SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: December 1, 1996
(Date of earliest event reported)
Bion Environmental Technologies, Inc.
(Exact Name of Registrant as Specified in its Charter
Colorado 0-19333 84-1176672
(State of (Commission (I.R.S. Employer
Incorporation) File No.) Identification No.)
555 17th Street, Suite 3310, Denver, Colorado 80202
(Address and Zip Code of Principal Executive Offices)
Registrant's telephone number including area code: (303) 294-0750
ITEM 5. OTHER EVENTS.
(a) (i) Bion Environmental Technologies, Inc., through its
wholly-owned subsidiaries Bion Technologies, Inc. and
BionSoil, Inc. (collectively referred to as the
"Registrant") signed contracts in New York State during
December 1996, for the design, permitting, construction
oversight and initial operation of a BionSoil NMSO system
for a large dairy farm (with a total of 600 cows) and for a
combination waste treatment system which will blend food
processing wastes with animal waste from a 500 cow dairy.
Additionally, during the same period the Registrant
completed start-up and initial operation of three BionSoil
NMS systems representing 1,200 additional cows in the same
area.
(ii) Currently the Registrant has ten BionSoil NMS systems
in operation in New York, Washington, Florida and North
Carolina, six in various stages of construction (ranging
from final design to initial operation) in Maryland, New
York, Washington and Oregon, and five signed contracts for
installations in New York and North Carolina. The BionSoil
NMS process is designed for the treatment and disposal of
large quantities of untreated livestock waste and wastewater
that are produced in large animal raising agricultural
facilities. The wastes generated in these types of
facilities represent a significant environmental problem for
the agricultural industry. The BionSoil NMS system
bioconverts these wastes into a marketable by-product,
BionSoilO, a nutrient-rich organic soil like product that is
saleable in the organic soils and soil enhancers market.
The Registrant processes and sells the BionSoil produced in
the systems and returns a portion of the wholesale price to
the farm. Additionally, the systems treat the wastewater so
that it can be reused on the farm and they significantly
reduce odors associated with the operation.
(b) Effective December 1, 1996, the Registrant entered into an
agreement (the "Agreement") with Global Financial Group,
Inc. ("GFG") whereby Registrant has engaged GFG to provide
investment banking services from December 1, 1996 to
November 30, 1998. Under the Agreement GFG has agreed to
provide Registrant with advice; to consult with Registrant
concerning business and financial planning, corporate
organization and structure, financial matters in connection
with the operation of the business of Registrant, private
and public equity and debt financing, acquisitions, mergers
and other similar business combinations, Registrant's
relations with its securities holders, preparation and
distribution of periodic reports, and shall periodically
provide to Registrant an analysis of its financial
statements. Registrant will provide GFG with the following
compensation for the provision of these services: a warrant
to purchase 100,000 shares of Registrant's common stock at
$6.00 per share exercisable for a six months period
commencing June 1, 1998. Additionally, if, directly or
indirectly through the efforts of GFG, Registrant raises not
less than $1,250,000, or other amount satisfactory to
Registrant by June 30, 1997, GFG shall have earned a warrant
to purchase 150,000 shares of Registrant's common stock at
$8.00 per share exercisable for a six months period
commencing June 1, 1999, and a warrant to purchase 200,000
shares of Registrant's common stock at $12.00 per share
exercisable for a six months period commencing June 1, 2001
and expiring December 1, 2001. If at any time prior to the
exercise of these warrants Registrant undertakes to register
any shares of its common stock pursuant to a form of
registration statement which would allow registration of the
shares underlying the exercise of these warrants, then
Registrant shall include the underlying shares in such
registration statement at Registrant's sole cost; PROVIDED,
HOWEVER, in the event of a registration statement involving
an underwriter, such underwriter shall have the right, in
its sole discretion, to impose restrictions on the resale of
Registrant's securities issued pursuant hereto and/or
eliminate this registration right from the underwritten
registration statement in its entirety. Additionally, the
agreement between GFG and Registrant effective August 1,
1995 to July 31, 1996 (see Form 8-K dated August 1, 1995)
contained warrants to purchase 50,000 shares of Registrant's
common stock at $2.00 per share for a period ending July 31,
1996 which warrants have expired, and warrants to purchase
50,000 shares of Registrant's common stock at $4.00 per
share for a period ending July 31, 1997 and warrants to
purchase 100,000 shares of Registrant's common stock at
$6.00 per share for a period ending July 31, 1998 which
warrants have been cancelled. However, for services
provided to this date under the agreement, Registrant has
issued to GFG warrants to purchase 25,000 shares of
Registrant's common stock at $6.00 per share for a six
months period commencing June 1, 1998, warrants to purchase
50,000 shares of Registrant's common stock at $8.00 per
share for a six months period commencing June 1, 1999 and
warrants to purchase 25,000 shares of Registrant's common
stock at a price of $10.00 per share for a period commencing
March 1, 2001 and ending October 1, 2003. A copy of the
Agreement is attached hereto as Exhibit 10.1.
c) Effective December 15, 1996 Registrant issued an option
under Registrant's Fiscal Year 1994 Incentive Compensation
Plan to Scott R. Sieck, Manager of Corporate Development and
Investor Relations, to purchase up to 50,000 shares of the
Registrant's Common Stock at a price of $6.25 exercisable
through May 1, 1997. A copy of the option agreement is
attached hereto as Exhibit 10.2.
d) Effective December 1, 1996 the Registrant and Harley E.
Northrop ("Lender") (collectively the "Parties") finalized a
credit facility agreement ("Agreement") effective as of
October 25, 1996 under which Lender shall make a $500,000
credit facility available to Registrant. Under the terms of
the Agreement the entire drawn down balance will be due and
payable on December 31, 1999 (with no prepayment penalties
should the balance be paid at an earlier date), interest
will be paid on the drawn down balance at the rate of 1% per
month, at any time after January 1, 1998 the entire
outstanding balance may be converted into Units each
consisting of one share of restricted stock of Registrant
and one warrant to purchase one share of restricted stock of
Registrant for a price per unit of $4.50. As additional
consideration for entering into the Agreement, for each
$5.00 drawn down the Registrant shall issue to Lender one
warrant to purchase one share of Registrant's restricted
stock at a price of $4.50 per share. As incentive for the
Registrant to pay the balance due at an earlier date than
December 31, 1999, it was agreed that if Registrant pays the
entire balance due on or before December 31, 1998, the
quantity of warrants issued will be reduced by 50%.
Further, Lender agreed that any warrants issued under the
Agreement will be exchanged for Class E-1 Warrants under the
exchange offer in e(iii) below. As of the date of this
report $85,000 has been advanced under the Agreement.
Harley E. Northrop is the father of Jon Northrop (Company's
Chief Executive Officer) and Jere Northrop (Company's
President). A copy of the Agreement is attached as Exhibit
10.3.
e) Effective December 1, 1996 the Registrant initiated a series
of actions designed to simplify its capital structure. The
following actions were taken:
i) On December 20, 1996 Dublin Holding, Ltd. ("DHL")
agreed to convert the Company's outstanding debt in the
amount of $319,527 into units (the "Units") consisting
of one share of the Registrant's common stock plus one
class K Warrant (the "Warrants")(each Warrant
authorizing the holder to purchase one share of
Registrants restricted and legended common stock for a
price of $4.50 per share for a period commencing
January 1, 2001 and expiring December 31, 2001, which
warrants were subsequently converted to Class E-1
Warrants pursuant to the offer described in e(iii)
below). A copy of the Agreement is attached hereto as
Exhibit 10.4.
ii) Effective December 1, 1996 Jon Northrop, Registrant's
CEO, Jere Northrop, Registrant's President and COO, and
M. Duane Stutzman, Registrant's Treasurer and CFO
signed Investor Representation and Subscription
Agreements ("Agreements") to purchase 33,334, 33,334,
and 13,334 shares of the restricted and legended common
stock of the Registrant plus 50,000, 50,000, and 20,000
E-1 Warrants to purchase additional shares of the
Registrant's common stock at a per share price of $6.00
for a price of $100,000, $100,000 and $40,000
respectively. Further, each of the officers have
notified the Registrant that payment for the subscribed
stock would be made by cancellation of salary amounts
owed to the officers by the Registrant in the amounts
of $100,000, $100,000, and $40,000 respectively, such
cancellation and payment to occur upon issuance of the
restricted and legended common stock. A copy of the
form of the Agreements is attached hereto as Exhibit
10.5.
iii) Effective December 1, 1996 through December 31, 1996,
the Registrant made an offer (the "Offer") to all
holders of warrants to purchase shares of the
Registrant's restricted and legended common stock at a
price per share of $4.50, to exchange each of their
warrants for 1.5 Class E-1 Warrants to purchase shares
of the Registrant's restricted and legended common
stock at a price per share of $6.00 for a period
commencing January 1, 2001 and expiring December 31,
2001. The holders of warrants subject to this offer
are primarily officers, directors, members of the
Northrop family, Dublin Holding, Ltd.("DHL"),
LoTayLingKyur, Inc. ("LTLK"), and principals of DHL and
LTLK. All such warrant holders accepted the Offer. A
copy of the Offer is attached as Exhibit 10.6.
