-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pmdpfp7knNd1Wixn0lD0zs9aN/oqYKhYe2tkJSVelVRmLTAeGrOiaqmWnfKLgEUv 3sq2twp4DMjCAB4qy+/emw== 0000904896-05-000084.txt : 20051012 0000904896-05-000084.hdr.sgml : 20051012 20051012093256 ACCESSION NUMBER: 0000904896-05-000084 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050922 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20051012 DATE AS OF CHANGE: 20051012 FILER: COMPANY DATA: COMPANY CONFORMED NAME: N-VIRO INTERNATIONAL CORP CENTRAL INDEX KEY: 0000904896 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 341741211 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21802 FILM NUMBER: 051133999 BUSINESS ADDRESS: STREET 1: 3450 W CENTRAL AVE STREET 2: STE 328 CITY: TOLEDO STATE: OH ZIP: 43606 BUSINESS PHONE: 4195356374 MAIL ADDRESS: STREET 1: 3450 WEST CENTRAL AVENUE SUITE 328 CITY: TOLEDO STATE: OH ZIP: 43606 8-K 1 doc1.txt 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 22, 2005 N-VIRO INTERNATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 0-21802 34-1741211 (STATE OR OTHER (COMMISSION FILE (IRS EMPLOYER JURISDICTION OF NUMBER) IDENTIFICATION INCORPORATION OR NO.) ORGANIZATION) 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 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry Into a Material Definitive Agreement On September 27, 2005, N-Viro International Corporation, or the Company, executed a Financial Public Relations Agreement, or the Agreement, dated September 15, 2005, with Strategic Asset Management, Inc., or SAMI. The Company has appointed SAMI as its non-exclusive financial public relations counsel for a term of two years from the date of the Agreement. For its services, the Company has issued SAMI 120,000 shares of the Company's unregistered common stock, and 120,000 common stock purchase warrants to purchase an equal number of shares of the Company's common stock at an exercise price of $1.84 per share, for an exercise period not to exceed five years from the date of the Agreement. The shares and the warrants were issued in a private transaction pursuant to an exemption under Section 4(2) of the Securities Act of 1933.The President of SAMI is Robert Cooke, who was listed as a more than 5% beneficial owner in our Definitive Proxy Statement, Amendment No. 1, filed May 27, 2005. The Agreement has been attached to this filing as Exhibit 10.1. The Warrant to Purchase 120,000 Shares of Common Stock has been attached to this filing as Exhibit 10.2. Item 3.02 Unregistered Sales of Equity Securities To the extent required by Item 3.02 of Form 8-K, the information contained in or incorporated by reference into Item 1.01 of this Current Report is hereby incorporated by reference into this Item 3.02. In an unrelated transaction, on September 22, 2005, pursuant to a Stock Subscription Agreement dated February 28, 2005, N-Viro International Corporation, or the Company, issued to Timothy Kasmoch 50,000 shares of the Company's unregistered common stock and 50,000 common stock purchase warrants at an exercise price of $1.85 per share and with an exercise period not to exceed five years from the date of the Agreement. Payment for the securities was made in kind, by the provision of trucking services valued at $62,500. The trucking services were provided from February 2005 to September 2005. The shares and warrants were issued in a private transaction pursuant to an exemption under Section 4(2) of the Securities Act of 1933. Mr. Kasmoch is not an officer or director of the Company nor is related to any officers of directors of the Company, and is not a more than 5% beneficial owner of the Company. Item 9.01 - Financial Statements and Exhibits (d) Exhibits Exhibit No. Description ------------ ----------- 10.1 Financial Public Relations Agreement dated September 15, 2005 between Strategic Asset Management, Inc. and N-Viro International Corporation. 10.2 Warrant to Purchase 120,000 Shares of Common Stock dated September 15, 2005 between Strategic Asset Management, Inc. and N-Viro International Corporation. