof, as the case may be, represented by the Letter of Credit, which sum may be held by Owner as Cash Security (as said term is hereinafter defined) in accordance with the provisions of this Article. If payment of the entire Security Amount or the undrawn portion thereof is made to Owner by reason of Tenant's failure to renew or replace the Letter of Credit in accordance with the foregoing provisions of this Article, Owner shall have the right, at any time on behalf of Tenant, to replace said Cash Security with a new Letter of Credit issued by the Bank or any other bank selected by Owner, in Owner's sole discretion, and Tenant hereby irrevocably constitutes and appoints Owner as Tenant's agent and attorney-in-fact to cause the Bank or any such other bank selected by Owner to issue such a replacement Letter of Credit. The Letter of Credit provides for partial drawings.

(3) Upon the occurrence of an Event of Default, or if this Lease and the Demised Term shall expire and come to an end as provided in Article 16 or by or under any summary proceeding or any other action or proceeding, or if Owner shall re-enter the Demised Premises as provided in Article 17, or by or under any summary proceeding or any other action or proceeding, then Owner, in addition to all rights and remedies which Owner may have under this Lease or at law, may from time to time, draw on the Letter of Credit in one or more drawings for the amount of any Fixed Rent or additional rent then due and for any amount then due and payable to Owner under this Lease and pay such sum to Owner's account. In the event of a partial drawing, as provided in the immediately preceding sentence, Tenant shall, within five (5) days after demand, cause the Bank to issue an amendment to the Letter of Credit restoring the amount available thereunder to the Security Amount. In amplification and not in limitation of the provisions of this Lease, a failure by Tenant to cause the Bank to timely issue an amendment to the Letter of Credit restoring the amount available thereunder to the Security Amount shall be deemed a monetary default in the payment of Fixed Rent by Tenant under the terms, covenants and conditions of this Lease. Notwithstanding anything to the contrary set forth in this Lease, including, but not limited to, the foregoing provisions of this Article, in addition to all rights granted to Owner pursuant to the provisions of the Lease, if this Lease and the Demised Term shall expire and come to an end as provided in Article 16, or by or under any summary proceeding, or any other action or proceeding, or if Owner shall re- enter the Demised Premises as provided in Article 17, or by or under any summary proceeding or any other action or proceeding, Owner, in addition to all rights and remedies which Owner may have under this Lease or at law, shall have the right to require the Bank to make payment to Owner of the entire Security Amount or the undrawn portion thereof, as the case may be, represented by the Letter of Credit, which sum shall be held and applied by Owner as Cash Security in accordance with the provisions of this Article.

Section 35.02. Application of Cash Security: Any proceeds of the Letter of Credit held by Owner and not paid to Owner for Owner's account as provided above shall be deemed held by Owner as Cash Security and is referred to herein as "Cash Security". Upon the occurrence of an Event of Default, Owner may use, apply or retain the whole or any part of any Cash Security held by Owner under any of the provisions of Section 35.01, to the extent required for the payment of any Fixed Rent, additional rent or any other sum with respect to which Tenant is in default, or for the payment of any sum which Owner may expend or incur because of Tenant's default in the observance or performance of any such term, covenant or condition, including, but not limited to, the payment of any damages or deficiency in the reletting of the Demised Premises, whether such damage or deficiency accrued before or after summary proceedings or other re- entry by Owner, without thereby waiving any other rights or remedies of Owner with respect to such default, and Owner shall hold the remainder of such Cash Security as security for the faithful performance and observance by Tenant of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed with the same rights as hereinabove set forth to use, apply or retain all or any part of such remainder in the event of any further default by Tenant under this Lease. Any sum held by Owner as Cash Security shall be held subject to the provisions of Section 7- 103 of the General Obligations Law or any similar statute successor thereto.

Section 35.03. Restoration of Cash Security: If Owner uses, applies or retains the whole or any part of the Cash Security held by Owner under any of the provisions of Section 35.01 or 35.02, Tenant, within five (5) days after notice thereof, shall deliver to Owner, in cash or by a cashier's check, or Tenant's certified check, in either case drawn by or on a bank which is a member of the New York Clearing House Association and payable to the order of Owner, the sum necessary to restore the Cash Security to the Security Amount. In amplification and not in limitation of the provisions of this Lease, a failure by Tenant to so replenish the Cash Security to the Security Amount shall be deemed a monetary default by Tenant in the payment of Fixed Rent under the terms, covenants and conditions of this Lease.

Section 35.04. Return of Security: The Letter of Credit and/or any remaining portion of any Cash Security then held by Owner for the performance of Tenant's obligations under this Lease as security shall be returned to Tenant reasonably promptly after (i) the Expiration Date and (ii) the full observance and performance by Tenant of all of the terms, covenants and conditions of this Lease on Tenant's part to be observed and performed, including, but not limited to, the provisions of Article 21.

Section 35.05. Transfer of Letter of Credit: In the event of a sale or other transfer of the Land and/or Building, or Owner's interest in this Lease, Owner shall transfer the Letter of Credit and/or any remaining portion of any Cash Security then held by Owner as security for the performance of Tenant's obligations under this Lease to the transferee, and Owner shall thereupon be released from all liability for the return of such security; Tenant agrees to look solely to the transferee for the return of any such security and it is agreed that the provisions of this sentence shall apply to every sale or transfer of the Land and/or Building or Owner's interest in this Lease by Owner named herein or its successors, and to every transfer or assignment made of any such security. Any transferee shall be deemed to have agreed that any Letter of Credit or Cash Security transferred to such transferee pursuant to this Section shall be held in accordance with the provisions of this Article for the purposes of this Article. A lease of the entire Building pursuant to which the lessee shall be entitled to collect the rents hereunder shall be deemed a transfer within the meaning of this Section.

Section 35.06. Deposit of Cash Security in Interest-Bearing Account:
Subject to Owner's right to replace the Cash Security with a new Letter of Credit in accordance with the provisions of Section 35.01, Owner agrees that, if not prohibited by law or the general policies of lending institutions in New York City, Owner shall deposit any Cash Security held by Owner in an interest-bearing savings account at a bank or banks selected by Owner, and all interest accruing thereon shall be added to and become part of such Cash Security and shall be retained by Owner under the same conditions as the principal sum held as Cash Security. Notwithstanding anything to the contrary set forth in this Article with respect to any Cash Security, Owner shall be entitled to retain the one (1%) percent administrative fee permitted by law to be retained by landlords with respect to cash security deposits.

Section 35.07. No Assignment of Security by Tenant: Tenant agrees that it will not assign, mortgage or encumber, or attempt to assign, mortgage or encumber, the Letter of Credit or any Cash Security held by Owner under this Lease, and that neither Owner nor its successors or assigns shall be bound by any such assignment, mortgage, encumbrance, attempted assignment, attempted mortgage or attempted encumbrance. Owner shall not be required to exhaust its remedies against Tenant before having recourse to the Letter of Credit, the Cash Security or any other security held by Owner. Recourse by Owner to the Letter of Credit, the Cash Security or any other security held by Owner shall not affect any remedies of Owner which are provided in this Lease or which are available in law or equity.

Section 35.08. Partial Return of Security:

A. Owner has agreed that Owner shall return to Tenant the sum of (i) FORTY-TWO THOUSAND NINE HUNDRED EIGHTY-SIX and 25/100 ($42,986.25) DOLLARS of such security reasonably promptly following the first (1st) anniversary of the first date of the Second Rent Period; (ii) FORTY-TWO THOUSAND NINE HUNDRED EIGHTY-SIX and 25/100 ($42,986.25) DOLLARS of such security reasonably promptly following the second (2nd) anniversary of the first date of the Second Rent Period; and (ii) TWENTY-EIGHT THOUSAND SIX HUNDRED FIFTY-SEVEN and 50/100 ($28,657.50) DOLLARS reasonably promptly following the third (3rd) anniversary of the first day of the Second Rent Period (each such amount to be returned by Owner, referred to as a "Reduction Amount" and each such date upon which such return shall occur, referred to as a "Partial Return Date"), provided Tenant is not then in default under any of the terms, covenants or conditions of this Lease on Tenant's part to be observed and performed. Accordingly, if on the applicable Partial Return Date Tenant shall not so be in default, Tenant may replace the Letter of Credit with a Letter of Credit in a sum reduced by the applicable Reduction Amount. In the event that at any time Tenant shall be entitled to reduce such Letter of Credit as provided in the foregoing provisions of this Article the security shall be held as Cash Security then, in lieu of Tenant replacing any such Letter of Credit, Owner shall return sums to Tenant equal to the amount by which the Letter of Credit would have been reduced if it were in existence; however, in no event shall the Letter of Credit or Cash Security ever be reduced below the sum of FIFTY- SEVEN THOUSAND THREE HUNDRED FIFTEEN and 00/100 ($57,315.00) DOLLARS. The sum of ONE HUNDRED SEVENTY-ONE THOUSAND NINE HUNDRED FORTY-FIVE and 00/100 ($171,945.00) DOLLARS referred to in the previous Sections of this Article shall be deemed reduced as the provisions of this Section 35.08 shall operate to so reduce the Letter of Credit and/or Cash Security, as the case may be

