<PAGE> 1
UNITED STATES
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 (DATE OF EARLIEST EVENT REPORTED): JULY 8, 1997
N-VIRO INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-21802 34-1741211
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
3450 W. CENTRAL AVENUE, SUITE 328
TOLEDO, OHIO 43606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 535-6374
<PAGE> 2
ITEM 5. OTHER ITEMS
a.) On July 8, 1997, N-Viro International Corporation executed four (4)
agreements, exchanging 136,500 shares of unregistered N-Viro International
Common Stock for debt totaling $409,500, incorporated by reference herein as
Exhibit 2. These share exchange agreements evidence agreements reached by the
Company with such creditors in June of 1997.
b.) On July 17, 1997 the Company entered into a certain Second
Agreement to Settlement Agreement (the "Second Amendment to Settlement Agreement
with Frank Manchak, Jr. and N-Viro Energy Systems, Ltd., an Ohio limited
partnership and an affiliate of the Company and certain other affiliates of the
Company. A copy of the Second Amendment to Settlement Agreement has been
attached hereto as Exhibit 3. The Second Amendment to Settlement Agreement was
executed by the Company in an effort to resolve substantially all of the
remaining outstanding issues with respect to the settlement of that certain
lawsuit entitled FRANK MANCHAK JR., V. N-VIRO ENERGY SYSTEMS,-LTD. that was
filed by Mr. Manchak in the United States District Court of Central District of
California, Case No. CV-93-3042-ABC. This suit, involving a patent infringement
claim against the Company, among others, was settled by the Company in February
of 1995. Pursuant to the terms of the original Settlement Agreement, the Company
agreed to pay Manchak $1.5 million over a period of thirteen months. In April of
1996, the original Settlement Agreement was amended to provide the Company with
more time to settle its monetary obligations to Manchak. This Amendment also
increased the amount owed to Manchak by $300,000.
At the time of execution of the Second Amendment to Settlement Agreement, the
Company's outstanding obligation to Mr. Manchak totaled $410,000. The Second
Amendment to Settlement Agreement provides for the satisfaction of the
Company's remaining obligations through the delivery to Mr. Manchak of up to
250,000 shares of the Company's voting common stock, with par value of $.01 per
share, as well as certain cash payments, all as described in the Second
Amendment to Settlement Agreement, a copy of which is attached hereto as
Exhibit 3.
c.) On July 15, 1997, the City and Count of Honolulu (the "City of
Honolulu) adopted a change order (the "Change Order") amending an agreement
with the Company with respect to the design and construction of a privately
operated wastewater treatment facility in Honolulu, Hawaii. The Company
incurred costs through 1996 for engineering and other work in preparation for
the construction of a privately operated wastewater treatment facility in
Honolulu, Hawaii. However, on October 30, 1996, the site selected for the
construction of this facility was rejected by the mayor of Honolulu. Since that
time, the Company has attempted to collect approximately $860,000 from the City
of Honolulu to compensate the Company for monies directly invested in the
Honolulu project. The Change order amends the City of Honolulu's original
agreement with the Company so as to facilitate (i) the Company's participate in
the design and construction of a wastewater treatment plant at a new site --
selected by the City of Honolulu; (ii) the reimbursment of the Company for
certain costs and expenses incurred by the company during the course of
planning and preparation for the initial site and (iii) the settlement of a
third party claim related to permitting, design and engineering work performed
by the third party in connection with the other site, all as more particularly
described in the Change Order. A copy of the Change Order is attached hereto as
Exhibit 4.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
N-VIRO INTERNATIONAL CORPORATION
Dated: July 17, 1997 By: /s/ James K. McHugh
--------------------- -------------------
James K. McHugh
Chief Financial Officer
<PAGE> 1
EXHIBIT #2
SHARE EXCHANGE AGREEMENT
------------------------
This Share Exchange Agreement (this "Agreement") is made and entered
into as of the 30th day of June, 1997 by and between N-Viro International
Corporation, a Delaware Corporation, (the "Company") and N-Viro Energy Systems,
Limited, an Ohio limited partnership ("Purchaser").
RECITALS.
---------
Whereas, the Company presently is indebted to Purchaser for obligations
arising in the ordinary course of business in an amount equal to One Hundred
Seventy-Six Thousand Five Hundred Dollars ($176,500.00) (the "Company's Existing
Obligation");
Whereas, the Company's Existing Obligation presently is evidenced by
(i) a $100,000.00 Promissory Note dated June 7, 1996 issued by the Company in
favor of Purchaser (ii) a $68,000.00 Promissory Note dated September 20, 1996
issued by the Company in favor of Purchaser and (iii) a $23,500.00 Promissory
Note dated November 1, 1996 issued by the Company in favor of Purchaser
(collectively, the "Old Notes").
Whereas, the Company has offered to satisfy the Existing Obligation
through the Company's delivery to Purchaser of Fifty Thousand (50,000) shares
("Shares") of the Company's voting common stock, with par value $.01 per share
(the "Common Stock") and (ii) a Promissory Note in the original principal amount
of Twenty Six Thousand Five Hundred Dollars ($26,500.00) (the "New Note"); and
Whereas, Purchaser has agreed to accept delivery of the Shares and the
New Note in complete satisfaction of the Company's Existing obligation.
Now, therefore, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. EXCHANGE. The Company hereby offers the Shares and the New
Note to Purchaser in complete satisfaction of the Company' s Existing
Obligation. Purchaser hereby accepts the Company' s offer, and, upon the
Company's delivery to Purchaser of stock certificates representing the Shares
and the New Note. Purchaser agrees that the Company's Existing Obligation shall
be fully and forever discharged and Purchaser shall have no continuing claim
against the Company with respect thereto. Purchaser further covenants and
agrees that, upon execution of this Agreement, Purchaser shall cancel the Old
Notes and return the same to the Company.
2. UNREGISTERED OFFERING. Purchaser acknowledges and agrees that
Purchaser's acceptance of the Shares and the New Note in exchange for releasing
the Company from the Company's Existing obligation constitutes the sale of
securities under and pursuant to the Securities Act of 1933 and the rules and
regulations promulgated thereunder, as amended from time to time (the 111933
Act"). Purchaser further acknowledges Purchaser's understanding that no aspect
of the transactions contemplated in this Agreement has been, prior to the date
of this Agreement, or will be, prior to the date of delivery of stock
certificates representing the Shares and the New Note, registered with or
reviewed by the Securities and Exchange Commission (the "SEC") under the 1933
Act, or with or by any state securities law administrator, and no federal or
state securities law administrator has approved any disclosure or other
material concerning the Company or the Shares or the New Note or made any
recommendation with respect thereto.
3. REPRESENTATIONS AND COVENANTS. To induce the Company to enter
into this Agreement, Purchaser represents, warrants, covenants and agrees that:
(a) ACCESS. Purchaser has investigated and will continue to
investigate the merits and risks of accepting the Shares in exchange for the
discharge of the Company's Existing Obligation. Purchaser has been provided
with the Annual Report on Form 10-K of the Company for the year ended March 31,
1996, a quarterly
<PAGE> 2
report on form 10-Q for the period ending March 31, 1997, the Proxy Statement
relating to the 1997 Annual Stockholders' Meeting, the 1997 Annual Report to
Stockholders and all subsequent reports filed by the Company with the SEC
pursuant to the requirements of the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, as amended from time to time, and
has had the opportunity to ask questions of, and receive answers from, members
of the Board of Directors and management of the Company. Purchaser has had the
opportunity to and will continue to avail himself of his rights to ask
questions of the management of the Company relating to the Company, the Shares,
and related matters. Purchaser also has had and shall continue to avail himself
of his rights to obtain additional information necessary to verify the accuracy
of information provided to him and to continue to evaluate the merits and risks
of the transactions contemplated by this Agreement.
(b) Investment Intent: State of Residence. Purchaser is
acquiring the Shares and the New Note for its own account for investment,
within the meaning of the 1933 Act. Purchaser's principal place of business and
domicile is and shall continue to be at the time of delivery of the Shares the
State of Ohio.
-2 -
(c) AFFILIATE STATUS. Purchaser is an affiliate of the
Company within the meaning of the 1934 Act by virtue of the fact that Purchaser
owns, both beneficially and of record, in excess of ten percent (10%) of the
aggregate number of issued and outstanding shares of Common Stock.
(d) RESALES. Purchaser agrees that it shall not resell or
transfer in any way the Shares acquired hereunder to any U.S. Person as
described in Regulation S under the 1933 Act or in the United States without an
applicable exemption from registration under the 1933 Act or upon registration
of the Shares pursuant to the 1933 Act. All certificates representing the
Shares shall contain the following legend:
"The Shares represented by this certificate have not been registered
pursuant to the Securities Act of 1933 and therefore may not be
transferred or sold in the United States or to a U.S. Person without
either an effective registration statement pursuant to the Securities
Act of 1933 or an opinion of counsel satisfactory to N-Viro
International Corporation that registration is not required under the
Securities Act of 1933.11
(e) Purchaser has knowledge and experience in financial and
business matters so is to be capable of evaluating the merits and risks of an
investment in the Shares and the New Note. Purchaser is willing and able to
bear the economic risk of an investment in the Shares indefinitely. In making
the foregoing statement, consideration has been given to whether Purchaser has
adequate means of providing for its current financial needs and business
contingencies, whether it could afford to hold the Shares indefinitely, and
whether, at this time, it could afford a significant or complete loss of its
investment. Purchaser is acquiring the Shares for Purchaser's own account, as
principal, for investment and not with a view to the resale or distribution of
all or any part of the Shares.
4. RELEASE. Upon the Company's delivery of the Shares and the New
Note to Purchaser, the Company shall be fully and forever released from the
requirement that it pay Purchaser the amount of the Company's Existing
Obligation. This discharge shall be effective without any further action on the
part of Purchaser.
5. DELIVERY OF STOCK CERTIFICATES AND NEW NOTE. A certificate or
certificates evidencing the Shares registered in the name of Purchaser shall be
executed, issued and delivered to Purchaser by the Company within fifteen (15)
business days from the
- 3 -
date of execution of this Agreement. The New Note shall be delivered upon
execution hereof.