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. N-VIRO INTERNATIONAL CORPORATION Dated: October 12, 2005 By: /s/ James K. McHugh ---------------- -------------------- James K. McHugh Chief Financial Officer EX-10.1 2 doc2.txt Exhibit 10.1 ------------ FINANCIAL PUBLIC RELATIONS AGREEMENT THIS FINANCIAL PUBLIC RELATIONS AGREEMENT, made as of the 15th day of September, 2005, by and between: N-VIRO INTERNATIONAL CORPORATION, a Delaware corporation having its principal place of business located at 3450 W. Central Avenue, Suite 328, Toledo, Ohio 43606 (hereinafter referred to as "COMPANY") AND STRATEGIC ASSET MANAGEMENT, INC. a Nevada corporation having its principal office located at 600 Boston Neck Road, North Kingstown, Rhode Island 02852 (hereinafter referred to as the "CONSULTANT"), WITNESSETH THAT: WHEREAS, the COMPANY, a public corporation, requires financial public relations services and intends to employ CONSULTANT as an independent contractor consultant to provide such services, and the parties now desire a written document formalizing their relationship and evidencing the terms of their agreement; NOW, THEREFORE, intending to be legally bound and in consideration of the mutual promises and covenants, the parties have agreed as follows: 1. APPOINTMENT. The COMPANY hereby appoints CONSULTANT as its non-exclusive financial public relations counsel and hereby retains and employs CONSULTANT, on the terms and conditions of this Agreement. CONSULTANT accepts such appointment and agrees to perform the services upon the terms and conditions of this Agreement. 2. TERM. (a) The term of this Agreement shall commence September 15, 2005 and shall terminate on September 14, 2007. (b) Prior to the execution of this Financial Consulting Agreement, CONSULTANT has provided services to the COMPANY in anticipation of the execution of this Agreement. The compensation provided herein is intended to cover such services and CONSULTANT waives any claim to separate compensation for such previously rendered services. (c) Services of the CONSULTANT commenced during the term of this agreement may continue beyond the term hereof, and the compensation provided herein is intended to cover any such continuation. 3. SERVICES. (a) CONSULTANT shall act, generally, as a non-exclusive financial consultant, advising the COMPANY about strategic options to obtain financing, either debt or equity, and the obtaining of and utilization of financial public relations counsel. If COMPANY shall so request, from time to time, CONSULTANT shall introduce COMPANY to potential lenders and investors, whether insurance companies, commercial banks, merchant banks, venture capital funds, REIT's, mortgage companies, or other institutional lenders or private individuals. CONSULTANT shall have no authority to commit the COMPANY in any way or on any basis to any financing. (b) As the COMPANY shall request or direct, CONSULTANT shall assist in establishing, and advise the COMPANY with respect to: shareholder meetings; interviews of COMPANY officers by the financial media; and interviews of COMPANY officers by analysts, market makers, broker-dealers, and other members of the financial community. (c) CONSULTANT shall seek to make the COMPANY, its management, its products, and its financial situation and prospects, known to the financial press and publications, broker-dealers, mutual funds, institutional investors, market makers, broker-dealers, and other members of the financial community. (d) As the COMPANY shall request or direct, CONSULTANT shall act, generally, as a financial public relations counselor to the COMPANY, including: (1) introducing the COMPANY to broker-dealers, market makers, banks, financial advisors, financial institutions and potential investors; (2) introducing the COMPANY to potential business partners and customers; and (3) arranging interviews and analyst meetings, and securing invitation of the COMPANY to appropriate conferences and business events, and similar financial public relations events. 4. LIMITATIONS ON SERVICES. The parties recognize that certain responsibilities and obligations are imposed by U. S. federal and state securities laws and by various foreign securities laws as well as by the applicable rules and regulations of U. S. and foreign stock exchanges, the National Association of Securities Dealers, in-house "due diligence" or "compliance" departments of brokerage houses, etc. Accordingly, CONSULTANT agrees: (a) CONSULTANT shall NOT release any financial or other information or data about the COMPANY without the consent and approval of the COMPANY. (b) CONSULTANT shall NOT conduct any meetings with financial analysts without informing the COMPANY in advance of the proposed meeting and the format or agenda of such meeting and the COMPANY may elect to have a representative of the COMPANY attend at such meeting. CONSULTANT shall inform the COMPANY promptly following any such meeting of the exact content of such meeting, so that the COMPANY can comply with its obligations under state and federal securities laws, including without limitation, Regulation FD. (c) CONSULTANT shall NOT release any information or data about the COMPANY to any selected or limited person(s), entity, or group unless the COMPANY has pre-approved the release of such information. (d) After notice by the COMPANY of filing for a proposed public