B. Owner has agreed that Tenant shall have the right, following the second (2nd) anniversary of the first day of the Second Rent Period, to deliver to Owner a reasonably detailed statement of the then current financial condition of Tenant, prepared in accordance with generally accepted accounting principles applied on a consistent basis, sworn to by an executive officer or principal or partner of Tenant, and certified without qualification by a firm of reputable independent certified public accountants. If, following Owner's review of such financial statements, Owner reasonably determines that a reduction in the Letter of Credit in addition to the reductions contemplated under Subsection A of this Section 35.08 is acceptable, and provided Tenant is not then in default under any of the terms, covenants or conditions of this Lease on Tenant's part to be observed and performed and provided Tenant has not defaulted in its obligation to pay Fixed Rent pursuant to Section 16.01(a) at any time during the Demised Term, then Owner shall advise Tenant of the amount by which Tenant shall be allowed to so further reduce such Letter of Credit. In the event that at such time the security shall be held as Cash Security then, in lieu of Tenant replacing any such Letter of Credit, Owner shall return sums to Tenant equal to the amount by which the Letter of Credit would have been reduced if it were in existence.

Section 35.09. Limited Guaranty: Tenant has caused Sal Zizza to deliver to Owner a certain guaranty together with this Lease.

ARTICLE 36
ARBITRATION, ETC.

Section 36.01. Any dispute with respect to the reasonability of any failure or refusal of Owner to grant its consent or approval to any request for such consent or approval pursuant to the provisions of Sections 3.01 or 11.03 with respect to which request Owner has agreed, in such Sections, not unreasonably to withhold such consent or approval, which is submitted to arbitration shall be finally determined by arbitration in the City of New York in accordance with the rules and regulations then obtaining of the American Arbitration Association or its successor. Any such determination shall be final and binding upon the parties, whether or not a judgment shall be entered in any court. In making their determination, the arbitrators shall not subtract from, add to, or otherwise modify any of the provisions of this Lease. Owner and Tenant may, at their own expense, be represented by counsel and employ expert witnesses in any such arbitration. Any dispute with respect to the reasonability of any failure or refusal of Owner to grant its consent or approval to any request for such consent or approval pursuant to any of the provisions of this Lease (other than Sections 3.01 and 11.03) with respect to which Owner has covenanted not unreasonably to withhold such consent or approval, and any dispute arising with respect to the increases in Fixed Rent due to the provisions of Section 23.02 shall be determined by applicable legal proceedings. If the determination of any such legal proceedings, or of any arbitration held pursuant to the provisions of this Section with respect to disputes arising under Sections 3.01 and 11.03, shall be adverse to Owner, Owner shall be deemed to have granted the requested consent or approval, or be bound by any determination as to the increases in Fixed Rent pursuant to
Section 23.02, but that shall be Tenant's sole remedy in such event and Owner shall not be liable to Tenant for a breach of Owner's covenant not unreasonably to withhold such consent or approval, or otherwise. Each party shall pay its own counsel and expert witness fees and expenses, if any, in connection with any arbitration held pursuant to the provisions of this
Section and the parties will equitably share all other expenses and fees of any such arbitration.

ARTICLE 37
PARTIES BOUND

Section 37.01. The terms, covenants and conditions contained in this Lease shall bind and inure to the benefit of Owner and Tenant and, except as otherwise provided in this Lease, their respective heirs, distributees, executors, administrators, successors and assigns. However, the obligations of Owner under this Lease shall no longer be binding upon Owner named herein after the sale, assignment or transfer by Owner named herein (or upon any subsequent Owner after the sale, assignment or transfer by such subsequent Owner) of its interest in the Building as owner or lessee, and in the event of any such sale, assignment or transfer, such obligations shall thereafter be binding upon the grantee, assignee or other transferee of such interest, and any such grantee, assignee or transferee, by accepting such interest, shall be deemed to have assumed such obligations. A lease of the entire Building shall be deemed a transfer within the meaning of the foregoing sentence. Neither the partners (direct or indirect) comprising Owner, nor the shareholders (nor any of the partners comprising same), partners, directors or officers of any of the foregoing (collectively, the "Owner's Parties") shall be liable for the performance of Owner's obligations under this Lease. Tenant shall look solely to Owner to enforce Owner's obligations hereunder and shall not seek any damages against any of the Owner's Parties. Notwithstanding anything contained in this Lease to the contrary, Tenant shall look solely to the estate and interest of Owner, its successors and assigns, in the Real Property and Building for the collection or satisfaction of any judgment recovered against Owner based upon the breach by Owner of any of the terms, conditions or covenants of this Lease on the part of Owner to be performed, and no other property or assets of Owner or any of Owner's Parties shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to either this Lease, the relationship of landlord and tenant hereunder, or Tenant's use and occupancy of the Demised Premises.

[SIGNATURE PAGE IMMEDIATELY FOLLOWS]

IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this Lease as of the day and year first above written.

OWNER:

FIRST LEXINGTON CORPORATION
By: Rudin Management Co., Inc., as Agent

By: /s/ John J. Gilbert
    Name:  John J. Gilbert
    Title: EOP and COO

TENANT:

BION ENVIRONMENTAL
TECHNOLOGIES, INC.

By: /s/ Mark A. Smith
    Name:  Mark A. Smith
    Title: President

UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Within New York State)

State of New York )
:ss.:
County of ______ )

On the ______ day of ________, in the year _____, before me, the undersigned, personally appeared __________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.

UNIFORM FORM CERTIFICATE OF ACKNOWLEDGMENT
(Outside of New York State)

State, District of Columbia, Territory,
Possession or Foreign Country
___________________):ss.:

On the ___ day of ____________ in the year ____, before me, the undersigned, personally appeared __________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument, and that such individual made such appearance before the undersigned in the __________. (Insert the city or other political subdivision and the state or country or other place the acknowledgment was taken.)

SCHEDULE A
BUILDING RULES

1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways, corridors or halls of the Building shall not be obstructed or encumbered or used for any purpose other than ingress and egress to and from the premises demised to any tenant or occupant. Any tenant whose premises are situate on the ground floor of the Building shall, at said Tenant's own expense, keep the sidewalks and curb directly in front of said premises clean and free from ice and snow.

2. No awnings or other projections shall be attached to the outside walls or windows of the Building without the prior consent of Owner. No curtains, blinds, shades, or screens shall be attached to or hung in, or used in connection with, any window or door of the premises demised to any tenant or occupant, without the prior consent of Owner. Such awnings, projections, curtains, blinds, shades, screens or other fixtures must be of a quality, type, design and color, and attached in a manner, approved by Owner.

3. No sign, advertisement, object, notice or other lettering shall be exhibited, inscribed, painted or affixed on any part of the outside or inside of the premises demised to any tenant or occupant or of the Building without the prior consent of Owner. Interior signs on doors and directory tablets, if any, shall be of a size, color and style approved by Owner.

4. The sashes, sash doors, skylights, windows, and doors that reflect or admit light and air into the halls, passageways or other public places in the Building shall not be covered or obstructed, nor shall any bottles, parcels, or other articles be placed on any window sills.

5. No showcases or other articles shall be put in front of or affixed to any part of the exterior of the Building, nor placed in the halls, corridors, vestibules or other public parts of the Building.

6. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags, or other substances shall be thrown therein. No tenant shall bring or keep, or permit to be brought or kept, any inflammable, combustible or explosive fluid, material, chemical or substance in or about the premises demised to such tenant.

7. No tenant or occupant shall mark, paint, drill into, or in any way deface any part of the Building or the premises demised to such tenant or occupant. No boring, cutting or stringing of wires shall be permitted, except with the prior consent of Owner, and as Owner may direct. No tenant or occupant shall install any resilient tile or similar floor covering in the premises demised to such tenant or occupant except in a manner approved by Owner.

8. No bicycles, vehicles or animals of any kind shall be brought into or kept in or about the premises demised to any tenant. No cooking shall be done or permitted in the Building by any tenant without the approval of Owner. No tenant shall cause or permit any unusual or objectionable odors to emanate from the premises demised to such tenant.

