f8k020310ex10ii_bioneutral.htm


     

    
      Exhibit
10.2

       

       

      BIONEUTRAL
GROUP, INC.

      


      STOCK
APPRECIATION RIGHTS AGREEMENT

      


      THIS STOCK APPRECIATION RIGHTS AGREEMENT
(this “Agreement”) is
entered into as of the 3rd day of February, 2010, by and between BioNeutral
Group, Inc., a Nevada corporation (the “Company”), and
Chertoff Group, L.L.C., a Delaware limited liability company (the “Grantee”).

      


      WHEREAS,
this Agreement evidences an equity award the Company is obligated to grant to
Advisor pursuant to that certain Advisory Agreement, dated as of August 26,
2009, by and between the Company and the Advisor, as amended from time to time
(the "Advisory
Agreement").

      


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

      


      1. Grant of
SARs.  Subject to the restrictions and other conditions set
forth herein, the Board of Directors of the Company (the “Board”) hereby grants
to the Grantee 7,442,725 stock appreciation rights (“SARs”) on February 3,
2010 (the “Grant
Date”) entitling the Grantee to receive, for each of the SARs exercised,
up to, but no more than, the number of shares of common stock of the Company,
par value $.00001 per share (the “Common Stock”), equal
in value to the excess of the Fair Market Value of one (1) share of Common Stock
on the date the SARs are exercised over $0.186.  Fractional shares of
Common Stock resulting from any exercise of the SARs shall be aggregated until,
and eliminated at, the time of exercise by rounding-down for fractions less than
one-half and rounding-up for fractions equal to or greater than
one-half.  No cash settlements shall be made with respect to
fractional shares eliminated by rounding.  For purposes hereof, the
term “Fair Market
Value” shall mean, as of any date, the last sales price reported for the
Common Stock on the applicable date:  (A) as reported on the principal
national securities exchange in the United States on which it is then traded;
(B) if the Common Stock is traded on the OTC Bulletin Board, the closing
bid price of the Common Stock for such date (or the nearest preceding date) on
the OTC Bulletin Board, (C) if the Common Stock is not then listed or
quoted for trading on the OTC Bulletin Board and if prices for the Common Stock
are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a
similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported, or (D) if
the Common Stock is not traded, listed or otherwise reported or quoted, Fair
Market Value shall be determined without applying minority interest, lack of
liquidity or other similar discounts by a nationally recognized, independent
appraisal firm mutually acceptable to Grantee and the Company, the expenses
associated with which shall be paid by the Company.

       

      2. Vesting
and Exercise.

       

      (a) Normal
Vesting.  Except as set forth in Section 2(b) hereof, the SARs
shall vest on a cumulative basis as set forth below, subject to the Grantee’s
continued service with the Company or any of its affiliates on each applicable
vesting date:

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

      


      
        	
                 

                Vesting Date

                 

              	
                 

                Cumulative Percentage of SARs
      Vested

              
	
                September
      1, 2010

              	
                25%

              
	
                September
      1, 2011

              	
                50%

              
	
                September
      1, 2012

              	
                100%

              


      

      


      To the
extent that the SARs have become vested and exercisable with respect to a
percentage of SARs as provided above, the vested SARs may thereafter be
exercised by the Grantee, in whole or in part, at any time or from time to time
prior to the expiration of the SARs as provided herein by written notification
to the Company.  Upon expiration of the SARs, the SARs shall be
canceled and no longer exercisable.

       

      (b) Accelerated
Vesting.  Notwithstanding the vesting provisions of Section
2(a) hereof, the SARs shall become fully vested upon the earlier to occur of (i)
the consummation of a “Change in Control” (as defined below) or (ii) the
termination of the Grantee’s service by the Company on or after February 26,
2010 pursuant to Section 4(b) of the Advisory Agreement.  In the event
that the Grantee voluntarily resigns the Grantee’s service with the Company on
or after February 26, 2010, the Grantee shall be obligated to refund to the
Company an amount equal to any after-tax gain realized as a result of the
exercise (whether at the time of exercise or thereafter) by the Grantee of the
SARs during the three-month period preceding such termination (provided that such
refund obligation shall not be required if such termination of service occurs
within three months prior to a Change in Control).  This Agreement
shall not in any way affect the right of the Company to adjust, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

