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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): SEPTEMBER 9, 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
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ITEM 5. OTHER ITEMS
a.) On September 9, 1997, N-Viro International Corporation ("the
Company") executed a Subscription Agreement with Gregory Meyer, to purchase
42,000 unregistered shares of N-Viro International Common Stock for $1.75 per
share, incorporated by reference herein as Exhibit 1.
b.) On September 23, 1997 the Company executed a Stock Purchase
Agreement with Heartland Limited Partnership I, a Wisconsin Limited Partnership,
to purchase 158,000 unregistered shares of N-Viro International Common Stock for
$1.75 per share, incorporated by reference herein as Exhibit 2.
c.) On September 23, 1997 the Company executed a Registration Rights
Agreement with Heartland Limited Partnership I, a Wisconsin Limited Partnership,
in connection with the sale referenced above in b.) above, 120,000 shares of
N-Viro International Common Stock, incorporated by reference herein as Exhibit
3.
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: October 8, 1997 By: /s/ James K. McHugh
----------------------------- -------------------
James K. McHugh
Chief Financial Officer
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EXHIBIT 1
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SUBSCRIPTION AGREEMENT
----------------------
This Subscription Agreement (the "Subscription Agreement") is made
and entered into as of the 9th day of September, 1997 (the "Subscription Date"),
by and between N-Viro International Corporation, a Delaware corporation (the
"Company"), and Gregory Meyer, an individual residing at 94 Ocean Avenue,
Monmouth Beach, New Jersey 07750 ("Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Purchaser desires to purchase from the Company,
and the Company desires to sell and issue to Purchaser, forty-two thousand
shares of common stock, $.01 par value per share, of the Company ("Purchased
Shares"), upon the terms and subject to the conditions set forth in this
Subscription Agreement.
NOW, THEREFORE, in consideration of the premises, the
mutual promises, covenants and conditions herein contained and for other good
and valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound hereby agree as
follows:
1. SALE OF PURCHASED SHARES TO PURCHASER. On the
Subscription Date, the Company shall sell and issue to Purchaser, and Purchaser
shall purchase from the Company, the Purchased Shares, upon the terms and
subject to the conditions set forth in this Subscription Agreement.
2. PURCHASE PRICE FOR PURCHASED SHARES. In consideration
for the sale and issuance of the Purchased Shares pursuant to Section 1 of this
Subscription Agreement, Purchaser shall pay to the Company the sum of $1.75 per
share or the total sum of $73,500 (the "Purchase Price") for all of the
Purchased Shares.
3. PAYMENT OF PURCHASE PRICE. Payment and delivery by
Purchaser of the Purchase Price to be received by the Company, as determined in
accordance with Section 2 of this Subscription Agreement, shall be paid to the
Company by cashier's check at the offices of the Company on the Subscription
Date.
4. DELIVERY OF THE PURCHASED SHARES. A certificate
evidencing the Purchased Shares registered in the name of Purchaser shall be
executed, issued and mailed to Purchaser by the Company within fifteen (15)
business days of the receipt by the Company from the Purchaser of this
Subscription Agreement as executed by the Purchaser and the Purchase Price.
5. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS OF
PURCHASER. Purchaser hereby represents, warrants and acknowledges to the
Company, and the Company may rely on the same in completing the sale of the
Purchased Shares and the other transactions herein contemplated, as of the
Subscription Date, as follows:
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5.01 VALIDITY. This Subscription Agreement constitutes
the legally valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms.
5.02 STATE OF RESIDENCE. The state of residence of
Purchaser is, and shall be at the time of delivery and acceptance of
the Purchased Shares, the State of New Jersey.
5.03 ACCESS. Purchaser has had access to all documents,
records and books pertaining to the Company at the office of the
Company upon reasonable notice to the Company and has had the
opportunity to ask questions of and receive answers from the
officers of the Company concerning the operations of the Company and
the purchase of the Purchased Shares. Prior to the date hereof,
Purchaser has received copies of (i) the Company's Form 10-K for the
year ended December 31, 1996; (ii) the Company's Forms 10-Q for the
quarters ended March 31, 1997 and June 30, 1997, respectively; (iii)
the Company's Notice of Annual Meeting of Stockholders and Proxy
Statement with respect to the annual meeting held on May 9, 1997;
and (iv) the Company's Annual Report for the year ended December 31,
1997 (collectively, the "Disclosed Documents").
5.04 NO REVIEW. Purchaser is aware that no federal or
state agency has made any finding or determination as to the
fairness for public or private investment, nor any recommendation or
endorsement, of the Purchased Shares as an investment.
5.05 SPECULATIVE NATURE. Purchaser recognizes the
speculative nature of an investment in the Purchased Shares.
5.06 HOLDING OF PURCHASED SHARES. As a purchaser of the
Purchased Shares, Purchaser must bear the economic risk of his
investment in the Purchased Shares for an indefinite period of time
because the Purchased Shares have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), in reliance
upon an exemption from such registration requirements set forth in
Rule 506 of Regulation D promulgated under the 1933 Act ("Regulation
D") and, therefore, cannot be sold unless they are subsequently
registered under the 1933 Act or an exemption from such registration
is available; the Company shall make a notation in its transfer
records regarding said restrictions on transfer of the Purchased
Shares; and the Purchased Shares shall not be sold without
registration under the 1933 Act or exemption therefrom.
5.07 FINANCIAL KNOWLEDGE AND EXPERIENCE. Purchaser has
knowledge and experience in financial and business matters so as to
be capable of evaluating the merits and risks of an investment in
the Purchased Shares; is not utilizing any other person to be his
"Purchaser Representative" (as defined in Regulation D) in
connection with evaluating such merits and risks; and offers as
evidence of his knowledge and experience in these matters the
representations and information set forth in this Subscription
Agreement.
5.08 ECONOMIC RISK. Purchaser is willing and able to bear
the economic risk of an investment in the Purchased Shares (in
making this representation, consideration has been given to whether
Purchaser can afford to
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hold the Purchased Shares for an indefinite period of time and
whether, at this time, Purchaser can afford a complete loss of his
investment).