<PAGE> 3
6. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their respective heirs, personal
representatives, successors and assigns.
7. AMENDMENTS. No amendment or variations of the terms and
conditions of this Agreement shall be valid unless the same is in writing and
signed by the parties hereto. All such amendments shall specifically refer to
this Agreement.
8. HEADINGS. The paragraph headings contained herein are for
convenience only and shall not, in any way, effect the interpretation or
enforceability of any provisions of this Agreement.
9. GOVERNING LAW. This Agreement shall be construed and enforced
under and pursuant to the internal laws of the state of Ohio.
10. ENTIRE AGREEMENT. This Agreement contains the entire
Agreement between the parties hereto with respect to the transactions
contemplated herein. This Agreement supersedes all prior oral and written
understandings and agreements with respect to the subject matter referred to
herein.
11. CERTAIN TERMS. Unless the context otherwise requires a
different meaning, words of a masculine gender shall be deemed and construed to
include correlative words of the feminine and neuter genders, words importing
the singular numbers shall include the plural number and vice versa, and the
terms "hereof," "hereby," "hereto," "hereunder," and "herein" as well as
similar terms refer to this Agreement.
12. ASSIGNMENT. None of the parties hereto may assign, transfer
or otherwise dispose of any of their rights or obligations under this
Agreement.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one document.
-4-
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of
the date first above written.
N-VIRO INTERNATIONAL CORPORATION
By: /s/ James K. McHugh
--------------------------
James K. McHugh
Chief Financial Officer
N-VIRO ENERGY SYSTEMS, LIMITED
By: N-Viro Energy Systems, Inc.
General Partner
By: /s/ J. Patrick Nicholson
--------------------------
J. Patrick Nicholson
President
-5-
<PAGE> 4
SHARE EXCHANGE AGREEMENT
------------------------
This Share Exchange Agreement (this "Agreement") is made and entered
into as of the 30th day of June, 1997 by and between N-Viro International
Corporation, a Delaware Corporation, (the "Company") and J. Patrick Nicholson,
an individual ("Purchaser") .
RECITALS.
---------
Whereas, the Company presently is indebted to Purchaser for obligations
arising in the ordinary course of business in an amount equal to Forty-Eight
Thousand Dollars ($48,000.00) (the "Company' s Existing Obligation");
Whereas, the Company has offered to satisfy this obligation to Purchase
through the Company's delivery to Purchaser of Sixteen Thousand (16,000) shares
("Shares") of the Company' s voting common stock, with par value $.01 per share
(the "Common Stock",); and
Whereas, Purchaser has agreed to accept delivery of the Shares in
complete satisfaction of the Company's Existing Obligation.
Now, therefore, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. EXCHANGE. The Company hereby offers the Shares to Purchaser IN
complete satisfaction of the Company's Existing obligation. Purchaser hereby
accepts the Company's offer, and, upon the Company's delivery to Purchaser of
stock certificates representing the Shares, Purchaser agrees that the Company's
Existing Obligation shall be fully and forever discharged and Purchaser shall
have no continuing claim against the Company with respect thereto.
2. UNREGISTERED OFFERING. Purchaser acknowledges and agrees that
Purchaser's acceptance of the Shares in exchange for releasing the Company from
the Company's Existing Obligation constitutes the sale of securities under and
pursuant to the Securities Act of 1933 and the rules and regulations
promulgated thereunder, as amended from time to time (the 111933 Act") .
Purchaser further acknowledges Purchaser's understanding that no aspect of the
transactions contemplated in this Agreement has been, prior to the date of this
Agreement, or will be, prior to the date of delivery of stock certificates
representing the Shares, registered with or reviewed by the Securities and
Exchange Commission (the "SEC") under the 1933 Act, or with or by any state
securities law administrator, and no federal or state securities
law administrator has approved any disclosure or other material concerning the
Company or the Shares or made any recommendation with respect thereto.
3. REPRESENTATIONS AND COVENANTS. To induce the Company to enter
into this Agreement, Purchaser represents, warrants, covenants and agrees that:
(a) ACCESS. Purchaser has investigated and will continue to
investigate the merits and risks of accepting the Shares in exchange for the
discharge of the Company's Existing Obligation. Purchaser has been provided
with the Annual Report on Form 10-K of the Company for the year ended March 31,
1996, a quarterly report on form 10-Q for the period ending March 31, 1997, the
Proxy Statement relating to the 1997 Annual Stockholders' Meeting, the 1997
Annual Report to Stockholders and all subsequent reports filed by the Company
with the SEC pursuant to the requirements of the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder, as amended from time
to time, and has had the opportunity to ask questions of, and receive answers
from, members of the Board of Directors and management of the Company.
Purchaser has had the opportunity to and will continue to avail himself of his
rights to ask questions of the management of the Company
<PAGE> 5
relating to the Company, the Shares, and related matters. Purchaser also has
had and shall continue to avail himself of his rights to obtain additional
information necessary to verify the accuracy of information provided to him and
to continue to evaluate the merits and risks of the transactions contemplated
by this Agreement.
(b) INVESTMENT INTENT: STATE OF RESIDENCE. Purchaser is
acquiring the Shares for its own account for investment, within the meaning of
the 1933 Act. Purchaser's principal place of business and domicile is and shall
continue to be at the time of delivery of the Shares the State of Ohio.
(c) AFFILIATE STATUS. Purchaser is an affiliate of the
Company within the meaning of the 1934 Act by virtue of the fact that Purchaser
is an officer and member of the Board of Directors of the Company.
(d) RESALES. Purchaser agrees that it shall not resell or
transfer in any way the Shares acquired hereunder to any U.S. Person as
described in Regulation S under the 1933 Act or in the United States without an
applicable exemption from registration under the 1933 Act or upon registration
of the Shares pursuant to the 1933 Act. All certificates representing the
Shares shall contain the following legend:
-2-
"The Shares represented by this certificate have not been registered
pursuant to the Securities Act of 1933 and therefore may not be
transferred or sold in the United States or to a U.S. Person without
either an effective registration statement pursuant to the
Securities Act of 1933 or an opinion of counsel satisfactory to
N-Viro International Corporation that registration is not required
under the Securities Act of 1933.11
(e) Purchaser has knowledge and experience in financial and
business matters so is to be capable of evaluating the merits and risks of an
investment in the Shares. Purchaser is willing and able to bear the economic
risk of an investment in the Shares indefinitely. In making the foregoing
statement, consideration has been given to whether Purchaser has adequate means
of providing for its current financial needs and business contingencies,
whether it could afford to hold the Shares indefinitely, and whether, at this
time, it could afford a significant or complete loss of his investment.
Purchaser is acquiring the Shares for Purchaser's own account, as principal,
for investment and not with a view to the resale or distribution of all or any
part of the Shares.
4. RELEASE. Upon the Company's delivery of the Shares to
Purchaser, the Company shall be fully and forever released from the requirement
that it pay Purchaser the amount of the Company's Existing Obligation. This
discharge shall be effective without any further action on the part of
Purchaser.
5. DELIVERY OF STOCK CERTIFICATES. A certificate or certificates
evidencing the Shares registered in the name of Purchaser shall be executed,
issued and delivered to Purchaser by the Company within fifteen (15) business
days from the date of execution of this Agreement.
6. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their respective heirs, personal
representatives, successors and assigns.
7. AMENDMENTS. No amendment or variations of the terms and
conditions of this Agreement shall be valid unless the same is in writing and
signed by the parties hereto. All such amendments shall specifically refer to
this Agreement.
8. HEADINGS. The paragraph headings contained herein are for
convenience only and shall not, in any way, effect the interpretation or
enforceability of any provisions of this Agreement.
-3 -
<PAGE> 6
9. GOVERNING LAW. This Agreement shall be construed and enforced
under and pursuant to the internal laws of the state of Ohio.
10. ENTIRE AGREEMENT. This Agreement contains the entire
Agreement between the parties hereto with respect to the transactions
contemplated herein. This Agreement supersedes all prior oral and written
understandings and agreements with respect to the subject matter referred to
herein.
11. CERTAIN TERMS. Unless the context otherwise requires a
different meaning, words of a masculine gender shall be deemed and construed to
include correlative words of the feminine and neuter genders, words importing
the singular numbers shall include the plural number and vice versa, and the
terms "hereby," "hereto," "hereunder," and "herein" as well as similar terms
refer to this Agreement.
12. ASSIGNMENT. None of the parties hereto may assign, transfer
or otherwise dispose of any of their rights or obligations under this
Agreement.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one document.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
N-VIRO INTERNATIONAL CORPORATION
By: /s/ James K. McHugh
-----------------------
James K. McHugh
Chief Financial Officer
/s/ J. Patrick Nicholson
- ---------------------------
J. Patrick Nicholson
-4-
<PAGE> 7
SHARE EXCHANGE AGREEMENT
------------------------
This Share Exchange Agreement (this "Agreement") is made and entered
into as of the 30th day of June, 1997 by and between N-Viro International
Corporation, a Delaware Corporation, (the "Company") and Frederick Kurtz, an
individual ("Purchaser").
RECITALS.
---------
Whereas, the Company presently is indebted to Purchaser for obligations
arising in the ordinary course of business in an amount equal to Sixty-One
Thousand-Five Hundred Dollars ($61,500.00) (the "Company's Existing
Obligation");
Whereas, the Company has offered to satisfy this obligation to Purchase
through the Company's delivery to Purchaser of Twenty Thousand Five Hundred
(20,500) shares ("Shares") of the Company's voting common stock, with par value
$.01 per share (the "Common Stock"); and
Whereas, Purchaser has agreed to accept delivery of the Shares in
complete satisfaction of the Company's Existing Obligation.
Now, therefore, the parties hereto, intending to be legally bound hereby, agree
as follows:
1. EXCHANGE. The Company hereby offers the Shares to Purchaser in
complete satisfaction of the Company's Existing obligation. Purchaser hereby
accepts the Company's offer, and, upon the Company's delivery to Purchaser of
stock certificates representing the Shares, Purchaser agrees that the Company's
Existing Obligation shall be fully and forever discharged and Purchaser shall
have no continuing claim against the Company with respect thereto.