       

      For
purposes hereof, the term “Change in Control”
shall mean:

       

      (i) any
“person,” as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) (other
than (A) the Company, (B) any trustee or other fiduciary holding securities
under any employee benefit plan of the Company, or (C) any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of Common Stock of the Company, becoming the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 35% or more of the
combined voting power of the Company’s then outstanding securities;

       

      (ii) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board and any Approved Directors (collectively, the
“Incumbent Directors”) cease to constitute a majority of the Board (an “Approved
Director” being defined to mean any person whose election to the Board or
nomination for election by the Company’s stockholders was approved by a vote of
(x) at least two-thirds of the Incumbent Directors or (y) all of the
Incumbent  Directors who are directors at the time of such election;
provided that
any person designated by a person who has entered into an agreement with the
Company to effect a transaction described in paragraph (i), (iii), or (iv) of
this definition or a person whose initial assumption of office occurs as a
result of either an actual or threatened election contest or other actual or
threatened solicitation of proxies or consents by or on behalf of a person other
than the Board) shall not be considered to be an Approved
Director);

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (iii) a merger
or consolidation of the Company or a direct or indirect subsidiary of the
Company with any other entity, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of the Company or the ultimate
parent company of the Company (or, in each case, the entity surviving any merger
with the Company); provided, however, that a
merger or consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no person (other than those covered by the
exceptions in paragraph (i) of this definition) acquires more than 50% of the
combined voting power of the Company’s then outstanding securities shall not
constitute a Change in Control of the Company; or

       

      (iv) a
complete liquidation or dissolution of the Company or the consummation of a sale
or disposition of all or substantially all of the assets of the Company and its
direct and indirect subsidiaries on a consolidated basis other than the sale or
disposition of all or substantially all of such assets to a person or persons
who beneficially own, directly or indirectly, 50% or more of the combined voting
power of the outstanding voting securities of the Company immediately prior to
such sale.

       

      Notwithstanding
anything to the contrary contained herein, the Grantee shall be permitted to
participate in any Change in Control involving a merger of the Company or any of
its subsidiaries that affects or involves the Common Stock or tender offer or
other general offer to purchase, acquire, exchange or convert shares of Common
Stock with respect to shares of Common Stock subject to outstanding SARs on a
contingent basis (i.e., by permitting
the Grantee to exercise all or a portion of the SARs contingent upon
consummation of such transaction and to receive the per share consideration
payable in respect of such transaction for the shares of Common Stock
deliverable upon such exercise).

      


      (c)       Board Discretion to
Accelerate Vesting.  Notwithstanding the foregoing, the Board
may, in its sole discretion, provide for accelerated vesting of the SARs at any
time.

       

      3. Term.  The
term of the SARs shall be ten (10) years after the Grant Date, subject to
earlier termination in the event of the Grantee’s termination of service as
specified in Section 4 hereof.

       

      4. Termination.  All
vested SARs outstanding as of the date of the Grantee’s termination of service
with the Company and its controlled affiliates for any reason shall remain
exercisable until the expiration of the stated term of the SARs pursuant to
Section 3 hereof.  Subject to Section 2 hereof, all unvested SARs
(after taking into account any accelerated vesting hereunder) shall be
immediately forfeited by the Grantee upon the Grantee’s termination of service
with the Company and its controlled affiliates.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      5. Rights as
a Stockholder.  The Grantee shall have no rights as a
stockholder with respect to any shares of Common Stock covered by the SARs
unless and until the Grantee has become the holder of record of such
shares.

       

      6. Restrictions
on Transfer.  No portion of the SARs or any of the Grantee’s
rights under this Agreement may be sold, assigned, transferred, encumbered,
hypothecated or pledged by the Grantee, other than to the Company as a result of
forfeiture of the SARs as provided herein; provided that the
Grantee may transfer all or any portion of the SARs and the related rights of
the Grantee under this Agreement to any of its affiliates.

