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: January 2, 1997
(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 a contract on January 3, 1997, for the
design, permitting, construction oversight and initial
operation of a BionSoil NMSO system on a small feedlot in
New York State. The system will accommodate a 1,300 animal
operation which grows beef cattle and replacement dairy
heifers. The BionSoil NMS system treats all solid and
liquid wastes, reducing odors and solving water pollution
and excess nutrient problems, and converts the wastes into
BionSoilO, a nutrient rich humus material.
(ii) Currently the Registrant has ten BionSoil NMS systems
in operation in New York, Washington, Florida and North
Carolina, four in various stages of construction (ranging
from final design to initial operation) in Maryland, New
York, Washington and Oregon, and six 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 facilities
represent a significant environmental problem for the
agricultural industry. The BionSoil NMS system bioconverts
these wastes into a marketable by-product, BionSoil, 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 significantly reduce odors
associated with the operation. When fully operational, the
BionSoil systems that the Registrant has in operation or
under contract will produce in excess of 100,000 cubic yards
of BionSoil per year.
(b) Effective January 2, 1997, the Registrant entered into an
agreement (the "Agreement") with LoTayLingKyur, Inc.
("LTLK") whereby LTLK will convert the note between
Registrant and LTLK in the amount of $2,007,035 which is due
on May 15, 2000 (see Form 10-KSB/A for fiscal year ended
June 30, 1996)(the "Note") in full on June 30, 1997 into
1,274,308 shares of the restricted and legended common stock
of the Registrant plus warrants to purchase 637,154 shares
of the common stock of the Registrant at a price per share
of $6.00 exercisable for a period from January 1, 2001
through December 31, 2001, provided that:
(i) all interest payments are made timely from
January through June 1997
(ii) all consulting payments (to continue past June
30, 1997) are made timely through June 30, 1997
(iii) the Registrant has not less than 36,000 Bion
Animals under contract as of June 30, 1997
(iv) the Registrant has raised not less than
$1,250,000 cash equity (net of offering costs) from
January 1, 1997 to June 30, 1997.
Upon conversion, all other covenants and conditions not
directly related to the Note and its security interest would
continue through the term of the earlier agreement. LTLK
could elect to convert, in its sole discretion, even if all
conditions have not been met. A copy of the Agreement is
attached hereto as Exhibit 10.1.
c) On January 16, 1997 the Registrant and Duane Kennedy
(collectively the Registrant and Mr. Kennedy are the
"Parties") signed a Memorandum of Understanding (the
"Memorandum") whereby the Registrant has employed Mr.
Kennedy in the position of President, Bion Technologies,
Inc. and BionSoil, Inc. (the "Position"). Mr. Kennedy has
spent the last five years as Vice President of Sales and
Marketing at Pursell Industries, Inc., a privately held
company located in Birmingham, Alabama. Prior to his
employment at Pursell, Mr. Kennedy worked for twenty five
years in marketing and sales positions of increasing
responsibility for Armstrong World Industries, Olympic
Stain, and PPG Industries. Mr. Kennedy received a B.S.
degree in Education from the University of Arkansas,
Fayetteville, in 1966. Under the terms of the Memorandum
the Position, which reports to the Chief Executive Officer:
(i) is a regular full time position,
(ii) Mr. Kennedy's (the "Employee's") performance will
be reviewed at least annually,
(iii) Employee's compensation is to be $100,000 per
year,
(iv) Employee will receive 3,000 shares of the
Registrant's restricted and legended common stock per
quarter,
(v) Employee shall receive warrants to purchase
restricted and legended common stock of the Registrant
in the following amounts:
40,000 shares at a price of $6.00 per share
40,000 shares at a price of $8.00 per share
40,000 shares at a price of $10.00 per share
40,000 shares at a price of $12.50 per share
40,000 shares at a price of $15.00 per share
all warrants exercisable in whole or in part from date
of vesting until December 31, 2001; warrants will vest
25% at the date of employment, and 25% at the end of
each of the first through third full year of
employment,
(vi) Employee shall receive additional warrants to
purchase restricted and legended common stock of
Registrant in the following amounts:
50,000 shares at a price of $15.00 per share
150,000 shares at a price of $20.00 per share
all warrants exercisable in whole or in part from date
of vesting until December 31, 2001; warrants will vest
33% at the end of the first through third full years of
employment,
(vii) Employee shall be awarded, on the date of
employment, an option under Registrant's Fiscal Year
1994 Incentive Compensation Plan to purchase up to
50,000 shares of the Company's common stock at a price
of $6.00 per share exercisable from date of employment
through December 31, 1997, and,
(viii) the Parties consent to incorporate the
Memorandum in an Employment Agreement drafted by legal
counsel at a later date.
