-----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, OT7nmu8j9jka8HtFGaIsdzZGrHsSAoJ7X1PC7pHp7hWPDSRQhgMWN9Z6xRU9UARV ywTeqeD69WMD2M6xRESG8g== 0000950152-97-007112.txt : 19971010 0000950152-97-007112.hdr.sgml : 19971010 ACCESSION NUMBER: 0000950152-97-007112 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970909 ITEM INFORMATION: FILED AS OF DATE: 19971009 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 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-21802 FILM NUMBER: 97693300 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 FORM 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): SEPTEMBER 9, 1997 N-VIRO INTERNATIONAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) DELAWARE 0-21802 34-1741211 (STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.) 3450 W. CENTRAL AVENUE, SUITE 328 TOLEDO, OHIO 43606 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 535-6374 2 ITEM 5. OTHER ITEMS a.) On September 9, 1997, N-Viro International Corporation ("the Company") executed a Subscription Agreement with Gregory Meyer, to purchase 42,000 unregistered shares of N-Viro International Common Stock for $1.75 per share, incorporated by reference herein as Exhibit 1. b.) On September 23, 1997 the Company executed a Stock Purchase Agreement with Heartland Limited Partnership I, a Wisconsin Limited Partnership, to purchase 158,000 unregistered shares of N-Viro International Common Stock for $1.75 per share, incorporated by reference herein as Exhibit 2. c.) On September 23, 1997 the Company executed a Registration Rights Agreement with Heartland Limited Partnership I, a Wisconsin Limited Partnership, in connection with the sale referenced above in b.) above, 120,000 shares of N-Viro International Common Stock, incorporated by reference herein as Exhibit 3. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. N-VIRO INTERNATIONAL CORPORATION Dated: October 8, 1997 By: /s/ James K. McHugh ----------------------------- ------------------- James K. McHugh Chief Financial Officer EX-1 2 EXHIBIT 1 1 EXHIBIT 1 --------- SUBSCRIPTION AGREEMENT ---------------------- This Subscription Agreement (the "Subscription Agreement") is made and entered into as of the 9th day of September, 1997 (the "Subscription Date"), by and between N-Viro International Corporation, a Delaware corporation (the "Company"), and Gregory Meyer, an individual residing at 94 Ocean Avenue, Monmouth Beach, New Jersey 07750 ("Purchaser"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Purchaser desires to purchase from the Company, and the Company desires to sell and issue to Purchaser, forty-two thousand shares of common stock, $.01 par value per share, of the Company ("Purchased Shares"), upon the terms and subject to the conditions set forth in this Subscription Agreement. NOW, THEREFORE, in consideration of the premises, the mutual promises, covenants and conditions herein contained and for other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound hereby agree as follows: 1. SALE OF PURCHASED SHARES TO PURCHASER. On the Subscription Date, the Company shall sell and issue to Purchaser, and Purchaser shall purchase from the Company, the Purchased Shares, upon the terms and subject to the conditions set forth in this Subscription Agreement. 2. PURCHASE PRICE FOR PURCHASED SHARES. In consideration for the sale and issuance of the Purchased Shares pursuant to Section 1 of this Subscription Agreement, Purchaser shall pay to the Company the sum of $1.75 per share or the total sum of $73,500 (the "Purchase Price") for all of the Purchased Shares. 3. PAYMENT OF PURCHASE PRICE. Payment and delivery by Purchaser of the Purchase Price to be received by the Company, as determined in accordance with Section 2 of this Subscription Agreement, shall be paid to the Company by cashier's check at the offices of the Company on the Subscription Date. 4. DELIVERY OF THE PURCHASED SHARES. A certificate evidencing the Purchased Shares registered in the name of Purchaser shall be executed, issued and mailed to Purchaser by the Company within fifteen (15) business days of the receipt by the Company from the Purchaser of this Subscription Agreement as executed by the Purchaser and the Purchase Price. 5. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS OF PURCHASER. Purchaser hereby represents, warrants and acknowledges to the Company, and the Company may rely on the same in completing the sale of the Purchased Shares and the other transactions herein contemplated, as of the Subscription Date, as follows: 2 5.01 VALIDITY. This Subscription Agreement constitutes the legally valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms. 5.02 STATE OF RESIDENCE. The state of residence of Purchaser is, and shall be at the time of delivery and acceptance of the Purchased Shares, the State of New Jersey. 5.03 ACCESS. Purchaser has had access to all documents, records and books pertaining to the Company at the office of the Company upon reasonable notice to the Company and has had the opportunity to ask questions of and receive answers from the officers of the Company concerning the operations of the Company and the purchase of the Purchased Shares. Prior to the date hereof, Purchaser has received copies of (i) the Company's Form 10-K for the year ended December 31, 1996; (ii) the Company's Forms 10-Q for the quarters ended March 31, 1997 and June 30, 1997, respectively; (iii) the Company's Notice of Annual Meeting of Stockholders and Proxy Statement with respect to the annual meeting held on May 9, 1997; and (iv) the Company's Annual Report for the year ended December 31, 1997 (collectively, the "Disclosed Documents"). 5.04 NO REVIEW. Purchaser is aware that no federal or state agency has made any finding or determination as to the fairness for public or private investment, nor any recommendation or endorsement, of the Purchased Shares as an investment. 5.05 SPECULATIVE NATURE. Purchaser recognizes the speculative nature of an investment in the Purchased Shares. 