As a result of these actions, $559,527 of short term debt
will be converted into 106,509 shares of restricted common
stock of the Registrant plus 159,764 class E-1 Warrants and
$240,000 of subscribed stock (see e(ii) above).
Additionally, 2,300,000 warrants at $4.50 per share have
been replaced with 3,450,000 Class E-1 Warrants all
exercisable for a 12 months period ending December 31, 2001.
As a result, the outstanding warrant structure was
simplified so that (with the exception of 14,500 warrants at
$3.00, 45,000 warrants at $5.00, and employee options under
the Fiscal Year 1994 Incentive Compensation Plan (10,000 at
$3.75, 60,000 at $5.00 and 50,000 at $5.25)) no warrants are
outstanding at less than $6.00 per share. A copy of the
form of the E-1 Warrants is attached hereto as Exhibit 10.7.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
10.1 Agreement dated December 16, 1996, effective December
1, 1996, with Global Financial Group, Inc.
10.2 Option Agreement with Scott R. Sieck under Fiscal Year
1994 Incentive Compensation Plan.
10.3 Agreement dated December 1, 1996 effective October 25,
1996 with Harley E. Northrop.
10.4 Agreement dated December 20, 1996, with Dublin Holding,
Ltd.
10.5 Form of Agreement with Jon Northrop, Jere Northrop and
M. Duane Stutzman.
10.6 Offer to Warrant Holders.
10.7 Form of E-1 Warrant.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
BION ENVIRONMENTAL TECHNOLOGIES, INC.
Date: January 21, 1997 By: /s/ M. Duane Stutzman
M. Duane Stutzman, Chief Financial Officer
INDEX TO EXHIBITS
Financial Statements and Exhibits.
10.1 Agreement dated December 16, 1996, effective December
1, 1996, with Global Financial Group, Inc.
10.2 Option Agreement with Scott R. Sieck under Fiscal Year
1994 Incentive Compensation Plan.
10.3 Agreement dated December 1, 1996 effective October 25,
1996 with Harley E. Northrop.
10.4 Agreement dated December 20, 1996, with Dublin Holding,
Ltd.
10.5 Form of Agreement with Jon Northrop, Jere Northrop and
M. Duane Stutzman.
10.6 Offer to Warrant Holders.
10.7 Form of E-1 Warrant.
Kevin S. Miller
December 16, 1996
Page 6
December 16, 1996
Kevin S. Miller, Chairman/President
Global Financial Group, Inc.
100 Washington Square, Suite 1319
Minneapolis, MN 55401
Dear Mr. Miller:
Upon acceptance this letter will serve as the agreement
between Global Financial Group ("GFG") and Bion Environmental
Technologies, Inc. ("BIET") concerning BIET's retention of GFG to
provide investment banking services from December 1, 1996 to
November 30, 1998.
1. BIET. BIET designs, sells, oversees the installation,
startup and operation of waste and wastewater treatment
systems based on patented and proprietary technology.
2. GFG. GFG is in the business of providing corporate
investment banking services, including but not limited to,
providing public and non-public financing, introducing
merger/acquisition and joint venture candidates, negotiating
and other related services including but not limited to
making public markets in stocks.
3. Engagement of GFG. BIET engages GFG and GFG accepts such
engagement, effective December 1, 1996, to provide BIET with
advice; to consult with BIET concerning business and
financial planing, corporate organization and structure,
financial matters in connection with the operation of the
business of BIET, private and public equity and debt
financing, acquisitions, mergers and other similar business
combinations, BIET's relations with its securities holders,
preparation and distribution of periodic reports, and shall
periodically provide to BIET analysis of its financial
statements. Said advice and consultation shall be provided
to BIET in such form, manner and place as BIET reasonably
requests. GFG shall not by this Letter Agreement be
prevented or barred from rendering services of the same or
similar nature, as herein described, or services of any
nature whatsoever for, or on behalf of, persons, firms, or
corporations other than BIET. Similarly, BIET shall not be
prevented or barred from seeking or requiring services of a
same or similar nature from persons other than GFG.
4. Compensation.
a) BIET shall deliver to GFG upon execution hereof a
warrant to purchase 100,000 shares of BIET common stock at
$6.00 per share for a period of six months commencing June
1, 1998 and expiring December 1, 1998.
b) Additionally, if, directly or indirectly through the
efforts of GFG, BIET raises not less than $1,250,000, or
other amount satisfactory to BIET by June 30, 1997, GFG
shall have earned the following:
1) A warrant to purchase 150,000 shares of BIET
common stock at $8.00 per share for a period of
six months commencing June 1, 1999 and expiring
December 1, 1999;
2) A warrant to purchase 200,000 shares of BIET
common stock at $12.00 per share for a period six
months commencing June 1, 2001 and expiring
December 1, 2001;
3) If at any time prior to the exercise of these
warrants BIET undertakes to register any shares of
its common stock pursuant to a form of
registration statement which would allow
registration of the shares underlying the exercise
of these warrants, then BIET shall include the
underlying shares in such registration statement
at BIET's sole cost; PROVIDED, HOWEVER, in the
event of a registration statement involving an
underwriter, such underwriter shall have the
right, in its sole discretion, to impose
restrictions on the resale of BIET's securities
issued pursuant hereto and/or eliminate this
registration right from the underwritten
registration statement in its entirety. There is
no assurance that any registration statement
including the warrants or the shares underlying
the warrants will ever be filed or, if filed, will
become effective.
c) Additionally, the agreement between GFG and BIET
effective August 1, 1995 to July 31, 1996 contained warrants
to purchase 50,000 shares of BIET common stock at $2.00 per
share for a period ending July 31, 1996 which warrants have
expired, and warrants to purchase 50,000 shares of BIET
common stock at $4.00 per share for a period ending July 31,
1997 and warrants to purchase 100,000 shares of BIET common
stock at $6.00 per share for a period ending July 31, 1998
which warrants have been cancelled. However, for services
provided to this date under the agreement BIET has issued to
GFG warrants to purchase 25,000 shares of BIET common stock
at $6.00 per share for a period commencing June 1, 1998 and
expiring December 1, 1998 and warrants to purchase 50,000
shares of BIET common stock at $8.00 per share for a period
commencing June 1, 1999 and expiring December 1, 1999.
5. Non-Circumvention. BIET agrees that GFG will be paid
additional compensation in the event BIET should enter into
an agreement to combine with or acquire assets from persons
or entities first introduced to BIET by GFG. BIET agrees
that it will not consummate any such agreement without first
entering into an agreement with GFG for compensation to GFG
for such introduction and for consultation and efforts
related thereto.
6. First Right of Refusal. If BIET determines to do a public
offering of its securities during the term of this
agreement, GFG will have the first right of refusal to act
as an underwriter for said offering, provided that GFG can
demonstrate to the satisfaction of BIET that it has the
capacity to complete an underwriting of the size
contemplated.
7. Indemnification. BIET and GFG will indemnify and hold each
other harmless from any and all losses, claims, damages or
liabilities, joint or several, to which either may become
subject in connection with any transaction contemplated by
this Letter Agreement, and agree to reimburse each other or
pay directly for any and all legal or other expenses
incurred in connection with investigating or defending any
action or claim in connection therewith; provided, however
that BIET shall not be liable in any such case to the extent
that any such loss, claim, damage or liability is found in a
final judgement by a court of competent jurisdiction to have
resulted in material part from any act by GFG which
constitutes, or results in a material breach of any
agreement with BIET, fraud, misconduct or negligence. The
foregoing indemnity shall also extend to directors,
officers, employees, agents and controlling personnel of GFG
and BIET.
8. Assignment. This Letter Agreement shall be binding upon and
inure to the benefit of the parties and their respective
successors and permitted assigns. Any attempt by either
party to assign any rights, duties or obligations which may
arise under this Letter Agreement without the prior written
consent of the other party shall be void.