offering of securities of the COMPANY, and during any period of restriction on publicity, CONSULTANT shall not engage in any public relations efforts not in the normal course without approval of counsel for the COMPANY and of counsel for the underwriter(s), if any. (e) CONSULTANT shall NOT take any action or advise or knowingly permit the COMPANY to take any action, which would violate any foreign securities laws or rules and regulations issued thereunder. (f) After notice by the COMPANY of any placement of its securities pursuant to the provisions of Regulation S and during any period of restriction on publicity, CONSULTANT shall NOT violate the publicity provisions of Regulation S. 5. DUTIES OF COMPANY. (a) COMPANY shall supply CONSULTANT, on a regular and timely basis, with all approved data and information about the COMPANY, its management, its products, and its operations and COMPANY shall be responsible for advising CONSULTANT of any facts which would affect the accuracy of any prior data and information previously supplied to CONSULTANT so that CONSULTANT may take corrective action. (b) COMPANY shall promptly supply CONSULTANT: with full and complete copies of all filings with all federal and state securities agencies; with full and complete copies of all filings with all U. S., Canadian and European stock exchanges; with full and complete copies of all shareholder reports and communications whether or not prepared with CONSULTANT's assistance; with all data and information supplied to any analyst, broker-dealer, market maker, or other member of the financial community; and with all product/services brochures, sales materials, etc. (c) COMPANY shall promptly notify CONSULTANT of the filing of any registration statement for the sale of securities, the making of any placement pursuant to Regulation S, and of any other event which triggers any restrictions on publicity, together with a statement as to the countries included within the publicity restriction requirements. (d) COMPANY shall contemporaneously notify CONSULTANT if any information or data being supplied to CONSULTANT has not been generally released or promulgated. 6. REPRESENTATION AND INDEMNIFICATION. (a) The COMPANY shall be deemed to make a continuing representation of the accuracy of any and all material facts, material information, and material data which it supplies to CONSULTANT and the COMPANY acknowledges its awareness that CONSULTANT will rely on such continuing representation in disseminating such information and otherwise performing their public relations functions. (b) CONSULTANT, in the absence of notice in writing from COMPANY, will rely on the continuing accuracy of material, information, and data supplied by the COMPANY. (c) COMPANY hereby agrees to indemnify CONSULTANT against, and to hold CONSULTANT harmless from, any claims, demands, suits, loss, damages, and etc. arising out of CONSULTANT's reliance upon the accuracy and continuing accuracy of such material facts, material information, and material data, unless CONSULTANT has been negligent in fulfilling its duties and obligations hereunder. (d) COMPANY hereby agrees to indemnify CONSULTANT against, and to hold CONSULTANT harmless from, any claims, demands, suits, losses, damages, etc. arising out of CONSULTANT's reliance on the information supplied to CONSULTANT by the COMPANY and approved for public disclosure, unless CONSULTANT has been negligent in fulfilling their duties and obligations hereunder. 7. COMPENSATION. (a) For its services hereunder COMPANY shall issue to CONSULTANT One Hundred Twenty Thousand (120,000) shares of its common stock (the "Shares") and One Hundred Twenty Thousand (120,000) Common Stock Purchase Warrants to purchase an equal number of shares of COMPANY's common stock (the "Warrants"), for an exercise period or term ending on September 14, 2010, at an exercise price of One and 84/100 Dollars ($1.84). The Shares and the Warrants to be issued to CONSULTANT for its services (as well as any shares issued upon exercise of the Warrants) are being issued in a private transaction pursuant to an exemption under Section 4(2) of the Securities Act of 1933. CONSULTANT represents that the Shares and the Warrants are being acquired for investment and not with a view to transfer, distribution or other disposition of any thereof, and agrees to hold such Shares and Warrants and not to distribute, transfer or otherwise dispose of any of the same except pursuant to an effective registration statement under the Securities Act of 1933 or an opinion of counsel satisfactory to the COMPANY that the share are exempt from such registration. Certificates issued for the shares shall bear the restrictive