-----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, K4u4kTMaO0/VDnMIlbHMYa8ZEejmRNfEvkTny+RW44Q3lepWzCjjNFCmos/sbgCk nLELCT23bSYhAiHvdfqsog== 0000950152-97-005193.txt : 19970721 0000950152-97-005193.hdr.sgml : 19970721 ACCESSION NUMBER: 0000950152-97-005193 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970708 ITEM INFORMATION: Other events FILED AS OF DATE: 19970718 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: N-VIRO INTERNATIONAL CORP CENTRAL INDEX KEY: 0000904896 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 341741211 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21802 FILM NUMBER: 97642250 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 N-VIRO INTERNATIONAL CORPORATION 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JULY 8, 1997 N-VIRO INTERNATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) DELAWARE 0-21802 34-1741211 (STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) 3450 W. CENTRAL AVENUE, SUITE 328 TOLEDO, OHIO 43606 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 535-6374 2 ITEM 5. OTHER ITEMS a.) On July 8, 1997, N-Viro International Corporation executed four (4) agreements, exchanging 136,500 shares of unregistered N-Viro International Common Stock for debt totaling $409,500, incorporated by reference herein as Exhibit 2. These share exchange agreements evidence agreements reached by the Company with such creditors in June of 1997. b.) On July 17, 1997 the Company entered into a certain Second Agreement to Settlement Agreement (the "Second Amendment to Settlement Agreement with Frank Manchak, Jr. and N-Viro Energy Systems, Ltd., an Ohio limited partnership and an affiliate of the Company and certain other affiliates of the Company. A copy of the Second Amendment to Settlement Agreement has been attached hereto as Exhibit 3. The Second Amendment to Settlement Agreement was executed by the Company in an effort to resolve substantially all of the remaining outstanding issues with respect to the settlement of that certain lawsuit entitled FRANK MANCHAK JR., V. N-VIRO ENERGY SYSTEMS,-LTD. that was filed by Mr. Manchak in the United States District Court of Central District of California, Case No. CV-93-3042-ABC. This suit, involving a patent infringement claim against the Company, among others, was settled by the Company in February of 1995. Pursuant to the terms of the original Settlement Agreement, the Company agreed to pay Manchak $1.5 million over a period of thirteen months. In April of 1996, the original Settlement Agreement was amended to provide the Company with more time to settle its monetary obligations to Manchak. This Amendment also increased the amount owed to Manchak by $300,000. At the time of execution of the Second Amendment to Settlement Agreement, the Company's outstanding obligation to Mr. Manchak totaled $410,000. The Second Amendment to Settlement Agreement provides for the satisfaction of the Company's remaining obligations through the delivery to Mr. Manchak of up to 250,000 shares of the Company's voting common stock, with par value of $.01 per share, as well as certain cash payments, all as described in the Second Amendment to Settlement Agreement, a copy of which is attached hereto as Exhibit 3. c.) On July 15, 1997, the City and Count of Honolulu (the "City of Honolulu) adopted a change order (the "Change Order") amending an agreement with the Company with respect to the design and construction of a privately operated wastewater treatment facility in Honolulu, Hawaii. The Company incurred costs through 1996 for engineering and other work in preparation for the construction of a privately operated wastewater treatment facility in Honolulu, Hawaii. However, on October 30, 1996, the site selected for the construction of this facility was rejected by the mayor of Honolulu. Since that time, the Company has attempted to collect approximately $860,000 from the City of Honolulu to compensate the Company for monies directly invested in the Honolulu project. The Change order amends the City of Honolulu's original agreement with the Company so as to facilitate (i) the Company's participate in the design and construction of a wastewater treatment plant at a new site -- selected by the City of Honolulu; (ii) the reimbursment of the Company for certain costs and expenses incurred by the company during the course of planning and preparation for the initial site and (iii) the settlement of a third party claim related to permitting, design and engineering work performed by the third party in connection with the other site, all as more particularly described in the Change Order. A copy of the Change Order is attached hereto as Exhibit 4. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. N-VIRO INTERNATIONAL CORPORATION Dated: July 17, 1997 By: /s/ James K. McHugh --------------------- ------------------- James K. McHugh Chief Financial Officer EX-2 2 EXHIBIT 2 1 EXHIBIT #2 SHARE EXCHANGE AGREEMENT ------------------------ This Share Exchange Agreement (this "Agreement") is made and entered into as of the 30th day of June, 1997 by and between N-Viro International Corporation, a Delaware Corporation, (the "Company") and N-Viro Energy Systems, Limited, an Ohio limited partnership ("Purchaser"). RECITALS. --------- Whereas, the Company presently is indebted to Purchaser for obligations arising in the ordinary course of business in an amount equal to One Hundred Seventy-Six Thousand Five Hundred Dollars ($176,500.00) (the "Company's Existing Obligation"); Whereas, the Company's Existing Obligation presently is evidenced by (i) a $100,000.00 Promissory Note dated June 7, 1996 issued by the Company in favor of Purchaser (ii) a $68,000.00 Promissory Note dated September 20, 1996 issued by the Company in favor of Purchaser and (iii) a $23,500.00 Promissory Note dated November 1, 1996 issued by the Company in favor of Purchaser (collectively, the "Old Notes"). Whereas, the Company has offered to satisfy the Existing Obligation through the Company's delivery to Purchaser of Fifty Thousand (50,000) shares ("Shares") of the Company's voting common stock, with par value $.01 per share (the "Common Stock") and (ii) a Promissory Note in the original principal amount of Twenty Six Thousand Five Hundred Dollars ($26,500.00) (the "New Note"); and Whereas, Purchaser has agreed to accept delivery of the Shares and the New Note in complete satisfaction of the Company's Existing obligation. Now, therefore, the parties hereto, intending to be legally bound hereby, agree as follows: 1. EXCHANGE. The Company hereby offers the Shares and the New Note to Purchaser in complete satisfaction of the Company' s Existing Obligation. Purchaser hereby accepts the Company' s offer, and, upon the Company's delivery to Purchaser of stock certificates representing the Shares and the New Note. Purchaser agrees that the Company's Existing Obligation shall be fully and forever discharged and Purchaser shall have no continuing claim against the Company with respect thereto. Purchaser further covenants and agrees that, upon execution of this Agreement, Purchaser shall cancel the Old Notes and return the same to the Company. 2. UNREGISTERED OFFERING. Purchaser acknowledges and agrees that Purchaser's acceptance of the Shares and the New Note in exchange for releasing the Company from the Company's Existing obligation constitutes the sale of securities under and pursuant to the Securities Act of 1933 and the rules and regulations promulgated thereunder, as amended from time to time (the 111933 Act"). Purchaser further acknowledges Purchaser's understanding that no aspect of the transactions contemplated in this Agreement has been, prior to the date of this Agreement, or will be, prior to the date of delivery of stock certificates representing the Shares and the New Note, registered with or reviewed by the Securities and Exchange Commission (the "SEC") under the 1933 Act, or with or by any state securities law administrator, and no federal or state securities law administrator has approved any disclosure or other material concerning the Company or the Shares or the New Note or made any recommendation with respect thereto. 3. REPRESENTATIONS AND COVENANTS. To induce the Company to enter into this Agreement, Purchaser represents, warrants, covenants and agrees that: (a) ACCESS. Purchaser has investigated and will continue to investigate the merits and risks of accepting the Shares in exchange for the discharge of the Company's Existing Obligation. Purchaser has been provided with the Annual Report on Form 10-K of the Company for the year ended March 31, 1996, a quarterly 2 report on form 10-Q for the period ending March 31, 1997, the Proxy Statement relating to the 1997 Annual Stockholders' Meeting, the 1997 Annual Report to Stockholders and all subsequent reports filed by the Company with the SEC pursuant to the requirements of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder, as amended from time to time, and has had the opportunity to ask questions of, and receive answers from, members of the Board of Directors and management of the Company. Purchaser has had the opportunity to and will continue to avail himself of his rights to ask questions of the management of the Company relating to the Company, the Shares, and related matters. Purchaser also has had and shall continue to avail himself of his rights to obtain additional information necessary to verify the accuracy of information provided to him and to continue to evaluate the merits and risks of the transactions contemplated by this Agreement. (b) Investment Intent: State of Residence. Purchaser is acquiring the Shares and the New Note for its own account for investment, within the meaning of the 1933 Act. Purchaser's principal place of business and domicile is and shall continue to be at the time of delivery of the Shares the State of Ohio. -2 - (c) AFFILIATE STATUS. Purchaser is an affiliate of the Company within the meaning of the 1934 Act by virtue of the fact that Purchaser owns, both beneficially and of record, in excess of ten percent (10%) of the aggregate number of issued and outstanding shares of Common Stock. (d) RESALES. Purchaser agrees that it shall not resell or transfer in any way the Shares acquired hereunder to any U.S. Person as described in Regulation S under the 1933 Act or in the United States without an applicable exemption from registration under the 1933 Act or upon registration of the Shares pursuant to the 1933 Act. All certificates representing the Shares shall contain the following legend: "The Shares represented by this certificate have not been registered pursuant to the Securities Act of 1933 and therefore may not be transferred or sold in the United States or to a U.S. Person without either an effective registration statement pursuant to the Securities Act of 1933 or an opinion of counsel satisfactory to N-Viro International Corporation that registration is not required under the Securities Act of 1933.11 (e) Purchaser has knowledge and experience in financial and business matters so is to be capable of evaluating the merits and risks of an investment in the Shares and the New Note. Purchaser is willing and able to bear the economic risk of an investment in the Shares indefinitely. In making the foregoing statement, consideration has been given to whether Purchaser has adequate means of providing for its current financial needs and business contingencies, whether it could afford to hold the Shares indefinitely, and whether, at this time, it could afford a significant or complete loss of its investment. Purchaser is acquiring the Shares for Purchaser's own account, as principal, for investment and not with a view to the resale or distribution of all or any part of the Shares. 