2. UNREGISTERED OFFERING. Purchaser acknowledges and agrees that Purchaser's
acceptance of the Shares in exchange for releasing the Company from the
Company's Existing Obligation constitutes the sale of securities under and
pursuant to the Securities Act of 1933 and the rules and regulations promulgated
thereunder, as amended from time to time (the "1933 Act") . Purchaser further
acknowledges Purchaser's understanding that no aspect of the transactions
contemplated in this Agreement has been, prior to the date of this Agreement, or
will be, prior to the date of delivery of stock certificates representing the
Shares, registered with or reviewed by the Securities and Exchange Commission
(the "SEC") under the 1933 Act, or with or by any state securities law
administrator, and no federal or state securities law administrator has approved
any disclosure or other material concerning the Company or the Shares or made
any recommendation with respect thereto.
3. REPRESENTATIONS AND COVENANTS. To induce the Company to enter
into this Agreement, Purchaser represents, warrants, covenants and agrees that:
(a) ACCESS. Purchaser has investigated and will continue to
investigate the merits and risks of accepting the Shares in exchange for the
discharge of the Company's Existing Obligation. Purchaser has been provided
with the Annual Report on Form 10-K of the Company for the year ended March 31,
1996, a quarterly report on form 10-Q for the period ending March 31, 1997, the
Proxy Statement relating to the 1997 Annual Stockholders' Meeting, the 1997
Annual Report to Stockholders and all subsequent reports filed by the Company
with the SEC pursuant to the requirements of the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder, as amended from time
to time, and has had the opportunity to ask questions of, and receive answers
from, members of the Board of Directors and management of the Company.
Purchaser has had the opportunity to and will continue to avail himself of his
rights to ask questions of the management of the Company relating to the
Company, the Shares, and related matters. Purchaser also has had and shall
continue to avail himself of his rights to obtain additional information
necessary to verify the accuracy of information provided to him and to continue
to evaluate the merits and risks of the transactions contemplated by this
Agreement.
<PAGE> 8
(b) INVESTMENT INTENT: STATE OF RESIDENCE. Purchaser is
acquiring the Shares for his own account for investment, within the meaning of
the 1933 Act. Purchaser's state of residence is and shall continue to be at the
time of delivery of the Shares the state of New Jersey.
(c) AFFILIATE STATUS. Purchaser is an affiliate of the
Company within the meaning of the 1934 Act by virtue of the fact that Purchaser
is a member of the Board of Directors of the Company.
(d) RESALES. Purchaser agrees that he shall not resell or
transfer in any way the Shares acquired hereunder to any U.S. Person as
described in Regulation S under the 1933 Act or in the United States without an
applicable exemption from registration under the 1933 Act or upon registration
of the Shares pursuant to the 1933 Act. All certificates representing the
Shares shall contain the following legend:
-2 -
"The Shares represented by this certificate have not been registered
pursuant to the Securities Act of 1933 and therefore may not be
transferred or sold in the United States or to a U.S. Person without
either an effective registration statement pursuant to the Securities
Act of 1933 or an opinion of counsel satisfactory to N-Viro
International Corporation that registration is not required under the
Securities Act of 1933."
(e) Purchaser has knowledge and experience in financial and
business matters so is to be capable of evaluating the merits and risks of an
investment in the Shares. Purchaser is willing and able to bear the economic
risk of an investment in the Shares indefinitely. In making the foregoing
statement, consideration has been given to whether he has adequate means of
providing for his current financial needs and personal contingencies, whether
he could afford to hold the Shares indefinitely, and whether, at this time, he
could afford a significant or complete loss of his investment. Purchaser is
acquiring the Shares for Purchaser's own account, as principal, for investment
and not with a view to the resale or distribution of all or any part of the
Shares.
4. RELEASE. Upon the Company's delivery of the Shares to
Purchaser, the Company shall be fully and forever released from the requirement
that it pay Purchaser the amount of the Company's Existing Obligation. This
discharge shall be effective without any further action on the part of
Purchaser.
5. DELIVERY OF STOCK CERTIFICATES. A certificate or certificates
evidencing the Shares registered in the name of Purchaser shall be executed,
issued and delivered to Purchaser by the Company within fifteen (15) business
days from the date of execution of this Agreement.
6. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their respective heirs, personal
representatives, successors and assigns.
7. AMENDMENTS. No amendment or variations of the terms and
conditions of this Agreement shall be valid unless the same is in writing and
signed by the parties hereto. All such amendments shall specifically refer to
this Agreement.
8. HEADINGS. The paragraph headings contained herein are for
convenience only and shall not, in any way, effect the interpretation or
enforceability of any provisions of this Agreement.
-3 -
9. GOVERNING LAW. This Agreement shall be construed and enforced
under and pursuant to the internal laws of the state of Ohio.
<PAGE> 9
10. ENTIRE AGREEMENT. This Agreement contains the entire
Agreement between the parties hereto with respect to the transactions
contemplated herein. This Agreement supersedes all prior oral and written
understandings and agreements with respect to the subject matter referred to
herein.
11. CERTAIN TERMS. Unless the context otherwise requires a
different meaning, words of a masculine gender shall be deemed and construed to
include correlative words of the feminine and neuter genders, words importing
the singular numbers shall include the plural number and vice versa, and the
terms "hereby," "hereto," "hereunder," and "herein" as well as similar terms
refer to this Agreement.
12. ASSIGNMENT. None of the parties hereto may assign, transfer
or otherwise dispose of any of their rights or obligations under this
Agreement.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one document.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
N-VIRO INTERNATIONAL CORPORATION
By: /s/ J. Patrick Nicholson
-----------------------------
J. Patrick Nicholson
Chairman of the Board & President
/s/ Frederick Kurtz
- -----------------------
Frederick Kurtz
-4 -
<PAGE> 10
SHARE EXCHANGE AGREEMENT
------------------------
This Share Exchange Agreement (this "Agreement") is made and entered
into as of the 30th day of June, 1997 by and between N-Viro International
Corporation, a Delaware Corporation, (the "Company") and Bobby B. Carroll, an
individual ("Purchaser").
RECITALS.
---------
Whereas, the Company presently is indebted to Purchaser for obligations
arising in the ordinary course of business in an amount equal to One Hundred
Fifty Thousand Dollars ($150,000.00) (the "Company's Existing Obligation");
Whereas, the Company has offered to satisfy this obligation to Purchase
through the Company's delivery to Purchaser of Fifty Thousand (50,000) shares
("Shares") of the Company's voting common stock, with par value $.01 per share
(the "Common Stock,,); and
Whereas, Purchaser has agreed to accept delivery of the Shares in
complete satisfaction of the Company's Existing Obligation.
Now, therefore, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. EXCHANGE. The Company hereby offers the Shares to Purchaser in
complete satisfaction of the Company's Existing obligation. Purchaser hereby
accepts the Company's offer, and, upon the Company's delivery to Purchaser of
stock certificates representing the Shares, Purchaser agrees that the Company's
Existing Obligation shall be fully and forever discharged and Purchaser shall
have no continuing claim against the Company with respect thereto.
2. UNREGISTERED OFFERING. Purchaser acknowledges and agrees that
Purchaser's acceptance of the Shares in exchange for releasing the Company from
the Company's Existing Obligation constitutes the sale of securities under and
pursuant to the Securities Act of 1933 and the rules and regulations
promulgated thereunder, as amended from time to time (the 111933 Act") .
Purchaser further acknowledges Purchaser's understanding that no aspect of the
transactions contemplated in this Agreement has been, prior to the date of this
Agreement, or will be, prior to the date of delivery of stock certificates
representing the Shares, registered with or reviewed by the Securities and
Exchange Commission (the "SEC") under the 1933 Act, or with or by any state
securities law administrator, and no federal or state securities law
administrator has approved any disclosure or other material
concerning the Company or the Shares or made any recommendation with respect
thereto.
3. REPRESENTATIONS AND COVENANTS. To induce the Company to enter
into this Agreement, Purchaser represents, warrants, covenants and agrees that:
(a) ACCESS. Purchaser has investigated and will continue to
investigate the merits and risks of accepting the Shares in exchange for the
discharge of the Company's Existing Obligation. Purchaser has been provided
with the Annual Report on Form 10-K of the Company for the year ended March 31,
1996, a quarterly report on form 10-Q for the period ending March 31, 1997, the
Proxy Statement relating to the 1997 Annual Stockholders' Meeting, the 1997
Annual Report to Stockholders and all subsequent reports filed by the Company
with the SEC pursuant to the requirements of the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder, as amended from time
to time, and has had the opportunity to ask questions of, and receive answers
from, members of the Board of Directors and management of the Company.
Purchaser has had the opportunity to and will continue to avail himself of his
rights to ask questions of the management of the Company relating to the
Company, the Shares, and
<PAGE> 11
related matters. Purchaser also has had and shall continue to avail himself of
his rights to obtain additional information necessary to verify the accuracy of
information provided to him and to continue to evaluate the merits and risks of
the transactions contemplated by this Agreement.
(b) INVESTMENT INTENT: STATE OF RESIDENCE. Purchaser is
acquiring the Shares for his own account for investment, within the meaning of
the 1933 Act. Purchaser's state of residence is and shall continue to be at the
time of delivery of the Shares the state of Tennessee.
(c) AFFILIATE STATUS. Purchaser is an affiliate of the
Company within the meaning of the 1934 Act by virtue of the fact that Purchaser
is a member of the Board of Directors of the Company.