9. Other Documentation. It is contemplated that BIET and GFG
may from time to time enter into other agreements concerning
matters not covered herein with respect to specific services
provided thereunder. The parties will negotiate in good
faith in their attempt to consummate such agreements.
10. General Provisions.
10.1 Representations. Each party hereto represents that it
has the right and authorization to enter into this
Letter Agreement and to bind itself to the terms and
conditions contained herein.
10.2 Governing Law. This Letter Agreement shall be governed
by and interpreted in accordance with the laws of the
State of Colorado.
10.3 Arbitration. Any dispute between the parties hereto
arising from or in relation to this Letter Agreement
which cannot be settled through amicable negotiation
shall be finally settled by arbitration in Denver,
Colorado in accordance with the arbitration rules of
the American Arbitration Association, by three
arbitrators appointed according to the applicable
arbitration rules.
10.4 No Waiver. No Provision of this Letter Agreement may
be waived except by agreement in writing signed by the
waiving party. A waiver of any term or provision of
this Letter Agreement shall not be construed as a
waiver of any other term or provision.
10.5 Entire Agreement. The Letter Agreement constitutes the
entire agreement between the parties hereto regarding
the subject matter hereof and supersedes all
negotiations, agreements and commitments in respect
thereto.
10.6 Severability. If any provision of this Letter
Agreement is declared by any court of competent
jurisdiction to be invalid for any reason, such
invalidity shall not affect the remaining provisions of
this Letter Agreement.
10.7 Termination. This Letter Agreement can be cancelled by
either party for any reason upon 30 day written notice
to the other party. In the event of a cancellation by
either party only such compensation as has been earned
to the cancellation date will be due.
10.8. Notices.
(a) If to GFG:
Global Financial Group
100 Washington Square, Suite 1319
Minneapolis, MN 55401
(612) 321-9700
(612) 321-9212 (fax)
(b) If to BIET:
Bion Environmental Technologies, Inc.
555 17th Street, Suite 3310
Denver, Colorado 80202
(303) 294-0750
(303) 298-8251 (fax)
Please sign on the indicated line and send a copy to me by
facsimile transmission which shall be deemed sufficient binding
acknowledgement of our agreement. I will forward an originally
executed copy of this Letter Agreement for your records and would
ask you to sign a second copy of the Letter Agreement and return
it for my records.
Sincerely,
BION ENVIRONMENTAL TECHNOLOGIES, INC.
/s/ M. Duane Stutzman
M. Duane Stutzman
Chief Financial Officer
AGREED TO AND ACCEPTED:
GLOBAL FINANCIAL GROUP, INC.
By: /s/ Kevin S. Miller
Kevin S. Miller
Chairman/President
6
BION ENVIRONMENTAL TECHNOLOGIES, INC.
1994 INCENTIVE PLAN
NON QUALIFIED STOCK OPTION AGREEMENT
This OPTION AGREEMENT is made this 31st day of December, 1996,
between Bion Environmental Technologies, Inc., a Colorado corporation
("Company"), 555 17th Street, Suite 3310, Denver, Colorado 80202, and
Scott R. Sieck, 1081 Park Ave. N., Winter Park, FL 32789 ("Optionee").
In consideration of the mutual covenants hereinafter set forth
and for other good and valuable consideration, the parties hereto
agree as follows:
1. Grant of Option. Pursuant to the provisions of the Company's
Fiscal Year 1994 Incentive Plan ("Plan"), the Company hereby grants to
the Optionee, subject to the terms and conditions of the Plan (as it
presently exists and as it may hereafter be amended), and subject to
the further terms and conditions hereinafter set forth, the right and
option to purchase from the Company all or any part of an aggregate of
50,000 shares of the Company's no par value common stock ("Common
Stock") at the purchase price of $6.25 per share ("Shares"), such
option to be exercised only as hereinafter provided. The option
("Option") is not intended to be, and will not be treated as, an
Incentive Stock Option within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended. The number of Shares with
respect to which the Option is exercisable, and the purchase price
with respect to each Share to be acquired pursuant to the exercise of
the Option herein granted, each are subject to adjustment under
certain circumstances as more fully set forth in the Plan. The term
"Common Stock" as used herein shall include any other class of stock
or other securities resulting from any such adjustment.
2. Exercise of Option. The Option herein granted shall be
exercisable commencing on December 31, 1996, and, to the extent that
it has not theretofore been exercised, shall expire at 11:59 P.M. on
May 30, 1997.
3. Option Exercise. Subject to the terms and conditions of
Section 2 above, the Option granted hereunder may be exercised in
whole or in any part, and may be exercised in part from time to time,
all subject to the limitations on exercise set forth herein and in the
Plan, provided that no partial exercise of the 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 the Option.
The partial exercise of the Option shall not cause the expiration,
termination or cancellation of the remaining portion thereof. The
Option may be exercised by delivering written notice, in the form
attached hereto, to the principal office of the Company, to the
attention of its Secretary, no less than three business days in
advance of the effective date of the proposed exercise. Such notice
shall be accompanied by this Option Agreement and shall specify the
number of Shares of Common Stock with respect to which the Option is
being exercised and the effective date of the proposed exercise, and
shall be signed by the Optionee. The Optionee 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 this Option Agreement shall be returned to the Optionee.
4. Payment of the Purchase Price. Payment for Shares of Common
Stock to be purchased upon the exercise of the 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 Incentive Plan Committee, in Shares of Common Stock
owned by the Optionee and valued at their fair market value on the
effective date of such exercise (determined in accordance with the
method for establishing fair market value as set forth in the Plan),
or partly in Shares of Common Stock with the balance in cash, by
certified check, bank cashier's check or wire transfer. Any payment
in Shares of Common Stock shall be effected by the delivery of such
Shares to the Secretary of the Company, duly endorsed in blank or
accompanied by stock powers duly executed in blank, together with any
other documents and evidences as the Secretary of the Company shall
require from time to time.
The Option may be exercised by a broker-dealer acting on behalf
of the Optionee if (i) the broker-dealer has received from the
Optionee or the Company a fully-and-duly-endorsed agreement evidencing
the Option and instructions signed by the Optionee requesting that the
Company deliver the Shares of Common Stock subject to the Option to
the broker-dealer on behalf of the Optionee 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 Optionee have
otherwise complied with Section 220.3(e)(4) of Regulation T, 12 CFR
Part 220.
Certificates for Shares of Common Stock purchased upon the
exercise of the Option shall be issued in the name of the Optionee and
delivered to the Optionee as soon as practicable following the
effective date on which the Option is exercised.
5. Effect of Termination of Employment. If Optionee was an
employee of the Company at the time the Option was granted, this
Option shall be subject to termination in accordance with the Plan in
the event that the employment of the Optionee with the Company shall
terminate.
6. Acceleration of Exercise Date Upon Change in Control. Upon
the occurrence of a "change in control" (as defined in the Plan) the
Option shall become fully and immediately exercisable and shall remain
exercisable until its expiration, termination or cancellation pursuant
to the terms of the Plan and this Option Agreement.
7. Investment Representations. The Optionee hereby represents
and warrants that:
(a) Any Shares purchased upon exercise of the Option shall
be acquired for the Optionee's account for investment only, and
not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act of
1933, as amended ("Securities Act"), any rule or regulation under
the Securities Act, or any applicable state securities law.
(b) The Optionee has had such opportunity as the Optionee
has deemed adequate to obtain from representatives of the Company
such information as is necessary to permit the Optionee to
evaluate the merits and risks of his investment in the Company.
(c) The Optionee is able to bear the economic risk of
holding any Shares acquired pursuant to the exercise of the
Option for an indefinite period.
Upon exercise of the Option, the Optionee shall be deemed to have
reaffirmed, as of the date of exercise, the representations made in
this Section 7.
8. Securities Law Matters. The Company shall be under no
obligation to effect the registration pursuant to the Securities Act
of any Shares to be issued pursuant the Option or to effect similar
compliance under any state securities laws. Notwithstanding anything
to the contrary, the Company shall not be obligated to cause to be
issued or delivered any certificates evidencing the Shares pursuant to
the Option 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 the Shares of Common
Stock are traded. The Company may, in its sole discretion, defer the
effectiveness of any exercise of the Option in order to allow the
issuance of Shares of Common Stock pursuant to the Option 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 Optionee in writing of
its decision to defer the effectiveness of the exercise of the Option.