9. No space in the Building shall be used for manufacturing, for the storage of merchandise, or for the sale of merchandise, goods or property of any kind at auction.

10. No tenant shall make, or permit to be made, any unseemly or disturbing noises or disturb or interfere with other tenants or occupants of the Building or neighboring buildings or premises whether by the use of any musical instrument, radio, television set or other audio device, unmusical noise, whistling, singing, or in any other way. Nothing shall be thrown out of any doors or windows.

11. No additional locks or bolts of any kind shall be placed upon any of the doors or windows, nor shall any changes be made in locks or the mechanism thereof. Each tenant must, upon the termination of its tenancy, restore to Owner all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by, such tenant.

12. All removals from the Building, or the carrying in or out of the Building or the premises demised to any tenant, of any safes, freight, furniture or bulky matter of any description must take place at such time and in such manner as Owner or its agents may determine, from time to time. Owner reserves the right to inspect all freight to be brought into the Building and to exclude from the Building all freight which violates any of the Building Rules or the provisions of such Tenant's lease.

13. No tenant shall use or occupy, or permit any portion of the premises demised to such tenant to be used or occupied, as an office for a public stenographer or typist, or as a barber or manicure shop, or as an employment bureau. No tenant or occupant shall engage or pay any employees in the Building, except those actually working for such tenant or occupant in the Building, nor advertise for laborers, giving an address at the Building.

14. No tenant or occupant shall purchase spring water, ice, food, beverage, lighting maintenance, cleaning, towels, or other like service, from any company or persons not approved by Owner, such approval not unreasonably to be withheld.

15. Owner shall have the right to prohibit any advertising by any tenant or occupant which, in Owner's opinion, tends to impair the reputation of the Building or its desirability as a building for offices, and upon notice from Owner, such tenant or occupant shall refrain from or discontinue such advertising.

16. Owner reserves the right to exclude from the Building, between the hours of 6 P.M. and 8 A.M. on business days and at all hours on Saturdays, Sundays and holidays, all persons who do not present a pass to the Building signed by Owner. Owner will furnish passes to persons for whom any tenant requests such passes. Each tenant shall be responsible for all persons for whom it requests such passes and shall be liable to Owner for all acts of such persons.

17. Each tenant, before closing and leaving the premises demised to such tenant at any time, shall see that all entrance doors are locked and all windows closed.

18. Each tenant shall, at its expense, provide artificial light in the premises demised to such tenant for Owner's agents, contractors and employees while performing janitorial or other cleaning services and making repairs or alterations in said premises.

19. No premises shall be used, or permitted to be used, for lodging or sleeping or for any immoral or illegal purpose.

20. The requirements of tenants will be attended to only upon application at the office of Owner. Building employees shall not be required to perform, and shall not be requested by any tenant or occupant to perform, any work outside of their regular duties, unless under specific instructions from the office of Owner.

21. Canvassing, soliciting and peddling in the Building are prohibited and each tenant and occupant shall cooperate in seeking their prevention.

22. There shall not be used in the Building, either by any tenant or occupant or by their agents or contractors, in the delivery or receipt of merchandise, freight or other matter, any hand trucks or other means of conveyance except those equipped with rubber tires, rubber side guards and such other safeguards as Owner may require.

23. If the premises demised to any tenant become infested with vermin, such tenant, at its sole cost and expense, shall cause its premises to be exterminated, from time to time, to the satisfaction of Owner, and shall employ such exterminators therefor as shall be approved by Owner.

24. No premises shall be used, or permitted to be used, at any time, as a store for the sale or display of goods, wares or merchandise of any kind, or as a restaurant, shop, booth, bootblack or other stand, or for the conduct of any business or occupation which predominantly involves direct patronage of the general public in the premises demised to such tenant, or for manufacturing or for other similar purposes.

25. No tenant shall clean, or permit to be cleaned, any window of the Building from the outside in violation of Section 202 of the New York Labor Law or any successor law or statute, or of the rules of the Board of Standards and Appeals or of any board or body having or asserting jurisdiction.

26. No tenant shall move, or permit to be moved, into or out of the Building or the premises demised to such tenant, any heavy or bulky matter, without the specific approval of Owner. If any such matter requires special handling, only a person holding a Master Rigger's license shall be employed to perform such special handling. No tenant shall place, or permit to be placed, on any part of the floor or floors of the premises demised to such tenant, a load exceeding the floor load per square foot which such floor was designed to carry and which is allowed by law. Owner reserves the right to prescribe the weight and position of safes and other heavy matter, which must be placed so as to distribute the weight.

EXHIBIT 2

Form of Letter of Credit
[BANK LETTERHEAD]

[CLIENT]
c/o Rudin Management Co. Inc.
345 Park Avenue
New York, New York 10154
Attention: Ms. Roslyn Stuart

RE: Irrevocable Letter of Credit No. ________________________________

Gentlemen:

BY ORDER OF OUR CLIENT, ____________________, WE HEREBY OPEN OUR IRREVOCABLE LETTER OF CREDIT NO. ______________________ IN YOUR FAVOR FOR AN AMOUNT NOT TO EXCEED IN THE AGGREGATE ______________DOLLARS, EFFECTIVE IMMEDIATELY AND EXPIRING AT OUR [INSERT: ADDRESS] OFFICE, WITH OUR CLOSE OF BUSINESS ON
[INSERT: DATE ONE YEAR FROM DATE OF ISSUANCE].

FUNDS UNDER THIS LETTER OF CREDIT ARE AVAILABLE TO YOU AGAINST YOUR CLEAN SIGHT DRAFT ON US MENTIONING THEREON OUR CREDIT NO. ___________________. NO DOCUMENTS REQUIRED.

IF WE RECEIVE YOUR DRAFT AS MENTIONED ABOVE HERE AT OUR [INSERT: BANK STREET ADDRESS] OFFICE, PRIOR TO OUR CLOSE OF BUSINESS ON [INSERT: DATE ONE (1) YEAR FROM DATE OF ISSUANCE], AS SUCH DATE SHALL BE EXTENDED BY RENEWAL(S) OF THE TERM OF THIS LETTER OF CREDIT, WE WILL PROMPTLY HONOR SAME. PARTIAL DRAWINGS ARE PERMITTED.

THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY RENEWED FROM YEAR TO YEAR UNTIL THE EARLIER OF (X) [INSERT: DATE WHICH IS NOT LESS THAN 60 DAYS FOLLOWING THE EXPECTED EXPIRATION DATE OF THE LEASE] OR (Y) TERMINATION BY THE UNDERSIGNED BY NOTICE TO YOU (AND AT YOUR OPTION, NOTICE TO AN ADDITIONAL PARTY DESIGNATED BY YOU) OF NOT LESS THAN ONE HUNDRED TWENTY (120) DAYS PRIOR TO THE THEN EXPIRATION DATE OF THIS LETTER OF CREDIT.

THIS LETTER OF CREDIT IS TRANSFERABLE MULTIPLE TIMES. ALL TRANSFER CHARGES ARE FOR OUR CLIENT's ACCOUNT.

EXCEPT AS FAR AS OTHERWISE EXPRESSLY STATED HEREIN, THIS LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION) INTERNATIONAL CHAMBER OF COMMERCE PUBLICATIONS NO. 500.

[NAME OF BANK]

EXHIBIT 10.29

BION ENVIRONMENTAL TECHNOLOGIES, INC.

2006 CONSOLIDATED INCENTIVE PLAN

1. Purpose of the Plan

The purposes of this Bion Environmental Technologies, Inc. 2006 Consolidated Incentive Plan ("Plan") are: a) to create shareholder value, and
b) to simplify and consolidate the multiple Incentive Plans which the Company has previously had simultaneously in operation ("Prior Plans"). Therefore, upon adoption of this Plan, all of the options, stock grants and other incentive grants, if any, that are outstanding under the Prior Plans shall be deemed to be outstanding under this Plan and each of the Prior Plans shall be amended so that it is deemed to be consolidated with and merged into this Plan. To effect its purpose of creating shareholder value, 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 67% 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 three-quarters (3/4's) 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 60% 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.

(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. 2006Incentive 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.

(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 3,200,000

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 3,200,000 Common Shares for issuance pursuant to the Plan.

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:

(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.

(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: Unless expressly provided otherwise by the Board of Directors of the Company:

(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 three months 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, and further expressly provided that this provision may be varied/amended by specific provisions in any given agreement evidencing an option.

(2) In the event that the employment of a Participant with the Company shall terminate on account of the retirement at age 55 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 Participant to a cash payment, for each such share, equal to the excess of (i) the Fair Market Value of a Common Share on the effective date of such exercise over
(ii) the exercise price of the related Option. Such payment shall be paid as soon as practical, but in no event later than the expiration of five business days, after the effective date of such exercise.