legend set forth on Exhibit A hereto, and the COMPANY shall issue "Stop Transfer" instructions to its Transfer Agent with respect to the Shares and the Warrants. All Shares and Warrants shall be issued by September 30, 2005. (b) COMPANY shall reimburse CONSULTANT for all reasonable costs incurred by CONSULTANT in providing the foregoing services, including but not limited to wire service distribution costs, out-of-pocket expenses for travel, entertainment, telephone/facsimile charges, and postage and delivery service charges (e.g., Federal Express) as well as compensation to third party vendors, copywriters, staff writers, art and graphic personnel, printing, etc. CONSULTANT shall obtain COMPANY's prior written consent to all costs in excess of $1,000 and shall provide adequate documentation of all costs for which reimbursement is sought. (c) For all special services, not within the scope of this Agreement, COMPANY shall pay CONSULTANT such fees, costs, and expenses as, and when, the parties shall determine in advance of performance of the special services provided that COMPANY has agreed in advance in writing to the performance of the special services on behalf of the COMPANY. 8. CONFIDENTIAL INFORMATION. (a) The relationship between COMPANY and CONSULTANT will be one of trust and confidence and there may have been and/or may be financial information, related trade secrets and proprietary business information of COMPANY disclosed or made accessible to CONSULTANT which may include, but not be limited to, the records of COMPANY dealing with sales, income, clients, services, products, prices, and other items relative thereto (collectively and individually referred to as the "Confidential Information"). COMPANY may, in its discretion, provide CONSULTANT with such promotional materials, financial data and projections, corporate data sheets or other similar information, and other materials relative thereto (collectively and individually referred to as the "Information Materials"). (b) CONSULTANT acknowledges that the Confidential Information and Information Materials are extremely valuable and important assets of COMPANY and that the unauthorized use of the Confidential Information and/or Information Materials would cause irreparable economic and business injury to COMPANY. (c) CONSULTANT shall hold the Confidential Information and Information Materials in strict confidence and in trust for COMPANY and shall not disclose or otherwise communicate, provide or reveal in any manner whatsoever any of the Confidential Information and Information Materials to any person or entity without the prior written consent of COMPANY. (d) The Confidential Information and Information Materials shall be used solely for the benefit of COMPANY and no other purposes without the express written consent of COMPANY. (e) Upon termination of this Agreement, CONSULTANT shall return to COMPANY, without demand from COMPANY, and CONSULTANT shall not retain, any Confidential Information and Information Materials disclosed or provided to CONSULTANT, including, but not limited to, all originals, copies, reproductions, notes, facsimiles, samples and products thereof. (f) CONSULTANT acknowledges that the Confidential Information and Information Materials, regardless of form, are, and shall always remain, the sole and exclusive property of COMPANY. (g) CONSULTANT shall indemnify, defend and hold COMPANY harmless against the loss, damage or destruction of the Confidential Information and Information Materials, including the reimbursement of COMPANY for any costs or fees (including attorneys' fees) incurred by COMPANY in reacquiring, protecting and/or defending the Confidential Information and Information Materials, and the cost of any non-compliance with securities laws caused by any such loss, damage or destruction. 9. RELATIONSHIP OF PARTIES. CONSULTANT is an independent contractor, responsible for compensation of its own agents, employees and representatives, as well as all applicable withholding therefrom and taxes thereon (including unemployment compensation) and all workmen's compensation insurance. This Agreement does not establish any partnership, joint venture, or other business entity or association between the parties and no party is intended to have any interest in the business or property of the other by reason of this Agreement. 10. TERMINATION. This Agreement may be terminated by either the Company or the CONSULTANT prior to the expiration of the term provided in Paragraph 2 above as follows: (a) Upon failure of the other party to cure a default under, or a breach of, this agreement within thirty (30) days after written notice is given as to such default or breach by the terminating party; (b) Upon the bankruptcy or liquidation of the other party; whether voluntary or involuntary; (c) Upon the other party taking the benefit of any insolvency law; and/or (d) Upon the other party having or applying for a receiver appointed for all or a substantial part of such party's assets or business. 