During the period that the effectiveness of the exercise of the Option
has been deferred, the Optionee may, by written notice, withdraw such
exercise and obtain the refund of any amount paid with respect
thereto.
9. Withholding Taxes. The Company's obligation to deliver
Shares upon exercise of the Option shall be subject to the Optionee's
satisfaction of all applicable federal, state and local tax
withholding requirements, in accordance with the provisions of the
Plan.
10. Legend on Stock Certificate. If appropriate, all stock
certificates representing Shares of Common Stock issued to the
Optionee upon exercise of the Option shall have affixed thereto a
legend substantially in the following form, in addition to any other
legend required by applicable law, unless such shares have been
acquired by Optionee pursuant to an effective registration statement
under the Securities Act of 1933:
"The shares of stock represented by this
certificate have not been registered under the
Securities Act of 1933, as amended, and may not be
transferred, sold or otherwise disposed of in the
absence of an effective registration statement
with respect to the shares evidenced by this
certificate, or an opinion of counsel satisfactory
to the Company to the effect that registration
under such Act is not required."
11. Non-Transferability. The Option shall not be assignable or
transferable otherwise than by will or by the laws of descent and
distribution. During the lifetime of the Optionee, the Option shall
be exercisable only by him.
12. Rights of Stockholder. The Optionee shall have no rights as
a stockholder with respect to any Shares subject to the Option until
the date of the issuance of a stock certificate with respect to such
Shares. Except as otherwise expressly provided in the Plan, no
adjustment to the Option shall be made for dividends or other rights
for which the record date occurs prior to the date such stock
certificate is issued.
13. No Special Employment Rights Created. Nothing contained in
the Option or the Plan shall confer upon the Optionee any right with
respect to the continuation of his employment, if any, 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 Optionee from the rate in existence at the time of
the grant of the Option.
14. Failure to Comply. The failure by the Optionee to comply
with any of the terms and conditions of the Option or of the Plan,
unless such failure is remedied by the Optionee within ten days after
having been notified of such failure by the Incentive Plan Committee,
shall be grounds for the cancellation and forfeiture of the Option, in
whole or in part, as the Committee, in its absolute discretion, may
determine.
15. Binding Effect. The Optionee hereby acknowledges receipt of
a copy of the Plan and agrees to be bound by all the terms and
provisions thereof. The terms of the Plan as it presently exists, and
as it may hereafter be amended, are deemed incorporated herein by
reference, and any conflict between the terms of this Option Agreement
and the provisions of the Plan shall be resolved by the Committee,
whose determination shall be final and binding on all parties.
16. Notices. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given upon
personal delivery or by registered or certified mail, or facsimile,
addressed to a party at the address set forth herein or at such other
address as such party may designate by notice in accordance with this
paragraph.
IN WITNESS WHEREOF, the Company has caused this Option Agreement
to be executed by its duly authorized officer and the Optionee has
executed this Agreement as of the day and year first above written.
OPTIONEE: BION ENVIRONMENTAL TECHNOLOGIES, INC.
/s/ Scott R. Sieck By: /s/ Jon Northrop
Scott R. Sieck Jon Northrop, Chief Executive Officer
OPTION EXERCISE FORM
TO: BION ENVIRONMENTAL TECHNOLOGIES, INC.
555 17th Street, Suite 3310
Denver, Colorado 80202
Attention: Secretary
RE: Notice of Intention to Exercise Option
I am the Optionee under the Non Qualified Stock Option Agreement
("Agreement") entered into with Bion Environmental Technologies, Inc.
("Company") on December 31, 1996. Pursuant to such Agreement, I
hereby provide you with official notice that I elect to exercise my
Option to purchase Shares of the Company's Common Stock as follows:
Number of Shares: ______________________
Effective Date of Exercise:_____________
I understand that payment for the Shares of Common Stock to be
purchased by me pursuant to the exercise of the Option must be made on
the effective date of exercise in accordance with the Plan. I further
understand and agree that the Company shall have the right to require
me to remit to the Company in cash an amount sufficient to satisfy
federal, state and local withholding tax requirements, if any,
attributable to my exercise of the Option prior to the delivery of any
certificate or certificates for such Shares.
I understand that this election to exercise the Option is
irrevocable once it is effective in accordance with the terms and
conditions of the Plan.
The certificate for the Shares should be delivered to me at the
address listed below:
NAME OF OPTIONEE:______________________________________
Please typewrite or print
ADDRESS:_______________________________________________
_______________________________________________
SOCIAL SECURITY NUMBER: _______________________________
DATED: ______________, 19___ ______________________________
Signature of Optionee
Exhibit 10.3
$500,000 Credit Facility
Bion Environmental Technologies, Inc. ("Biet") and Harley E.
Northrop ("Lender") agree effective as of October 26, 1996 that Lender
will make a $500,000 credit facility available to Biet, and that Biet
will use such credit under the terms and conditions as described below:
* Biet will be able to borrow up to a maximum of $500,000 under this
credit facility.
* Biet may request that funds be advanced on either the first or the
fifteenth of any month, and Lender will make such funds available
within fifteen working days.
* Interest will be paid monthly in cash by Biet to Lender at the
rate of 1% per month on the drawn down balance, and if by mutual
agreement not paid in cash, will be added to the unpaid balance.
* The entire drawn down balance will be due and payable on December
31, 1999.
* There will be no prepayment penalties should Biet pay off the
drawn down amount prior to December 31, 1999.
* Advances from Lender to Biet shall be evidenced by a promissory
note in the form attached hereto as Exhibit A.
* The entire outstanding balance may be converted into units (the
"Units") at a conversion price of $4.50 per Unit by mutual agreement
between Biet and Lender at any time after January 1, 1998. Each
Unit shall consist of one share of the restricted and legended
common stock of Biet plus one warrant authorizing the holder to
purchase one share of the restricted and legended common stock of
Biet for a price of $4.50 per share for a period commencing at the
time of conversion and expiring December 31, 2001.
As additional consideration for establishing this credit facility,
for each $5.00 loaned to Biet, Biet shall issue to Lender one warrant
("Warrant") to purchase one share of Biet stock between November 15, 1998
and November 15, 2001 at a price of $4.50 per share. Further, as
incentive for Biet to pay the balance due at an earlier date than
December 31, 1999, it is agreed that if Biet pays the entire balance due
on or before December 31, 1998, the quantity of Warrants issued will be
reduced by 50%.
Bion Environmental Harley E. Northrop
Technologies, Inc.
by: /s/ M. Duane Stutzman /s/ Harley E. Northrop
Acting as its: Chief Financial Officer
EXHIBIT A
Principal Amount Due: $ 20,000 but in no event to
exceed $ 500,000
Date Due: January 1, 1999
PROMISSORY NOTE ("Note")
FOR VALUE RECEIVED, the undersigned, Bion Environmental
Technologies, Inc., a Colorado corporation ("Maker"), hereby promises to
pay to the order of Harley E. Northrop, ("Holder"), its successors and
assignees, at P.O. Box 188, Westfield, New York 14787, or at such other
place as the Holder of this Note may from time to time designate in
writing, the principal amount of twenty thousand dollars ($ 20,000)(but
in no event to exceed five hundred thousand dollars ($ 500,000)) in
lawful and immediately available money of the United States. All
outstanding principal shall be due and payable on or before December 31,
1999, if not previously paid.
Interest shall be paid in cash on the drawn down amount from date of
draw down at one percent (1.0%) per month, or if by mutual agreement not
paid in cash, will be added to the unpaid balance. If this Note 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 immediately 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):
(a) Default shall be made in the 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 shall admit in writing its inability to pay its
debts as they become due, files a petition in bankruptcy or makes a
petition to take advantage of an insolvency act; makes an assignment for
the benefit of creditors, commences a proceeding for the appointment of a
receiver, trustee liquidator or conservator of itself or of the whole or
any
_______________
** initial principal advanced to be inserted which sum shall be increased
by subsequent cash advances from Holder to Maker as described in the
Credit Facility to which this Note is attached.
substantial part of its properties; 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; or
(c) Maker shall be adjudged as bankrupt, or a court shall
enter 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 State or any state, or if,
under the provisions of any other law for the relief or aid of debtors, a
court shall assume custody or control of Maker or the whole or any
substantial part of his properties, or if there is commenced against
Maker any proceeding for any of the foregoing relief or if a petition in
bankruptcy is filed against Maker; or if Maker by any act indicates its
consent to approval of or acquiescence in any such proceeding or
petition; then and in such event, and at any time thereafter, if such or
any other Event of Default shall then be continuing, 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.