(b) Term and Exercise of LSARs

(1) An LSAR shall be exercisable only during the period commencing on the first day following the occurrence of a Change in Control and terminating on the expiration of sixty days after such date. Notwithstanding the preceding sentence of this Section 7(b), in the event that an LSAR held by any Participant who is or may be subject to the provisions of Section 16(b) of the Exchange Act becomes exercisable prior to the expiration of six months following the date on which it is granted, then the LSAR shall also be exercisable during the period commencing on the first day immediately following the expiration of such six month period and terminating on the expiration of sixty days following such date. Notwithstanding anything else herein, an LSAR relating to an Incentive Stock Option may be exercised with respect to a Common Share only if the Fair Market Value of such share on the effective date of such exercise exceeds the exercise price relating to such share. Notwithstanding anything else herein, an LSAR may be exercised only if and to the extent that the Option to which it relates is exercisable.

(2) The exercise of an LSAR with respect to a number of Common Shares shall cause the immediate and automatic cancellation of the Option to which it relates with respect to an equal number of shares. The exercise of an Option, or the cancellation, termination or expiration of an Option (other than pursuant to this Paragraph (2)), with respect to a number of Common Shares, shall cause the cancellation of the LSAR related to it with respect to an equal number of shares.

(3) Each LSAR shall be exercisable in whole or in part; provided, that no partial exercise of an LSAR shall be for an aggregate exercise price of less than $1,000, unless such partial exercise is for the last remaining unexercised portion of such LSAR. The partial exercise of an LSAR shall not cause the expiration, termination or cancellation of the remaining portion thereof. Upon the partial exercise of an LSAR, the agreements evidencing the LSAR, the related Option and any Tandem SARs related to such Option shall be returned to the Participant exercising such LSAR together with the payment described in Paragraph 7(a)(1) or (2) hereof, as applicable.

(4) An LSAR shall be exercised by delivering notice to Bion Environmental Technologies, Inc.'s principal office, to the attention of its Secretary, no less than one business day in advance of the effective date of the proposed exercise. Such notice shall be accompanied by the applicable agreements evidencing the LSAR, the related Option and any Tandem SARs relating to such Option, shall specify the number of Common Shares with respect to which the LSAR is being exercised and the effective date of the proposed exercise and shall be signed by the Participant. The Participant may withdraw such notice at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise, in which case such agreements shall be returned to him.

8. Tandem Stock Appreciation Rights

The 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 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.

(2) Each Stand Alone SAR may be exercised in whole or in part; provided, that no partial exercise of a Stand Alone SAR shall be for an aggregate exercise price of less than $1,000, unless such partial exercise is for the last remaining unexercised portion of such Stand Alone SAR. The partial exercise of a Stand Alone SAR shall not cause the expiration, termination or cancellation of the remaining portion thereof. Upon the partial exercise of a Stand Alone SAR, the agreement evidencing such Stand Alone SAR shall be returned to the Participant exercising such Stand Alone SAR together with the payment described in Section 9(b) hereof.

(3) A Stand Alone SAR shall be exercised by delivering notice to Bion Environmental Technologies, Inc.'s principal office, to the attention of its Secretary, no less than one business day in advance of the effective date of the proposed exercise. Such notice shall be accompanied by the applicable agreement evidencing the Stand Alone SAR, shall specify the number of Common Shares with respect to which the Stand Alone SAR is being exercised and the effective date of the proposed exercise and shall be signed by the Participant. The Participant may withdraw such notice at any time prior to the close of business on the business day immediately preceding the effective date of the proposed exercise, in which case the agreement evidencing the Stand Alone SAR shall be returned to him.

(d) Effect of Termination of Employment

(1) In the event that the employment of a Participant with the Company shall terminate for any reason other than retirement at age 60 or later, Cause, Disability or death, (i) Stand Alone SARs granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the expiration of one month after such termination, on which date they shall expire, and (ii) Stand Alone SARs granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination; provided, however, that no Stand Alone SAR shall be exercisable after the expiration of its term.

(2) In the event that the employment of a Participant with the Company shall terminate on account of the retirement at age 60 or later, Disability or death of the Participant, (i) Stand Alone SARs granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable until the expiration of one year after such termination, on which date they shall expire, and (ii) Stand Alone SARs granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination; provided, however, that no Stand Alone SAR shall be exercisable after the expiration of its term.

(3) In the event of the termination of a Participant's employment for Cause, all outstanding Stand Alone SARs granted to such Participant shall expire at the commencement of business on the date of such termination.

(4) In the event that a Non Employee Participant ceases to provide services to the Company, all Stand Alone SARs granted to such Non Employee Participant shall remain exercisable in accordance with their terms.

(e) Acceleration of Exercise Date Upon Change in Control

Upon the occurrence of a Change in Control, each Stand Alone SAR granted under the Plan and outstanding at such time shall become fully and immediately exercisable and shall remain exercisable until its expiration, termination or cancellation pursuant to the terms of the Plan.

10. Restricted Stock

Subject to the provisions of the Plan, the Board of Directors may grant (directly or subject to contingencies) 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 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. 2006 Consolidated 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: Unless expressly provided otherwise by the Board of Directors of the Company:

(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(assuming all

contingencies to the grant have been met), 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.

(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 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 and contingencies 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 40% 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.

(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:

(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.

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.

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

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 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 June 26, 2006.

EXHIBIT 10.30

To: Dominic Bassani ("DB") & Bright Capital, Ltd. ("BC")

From: Mark A. Smith ("MAS"), President
Bion Environmental Technologies, Inc. & subsidiaries (collectively "Bion")

Date: October 16, 2006

Re: Change in Title/Status of DB/Amendment to Brightcap Agreement

This memo will confirm that effective September 30, 2006 DB ceased to serve as General Manager of Bion Dairy Corporation ("Dairy") due to management additions in Bion and Dairy during 2006 which has others fulfilling the former general manager functions. DB, as provided to Bion by BC pursuant to an existing agreement which remains in full force and effect except for the change in DB's role and title, shall continue to provide full-time consulting services to Bion with focus on strategic planning and special projects. DB will report directly to MAS and Sal Zizza ("SZ"), Chairman of Dairy, and will work with Bion's entire management and technical management cadre on matters designated by MAS &/or SZ.

Please sign below (and fax back to me at 429-984-9702) to affirm this change of status and the continuing nature of the existing agreement except for this change.

Mark A. Smith, President Bion & Dairy

Affirmed this 17th day of October, 2006

Bright Capital, Ltd.

By: /s/ Dominic Bassani

EXHIBIT 10.31

R.W. PRESSPRICH & CO. INC.
520 Madison Avenue
New York, New York 10022

November 9, 2006

Bion Environmental Technologies, Inc.
641 Lexington, 17th Floor
New York, New York 10022
Attention: Mark A. Smith, President

Re: Engagement Letter - Placement Agent, Financial Advisor and Arranger

This letter confirms the agreement between R.W. Pressprich & Co., Inc. ("RWP" or "we" or "us") and Bion Environmental Technologies, Inc. (the "Company" or "you" or "Bion") as follows:

1. Engagement. The Company hereby engages RWP to act as its sole and exclusive (except as provided in Section 11 hereof) placement agent, financial advisor and arranger in connection with: (i) proposed offerings by private placements ("Placements") of equity, equity-linked or debt securities (and equity-kickers, if any) issued by the Company or any of its subsidiaries or affiliates (including any special purpose vehicles (each such entity, an "SPV") created for the purpose of holding and/or financing projects, including, without limitation, promissory notes issued by an SPV which are exchangeable for shares of the Company's common stock ("Common Stock") or other equity securities of the Company, and shares of preferred stock of the Company or an SPV which provide for pay-in-kind dividends and are convertible into or exchangeable for shares of Common Stock (collectively, the "Securities"), and (ii) subject to the successful completion of the Initial Placements (as hereinafter defined), Project (as hereinafter defined) financing facilities, including, without limitation, the entering into by the Company or any of its subsidiaries or affiliates or SPVs of project finance credit facilities or other financing arrangements for the purpose of providing project financing (collectively, "Facilities") for Bion integrated projects ("Project" or "Projects").