4. RELEASE. Upon the Company's delivery of the Shares and the New Note to Purchaser, the Company shall be fully and forever released from the requirement that it pay Purchaser the amount of the Company's Existing Obligation. This discharge shall be effective without any further action on the part of Purchaser. 5. DELIVERY OF STOCK CERTIFICATES AND NEW NOTE. A certificate or certificates evidencing the Shares registered in the name of Purchaser shall be executed, issued and delivered to Purchaser by the Company within fifteen (15) business days from the - 3 - date of execution of this Agreement. The New Note shall be delivered upon execution hereof. 3 6. BINDING EFFECT. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, personal representatives, successors and assigns. 7. AMENDMENTS. No amendment or variations of the terms and conditions of this Agreement shall be valid unless the same is in writing and signed by the parties hereto. All such amendments shall specifically refer to this Agreement. 8. HEADINGS. The paragraph headings contained herein are for convenience only and shall not, in any way, effect the interpretation or enforceability of any provisions of this Agreement. 9. GOVERNING LAW. This Agreement shall be construed and enforced under and pursuant to the internal laws of the state of Ohio. 10. ENTIRE AGREEMENT. This Agreement contains the entire Agreement between the parties hereto with respect to the transactions contemplated herein. This Agreement supersedes all prior oral and written understandings and agreements with respect to the subject matter referred to herein. 11. CERTAIN TERMS. Unless the context otherwise requires a different meaning, words of a masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders, words importing the singular numbers shall include the plural number and vice versa, and the terms "hereof," "hereby," "hereto," "hereunder," and "herein" as well as similar terms refer to this Agreement. 12. ASSIGNMENT. None of the parties hereto may assign, transfer or otherwise dispose of any of their rights or obligations under this Agreement. 13. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one document. -4- IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first above written. N-VIRO INTERNATIONAL CORPORATION By: /s/ James K. McHugh -------------------------- James K. McHugh Chief Financial Officer N-VIRO ENERGY SYSTEMS, LIMITED By: N-Viro Energy Systems, Inc. General Partner By: /s/ J. Patrick Nicholson -------------------------- J. Patrick Nicholson President -5- 4 SHARE EXCHANGE AGREEMENT ------------------------ This Share Exchange Agreement (this "Agreement") is made and entered into as of the 30th day of June, 1997 by and between N-Viro International Corporation, a Delaware Corporation, (the "Company") and J. Patrick Nicholson, an individual ("Purchaser") . RECITALS. --------- Whereas, the Company presently is indebted to Purchaser for obligations arising in the ordinary course of business in an amount equal to Forty-Eight Thousand Dollars ($48,000.00) (the "Company' s Existing Obligation"); Whereas, the Company has offered to satisfy this obligation to Purchase through the Company's delivery to Purchaser of Sixteen Thousand (16,000) shares ("Shares") of the Company' s voting common stock, with par value $.01 per share (the "Common Stock",); and Whereas, Purchaser has agreed to accept delivery of the Shares in complete satisfaction of the Company's Existing Obligation. Now, therefore, the parties hereto, intending to be legally bound hereby, agree as follows: 1. EXCHANGE. The Company hereby offers the Shares to Purchaser IN complete satisfaction of the Company's Existing obligation. Purchaser hereby accepts the Company's offer, and, upon the Company's delivery to Purchaser of stock certificates representing the Shares, Purchaser agrees that the Company's Existing Obligation shall be fully and forever discharged and Purchaser shall have no continuing claim against the Company with respect thereto. 2. UNREGISTERED OFFERING. Purchaser acknowledges and agrees that Purchaser's acceptance of the Shares in exchange for releasing the Company from the Company's Existing Obligation constitutes the sale of securities under and pursuant to the Securities Act of 1933 and the rules and regulations promulgated thereunder, as amended from time to time (the 111933 Act") . Purchaser further acknowledges Purchaser's understanding that no aspect of the transactions contemplated in this Agreement has been, prior to the date of this Agreement, or will be, prior to the date of delivery of stock certificates representing the Shares, registered with or reviewed by the Securities and Exchange Commission (the "SEC") under the 1933 Act, or with or by any state securities law administrator, and no federal or state securities law administrator has approved any disclosure or other material concerning the Company or the Shares or made any recommendation with respect thereto. 3. REPRESENTATIONS AND COVENANTS. To induce the Company to enter into this Agreement, Purchaser represents, warrants, covenants and agrees that: (a) ACCESS. Purchaser has investigated and will continue to investigate the merits and risks of accepting the Shares in exchange for the discharge of the Company's Existing Obligation. Purchaser has been provided with the Annual Report on Form 10-K of the Company for the year ended March 31, 1996, a quarterly report on form 10-Q for the period ending March 31, 1997, the Proxy Statement relating to the 1997 Annual Stockholders' Meeting, the 1997 Annual Report to Stockholders and all subsequent reports filed by the Company with the SEC pursuant to the requirements of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder, as amended from time to time, and has had the opportunity to ask questions of, and receive answers from, members of the Board of Directors and management of the Company. Purchaser has had the opportunity to and will continue to avail himself of his rights to ask questions of the management of the Company 5 relating to the Company, the Shares, and related matters. Purchaser also has had and shall continue to avail himself of his rights to obtain additional information necessary to verify the accuracy of information provided to him and to continue to evaluate the merits and risks of the transactions contemplated by this Agreement. (b) INVESTMENT INTENT: STATE OF RESIDENCE. Purchaser is acquiring the Shares for its own account for investment, within the meaning of the 1933 Act. Purchaser's principal place of business and domicile is and shall continue to be at the time of delivery of the Shares the State of Ohio. (c) AFFILIATE STATUS. Purchaser is an affiliate of the Company within the meaning of the 1934 Act by virtue of the fact that Purchaser is an officer and member of the Board of Directors of the Company. (d) RESALES. Purchaser agrees that it shall not resell or transfer in any way the Shares acquired hereunder to any U.S. Person as described in Regulation S under the 1933 Act or in the United States without an applicable exemption from registration under the 1933 Act or upon registration of the Shares pursuant to the 1933 Act. All certificates representing the Shares shall contain the following legend: -2- "The Shares represented by this certificate have not been registered pursuant to the Securities Act of 1933 and therefore may not be transferred or sold in the United States or to a U.S. Person without either an effective registration statement pursuant to the Securities Act of 1933 or an opinion of counsel satisfactory to N-Viro International Corporation that registration is not required under the Securities Act of 1933.11 (e) Purchaser has knowledge and experience in financial and business matters so is to be capable of evaluating the merits and risks of an investment in the Shares. Purchaser is willing and able to bear the economic risk of an investment in the Shares indefinitely. In making the foregoing statement, consideration has been given to whether Purchaser has adequate means of providing for its current financial needs and business contingencies, whether it could afford to hold the Shares indefinitely, and whether, at this time, it could afford a significant or complete loss of his investment. Purchaser is acquiring the Shares for Purchaser's own account, as principal, for investment and not with a view to the resale or distribution of all or any part of the Shares. 4. RELEASE. Upon the Company's delivery of the Shares to Purchaser, the Company shall be fully and forever released from the requirement that it pay Purchaser the amount of the Company's Existing Obligation. This discharge shall be effective without any further action on the part of Purchaser. 5. DELIVERY OF STOCK CERTIFICATES. A certificate or certificates evidencing the Shares registered in the name of Purchaser shall be executed, issued and delivered to Purchaser by the Company within fifteen (15) business days from the date of execution of this Agreement. 6. BINDING EFFECT. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, personal representatives, successors and assigns. 7. AMENDMENTS. No amendment or variations of the terms and conditions of this Agreement shall be valid unless the same is in writing and signed by the parties hereto. All such amendments shall specifically refer to this Agreement. 8. HEADINGS. The paragraph headings contained herein are for convenience only and shall not, in any way, effect the interpretation or enforceability of any provisions of this Agreement. -3 - 6 9. GOVERNING LAW. This Agreement shall be construed and enforced under and pursuant to the internal laws of the state of Ohio. 10. ENTIRE AGREEMENT. This Agreement contains the entire Agreement between the parties hereto with respect to the transactions contemplated herein. This Agreement supersedes all prior oral and written understandings and agreements with respect to the subject matter referred to herein. 11. CERTAIN TERMS. Unless the context otherwise requires a different meaning, words of a masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders, words importing the singular numbers shall include the plural number and vice versa, and the terms "hereby," "hereto," "hereunder," and "herein" as well as similar terms refer to this Agreement. 12. ASSIGNMENT. None of the parties hereto may assign, transfer or otherwise dispose of any of their rights or obligations under this Agreement. 13. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one document. IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first above written. N-VIRO INTERNATIONAL CORPORATION By: /s/ James K. McHugh ----------------------- James K. McHugh Chief Financial Officer /s/ J. Patrick Nicholson - --------------------------- J. Patrick Nicholson -4- 7 SHARE EXCHANGE AGREEMENT ------------------------ This Share Exchange Agreement (this "Agreement") is made and entered into as of the 30th day of June, 1997 by and between N-Viro International Corporation, a Delaware Corporation, (the "Company") and Frederick Kurtz, an individual ("Purchaser"). RECITALS. --------- Whereas, the Company presently is indebted to Purchaser for obligations arising in the ordinary course of business in an amount equal to Sixty-One Thousand-Five Hundred Dollars ($61,500.00) (the "Company's Existing Obligation"); Whereas, the Company has offered to satisfy this obligation to Purchase through the Company's delivery to Purchaser of Twenty Thousand Five Hundred (20,500) shares ("Shares") of the Company's voting common stock, with par value $.01 per share (the "Common Stock"); and Whereas, Purchaser has agreed to accept delivery of the Shares in complete satisfaction of the Company's Existing Obligation. Now, therefore, the parties hereto, intending to be legally bound hereby, agree as follows: 1. EXCHANGE. The Company hereby offers the Shares to Purchaser in complete satisfaction of the Company's Existing obligation. Purchaser hereby accepts the Company's offer, and, upon the Company's delivery to Purchaser of stock certificates representing the Shares, Purchaser agrees that the Company's Existing Obligation shall be fully and forever discharged and Purchaser shall have no continuing claim against the Company with respect thereto. 