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 Chautauqua County, 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: /s/ M. Duane Stutzman
Authorized Officer
Date: December 1, 1996
Exhibit 10.4
January 13, 1997
Mark A. Smith, Attorney at Law
Dorje Dzong
1345 Spruce St., Suite I
Boulder, CO 80302
Dear Mr. Smith:
This letter will confirm our recent discussions and your December
20, 1996 letter to Bion Environmental Technologies, Inc. ("BIET")
as follows:
1) Dublin Holding, Ltd. ("DHL") was transferred by
LoTayLingKyur, Inc. ("LTLK") the right to receive interest
and consulting payments due to LTLK from BIET for the months
of October, November, and December 1996.
2) DHL agreed during November to allow BIET to add these
sums to the outstanding note between DHL and BIET.
3) DHL agreed to convert the entire balance of the
outstanding note of $319,527 (principal, interest, LTLK pay-
ments) into BIET securities by acquiring 106,509 units
("Units") (consisting of one share of BIET common stock plus
one Class K Warrant) at a price of $3.00 per Unit as of
December 1, 1996.
4) Subsequently, DHL agreed to convert all of its Class E
and Class K Warrants to Class E-1 Warrants.
Yours truly,
/s/ Jon Northrop
Jon Northrop
Chief Executive Officer
cc: Dublin Holding, Ltd.
January 13, 1997
Mark A. Smith, President
LoTayLingKyur, Inc.
Dorje Dzong
1345 Spruce St., Suite I
Boulder, CO 80302
Dear Mr. Smith:
This letter will confirm our recent discussions and your December
20, 1996 letter to Bion Environmental Technologies, Inc. ("BIET")
as follows:
1) LoTayLingKyur, Inc. ("LTLK") (in partial repayment of a
debt) transferred to Dublin Holding, Ltd. ("DHL") the right
to receive October, November, and December 1996 interest
payments and consulting fees due LTLK from BIET.
2) This transfer was made in November 1996.
Yours truly,
/s/ Jon Northrop
Jon Northrop
Chief Executive Officer
Exhibit 10.5
INVESTMENT REPRESENTATION AGREEMENT
Bion Environmental Technologies, Inc.
555 17th St. Suite 3310
Denver, CO 80202
Gentlemen
1. Subscription. Memorializing the agreement made on
December 1, 1996 between Bion Environmental Technologies, Inc.
("Company") and ________________ ("Purchaser"), Purchaser hereby
agrees to purchase from the Company _______ shares of the
restricted and legended Common Stock of the Company plus 1.5
warrants per share to purchase additional shares of the Company's
common stock at a per share price of $6.00 for a period
commencing January 1, 2001 and expiring December 31, 2001
(collectively the "Securities"), in a private negotiated
transaction pursuant to Section 3(b) and/or 4(2) or other
applicable provisions of the Securities Act of 1933, as amended
("Act"), (and the regulations promulgated thereunder) at a price
of $__________.
2. Representations and Warranties. The undersigned warrants
and represents to the Company (and its shareholders, affiliates
and agents) that:
a. The Securities are being acquired by the undersigned
for investment for its own account, and not with a view to the
offer or sale in connection therewith, or the distribution
thereof, and that the undersigned is not now, and will not in the
future, participate, directly or indirectly, in an underwriting
of any such undertaking except in compliance with applicable
registration provisions of the Act.
b. The undersigned will not take, or cause to be taken,
any action that would cause it or the Company to be deemed an
underwriter of the Securities, as defined in Section 2(11) of the
Act.
c. The undersigned has been afforded an opportunity to
examine such documents and obtain such information concerning the
Company as it may have requested, including without limitation
all publicly available information, and has had the opportunity
to request such other information (and all information so
requested has been provided) for the purpose of verifying the
information furnished to it and for the purpose of answering any
questions it may have had concerning the business affairs of the
Company and it has reviewed to the extent desired by it the Arti
cles, Bylaws and minutes of the Company, documentation concerning
the Company's financial condition, assets, liabilities, share
ownership and capital structure, lack of operations and sales,
lack of assets, including without limitation its S.E.C. filings
(including Form 10K-SB/A for the fiscal year ended June 30, 1996,
Form 10Q-SB for the quarter ended September 30, 1996, and Form 8K
dated August 30, 1996 and other material documents and have
reviewed all of the terms of the acquisition of Bion
Technologies, Inc. by the Company ("Acquisition") and understand
the terms of the Acquisition and that the Company was a "shell"
corporation with no assets and no operations prior to the
Acquisition.
d. The undersigned (and its officers, directors and
principals as applicable) have had an opportunity to personally
ask questions of, and receive answers from, one or more of the
officers and directors of the Company and/or the attorneys for
the Company to ascertain and verify the accuracy and completeness
of all material information regarding the Company, its business
and its officers, directors, and promoters. The undersigned has
had an opportunity to ask questions of and receive answers from
duly designated representatives of the Company concerning the
terms and conditions pursuant to which the Securities are being
acquired by it.
e. It understands that its acquisition of the Securi
ties is a negotiated private transaction.
f. By reason of its knowledge and experience (and that
of its principals, officers and directors and their respective
attorneys, advisors and investment bankers) in financial and
business matters in general, and investments in particular, it is
capable of evaluating the merits and risks of an investment in
the Securities.
g. The undersigned is capable of bearing the economic
risks of an investment in the Securities.
h. The undersigned's present financial condition is
such that it is under no present or contemplated future need to
dispose of any portion of the Securities to satisfy any existing
or contemplated undertaking, need or indebtedness.
i. If required to do so, it has retained to advise it,
as to the merits and risks of a prospective investment in the
Securities, a purchaser representative, legal counsel, financial
and accounting advisors, investment bankers, etc.
j. The undersigned hereby represents and warrants to
the Company that all of the representations, warranties and
acknowledgements contained in this agreement are true, accurate
and complete as of the date herein and acknowledges that the
Company, its officers, directors, agents, and affiliates have
relied on its representations and warranties herein in consenting
to the restricted issuance and/or transfer of the Securities and
the undersigned hereby agrees to indemnify and hold the Company
(together with its respective officers, directors, agents and
affiliates) harmless with respect to any and all expenses, claims
or litigation (including without limitation reasonable attorneys'
fees related thereto) arising from or related to breach of any
warranty or representation herein.
3. Restrictions on Transferability: The undersigned acknow
ledges and understands that the Securities are unregistered and
must be held indefinitely unless they are subsequently registered
under the Act or an exemption from such registration is availa
ble.
The undersigned further acknowledges that it is fully aware
of the applicable limitations on the resale of the Securities.
Rule 144 (the "Rule") permits sales of "Restricted Securities"
held for not less than two years and upon compliance with the
requirements of such Rule. Further, the Securities must be sold
in an active market and appropriate information relating to the
Company must be generally available in order to effectuate a
transaction pursuant to the Rule by an affiliate of the Company.
There is currently only an extremely limited and "thin"
trading market in securities of the Company on the
over-the-counter market, and there is no assurance that it will
continue or that any active trading market will ever develop, or
if such a trading market develops, that it will grow and/or
continue.
Any and all certificates representing the Securities and any
and all securities issued in replacement or conversion thereof or
in exchange therefor shall bear the following legend, or one sub
stantially similar thereto, which the undersigned has read and
understands:
The securities represented by this Certificate have not
been registered under the Securities Act of 1933 (the
"Act") and are "restricted securities" as that term is
defined in Rule 144 under the Act. The securities may
not be offered for sale, sold or otherwise 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 the
Company.
The undersigned further agrees that the Company shall have
the right to issue a stop transfer instruction to its transfer
agent, if any, or to note a stop transfer instruction in its
stockholder records, and it acknowledges that the Company has
informed it of its intention to issue such instructions when and
if necessary.
4. Notices. Any notices or other communications required or
permitted hereby shall be sufficiently given if sent by regis
tered or certified mail, postage prepaid, return receipt
requested, and, if to the Company, at the address to which this
agreement is addressed, and if to the undersigned, at the address
set forth below my signature hereto, or to such other addresses
as either you or the undersigned shall designate to the other by
notice in writing.
5. Registration Rights. In the event that the Company
shall file a registration statement (or similar document) with
the U.S. Securities & Exchange Commission on the Company's equity
securities on a form which would legally allow inclusion of the
shares of the Company's common stock issued pursuant hereto, the
Company will include such shares in such registration statement
at the Company's sole cost; PROVIDED, HOWEVER, in the event of a
registration statement involving an underwriter, such underwriter
shall have the right, in its sole discretion, to impose
restrictions on the resale of the Company's securities issued
pursuant hereto and/or eliminate this registration right from the
underwritten registration statement in its entirety.