5.09 ACCREDITED INVESTOR. Purchaser is an "accredited
investor" as defined in Rule 501 of Regulation D (an "Accredited
Investor"). In addition to certain institutional investors and
fiduciaries, an Accredited Investor in the Company includes any
person or entity that falls within any one of the following
categories:
(a) any natural person whose individual net
worth, or joint net worth with such person's spouse,
exceeds $1,000,000.00;
(b) any natural person who had an individual
income in excess of $200,000.00 in each of the two most
recent tax years or joint income with such person's
spouse in excess of $300,000.00 in each of those years
and who reasonably expects to reach the same income level
in the current year;
(c) any corporation, business trust or
partnership not formed for the specific purpose of
acquiring the Shares, with total assets in excess of
$5,000,000.00;
(d) any entity in which all of the equity
owners are "Accredited Investors";
(e) any trust, with total assets in excess of
$5,000,000.00, not formed for the specific purpose of
acquiring the Shares, whose purchase is directed by a
"Sophisticated Person" (as described in Rule 506 of
Regulation D);
(f) any employee benefit plan within the
meaning of the Employee Retirement Income Security Act of
1974 if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of such Act, which
is either a bank, savings and loan association, insurance
company or registered investment adviser, or if the
employee benefit plan has total assets in excess of
$5,000,000.00 or, if a self-directed plan, with
investment decisions made solely by persons who are
Accredited Investors; or
(g) any director or executive officer of the
Company.
5.10 REGISTRATION OF PURCHASED SHARES. Purchaser
understands and acknowledges that no aspect of the transactions
contemplated in this Subscription Agreement has been, prior to the
date of this Subscription Agreement, or will be, prior to the date
of delivery and acceptance of the Purchased Shares, registered with
or reviewed by the Securities and Exchange Commission 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 Purchased
Shares or made any recommendation with respect thereto. Purchaser
also understands and acknowledges that the Company has not granted
Purchaser any rights whatsoever with respect to the
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future registration of any Purchased Shares with any federal or
state securities administrator or authority, including, but not
limited to, any piggyback registration rights whereby the Purchased
Shares would be registered in conjunction with the registration by
the Company of any other of its issued securities.
5.11 COMMITMENTS. Purchaser's overall commitment to
investments which are not readily marketable is not disproportionate
to his net worth.
5.12 LIQUIDITY. Purchaser has adequate means of providing
for his current needs and personal contingencies and has no need for
liquidity in his investment in the Purchased Shares.
5.13 OBJECTIVE. The objectives of the Company are
compatible with Purchaser's investment goals.
5.14 INVESTMENT. Purchaser is purchasing the Purchased
Shares for the 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 Purchased Shares.
5.15 ADVISOR. Purchaser has been advised by the Company
that he should consult his own legal counsel, accountant or business
advisor as to the legal, tax and other matters concerning his
purchase of the Purchased Shares and his execution of this
Subscription Agreement.
5.16 NO FINANCIAL PROJECTIONS. The Company has neither
delivered nor disclosed to Purchaser any financial projections
relating to the Company.
5.17 NO OTHER COMPANY MATERIALS. Purchaser acknowledges
that the Company has made no oral or written representations or
warranties to the Purchaser, either directly or indirectly, through
its officers, directors, employees or agents, with respect to the
Company or the Purchased Shares, other than those representations
and warranties included herein. Purchaser further acknowledges that
he has not relied on any disclosures of the Company, its directors,
employees or agents, other than such disclosures as are set forth in
the Disclosed Documents.
6. INDEMNIFICATION. Purchaser acknowledges his
understanding of the meaning and legal consequences of all the representations,
warranties and agreements contained in this Subscription Agreement and
Purchaser hereby agrees to indemnify and hold harmless the Company, its agents
and affiliates, successors and assigns from and against any and all loss,
damage, or liability arising out of, connected with or any way related to a
breach of any representation or warranty of Purchaser contained in this
Subscription Agreement.
7. REPRESENTATIONS, WARRANTIES, ACKNOWLEDGEMENTS AND
COVENANTS OF THE COMPANY. The Company hereby represents, warrants, acknowledges
and covenants to Purchaser, and Purchaser may rely on the same in consummating
transactions herein contemplated, as of the Subscription Date, as follows:
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7.01 DUE INCORPORATION. The Company is a corporation duly
organized and validly existing under the Delaware General
Corporation Law (the "DGCL").
7.02 VALIDITY. Subject to the approval of the Board of
Directors (the "Board") of the Company, this Subscription Agreement
constitutes the legally valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. The
company covenants to seek Board approval of this Subscription
Agreement within ten (10) days of the date of receipt by the Company
from the Purchaser of this Subscription Agreement executed by the
Purchaser and the Purchase Price (the "Payment Date"). In the event
that the Board does not approve this Subscription Agreement within
ten (10) business days of the Payment Date, then the Company shall
return the entire Purchase Price to the Purchaser as soon as
practicable after the expiration of such ten (10) business day
period.
7.03 RECEIPT. Upon receipt by the Company of the Purchase
Price from Purchaser and the delivery of the certificate(s) for
the Purchased Shares to Purchaser, the Purchased Shares will be
validly issued, fully paid and nonassessable.
8. FURTHER ACTION. The parties hereto hereby agree that
they will, at any time and from time to time, after the date hereof, upon
request of any other party hereto, do, execute, acknowledge and deliver or
cause to be done, executed, acknowledged and delivered, all such further acts,
assignments, transfers, agreements, assurances and powers of attorney as may be
reasonably required to carry out the transactions herein contemplated.
9. WAIVER OF BREACH. The waiver of any party hereto of a
breach of any provision of this Subscription Agreement shall not operate or be
construed as a waiver of any subsequent breach by any party hereto.
10. BINDING EFFECT. This Subscription Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their
respective heirs, personal representatives, successors and permitted assigns.
11. AMENDMENTS. No amendments or variations of the terms
and conditions of this Subscription Agreement shall be valid unless the same is
in writing and signed by the parties hereto.
12. HEADINGS. The paragraph headings contained herein are
for convenience only and shall not, in any way, affect the interpretation or
enforceability of any provision of this Subscription Agreement.
13. GOVERNING LAW. This Subscription Agreement shall be
construed and enforced pursuant to the laws of the State of Delaware.
