Form of Bridge Warrant

THIS BRIDGE 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 BRIDGE WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE OF THIS BRIDGE WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.


BION ENVIRONMENTAL TECHNOLOGIES, INC.


Bridge Warrant


Bridge Warrant to Subscribe Date for shares


Void After December 31, 2004


THIS CERTIFIES that, for value received, 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 $2.375 per share (such price as from time to time adjusted as hereinafter provided being hereinafter called the "Warrant Price"), at any time prior to December 31, 2004 (the "Warrant Expiration Date"), up to shares (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 Bridge Warrant was issued pursuant to a certain Note and Warrant Purchase Agreement, dated as of (the "Purchase Agreement"), among the Company, D2 Co., LLC and certain other parties and the rights and benefits contained therein shall inure to the benefit of all subsequent holders of this Bridge Warrant. The Bridge Warrants issued pursuant to the Purchase Agreement and any warrant or warrants subsequently issued upon exchange or transfer thereof are hereinafter collectively called the "Bridge Warrants.""Registered Holder" shall mean, as to any Bridge Warrant and as of any particular date the person in whose name the certificate representing the Bridge Warrant shall be registered on that date on the books maintained by the Company pursuant to Section 3(b).


Section 1.Exercise of Bridge Warrant.


(a) Method of Exercise. The rights represented by this Bridge 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 Bridge Warrant (properly endorsed) at the office of the Company as it may designate by notice in writing to the holder hereof 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.


(b) Delivery of Certificates. Etc. In the event of any exercise of the rights represented by this Bridge 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 Bridge Warrant shall have been so exercised; and, unless this Bridge Warrant has expired, a new Bridge Warrant representing the number of shares (except a remaining fractional share), if any, with respect to which this Bridge 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 Bridge Warrant shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Bridge 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 Bridge Warrant, such number of shares of Common Stock as shall then be issuable upon the exercise of all outstanding Bridge Warrant. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of the Bridge 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 the Bridge 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, Bridge 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 Bridge Warrants, or the issuance or delivery of any shares upon exercise of the Bridge Warrants; 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 Bridge 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 Bridge Warrant may be exchanged for another Bridge Warrant representing an equal aggregate number of Bridge 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 therefor, such new Bridge Warrant or Bridge 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 Bridge Warrants and any transfers thereof in accordance with its regular practice. Upon due presentment for registration of transfer of any Bridge Warrant at such office, the Company shall execute and the Company shall issue and deliver to the transferee or transferees a new Bridge Warrant or Bridge Warrants representing an equal aggregate number of Bridge Warrants.


(c) With respect to all Bridge 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 Bridge 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. The Bridge Warrants, which are being offered in Units with the Bridge Notes pursuant to the Purchase Agreement, will immediately be detachable and separately transferable from the Bridge Notes.


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 Bridge 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 Bridge Warrant of like tenor representing an equal aggregate number of Bridge Warrants.


5. Redemption.


(a) At any time after the first anniversary of the Final Closing Date (as defined in the Purchase Agreement), so long as the Company has caused the Registrable Securities to become registered in accordance with Section 8 of the Purchase Agreement, the Company may, at its option, redeem the Bridge Warrants at a price of $0.05 per share of Common Stock, as may adjusted pursuant to Section 6 (the Redemption Price"), provided the Closing Bid Price exceeds 250% of the Warrant Price on the Initial Closing Date (as defined in the Purchase Agreement) per share of Common Stock for at least 20 trading days in any 30 consecutive trading day period ending three days prior to the date of notice of redemption (which shall be the date of mailing of such notice). All outstanding Bridge Warrants must be redeemed if any are redeemed. The date fixed for redemption of the Bridge Warrants is referred to herein as the "Redemption Date." For purposes hereof, the "Closing Bid Price" for each trading day shall be the reported per share closing bid price of the Common Stock regular way on the Stock Market on such trading day.


(b) If the conditions set forth in Subsection 5(a) are met, and the Company desires to exercise its right to redeem the Bridge Warrants, it shall mail a notice of redemption to each of the Registered Holders of the Bridge Warrants to be redeemed, first class, postage prepaid, not later than the sixtieth day before the date fixed for redemption, at their last address as shall appear on the records maintained pursuant to Subsection 3(b). Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Registered Holder receives such notice.


(c) The notice of redemption shall specify (i) the Redemption Price, (ii) the Redemption Date, (iii) the place where the Bridge Warrants shall be delivered and the redemption price paid and (iv) that the right to exercise the Bridge Warrants shall terminate at 5:00 P.M. (New York time) on the business day immediately preceding the Redemption Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to a Registered Holder (a) to whom notice was not mailed or (b) whose notice was defective. An affidavit of the Secretary or an Assistant Secretary of the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein.


(d) Any right to exercise a Bridge Warrant shall terminate at 5:00 P.M. (New York time) on the business day immediately preceding the Redemption Date. On and after the Redemption Date, Holders of the Bridge Warrants shall have no further rights except to receive, upon surrender of the Bridge Warrants, the Redemption Price.


(e) From and after the Redemption Date, the Company shall, at the place specified in the notice of redemption, upon presentation and surrender to the Company by or on behalf of the Registered Holder thereof of one or more Bridge Warrants to be redeemed, deliver or cause to be delivered to or upon the written order of such Holder a sum in cash equal to the redemption price of such Bridge Warrants. From and after the Redemption Date and upon the deposit or setting aside by the Company of a sum sufficient to redeem all the Bridge Warrants called for redemption, such Bridge Warrants shall expire and become void and all rights hereunder, except the right to receive payment of the Redemption Price, shall cease.


6. Adjustment of Warrant Price and Number of Shares of Common Stock or Bridge Warrants. Upon each adjustment of the Warrant Price pursuant to this Section 6, the total number of shares of Common Stock purchasable upon the exercise of each Bridge Warrant shall (subject to the provisions contained in Subsection 6(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 6(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.
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