A copy of the Memorandum is attached hereto as Exhibit 10.2.
d) Effective January 8, 1997 the Registrant
(along with its wholly-owned subsidiary
BionSoil, Inc., "BSI") entered into a
financing agreement (the "Agreement") with
LoTayLingKyur, Inc. ("LTLK") whereby LTLK
advanced the sum of $73,870 to Registrant on
the following terms and conditions: as
security, LTLK took title to 7,387 cubic
yards of raw unscreened BionSoil, BSI shall
have the right to acquire the collateral,
BionSoil, in whole or in part by payment to
LTLK the sum of $11.50 per cubic yard through
June 30, 1997, thereafter the price shall
increase by $.20 per cubic yard per month,
BSI shall repurchase all of the collateral
BionSoil not previously repurchased at a
price of $12.70 per cubic yard by December
31, 1997. A copy of the Agreement is
attached hereto as Exhibit 10.3.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
10.1 Agreement effective January 2, 1997, with
LoTayLingKyur, Inc.
10.2 Memorandum of Understanding dated January 16, 1996,
with Duane Kennedy
10.3 Agreement effective January 8, 1997 with
LoTayLingKyur, Inc.
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 28, 1997 By: /s/ M. Duane Stutzman
M. Duane Stutzman, Chief
Financial Officer
INDEX TO EXHIBITS
Financial Statements and Exhibits.
10.1 Agreement effective January 2, 1997, with
LoTayLingKyur, Inc.
10.2 Memorandum of Understanding dated January 16, 1996,
with Duane Kennedy
10.3 Agreement effective January 8, 1997 with
LoTayLingKyur, Inc.
Exhibit 10.1
January 3, 1997
Mark A. Smith, President
LoTayLingKyur, Inc.
Dorje Dzong
1345 Spruce St., Suite I
Boulder, CO 80302
Dear Mr. Smith:
Bion Environmental Technologies, Inc. ("Biet") hereby
agrees with the terms of the offer of early conversion of the
note held by LoTayLingKyur, Inc. as discussed with you and
further described in your memo to Biet dated January 2, 1997
(copy attached as Exhibit A).
Very truly yours,
/s/ Jon Northrop
Jon Northrop
Chief Executive Officer
Exhibit A
LOTAYLINGKYUR, INC.
1280 Terminal Way, Suite 3 Dorje Dzong
Reno, Nevada 89502 1345 Spruce Street, Suite I
(702) 333-1193 (303) 444-1713
FAX (702) 329-0852 FAX (303) 444-1904
1/2/97
TO: Jon Northrop, CEO - BIET
FROM: Mark A. Smith, President
RE: Conversion of Note
Dear Mr. Northrop:
As discussed previously, LTLK would enter into an agreement that
provides:
1)LTLK will convert the Note in full on 6/30/97 into
1,274,308 BIET common shares plus 637,154 five year
warrants exerciseable at $6.00 per share, provided that
a) all interest payments timely made from January
through June 1997; and
b) all consulting payments (to continue past 6/30/97)
made timely; and
c) BIET has not less than 36,000 BionAnimals under
contract at 6/30/97; and
d) BIET has raised not less than $1,250,000 cash
equity (net of offering costs) from January 1, 1997 to
June 30, 1997.
Upon conversion, all other covenants and conditions not directly
related to the Note and its security interest would continue
through the term of the existing agreement. LTLK could elect to
convert, in its sole discretion, even if all conditions have not
been met.
Please contact me.
Yours,
/s/ Mark A. Smith
Mark A. Smith
President
Exhibit 10.2
Memorandum of Understanding
This Memorandum of Understanding ("Memorandum") between Bion
Environmental Technologies, Inc. ("Company") and Duane Kennedy
("Employee) (collectively the "Parties") reflects the mutual
understanding of the Parties of the terms of employment of the
Employee by the Company.
1. Employee's position shall be President, Bion Technologies and
BionSoil, Inc.
2. Position is a regular, full time position.
3. Employee's performance will be reviewed no less than once per
year with a view to making such increases in Employee's salary or
declaring such bonuses or other benefits as may be warranted in
light of factors considered pertinent.
4. Position reports to the Chief Executive Officer.
5. Compensation shall consist of:
* initial salary of $100,000 per year,
* 3,000 shares of the Company's restricted and legended
common stock per quarter at a deemed price per share of
$6.00 per share, and,
* an equity package made up of warrants to purchase stock
in the Company in the future that contains both a short term
and long term component.