11. ATTORNEY FEES. Should a party default in the terms or conditions of this Agreement and suit be filed as a result of such default, the prevailing party shall be entitled to recover all costs incurred as a result of such default including all costs and reasonable attorney fees, expenses and court costs through trial and appeal. 12. WAIVER OF BREACH. The waiver by a party of a breach of any provision of this Agreement by another party shall not operate or be construed as a waiver of any subsequent breach by the breaching party. 13. ASSIGNMENT. The rights and obligations of the parties under this Agreement related to the provision of personal services, and such rights and obligations may not be assigned without the prior written consent of the parties. 14. NOTICES. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing, and if sent by certified mail, return receipt requested, to the principal office of the party being notified. 15. ENTIRE AGREEMENT. This instrument contains the entire agreement of the parties and may be modified only be agreement in writing, signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. If any provision of this Agreement is declared void, such provision shall be deemed severed from this Agreement, which shall otherwise remain in full force and effect. 16. GOVERNING LAW. This Agreement shall be a contract made in the State of Delaware and shall be interpreted and governed by, and construed in accordance with, the laws of the State of Delaware. 17. TAXES. Any and all taxes, excises, assessments, levies, interest and penalties, which may be assessed, levied, demanded, or imposed by any governmental agency in connection with this Agreement, shall be paid by the party upon which they are imposed and shall be the sole obligation of such party. 18. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have executed this Agreement. N-VIRO INTERNATIONAL CORPORATION By: /s/ Daniel Haslinger ----------------------- STRATEGIC ASSET MANAGEMENT, INC. By: /s/ Robert Cooke ------------------ EXHIBIT A Restrictive Legend for Shares and Warrants THE [SHARES] [WARRANTS] REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION AND COMPLIES WITH THE REQUIREMENTS OF ANY APPLICABLE STATE SECURITIES LAWS. EX-10.2 3 doc3.txt Exhibit 10.2 ------------ WARRANT TO PURCHASE 120,000 SHARES OF COMMON STOCK OF N-VIRO INTERNATIONAL CORPORATION (the "Company") THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION AND COMPLIES WITH THE REQUIREMENTS OF ANY APPLICABLE STATE SECURITIES LAWS ISSUANCE NO. 22 SEPTEMBER 15, 2005 THIS CERTIFIES THAT, for valuable consideration received, STRATEGIC ASSET MANAGEMENT, INC. (the "Holder"), or its successors or assigns, is entitled to purchase ONE HUNDRED TWENTY THOUSAND (120,000) fully paid and nonassessable shares of common stock, with par value of $.01 per share, of the Company (the "Stock") at a purchase price of ONE AND 84/100 DOLLARS ($1.84) PER SHARE. The number of shares of Stock to be received upon exercise of this Warrant and the price to be paid per share of Stock may be adjusted, from time to time as hereinafter set forth. The shares of Stock deliverable upon such exercise, as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares" and the exercise price for a share of Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Warrant Price". The terms and provisions of Stock as of the date hereof are set forth in the Certificate of Incorporation of the Company. 1. ANTIDILUTION PROVISIONS. ------------------------ (a) Adjustment of Number of Shares. This Warrant, the Warrant Price -------------------------------- and the number of Warrant Shares are subject to adjustment under the following provisions: (i) Dividends, Reclassification, etc. In case, prior to the ----------------------------------- expiration of this Warrant by exercise or by its terms, the Company shall at any time issue Stock as a stock dividend or other distribution or subdivide the number of outstanding shares of Stock into a greater number of shares, then, in either of such cases, the Warrant Price of the Warrant Shares purchasable pursuant to this Warrant in effect at the time of such action shall be proportionately reduced and the number of Warrant Shares at that time purchasable pursuant to this Warrant shall be proportionately increased; and conversely, in the event the Company shall contract the number of