14. ENTIRE AGREEMENT. This instrument contains the entire
agreement between the parties hereto with respect to the transactions
contemplated in this Subscription Agreement.
15. SEVERABILITY. The validity or unenforceability of any
provision of this Subscription Agreement shall not affect the enforceability or
validity of any other provision of this
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Subscription Agreement and such provisions shall remain valid and binding on the
parties to this Subscription Agreement.
16. GENDER. 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 number shall include the plural number, and vice versa, and the
terms "hereof", "hereby", "hereto", "hereunder", "herein" and similar terms
mean this Subscription Agreement.
17. ASSIGNMENT. None of the parties hereto may assign,
transfer or otherwise dispose of any of their rights or obligations under this
Subscription Agreement.
18. REMEDIES. The rights and obligations under this
Subscription Agreement are several, with each party being completely free to
enforce any or all rights or obligations under this Subscription Agreement
against any other party with or without the concurrence or joinder of any other
party hereto.
19. COUNTERPARTS. This Subscription 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
Subscription Agreement in three (3) counterparts effective as of the
Subscription Date.
N-VIRO INTERNATIONAL CORPORATION
By /s/ J. Patrick Nicholson
-------------------------------------
J. Patrick Nicholson, Chairman, Chief
Executive Officer and President
/s/ Gregory Meyer
--------------------------------------
Gregory Meyer, Purchaser
[Notary Stamp - Joyce L. Escalante Notary Public of New Jersey - Comm. exp
10/10/2000]
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EXHIBIT 2
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STOCK PURCHASE AGREEMENT
N-VIRO INTERNATIONAL CORPORATION
This Stock Purchase Agreement (the "Agreement") is made this 23rd day
of September, 1997, by and between N-Viro International Corporation, a Delaware
corporation ("Seller"), and Heartland Limited Partnership I, a Wisconsin limited
partnership (the "Purchaser").
In consideration of the mutual promises and covenants herein contained,
the parties hereto agree as follows:
I. STOCK PURCHASE
1.1 STOCK PURCHASE. Subject to the terms and conditions hereof and in
reliance upon the representations and warranties contained herein, Seller will
issue and sell to the Purchaser, and the Purchaser will purchase from Seller,
158,000 shares of common stock of Seller, $.01 par value per share (the
"Shares"), for a purchase price of $1.75 per Share, for an aggregate purchase
price for the Shares of $276,500.
1.2 PAYMENT FOR AND DELIVERY OF THE SHARES. At the Closing, which
shall be on September 22, 1997, or such other date as the parties may agree,
Purchaser shall pay the $276,500 total purchase price for the Shares (the
"Purchase Price") to Seller by wire transfer of immediately available funds to
such account or accounts as Seller shall designate to Purchaser in writing at
least two business days prior to the Closing Date, and Seller shall deposit
with Federal Express for overnight delivery to Furnam Selz LLC, Attn: Andrew
Tonge, 230 Park Avenue, 12th Floor, New York, NY 10169, the custodian for the
Purchaser two days prior to Closing for release upon payment one or more
certificates for the Shares duly registered in the name of Purchaser.
1.3 RESTRICTIONS ON SHARES.
Purchaser acknowledges and agrees that:
(a) The offer and sale of the Shares has not been registered under the
Securities Act of 1933 (the "Act"), any state securities laws or the laws of any
foreign jurisdiction, but rather are being made privately by Seller pursuant to
the exemption from registration provided by Rule 506 of Regulation D promulgated
under the Act and applicable state law exemptions.
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(b) All stock certificates evidencing the Shares shall bear a
restrictive legend in substantially the language set forth below.
The shares represented by this Certificate have not been registered
pursuant to the Securities Act of 1933 (the "Act") and are "restricted
securities" as that term is defined in Rule 144 under the Act. These
shares may not be offered for sale, sold, or otherwise transferred
except pursuant to an effective registration statement under the Act or
pursuant to an exemption from registration under the Act.
II. REPRESENTATIONS AND WARRANTIES OF PURCHASER
KNOWLEDGE AND EXPERIENCE. Purchaser hereby represents,
warrants and agrees that it is an "Accredited Investor" as that term is defined
in Rule 501(a) of Regulation D promulgated under the Act by virtue of having
assets in excess of $5,000,000 and not being formed for the purpose of acquiring
the Shares.
INFORMATION PROVIDED RESPECTING SELLER. Purchaser has been
supplied with information and materials concerning Seller consisting of its
filings with the United States Securities and Exchange Commission during the
past 18 months. Seller has provided Purchaser with the opportunity to discuss
with and ask questions of Seller's representatives concerning Seller's business
and business plan. Purchaser has had the opportunity to ask questions of and
receive answers from management of Seller concerning the terms and conditions of
this Agreement, and to obtain from Seller any additional information which
Seller possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of the information provided to such Purchaser.
SHARES ACQUIRED BY PURCHASER.
Purchaser represents and warrants that:
(a) Purchaser is acquiring the Shares for the Purchaser's own account
and not for or on behalf of any other person;
(b) The Shares have not been acquired with a view towards distribution
or redistribution or with the intent to divide Purchaser's participation with
others;
(c) Purchaser will only resell the Shares pursuant to registration
under the Act and the laws of any applicable states or pursuant to an available
exemption from registration. The only registration rights which Purchaser has
with respect to the Shares are set forth in the Registration Rights Agreement.
<PAGE> 3
NON-DISCLOSURE. Purchaser has not distributed any written
materials furnished to Purchaser by Seller to anyone other than the Purchaser's
professional advisors.
KNOWLEDGE AND EXPERIENCE. Purchaser has such knowledge and
experience in financial and business mattes in general to evaluate the merits
and risks of the prospective investment and to make an informed investment
decision.
NO GOVERNMENTAL FINDINGS. Purchaser understands that no federal
or state agency has made any finding or determination regarding the fairness of
the Shares or any recommendation or endorsement concerning an investment in the
Shares.
ORGANIZATION. Purchaser is a limited partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization and has the requisite power and authority to own its properties
and carry out its business as now being conducted.
CAPACITY, AUTHORIZATION AND ENFORCEABILITY OF AGREEMENT.