(d) RESALES. Purchaser agrees that he shall not resell or
transfer in any way the Shares acquired hereunder to any U.S. Person as
described in Regulation S under the 1933 Act or in the United States without an
applicable exemption from registration under the 1933 Act or upon registration
of the Shares pursuant to the 1933 Act. All certificates representing the
Shares shall contain the following legend:
-2 -
"The Shares represented by this certificate have not been registered
pursuant to the Securities Act of 1933 and therefore may not be
transferred or sold in the United States or to a U.S. Person without
either an effective registration statement pursuant to the Securities
Act of 1933 or an opinion of counsel satisfactory to N-Viro
International Corporation that registration is not required under the
Securities Act of 1933.11
(e) Purchaser has knowledge and experience in financial and
business matters so is to be capable of evaluating the merits and risks of an
investment in the Shares. Purchaser is willing and able to bear the economic
risk of an investment in the Shares indefinitely. In making the foregoing
statement, consideration has been given to whether he has adequate means of
providing for his current financial needs and personal contingencies, whether
he could afford to hold the Shares indefinitely, and whether, at this time, he
could afford a significant or complete loss of his investment. Purchaser is
acquiring the Shares for Purchaser's own account, as principal, for investment
and not with a view to the resale or distribution of all or any part of the
Shares.
4. RELEASE. Upon the Company's delivery of the Shares to
Purchaser, the Company shall be fully and forever released from the requirement
that it pay Purchaser the amount of the Company's Existing Obligation. This
discharge shall be effective without any further action on the part of
Purchaser.
5. DELIVERY OF STOCK CERTIFICATES. A certificate or certificates
evidencing the Shares registered in the name of Purchaser shall be executed,
issued and delivered to Purchaser by the Company within fifteen (15) business
days from the date of execution of this Agreement.
6. BINDING EFFECT. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their respective heirs, personal
representatives, successors and assigns.
7. AMENDMENTS. No amendment or variations of the terms and
conditions of this Agreement shall be valid unless the same is in writing and
signed by the parties hereto. All such amendments shall specifically refer to
this Agreement.
8. HEADINGS. The paragraph headings contained herein are for
convenience only and shall not, in any way, effect the interpretation or
enforceability of any provisions of this Agreement.
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<PAGE> 12
9 GOVERNING LAW. This Agreement shall be construed and enforced
under and pursuant to the internal laws of the state of Ohio.
10. ENTIRE AGREEMENT. This Agreement contains the entire
Agreement between the parties hereto with respect to the transactions
contemplated herein. This Agreement supersedes all prior oral and written
understandings and agreements with respect to the subject matter referred to
herein.
11. CERTAIN TERMS. Unless the context otherwise requires a
different meaning, words of a masculine gender shall be deemed and construed to
include correlative words of the feminine and neuter genders, words importing
the singular numbers shall include the plural number and vice versa, and the
terms "hereby," "hereto," "hereunder," and "herein" as well as similar terms
refer to this Agreement.
12. ASSIGNMENT. None of the parties hereto may assign, transfer
or otherwise dispose of any of their rights or obligations under this
Agreement.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one document.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
N-VIRO INTERNATIONAL CORPORATION
By: /s/ J. Patrick Nicholson
-----------------------------
J. Patrick Nicholson
Chairman of the Board & President
/s/ Bobby B. Carroll
- ------------------------
Bobby B. Carroll
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<PAGE> 1
EXHIBIT #3
SECOND AMENDMENT TO SETTLEMENT AGREEMENT
This SECOND AMENDMENT TO SETTLEMENT AGREEMENT (the "Second
Amendment") is made effective as of the 17TH day of July, 1997 by and among
Frank Manchak, Jr., an individual ("Manchak"); N-Viro Energy Systems, Ltd., an
Ohio limited partnership ("NESL"); N-Viro International Corporation, a Delaware
corporation ("NVIC"); N-Viro Energy Systems, Inc., an Ohio corporation ("NESI");
and American N-Viro Resources, Inc., an Ohio corporation ("ANRN").
W I T N E S S E T H:
WHEREAS, in order to settle certain disputes that were the
subject of a lawsuit entitled FRANK MANCHAK, JR. V. N-VIRO ENERGY SYSTEMS, LTD.
which had been filed by Manchak in the United States District Court for the
Central District of California, Case No. CV-93-3042-ABC, the parties hereto
entered into a certain settlement agreement (the "Settlement Agreement") in
February, 1995;
WHEREAS, on April 24, 1996, the parties hereto amended the
Settlement Agreement pursuant to the terms of that certain Amendment to
Settlement Agreement (the "First Amendment") for the purpose of, among other
things, amending the sum owed to Manchak by NVIC under and pursuant to the terms
of the Settlement Agreement and altering the terms of payment thereof; and
WHEREAS, the parties hereto desire to further amend the
Settlement Agreement to alter both the sum owing Manchak by NVIC and the terms
of payment thereof, all as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. EFFECT OF AGREEMENT. This Second Amendment amends,
supplements and supersedes the Settlement Agreement and the First Amendment with
respect to all matters set forth herein. As to matters not set forth herein, the
Settlement Agreement and the First Amendment shall not be affected. In the event
and to the extent of a conflict with the terms and provisions set forth in this
Second Amendment and the terms and provisions set forth in either the Settlement
Agreement or the First Amendment, the terms and provisions set forth in this
Second Amendment shall control.
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<PAGE> 2
2. CERTAIN PAYMENTS. In full satisfaction of all of NVIC's
remaining obligations under and pursuant to Paragraph 2 of the First Settlement
Agreement, as amended by the terms and provisions of the Amendment, NVIC shall
make all of the following payments and deliveries to Manchak and Kenyon and
Kenyon:
(a) on or before July 20, 1997, NVIC will pay Manchak the sum
of Thirty Thousand Dollars ($30,000.00). This payment, as well as all other
payments under and pursuant to the terms of this Second Amendment, shall be
wired to Kenyon and Kenyon's escrow account as specified in the Settlement
Agreement.
(b) on or before July 24, 1997, NVIC will (i) issue and
deliver to Manchak 150,000 shares (the "Settlement Stock") of its voting, common
stock, with par value of $.01 per share (the "Common Stock") and (ii) issue to
Manchak but deliver to the Escrow Agent 100,000 shares of Common Stock (the
"Escrow Stock") to be held by such Escrow Agent in accordance with the terms and
provisions of Section 9 hereof. None of such Common Stock shall be registered
under the Securities Act of 1933, as amended (the "1933 Act") and shall
constitute "restricted securities" as such term is defined in Rule 144(a)
promulgated under the 1933 Act.
(c) on August 15, 1997, $100,000 (the "Escrow Funds"), shall
be delivered by NVIC to the Escrow Agent to be held by such Escrow Agent in
accordance with the terms and provisions of Section 9 hereof. Any payments
required to be made from the Escrow Funds prior to August 15, 1997 shall be made
instead by NVIC.
(d) within thirty days of the date of execution of this Second
Amendment, NVIC shall issue and deliver to Manchak an option (the "Option") to
purchase up to 100,000 additional shares (the "Option Stock") of Common Stock at
a price of $2.50 per share. Neither the Option nor the Option Stock at the time
of issuance shall be registered under the 1933 Act and both the Option and the
Option Stock shall constitute restricted securities as defined in Rule 144(a)
promulgated under the 1933 Act. Under and pursuant to the terms of the Option,
(i) Manchak's rights with respect to the purchase of the Option Stock shall vest
immediately upon the Escrow Agent's delivery of any remaining Escrow Funds to
NVIC but in no event later than November 15, 1997 (the "Vesting Date"), (ii) the
Option shall expire 60 days after the Vesting Date, (iii) Manchak shall have the
right to resell all or a portion of the Option Stock back to NVIC at a price of
$3.00 per share at any time during the two business days immediately following
the date of exercise of the Option, provided, however, Manchak shall forfeit
this right in the event that he sells any of the Option Stock in a public
offering pursuant to an effective registration statement under the 1933 Act and
the rules and regulations promulgated thereunder, (iv) prior to exercising his
right to purchase the Option Stock, Manchak shall have the right, in his sole
and absolute discretion, to require NVIC to repurchase all or a portion of the
Option by paying Manchak an amount equal to $.50 per share of Option Stock
offered for repurchase by Manchak and (v) the Option shall be non-assignable and
non-transferable. The Option shall otherwise be in such form as Manchak and NVIC
shall mutually agree.
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<PAGE> 3
(e) On November 3, 1997, Manchak shall submit to NVIC a
detailed accounting of (i) the aggregate number of shares of Settlement Stock
owned by Manchak as of such date, (ii) the aggregate amount of proceeds,
exclusive of any transaction costs, such as broker's fees and commissions, (the
"Sale Proceeds") received by Manchak from the sale of shares of Settlement Stock
prior to such date, as well as documentary evidence reasonably satisfactory to
NVIC in support of such calculation and (iii) the aggregate amount of all sums
(the "Cash Proceeds") paid by either NVIC or the Escrow Agent to Manchak
pursuant to the terms of this Second Amendment (the sum of the Sale Proceeds and
the Cash Proceeds shall be referred to herein as the "Aggregate Proceeds"). In
the event and to the extent that the Aggregate Proceeds fails to equal or exceed
$410,000, NVIC shall be obligated to redeem such number of shares of Settlement
Stock then held by Manchak at a price equal to $2.00 per share as is necessary
to increase the Aggregate Proceeds to $410,000. The funds necessary for such
redemption shall first be paid by the Escrow Agent from any remaining Escrow
Funds and then, in the event and to the extent that the Escrow Funds are
insufficient to fund any required redemption, from NVIC. All such payments shall
be made to Manchak on or before November 15, 1997. Upon completion of its
obligations pursuant to the terms of this Section 2(f), NVIC shall be entitled
to the return of the balance of the Escrow Funds. Notwithstanding any other
provision herein to the contrary, Manchak shall have no obligation to sell any
of the Settlement Stock to NVIC pursuant to the terms of this Section 2(f). In
the event that the Aggregate Proceeds do not equal or exceed $410,000, and
Manchak elects not to sell such number of shares of Settlement Stock to NVIC as
are necessary to increase the Aggregate Proceeds to $410,000, then the amount of
Aggregate Proceeds shall be deemed to be increased by the sum of $2.00 per share
of Settlement Stock retained by Manchak on and after November 3, 1997.