2. UNREGISTERED OFFERING. Purchaser acknowledges and agrees that Purchaser's acceptance of the Shares in exchange for releasing the Company from the Company's Existing Obligation constitutes the sale of securities under and pursuant to the Securities Act of 1933 and the rules and regulations promulgated thereunder, as amended from time to time (the "1933 Act") . Purchaser further acknowledges Purchaser's understanding that no aspect of the transactions contemplated in this Agreement has been, prior to the date of this Agreement, or will be, prior to the date of delivery of stock certificates representing the Shares, registered with or reviewed by the Securities and Exchange Commission (the "SEC") under the 1933 Act, or with or by any state securities law administrator, and no federal or state securities law administrator has approved any disclosure or other material concerning the Company or the Shares or made any recommendation with respect thereto. 3. REPRESENTATIONS AND COVENANTS. To induce the Company to enter into this Agreement, Purchaser represents, warrants, covenants and agrees that: (a) ACCESS. Purchaser has investigated and will continue to investigate the merits and risks of accepting the Shares in exchange for the discharge of the Company's Existing Obligation. Purchaser has been provided with the Annual Report on Form 10-K of the Company for the year ended March 31, 1996, a quarterly report on form 10-Q for the period ending March 31, 1997, the Proxy Statement relating to the 1997 Annual Stockholders' Meeting, the 1997 Annual Report to Stockholders and all subsequent reports filed by the Company with the SEC pursuant to the requirements of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder, as amended from time to time, and has had the opportunity to ask questions of, and receive answers from, members of the Board of Directors and management of the Company. Purchaser has had the opportunity to and will continue to avail himself of his rights to ask questions of the management of the Company relating to the Company, the Shares, and related matters. Purchaser also has had and shall continue to avail himself of his rights to obtain additional information necessary to verify the accuracy of information provided to him and to continue to evaluate the merits and risks of the transactions contemplated by this Agreement. 8 (b) INVESTMENT INTENT: STATE OF RESIDENCE. Purchaser is acquiring the Shares for his own account for investment, within the meaning of the 1933 Act. Purchaser's state of residence is and shall continue to be at the time of delivery of the Shares the state of New Jersey. (c) AFFILIATE STATUS. Purchaser is an affiliate of the Company within the meaning of the 1934 Act by virtue of the fact that Purchaser is a member of the Board of Directors of the Company. (d) RESALES. Purchaser agrees that he shall not resell or transfer in any way the Shares acquired hereunder to any U.S. Person as described in Regulation S under the 1933 Act or in the United States without an applicable exemption from registration under the 1933 Act or upon registration of the Shares pursuant to the 1933 Act. All certificates representing the Shares shall contain the following legend: -2 - "The Shares represented by this certificate have not been registered pursuant to the Securities Act of 1933 and therefore may not be transferred or sold in the United States or to a U.S. Person without either an effective registration statement pursuant to the Securities Act of 1933 or an opinion of counsel satisfactory to N-Viro International Corporation that registration is not required under the Securities Act of 1933." (e) Purchaser has knowledge and experience in financial and business matters so is to be capable of evaluating the merits and risks of an investment in the Shares. Purchaser is willing and able to bear the economic risk of an investment in the Shares indefinitely. In making the foregoing statement, consideration has been given to whether he has adequate means of providing for his current financial needs and personal contingencies, whether he could afford to hold the Shares indefinitely, and whether, at this time, he could afford a significant or complete loss of his investment. Purchaser is acquiring the Shares for Purchaser's own account, as principal, for investment and not with a view to the resale or distribution of all or any part of the Shares. 4. RELEASE. Upon the Company's delivery of the Shares to Purchaser, the Company shall be fully and forever released from the requirement that it pay Purchaser the amount of the Company's Existing Obligation. This discharge shall be effective without any further action on the part of Purchaser. 5. DELIVERY OF STOCK CERTIFICATES. A certificate or certificates evidencing the Shares registered in the name of Purchaser shall be executed, issued and delivered to Purchaser by the Company within fifteen (15) business days from the date of execution of this Agreement. 6. BINDING EFFECT. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, personal representatives, successors and assigns. 7. AMENDMENTS. No amendment or variations of the terms and conditions of this Agreement shall be valid unless the same is in writing and signed by the parties hereto. All such amendments shall specifically refer to this Agreement. 8. HEADINGS. The paragraph headings contained herein are for convenience only and shall not, in any way, effect the interpretation or enforceability of any provisions of this Agreement. -3 - 9. GOVERNING LAW. This Agreement shall be construed and enforced under and pursuant to the internal laws of the state of Ohio. 9 10. ENTIRE AGREEMENT. This Agreement contains the entire Agreement between the parties hereto with respect to the transactions contemplated herein. This Agreement supersedes all prior oral and written understandings and agreements with respect to the subject matter referred to herein. 11. CERTAIN TERMS. Unless the context otherwise requires a different meaning, words of a masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders, words importing the singular numbers shall include the plural number and vice versa, and the terms "hereby," "hereto," "hereunder," and "herein" as well as similar terms refer to this Agreement. 12. ASSIGNMENT. None of the parties hereto may assign, transfer or otherwise dispose of any of their rights or obligations under this Agreement. 13. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one document. IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first above written. N-VIRO INTERNATIONAL CORPORATION By: /s/ J. Patrick Nicholson ----------------------------- J. Patrick Nicholson Chairman of the Board & President /s/ Frederick Kurtz - ----------------------- Frederick Kurtz -4 - 10 SHARE EXCHANGE AGREEMENT ------------------------ This Share Exchange Agreement (this "Agreement") is made and entered into as of the 30th day of June, 1997 by and between N-Viro International Corporation, a Delaware Corporation, (the "Company") and Bobby B. Carroll, an individual ("Purchaser"). RECITALS. --------- Whereas, the Company presently is indebted to Purchaser for obligations arising in the ordinary course of business in an amount equal to One Hundred Fifty Thousand Dollars ($150,000.00) (the "Company's Existing Obligation"); Whereas, the Company has offered to satisfy this obligation to Purchase through the Company's delivery to Purchaser of Fifty Thousand (50,000) shares ("Shares") of the Company's voting common stock, with par value $.01 per share (the "Common Stock,,); and Whereas, Purchaser has agreed to accept delivery of the Shares in complete satisfaction of the Company's Existing Obligation. Now, therefore, the parties hereto, intending to be legally bound hereby, agree as follows: 1. EXCHANGE. The Company hereby offers the Shares to Purchaser in complete satisfaction of the Company's Existing obligation. Purchaser hereby accepts the Company's offer, and, upon the Company's delivery to Purchaser of stock certificates representing the Shares, Purchaser agrees that the Company's Existing Obligation shall be fully and forever discharged and Purchaser shall have no continuing claim against the Company with respect thereto. 2. UNREGISTERED OFFERING. Purchaser acknowledges and agrees that Purchaser's acceptance of the Shares in exchange for releasing the Company from the Company's Existing Obligation constitutes the sale of securities under and pursuant to the Securities Act of 1933 and the rules and regulations promulgated thereunder, as amended from time to time (the 111933 Act") . Purchaser further acknowledges Purchaser's understanding that no aspect of the transactions contemplated in this Agreement has been, prior to the date of this Agreement, or will be, prior to the date of delivery of stock certificates representing the Shares, registered with or reviewed by the Securities and Exchange Commission (the "SEC") under the 1933 Act, or with or by any state securities law administrator, and no federal or state securities law administrator has approved any disclosure or other material concerning the Company or the Shares or made any recommendation with respect thereto. 