Purchaser has the requisite power and authority to enter into this Agreement
and to perform its obligations hereunder. This Agreement has been duly
authorized, executed and delivered by Purchaser and constitutes a legal, valid
and binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms.
PLACE OF BUSINESS. Purchaser's principal place of business is,
and shall be at the time of delivery and acceptance of the Shares, the State of
Wisconsin.
SPECULATIVE INVESTMENT. Purchase recognizes the speculative
nature of an investment in the Shares.
2.11 NO PREPRESENTATIONS. Purchaser acknowledges and agrees that
Seller has made no oral or written representations or warranties to Purchaser,
either directly or indirectly, through its officers, directors, employees or
agents, with respect to Seller or the Shares, other than those representations
and warranties set forth herein. Purchaser further acknowledges and agrees
that, in making its decision to execute this Agreement and purchase the Shares,
Purchaser has not relied upon on any disclosures of Seller, its officers,
directors, employees or agents, other than such disclosures as are set forth
herein and in the SEC Reports (as hereinafter defined).
III. REPRESENTATION, WARRANTIES AND COVENANTS OF SELLER
Seller represents, warrants and agrees with Purchaser as follows:
3.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has the requisite corporate power and
authority to own or lease all material property that it purports to own or lease
and to carry on its business as now being
<PAGE> 4
conducted. Seller is duly qualified as a foreign corporation, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities make such qualification
necessary, except to the extent that the failure to so qualify would not have a
material adverse effect on the business or financial condition of Seller.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Seller has heretofore
furnished to Purchaser or its counsel a complete and correct copy of its
Certificate of Incorporation, as amended, and the Bylaws, as amended, of
Seller, as presently in effect.
3.3 CAPITALIZATION. As of the date hereof, the authorized capital
stock of Seller consists of 45,000,000 shares of common stock $.01 par value of
which 2,642,750 shares are issued and outstanding. There are 250,000 shares of
Common Stock reserved for issuance upon exercise of stock options granted by
Seller. Except for this Agreement and as described in Schedule 3.3 hereto,
there are no options, warrants or other rights, agreements or commitments that
do or may obligate Seller to issue any shares of its capital stock. The Shares,
upon issuance on the terms and conditions specified herein, will be duly
authorized, validly issued, fully paid and nonassessable, and free of
preemptive rights. Upon delivery of the Shares, in consideration of the
purchase price, the Purchaser will acquire valid and marketable title to the
Shares free and clear of any encumbrances and restrictions except for the
transfer restrictions described in Section 1.3 of this Agreement.
3.4 CAPACITY, AUTHORIZATION AND ENFORCEABILITY OF AGREEMENT. Seller
has the requisite corporate power and authority to enter into this Agreement,
including the Registration of Rights Agreement, and to perform its obligations
hereunder and thereunder. This Agreement has been duly authorized, executed and
delivered by Seller and constitutes a legal, valid and binding obligation of
Seller enforceable against the Seller in accordance with its terms. The
Registration Rights Agreement has been duly authorized by Seller and, upon due
execution and delivery by Seller of this Agreement, will constitute a legal,
valid and binding obligation of Seller enforceable against Seller in accordance
with its terms.
3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The execution and
delivery of this Agreement and the attached Registration Rights Agreement and
the consummation of the transactions herein and therein contemplated will not
conflict with or violate any law, regulation, court order, judgment or decree
applicable to Seller or by which its property is bound or affected, or conflict
with or result in any breach of or constitute a default (or any event which
with or without notice or lapse of time or both could become a default) under,
or give to others any rights of termination or cancellation of, or result in
the creation of any lien or encumbrance on any of the properties or assets of
Seller pursuant to: (a) the Certificate of Incorporation or Bylaws of Seller or
(b) any material contract, instrument, permit, license or franchise to which
Seller is a party or by which Seller or its property is bound or affected.
Except for applicable requirements, if any, of the Securities Exchange Act of
1934 (the "Exchange Act"), the Employee Retirement
<PAGE> 5
Income Security Act of 1974, state securities laws ("Blue Sky Laws") and the
Nasdaq Stock Market, (i) Seller is not required to submit any notice, report or
other filing with any governmental or regulatory authority, domestic or foreign,
in connection with the execution, delivery or consummation of this Agreement,
the Registration Rights Agreement and the transactions contemplated thereby; and
(ii) no waiver, consent, approval or authorization of any governmental or
regulatory authority, domestic or foreign, is required to be obtained or made by
Seller in connection with its execution or delivery of this Agreement, the
Registration Rights Agreement or the consummation of the transactions intended
hereby.
3.6 FINANCIAL STATEMENTS; SEC REPORTS. Seller has previously furnished
or will furnish to Purchaser prior to the Closing with true and complete copies
of any registration statements filed pursuant to the Securities Act of 1933
since January 1, 1997 (the "Registration Statements"); and its Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, its Forms 10-Q for the
quarters ended March 31, 1997 and June 30, 1997, its definitive proxy statement
for the 1997 Annual Meeting of Shareholders, any reports on Form 8-K, and any
amendments to any of the foregoing, in each case as filed with or furnished to
the SEC (collectively the "SEC Reports"). The financial statements and
schedules contained in the SEC Reports and Registration Statements (or
incorporated therein by reference) were prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as specifically disclosed therein) and fairly present
the information purported to be included therein. Except as set forth on
Schedule 3.6 attached hereto and made a part hereof, each such SEC Report was
filed with or furnished to the SEC on a timely basis and, on the date of filing
thereof, complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC thereunder. Subject to
the matters referred to in that certain letter from the SEC to Seller dated
August 22, 1997, a copy of which is attached hereto and made a part hereof,
neither the SEC Reports or the Registration Statements, at the time they were
filed with SEC, contained any untrue statement of a material fact or omitted to
state material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
3.7 COMPLIANCE WITH LAW. Seller is in compliance in all material
respects with all laws and regulations applicable to its operations or with
respect to which compliance is a condition of engaging in the business thereof,
except to the extent that failure to comply would not have a material adverse
effect on the business or financial condition of Seller.