3. REGISTRATION OF COMMON STOCK. NVIC and Manchak agree to be
bound by the terms and conditions of Schedule I hereto, which relates to the
registration of the Settlement Stock, the Escrow Stock and the Option Stock
under applicable securities laws.
4. RESTRICTIONS ON RESALES. Manchak covenants and agrees that
he shall not sell, hypothecate, transfer or pledge any of the Settlement Stock,
the Escrow Stock or the Option Stock acquired hereunder to any U.S. person as
described in Regulation S under the 1933 Act or in the United States without an
applicable exemption from registration under the 1933 Act or upon registration
of such securities pursuant to the 1933 Act. All shares of Common Stock acquired
hereunder shall contain the following legend:
"The shares of Common Stock represented by this
certificate have not been registered pursuant to the
Securities Act of 1933 and therefore may not be transferred or
sold in the United States or to an American citizen or
resident alien without either an effective Registration
Statement pursuant to the Securities Act of 1933 or an opinion
of counsel satisfactory to the issuer that registration is not
required under such Act."
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<PAGE> 4
5. ADDITIONAL RESTRICTIONS ON RESALES. Prior to July 15,
1997, Manchak covenants and agrees that he shall not sell, hypothecate, transfer
or pledge any of the shares of Common Stock acquired hereunder. On and after
July 15, 1997 but subject to the requirements set forth in Section 4 above,
Manchak shall have the right, in his sole and absolute discretion, to sell on a
monthly basis such number of shares of Common Stock issued hereunder as shall
have a fair market value at the time of sale of up to Ninety Thousand Dollars
($90,000.00), but in no event shall the number of shares sold during any given
month exceed 45,000. Notwithstanding the foregoing, in October of 1997 Manchak
may sell such number of shares of Common Stock as shall have a fair market value
at the time of sale of up to One Hundred Ten Thousand Dollars ($110,000.00), but
in no event shall the number of shares sold in October, 1997 exceed 55,000. In
calculating the fair market value of any shares sold pursuant to the terms of
the preceding sentence, brokerage fees, commissions and other transactional
expenses shall be excluded. The resale limit shall remain in effect for a period
of 18 months following the date hereof.
6. Cash Flow/Escrow Stock.
-----------------------
(a) For a period commencing on the date hereof and expiring on
the earlier of (i) such date as the aggregate fair market value of all shares of
Common Stock sold by Manchak hereunder equals or exceeds Three Hundred Eighty
Thousand Dollars ($380,000.00) and (ii) November 15, 1997, NVIC shall guarantee
that the average fair market value of a share of the Common Stock sold by
Manchak during any given month shall not be less than Two Dollars ($2.00) per
share. For purposes of the preceding sentence, the average fair market value of
a share of Common Stock shall be computed by dividing the aggregate fair market
value of all shares of Common Stock sold by Manchak during any given month by
the number of such shares sold. In the event and to the extent that such average
fails to equal or exceed Two Dollars $2.00 per share, the Escrow Agent shall
distribute to Manchak from the Escrow Funds such amount as necessary so that
when such distribution is combined with the aggregate fair market value of all
of the Common Shares sold during such month and such sum is divided by 45,000
(55,000 with respect to the calculation made in connection with sales occurring
during the month of October 1997), the dividend equals Two Dollars ($2.00) per
share. Any payments required to be made by the Escrow Agent pursuant to the
terms of the preceding sentence shall be made within five (5) business days of
such date as the Escrow Agent receives from Manchak documentary evidence of the
number of shares sold by Manchak during the preceding month and the prices at
which such shares were sold. Notwithstanding the foregoing, any payment required
with respect to sales occurring in the month of October 1997 shall be made on or
before November 15, 1997. In the event and to the extent that the Escrow Funds
are insufficient to fulfill the obligation set forth above, then NVIC shall pay
Manchak such amount as is necessary to increase the dividend to Two Dollars
($2.00) per share. Notwithstanding any provision herein to the contrary, if, for
any reason whatsoever, Manchak is unable to sell the maximum number of shares
permitted to be sold hereunder, in any given month, after exercising good faith
in an attempt to do so, then NVIC shall within five (5) business days of such
date as either NVIC or the Escrow Agent receives from Manchak documentary
evidence of the inability to sell the maximum number of shares, redeem at a
price of $2.00 per share such number of shares as is necessary to increase the
total number of shares sold by Manchak with respect to the
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<PAGE> 5
prior monthly period to the applicable maximum number and the total
consideration received by Manchak for such shares to the applicable maximum
amount. Notwithstanding any provision in this Second Amendment to the contrary,
except for the payment, if any, to be made by NVIC on or before November 15,
1997, the maximum amount of any monthly cash payment by NVIC to Manchak shall be
Sixty Thousand Dollars ($60,000).
(b) After the close of business on September 30, 1997 or the
next business day immediately thereafter, Manchak shall submit to the Escrow
Agent and NVIC a detailed accounting of (i) the aggregate number of shares of
Settlement Stock owned by Manchak as of such date, (ii) the aggregate amount of
Sale Proceeds from the sale of shares of Settlement Stock through September 30,
1997, as well as documentary evidence reasonably satisfactory to NVIC in support
of such calculation and (iii) the aggregate amount of all Cash Proceeds paid by
NVIC to Manchak pursuant to the terms of this Second Amendment through September
30, 1997. Within three (3) business days after receipt of such information, the
Escrow Agent shall compute the difference (the "Remaining Obligation") between
(x) $410,000.00 and (y) the Aggregate Proceeds received by Manchak through
September 30, 1997. After computing the amount of the Remaining Obligation, the
Escrow Agent shall multiply the number of shares of Settlement Stock held by
Manchak at the close of business on September 30, 1997 by the sum of $2.00 per
share and the Escrow Agent shall subtract such product from the amount of the
Remaining Obligation to calculate the "Share Deficit Amount." The Escrow Agent
shall then deliver to Manchak such number of shares of Escrow Stock as equals
the Share Deficit Amount divided by two (2), rounded up to the nearest whole
number. Any such shares of Escrow Stock delivered to Manchak shall thereafter be
classified as shares of Settlement Stock under and pursuant to the terms of this
Agreement. Following delivery of such shares of Escrow Stock to Manchak, the
Escrow Agent shall return any remaining shares of Escrow Stock to NVIC and
Manchak shall not be entitled to, nor shall he receive, any compensation in
return for the surrender of such remaining shares of Escrow Stock.
Notwithstanding any provision to the contrary, NVIC may direct the Escrow Agent
to satisfy its obligations under this section by delivery to Manchak from the
Escrow Funds of an amount equal to the Share Deficit Amount instead of the
delivery of any shares of Escrow Stock.
7. CERTAIN REPRESENTATIONS OF MANCHAK. Manchak represents,
warrants and agrees as follows:
(a) REGISTRATION STATEMENT. None of the information regarding
Manchak supplied or to be supplied by Manchak for inclusion (i) in the
Registration Statement to be filed by NVIC with the Securities and Exchange
Commission (the "SEC") in connection with the registration of any Common Stock
transferred to Manchak hereunder or (ii) in any other documents to be filed with
the SEC or any other regulatory authority in connection with the transactions
contemplated in this Second Amendment will at the respective time such documents
are filed and, in the case of the Registration Statement, when it becomes
effective, be false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein not
misleading.
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<PAGE> 6
(b) ACCESS. Manchak understands that no aspect of the
transactions contemplated in this Second Amendment has been, prior to the date
of this Second Amendment, or will be, prior to the date of delivery of the
Settlement Stock, the Escrow Stock, the Option or the Option Stock registered
with or reviewed by the SEC under the 1933 Act, or with or by any state
securities law administrator, and no federal or state securities law
administrator has approved any disclosure or other material concerning NVIC or
the Common Stock, or made any recommendation with respect thereto. Manchak
hereby acknowledges his right to investigate the merits and risks of the
transactions contemplated under the provisions of this Second Amendment. Manchak
acknowledges that he has been advised of his rights to ask questions of the
management of NVIC relating to NVIC, the Common Stock and related matters and
his right to obtain additional information necessary to verify the accuracy of
information provided to him and to continue to evaluate the merits and risks of
the transactions contemplated by this Second Amendment.
(c) BROKERED TRANSACTION. Manchak covenants and agrees that he
shall use the brokerage services of such brokerage firm (the "Selected Broker")
as NVIC shall indicate in writing to Manchak within five (5) business days of
the date hereof in connection with all sales of Settlement Stock, if any,
occurring during the period from the date hereof until November 15, 1997.
Notwithstanding the foregoing, if the Selected Broker fails for any reason to
complete any sell order within five (5) business days, or if Manchak reasonably
determines that such brokerage firm has otherwise failed to carry out its duties
in a reasonable manner, Manchak shall be permitted to employ a broker/dealer
selected by Kenyon & Kenyon.
(d) COOPERATION. From and after the date of this Second
Amendment, Manchak, his accountants, attorneys, agents and other representatives
will cooperate fully with NVIC (i) in the preparation of all statements and
reports contemplated by this Second Amendment and required pursuant to the
registration and reporting requirements provided in the 1933 Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and (ii) to
facilitate the consummation of the transactions provided for herein, all in
accordance with federal and state regulatory requirements. NVIC shall reimburse
Manchak for all reasonable costs and expenses incurred by Manchak in connection
with the preparation of any statements and reports prepared primarily for the
benefit of NVIC in accordance with the terms of this paragraph.
(e) INFORMATION. On request of NVIC, Manchak will furnish to
NVIC all information concerning Manchak as is required to be set forth in (i)
the Registration Statement and (ii) any application or statement made by NVIC to
any governmental agency or authority in connection with the transactions
contemplated by this Second Amendment. NVIC shall reimburse Manchak for all
reasonable costs and expenses incurred by Manchak in connection with the
provision of any information required hereunder. Manchak shall advise NVIC
promptly of the happening of any event which makes untrue any statement of a
material fact contained in the Registration Statement or any amendment or
supplement thereto or that requires the making of a change in the Registration
Statement or any amendment or supplement thereto in order to make any material
statement therein not misleading.