3. REPRESENTATIONS AND COVENANTS. To induce the Company to enter into this Agreement, Purchaser represents, warrants, covenants and agrees that: (a) ACCESS. Purchaser has investigated and will continue to investigate the merits and risks of accepting the Shares in exchange for the discharge of the Company's Existing Obligation. Purchaser has been provided with the Annual Report on Form 10-K of the Company for the year ended March 31, 1996, a quarterly report on form 10-Q for the period ending March 31, 1997, the Proxy Statement relating to the 1997 Annual Stockholders' Meeting, the 1997 Annual Report to Stockholders and all subsequent reports filed by the Company with the SEC pursuant to the requirements of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder, as amended from time to time, and has had the opportunity to ask questions of, and receive answers from, members of the Board of Directors and management of the Company. Purchaser has had the opportunity to and will continue to avail himself of his rights to ask questions of the management of the Company relating to the Company, the Shares, and 11 related matters. Purchaser also has had and shall continue to avail himself of his rights to obtain additional information necessary to verify the accuracy of information provided to him and to continue to evaluate the merits and risks of the transactions contemplated by this Agreement. (b) INVESTMENT INTENT: STATE OF RESIDENCE. Purchaser is acquiring the Shares for his own account for investment, within the meaning of the 1933 Act. Purchaser's state of residence is and shall continue to be at the time of delivery of the Shares the state of Tennessee. (c) AFFILIATE STATUS. Purchaser is an affiliate of the Company within the meaning of the 1934 Act by virtue of the fact that Purchaser is a member of the Board of Directors of the Company. (d) RESALES. Purchaser agrees that he shall not resell or transfer in any way the Shares acquired hereunder to any U.S. Person as described in Regulation S under the 1933 Act or in the United States without an applicable exemption from registration under the 1933 Act or upon registration of the Shares pursuant to the 1933 Act. All certificates representing the Shares shall contain the following legend: -2 - "The Shares represented by this certificate have not been registered pursuant to the Securities Act of 1933 and therefore may not be transferred or sold in the United States or to a U.S. Person without either an effective registration statement pursuant to the Securities Act of 1933 or an opinion of counsel satisfactory to N-Viro International Corporation that registration is not required under the Securities Act of 1933.11 (e) Purchaser has knowledge and experience in financial and business matters so is to be capable of evaluating the merits and risks of an investment in the Shares. Purchaser is willing and able to bear the economic risk of an investment in the Shares indefinitely. In making the foregoing statement, consideration has been given to whether he has adequate means of providing for his current financial needs and personal contingencies, whether he could afford to hold the Shares indefinitely, and whether, at this time, he could afford a significant or complete loss of his investment. Purchaser is acquiring the Shares for Purchaser's own account, as principal, for investment and not with a view to the resale or distribution of all or any part of the Shares. 4. RELEASE. Upon the Company's delivery of the Shares to Purchaser, the Company shall be fully and forever released from the requirement that it pay Purchaser the amount of the Company's Existing Obligation. This discharge shall be effective without any further action on the part of Purchaser. 5. DELIVERY OF STOCK CERTIFICATES. A certificate or certificates evidencing the Shares registered in the name of Purchaser shall be executed, issued and delivered to Purchaser by the Company within fifteen (15) business days from the date of execution of this Agreement. 6. BINDING EFFECT. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, personal representatives, successors and assigns. 7. AMENDMENTS. No amendment or variations of the terms and conditions of this Agreement shall be valid unless the same is in writing and signed by the parties hereto. All such amendments shall specifically refer to this Agreement. 8. HEADINGS. The paragraph headings contained herein are for convenience only and shall not, in any way, effect the interpretation or enforceability of any provisions of this Agreement. -3 - 12 9 GOVERNING LAW. This Agreement shall be construed and enforced under and pursuant to the internal laws of the state of Ohio. 10. ENTIRE AGREEMENT. This Agreement contains the entire Agreement between the parties hereto with respect to the transactions contemplated herein. This Agreement supersedes all prior oral and written understandings and agreements with respect to the subject matter referred to herein. 11. CERTAIN TERMS. Unless the context otherwise requires a different meaning, words of a masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders, words importing the singular numbers shall include the plural number and vice versa, and the terms "hereby," "hereto," "hereunder," and "herein" as well as similar terms refer to this Agreement. 12. ASSIGNMENT. None of the parties hereto may assign, transfer or otherwise dispose of any of their rights or obligations under this Agreement. 13. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one document. IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date first above written. N-VIRO INTERNATIONAL CORPORATION By: /s/ J. Patrick Nicholson ----------------------------- J. Patrick Nicholson Chairman of the Board & President /s/ Bobby B. Carroll - ------------------------ Bobby B. Carroll -4- EX-3 3 EXHIBIT 3 1 EXHIBIT #3 SECOND AMENDMENT TO SETTLEMENT AGREEMENT This SECOND AMENDMENT TO SETTLEMENT AGREEMENT (the "Second Amendment") is made effective as of the 17TH day of July, 1997 by and among Frank Manchak, Jr., an individual ("Manchak"); N-Viro Energy Systems, Ltd., an Ohio limited partnership ("NESL"); N-Viro International Corporation, a Delaware corporation ("NVIC"); N-Viro Energy Systems, Inc., an Ohio corporation ("NESI"); and American N-Viro Resources, Inc., an Ohio corporation ("ANRN"). W I T N E S S E T H: WHEREAS, in order to settle certain disputes that were the subject of a lawsuit entitled FRANK MANCHAK, JR. V. N-VIRO ENERGY SYSTEMS, LTD. which had been filed by Manchak in the United States District Court for the Central District of California, Case No. CV-93-3042-ABC, the parties hereto entered into a certain settlement agreement (the "Settlement Agreement") in February, 1995; WHEREAS, on April 24, 1996, the parties hereto amended the Settlement Agreement pursuant to the terms of that certain Amendment to Settlement Agreement (the "First Amendment") for the purpose of, among other things, amending the sum owed to Manchak by NVIC under and pursuant to the terms of the Settlement Agreement and altering the terms of payment thereof; and WHEREAS, the parties hereto desire to further amend the Settlement Agreement to alter both the sum owing Manchak by NVIC and the terms of payment thereof, all as set forth herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. EFFECT OF AGREEMENT. This Second Amendment amends, supplements and supersedes the Settlement Agreement and the First Amendment with respect to all matters set forth herein. As to matters not set forth herein, the Settlement Agreement and the First Amendment shall not be affected. In the event and to the extent of a conflict with the terms and provisions set forth in this Second Amendment and the terms and provisions set forth in either the Settlement Agreement or the First Amendment, the terms and provisions set forth in this Second Amendment shall control. -1- 2 2. CERTAIN PAYMENTS. In full satisfaction of all of NVIC's remaining obligations under and pursuant to Paragraph 2 of the First Settlement Agreement, as amended by the terms and provisions of the Amendment, NVIC shall make all of the following payments and deliveries to Manchak and Kenyon and Kenyon: (a) on or before July 20, 1997, NVIC will pay Manchak the sum of Thirty Thousand Dollars ($30,000.00). This payment, as well as all other payments under and pursuant to the terms of this Second Amendment, shall be wired to Kenyon and Kenyon's escrow account as specified in the Settlement Agreement. (b) on or before July 24, 1997, NVIC will (i) issue and deliver to Manchak 150,000 shares (the "Settlement Stock") of its voting, common stock, with par value of $.01 per share (the "Common Stock") and (ii) issue to Manchak but deliver to the Escrow Agent 100,000 shares of Common Stock (the "Escrow Stock") to be held by such Escrow Agent in accordance with the terms and provisions of Section 9 hereof. None of such Common Stock shall be registered under the Securities Act of 1933, as amended (the "1933 Act") and shall constitute "restricted securities" as such term is defined in Rule 144(a) promulgated under the 1933 Act. (c) on August 15, 1997, $100,000 (the "Escrow Funds"), shall be delivered by NVIC to the Escrow Agent to be held by such Escrow Agent in accordance with the terms and provisions of Section 9 hereof. Any payments required to be made from the Escrow Funds prior to August 15, 1997 shall be made instead by NVIC. (d) within thirty days of the date of execution of this Second Amendment, NVIC shall issue and deliver to Manchak an option (the "Option") to purchase up to 100,000 additional shares (the "Option Stock") of Common Stock at a price of $2.50 per share. Neither the Option nor the Option Stock at the time of issuance shall be registered under the 1933 Act and both the Option and the Option Stock shall constitute restricted securities as defined in Rule 144(a) promulgated under the 1933 Act. Under and pursuant to the terms of the Option, (i) Manchak's rights with respect to the purchase of the Option Stock shall vest immediately upon the Escrow Agent's delivery of any remaining Escrow Funds to NVIC but in no event later than November 15, 1997 (the "Vesting Date"), (ii) the Option shall expire 60 days after the Vesting Date, (iii) Manchak shall have the right to resell all or a portion of the Option Stock back to NVIC at a price of $3.00 per share at any time during the two business days immediately following the date of exercise of the Option, provided, however, Manchak shall forfeit this right in the event that he sells any of the Option Stock in a public offering pursuant to an effective registration statement under the 1933 Act and the rules and regulations promulgated thereunder, (iv) prior to exercising his right to purchase the Option Stock, Manchak shall have the right, in his sole and absolute discretion, to require NVIC to repurchase all or a portion of the Option by paying Manchak an amount equal to $.50 per share of Option Stock offered for repurchase by Manchak and (v) the Option shall be non-assignable and non-transferable. The Option shall otherwise be in such form as Manchak and NVIC shall mutually agree. -2- 3 (e) On November 3, 1997, Manchak shall submit to NVIC a detailed accounting of (i) the aggregate number of shares of Settlement Stock owned by Manchak as of such date, (ii) the aggregate amount of proceeds, exclusive of any transaction costs, such as broker's fees and commissions, (the "Sale Proceeds") received by Manchak from the sale of shares of Settlement Stock prior to such date, as well as documentary evidence reasonably satisfactory to NVIC in support of such calculation and (iii) the aggregate amount of all sums (the "Cash Proceeds") paid by either NVIC or the Escrow Agent to Manchak pursuant to the terms of this Second Amendment (the sum of the Sale Proceeds and the Cash Proceeds shall be referred to herein as the "Aggregate Proceeds"). In the event and to the extent that the Aggregate Proceeds fails to equal or exceed $410,000, NVIC shall be obligated to redeem such number of shares of Settlement Stock then held by Manchak at a price equal to $2.00 per share as is necessary to increase the Aggregate Proceeds to $410,000. The funds necessary for such redemption shall first be paid by the Escrow Agent from any remaining Escrow Funds and then, in the event and to the extent that the Escrow Funds are insufficient to fund any required redemption, from NVIC. All such payments shall be made to Manchak on or before November 15, 1997. Upon completion of its obligations pursuant to the terms of this Section 2(f), NVIC shall be entitled to the return of the balance of the Escrow Funds. Notwithstanding any other provision herein to the contrary, Manchak shall have no obligation to sell any of the Settlement Stock to NVIC pursuant to the terms of this Section 2(f). In the event that the Aggregate Proceeds do not equal or exceed $410,000, and Manchak elects not to sell such number of shares of Settlement Stock to NVIC as are necessary to increase the Aggregate Proceeds to $410,000, then the amount of Aggregate Proceeds shall be deemed to be increased by the sum of $2.00 per share of Settlement Stock retained by Manchak on and after November 3, 1997. 