3.8 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Reports, Registration Statements, Schedule 3.8 attached hereto, or as
contemplated by this Agreement, since January 1, 1997, there has not been:
(a) any material adverse change in the business, assets,
condition (financial or otherwise), operations or prospects
of Seller;
<PAGE> 6
(b) any damage, destruction or loss, whether covered by insurance
or not, having a material adverse effect on the business or
financial condition of Seller;
(c) any issuance of capital stock or of rights to acquire capital
stock or securities convertible into capital stock, or any
agreements relating to such issuance, other than the issuance
of Common Stock upon the exercise of stock options under the
option plans of Seller;
(d) any redemption, repurchase or other acquisition of Common
Stock of Seller or any declaration or payment of any dividend
or other distribution in cash, stock or property with respect
to Common Stock, or any amendment to the Certificate of
Incorporation or Bylaws or comparable documents of Seller.
(e) any labor dispute, other than routine individual grievances
that are not, singly or in the aggregate, material to the
business, assets, condition (financial or otherwise),
operations or prospects of Seller;
(f) any entry into any material commitment or transaction
including, without limitation, any borrowing, repayment of
indebtedness, capital expenditure or business combination,
other than in the ordinary course of business consistent with
past practice or as contemplated by this Agreement;
(g) any transfer of or rights granted under any material leases,
licenses, agreements, patents, trademarks, trade names or
copyrights other than those transferred or granted in the
ordinary course of business;
(h) any change by Seller in accounting principles or methods
except insofar as may have been required by a change in
generally accepted accounting principles;
(i) any contract, agreement, commitment or arrangement with
respect to any of the foregoing; or
(j) any pending or, to the knowledge of Seller, threatened
litigation or investigation against Seller which individually
or in the aggregate might result in any material adverse
change in the business, assets, condition (financial or
otherwise), operations or prospects of Seller.
3.9 BROKERS AND FINDERS. Neither Seller nor any of its officers,
directors, employees or agents acting on behalf of the Seller have employed any
broker or finder, and none of the foregoing have incurred any liability for any
brokerage fees, commissions or finders' fees in connection with this Agreement.
<PAGE> 7
3.10 OFFERING. Subject to the accuracy of Purchaser's representations
herein, the offer, sale and issuance of the Shares to be issued in conformity
with the terms of this Agreement constitute transactions exempt from the
registration requirements of Section 5 of the Act.
3.11 USE OF PROCEEDS. The proceeds from the sale of the Shares to the
Purchaser shall be used primarily to settle all remaining monetary obligations
of Seller to Frank Manchak, Jr., under and pursuant to the terms of the Second
Amendment to Settlement Agreement dated as of July 18, 1997, by and among Frank
Manchak, Jr., Seller, N-Viro Energy Systems, Ltd., an Ohio limited partnership,
N-Viro Energy Systems, Inc., an Ohio corporation, and American N-Viro
Resources, Inc., an Ohio corporation.
3.12 CONDUCT OF BUSINESS BY SELLER PENDING THE CLOSING. Prior to the
Closing Date, unless Purchaser shall otherwise agree in writing or as otherwise
contemplated by this Agreement:
(i) Seller agrees to conduct its business only in the ordinary and
usual course, and to ensure that the representations of Seller
contained hereinabove shall at all times continue to be true.
(ii) Seller shall use its best efforts to preserve intact the
business organization of Seller, to keep available the
services of its current officers and key employees, and to
preserve the goodwill of those having a business relationship
with Seller.
3.13 ACCESS TO INFORMATION. Prior to the Closing Date, Seller will
give Purchaser and its authorized representatives reasonable access during
normal business hours to Seller's facilities and to its books and records and
will cause its officers promptly to furnish Purchaser with such information
with respect to the business and properties of Seller as Purchaser may from
time to time reasonably request. Notwithstanding the foregoing, Seller may
decline to furnish to Purchaser non-public information to the extent that
Seller reasonably concludes that such information is proprietary or otherwise
commercially sensitive.
IV. FURTHER COVENANTS
4.1 REGISTRATION RIGHTS. On or before the Closing Date, Seller and
Purchaser shall enter into a registration rights agreement substantially in the
form of Exhibit B (the "Registration Rights Agreement").
4.2 PUBLIC ANNOUNCEMENTS. Purchaser and Seller will consult with each
other before issuing any press release or otherwise making any public statements
with respect to any of the transactions contemplated hereby and shall not issue
any such press release or make any such public statement prior to such
consultation, except as may be required by law.
<PAGE> 8
4.3 BEST EFFORTS. Upon the terms and subject to the conditions hereof,
and subject to fiduciary obligations under applicable law, each of the parties
hereto agrees to use its best efforts to take or cause to be taken all actions
and to do or cause to be done all things necessary, proper or advisable to
consummate the transactions contemplated by this Agreement, and shall use its
best efforts to obtain all necessary registrations and filings, approvals and to
effect all necessary registrations and filings, including without limitation
filings under the Exchange Act and any Blue Sky Laws. The parties will comply
with all applicable rules and regulations of any governmental authority in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
V. CONDITIONS OF PURCHASE AND SALE
5.1 PURCHASER'S CONDITIONS OF CLOSING. Purchaser's obligation to
purchase the Shares at the Closing are subject to the fulfillment (or waiver by
Purchaser) of the following conditions:
5.1.1 AGREEMENTS AND CONDITIONS COMPLIED WITH. All the terms,
agreements and conditions of this Agreement, including execution of the
Registration Rights Agreement, to be complied with or performed or fulfilled by
Seller at or prior to the Closing Date shall have been complied with, performed
and fulfilled in all material respects.
5.1.2 REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties of Seller contained herein shall be true and correct in all
material respects at and as of the Closing Date as if made at and as of such
time, except insofar as any such representations or warranties relate solely to
a particular date or period.
5.1.3 CONSENTS AND FILINGS. All filings and registrations with,
and notifications to, all federal, state, local and foreign authorities,
required for consummation of the sale of Shares shall have been made by Seller,
and all waivers, approvals, consents, licenses, permits and authorizations of
all federal, state, local and foreign authorities required for consummation of
the sale of the Shares shall have been received and shall be in full force and
effect, except for such filings, registrations, notifications, approvals,
licenses, permits and authorizations, the absence of which would not in the
aggregate prevent the sale of the Shares from being consummated or having a
material adverse effect on the business or financial condition of Seller.