6. Successors and Assigns. This agreement shall be binding
upon and shall inure to the benefit of the parties hereto and to
the successors and assigns of the Company and to the personal and
legal representatives, heirs, guardians, successors and permitted
assignees of the undersigned.
7. Applicable Law. This agreement shall be governed by and
construed in accordance with the laws of the State of Colorado
and, to the extent it involves any United States statute, in
accordance with the laws of the United States, and jurisdiction
and venue for any dispute related hereto shall be in a court of
general jurisdiction located in Denver, Colorado.
Purchaser
_________________________ By: _____________________________
Name Signature
_________________________ ___________________________________
Social Security Number Address
Date: ___________________________
ACCEPTED:
Bion Environmental Technologies, Inc.
By: ______________________ Date: _______________________
Authorized Officer
RISK FACTORS
The securities being offered hereby are speculative in
nature and involve a high degree of risk. Following is a summary
discussion of some of the risk factors applicable to an
investment in the securities. Prospective investors should
thoroughly consider all of the risk factors discussed below and
should understand that there is substantial risk they will lose
all or part of their investment. No person should consider
investing who cannot afford to lose his entire investment or who
is in any way dependent upon the funds that he is investing.
1. Lack of Operating History. Substantially all of the
Company's business activities are conducted through its
subsidiaries, which have been in the development stage until
recently. Potential investors should be aware of the
difficulties encountered by a new enterprise, especially in view
of the intense competition from existing and more established
companies in the wastewater, waste management, environmental
control, and soils products businesses which will be the
principal focus of the Company. Since commercial operations have
only recently commenced, the Company is without a history of
significant revenues.
2. No Profitable Operations. From inception to date,
neither the Company nor its subsidiaries has ever sustained any
profitable operations. Although the subsidiaries have now
commenced sales of wastewater treatment systems, BionSoilO
production systems, and BionSoilO and expect to generate
sufficient revenues from these operations to pay operating
expenses in the future, there can be no assurance that profitable
operations will ever be achieved or sustained in the future. In
the past, the subsidiaries have been dependent upon infusions of
capital from investors and proceeds from loans to enable them to
continue in business. In the event the Company is unable to
achieve sustained profitable operations in the future, it is
likely that any investment in the Shares will ultimately be lost.
3. Immediate Need for Additional Capital and "Going
Concern" Qualification of Independent Auditor's Report. The
Company has incurred losses from inception totalling $5,903,824
at June 30, 1996, and $6,321,791 at September 30, 1996, and the
Company has thus far failed to generate adequate working capital
from operations. The Company's audited financial statements for
the fiscal period ended June 30, 1996 (and unaudited financial
statements for the fiscal period ended September 30, 1996) have
been prepared assuming that the Company will continue as a going
concern because continued losses without additional equity
capital raise substantial doubt about its ability to continue in
business during the next twelve months. Management anticipates
that in order for the Company to survive for the next three
months, it will be necessary to obtain outside funding of
approximately $500,000, and that in order for the Company to
survive for the next twelve months, it will be necessary for the
Company to obtain additional outside funding of approximately
$1,500,000 (about one-half of which will be utilized to fund
anticipated growth). It is presently anticipated that it will be
necessary for the Company to obtain additional funding from some
other source(s) in order to meet its expected working capital
needs during the next twelve months. Accordingly, it is
anticipated that management will be engaged in attempts to obtain
additional funds from one or more other outside sources (the
availability, terms and viability of which are currently
unknown).
4. Dependence on Management. The success of the Company
is and will continue to be substantially dependent on the efforts
of Jon Northrop, CEO and Jere Northrop, President. Pursuant to
existing employment agreements, Messrs. Northrop devote
substantially all of their time to the Company's affairs. The
Company is wholly dependent, at present, upon the personal
efforts and abilities of certain of its officers and directors.
Loss of the services of these key employees would have a material
adverse effect on the Company. The Company carries key-man life
insurance in the amount of $1,500,000 on the lives of Jere
Northrop, President, and Jon Northrop, CEO.
5. Conflicts of Interest. The Company and the Subsidiary
have entered into several agreements which were not negotiated at
arm's length. On March 23, 1990, the Company acquired through a
merger 100% of the outstanding stock of Biocycle, Ltd. and
Zabion, Ltd. (predecessor companies to one subsidiary, one of
which was at that time controlled by Jere Northrop and Harley E.
Northrop (father of Jon and Jere Northrop)), including their
patents and rights to certain proprietary knowledge. On July 12,
1993 the Company entered into employment agreements with Messrs.
Jon Northrop and Jere Northrop. The Company believes that these
agreements were negotiated on terms at least as favorable to the
Company as those which could have been obtained from unaffiliated
persons.
6. Control by Management and Existing Shareholders. As of
the date of this offering, present management (together with
their affiliates) control approximately 52.7% of the Company's
outstanding Common Stock and can elect all of the Company's
directors, appoint its officers and control the Company's affairs
and operations. The Company's Articles of Incorporation do not
provide for cumulative voting.
7. Limited Development of Technology and Uncertain Market
Acceptance. The wastewater treatment systems developed and
marketed to date by the Company have been limited to certain
agricultural and food processing applications and have not yet
been expanded into other markets. The Company has not yet
completed the development of all of the wastewater treatment
system applications that will be necessary to address targeted
market applications and geographic areas and anticipates a
continuing need for the development of additional applications.
Although management believes that the Company's existing
technology is sufficient to support development of additional
commercial applications, no assurance can be given that new
applications can be developed or that existing and/or new
applications will achieve commercially viable sales levels. The
Company has conducted no formal market studies with respect to
its technology and services. It is anticipated that the
achievement of any significant degree of market acceptance for
the Company's wastewater treatment systems and products will
require substantial marketing efforts and the expenditure of
significant amounts of funds to inform potential customers of the
distinctive characteristics and benefits of such products. There
can be no assurance that the Company's proposed products will
ultimately be accepted by targeted industries, and there can be
no assurance that substantial revenues will ever be realized from
sales of the Company's products.
8. Competition. Although the Company believes that its
systems offer many significant advantages over other competing
technologies or systems, competition in the biological wastewater
treatment industry is intense. The Company is in direct
competition with local, regional and national engineering and
environmental consulting firms and soils products companies, and
some of these companies may be capable of developing soils
products or wastewater treatment systems similar to those being
developed by the Company or based on other technologies that are
competitive with the Company's products. Many of those companies
are well-established and have substantially greater financial and
other resources than the Company.
9. Obsolescence and Technological Change. The Company's
business is susceptible to changing technology. Although the
Company intends to continue to develop and improve its wastewater
treatment systems, there can be no assurance that funds for such
expenditures will be available or that the Company's competitors
will not develop similar or superior capabilities.
10. Potential Lack of Adequate Patent and Trade Secret
Protection. The Company has limited patent protection on certain
aspects of its technology for its wastewater treatment systems
and soils products and it possesses certain proprietary
processes. The Company intends to obtain additional patents or
other appropriate protection for its technology. Additionally,
the Company uses nondisclosure contract provisions and license
arrangements which prohibit the disclosure of the Company's
proprietary processes. However, there can be no assurance that
the Company can effectively protect against unauthorized
duplication or the introduction of substantially similar
products. The Company's ability to compete effectively with
other companies is materially dependent upon the proprietary
nature of the Company's patents and technologies. There can be
no assurance that the Company will be able to obtain any
additional key patents or other protection for its technology.
In addition, the invalidation of key patents or proprietary
rights owned by the Company could have an adverse effect on the
Company and its business prospects.
11. Governmental Regulations. As the Company does not
itself discharge any substantial waste of any kind during the
normal course of its business (and does not itself discharge any
wastewater into the environment) it is not itself subject to
governmental regulation. However, the Company is in the business
of helping its customers solve problems associated with their
discharge of wastewater into the environment, and most of the
Company's systems and services are subject (both directly and
indirectly) to federal, state and local government regulation,
and many are subject to extensive testing procedures. The
effects of regulatory bodies could delay the Company's marketing
efforts for a considerable time and ultimately could prevent the
completion of projects. The regulations pertaining to the
environment which may impact on the Company's systems are
continually changing. While the Company believes that such
regulatory changes are favorable to the Company's business since
such regulations may require the use of the Company's systems (or
similar systems), there can be no assurance that, in the future,
such regulations will not cause the Company additional economic
expenses.