3. REGISTRATION OF COMMON STOCK. NVIC and Manchak agree to be bound by the terms and conditions of Schedule I hereto, which relates to the registration of the Settlement Stock, the Escrow Stock and the Option Stock under applicable securities laws. 4. RESTRICTIONS ON RESALES. Manchak covenants and agrees that he shall not sell, hypothecate, transfer or pledge any of the Settlement Stock, the Escrow Stock or the Option Stock acquired hereunder to any U.S. person as described in Regulation S under the 1933 Act or in the United States without an applicable exemption from registration under the 1933 Act or upon registration of such securities pursuant to the 1933 Act. All shares of Common Stock acquired hereunder shall contain the following legend: "The shares of Common Stock represented by this certificate have not been registered pursuant to the Securities Act of 1933 and therefore may not be transferred or sold in the United States or to an American citizen or resident alien without either an effective Registration Statement pursuant to the Securities Act of 1933 or an opinion of counsel satisfactory to the issuer that registration is not required under such Act." -3- 4 5. ADDITIONAL RESTRICTIONS ON RESALES. Prior to July 15, 1997, Manchak covenants and agrees that he shall not sell, hypothecate, transfer or pledge any of the shares of Common Stock acquired hereunder. On and after July 15, 1997 but subject to the requirements set forth in Section 4 above, Manchak shall have the right, in his sole and absolute discretion, to sell on a monthly basis such number of shares of Common Stock issued hereunder as shall have a fair market value at the time of sale of up to Ninety Thousand Dollars ($90,000.00), but in no event shall the number of shares sold during any given month exceed 45,000. Notwithstanding the foregoing, in October of 1997 Manchak may sell such number of shares of Common Stock as shall have a fair market value at the time of sale of up to One Hundred Ten Thousand Dollars ($110,000.00), but in no event shall the number of shares sold in October, 1997 exceed 55,000. In calculating the fair market value of any shares sold pursuant to the terms of the preceding sentence, brokerage fees, commissions and other transactional expenses shall be excluded. The resale limit shall remain in effect for a period of 18 months following the date hereof. 6. Cash Flow/Escrow Stock. ----------------------- (a) For a period commencing on the date hereof and expiring on the earlier of (i) such date as the aggregate fair market value of all shares of Common Stock sold by Manchak hereunder equals or exceeds Three Hundred Eighty Thousand Dollars ($380,000.00) and (ii) November 15, 1997, NVIC shall guarantee that the average fair market value of a share of the Common Stock sold by Manchak during any given month shall not be less than Two Dollars ($2.00) per share. For purposes of the preceding sentence, the average fair market value of a share of Common Stock shall be computed by dividing the aggregate fair market value of all shares of Common Stock sold by Manchak during any given month by the number of such shares sold. In the event and to the extent that such average fails to equal or exceed Two Dollars $2.00 per share, the Escrow Agent shall distribute to Manchak from the Escrow Funds such amount as necessary so that when such distribution is combined with the aggregate fair market value of all of the Common Shares sold during such month and such sum is divided by 45,000 (55,000 with respect to the calculation made in connection with sales occurring during the month of October 1997), the dividend equals Two Dollars ($2.00) per share. Any payments required to be made by the Escrow Agent pursuant to the terms of the preceding sentence shall be made within five (5) business days of such date as the Escrow Agent receives from Manchak documentary evidence of the number of shares sold by Manchak during the preceding month and the prices at which such shares were sold. Notwithstanding the foregoing, any payment required with respect to sales occurring in the month of October 1997 shall be made on or before November 15, 1997. In the event and to the extent that the Escrow Funds are insufficient to fulfill the obligation set forth above, then NVIC shall pay Manchak such amount as is necessary to increase the dividend to Two Dollars ($2.00) per share. Notwithstanding any provision herein to the contrary, if, for any reason whatsoever, Manchak is unable to sell the maximum number of shares permitted to be sold hereunder, in any given month, after exercising good faith in an attempt to do so, then NVIC shall within five (5) business days of such date as either NVIC or the Escrow Agent receives from Manchak documentary evidence of the inability to sell the maximum number of shares, redeem at a price of $2.00 per share such number of shares as is necessary to increase the total number of shares sold by Manchak with respect to the -4- 5 prior monthly period to the applicable maximum number and the total consideration received by Manchak for such shares to the applicable maximum amount. Notwithstanding any provision in this Second Amendment to the contrary, except for the payment, if any, to be made by NVIC on or before November 15, 1997, the maximum amount of any monthly cash payment by NVIC to Manchak shall be Sixty Thousand Dollars ($60,000). (b) After the close of business on September 30, 1997 or the next business day immediately thereafter, Manchak shall submit to the Escrow Agent and NVIC a detailed accounting of (i) the aggregate number of shares of Settlement Stock owned by Manchak as of such date, (ii) the aggregate amount of Sale Proceeds from the sale of shares of Settlement Stock through September 30, 1997, as well as documentary evidence reasonably satisfactory to NVIC in support of such calculation and (iii) the aggregate amount of all Cash Proceeds paid by NVIC to Manchak pursuant to the terms of this Second Amendment through September 30, 1997. Within three (3) business days after receipt of such information, the Escrow Agent shall compute the difference (the "Remaining Obligation") between (x) $410,000.00 and (y) the Aggregate Proceeds received by Manchak through September 30, 1997. After computing the amount of the Remaining Obligation, the Escrow Agent shall multiply the number of shares of Settlement Stock held by Manchak at the close of business on September 30, 1997 by the sum of $2.00 per share and the Escrow Agent shall subtract such product from the amount of the Remaining Obligation to calculate the "Share Deficit Amount." The Escrow Agent shall then deliver to Manchak such number of shares of Escrow Stock as equals the Share Deficit Amount divided by two (2), rounded up to the nearest whole number. Any such shares of Escrow Stock delivered to Manchak shall thereafter be classified as shares of Settlement Stock under and pursuant to the terms of this Agreement. Following delivery of such shares of Escrow Stock to Manchak, the Escrow Agent shall return any remaining shares of Escrow Stock to NVIC and Manchak shall not be entitled to, nor shall he receive, any compensation in return for the surrender of such remaining shares of Escrow Stock. Notwithstanding any provision to the contrary, NVIC may direct the Escrow Agent to satisfy its obligations under this section by delivery to Manchak from the Escrow Funds of an amount equal to the Share Deficit Amount instead of the delivery of any shares of Escrow Stock. 7. CERTAIN REPRESENTATIONS OF MANCHAK. Manchak represents, warrants and agrees as follows: (a) REGISTRATION STATEMENT. None of the information regarding Manchak supplied or to be supplied by Manchak for inclusion (i) in the Registration Statement to be filed by NVIC with the Securities and Exchange Commission (the "SEC") in connection with the registration of any Common Stock transferred to Manchak hereunder or (ii) in any other documents to be filed with the SEC or any other regulatory authority in connection with the transactions contemplated in this Second Amendment will at the respective time such documents are filed and, in the case of the Registration Statement, when it becomes effective, be false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make the statements therein not misleading. -5- 6 (b) ACCESS. Manchak understands that no aspect of the transactions contemplated in this Second Amendment has been, prior to the date of this Second Amendment, or will be, prior to the date of delivery of the Settlement Stock, the Escrow Stock, the Option or the Option Stock registered with or reviewed by the SEC under the 1933 Act, or with or by any state securities law administrator, and no federal or state securities law administrator has approved any disclosure or other material concerning NVIC or the Common Stock, or made any recommendation with respect thereto. Manchak hereby acknowledges his right to investigate the merits and risks of the transactions contemplated under the provisions of this Second Amendment. Manchak acknowledges that he has been advised of his rights to ask questions of the management of NVIC relating to NVIC, the Common Stock and related matters and his right to obtain additional information necessary to verify the accuracy of information provided to him and to continue to evaluate the merits and risks of the transactions contemplated by this Second Amendment. (c) BROKERED TRANSACTION. Manchak covenants and agrees that he shall use the brokerage services of such brokerage firm (the "Selected Broker") as NVIC shall indicate in writing to Manchak within five (5) business days of the date hereof in connection with all sales of Settlement Stock, if any, occurring during the period from the date hereof until November 15, 1997. Notwithstanding the foregoing, if the Selected Broker fails for any reason to complete any sell order within five (5) business days, or if Manchak reasonably determines that such brokerage firm has otherwise failed to carry out its duties in a reasonable manner, Manchak shall be permitted to employ a broker/dealer selected by Kenyon & Kenyon. (d) COOPERATION. From and after the date of this Second Amendment, Manchak, his accountants, attorneys, agents and other representatives will cooperate fully with NVIC (i) in the preparation of all statements and reports contemplated by this Second Amendment and required pursuant to the registration and reporting requirements provided in the 1933 Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") and (ii) to facilitate the consummation of the transactions provided for herein, all in accordance with federal and state regulatory requirements. NVIC shall reimburse Manchak for all reasonable costs and expenses incurred by Manchak in connection with the preparation of any statements and reports prepared primarily for the benefit of NVIC in accordance with the terms of this paragraph. (e) INFORMATION. On request of NVIC, Manchak will furnish to NVIC all information concerning Manchak as is required to be set forth in (i) the Registration Statement and (ii) any application or statement made by NVIC to any governmental agency or authority in connection with the transactions contemplated by this Second Amendment. NVIC shall reimburse Manchak for all reasonable costs and expenses incurred by Manchak in connection with the provision of any information required hereunder. Manchak shall advise NVIC promptly of the happening of any event which makes untrue any statement of a material fact contained in the Registration Statement or any amendment or supplement thereto or that requires the making of a change in the Registration Statement or any amendment or supplement thereto in order to make any material statement therein not misleading. -6- 7 8. CERTAIN REPRESENTATIONS OF NVIC. As a material inducement to Manchak entering into this Second Amendment, NVIC represents, warrants and agrees that: (a) REGISTRATION STATEMENT. None of the information regarding NVIC supplied or to be supplied by NVIC for inclusion, (i) in the Registration Statement or (ii) in any other documents to be filed with the SEC or any regulatory authority in connection with the transactions contemplated in this Second Amendment will at the respective time such documents are filed and, in the case of the Registration Statement, when it becomes effective, contain an untrue statement of a material fact required to be stated therein, or omit to state any material fact necessary in order to make the statements therein not misleading. 