5.1.4 NO LITIGATION. There shall not have been any action taken
nor threatened, or any statute, regulation, judgment, order or injunction
enacted or entered, by or before any governmental or regulatory authority or
any court, domestic or foreign, which questions the validity of this Agreement,
the Registration Rights Agreement or the right of Seller to enter into any such
agreement or to consummate the transactions herein contemplated or which would
make the transactions herein contemplated illegal or which otherwise seeks to
<PAGE> 9
restrain the consummation of the transactions or the exercise by Purchaser of
any rights appurtenant to the Shares or which seeks to obtain any damages as a
result of the transaction from Purchaser or Seller, which damages, in the case
of Seller, would have a material adverse effect on the business or financial
condition of Seller taken as a whole.
5.2 SELLER'S CONDITIONS TO CLOSING. Seller's obligation to sell and
issue the Shares at the Closing is subject to the fulfillment (or waiver by
Seller) as of the Closing Date of the following conditions:
5.2.1 AGREEMENTS AND CONDITIONS COMPLIED WITH. All the terms,
agreements and conditions of this Agreement to be complied with or performed or
fulfilled by Purchaser at or prior to the Closing Date shall have been complied
with, performed and fulfilled in all material respects.
5.2.2 REPRESENTATIONS AND WARRANTIES CORRECT. The
representations and warranties of Purchaser contained herein shall be true and
correct in all material respects at and as of the Closing, except insofar as any
such representations or warranties relate solely to a particular date or period.
VI. MISCELLANEOUS
6.1 CAPTIONS AND HEADINGS. The Article and Section headings throughout
this Agreement are for the convenience of reference only and shall in no way be
deemed to define, limit or add to any provision of this Agreement.
6.2 LEGAL FEES. Seller shall reimburse Purchaser for the fees of
Purchaser's legal counsel, Quarles & Brady, incurred in connection with this
transaction.
6.3 ENTIRE AGREEMENT. This Agreement states the entire agreement and
understanding of the parties and shall supersede all prior agreements and
understandings. No amendment to this Agreement shall be made without the
written approval of the parties.
6.4 SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect any other provision hereof, which
shall be construed in all respects as if such invalid or unenforceable
provision were omitted.
6.5 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.
<PAGE> 10
6.6 BINDING EFFECT. This Agreement shall inure to the benefit of and
be binding upon the parties to this Agreement, their heirs, representatives,
successors, agents, assigns, transferees, and all subsequent holders of the
Shares purchased by the Purchaser.
6.7 NOTICES. All notices, requests, demands, consents, and other
communications hereunder shall be transmitted in writing and shall be deemed to
have been duly given when delivered or sent by certified mail, postage prepaid,
with return receipt requested, addressed to the parties as follows: Seller at
3450 West Central Avenue, Suite 328, Toledo, Ohio 43606, with a copy to James
F. White, Jr., 1000 Jackson Street, Toledo, Ohio 43624; and to Purchaser at 790
North Milwaukee, Milwaukee, Wisconsin 53202, with a copy to Conrad G. Goodkind,
Quarles & Brady, 411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. Any
party may change its address for purposes of this Section by giving written
notice as provided herein.
6.8 INDEMNIFICATION. Purchaser agrees to indemnify and hold harmless
Seller and its officers, directors and persons who control Seller, from and
against all damages, losses, costs and reasonable expenses (including
attorneys' fees) which they may incur by reason of the failure of Purchaser to
fulfill any of the terms or conditions of this Agreement, or by reason of any
breach of the representations and warranties made by the Purchaser in this
Agreement. Seller agrees to indemnify and hold harmless Purchaser and all its
partners, officers and persons who control Purchaser from and against all
damages, losses, costs and reasonable expenses (including attorneys' fees)
which it may incur by reason of the failure of Seller to fulfill any of the
terms or conditions of this Agreement, or by reason of any breach of the
representations and warranties made by Seller in this Agreement or in any
document provided by Seller to the Purchaser.
6.9 SURVIVAL. The representations and warranties of the Purchaser and
Seller shall survive the sale of the Shares pursuant to this Agreement.
6.10 COUNTERPARTS. This Agreement may be executed in counterparts,
which shall be deemed to constitute one and the same instrument.
VII. TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement shall continue until the earlier of
(a) the termination hereof by the mutual consent of Purchaser and Seller or (b)
the close of business on September 25, 1997, in which case this Agreement shall
terminate if the transactions contemplated herein have not yet been
consummated.
7.2 EFFECT OF TERMINATION. Upon the termination of this Agreement
pursuant to Section 7.1, no party hereto shall have any liability or further
obligation to any other party except as may result from a breach of this
Agreement.
<PAGE> 11
7.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
7.4 WAIVER. At any time prior to the Closing, any party hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other party hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only as set forth in an instrument in writing signed by such
party.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
HEARTLAND LIMITED PARTNERSHIP I
By: Heartland Advisors, Inc., General Partner of
Heartland Limited Partnership I, by William J.
Nasgovitz, President
/s/ William J. Nasgovitz, President
-------------------------------------------
N-VIRO INTERNATIONAL CORPORATION
By: /s/ J. Patrick Nicholson
-------------------------------------------
J. Patrick Nicholson
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 3
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is entered into
as of September 23, 1997, by and among N-Viro International Corporation, its
successors and assigns (the "Company"), and Heartland Limited Partnership I (the
"Holder").
WHEREAS, this Agreement is made in connection with the sale by the
Company to Holder of 120,000 shares of the Common Stock of the Company (the
"Shares") pursuant to that certain Stock Purchase Agreement dated September 23,
1997 (the "Purchase Agreement"), the terms of which require the Company to
provide Holder certain registration rights with respect to the Shares.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
REGISTRATION RIGHTS
Section 1.01 CERTAIN DEFINITIONS. In addition to the other terms
defined elsewhere in this Agreement and the Stock Purchase Agreement to which it
is attached, as used in this Agreement, the following terms shall have the
following respective meanings:
(a) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the same time.
(c) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the same time.