12. Use of Proceeds Not Certain. The proceeds of this
offering have been allocated by the Company to working capital
for general corporate purposes. Specific uses of investor's
funds will depend upon the business judgment of management.
Investor must therefore rely on management's judgment with only
limited information about management's specific intentions.
13. Determination of Offering Price of Shares. The price
of the Shares offered hereby has been established by management
of the Company. Accordingly, investors are cautioned that the
offering price of the Shares does not have any direct
relationship to the Company's current assets, earnings, book
value or any other objective criteria of value, and in no event
should such price be regarded as an indication of any future
value of the securities.
14. Shares Available for Resale. Of the Company's
presently outstanding shares of Common Stock, approximately
870,836 shares are "restricted securities" which may in the
future be sold upon compliance with Rule 144 adopted under the
Securities Act of 1933, as amended (the "Act"). Generally, Rule
144 provides that a person holding "restricted securities" for a
period of at least two years may sell every three months, in
brokerage transactions, an amount equal to the greater of one
percent of the Company's outstanding shares of Common Stock or
the average weekly reported volume of trading for the securities.
There is no limitation on the amount of "restricted securities"
which may be sold by a person who has been the beneficial owner
of such restricted securities for more than three years, and who
is not an "affiliate" (and has not been an "affiliate" for at
least 90 days prior to the date of such sales). The currently
outstanding restricted securities of the Company were issued
between April 1992 and November 30, 1996, and such restricted
securities will become available for resale pursuant to Rule 144
on dates from April 1994 through November 30, 1999. Investors
should be aware that such sales under Rule 144 may, in the
future, have a depressive effect on the price of the Company's
Common Stock.
15. No Dividends and None Anticipated. The investor is
cautioned that the Company has never paid any dividends on any
class of stock in its past, and that because of its present
financial status and its contemplated financial requirements, it
does not anticipate paying any cash dividends upon any class of
its stock in the immediately foreseeable future.
16. Potential Liabilities and Lack of Insurance Coverage
for Damage to the Environment. The Company is in the business of
helping its customers solve problems associated with their
discharge of wastewater into the environment. As the Company
does not itself discharge any substantial waste of any kind
during the normal course of its business (and does not itself
discharge any wastewater into the environment), it does not
consider the risk of potential liability associated with damage
to the environment to be substantial, and does not have any
insurance coverage with respect to such risks. The Company
presently carries only nominal amounts of insurance coverage to
cover relatively standard business risks, which coverage
management deems to be adequate for the Company's current
operations. It is possible, however, that circumstances might
potentially exist whereby the Company could be held liable for
damage to the environment (i.e., the negligent design of a system
resulting in the aggravation of, as opposed to the resolution of,
an existing wastewater problem), or for other liabilities
resulting from other business risks in excess of its current
policy amounts (i.e., personal injury to an employee, breach of
contract, etc.). Any such liability, if imposed, could be
substantial and would, in all likelihood, cause the business of
the Company to be materially and adversely affected.
Exhibit 10.6
December 1996
Dear Warrant Holder:
Bion Environmental Technologies, Inc. (the "Company") hereby
offers, effective December 1, 1996, to exchange each of your
warrants to purchase common stock of the Company at a price per
share of $4.50 for Class E-1 Warrants to purchase one and one
half times the prior amount of common stock of the Company at a
price per share of $6.00. The Class E-1 warrants will be
exercisable for a period commencing January 1, 2001 and expiring
December 31, 2001. Please contact the Company to indicate your
participation in this offer.
Very truly yours,
/s/ Jon Northrop
Jon Northrop
Chief Executive Officer
Exhibit 1
Warrants exchanged
<TABLE>
<CAPTION>
Class E-1
Warrant Holder Warrants Replaced Warrants Issued
<S> <C> <C>
Dublin Holding, Ltd. 1,006,509 1,509,764
Mark Smith 500,000 750,000
Rosalynde Smith 25,000 37,500
Diana Smith 25,000 37,500
Kelly Moone 30,000 45,000
Quenby Moone 10,000 15,000
Christopher Moone 10,000 15,000
Jere Northrop 400,000 600,000
Jon Northrop 400,000 600,000
2,406,509 3,609,764
Warrants to be exchanged
Harley E. Northrop 17,000 25,500
</TABLE>
Void after 3:30 p.m., Denver Time, on December 31, 2001
Warrant to Purchase
_______ Shares
of Common Stock
CLASS E-1 WARRANT TO PURCHASE COMMON STOCK
OF
BION ENVIRONMENTAL TECHNOLOGIES, INC.
This is to certify that, FOR VALUE RECEIVED, ___________________
or registered assigns ("Holder), is entitled to purchase, subject
to the provisions of this Warrant, from Bion Environmental
Technologies, Inc., a Colorado corporation ("Company"), at any
time on or after January 1, 2001, and not later than 3:30 p.m.,
Denver Time, on December 31, 2001, unless extended as provided in
Section (a) below, _______ restricted and legended shares of
common stock, no par value per share, of the Company ("Common
Stock") at a purchase price per share of $6.00 (in cash or stock
of the Company). The number of shares of Common Stock to be
received upon the exercise of this Warrant and the price to be
paid for a share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock
deliverable upon such exercise, and as adjusted from time to
time, are hereinafter sometimes referred to as "Warrant Stock"
and the exercise price of a share of Common Stock in effect at
any time and as adjusted from time to time is hereinafter
sometimes referred to as the "Exercise Price."
(a) Exercise of Warrant. Subject to the provisions of
Section (1) hereof, this Warrant may be exercised in whole or in
part at any time or from time to time on or after December 1,
1996, but not later than 3:30 p.m., Denver time on December 31,
2001, or if such date is a day on which banking institutions are
authorized by law to close, then on the next succeeding day which
shall not be such a day, by presentation and surrender hereof to
the Company or at the office of its stock transfer agent, if any,
with the Purchase Form annexed hereto duly executed and
accompanied by payment of the Exercise Price (in cash or
equivalent value) for the number of shares specified in such
form, together with all federal and state taxes applicable upon
such exercise. The Company may unilaterally extend the time
within which the Warrant may be exercised but is not obligated to
do so, but not longer than twelve (12) months. The Company may
unilaterally reduce the exercise price per share. If this
Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the right hereunder. Upon receipt by the
Company of this Warrant at the office or agency of the Company,
in proper form for exercise, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of the
Company shall then be closed or that
certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder.
(b) Reservation of shares. The Company, hereby agrees that
at all times subsequent hereto there shall be reserved for
issuance and/or delivery upon exercise of this Warrant such
number of shares of its Common Stock as shall be required for
issuance or delivery upon exercise of this Warrant.
(c) Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise
of this Warrant. With respect to any fraction of a share called
for upon any exercise hereof, the Company shall pay to the Holder
an amount in cash equal to such fraction multiplied by the
current market value of such fractional share, determined as
follows:
(1) If the Common Stock is listed on a national securi
ties exchange or admitted to unlisted trading privileges on
such exchange, the current value shall be the last reported
sale price of the Common Stock on such exchange on the last
business day prior to the date of exercise of this Warrant
or if no such sale is made on such day, the average closing
bid and asked prices for such day on such exchange; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current value shall be the
mean of the last reported bid and asked prices reported by
the National Association of Securities Dealers Automated
Quotation System (or, if not so quoted on NASDAQ, by the
National Quotation Bureau, Inc.) on the last business day
prior to the day of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not
so reported, the current value shall be an amount, not less
than book value, determined in such reasonable manner as may
be prescribed by the Board of Directors of the Company, such
determination to be final and binding on the Holder.
(d) Exchange, Assignment or Loss of Warrant. This Warrant
is exchangeable, without expense, at the option of the Holder,
upon presentation and surrender hereof to the Company or at the
office of its stock transfer agent, if any, for other Warrants of
different denominations entitling the Holder thereof to purchase
in the aggregate the same number of shares of Common Stock
purchasable hereunder. Any assignment hereof shall be made by
surrender of this Warrant to the Company or at the office of its
stock transfer agent, if any, with the Assignment Form annexed
hereto duly executed and funds sufficient to pay any transfer
tax; whereupon the Company shall, without charge, execute and
deliver a new Warrant in the name of the assignee named in such
instrument of assignment and this Warrant shall promptly be
cancelled. This Warrant may be divided upon presentation hereof
at the office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying
the names and denominations in which new Warrants are to be
issued and signed by the Holder hereof. The terms "Warrant" and
"Warrants" as used herein include any Warrants issued in
substitution for a replacement of this Warrant, or into which
this Warrant may be divided or exchanged. Upon receipt by the
Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory
indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new
Warrant of like tenor and date. Any such new Warrant executed
and delivered shall constitute an additional contractual
obligation on the part of the Company, whether or not this
Warrant so lost, stolen, destroyed, or mutilated shall be at any
time enforceable by anyone.