9. ESCROW. In connection with the transactions contemplated in this Second Amendment, Shumaker, Loop & Kendrick, LLP (the "Escrow Agent") has agreed to serve as escrow agent to hold certain funds, if any, required to be deposited by NVIC with the Escrow Agent pursuant to the terms of Section 2(d) hereof and the Escrow Stock to be deposited by NVIC with the Escrow Agent pursuant to the terms of Section 2(b) hereof. The Escrow Agent shall hold the Escrow Funds in an interest bearing account at a nationally chartered financial institution and shall, from time to time, disburse the balance of such account or a portion thereof to either Manchak and Kenyon & Kenyon or NVIC as required pursuant to the terms hereof. The Escrow Agent shall hold certificates representing the Escrow Stock in a secure location and shall, from time to time, deliver such certificates to either Manchak or NVIC as required pursuant to the terms hereof. The liability of the Escrow Agent hereunder shall be limited to compliance with its obligations under this Second Amendment. In no event shall the Escrow Agent have any liability with respect to any judgment against any party other than to comply with any order of any court with respect to any assets in the custody of the Escrow Agent. NVIC shall indemnify, defend and hold the Escrow Agent harmless from and against any and all claims arising out of, resulting from or in any way connected with the Escrow Agent's performance of its duties hereunder, except for such acts of the Escrow Agent as shall constitute gross negligence or willful misconduct. Manchak covenants and agrees that he shall not assert any claims or institute any proceedings against the Escrow Agent arising out of, resulting from or in any way connected with the Escrow Agent's performance of its duties hereunder, except for such acts of the Escrow Agent, if any, as constitute gross negligence or willful misconduct. 10. DISCHARGE OF OBLIGATIONS. The payment and other obligations of NVIC set forth in this Second Amendment are intended to supersede the payment terms set forth in the Settlement Agreement and the First Amendment. In the event that NVIC fully performs all of its obligations hereunder, then NVIC shall be deemed to have fulfilled all of its obligations pursuant to Section 2 of the Settlement Agreement as amended by the First Amendment. Notwithstanding the foregoing, this Second Amendment shall not be deemed a waiver of any rights or remedies of any of the parties hereto under the Settlement Agreement or the First Amendment. In the event that NVIC fails to comply with any of the terms set forth herein, for any reason, including, without limitation, voluntary or involuntary bankruptcy of NVIC or the failure to effect registration of any stock as required herein, such failure shall be deemed a Default under the Settlement Agreement -7- 8 and the First Amendment, and all of the remedies specified in the Settlement Agreement and the First Amendment shall be available to Manchak, including, without limitation, the acceleration of all sums due and payable to Manchak by NVIC. 11. HEADINGS. The paragraph headings contained herein are for convenience only and shall not, in any way, affect the interpretation or enforceability of any provisions of this Second Amendment. 12. GOVERNING LAW. This Second Amendment shall be construed and enforced pursuant to the laws of the State of California. 13. COUNTERPARTS. This Second Amendment may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute but one document. 14. AMENDMENTS. No amendment or variation of the terms and conditions of this Second Amendment shall be valid unless the same is in writing and signed by all of the parties hereto or their duly authorized agent. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] -8- 9 IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment or caused this Second Amendment to be executed by them or their duly authorized agents as of the date first written above. /s/ Frank Manchak, Jr. ---------------------- Frank Manchak, Jr. N-VIRO ENERGY SYSTEMS, INC. By: /s/ J. Patrick Nicholson ------------------------ J. Patrick Nicholson President N-VIRO ENERGY SYSTEMS, LTD. By: N-Viro Energy Systems, Inc. Its General Partner By: /s/ J. Patrick Nicholson ------------------------ J. Patrick Nicholson President N-VIRO INTERNATIONAL CORPORATION By: /s/ J. Patrick Nicholson ------------------------ J. Patrick Nicholson Chairman of the Board AMERICAN N-VIRO RESOURCES, INC. By: /s/ J. Patrick Nicholson ------------------------ J. Patrick Nicholson President -9- EX-3.1 4 EXHIBIT 3.1 1 Exhibit 3.1 SCHEDULE I REGISTRATION RIGHTS PROVISIONS ------------------------------ 1. Definitions ----------- Terms defined in the foregoing Second Amendment are used as therein defined unless otherwise defined in this Schedule I. In addition, as used in this Schedule, the following capitalized terms shall have the following meanings: NVIC SHARES: A voting common share of NVIC with par value of $.01 per share. EFFECTIVE DATE: The date the Shelf Registration is declared effective by the SEC. INDEMNIFIED HOLDER: See Section 6(a). NASD: National Association of Securities Dealers, Inc. PERSON: An individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. PROSPECTUS: The prospectus included in any Registration Statement, as amended or supplemented, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus. REGISTRABLE SECURITIES: The shares of Settlement Stock and Option Stock provided that any such share ceases to be a Registrable Security when it may be distributed to the public pursuant to Rule 144 (or any similar provisions then in force) promulgated under the 1933 Act or when the certificate therefor ceases to contain the restricted stock legend specified in Section 7(g) of the Second Amendment or the equivalent thereof. REGISTRATION EXPENSES. See Section 5. REGISTRATION STATEMENT: Any registration statement of NVIC which covers any of the Registrable Securities pursuant to the provisions of this Schedule, including the Prospectus, amendments to such Registration Statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such Registration Statement. SHELF REGISTRATION: See Section 3. 2 STOCKHOLDERS: Frank Manchak, Jr. 2. Securities Subject to this Schedule ----------------------------------- The benefits of this Schedule are limited to the Registrable Securities, whether held by the Stockholders or a subsequent holder thereof. 3. Shelf Registration: Timing of Filing, Effectiveness and Period of ----------------------------------------------------------------- Usability --------- Subject to the provisions of Section 4 hereof, NVIC shall file within fifteen (15) business days hereof and shall use its commercially reasonable best efforts to cause to be declared effective as soon as practicable a "shelf" Registration Statement (a "Shelf Registration") pursuant to Rule 415 (or similar rule that may be adopted by the SEC) under the 1933 Act for all the Registrable Securities and such other NVIC Shares as NVIC deems appropriate, which form shall be available for the sale of the Registrable Securities for cash in accordance with the intended method or methods of distribution thereof. NVIC agrees to use its commercially reasonable best efforts to keep the Registration Statement continuously effective and usable for resale of Registrable Securities until 790 days (the "Effectiveness Period") from the Vesting Date or such shorter period which will terminate when all the Registrable Securities covered by such Registration Statement have been sold pursuant to such Registration Statement, may be sold pursuant to Rule 144, or are freely tradeable. Notwithstanding the foregoing, NVIC shall have the right (i) to defer for a period of up to 90 days the request for acceleration of effectiveness, or (ii) after effectiveness, to suspend effectiveness of the Registration Statement for periods of up to 90 days if, in the good faith judgment of the board of directors of NVIC or upon the advice of counsel to NVIC, such delay in requesting acceleration of effectiveness or such suspension of effectiveness (A) is necessary in light of the existence of material non-public information (financial or otherwise) concerning NVIC and/or any other entity in which NVIC has, or is proposing to acquire, an equity interest, or (B) otherwise is in the best interest of NVIC and its shareholders. Notwithstanding any provision herein to the contrary, the aggregate number of days during any given twelve month period in which the effectiveness of the Registration Statement shall be suspended at the request of NVIC shall not exceed one hundred twenty (120) days. NVIC will give each of the Stockholders prompt written notice of any decision to defer or suspend effectiveness of the Registration Statement. -2- 3 In connection with the registration of NVIC Shares as provided in this Schedule, NVIC shall be entitled to include in the Registration Statement any other securities of NVIC (whether to be offered by NVIC or other security holders of NVIC and regardless of the proposed terms of transfer or sale of such other securities). 4. Registration Procedures ----------------------- In connection with NVIC's obligation to file Registration Statements as provided in Section 3 hereof, but subject to the terms, conditions and limitations thereof, NVIC will as expeditiously as possible: (a) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement, and such supplements to the Prospectus, as may be required by the rules, regulations or instructions applicable to the registration form utilized by NVIC under the 1933 Act or rules and regulations thereunder for shelf registration or otherwise necessary to keep the Registration Statement effective for the applicable period and cause the Prospectus as so supplemented to be filed pursuant to Rule 424 under the 1933 Act; and comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (b) notify the Stockholders and the holders of Registrable Securities promptly, and confirm such advice in writing, (1) when the Registration Statement or the Prospectus included therein, or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (2) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; and (3) of the receipt by NVIC of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. -3- 4 (c) make every commercially reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible date; (d) furnish, without charge, to Stockholders and each selling holder of Registrable Securities, at least one conformed copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (but excluding exhibits incorporated by reference); (e) deliver to Stockholders and each selling holder of Registrable Securities without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request; NVIC consents to the use of the Prospectus or any amendment or supplement thereto by each Stockholder and the selling holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (f) cooperate with Stockholders and the selling holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restricted stock legends; (g) use its commercially reasonable best efforts to cause the Registrable Securities covered by the Registration Statement to be registered with or approved by governmental agencies or authorities within the United States under states' securities or "Blue Sky" laws as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities in such jurisdictions as the sellers may specify in response to inquiries to be made by NVIC, provided that NVIC will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or taxation in any such jurisdiction where it is not then so subject; (h) if any event shall occur as a result of which it is necessary, in the opinion of NVIC, to amend or supplement the Prospectus in order to make the Prospectus not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as -4- 5 thereafter delivered to the purchasers of the Registrable Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (i) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make generally available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the 1933 Act (in accordance with Rule 158 thereunder or otherwise), no later than 60 days after the end of the 12-month period (or 120 days, if such period is a fiscal year) beginning with the first month of NVIC's first fiscal quarter commencing after the Effective Date, which statements shall cover said 12-month period; (j) if at any time an event of the kind described in Section 4(h) shall occur, promptly notify the Stockholders and the holders of Registrable Securities that the use of the Prospectus must be discontinued; (k) cause the NVIC Shares issued to the Stockholders to be listed on the NASD's automated quotation system. Each selling holder of Registrable Securities as to which any registration is being effected agrees, as a condition to the registration obligations with respect to such holder provided herein, to furnish to NVIC such information regarding the distribution of such securities as NVIC may from time to time reasonably request in writing. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from NVIC described in paragraph 4(j), such holder will forthwith discontinue disposition of Registrable Securities until such holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(h) hereof, or until it is advised in writing by NVIC (which notice NVIC shall give as promptly as possible), that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by NVIC, such holder will deliver to NVIC (at NVIC's expense) all copies, other than permanent file copies then in such holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. 5. Registration Expenses --------------------- (a) All expenses incident to NVIC's performance of or compliance with this Schedule, including without limitation: -5- 6 (2) all registration, filing and listing fees; (3) fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities under the laws of such jurisdictions as the holders of a majority in principal amount of the Registrable Securities being sold may reasonably designate); (4) printing, messenger, telephone and delivery expenses; (5) fees and disbursements of counsel for NVIC; (6) fees and disbursements of all independent certified public accountants of NVIC (including the expenses of any special audit necessary to satisfy the requirements of the 1933 Act and any "cold comfort" letters required by or incident to such performance); (7) securities acts liability insurance if NVIC so desires; (8) fees and expenses of other Persons retained by NVIC; and (9) fees and expenses associated with any NASD filing required to be made in connection with the Registration Statement. (all such expenses being herein called "Registration Expenses") will be borne by NVIC, regardless of whether the Registration Statement becomes effective. NVIC will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on a securities exchange or on the NASD's automated quotation system, rating agency fees and the fees and expenses of any Person, including special experts, retained by NVIC. 6. Indemnification and Contribution -------------------------------- (a) INDEMNIFICATION BY NVIC. NVIC agrees to indemnify and hold harmless each holder of Registrable Securities, its officers, directors, employees and agents and each Person who controls such holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the Exchange Act (each such person being sometimes hereinafter referred to as an "Indemnified Holder") from and against all losses, claims, damages, -6- 7 liabilities and expenses (including reasonable costs of investigation and legal expenses) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses arise out of or are based upon any such untrue statement or omission or allegation thereof based upon information furnished in writing to NVIC by such holder expressly for use therein. This indemnity will be in addition to any liability which NVIC may otherwise have. NVIC will also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. If any action or proceeding (including any governmental investigation or inquiry) shall be brought or asserted against any Indemnified Holder in respect of which indemnity may be sought from NVIC, such Indemnified Holder shall promptly notify NVIC in writing (but the omission to so notify NVIC shall not relieve it of any liability that it may have against any Indemnified Holder otherwise than under this subsection), and NVIC shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Holder and the payment of all expenses. Indemnified Holders shall have the right, collectively, to employ their own counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expense of the Indemnified Holders unless (a) NVIC has agreed to pay such fees and expenses or (b) NVIC shall have failed to assume the defense of such action or proceeding and have failed to employ counsel reasonably satisfactory to the Indemnified Holders in any such action or proceeding or (c) the named parties to any such action or proceeding (including any impleaded parties) include the Indemnified Holders and NVIC, and the Indemnified Holders shall have been advised by counsel that there may be one or more legal defenses available to the Indemnified Holders which are different from or additional to those available to NVIC (in which case, if the Indemnified Holders notify NVIC in writing that they elect to employ their own counsel at the expense of NVIC, NVIC shall not have the right to assume the defense of such action or proceeding on behalf of the Indemnified Holders, it being understood, however, that NVIC shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable -7- 8 for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for the Indemnified Holders, which firm shall be designated in writing by the Indemnified Holders representing at least a majority of the aggregate principal amount of the Registrable Securities). Any such fees and expenses payable by NVIC shall be paid to the Indemnified Holders entitled thereto as incurred by the Indemnified Holders. NVIC shall not be liable for any settlement of any such action or proceeding effected without its written consent, but if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding, NVIC agrees to indemnify and hold harmless the Indemnified Holders from and against any loss or liability by reason of such settlement or judgment. (b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. Each holder of Registrable Securities agrees to indemnify and hold harmless NVIC, its respective directors and officers and each Person, if any, who controls NVIC within the meaning of either Section 15 of the 1933 Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from NVIC to such holder, but only with respect to information relating to such holder furnished in writing by such holder expressly for use in any Registration Statement or Prospectus, or any amendment or supplement thereto, or any preliminary prospectus. In case any action or proceeding shall be brought against NVIC or its respective directors or officers or any such controlling person, in respect of which indemnity may be sought against a holder of Registrable Securities, such holder shall have the rights and duties given NVIC, and NVIC or its respective directors or officers or such controlling person shall have the rights and duties given to each holder by the preceding paragraph. Each holder of Registrable Securities will also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of NVIC. NVIC and each holder of Registrable Securities shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any Prospectus or Registration Statement. (c) CONTRIBUTION. If the indemnification provided for in this Section 6 is unavailable to an indemnified party under Section 6(a) or Section 6(b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying -8- 9 such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses, in such proportion as is appropriate to reflect the relative fault of NVIC on the one hand and each holder of Registrable Securities on the other in connection with the statements or omissions that resulted in such losses, claims, damages, or liabilities, as well as the other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by NVIC or the particular holder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. NVIC acknowledges that the holders of the Registrable Securities are not involved in any manner in the business of NVIC and, accordingly, have limited knowledge of and access to information about the business of NVIC. NVIC and the holders of Registrable Securities agree that it would not be just and equitable if contributions pursuant to this subsection (c) were to be determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the first sentence of this subsection (c). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (c) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigation or defending against any action or claim that is the subject of this subsection (c). Notwithstanding the provisions of this subsection (c), each holder of Registrable Securities shall not be required to contribute any amount in excess of the amount by which the Difference exceeds the amount of any damages that such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act), shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 7. Rule 144 -------- For so long as NVIC is subject to the reporting requirements of Section 13 or 15 of the Exchange Act, NVIC covenants that it will file the reports required to be filed by it under the 1933 Act and Section 13(a) or 15(d) of the Exchange Act and the rules and regulations adopted by the SEC thereunder. 