(d) "Registrable Securities" means any of the following shares which
have not been sold to the public or which have not lost their registration
rights as provided herein: (i) the Shares and (ii) any shares of Common Stock
of the Company, and any securities of the Company or any other corporation,
issued as a dividend or other distribution with respect to or in replacement of
or exchange for the Shares. Notwithstanding the foregoing, the Shares, as well
as all other securities of the Seller held by Holder or any party purchasing
the Shares, either directly or indirectly, from the Holder, shall cease to be
Registrable Securities when such Shares or
<PAGE> 2
securities, as the case may be, may be distributed to the public pursuant to
Rule 144(k) (or any similar provision then in force) promulgated under the
Securities Act.
(e) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Article I hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company and Holder's counsel, blue sky fees
and expenses and the expense of any audits incident to or required by any such
registration, but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company.
(g) "Seller Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of the Registrable Securities.
Section 1.02 REGISTRATION OF REGISTERABLE SECURITIES.
(a) DEMAND REGISTRATION RIGHTS.
(1) REGISTRATION. The Company will file a registration
statement with the Commission with respect to all or a portion of the
Registrable Securities within 30 days of a request made by Holder at any time
after March 31, 1998. Purchaser may exercise this demand registration right up
to the earlier of (i) two years from the date of this Agreement, (ii) the
period of time after which restrictions on sales of the Company's securities by
persons other than affiliates pursuant to Commission Rule 144(k) (or any
successor provision) terminate, or (iii) until the Holder no longer owns any of
the Registrable Securities;
(2) REGISTRATION STATEMENT FORM. The Company may, if
permitted by law, effect the registration pursuant to Section 1.02 by filing a
registration statement on Form S-3 or any successor or similar short form
registration statement (or Form S-1 if Form S-3 is not available). The Company
may effect the registration by filing a shelf registration statement with the
Commission pursuant to Rule 415 under the Securities Act covering the
Registrable Securities. The Company may, in its discretion, register under such
registration, in addition to the Registrable Securities, shares of Common Stock
of the Company held by others.
(3) DELAY OR SUSPENSION OF EFFECTIVENESS. Seller shall have
the right (i) to defer its request for acceleration of effectiveness or, after
effectiveness, to suspend effectiveness
<PAGE> 3
of the registration statement if, in the good faith judgment of the Board of
Directors of the Seller and an opinion of counsel acceptable to Buyer, such
delay in requesting acceleration of effectiveness or suspension of effectiveness
is necessary in light of the existence of material non-public information
(financial or otherwise) concerning the Seller and/or any other entity in which
the Seller has, or is proposing to acquire an equity interest provided further
that the period of such delay or suspension shall not exceed the lesser of 60
days or the time at which the information either becomes public or non-material;
and provided further that the aggregate of any such delay and/or suspension
periods shall not exceed 120 days.
(b) PIGGY-BACK REGISTRATION. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering by
the Company for its own account or for the account of any other person or entity
of any class of equity security, including any security convertible into or
exchangeable for any equity securities (other than (a) a registration statement
on Form S-4 or S-8 (or any substitute form for comparable purposes that may be
adopted by the Commission), (b) a registration statement filed in connection
with an exchange offer or an offering of securities solely to the Company's
existing security holders, or (c) in connection with a registration statement
that is on a form pursuant to which an offering of the Registrable Securities
cannot be registered), then the Company shall in each case give written notice
of such proposed filing to the Holder at least 20 days before the anticipated
filing date. Such notice shall offer the Holder the opportunity to register such
number of Registrable Securities as Holder may request. Upon written request of
Holder received by the Company within 10 business days after the date of the
Company's delivery of its notice to the Holder of its intention to file such a
registration statement, subject to the conditions and in accordance with the
procedures set forth herein, the Company shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the Registrable Securities requested by Holder to be included in the
registration statement for such offering on the same terms and conditions as any
similar securities of the Company included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of such offering
indicates in writing to the Holder its reasonable belief that because of the
size of the offering intended to be made, the inclusion of the Registrable
Securities requested to be included might reasonably be expected to jeopardize
the success of the offering of the securities of the Company to be offered and
sold by the Company for its own account, then the amount of securities to be
offered for the account of the Holder shall be reduced on a pro rata basis with
all other sellers other than the Company, to the extent necessary to reduce the
total amount of securities to be included in such offering to an amount
recommended by such managing underwriter or underwriters.
Section 1.03 EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 1.02 shall be
<PAGE> 4
borne by the Company. Unless otherwise stated, all Seller Expenses related to
securities registered by the Holder shall be borne by Holder.
Section 1.04 REGISTRATION PROCEDURES. The Company will:
(a) use its best efforts to cause the registration statement filed
pursuant to Section 1.02 to become and remain effective;
(b) furnish to Holder such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as Holder may reasonably request to facilitate the public offering of
the registrable Securities;
(c) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such state securities
or Blue Sky laws of such jurisdictions as Holder may reasonably request,
provided that the Company shall not be obligated to take any action to effect
any such registration or qualification pursuant to Section 1.04(d) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration or
qualification unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act;
(d) notify counsel for Holder, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective
under the Securities Act or a supplement to any prospectus forming a part of
such registration statement has been filed;
(e) notify counsel for Holder promptly of any request by the
Commission for the amending or supplementing of such registration statement or
prospectus or for additional information;
(f) prepare and file with the Commission, promptly upon the request of
Holder, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for Holder (and concurred in by
counsel for the Company), is required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of the Registerable
Securities;
(g) prepare and promptly file with the Commission and promptly notify
counsel for Holder of the filing of such amendment or supplement to any such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act,
any event shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state
<PAGE> 5
any material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
(h) advise counsel for Holder, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement under
the Securities Act or the initiation or threatening of any proceeding for such
purpose, and promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be issued, with it
being provided further that the effective requirements for the registration
statement referred to in Section 1.04(a) will be extended for any such time as
there shall exist any stop order in respect of the registration statement; and
(i) not file any amendment or supplement to such registration
statement or prospectus if, in the opinion of counsel for Holder, such
amendment or supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations thereunder,
after having been furnished with a copy substantially in the form thereof at
least two business days before the filing thereof; provided, however, that if
in the opinion of counsel for the Company the filing of such amendment or
supplement is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not violate
applicable law, the Company may make such filings.