We accept this engagement ("Engagement") upon the terms and conditions set forth in this engagement letter ("Agreement"). During the term of our Engagement, we will, as appropriate to the Engagement:

* consult with you in planning and implementing Placements, and the negotiations for, the entering into of and arranging Facilities (and/or commitments therefor);

* review the business and operations of the Company and its historical and projected financial condition;

* assist you in preparing and distributing relevant documents we mutually agree are beneficial or necessary to the consummation of the Placements or the entering into of Facilities (and/or commitments therefor), including documents describing the Company, the Securities, and the terms of the Placements and/or the Facilities (collectively, the "Offering Materials");

Bion Environmental Technologies, Inc.
November 9, 2006

* assist you in preparing for due diligence conducted by prospective purchasers of the Securities and/or lenders or agents (collectively, "Lenders") for the Facilities;

* assist you in identifying and contacting prospective purchasers of the Securities and Lenders for Facilities;

* consult with you as to the structure and timing of the Placements and for the Facilities;

* assist you in negotiating definitive documentation with prospective purchasers of the Securities and with prospective Lenders for the Facilities and, if requested by you, participate in such negotiations; and

* render such other financial advisory and investment banking services as may from time to time be agreed upon by RWP and the Company.

You acknowledge and agree that our Engagement pursuant to this Agreement does not constitute an agreement or a commitment, express or implied, by us or any of our affiliates to underwrite, purchase or place any Securities or otherwise provide any financing, or to provide loans (or commitments therefor) or serve as an agent under any Facility, nor an agreement by you to issue and sell any Securities. The Placements and services rendered in connection with the Facilities (and any commitments therefor) will be made by RWP, if at all, on a "best efforts" basis.

You further acknowledge and agree that our services hereunder shall be subject to, among other things, satisfactory completion of due diligence by RWP, market conditions, the absence of adverse changes to the Company's business or financial condition and other conditions that RWP may deem appropriate for placements and engagements of such nature. During the term of this Engagement, you will not make any commitment with any other person to sell Securities or enter into Facilities (or commitments therefor) without our prior written consent, except as permitted hereunder.

2. Term.

(a) Our engagement for one or more Placements shall automatically expire one hundred twenty (120) days after the date of this Agreement, unless extended in writing by RWP and the Company (the "Initial Term"); provided, however, that upon the successful completion of not less than U.S. $10 million in aggregate gross proceeds of Placements on terms and conditions acceptable to the Company (as set forth at Annex B hereto unless agreed otherwise in writing) during the Initial Term (the "Initial Placements"), the expiration date of the term of our engagement for Placements of Securities shall be extended to the five (5) year anniversary of the date of this Agreement, unless extended in writing by RWP and the Company. From and after the date of the successful completion of the Initial Placements, you or we may terminate our engagement under this Agreement, with or without cause, upon sixty (60) days' written notice to the other party; provided, however,

Bion Environmental Technologies, Inc.
November 9, 2006

no such notice may be given by you prior to one hundred eighty (180) days after the closing of the Initial Placements; further provided, however, that the Company shall not exercise this right to terminate RWP's engagement under this Agreement so long as RWP has obtained firm commitments from qualified investors to fund each Facility within the period (from thirty (30) to ninety
(90) days, said period being agreed upon by Bion and RWP) from the date on which Bion presents RWP with a Project and seeks a financing Facility for such Project and RWP agrees to begin marketing the Project financing. If RWP does not agree to begin marketing the Project financing, RWP must specify the reasons that the marketing can not commence and communicate such reasons to the Company in writing within five (5) business days.

(b) Our engagement and right to serve as the exclusive financial advisor, arranger and placement agent for Facilities (or commitments therefor) shall commence upon the successful completion of the Initial Placements and shall automatically expire upon the earlier of (i) five (5) years from the date of this Agreement or (ii) the consummation of at least fifteen (15) Facilities with aggregate commitments under all such facilities of not less than U.S. $2,000,000,000, in each case unless extended in writing by RWP and the Company. You or we may terminate our engagement under this Agreement, with or without cause, upon ten (10) days' written notice to the other party; provided, however, no such notice may be given by you prior to one hundred eighty (180) after the closing of the Initial Placements, further provided, however, that the Company shall not exercise this right to terminate RWP's engagement under this Agreement so long as RWP has obtained firm commitments from qualified investors to fund each Facility within the period (from thirty (30) to ninety (90) days, said period being agreed upon by Bion and RWP) from the date on which Bion presents RWP with a Project and seeks a financing Facility for such Project and RWP agrees to begin marketing the Project financing. If RWP does not agree to begin marketing the Project financing, RWP must specify the reasons that the marketing can not commence and communicate such reasons to the Company in writing within five (5) business days.

(c) Upon termination or expiration, this Agreement shall have no further force or effect, except that the provisions concerning the obligations provided in Annex A, the Company's obligation to pay RWP fees and expenses as described in this Agreement, the confidentiality provisions of
Section 8, the status of RWP as an independent contractor, your representations, warranties and agreements, the limitation on to whom RWP shall owe any duties, governing law, choice of forum, successors and assigns, and waiver of the right to trial by jury shall survive any such termination or expiration of this Agreement. A "Tail Period" shall extend for eighteen
(18) months from the date of termination pursuant to this Section 2 or automatic expiration of this Agreement; provided, however, to the extent that Bion (without the services of another broker or agent) completes a Project financing or Facility during the Tail Period, RWP shall receive a sum equal to twenty percent (20%) of the fees which RWP would have received had RWP provided the Facility for the Project pursuant to this Agreement.

3. Fees. For our services under this Agreement, you agree to pay us the following fees:

Bion Environmental Technologies, Inc.
November 9, 2006

* Placement Fee. A placement fee payable at the closing of the Initial Placements and subsequent Placements consisting of: (i) seven percent (7%) of the gross proceeds of all Securities sold in a Placement (including sales to any entity affiliated or associated with RWP) with: (A) fifty percent (50%) of such fee shall be payable in cash and (B) fifty percent (50%) of such fee shall be payable in shares of Common Stock, which stock shall be valued at the implied price per share of Common Stock sold in the Placement (assuming the conversion, exercise and/or exchange of all Convertible Securities (as hereinafter defined) into the maximum number of shares of Common Stock into which the Securities shall be convertible); provided, however, that in the event that the Securities issued in the Placement consist solely of Securities which do not include Common Stock or Convertible Securities, the portion of the placement fee due under this clause (i)(B) shall be payable, at the option of RWP, in (x) cash or (y) in shares of Common Stock at a price per share equal to the fair market value thereof as reasonably determined in good faith by the board of directors of the Company; and (ii) warrants to purchase up to (A) five percent (5%) of the Securities sold in the Placement, if the Securities are Common Stock, and/or (B) that number of shares of Common Stock equal to five percent (5%) of the number of shares of Common Stock into which the Securities shall be convertible, exercisable and/or exchangeable into or for, if the Securities are Convertible Securities. Such warrants shall have a five (5) year term, an exercise price equal to one hundred twenty percent (120%) of the price per share of the Securities sold in the Placement, cashless exercise provisions and otherwise be of like tenor as the other warrants, if any, issued in such Placement. As used in this Agreement, the term "Convertible Securities" means Securities, other than Common Stock, that are convertible, exercisable or exchangeable into or for shares of Common Stock, including, without limitation, warrants, rights, options, convertible preferred stock, convertible notes, exchangeable preferred stock and exchangeable notes, whether or not such Securities are issued by the Company or any subsidiary, affiliate or SPV of the Company.

You will also pay us the same commission (cash, shares of Common Stock and warrants) on any financing by you or any of your affiliates involving the issuance of Securities consummated pursuant to any agreement, commitment or understanding which is entered into within the Tail Period; provided, however, in the case of termination pursuant to Section 2 hereof, such commission only extends to Securities sold to investors with whom you have had contact through introduction by RWP prior to such termination; further provided, however, to the extent that Bion (without the services of another broker or agent) completes a Project financing or Facility during the Tail Period, RWP shall receive a sum equal to twenty percent (20%) of the fees which RWP would have received had RWP provided the Facility for the Project pursuant to this Agreement. We will deliver to you, reasonably promptly following the date of termination, a schedule listing the investors with whom you or we had contact prior to termination.

Bion Environmental Technologies, Inc.
November 9, 2006

* Placement Expenses. Upon receipt of an invoice, you agree to promptly reimburse us for our reasonable out-of-pocket expenses incurred in preparing to market and marketing the Securities, including, but not limited to, travel, reasonable fees and disbursements of our legal counsel, and printing and distribution of Offering Materials, whether or not a closing occurs, but such reimbursement will not exceed $50,000 in the aggregate in connection with a Placement, without your approval which approval shall not be unreasonably withheld or delayed.