-6-
<PAGE> 7
8. CERTAIN REPRESENTATIONS OF NVIC. As a material inducement
to Manchak entering into this Second Amendment, NVIC represents, warrants and
agrees that:
(a) REGISTRATION STATEMENT. None of the information regarding
NVIC supplied or to be supplied by NVIC for inclusion, (i) in the Registration
Statement or (ii) in any other documents to be filed with the SEC or any
regulatory authority in connection with the transactions contemplated in this
Second Amendment will at the respective time such documents are filed and, in
the case of the Registration Statement, when it becomes effective, contain an
untrue statement of a material fact required to be stated therein, or omit to
state any material fact necessary in order to make the statements therein not
misleading.
9. ESCROW. In connection with the transactions contemplated
in this Second Amendment, Shumaker, Loop & Kendrick, LLP (the "Escrow Agent")
has agreed to serve as escrow agent to hold certain funds, if any, required to
be deposited by NVIC with the Escrow Agent pursuant to the terms of Section 2(d)
hereof and the Escrow Stock to be deposited by NVIC with the Escrow Agent
pursuant to the terms of Section 2(b) hereof. The Escrow Agent shall hold the
Escrow Funds in an interest bearing account at a nationally chartered financial
institution and shall, from time to time, disburse the balance of such account
or a portion thereof to either Manchak and Kenyon & Kenyon or NVIC as required
pursuant to the terms hereof. The Escrow Agent shall hold certificates
representing the Escrow Stock in a secure location and shall, from time to time,
deliver such certificates to either Manchak or NVIC as required pursuant to the
terms hereof. The liability of the Escrow Agent hereunder shall be limited to
compliance with its obligations under this Second Amendment. In no event shall
the Escrow Agent have any liability with respect to any judgment against any
party other than to comply with any order of any court with respect to any
assets in the custody of the Escrow Agent. NVIC shall indemnify, defend and hold
the Escrow Agent harmless from and against any and all claims arising out of,
resulting from or in any way connected with the Escrow Agent's performance of
its duties hereunder, except for such acts of the Escrow Agent as shall
constitute gross negligence or willful misconduct. Manchak covenants and agrees
that he shall not assert any claims or institute any proceedings against the
Escrow Agent arising out of, resulting from or in any way connected with the
Escrow Agent's performance of its duties hereunder, except for such acts of the
Escrow Agent, if any, as constitute gross negligence or willful misconduct.
10. DISCHARGE OF OBLIGATIONS. The payment and other
obligations of NVIC set forth in this Second Amendment are intended to supersede
the payment terms set forth in the Settlement Agreement and the First Amendment.
In the event that NVIC fully performs all of its obligations hereunder, then
NVIC shall be deemed to have fulfilled all of its obligations pursuant to
Section 2 of the Settlement Agreement as amended by the First Amendment.
Notwithstanding the foregoing, this Second Amendment shall not be deemed a
waiver of any rights or remedies of any of the parties hereto under the
Settlement Agreement or the First Amendment. In the event that NVIC fails to
comply with any of the terms set forth herein, for any reason, including,
without limitation, voluntary or involuntary bankruptcy of NVIC or the failure
to effect registration of any stock as required herein, such failure shall be
deemed a Default under the Settlement Agreement
-7-
<PAGE> 8
and the First Amendment, and all of the remedies specified in the Settlement
Agreement and the First Amendment shall be available to Manchak, including,
without limitation, the acceleration of all sums due and payable to Manchak by
NVIC.
11. HEADINGS. The paragraph headings contained herein are for
convenience only and shall not, in any way, affect the interpretation or
enforceability of any provisions of this Second Amendment.
12. GOVERNING LAW. This Second Amendment shall be construed
and enforced pursuant to the laws of the State of California.
13. COUNTERPARTS. This Second Amendment may be executed in one
or more counterparts, each of which shall be deemed to be an original, but all
of which taken together shall constitute but one document.
14. AMENDMENTS. No amendment or variation of the terms and
conditions of this Second Amendment shall be valid unless the same is in writing
and signed by all of the parties hereto or their duly
authorized agent.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this
Second Amendment or caused this Second Amendment to be executed by them or their
duly authorized agents as of the date first written above.
/s/ Frank Manchak, Jr.
----------------------
Frank Manchak, Jr.
N-VIRO ENERGY SYSTEMS, INC.
By: /s/ J. Patrick Nicholson
------------------------
J. Patrick Nicholson
President
N-VIRO ENERGY SYSTEMS, LTD.
By: N-Viro Energy Systems, Inc.
Its General Partner
By: /s/ J. Patrick Nicholson
------------------------
J. Patrick Nicholson
President
N-VIRO INTERNATIONAL CORPORATION
By: /s/ J. Patrick Nicholson
------------------------
J. Patrick Nicholson
Chairman of the Board
AMERICAN N-VIRO RESOURCES, INC.
By: /s/ J. Patrick Nicholson
------------------------
J. Patrick Nicholson
President
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<PAGE> 1
Exhibit 3.1
SCHEDULE I
REGISTRATION RIGHTS PROVISIONS
------------------------------
1. Definitions
-----------
Terms defined in the foregoing Second Amendment are used as therein
defined unless otherwise defined in this Schedule I. In addition, as used in
this Schedule, the following capitalized terms shall have the following
meanings:
NVIC SHARES: A voting common share of NVIC with par value of
$.01 per share.
EFFECTIVE DATE: The date the Shelf Registration is declared
effective by the SEC.
INDEMNIFIED HOLDER: See Section 6(a).
NASD: National Association of Securities Dealers, Inc.
PERSON: An individual, partnership, limited liability company,
corporation, trust or unincorporated organization, or a government or agency or
political subdivision thereof.
PROSPECTUS: The prospectus included in any Registration
Statement, as amended or supplemented, with respect to the terms of the offering
of any portion of the Registrable Securities covered by the Registration
Statement and by all other amendments and supplements to the prospectus,
including post-effective amendments and all material incorporated by reference
in such prospectus.
REGISTRABLE SECURITIES: The shares of Settlement Stock and
Option Stock provided that any such share ceases to be a Registrable Security
when it may be distributed to the public pursuant to Rule 144 (or any similar
provisions then in force) promulgated under the 1933 Act or when the certificate
therefor ceases to contain the restricted stock legend specified in Section 7(g)
of the Second Amendment or the equivalent thereof.
REGISTRATION EXPENSES. See Section 5.
REGISTRATION STATEMENT: Any registration statement of NVIC
which covers any of the Registrable Securities pursuant to the provisions of
this Schedule, including the Prospectus, amendments to such Registration
Statement, including post-effective amendments, and all exhibits and all
material incorporated by reference in such Registration Statement.
SHELF REGISTRATION: See Section 3.
<PAGE> 2
STOCKHOLDERS: Frank Manchak, Jr.
2. Securities Subject to this Schedule
-----------------------------------
The benefits of this Schedule are limited to the Registrable
Securities, whether held by the Stockholders or a subsequent holder thereof.
3. Shelf Registration: Timing of Filing, Effectiveness and Period of
-----------------------------------------------------------------
Usability
---------
Subject to the provisions of Section 4 hereof, NVIC shall file within
fifteen (15) business days hereof and shall use its commercially reasonable best
efforts to cause to be declared effective as soon as practicable a "shelf"
Registration Statement (a "Shelf Registration") pursuant to Rule 415 (or similar
rule that may be adopted by the SEC) under the 1933 Act for all the Registrable
Securities and such other NVIC Shares as NVIC deems appropriate, which form
shall be available for the sale of the Registrable Securities for cash in
accordance with the intended method or methods of distribution thereof.
NVIC agrees to use its commercially reasonable best efforts to keep the
Registration Statement continuously effective and usable for resale of
Registrable Securities until 790 days (the "Effectiveness Period") from the
Vesting Date or such shorter period which will terminate when all the
Registrable Securities covered by such Registration Statement have been sold
pursuant to such Registration Statement, may be sold pursuant to Rule 144, or
are freely tradeable.
Notwithstanding the foregoing, NVIC shall have the right (i) to defer
for a period of up to 90 days the request for acceleration of effectiveness, or
(ii) after effectiveness, to suspend effectiveness of the Registration Statement
for periods of up to 90 days if, in the good faith judgment of the board of
directors of NVIC or upon the advice of counsel to NVIC, such delay in
requesting acceleration of effectiveness or such suspension of effectiveness (A)
is necessary in light of the existence of material non-public information
(financial or otherwise) concerning NVIC and/or any other entity in which NVIC
has, or is proposing to acquire, an equity interest, or (B) otherwise is in the
best interest of NVIC and its shareholders. Notwithstanding any provision herein
to the contrary, the aggregate number of days during any given twelve month
period in which the effectiveness of the Registration Statement shall be
suspended at the request of NVIC shall not exceed one hundred twenty (120) days.
NVIC will give each of the Stockholders prompt written notice of any decision to
defer or suspend effectiveness of the Registration Statement.
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<PAGE> 3
In connection with the registration of NVIC Shares as provided in this
Schedule, NVIC shall be entitled to include in the Registration Statement any
other securities of NVIC (whether to be offered by NVIC or other security
holders of NVIC and regardless of the proposed terms of transfer or sale of such
other securities).