8. Miscellaneous ------------- (a) NO INCONSISTENT AGREEMENTS. NVIC will not on or after the date of this Schedule enter into any agreement with respect to its securities which is inconsistent with the rights granted -9- 10 to the holders of Registrable Securities in this Schedule or otherwise conflicts with the provisions hereof. The rights granted to the holders of Registrable Securities hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of NVIC's securities under any such agreements. (b) AMENDMENTS AND WAIVERS. The provisions of this Schedule, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless NVIC has obtained the written consent of holders of a majority of the Registrable Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provision hereof that relates exclusively to the rights of holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by the holders of a majority of the Registrable Securities being sold. (c) NOTICES. All notices, requests, consents and other communications hereunder shall be in writing, shall be mailed by first-class registered or certified airmail, telecopier, or nationally recognized overnight express courier postage prepaid, and shall be deemed given when so mailed or if telecopied, when receipt is acknowledged, and shall be delivered as addressed as follows: (1) if to a Stockholder, at the most current address given by the Stockholder to NVIC in accordance with the provisions of this Section 8(c); (2) if to a holder of Registrable Securities, at its address of record as indicated on the books of the transfer agent and registrar for the Registrable Securities; and (3) if to NVIC, initially at its address set forth in the Settlement Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 8(c). (d) SUCCESSORS AND ASSIGNS. This Schedule shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent holders of Registrable Securities. (e) HEADINGS. The headings in this Schedule are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. -10- 11 (f) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. -11- EX-4 5 EXHIBIT 4 1 EXHIBIT #4 DEPARTMENT OF WASTEWATER MANAGEMENT CITY AND COUNTY OF HONOLULU STATE OF HAWAII CONTRACT CHANGE ORDER NO.1 Project: Honolulu Beneficial Sludge Reuse Project Contract No. F-91205 ------- Date July 15, 1997 ------------- Sheet 1 of 3 ------ Original Completion Date ___________ Revised Completion Date n/a --- Job No. __________ Contractor N-Viro Honolulu,Inc. -------------------- Official Commencement Date n/a --- Contract Time 4017 calendar days ---- Total Time Extension to Date 0 calendar days -- This change order shall serve as a supplemental agreement covering extra work or a change in the quantity of work from that called for in the proposal for this project. - -------------------------------------------------------------------------------- [Note here as specifically as possible the item, quantity, and location of work required, with an accurate description of its character, using sketches if necessary. Also note any quantities or work which this replaces and show net value or quantity of extra] Change order No. 1 shall include the following: - ----------------------------------------------- A. The site selected by the Contractor for the project ("original site") became an unacceptable location for this project. As a result, the Contractor evaluated and considered other locations for the project. Due to this changed condition, the bid price and its basic costs and the terms and conditions of the Contract must be reviewed and negotiated. Therefore, in accordance with the intent of the parties as set forth in Paragraph F, herein, by this change order No. 1, the obligations of the Contruction and Operating Contracts are suspended and not in effect. It is further agreed that N-Viro International Corporation, the predecessor contractor, incurred costs to the sum of $749,651.18 in pursuing the project at the original site, which costs are comprised of "non-transferrable costs" of $450,000 and "transferrable costs" of $299,651.18. Such costs shall be reimbursed under this contract as follows: 1. The "non-transferrable costs" of $450,000 are costs that are specific to the original site and are not transferrable to a project at any other site. These costs shall be paid for in accordance with the following schedule: $200,000 on or before July 30, 1997, and the remaining balance of $250,000 by July 15, 1998. 2. The "transferrable costs" of $299,651.18 are costs that were incurred in pursuing the original site were related to such activities as promoting beneficial reuse, developing markets for the recovered products and pursuing sources of admixture for the process. The results of these activities would benefit projects developed at other locations, and therefore the costs are considered transferrable and shall be included in the negotiated tipping fee for the project(s) at the new location(s). B. The Contractor shall finance, design, construct, shakedown and test and shall operate and maintain for ten years, a facility to be located at the Honouliuli Wastewater Treatment Plant (WWTP) and, provided that a Special Management Permit (SMP) is obtained for the Sand Island WWTP site, a second facility at that location. The quantity and quality of the sludge to be provided by the City for processing and beneficial reuse and on which the terms and conditions of the Contract are to be based are estimated as follows: 2 1. Honouliuli WWTP Average Daily Dry Tonnage - 10 tons per day Average Cake Solids - 38% total solids Total Dewatered Sludge Per Year - 9605 wet tons per year 2. Sand Island WWTP (provided SMP is obtained) Average Daily Dry Tonnage - 16 tons per day Average Cake Solids - 34% total solids Total Dewatered Sludge Per Year - 17,176 wet tons per year PW-DE-45(12/73) 3 DEPARTMENT OF WASTEWATER MANAGEMENT CITY AND COUNTY OF HONOLULU STATE OF HAWAII CONTRACT CHANGE ORDER NO.1 Project: Honolulu Beneficial Sludge Reuse Project Contract No. F-91205 ------- Date July 15, 1997 ------------- Sheet 2 of 3 ------ Original Completion Date ___________ Revised Completion Date n/a --- Job No. _________ Contractor N-Viro Honolulu,Inc. -------------------- Official Commencement Date n/a ---- Contract Time 4017 calendar days ---- Total Time Extension to Date 0 calendar days -- This change order shall serve as a supplemental agreement covering extra work or a change in the quantity of work from that called for in the proposal for this project. - -------------------------------------------------------------------------------- [Note here as specifically as possible the item, quantity, and location of work required, with an accurate description of its character, using sketches if necessary. Also note any quantities or work which this replaces and show net value or quantity of extra] Change order No. 1 shall include the following (cont.): C. The use of the Recovered Material for landfill cover will continue to be recognized as beneficial reuse. The Contractor, however, shall endeavor to find and develop other beneficial reuse markets for the Recovered Materials to enable the City to meet its consent order requirements for beneficial reuse. D. Subparagraph 7.10 (2) of the Operating Contract shall be deleted in its entirety and, subject to negotiation, be replaced with a paragraph similar to the following: The Contractor shall monitor and report to the City on a monthly basis the amount of dewatered sludge required to be diverted, prior to processing, to a landfill or other disposal or any other reuse option in the unlikely event the facility is shutdown other than as allowed for by the operating contract. In such case the City shall not be required to pay the Contractor the Service Fee (operating rate) as stipulated in the pricing proposal and the operating contract. The Contractor shall be compensated for its reasonable and documented transportation and disposal or reuse fees as approved by the City. E. It is recognized that the Sand Island and the Honouliuli WWTPs have been subject to odor complaints. The Contractor shall provide for Best Available Control Technology (BACT) for control of odor and other gaseous emissions from the beneficial reuse facility(ies) as may be required by applicable federal and state regulations and any air permit(s) and shall work with the City to integrate such system(s) into any system that the City may be undertaking. F. The parties intend to further review and negotiate the terms and conditions of the Construction and Operating Contracts to reflect the necessary changes required by a new technical proposal and new pricing proposal, based on changing the site for this project. The obligations of the Construction and Operating Contracts, as they are affected by the original technical proposal and pricing proposal, are immediately suspended and not in effect. The parties intend to negotiate these terms and conditions upon submittal of a new technical proposal and a new pricing proposal. All details of the the Construction and Operating Contracts, including the exhibits thereto, a new technical proposal, and a new pricing proposal, including its basic costs, are intended to be negotiated and agreed to and 4 reflected by further change order. The Contractor agrees to submit a new technical proposal and preliminary pricing proposal to the City by September 15, 1997, and both parties shall negotiate, agree upon and execute a second change order incorporating all amended terms of the Construction and Operating Contracts, except for any unknown price terms and terms relating to use permits and their requirements by September 30,1997. The Contractor agrees to submit its final technical proposal and pricing proposal by November 15, 1997. The parties shall negotiate, agree upon and execute a third change order incorporating all other amended terms relating to the change in project site on or before December 31, 1997. If either of such further change orders are not executed by both parties on or before the stated deadlines, this Contract shall be automatically terminated unless such dates are extended by change order agreed upon by both parties. PW-DE-45(12/73) 5 DEPARTMENT OF WASTEWATER MANAGEMENT CITY AND COUNTY OF HONOLULU STATE OF HAWAII CONTRACT CHANGE ORDER NO.1 Project: Honolulu Beneficial Sludge Reuse Project Contract No. F-91205 ------- Date July 15, 1997 ------------- Sheet 3 of 3 ------ Original Completion Date _____________ Revised Completion Date n/a --- Job No. _________ Contractor N-Viro Honolulu,Inc. -------------------- Official Commencement Date n/a --- Contract Time 4017 calendar days ---- Total Time Extension to Date 0 calendar days --- This change order shall serve as a supplemental agreement covering extra work or a change in the quantity of work from that called for in the proposal for this project. - -------------------------------------------------------------------------------- [Note here as specifically as possible the item, quantity, and location of work required, with an accurate description of its character, using sketches if necessary. Also note any quantities or work which this replaces and show net value or quantity of extra] G. In the event the Contract is mutually terminated, any outstanding balance of the costs incurred by the Contractor and its predecessor in pursuing the original site (see subparagraph A herein) plus all reasonable costs incurred by the Contractor between June 30, 1997, and December 31, 1997, or the actual date of termination, whichever is earlier, will be paid by the City on or before November 30, 1998. NECESSITY: - ---------- This change order is necessary because the original site selected by the Contractor for this project became unacceptable as a result of public input. CONTRACT PRICE SUMMARY: - ----------------------- (PRICE CHANGES SHALL BE NEGOTIATED) By reason of this proposed change a time extension of 0 calendar days will be --- made to this contract. The new completion date shall be: n/a --- - -------------------------------------------------------------------------------- I. Computed and checked 4. Certified as to availability of funds: Project Engineer Date Fiscal Officer Date 2- Approved 5. Approved Division Chief Date 6 Director Date 3. Accepted 6. Approved as to form & legality Contractor or Contractor's Rcpmeentative Datc Deputy Corporation's Counsel Date 7. Approved 1 copy to: Direcotor of Finance Project Engineer Contractor Project Inspector Division Chief 3 copies to: Fiscal Section PW-DE-45(12/73) -----END PRIVACY-ENHANCED MESSAGE-----