* Facility Fees. The fees to be charged in connection with a Facility shall be paid in cash, stock warrants or a combination thereof on the closing date of a Facility and shall be deemed to be earned upon the closing of such Facility (or any other project financing facility or arrangements entered into between a Lender (or any affiliate thereof) within six (6) months after the termination of our engagement pursuant to Section 2(b) hereof), in an amount to be reasonably agreed to by the parties prior to the entering into of any such Facility (or commitment therefor), which amount shall reflect the then-current market rate for performing services of such type and tenor.

* Facility Expenses. The expenses incurred in connection with a Facility shall be in accord, and paid in a time and manner consistent with, the then-current market provisions for performing services of such type and tenor.

4. Indemnification and Contribution. The Company and RWP agree to the provisions with respect to the Company's indemnity of RWP and RWP's indemnity of the Company and other matters set forth on Annex A attached hereto, the terms of which are hereby incorporated into this Agreement by reference in their entirety and made a part of this Agreement.

5. Representations, Warranties and Agreements of the Company. You represent and warrant to, and agree with us, that:

(a) The Company has not taken, and will not take, any action, directly or indirectly, that may cause a Placement to fail to be entitled to an exemption from registration under the U.S. federal securities laws, or applicable state securities or "blue sky" laws. The Company shall be responsible for any costs and expenses associated with filings, applications or registrations with any governmental or regulatory body, including, without limitation, those associated with any sales pursuant to Regulation D under the Securities Act of 1933, as amended (the "1933 Act"), and "blue sky" laws;

(b) The Company hereby warrants that the Offering Materials, and any other information relating to the Company or a Placement, will not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained therein, in the light of circumstances under which they were made, not misleading. The Company agrees to provide RWP with (i) prompt notice of any material development affecting the Company or the occurrence of any event or other change known to the

Bion Environmental Technologies, Inc.
November 9, 2006

Company that could result in the Offering Materials containing an untrue statement of a material fact or omitting to state any material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading, (ii) copies of any financial reports as soon as reasonably practicable and (iii) such other information concerning the business and financial condition of the Company as RWP may from time to time reasonably request. RWP will have the right to approve the Offering Materials and other written communications furnished by or on behalf of the Company in connection with a Placement and/or the Facilities. The Company will comply with Securities and Exchange Commission Regulation FD;

(c) The Company acknowledges that RWP will be using information provided by others, including, without limitation, information provided by or on behalf of the Company, and that RWP does not assume responsibility for and may rely, without independent verification, on the accuracy and completeness of any such information; and

(d) At each closing, you will permit us to rely on the representations and warranties of the Company. The Company will cause to be furnished to RWP and the purchasers of the Securities, on each closing date of a Placement, copies of such opinions of counsel and such other documents, letters, certificates and opinions as RWP or the purchasers may reasonably request in form and substance reasonably satisfactory to RWP and its counsel and the purchasers and their counsel. To the extent the Company's counsel shall deliver a legal opinion in connection with a Placement to the purchasers of the Securities, such opinion shall also be addressed to RWP and be in form and substance satisfactory to the purchasers of the Securities and RWP. Such opinion of counsel will be modified as appropriate to also address any warrants or other securities of the Company issued to us in connection with the Placement and the shares of Common Stock issuable upon exercise of such warrants.

6. Compliance with Law. It is understood that the Company intends the Placements to take the form of private placements exempt from the registration requirements of the 1933 Act. If a Placement takes such form, the Company shall enter into agreements with the purchasers of the Securities (the "Transaction Agreements") whereby (a) the Company prepares and delivers a private placement memorandum which contains, among other things, a description of the applicable Placement and the Securities offered therein, all of the material information about the Company and its business, and all of the financial statements and other financial information that, in each case, would be required to be included in a registration statement filed with the U.S. Securities and Exchange Commission ("SEC") for the registration of such Securities on Form S 1, (b) the Company will file a Form D (pursuant to Regulation D promulgated under the 1933 Act) with the SEC and in each state where Securities are being placed with respect to each Placement and (c) the Company will promptly notify the OTC Bulletin Board (or any stock exchange or market on which the Common Stock is then quoted if the Common Stock is not then quoted on the OTC Bulletin Board) (the "Quotation Market") that it intends to offer and sell the Securities as contemplated in accordance with the rules and regulations of the Quotation Market and the Company's (or the market-maker's for the Common Stock, as the case may be) listing agreement with that organization.

Bion Environmental Technologies, Inc.
November 9, 2006

The Transaction Agreements shall (i) state, in substance, that the Securities have not been registered with the SEC and may not be offered, sold or otherwise transferred or disposed of except pursuant to an effective registration statement under the 1933 Act and applicable state securities laws or pursuant to an applicable exemption from the registration requirements of the 1933 Act and such laws, and (ii) provide that any certificates representing or evidencing Securities issued by the Company in a Placement shall include a legend substantially in the form set forth below:

"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."

7. Registration Rights. The Company agrees to provide the registration rights described below to RWP and investors in the Placements (and their respective successors and permitted transferees), which will be on customary terms and conditions for transactions of the types described below and will include, among other things, indemnification provisions for the benefit of RWP and the holders of Registrable Securities (as hereinafter defined) and any agents, underwriters, managers or arrangers participating in such registrations.

(a) Certain Definitions. For the purposes of this Section 7, (i) "Effective Time" shall mean such time, if any, on or after the date hereof that the Company shall become subject to the reporting requirements of
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended; and (ii) "Registrable Securities" shall mean each share of Common Stock issued to RWP or any investor in a Placement in connection herewith (including each share of Common Stock to be issued upon the conversion, exchange or exercise of any Convertible Security) until the two (2) year anniversary of the issuance of such share of Common Stock (or the Security convertible, exchangeable or exercisable into or for such share, as applicable), which Security constitutes a "restricted security" within the meaning of Rule 144(a)(3)(i) promulgated under the 1933 Act.

(b) Demand Registrations. At any time following the 180th day after the Effective Time (i) the holders of a majority of Registrable Securities may request one registration under the 1933 Act during any consecutive twelve (12) month period (a "Demand Registration") of all or part of their Registrable Securities on Form S-3 (except if the Company is not then eligible to use Form S-3, then such registration shall be on Form S-1 or Form SB-2 or on another appropriate form in accordance herewith permitting registration of the Securities for resale by such holders in the manner or manners designated by them), in which the Company will pay all registration expenses. The Company will not be obligated to effect any Demand Registration within six (6) months after the effective date of a registration in which the holders of Registrable Securities were given piggyback rights pursuant to
Section 7(c) or within twelve (12) months after the closing a prior Demand Registration. The Company will be required to file a registration within sixty (60) days after a request for a Demand Registration and shall use

Bion Environmental Technologies, Inc.
November 9, 2006

commercially reasonable efforts to have such registration declared effective as soon as practicable thereafter; provided that the Company may postpone for up to a total of sixty (60) days the filing or the effectiveness of a registration statement for a Demand Registration if such Demand Registration would reasonably be expected to have an adverse effect on any proposal or plan by the Company to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other transaction or any material corporate development, including without limitation, a Facility financing hereunder; provided, further, that in such event, the holders of Registrable Securities initially requesting such Demand Registration will be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration will not count as the one permitted Demand Registration within the twelve (12) month period applicable thereto.

(c) Piggyback Registrations. If at any time following the Effective Time the Company shall determine to prepare and file with the Commission a registration statement relating to an offering for its own account or the account of others under the 1933 Act of any of its equity securities, including, without limitation, in connection with the registration of the Company's securities in a subsequent financing, other than on Form S-4 or Form S-8 (each as promulgated under the 1933 Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans, then the Company shall include in such registration statement all of the Registrable Securities requested to be so included by the holders thereof, subject to the written approval of the underwriter, if any, for such offering, with respect to any portion of the Registrable Securities to be included in such registration which would exceed ten percent (10%) of the total number shares of Common Stock to be included in such registration; provided, however, that (i) if, at any time after giving written notice of is intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company determines for any reason not to proceed with such registration, the Company shall be relieved of its obligation to register any Registrable Securities in connection with such registration, and (ii) in case of a determination by the Company to delay registration of its securities, the Company will be permitted to delay the registration of Registrable Securities for the same period as the delay in registering such other securities.

8. Confidentiality. We agree to use all material non-public information provided to us by you or on your behalf solely for the purpose of providing the services that are the subject of this Agreement and, except as otherwise required by law, regulation or legal process, to treat all such information confidentially and not disclose such information to any third party without the Company's consent, other than to our affiliates and our respective employees, legal counsel, independent auditors and other experts or agents who need to know such information in connection with the Placement, the Facilities or any other services provided by us or our affiliates to you and your affiliates. We accept responsibility for compliance with the provisions of this paragraph by the persons referred to above. This undertaking by us will automatically terminate one year following the earlier of completion of the Placement or termination of our engagement hereunder.

