Agreement for 10,500 Cow Midwest Dairy Bion System
May 1st, 2005
Bion Dairy Corporation (Dairy), a subsidiary of Bion Environmental Technologies, Inc. (‘Bion’) has executed an initial agreement to design and install Bion’s proprietary waste treatment technology to process the waste from a 10,500 milking cow expansion of the existing 14,000 cow Fair Oaks Dairy (FODF) in Indiana. The initial system will process approximately 325,000 gallons of dairy waste daily and is committed to reduce the nutrient discharges by 75% and as well as significantly reduce air emissions to a level consistent with its Texas data that was published in December 2004 and is available on its website at http://www.biontech.com/technology/.
The system is being designed to be expandable to 24,000 milking cows. Bion is in the process of completing its engineering and feasibility analysis to determine final costing and pricing. The initial twenty-year agreement has a projected annual fee in excess of $1.5 million per year plus escalators. In addition, Bion projects additional revenues from solids sales as well as greenhouse gas credits and potentially other environmental credits for air and nutrient emission reductions. A final agreement will be drafted upon completion of the engineering study. Bion is projected to complete its engineering and feasibility analysis by end of July 2005 with final revised agreements to be completed within 30 days including final pricing. A final agreement is contingent upon final engineering cost estimates, permitting and financing.
The principals of FODF have agreed to be 50% owners of the project and provide 50% of the equity capital. The FODF installation is a cold weather installation that will incorporate renewable energy in Bion’s technology platform by incorporating an anaerobic digestion system that is capable of producing enough methane to produce 25,000 KW HRS. per day of electricity. The FODF installation will demonstrate Bion’s ability to process animal waste on a large scale and in cold climates and will be used as part of Bion’s effort to secure local and state approval for its Dairy Park initiatives in cold climates such as NE. See Bion’s Executive Summary at www.biontech.com/about/docs/ExeSum.pdf
Effective May 1, 2005, Mike McCloskey and Tim den Dulk (‘MM/TDD’), the principals of FODF became consultants to Bion and Dairy in relation to its Dairy Park initiative and its dairy business pursuant to a 5 year agreement. This will give opportunity for the cooperatives, that they represent, to participate in the process. For biographical information concerning MM/TDD see below:
Michael J. McCloskey, age 53, who recently became a consultant to Bion and Dairy with respect to the Dairy Park initiative and their entire dairy business, obtained his Doctorate of Veterinary Medicine in 1976 from the University of Mexico, Mexico City and completed a specialty in dairy production medicine from the University of California, Davis, which he attended from 1978-80. During the period from 1980-89 he ran a dairy consulting/veterinarian practice in Southern California. Also during that period, he was an owner/manager of 2 dairies in Southern California. In 1990, he moved to New Mexico where he established a 5000-milking cow operation. Dr. McCloskey has expanded his dairy operations into Indiana and Michigan. He is the co-owner/manager of Fair Oaks Dairy Farm, Fair Oaks, Indiana. Dr. McCloskey’s herd in Indiana is currently at 15,000 dairy cows and expects to add on another 10,000 cows over the next two (2) years. Dr. McCloskey is currently living in Indiana while developing this project. Dr. McCloskey is actively involved in the ownership and management of dairies in New Mexico, Michigan, and Indiana. In 2004, Dr. McCloskey started the Fair Oaks Dairy Adventure and Fair Oaks Dairy Products Partnerships, a large-scale agri-tourism and brand building experience. In 1992, Dr. McCloskey formed a milk marketing business called Quality Milk Sales. As the co-owner/manager of Quality Milk Sales, he is responsible for marketing the milk produced by the dairy farmer members of Select Milk Producers and Continental Dairy Products, who jointly produce in excess of 3 billion pounds of milk per year. These cooperatives stretch through New Mexico, Texas, Oklahoma, Kansas, Indiana, Michigan, and Ohio. Dr. McCloskey was instrumental in the formation of the Southwest Agency, an agency that controls the marketing and transportation of virtually all milk marketed in Texas and New Mexico. This Agency is a Marketing Agency in Common (MAC), created under the Capper-Volstead Act, which allows private dairy farmer cooperatives to collectively bargain to maximize marketing efficiencies. Under the guidance of Dr. McCloskey and the board of Southwest Agency, this agency has been able to stabilize both prices and supplies to the processor/consumer while at the same time returning efficiencies in the form of increased revenue to the producer. The success of the Southwest Agency is now being viewed as the model for achieving price stability without government intervention in other regions of the country. Dr. McCloskey successfully brought together a joint venture between Glanbia Foods, Select Milk Producers, and Dairy Farmers of America to establish Southwest Cheese Company (‘SWC’) now under construction. SWC will open its doors in November of 2005 and will receive 10 million pounds of milk per day at its full commission with sales of over 400 million a year. Dr. McCloskey is the acting Chairman of SWC. Dr. McCloskey serves on the board of National Milk Producers Federation and participates in the Federal Order Policy and Dairy Export Policy committees. Dr. McCloskey has had the opportunity to be in a leadership position in every aspect of the dairy industry: from individual cow production to processing, from marketing to federal order reform, and from regional political issues to national issues and international trade.
Timothy C. den Dulk, age 42, who recently became a consultant to Bion and Dairy with respect to the Dairy Park initiative and their entire dairy business, owns and manages dairy farms in California, New Mexico, Michigan, Ohio, and Indiana that milk approximately 30,000 cows. He also raises dairy heifers in Tennessee, Kentucky, Missouri, Nebraska, and South Dakota which, when combined with his dairy cows, total to a herd size of almost 60,000 cows. Mr. den Dulk farms row crops on approximately 20,000 acres in the above-mentioned states and grapes, walnuts, peaches and almonds in California. These numbers and geographical diversification give Mr. den Dulk a unique national presence in the U.S. dairy and farming industry. Mr. Den Dulk is owner and participates in the management of: a) Quality Milk Sales, Inc., New Mexico, which accounts for 350 loads of milk per day: $600,000,000 yearly sales: Employs 45 people (including plant employees); b) Pioneer Dairy Laboratory, Inc., New Mexico, Texas; c) Pecos Dairy Investment Group, L.L.C. (Reverse osmosis and Ultra-filtration technology); d) Siesta Foods, Mexico; e) 1 st National Bank, Artesia, New Mexico (Ownership of 35%) & f) Farm Journal, LTD; (Minority partner- Publication of Farm Journal magazine). In addition, Mr. Den Dulk was a) an Incorporator and Director (1994-1998) of Select Milk Producers, Inc. which is currently managed and operated by Mr. den Dulk’s business, Quality Milk Sales) and b) President (1998-present), Incorporator, and Director, Continental Dairy Products, Inc., an Ohio marketing cooperative formed in 1998 (a rapidly growing cooperative with members in Ohio, Indiana, and Michigan).
|Mark A. Smith
Vice President-Capital Markets/IR