       

      7. Changes
in Capitalization; Adjustments; Fractional Shares.

       

      (a) If there
shall occur (i) any change in the capital structure of the Company by reason of
any stock split, reverse stock split, stock dividend, subdivision, combination
or reclassification of shares that may be issued under this Agreement; (ii) any
recapitalization, merger, consolidation, spin off, reorganization, or any other
corporate transaction or event in which the Common Stock is exchanged for
securities, cash or other property; or (iii) any extraordinary stock dividend,
then the number and/or kind of shares or other property  to be issued
hereunder shall be appropriately adjusted to preserve the economic benefits of
this award of SARs in a manner determined by the Board in its reasonable, good
faith discretion and reasonably satisfactory to the Grantee.  If there
shall occur a cash dividend, the Company shall pay Grantee in cash the per share
amount of the dividend with respect to each share of Common Stock then covered
by the SARs, such payment to be made (i) at the time of such dividend for the
portion of the SAR that is vested at the time of the dividend and (ii) at the
time of vesting for the portion of the SAR that is not vested at the time of the
dividend.  Grantee shall forfeit the right to any unpaid portion of
any such dividend upon any forfeiture of the SAR.

       

      (b) Fractional
shares of Common Stock resulting from any adjustment hereunder shall be
aggregated until, and eliminated at, the time of issuance by rounding-down for
fractions less than one-half and rounding-up for fractions equal to or greater
than one-half.  No cash settlements shall be made with respect to
fractional shares eliminated by rounding.  Notice of any adjustment
shall be given by the Company to the Grantee in writing within ten (10) days
following such adjustment.

       

      8. Notices.  Any
notice or communication given hereunder shall be in writing and shall be deemed
to have been duly given when delivered in person, or by overnight courier
service or United States mail, to the appropriate party at the address set forth
below (or such other address as the party shall from time to time
specify):

       

      


      If to the
Company, to:

       

      BioNeutral
Group, Inc.

      211
Warren Street, 4th Floor

      Newark,
New Jersey 07103

      Attention:
Stephen J. Browand

       

      If to the
Grantee, to:

      


      Chertoff
Group, L.L.C.

      1110
Vermont Avenue, NW

      Suite
1200

      Washington,
DC 20005

      Attention:  Bennet
Waters

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      


      9. No
Obligation to Continue Service.  This Agreement is not an
agreement of employment or service.  This Agreement does not guarantee
that the Company or its affiliates will employ or retain, or to continue to,
employ or retain the Grantee during the entire, or any portion of the, term of
this Agreement, including, but not limited to, any period during which the SARs
are outstanding, nor does it modify in any respect the Company’s or any of its
affiliate’s rights to terminate or modify the Grantee’s service or compensation
at any time.

       

      10. Legend.  The
Company may at any time place legends referencing any applicable federal, state
or foreign securities law restrictions on all certificates representing shares
of Common Stock issued pursuant to this Agreement.  The Grantee shall,
at the request of the Company, promptly present to the Company any and all
certificates representing shares of Common Stock acquired pursuant to this
Agreement in the possession of the Grantee in order to carry out the provisions
of this Section 10.

       

      11. Representations
by Grantee.  The Grantee is an “accredited investor” as such
term is defined in Regulation D promulgated under the Securities Act of 1933, as
amended (the “Securities
Act”).  The Grantee understands that the SARs and the shares of
Common Stock underlying such SARs are being offered and sold to the Grantee in
reliance on specific exemptions from the registration requirements of the United
States federal securities laws.  The Grantee is acquiring the SARs and
the shares of Common Stock underlying such SARs for the Grantee’s own account
and not with a view to resale or distribution other than pursuant to
registration under the Securities Act or an available exemption
therefrom.

       

      12. Amendment;
Waivers. No
modification or waiver of any of the provisions of this Agreement shall be
effective unless in writing and signed by the party against whom it is sought to
be enforced.  The failure of any party hereto at any time to require
performance by another party of any provision of this Agreement shall not affect
the right of such party to require performance of that provision, and any waiver
by any party of any breach of any provision of this Agreement shall not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right under this
Agreement.