Bion Environmental Technologies, Inc.
November 9, 2006

9. Disclosure. The Company agrees that any information or advice rendered by RWP or its representatives in connection with this Agreement is solely for the confidential use of the Company and, except as otherwise required by applicable law, regulation or legal process, the Company will not and will not permit any third party to disclose, reproduce, disseminate, quote or otherwise refer to such advice or information in any manner without RWP's prior written consent, which consent shall not be unreasonably withheld.

10. No Third Party Beneficiaries. The Company acknowledges and agrees that RWP has been retained to act as exclusive placement agent and financial advisor to the Company, and not as an advisor to or agent of any other person, and that the Company's engagement of RWP is not intended to confer rights upon any person not a party to this Agreement (including shareholders, employees or creditors of the Company) as against RWP or its affiliates, or their respective directors, officers, employees or agents. Accordingly, no other person (other than as set forth in Annex A attached hereto) will acquire or have any rights by virtue of this Agreement.

11. Exclusivity. During the Term of this Agreement, the Company will not permit any stockholder, employee, affiliate, advisor or representative of the Company to engage any other person to perform any financial or similar advisory services for the Company with respect to any potential Placement and/or Facility. If the Company or any of their respective stockholders, employees, affiliates or other advisors or representatives are contacted by any person concerning a potential Placement and/or Facility, the Company will inform RWP of such inquiry, and all relevant details thereof. Notwithstanding the foregoing, the Company and RWP consent to the participation of Ardour Capital Investments, LLC ("Ardour") as a co-placement agent and/or participating dealer with respect to the Initial Placements and subsequent Placements of equity securities (including Convertible Securities); provided, however, that RWP shall serve as the lead and/or managing agent for each such Placement; further provided, however, if Ardour so participates in a Placement, Ardour will be entitled to not less than fifty percent (50%) of the Placement Fees in connection with Securities sold or placed by Ardour in each such Placement; further provided, however, Ardour will not have the right to participate as a placement agent in connection with any Facility or any Placement of non-convertible debt securities without the written consent of RWP; and provided, further, however, that as a condition to Ardour's engagement with respect to any Placement of Securities, Ardour must (i) be a broker dealer registered with the SEC, (ii) agree in writing to contribute its proportionate share of any contribution requirement RWP may have with respect to such Placement and (iii) enter into a mutually acceptable agreement with RWP with respect to such Placement.

12. Independent Contractor. RWP shall act as an independent contractor under this Agreement, and any duties arising out of its engagement shall be owed solely to the Company. You acknowledge that nothing in this Agreement is intended to create duties to you or your creditors or security holders beyond those expressly provided for in this Agreement, and we and you specifically disclaim the creation of any fiduciary relationship between, or the imposition of any fiduciary duties on, either party.

Bion Environmental Technologies, Inc.
November 9, 2006

13. Participation in Future Offerings. If, during the period RWP is retained by the Company, the Company proposes to effect (as to itself or any of its subsidiaries or SPVs) any public offerings or private placements (including Rule 144A offerings or private placement not already the subject of this Agreement) of debt securities (other than Convertible Securities) or the refinancing of any Facility, the Company agrees to offer to engage RWP as the Company's (or such subsidiary's or SPV's, as the case may be) lead underwriter, initial purchaser, financial advisor, book-running manager or placement agent, as the case may be, in connection with such transaction(s) on terms and conditions customary to RWP for similar transactions; provided, however, that RWP may decline such engagement in its sole and absolute discretion at such time which decision shall be communicated to the Company within five (5) business days after such offer. If we agree to act in such capacity, the terms of such engagements shall be set forth in separate agreements and may be subject to, among other things, satisfactory completion of due diligence by RWP, market conditions, the absence of adverse changes to the Company's business or financial condition and any other conditions that RWP may deem appropriate for transactions of such nature. This Agreement is neither an expressed nor implied commitment by us to act in any capacity in any such transaction or to purchase any securities in connection therewith, which commitment will only be set forth in a separate agreement.

14. RWP Affiliates; Conflicts; Exculpation. At RWP's discretion, any right set forth herein may be exercised, and any services to be provided by RWP may be provided, by an affiliate of RWP. The Company hereby agrees that RWP and/or any affiliate or employee of RWP will have the right, but not the obligation, to purchase Securities or become a Lender for its own account and that any such purchase or loan will not constitute a conflict of interest for purposes of RWP's engagement hereunder; provided, however, that the right of such person to participate in a Facility as a Lender is subject to such person's ability to satisfy the reasonable eligibility requirements for a Lender under such Facility. You acknowledge that we are a securities firm engaged in securities trading and brokerage activities and providing investment banking and financial advisory services. In the ordinary course of business, we and our affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for our own account or the accounts of customers, in your debt or equity securities, or the debt or equity securities of your affiliates or other entities that may be involved in the transactions contemplated by this Agreement.

In addition, we and our affiliates may from time to time perform various investment banking and financial advisory services for other clients and customers who may have conflicting interests with respect to you, the Placement or the Facilities. You also acknowledge that we and our affiliates have no obligation to use in connection with this engagement or to furnish you confidential information obtained from other companies.

Furthermore, you acknowledge we may have fiduciary or other relationships whereby we or our affiliates may exercise voting power over securities of various persons, which securities may from time to time include securities of the Company or of potential investors or others with interests in respect of the Placement or the Facilities. You acknowledge that we or such affiliates may exercise such powers and otherwise perform our functions in connection with such fiduciary or other relationships without regard to our relationship with you hereunder.

Bion Environmental Technologies, Inc.
November 9, 2006

You acknowledge that we are not an advisor as to legal, tax, accounting or regulatory matters in any jurisdiction. You should consult with your own advisors concerning such matters and are responsible for making your own independent investigation and appraisal of the transactions contemplated by this Agreement, and we have no responsibility or liability to you with respect to such matters.

15. Publicity. The Company acknowledges that upon completion of the Placement or the entering into a binding agreement with respect to the Facilities, RWP may, at its own expense, place an announcement in such newspapers and periodicals as it may choose, stating that RWP has acted as exclusive placement agent to the Company in connection with such Placement or Facility.

16. Amendments and Successors. This Agreement may not be waived, amended, modified or assigned, in any way, in whole or in part, including by operation of law, without the prior written consent of the Company and RWP. The provisions of this Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company and RWP. The invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other provisions of this Agreement, which will remain in full force and effect.

17. Entire Agreement; Modifications. This Agreement constitutes the entire agreement between RWP and the Company, and supersedes any prior agreements and understandings, with respect to the subject matter of this Agreement. No provision of this Agreement may be changed or terminated except by a writing signed by the party or parties to be charged therewith.

18. Counterparts. This Agreement may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or by e-mail of a Portable Document Format (PDF) file shall be effective as delivery of a manually executed counterpart of this Agreement.

19. No Brokers. The Company acknowledges and agrees that there are no brokers, agents, representatives or other parties that have an interest in compensation paid or payable to RWP hereunder.

20. Governing Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York without regard to the conflicts of laws principles thereof. The parties hereto hereby irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to or under this Agreement, shall be brought solely and exclusively in a federal or state court located in The City, County and State of New York. By its execution hereof, the Company and RWP irrevocably submit to the in personam jurisdiction of the federal and state courts located in The City, County and State of New York and agree that any process in any such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon

Bion Environmental Technologies, Inc.
November 9, 2006

them in The City of New York. The parties hereto waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto. In the event of any such action or proceeding, the party prevailing therein shall be entitled to payment from the other party hereto of its reasonable counsel fees and disbursements. You and we hereby waive all right to trial by jury in any action, proceeding, or counterclaim (whether based upon contract, tort or otherwise) in connection with any dispute arising out of this Agreement or any matters contemplated by this Agreement.

[Signature Page Follows.]

Bion Environmental Technologies, Inc.
November 9, 2006

We are pleased to accept this engagement and look forward to working with the Company. Please confirm that the foregoing correctly and completely sets forth our understanding by signing and returning to us the enclosed duplicate of this Agreement, which shall thereupon constitute a binding agreement.
Sincerely,

R.W. PRESSPRICH & CO., INC.

By:/s/ Patrick J. Gallaway
   Name:  Patrick J. Gallaway
   Title: Managing Director

Agreed and accepted as of the date first written above:

BION ENVIRONMENTAL TECHNOLOGIES, INC.