Section 1.05 INDEMNIFICATION.
(a) The Company will indemnify, hold harmless and defend Holder, its
officers, partners, legal counsel and accountants, each underwriter of the
Registrable Securities and each person who controls Holder or any underwriter
within the meaning of Section 15 of the Securities Act against any and all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any registration or qualification
of the Registrable Securities, or which arise out of or are based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act or any
state securities laws applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such indemnified party for
any legal and any other expenses
<PAGE> 6
reasonably incurred by them in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable, in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission, made in reliance upon and in conformity with information
furnished to the Seller by or on behalf of Holder or any such underwriter for
use therein.
(b) Holder will, if Registerable Securities held by Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, and each of its officers,
directors, legal counsel and accountants, and each person who controls the
Company within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration, prospectus, offering circular
or other document, or 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, and will reimburse each such indemnified person for any
legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
information furnished to the Seller by or on behalf of Holder for use therein.
(c) Each person to be indemnified pursuant to this Section 1.05 (the
"Indemnified Party") will, promptly after receipt of written notice of the
commencement of any action against such Indemnified Party in respect of which
indemnity may be sought from an indemnifying person under this Section 1.05
(the "Indemnifying Party") notify the Indemnifying Party in writing of the
commencement thereof, provided, however, that the failure of any person to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement except to the extent that such Indemnifying
Party is actually prejudiced by such failure to give notice. If any such action
shall be brought against any Indemnified Party and it shall notify an
Indemnifying Party of the commencement thereof, the Indemnifying Party will be
entitled to participate therein and, to the extent it may desire, jointly with
any other Indemnifying Party similarly notified, to assume the defense thereof
with counsel satisfactory to such Indemnified Party, and after notice from the
Indemnifying Party to such Indemnified Party of its election to assume the
defense thereof, the Indemnifying Party will not be liable to such Indemnified
Party under Section 1.05 for any other legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation unless (i) the Indemnified Party shall
have employed counsel in an action in which the Indemnified Party and
Indemnifying Party are both defendants and there is a conflict of
<PAGE> 7
interest between such parties that would prevent counsel from adequately
representing both parties, (ii) the Indemnifying Party shall not have employed
counsel satisfactory within the exercise of reasonable judgment of the
Indemnified Party to represent the Indemnified Party within a reasonable time
after the notice of the commencement of the action or (iii) the Indemnifying
Party has authorized the employment of counsel for the Indemnified Party at the
expense of the Indemnifying Party. The undertaking contained in this Section
1.05 shall be in addition to any liabilities which the Indemnifying Party may
have pursuant to law.
(d) If the indemnification provided for in this Section 1.05 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements, actions or omissions which resulted in
such loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
Section 1.06 LOCKUP AGREEMENT. In consideration for the Company
agreeing to its obligations under this Article I, Holder agrees in connection
with any firmly underwritten public offering of the Company's Common Stock,
upon the request of the Company or the underwriters managing such offering, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities without the prior written
consent of the Company or such underwriters, as the case may be, for such
period of time (not to exceed 30 days) from the effective date of such
registration as the Company or the underwriters may specify; provided, however,
that Holder shall have no obligation to enter into the agreement described
herein unless all executive officers and directors of the Company and all other
holders of more than 5% of the Company's outstanding Common Stock enter into
similar agreements.
Section 1.07 INFORMATION BY HOLDER. Holder shall furnish to the
Company such information regarding Holder and the distribution of proceeds by
Holder as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
Section 1.02 of this Agreement.
<PAGE> 8
Section 1.08 RULE 144 REPORTING. With a view to making available to
Holder the benefits of certain rules and regulations of the Commission which at
any time permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) so long as Holder owns any unregistered Registrable Securities,
furnish to Holder forthwith upon request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 and the
Securities Act and Exchange Act, a copy of the most recent annual or quarterly
report of the Company and such other reports and documents of the Seller as
Holder may reasonably request in availing Holder of any rule or regulation of
the Commission allowing the sale of any such securities without registration.
Section 1.09 TRANSFER OF REGISTRATION RIGHTS. The rights of Holder to
have the Company register the Registrable Securities granted to the Holder by
the Company under this Agreement may be assigned by the Holder to not more than
five transferees or assignees of any of the Holder's Registrable Securities,
provided that the Company is given written notice by the Holder at the time of
or within a reasonable time after said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned, provided that no such assignment
shall increase the number of registrations that the Company may be required to
effect under this Agreement. Any person who, in accordance with the provisions
of Section 1.09, becomes a transferee or assignee of any of the Registrable
Securities shall, upon agreeing in writing to be bound by the terms of this
Agreement, be included in the term "Holder" so long as such person holds such
Registrable Securities and shall be entitled to take benefits of this Agreement.
ARTICLE II
MISCELLANEOUS
Section 2.01 AMENDMENT. Any modification, amendment, or waiver of this
Agreement or any provision hereof shall be effective only if in writing and
executed by Holder and the Company.
<PAGE> 9
Section 2.02 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Delaware without regard to its conflicts of
laws principles.
Section 2.03 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the Provisions hereof shall insure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
Section 2.04 NOTICES. All notices, requests, demands, consents, and
other communications hereunder shall be transmitted in writing and shall be
deemed to have been duly given when hand delivered or sent by certified mail,
postage prepaid, with return receipt requested, addressed to the parties as
follows: Seller at 3450 West Central Avenue, Suite 328, Toledo, Ohio 43606; and
to Purchaser at 790 North Milwaukee, Milwaukee, Wisconsin 53202, with a copy to
Conrad G. Goodkind, Quarles & Brady, 411 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202. Any party may change its address for the purposes of this
Section by giving written notice as provided herein.
Section 2.05 SEVERABILITY. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
Section 2.06 ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 2.07 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective representatives thereunto duly authorized as of the
date first above written.
N-VIRO INTERNATIONAL CORPORATION
By: /s J. Patrick Nicholson
-------------------------------------
J. Patrick Nicholson
HEARTLAND LIMITED PARTNERSHIP I
By: /s/ William J. Nasgovitz
-------------------------------------
William J. Nasgovitz, President
Heartland Advisors, Inc., General Partner
of Heartland Limited Partnership I