       

      13. Code
Section 409A.  The SARs granted hereunder are intended to be
exempt from the requirements of Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”), and the
treasury regulations and other official guidance promulgated thereunder pursuant
to the exemption for certain independent contractors set forth in Treasury
Regulation §1.409A-1(f)(2)(i).

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      14. Successors
and Assigns.  This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns.

       

      15. Severability.  If
any provision of this Agreement shall be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provisions hereof, and
this Agreement shall be construed and enforced as if such provisions had not
been included.

       

      16. Unfunded
Arrangement.  This Agreement is intended to constitute an
“unfunded” arrangement for incentive compensation.  With respect to
any payment or issuance as to which the Grantee has a fixed and vested interest
but which is not yet made to the Grantee by the Company, nothing contained
herein shall give the Grantee any right that is greater than the rights of a
general unsecured creditor of the Company.

       

      17. Governing
Law; Arbitration.  This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware (regardless of
the law that might otherwise govern under applicable Delaware principles of
conflict of laws).  The parties hereto hereby agree that any dispute
arising out of or relating to this Agreement shall be settled by arbitration
pursuant to this Section 17.  All arbitration shall be finally
and conclusively determined by the decision of a board of arbitration consisting
of three members (the “Board of
Arbitration”) selected as hereinafter provided.  Each of
Company and the Grantee shall select one member and the third member shall be a
retired judge selected by mutual agreement of the other members, or if the other
members fail to reach agreement on a third member within twenty (20) days after
their selection, such third member, who shall be a retired judge, shall
thereafter be selected by the American Arbitration Association (“AAA”) upon
application made to it for a third member jointly by Company and the
Grantee.  The Board of Arbitration shall meet in Wilmington, DE, and
shall reach and render a decision in writing (concurred in by a majority of the
members of the Board of Arbitration) specifying its findings of fact and
conclusions of law.  In connection with its proceedings, the Board of
Arbitration shall follow the AAA Commercial Arbitration rules; provided, however, that if
there is any conflict between the procedures set forth herein and the AAA rules,
the provisions herein will control.  To the extent practical,
decisions of the Board of Arbitration shall be rendered no more than sixty (60)
days following the later to occur of completion of the hearing or the closing of
the record with respect thereto.  The Board of Arbitration shall cause
its written decision to be delivered to the parties in the manner provided for
the giving of notices in Section 8 hereof.  Any decision made by
the Board of Arbitration (either prior to or after the expiration of such sixty
(60)-day period) shall be final, binding and conclusive on the parties and
entitled to be enforced to the fullest extent permitted by applicable law and
entered in any court of competent jurisdiction.  The Board of
Arbitration shall allocate among the parties to such arbitration the expenses
and fees of each member of the Board of Arbitration on such basis as the Board
of Arbitration may determine.  In addition, the Board of Arbitration
shall have the right to require one party to such arbitration to bear all or a
portion of the expenses (including attorneys' fees) of the other party to the
arbitration.

       

      18. Costs and
Expenses.  The Company shall bear all costs and expenses
associated with administering this Agreement, including the costs and expenses
associated with issuing and registering on the Company's books the shares of
Common Stock hereunder.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      19. Headings
and Captions.  The headings and captions herein are provided
for reference and convenience only, shall not be considered part of this
Agreement, and shall not be employed in the construction of this
Agreement.

       

      20. Counterparts.  This
Agreement may be executed in one or more counterparts, all of which taken
together shall constitute one contract.

       

      21. Entire
Agreement.  This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof and supersedes all prior
agreements between the Company and the Grantee with respect to the subject
matter hereof, whether written or oral.

       

      


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

       

      
        


        BIONEUTRAL
GROUP, INC.

        


        


        


        By:                
                                                                 

        


        Name:  Stephen
J. Browand

        


        Title:  Chief
Executive Officer

        


        


        


        CHERTOFF
GROUP, L.L.C.

        


        


        


        By:                
                                                                   

        


        Name:                                                                            

        


        Title:                         
                                                                 

         

         

         

        8