outstanding shares of Stock by combining such shares into a smaller number of shares, then, in such case, the Warrant Price of the Warrant Shares purchasable pursuant to this Warrant in effect at the time of such action shall be proportionately increased and the number of Warrant Shares at that time purchasable pursuant to this Warrant shall be proportionately decreased. If the Company shall, at any time during the life of this Warrant, declare a dividend payable in cash on its Stock and shall at substantially the same time offer to the holders of its Stock the right to purchase new Stock from the proceeds of such dividend or for an amount substantially equal to the dividend, all shares of Stock so issued shall, for the purpose of this Warrant be deemed to have been issued as a stock dividend. Any dividend paid or distributed upon the Stock in shares of any other class of securities convertible into Stock shall be treated as a dividend paid in Stock to the extent that Stock is issuable upon the conversion thereof. (ii) No Adjustment for Small Amounts. The Company shall not be ---------------------------------- required to give effect to any adjustment in the Warrant Price unless and until the net effect of one or more adjustments, determined as provided above, shall have required a change of the Warrant Price by at least thirteen cents ($0.13), but when the cumulative net effect of more than one adjustment so determined shall be to change the actual Warrant Price by at least twenty cents ($0.20), such change in the Warrant Price shall thereupon be given effect. (b) Stock Defined. Whenever reference is made in this Section 1 to the ------------- issue or sale of shares of Stock, the term "Stock" shall mean the Stock of the Company of the class authorized as of the date hereof and any other class of stock ranking on a parity with such Stock. However, shares issuable upon exercise of this Warrant shall include only shares of the class designated as Stock of the Company as of the date hereof. (c) Determination of Adjusted Purchase Price. Upon the occurrence of ------------------------------------------ each event requiring an adjustment of the Warrant Price and of the number of Warrant Shares purchasable pursuant to this Warrant in accordance with, and as required by, the terms of this Warrant, the Company shall forthwith employ a firm of certified public accountants (who may be the regular accountants for the Company) who shall compute the adjusted Warrant Price and the adjusted number of shares purchasable at such adjusted Warrant Price by reason of such event in accordance with the provisions hereof. The Company shall mail forthwith to the holder of this Warrant a copy of such computation. 2. LIMITATIONS ON EXERCISE RIGHT. -------------------------------- This Warrant is exercisable only from the date of issuance through and including the expiration date of SEPTEMBER 14, 2010. 3. EXERCISE OF WARRANT. --------------------- The terms and conditions upon which this Warrant may be exercised, and the Stock covered hereby may be purchased, are as follows: (a) Method of Exercise. At any time after 12:01 a.m. Toledo, Ohio ------------------ time on the date hereof and prior to 5:00 p.m., Toledo, Ohio time on September 14, 2010, the Holder may exercise in whole or in part this Warrant. Such exercise shall be effected by: (i) the surrender of this Warrant, together with a duly executed copy of the Notice of Exercise attached hereto, to the Secretary or any Assistant Secretary of the Company at its principal offices. (ii) the payment to the Company, by certified or cashier's check or bank draft payable to its order, of an amount equal to the aggregate Warrant Price for the number of Warrant Shares for which the purchase rights hereunder are being exercised. (b) Issuance of Shares. The Company shall cause, at its expense, ------------------- the issuance within five (5) business days of the date of exercise hereof to the Holder of such number of Warrant Shares as subscribed for by the Holder. All such Warrant Shares shall be unregistered, restricted securities. In the event that, pursuant to subparagraph 3(a), there is a partial exercise of a Warrant, a Warrant for the unexercised portion shall be issued to the Holder. (c) Conditions Precedent to Obligations of the Company. The -------------------------------------------------------- obligation of the Company under this Warrant to sell and deliver the Warrant Shares, is at its option, subject to (i) receiving an opinion of counsel for the Company that the Company has complied with or is exempt from (a) all applicable registration requirements under the Securities Act of 1933, (b) all applicable registration requirements under the securities laws of any state, and (c) all other requirements of law or of any regulatory body having jurisdiction over the issuance and delivery of the Warrant Shares; and (ii) the Holder's complying with all the terms and conditions of this Warrant. (d) Restrictive Legend. Any stock certificates evidencing Warrant ------------------ Shares acquired under this Warrant pursuant to an unregistered transaction shall bear the following restrictive legend and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION AND COMPLIES WITH THE REQUIREMENTS OF ANY APPLICABLE STATE SECURITIES LAWS. 4. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. -------------------------------------------------- Solely for the purpose of effecting the exercise of this Warrant the Company shall at all times reserve and keep available out of its authorized but unissued shares of Stock such number of shares of Stock as shall from time to time be sufficient to effect the exercise of this Warrant. 5. TRANSFERS AND EXCHANGES. ------------------------- (a) Subject only to limitations imposed by the Securities Act of 1933, as amended, and applicable state securities laws, this Warrant and all rights hereunder are transferable in whole, or in part, by the Holder. The transfer shall be recorded on the books of the Company upon the surrender of this Warrant, properly endorsed, to the Secretary or any Assistant Secretary of the Company at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer (if any) and a new Warrant shall be issued in the name of the transferee. In the event of a partial transfer, the Company shall issue to the Holders one or more appropriate new Warrants. (b) Each Holder agrees that this Warrant when endorsed in blank shall be negotiable and that when so endorsed the Holder may be treated by the Company and all other persons dealing with this Warrant as the absolute owner for all purposes and as the person entitled to exercise the purchase rights evidenced hereby; provided, however, that until such time as the transfer is recorded on the books of the Company, the Company may treat the registered Holder of this Warrant as the absolute owner. (c) All Warrants issued in connection with transfers or exchanges of this Warrant shall bear the same date as this Warrant and shall be identical in form and provision to this Warrant except for the number of shares purchasable thereunder. 6. NO PRIVILEGES OF STOCK OWNERSHIP. ------------------------------------ Prior to exercise of this Warrant, the Holder shall not be entitled to any rights of a shareholder of the Company, including (without limitation) the right to vote, receive dividends or other distributions, exercise preemptive rights or be notified of shareholder meetings, and such Holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company except as otherwise provided herein. 7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. --------------------------------------------------- The Company represents and warrants to the Holder as follows: (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and the Company has all requisite corporate power and authority to own its properties and conduct its business as now being conducted. The Company is duly licensed or qualified to conduct business in each jurisdiction wherein the failure to be licensed or qualified could have a material adverse effect on the business or financial condition of the Company or its ability to execute, deliver or perform its obligations under this Warrant. (b) Upon issuance thereof and payment therefore as contemplated in this Warrant, each Warrant Share will have been duly authorized and validly issued and will be fully paid and nonassessable and free of preemptive rights. (c) The Company has all requisite corporate power and authority to execute, deliver and perform this Warrant and to consummate the transactions contemplated hereby. The Company has taken all requisite corporate action to authorize the execution, delivery and performance of this Warrant. This Warrant has been duly executed and delivered by the Company. This Warrant is the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms. (d) The execution, delivery and performance of this Warrant and the consummation of the transaction contemplated hereby; (i) do not violate any provisions of law applicable to the Company, (ii) will not conflict with, or result in the breach or termination of any provision of, or constitute a default under (in each case whether with or without the giving of notice or the lapse of time or both), the Company's Certificate of Incorporation or By-Laws, or any indenture, mortgage, lease, deed of trust, or other instrument, contract or agreement or any order, judgment, arbitration award, or decree to which the Company is a party or by which it or any of its assets and properties are bound and (iii) do not and will not result in the creation of any encumbrance upon any of the properties, assets, or business of the Company. 