4. Registration Procedures
-----------------------
In connection with NVIC's obligation to file Registration Statements as
provided in Section 3 hereof, but subject to the terms, conditions and
limitations thereof, NVIC will as expeditiously as possible:
(a) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement, and such
supplements to the Prospectus, as may be required by the rules,
regulations or instructions applicable to the registration form
utilized by NVIC under the 1933 Act or rules and regulations thereunder
for shelf registration or otherwise necessary to keep the Registration
Statement effective for the applicable period and cause the Prospectus
as so supplemented to be filed pursuant to Rule 424 under the 1933 Act;
and comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(b) notify the Stockholders and the holders of Registrable
Securities promptly, and confirm such advice in writing,
(1) when the Registration Statement or the Prospectus
included therein, or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to
the Registration Statement or any post-effective amendment,
when the same has become effective,
(2) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose; and
(3) of the receipt by NVIC of any notification with
respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
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<PAGE> 4
(c) make every commercially reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
Registration Statement at the earliest possible date;
(d) furnish, without charge, to Stockholders and each selling
holder of Registrable Securities, at least one conformed copy of the
Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (but excluding
exhibits incorporated by reference);
(e) deliver to Stockholders and each selling holder of
Registrable Securities without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons may reasonably request; NVIC consents to the
use of the Prospectus or any amendment or supplement thereto by each
Stockholder and the selling holders of Registrable Securities in
connection with the offering and sale of the Registrable Securities
covered by the Prospectus or any amendment or supplement thereto;
(f) cooperate with Stockholders and the selling holders of
Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold
and not bearing any restricted stock legends;
(g) use its commercially reasonable best efforts to cause the
Registrable Securities covered by the Registration Statement to be
registered with or approved by governmental agencies or authorities
within the United States under states' securities or "Blue Sky" laws as
may be necessary to enable the seller or sellers thereof to consummate
the disposition of such Registrable Securities in such jurisdictions as
the sellers may specify in response to inquiries to be made by NVIC,
provided that NVIC will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to
take any action which would subject it to general service of process or
taxation in any such jurisdiction where it is not then so subject;
(h) if any event shall occur as a result of which it is
necessary, in the opinion of NVIC, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in the light
of the circumstances existing at the time it is delivered to a
purchaser, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as
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<PAGE> 5
thereafter delivered to the purchasers of the Registrable Securities,
the Prospectus will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein not misleading;
(i) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make generally
available to its security holders an earnings statement satisfying the
provisions of Section 11(a) of the 1933 Act (in accordance with Rule
158 thereunder or otherwise), no later than 60 days after the end of
the 12-month period (or 120 days, if such period is a fiscal year)
beginning with the first month of NVIC's first fiscal quarter
commencing after the Effective Date, which statements shall cover said
12-month period;
(j) if at any time an event of the kind described in Section
4(h) shall occur, promptly notify the Stockholders and the holders of
Registrable Securities that the use of the Prospectus must be
discontinued;
(k) cause the NVIC Shares issued to the Stockholders to be
listed on the NASD's automated quotation system.
Each selling holder of Registrable Securities as to which any
registration is being effected agrees, as a condition to the registration
obligations with respect to such holder provided herein, to furnish to NVIC such
information regarding the distribution of such securities as NVIC may from time
to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from NVIC described in
paragraph 4(j), such holder will forthwith discontinue disposition of
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 4(h) hereof, or until
it is advised in writing by NVIC (which notice NVIC shall give as promptly as
possible), that the use of the Prospectus may be resumed, and has received
copies of any additional or supplemental filings which are incorporated by
reference in the Prospectus, and, if so directed by NVIC, such holder will
deliver to NVIC (at NVIC's expense) all copies, other than permanent file copies
then in such holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice.
5. Registration Expenses
---------------------
(a) All expenses incident to NVIC's performance of or compliance with
this Schedule, including without limitation:
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<PAGE> 6
(2) all registration, filing and listing fees;
(3) fees and expenses of compliance with securities or blue
sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities
under the laws of such jurisdictions as the holders of a majority in
principal amount of the Registrable Securities being sold may
reasonably designate);
(4) printing, messenger, telephone and delivery expenses;
(5) fees and disbursements of counsel for NVIC;
(6) fees and disbursements of all independent certified public
accountants of NVIC (including the expenses of any special audit
necessary to satisfy the requirements of the 1933 Act and any "cold
comfort" letters required by or incident to such performance);
(7) securities acts liability insurance if NVIC so desires;
(8) fees and expenses of other Persons retained by NVIC; and
(9) fees and expenses associated with any NASD filing required
to be made in connection with the Registration Statement.
(all such expenses being herein called "Registration Expenses") will be borne by
NVIC, regardless of whether the Registration Statement becomes effective.
NVIC will, in any event, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, the fees and
expenses incurred in connection with the listing of the securities to be
registered on a securities exchange or on the NASD's automated quotation system,
rating agency fees and the fees and expenses of any Person, including special
experts, retained by NVIC.
6. Indemnification and Contribution
--------------------------------
(a) INDEMNIFICATION BY NVIC. NVIC agrees to indemnify and hold harmless
each holder of Registrable Securities, its officers, directors, employees and
agents and each Person who controls such holder within the meaning of either
Section 15 of the 1933 Act or Section 20 of the Exchange Act (each such person
being sometimes hereinafter referred to as an "Indemnified Holder") from and
against all losses, claims, damages,
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<PAGE> 7
liabilities and expenses (including reasonable costs of investigation and legal
expenses) arising out of or based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any such untrue
statement or omission or allegation thereof based upon information furnished in
writing to NVIC by such holder expressly for use therein. This indemnity will be
in addition to any liability which NVIC may otherwise have. NVIC will also
indemnify underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, their officers and
directors and each Person who controls such Persons (within the meaning of
Section 15 of the 1933 Act or Section 20 of the Exchange Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
If any action or proceeding (including any governmental investigation
or inquiry) shall be brought or asserted against any Indemnified Holder in
respect of which indemnity may be sought from NVIC, such Indemnified Holder
shall promptly notify NVIC in writing (but the omission to so notify NVIC shall
not relieve it of any liability that it may have against any Indemnified Holder
otherwise than under this subsection), and NVIC shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Holder and the payment of all expenses. Indemnified Holders shall
have the right, collectively, to employ their own counsel in any such action and
to participate in the defense thereof, but the fees and expenses of such counsel
shall be the expense of the Indemnified Holders unless (a) NVIC has agreed to
pay such fees and expenses or (b) NVIC shall have failed to assume the defense
of such action or proceeding and have failed to employ counsel reasonably
satisfactory to the Indemnified Holders in any such action or proceeding or (c)
the named parties to any such action or proceeding (including any impleaded
parties) include the Indemnified Holders and NVIC, and the Indemnified Holders
shall have been advised by counsel that there may be one or more legal defenses
available to the Indemnified Holders which are different from or additional to
those available to NVIC (in which case, if the Indemnified Holders notify NVIC
in writing that they elect to employ their own counsel at the expense of NVIC,
NVIC shall not have the right to assume the defense of such action or proceeding
on behalf of the Indemnified Holders, it being understood, however, that NVIC
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable
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<PAGE> 8
for the reasonable fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for the Indemnified
Holders, which firm shall be designated in writing by the Indemnified Holders
representing at least a majority of the aggregate principal amount of the
Registrable Securities). Any such fees and expenses payable by NVIC shall be
paid to the Indemnified Holders entitled thereto as incurred by the Indemnified
Holders. NVIC shall not be liable for any settlement of any such action or
proceeding effected without its written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such action or
proceeding, NVIC agrees to indemnify and hold harmless the Indemnified Holders
from and against any loss or liability by reason of such settlement or judgment.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. Each holder of
Registrable Securities agrees to indemnify and hold harmless NVIC, its
respective directors and officers and each Person, if any, who controls NVIC
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from NVIC to such
holder, but only with respect to information relating to such holder furnished
in writing by such holder expressly for use in any Registration Statement or
Prospectus, or any amendment or supplement thereto, or any preliminary
prospectus. In case any action or proceeding shall be brought against NVIC or
its respective directors or officers or any such controlling person, in respect
of which indemnity may be sought against a holder of Registrable Securities,
such holder shall have the rights and duties given NVIC, and NVIC or its
respective directors or officers or such controlling person shall have the
rights and duties given to each holder by the preceding paragraph. Each holder
of Registrable Securities will also indemnify underwriters, selling brokers,
dealer managers and similar securities industry professionals participating in
the distribution, their officers and directors and each Person who controls such
Persons (within the meaning of Section 15 of the 1933 Act or Section 20 of the
Exchange Act) to the same extent as provided above with respect to the
indemnification of NVIC. NVIC and each holder of Registrable Securities shall be
entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above with respect to information
so furnished in writing by such Persons specifically for inclusion in any
Prospectus or Registration Statement.
(c) CONTRIBUTION. If the indemnification provided for in this Section 6
is unavailable to an indemnified party under Section 6(a) or Section 6(b) hereof
(other than by reason of exceptions provided in those Sections) in respect of
any losses, claims, damages, liabilities or expenses referred to therein, then
each applicable indemnifying party, in lieu of indemnifying
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<PAGE> 9
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses, in such proportion as is appropriate to reflect the relative fault of
NVIC on the one hand and each holder of Registrable Securities on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, or liabilities, as well as the other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by NVIC or the particular holder and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. NVIC acknowledges that the holders of the
Registrable Securities are not involved in any manner in the business of NVIC
and, accordingly, have limited knowledge of and access to information about the
business of NVIC. NVIC and the holders of Registrable Securities agree that it
would not be just and equitable if contributions pursuant to this subsection (c)
were to be determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred
to in the first sentence of this subsection (c). The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (c) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigation or defending against any action or claim
that is the subject of this subsection (c). Notwithstanding the provisions of
this subsection (c), each holder of Registrable Securities shall not be required
to contribute any amount in excess of the amount by which the Difference exceeds
the amount of any damages that such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act), shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
7. Rule 144
--------
For so long as NVIC is subject to the reporting requirements of Section
13 or 15 of the Exchange Act, NVIC covenants that it will file the reports
required to be filed by it under the 1933 Act and Section 13(a) or 15(d) of the
Exchange Act and the rules and regulations adopted by the SEC thereunder.
8. Miscellaneous
-------------
(a) NO INCONSISTENT AGREEMENTS. NVIC will not on or after the date of
this Schedule enter into any agreement with respect to its securities which is
inconsistent with the rights granted
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<PAGE> 10
to the holders of Registrable Securities in this Schedule or otherwise conflicts
with the provisions hereof. The rights granted to the holders of Registrable
Securities hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of NVIC's securities under any such
agreements.