* Short term, made up of warrants to purchase:
40,000 shares at a price per share of $6.00 per share
40,000 shares at a price per share of $8.00 per share
40,000 shares at a price per share of $10.00 per share
40,000 shares at a price per share of $12.50 per share
40,000 shares at a price per share of $15.00 per share
All warrants will be exercisable in whole or in partial
quantities from the date of vesting to December 31, 2001
(unless extended by the Company). Warrants will vest 25% at
the date of employment, and 25% at the end of each of the
first through third full year of employment.
* Long term, made up of warrants to purchase:
50,000 shares at a price per share of $15.00 per share
150,000 shares at a price per share of $20.00 per share
All warrants will be exercisable in whole or in partial
quantities from the date of vesting to December 31, 2001
(unless extended by the Company). Warrants will vest 33% at
the end of each of first through third full years of
employment.
6. On date of employment Employee shall be awarded an option
under the Company's Fiscal Year 1994 Incentive Compensation Plan
to purchase up to 50,000 shares of the Company's common stock at
a price of $6.00 per share exercisable from date of employment
through December 31, 1997.
7. The Company shall reimburse all direct expenses incurred on
behalf of the Company upon submission of appropriate expense
reports on the 15th and last day of the month. Expenses should
be detailed to the extent required to meet IRS requirements.
Additionally, the Company will reimburse storage fees for
Employee from employment date until a determination has been made
as the Employee's office location and Employee has established a
residence in the office location. Company shall reimburse
Employee for travel expenses for Employee and his spouse as
appropriate during the time until Employee has established a
residence in the office location.
8. The Company and Employee shall develop and implement an
automobile reimbursement plan for appropriate employees of the
Company within three months from date of employment.
9. Employee agrees to sign a standard Bion Technologies, Inc.
Employee Confidential Information and Invention Agreement.
By consent of the Parties this Memorandum shall be
incorporated in an Employment Agreement drafted by legal counsel
at a later date.
Bion Environmental Technologies, Inc.
/s/ Jon Northrop
Date: 1/8/97
Jon Northrop, C.E.O.
/s/ Duane Kennedy
Date: 1/16/97
Duane Kennedy
Exhibit 10.3
January 8, 1997
Mark A. Smith, President
LoTayLingKyur, Inc.
Dorje Dzong
1345 Spruce St., Suite I
Boulder, CO 80302
Dear Mr. Smith:
BionSoil, Inc. ("BSI") and Bion Environmental Technologies, Inc.
("Biet") hereby accept the terms of the loan from LoTayLingKyur,
Inc. ("LTLK") on the terms and conditions outlined in your letter
of January 8, 1997 (attached hereto as Exhibit 1).
Very truly yours,
/s/ Jon Northrop
Jon Northrop
Chief Executive Officer
Exhibit A
LOTAYLINGKYUR, INC.
1280 Terminal Way, Suite 3 Dorje Dzong
Reno, Nevada 89502 1345 Spruce Street, Suite I
(702) 333-1193 (303) 444-1713
FAX (702) 329-0852 FAX (303) 444-1904
1/8/97
TO: Jon Northrop, CEO - BIET & BionSoil, Inc.
FROM: Mark A. Smith, President
RE: Loan to BionSoil, Inc. ("BSI")/Security, etc.
Dear Mr. Northrop:
Enclosed find a check to BionSoil, Inc. (BSI) in the amount of
$73,870 which represents a loan to BSI and BIET, jointly and
severally, on the following terms and conditions:
1)As security, LTLK will take title to 7,387 cubic yards of
raw unscreened BionSoil located as follows:
a)Florida (Red Top) = 675 yards;
b)New York (Ring - 1,837 yards) (Southview "B" - 3,875
yards) (Groveland - 1,000 yards) which collateral shall be
segregated and labeled as owned by LTLK at no cost to LTLK
during the term of this loan. Within 10 business days LTLK
will be provided with collateral assignment documents
together with evidence that BSI had title to the BionSoil
and that all royalties owned by BIET related to the
collateral BionSoil and all other BionSoil have been paid.
2)BSI shall have the right to reacquire title to the
collateral BionSoil (in whole or in part) by payment to LTLK
of the sum of $11.50 per cubic yard through 6/30/97 which
price shall increase by $.20 per cubic yard each month (or
part) thereafter. BionSoil shall repurchase all of the
collateral BionSoil (not previously repurchased) at a price of
$12.70 per cubic yard on or before 12/31/97. BSI shall
prepare documents regarding partial releases and reassignments
at its sole expense.
3)Formal documents including promissory note, assignments,
etc., shall be prepared by BIET and BSI at their expense and
shall be executed within ten business days.
Yours,
/s/ Mark A. Smith
Mark A. Smith, President
LoTayLingKyur, Inc.
AGREED:
Bion Environmental Technologies, Inc. BionSoil, Inc.
By: /s/ Jon Northrop By: /s/ Jon Northrop
Authorized Officer Authorized Officer