8. NOTICES. ------- All communications hereunder shall be in writing and shall be deemed duly given when delivered personally, when sent by facsimile transmission (receipt confirmed) or one day after being mailed by first class mail, postage prepaid or sent by overnight courier, properly addressed, if to the Company, to N-Viro International Corporation, 3450 W. Central Avenue, Suite 328, Toledo, Ohio 43606, Attention: Daniel J. Haslinger President and CEO, fax 419-535-7008, with a copy to Clark Hill PLC, 500 Woodward Avenue, Suite 3500, Detroit, MI 48226-3435, Attention: D. Kerry Crenshaw, Esquire, fax (313) 965-8252 or if to the Holder hereof, at the address last appearing on the records of the Company. The Company or the Holder hereof may change such address and/or facsimile number at any time or times by notice hereunder to the other. 9. GOVERNING LAW. -------------- This Warrant shall be binding upon any successors or assigns of the Company. This Warrant shall constitute a contract under the laws of Delaware and for all purposes shall be construed in accordance with and governed by the laws of said state, without giving effect to the conflict of laws principles. 10. ATTORNEY'S FEES. ----------------- In any litigation, arbitration or court proceeding between the Company and the Holder as the holder of this Warrant relating hereto, the prevailing party shall be entitled to reasonable attorney's fees and expenses incurred in enforcing this Warrant. 11. AMENDMENTS. ----------- This Warrant may be amended and the observance of any term of this Warrant may be waived only with the written consent of the Company and the Holder as the holder hereof. 12. SUCCESSORS AND ASSIGNS ------------------------ The terms and provisions of this Warrant shall inure to the benefit of, and be binding upon, the Company and the holder thereof and their respective successors and assigns. N-VIRO INTERNATIONAL CORPORATION By: /s/ James K. McHugh ------------------------- James K. McHugh Secretary and Treasurer Dated: September 15, 2005 -------------------- NOTICE OF EXERCISE ------------------ To: N-Viro International Corporation 1. The undersigned hereby elects to purchase ___________________ shares (the "Shares") of common stock $.01 par value of N-Viro International Corporation, a Delaware Corporation (the "Company"), pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price and any transfer taxes payable pursuant to the terms of the Warrant, together with an investment representation statement in form and substance satisfactory to legal counsel to the Company. 2. The Shares to be received by the undersigned upon exercise of the Warrant are being acquired for its own account not as a nominee or agent, and not with a view to resale or distribution of any part thereof, and the undersigned has no present intention of selling, granting any participation in, or otherwise distributing the same, except in compliance with applicable federal and state securities laws. The undersigned further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to such person or to any third person, with respect to the Shares. The undersigned believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Shares. 3. The undersigned understands that the Shares are characterized as "restricted securities" under the federal securities laws inasmuch as they are being acquired from the Company in transactions not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the "Act"), only in certain limited circumstances. In this connection, the undersigned represents that it is familiar with Rule 144 of the Act, as presently in effect, and understands the resale limitations imposed thereby and by the Act. 4. The undersigned understands the certificates evidencing the Shares may bear one or all of the following legends: (a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION IS EXEMPT FROM REGISTRATION AND COMPLIES WITH THE REQUIREMENTS OF ANY APPLICABLE STATE SECURITIES LAWS." (b) Any legend required by applicable state law. 5. Please issue a certificate or certificates representing said Shares in the name of the undersigned. 6. Please issue a new Warrant for the unexercised portion of the attached Warrant in the name of the undersigned. _________________________________________ [Name] ____________________________ _________________________________________ [Date] [Signature] -----END PRIVACY-ENHANCED MESSAGE-----