(b) AMENDMENTS AND WAIVERS. The provisions of this Schedule, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless NVIC has obtained the written consent of holders of a majority of
the Registrable Securities. Notwithstanding the foregoing, a waiver or consent
to departure from the provision hereof that relates exclusively to the rights of
holders of Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other holders of Registrable Securities may be given by the holders of
a majority of the Registrable Securities being sold.
(c) NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, telecopier, or nationally recognized overnight express
courier postage prepaid, and shall be deemed given when so mailed or if
telecopied, when receipt is acknowledged, and shall be delivered as addressed as
follows:
(1) if to a Stockholder, at the most current address given by
the Stockholder to NVIC in accordance with the provisions of this
Section 8(c);
(2) if to a holder of Registrable Securities, at its address
of record as indicated on the books of the transfer agent and registrar
for the Registrable Securities; and
(3) if to NVIC, initially at its address set forth in the
Settlement Agreement and thereafter at such other address, notice of
which is given in accordance with the provisions of this Section 8(c).
(d) SUCCESSORS AND ASSIGNS. This Schedule shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
holders of Registrable Securities.
(e) HEADINGS. The headings in this Schedule are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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<PAGE> 11
(f) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
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<PAGE> 1
EXHIBIT #4
DEPARTMENT OF WASTEWATER MANAGEMENT
CITY AND COUNTY OF HONOLULU
STATE OF HAWAII
CONTRACT CHANGE ORDER NO.1
Project: Honolulu Beneficial Sludge Reuse Project
Contract No. F-91205
-------
Date July 15, 1997
-------------
Sheet 1 of 3
------
Original Completion Date ___________
Revised Completion Date n/a
---
Job No. __________ Contractor N-Viro Honolulu,Inc.
--------------------
Official Commencement Date n/a
---
Contract Time 4017 calendar days
----
Total Time Extension to Date 0 calendar days
--
This change order shall serve as a supplemental agreement covering extra work or
a change in the quantity of work from that called for in the proposal for this
project.
- --------------------------------------------------------------------------------
[Note here as specifically as possible the item, quantity, and location of work
required, with an accurate description of its character, using sketches if
necessary. Also note any quantities or work which this replaces and show net
value or quantity of extra]
Change order No. 1 shall include the following:
- -----------------------------------------------
A. The site selected by the Contractor for the project ("original site") became
an unacceptable location for this project. As a result, the Contractor evaluated
and considered other locations for the project. Due to this changed condition,
the bid price and its basic costs and the terms and conditions of the Contract
must be reviewed and negotiated. Therefore, in accordance with the intent of the
parties as set forth in Paragraph F, herein, by this change order No. 1, the
obligations of the Contruction and Operating Contracts are suspended and not in
effect. It is further agreed that N-Viro International Corporation, the
predecessor contractor, incurred costs to the sum of $749,651.18 in pursuing the
project at the original site, which costs are comprised of "non-transferrable
costs" of $450,000 and "transferrable costs" of $299,651.18. Such costs shall be
reimbursed under this contract as follows:
1. The "non-transferrable costs" of $450,000 are costs that are specific to the
original site and are not transferrable to a project at any other site. These
costs shall be paid for in accordance with the following schedule: $200,000 on
or before July 30, 1997, and the remaining balance of $250,000 by July 15, 1998.
2. The "transferrable costs" of $299,651.18 are costs that were incurred in
pursuing the original site were related to such activities as promoting
beneficial reuse, developing markets for the recovered products and pursuing
sources of admixture for the process. The results of these activities would
benefit projects developed at other locations, and therefore the costs are
considered transferrable and shall be included in the negotiated tipping fee for
the project(s) at the new location(s).
B. The Contractor shall finance, design, construct, shakedown and test and shall
operate and maintain for ten years, a facility to be located at the Honouliuli
Wastewater Treatment Plant (WWTP) and, provided that a Special Management Permit
(SMP) is obtained for the Sand Island WWTP site, a second facility at that
location. The quantity and quality of the sludge to be provided by the City for
processing and beneficial reuse and on which the terms and conditions of the
Contract are to be based are estimated as follows:
<PAGE> 2
1. Honouliuli WWTP
Average Daily Dry Tonnage - 10 tons per day
Average Cake Solids - 38% total solids
Total Dewatered Sludge Per Year - 9605 wet tons per year
2. Sand Island WWTP (provided SMP is obtained)
Average Daily Dry Tonnage - 16 tons per day
Average Cake Solids - 34% total solids
Total Dewatered Sludge Per Year - 17,176 wet tons per year
PW-DE-45(12/73)
<PAGE> 3
DEPARTMENT OF WASTEWATER MANAGEMENT
CITY AND COUNTY OF HONOLULU
STATE OF HAWAII
CONTRACT CHANGE ORDER NO.1
Project: Honolulu Beneficial Sludge Reuse Project
Contract No. F-91205
-------
Date July 15, 1997
-------------
Sheet 2 of 3
------
Original Completion Date ___________
Revised Completion Date n/a
---
Job No. _________ Contractor N-Viro Honolulu,Inc.
--------------------
Official Commencement Date n/a
----
Contract Time 4017 calendar days
----
Total Time Extension to Date 0 calendar days
--
This change order shall serve as a supplemental agreement covering extra work or
a change in the quantity of work from that called for in the proposal for this
project.
- --------------------------------------------------------------------------------
[Note here as specifically as possible the item, quantity, and location of work
required, with an accurate description of its character, using sketches if
necessary. Also note any quantities or work which this replaces and show net
value or quantity of extra]
Change order No. 1 shall include the following (cont.):
C. The use of the Recovered Material for landfill cover will continue to be
recognized as beneficial reuse. The Contractor, however, shall endeavor to find
and develop other beneficial reuse markets for the Recovered Materials to enable
the City to meet its consent order requirements for beneficial reuse.
D. Subparagraph 7.10 (2) of the Operating Contract shall be deleted in its
entirety and, subject to negotiation, be replaced with a paragraph similar to
the following:
The Contractor shall monitor and report to the City on a monthly basis the
amount of dewatered sludge required to be diverted, prior to processing, to a
landfill or other disposal or any other reuse option in the unlikely event the
facility is shutdown other than as allowed for by the operating contract. In
such case the City shall not be required to pay the Contractor the Service Fee
(operating rate) as stipulated in the pricing proposal and the operating
contract. The Contractor shall be compensated for its reasonable and documented
transportation and disposal or reuse fees as approved by the City.
E. It is recognized that the Sand Island and the Honouliuli WWTPs have been
subject to odor complaints. The Contractor shall provide for Best Available
Control Technology (BACT) for control of odor and other gaseous emissions from
the beneficial reuse facility(ies) as may be required by applicable federal and
state regulations and any air permit(s) and shall work with the City to
integrate such system(s) into any system that the City may be undertaking.
F. The parties intend to further review and negotiate the terms and conditions
of the Construction and Operating Contracts to reflect the necessary changes
required by a new technical proposal and new pricing proposal, based on changing
the site for this project. The obligations of the Construction and Operating
Contracts, as they are affected by the original technical proposal and pricing
proposal, are immediately suspended and not in effect. The parties intend to
negotiate these terms and conditions upon submittal of a new technical proposal
and a new pricing proposal. All details of the the Construction and Operating
Contracts, including the exhibits thereto, a new technical proposal, and a new
pricing proposal, including its basic costs, are intended to be negotiated and
agreed to and
<PAGE> 4
reflected by further change order. The Contractor agrees to submit a new
technical proposal and preliminary pricing proposal to the City by September 15,
1997, and both parties shall negotiate, agree upon and execute a second change
order incorporating all amended terms of the Construction and Operating
Contracts, except for any unknown price terms and terms relating to use permits
and their requirements by September 30,1997. The Contractor agrees to submit its
final technical proposal and pricing proposal by November 15, 1997. The parties
shall negotiate, agree upon and execute a third change order incorporating all
other amended terms relating to the change in project site on or before December
31, 1997. If either of such further change orders are not executed by both
parties on or before the stated deadlines, this Contract shall be automatically
terminated unless such dates are extended by change order agreed upon by both
parties.
PW-DE-45(12/73)
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DEPARTMENT OF WASTEWATER MANAGEMENT
CITY AND COUNTY OF HONOLULU
STATE OF HAWAII
CONTRACT CHANGE ORDER NO.1
Project: Honolulu Beneficial Sludge Reuse Project
Contract No. F-91205
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Date July 15, 1997
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Sheet 3 of 3
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Original Completion Date _____________
Revised Completion Date n/a
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Job No. _________ Contractor N-Viro Honolulu,Inc.
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Official Commencement Date n/a
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Contract Time 4017 calendar days
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Total Time Extension to Date 0 calendar days
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This change order shall serve as a supplemental agreement covering extra work or
a change in the quantity of work from that called for in the proposal for this
project.
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[Note here as specifically as possible the item, quantity, and location of work
required, with an accurate description of its character, using sketches if
necessary. Also note any quantities or work which this replaces and show net
value or quantity of extra]
G. In the event the Contract is mutually terminated, any outstanding balance of
the costs incurred by the Contractor and its predecessor in pursuing the
original site (see subparagraph A herein) plus all reasonable costs incurred by
the Contractor between June 30, 1997, and December 31, 1997, or the actual date
of termination, whichever is earlier, will be paid by the City on or before
November 30, 1998.
NECESSITY:
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This change order is necessary because the original site selected by the
Contractor for this project became unacceptable as a result of public input.
CONTRACT PRICE SUMMARY:
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(PRICE CHANGES SHALL BE NEGOTIATED)
By reason of this proposed change a time extension of 0 calendar days will be
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made to this contract. The new completion date shall be: n/a
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I. Computed and checked
4. Certified as to availability of funds:
Project Engineer Date
Fiscal Officer Date
2- Approved
5. Approved
Division Chief Date
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Director Date
3. Accepted
6. Approved as to form & legality
Contractor or Contractor's Rcpmeentative Datc
Deputy Corporation's Counsel Date
7. Approved
1 copy to: Direcotor of Finance Project Engineer
Contractor Project Inspector
Division Chief
3 copies to: Fiscal Section
PW-DE-45(12/73)