(e) Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the
Company, either at law or equity, and the rights of the Holder
are limited to those expressed in the Warrant and are not
enforceable against the Company except to the extent set forth
herein.
(f) Adjustments to Exercise Price and Number of Shares.
(1) Adjustment of Number of Shares. Anything in this
Section (f) to the contrary notwithstanding, in case the
Company shall at any time issue Common Stock or Convertible
Securities by way of dividend or other distribution on any
stock of the Company or subdivide or combine the outstanding
shares of Common Stock, the Exercise Price shall be
proportionately decreased in the case of such issuance (on
the day following the date fixed for determining
shareholders entitled to receive such dividend or other
distribution) or decreased in the case of such subdivision
or increased in the case of such combination (on the date
that such subdivision or combination shall become
effective).
(2) No Adjustment for Small Amounts. Anything in this
Section (f) to the contrary notwithstanding, the Company
shall not be required to give effect to any adjustment in
the Exercise Price unless and until the net effect of one or
more adjustments, determined as above provided, shall have
required a change of the Exercise Price by at least one
cent, but when the cumulative net effect of more than one
adjustment so determined shall be to change the actual
Exercise Price by at least one cent, such change in the
Exercise Price shall thereupon be given effect.
(3) Number of Shares Adjusted. Upon any adjustment of
the Exercise Price, the Holder of this Warrant shall
thereafter (until another such adjustment) be entitled to
purchase, at the new Exercise Price, the number of shares,
calculated to the nearest full share, obtained by
multiplying the number of shares of Common Stock initially
issuable upon exercise of this Warrant by the Exercise Price
in effect on the date hereof and dividing the product so
obtained by the new Exercise Price.
(4) Common Stock Defined. Whenever reference is made
in this Section (f) to the issue or sale of shares of Common
Stock, the term "Common Stock" shall mean the Common Stock
of the Company of the class authorized as of the date hereof
and any other class of stock ranking on a parity with such
Common Stock. However, subject to the provisions of Section
(i) hereof, shares issuable upon exercise hereof shall
include only shares of the class designated as Common Stock
of the Company as of the date hereof.
(g) Officer's Certificate. Whenever the Exercise Price
shall be adjusted as required by the provisions of Section (f)
hereof, the Company shall forthwith file in the custody of its
Secretary or an Assistant Secretary at its principal office, and
with its stock transfer agent, if any, an officer's certificate
showing the adjusted Exercise Price determined as herein provided
and setting forth in reasonable detail the facts requiring such
adjustment. Each such officer's certificate shall be made
available at all reasonable times for inspection by the Holder
and the Company shall, forthwith after each such adjustment,
deliver a copy of such certificate to the Holder. Such
certificate shall be conclusive as to the correctness of such
adjustment.
(h) Notices to Warrant Holders. So long as this Warrant
shall be outstanding and unexercised (i) if the Company shall pay
any dividend or make any distribution upon the Common Stock or
(ii) if the Company shall offer to the Holders of Common Stock
for subscription or purchase by them any shares of stock of any
class or any other rights or (iii) if any capital reorganization
of the Company, reclassification of the capital stock of the
Company, consolidation or merger of the Company with or into
another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company to
another corporation, or voluntary or involuntary dissolution,
liquidation or winding up of the Company shall cause to be
delivered to the Holder, at least ten days prior to the date
specified in (x) or (y) below, as the case may be, a notice
containing a brief description of the proposed action and stating
the date on which (x) a record is to be taken for the purpose of
such dividend, distribution or rights, or (y) such
reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to
take place and the date, if any, is to be fixed as of which the
Holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property
deliverable upon such reclassification, reorganization,
consolidation, merger, conveyance, dissolution, liquidation or
winding up.
(i) Reclassification, Reorganization or Merger. In case of
any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company (other than a
change in par value, or from no par value to par value, or as a
result of an issuance of Common Stock by way of dividend or other
distribution or of a subdivision or combination), or in case of
any consolidation or merger of the Company with or into another
corporation (other than a merger with a subsidiary in which
merger the Company is the continuing corporation and which does
not result in any reclassification, capital reorganization or
other change of outstanding shares of Common Stock of the class
issuable upon exercise of this Warrant) or in case of any sale or
conveyance to another corporation of the property of the Company
as an entirety or substantially as an entirety, the Company shall
cause effective provision to be made so that the Holder shall
have the right thereafter, by exercising this Warrant, to
purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification,
capital reorganization or other change, consolidation, merger,
sale or conveyance. Any such provision shall include provision
for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The
foregoing provisions of this Section (i) shall similarly apply to
successive reclassifications, capital reorganizations and changes
of shares of Common Stock and to successive consolidations,
mergers, sales or conveyances. In the event that in any such
capital reorganization or reclassification, consolidation,
merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment,
in whole or in part, for or of a security of the Company other
than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of subsection (f) hereof
with the amount of the consideration received upon the issue
thereof being determined by the Board of Directors of the
Company, such determination to be final and binding on the
Holder.
(j) Transfer to Comply with the Securities Act of 1933.
(1) This Warrant or the Warrant Stock or any other
security issued or issuable upon exercise of this Warrant
may not be sold, transferred or otherwise disposed of except
to a person who, in the opinion of counsel for the Company,
is a person to whom this Warrant or such Warrant Stock may
legally be transferred pursuant to Section (d) hereof
without registration and without the delivery of a current
prospectus under the Securities Act with respect thereto and
then only against receipt of an agreement of such person to
comply with the provisions of this Section (j) with respect
to any resale or other disposition of such securities.
(2) The Company may cause the following legend to be
set forth on each certificate representing Warrant Stock or
any other security issued or issuable upon exercise of this
Warrant not theretofore distributed to the public or sold to
underwriters for distribution to the public pursuant to
Section (k) hereof, unless counsel for the Company is of the
opinion as to any such certificate that such legend is
unnecessary:
The securities represented by this certificate may not be
offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the
Securities Act of 1933 (the "Act"), or pursuant to an
exemption from registration under the Act the availability
of which is to be established to the satisfaction of the
Company.
(k) Registration Rights for Warrant Stock.
In the event that the Company on or before the expiration
date shall file a registration statement (or similar document)
with the U.S. Securities & Exchange Commission on the Company's
equity securities on a form which would legally allow inclusion
of the shares of the Company's common stock issued pursuant
hereto, the Company shall include such shares in such
registration statement, at the Company's sole cost; PROVIDED,
HOWEVER, in the event of a registration involving an underwriter,
such underwriter shall have the right, in its sole discretion, to
impose restrictions on the resale of the Company's securities
issued pursuant hereto and/or eliminate this registration right
from the underwritten registration statement in its entirety;
FURTHER PROVIDED, HOWEVER, in the event an underwriter has
eliminated this registration right from an underwritten
registration statement, upon request by a majority of the Holders
at a date three months after close or cancellation of such
underwritten registration, the Company shall one time and one
time only file and process to effectiveness (and maintain
effectiveness for not less than six months), at the Company's
sole expense, a registration statement including all the shares
underlying the exercise of this Warrant and any other warrant of
the Company owned by Holder. All expenses of any such
registration statement including the shares shall be borne by the
Company.
(l) Applicable Law. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of Colorado.
Bion Environmental Technologies,
Inc.
Date: _______________ By: ______________________
Authorized Officer
PURCHASE FORM
Dated ________________
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing _________ shares of
Common Stock and hereby makes payment of $________ in payment of
the actual exercise price thereof.
__________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name _________________________________________________
(please typewrite or print in block letters)
Address_______________________________________________
Signature__________________________________________
_____________________________
FOR VALUE RECEIVED, ____________________________ hereby
sells, assigns, and transfers unto
Name________________________________________________
(please typewrite or print in block letters)
Address______________________________________________
the right to purchase Common Stock represented by this Warrant to
the extent of __________ shares as to which such right is exercis
able and does hereby irrevocably constitute and appoint
______________, attorney, to transfer the same on the books of
the Company with full power of substitution in the premises.
Signature _______________________________
Dated: _______________________