By:/s/ Mark A. Smith
   Name:  Mark A. Smith
   Title: President

Annex A to Engagement Letter

You, Bion, agree to (i) indemnify and hold harmless us, our affiliates (within the meaning of the 1933 Act), and each of our respective partners, directors, officers, agents, consultants, employees and controlling persons (within the meaning of the 1933 Act) (each of RWP and such other person or entity is hereinafter referred to as an "Indemnified Person"), from and against any and all losses, claims, damages, liabilities and expenses, joint or several, and all actions, inquiries, proceedings and investigations in respect thereof (and reasonable expenses incurred in investigation, defense, etc. in relation thereto), to which any Indemnified Person may become subject arising in any manner out of or in connection with our engagement or any matter referred to in the agreement to which this Annex A is attached and of which this Annex A forms a part (the "Agreement"), regardless of whether any of such Indemnified Persons is a party thereto, and (ii) immediately upon request reimburse an Indemnified Person for such person's legal and other expenses as they are incurred in connection with investigating, preparing, defending, paying, settling or compromising any such action, inquiry, proceeding or investigation (including, without limitation, usual and customary per diem compensation for any Indemnified Person's involvement in discovery proceedings or testimony), whether or not such action, inquiry, proceeding or investigation is initiated or brought by you, your creditors or stockholders, or any other person.

If the indemnity or reimbursement referred to above is, for any reason whatsoever, unenforceable, unavailable or otherwise insufficient to hold each Indemnified Person harmless, you agree to pay to or on behalf of each Indemnified Person contributions for losses, claims, damages, liabilities or expenses so that each Indemnified Person ultimately bears only a portion of such losses, claims, damages, liabilities or expenses as is appropriate (i) to reflect the relative benefits received by each such Indemnified Person, respectively, on the one hand and you and your stockholders on the other hand in connection with any Placement or Facility, or (ii) if the allocation on that basis is not permitted by applicable law, to reflect not only the relative benefits referred to in clause (i) above, but also the relative fault of each such Indemnified Person, respectively, and you as well as any other relevant equitable considerations; provided, however, that in no event will the aggregate contribution of all Indemnified Persons to all losses, claims, expenses, damages, liabilities or expenses in connection with any Placement or Facility exceed the amount of the fee actually received by us pursuant to this Agreement. The respective relative benefits received by us and you in connection with any Placement or Facility will be deemed to be in the same proportion as the aggregate fee paid or proposed to be paid to RWP in connection with any Placement or Facility bears to the aggregate consideration paid or proposed to be paid in such Placement or Facility, whether or not consummated.

Promptly after its receipt of notice of the commencement of any action or proceeding, any Indemnified Person will, if a claim in respect thereof is to be made against you pursuant to this letter, notify you in writing of the commencement thereof; but omission so to notify you will not relieve you from any liability which you may have to any Indemnified Person, except your obligation to indemnify for losses, claims, damages, liabilities or expenses to the extent that you suffer actual prejudice as a result of such failure, but will not relieve you from your obligation to provide reimbursement of expenses and any liability which you may have to an Indemnified Person otherwise than hereunder. If you so elect, you may assume the defense of such

action or proceeding in a timely manner, including the employment of counsel (reasonably satisfactory to us) and payment of expenses, provided you permit an Indemnified Person and counsel retained by an Indemnified Person at its expense to participate in such defense. Notwithstanding the foregoing, in the event (i) you fail promptly to assume the defense and employ counsel reasonably satisfactory to us, or (ii) the Indemnified Person has been advised by counsel that there exist actual or potential conflicting interests between you or your counsel and such Indemnified Person, an Indemnified Person may employ separate counsel (in addition to any local counsel) to represent or defend such Indemnified Person in such action or proceeding, and you agree to pay the fees and disbursements of such separate counsel as incurred; provided however, that you will not, in connection with any one such action or proceeding, or separate but substantially similar actions or proceedings arising out of the same general allegations, be liable for fees and expenses of more than one separate firm of attorneys (in addition to any local counsel).

You will not, without our prior written consent, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought under this Agreement, unless such settlement, compromise or consent includes an express, complete and unconditional release of us and each other Indemnified Person from all liability and obligations arising therefrom. Without your prior written consent, which will not be unreasonably withheld, delayed or conditioned, no Indemnified Person will settle or compromise any claim for which indemnification or contribution may be sought hereunder. Notwithstanding the foregoing sentence, if at any time an Indemnified Person requests that you reimburse the Indemnified Person for fees and expenses as provided in this Agreement, you agree that you will be liable for any settlement of any proceeding effected without your prior written consent if (i) such settlement is entered into more than 30 days after receipt by you of the request for reimbursement, and (ii) you will not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement.

You also agree that no Indemnified Person will have any liability to you or your affiliates, directors, officers, employees, agents, creditors or stockholders, directly or indirectly, related to or arising out of the Agreement or the services performed thereunder, except losses, claims, damages, liabilities and expenses you incur which have been finally judicially determined to have resulted primarily and directly from actions taken or omitted to be taken by such Indemnified Person due to such person's gross negligence or willful misconduct. In no event, regardless of the legal theory advanced, will any Indemnified Person be liable for any consequential, indirect, incidental or special damages of any nature. Your indemnification, reimbursement, exculpation and contribution obligations in this Annex A will be in addition to any rights that any Indemnified Person may have at common law or otherwise.

You understand that in the event that you reimburse RWP pursuant to this Annex A for the fees and expenses of its counsel, such reimbursement will be made on the basis of counsel's generally applicable rates, which may be higher than the rates that counsel charges RWP for other matters based on arrangements that it has entered into with such counsel.

You acknowledge that the indemnity, reimbursement and contribution obligations under this Annex A shall be in addition to, and shall no way limit or otherwise adversely affect any rights that any Indemnified Person may have at law or equity. You shall not responsible for any losses, claims, damages, liabilities or expenses to the extent that such loss, claim, damage, liability or expense has been finally judicially determined to have resulted primarily and directly from actions taken or omitted to be taken by RWP and/or any Indemnified Person due to such person's gross negligence or willful misconduct. To the extent that any prior payment any Bion Party made to RWP or any Indemnified Person is determined to have been improper by reason of RWP's and/or such Indemnified Person's gross negligence or willful misconduct, RWP and/or such Indemnified Person will promptly pay the applicable Bion Party such amount.

Notwithstanding the limitations set forth above, RWP agrees to indemnify and hold harmless Bion, its affiliates (within the meaning of the 1933 Act) and their respective officers, directors, employees and agents and controlling persons (within the meaning of the 1933 Act) (each of Bion and such other person or entity is hereinafter referred to as a "Bion Party"), from any and all losses, claims, damages or liabilities (and reasonable expenses incurred in investigation, defense, etc. in relation thereto) related to, arising out of or in connection with the Agreement to the extent and in the manner set forth for above describing Bion's obligations to the Indemnified Persons, that have resulted from the willful misconduct or gross negligence of RWP. All procedures set forth in the prior paragraphs of this Annex A shall be applicable in regard the indemnification and other rights provided in this paragraph. RWP shall not be responsible for any losses, claims, damages, liabilities or expenses to the extent that such loss, claim, damage, liability or expense has been finally judicially determined to have resulted primarily and directly from actions taken or omitted to be taken by any Bion Party due to such person's gross negligence or willful misconduct. To the extent that any prior payment RWP made to a Bion Party is determined to have been improper by reason of such Bion Party's gross negligence or willful misconduct, such Bion Party will promptly pay RWP such amount.

Capitalized terms used, but not defined in this Annex A, have the meanings assigned to such terms in the Agreement.

Annex B to Engagement Letter

Unless agreed otherwise by RWP and Bion in writing, the Initial Placements shall consist of a placement of a new series of Bion preferred stock ("PFD Stock") in the amount of not less than $10.0 million gross proceeds with the following terms (in addition to the registration rights set forth in Section 7 of the agreement to which this Annex B is attached and of which this Annex B forms a part (the "Agreement")):

(a) cumulative dividend rate of 2.5% to 3.0% per annum (based on prevailing market conditions at the time of such placement), which dividend shall be earned quarterly (with no accrual for partial quarters) and payable 'in kind' or in cash at the sole option of Bion;

(b) convertible into shares of Common Stock at a price of $6.60 in liquidation preference (principal plus accrued dividends) of PFD Stock per share of Common Stock (subject to adjustment as described below, the "Conversion Price");

(c) automatic conversion into shares of Common Stock at the Conversion Price upon the effectiveness of a registration statement registering the Common Stock underlying conversion of the PFD Stock; and

(d) customary anti-dilution adjustments in the event of stock splits, stock dividends, reclassifications or other similar transactions and for weighted average anti-dilution adjustments in the event of below fair market value issuances of shares of Common Stock or Convertible Securities.

Capitalized terms used, but not defined in this Annex B, have the meanings assigned to such terms in the Agreement.