5.06 HOLDING OF PURCHASED SHARES. As a purchaser of the Purchased Shares, Purchaser must bear the economic risk of his investment in the Purchased Shares for an indefinite period of time because the Purchased Shares have not been registered under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon an exemption from such registration requirements set forth in Rule 506 of Regulation D promulgated under the 1933 Act ("Regulation D") and, therefore, cannot be sold unless they are subsequently registered under the 1933 Act or an exemption from such registration is available; the Company shall make a notation in its transfer records regarding said restrictions on transfer of the Purchased Shares; and the Purchased Shares shall not be sold without registration under the 1933 Act or exemption therefrom. 5.07 FINANCIAL KNOWLEDGE AND EXPERIENCE. Purchaser has knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of an investment in the Purchased Shares; is not utilizing any other person to be his "Purchaser Representative" (as defined in Regulation D) in connection with evaluating such merits and risks; and offers as evidence of his knowledge and experience in these matters the representations and information set forth in this Subscription Agreement. 5.08 ECONOMIC RISK. Purchaser is willing and able to bear the economic risk of an investment in the Purchased Shares (in making this representation, consideration has been given to whether Purchaser can afford to 3 hold the Purchased Shares for an indefinite period of time and whether, at this time, Purchaser can afford a complete loss of his investment). 5.09 ACCREDITED INVESTOR. Purchaser is an "accredited investor" as defined in Rule 501 of Regulation D (an "Accredited Investor"). In addition to certain institutional investors and fiduciaries, an Accredited Investor in the Company includes any person or entity that falls within any one of the following categories: (a) any natural person whose individual net worth, or joint net worth with such person's spouse, exceeds $1,000,000.00; (b) any natural person who had an individual income in excess of $200,000.00 in each of the two most recent tax years or joint income with such person's spouse in excess of $300,000.00 in each of those years and who reasonably expects to reach the same income level in the current year; (c) any corporation, business trust or partnership not formed for the specific purpose of acquiring the Shares, with total assets in excess of $5,000,000.00; (d) any entity in which all of the equity owners are "Accredited Investors"; (e) any trust, with total assets in excess of $5,000,000.00, not formed for the specific purpose of acquiring the Shares, whose purchase is directed by a "Sophisticated Person" (as described in Rule 506 of Regulation D); (f) any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000.00 or, if a self-directed plan, with investment decisions made solely by persons who are Accredited Investors; or (g) any director or executive officer of the Company. 5.10 REGISTRATION OF PURCHASED SHARES. Purchaser understands and acknowledges that no aspect of the transactions contemplated in this Subscription Agreement has been, prior to the date of this Subscription Agreement, or will be, prior to the date of delivery and acceptance of the Purchased Shares, registered with or reviewed by the Securities and Exchange Commission under the 1933 Act or with or by any state securities law administrator, and no federal or state securities law administrator has approved any disclosure or other material concerning the Company or the Purchased Shares or made any recommendation with respect thereto. Purchaser also understands and acknowledges that the Company has not granted Purchaser any rights whatsoever with respect to the 4 future registration of any Purchased Shares with any federal or state securities administrator or authority, including, but not limited to, any piggyback registration rights whereby the Purchased Shares would be registered in conjunction with the registration by the Company of any other of its issued securities. 5.11 COMMITMENTS. Purchaser's overall commitment to investments which are not readily marketable is not disproportionate to his net worth. 5.12 LIQUIDITY. Purchaser has adequate means of providing for his current needs and personal contingencies and has no need for liquidity in his investment in the Purchased Shares. 5.13 OBJECTIVE. The objectives of the Company are compatible with Purchaser's investment goals. 5.14 INVESTMENT. Purchaser is purchasing the Purchased Shares for the Purchaser's own account, as principal, for investment and not with a view to the resale or distribution of all or any part of the Purchased Shares. 5.15 ADVISOR. Purchaser has been advised by the Company that he should consult his own legal counsel, accountant or business advisor as to the legal, tax and other matters concerning his purchase of the Purchased Shares and his execution of this Subscription Agreement. 5.16 NO FINANCIAL PROJECTIONS. The Company has neither delivered nor disclosed to Purchaser any financial projections relating to the Company. 5.17 NO OTHER COMPANY MATERIALS. Purchaser acknowledges that the Company has made no oral or written representations or warranties to the Purchaser, either directly or indirectly, through its officers, directors, employees or agents, with respect to the Company or the Purchased Shares, other than those representations and warranties included herein. Purchaser further acknowledges that he has not relied on any disclosures of the Company, its directors, employees or agents, other than such disclosures as are set forth in the Disclosed Documents. 6. INDEMNIFICATION. Purchaser acknowledges his understanding of the meaning and legal consequences of all the representations, warranties and agreements contained in this Subscription Agreement and Purchaser hereby agrees to indemnify and hold harmless the Company, its agents and affiliates, successors and assigns from and against any and all loss, damage, or liability arising out of, connected with or any way related to a breach of any representation or warranty of Purchaser contained in this Subscription Agreement. 7. REPRESENTATIONS, WARRANTIES, ACKNOWLEDGEMENTS AND COVENANTS OF THE COMPANY. The Company hereby represents, warrants, acknowledges and covenants to Purchaser, and Purchaser may rely on the same in consummating transactions herein contemplated, as of the Subscription Date, as follows: 5 7.01 DUE INCORPORATION. The Company is a corporation duly organized and validly existing under the Delaware General Corporation Law (the "DGCL"). 7.02 VALIDITY. Subject to the approval of the Board of Directors (the "Board") of the Company, this Subscription Agreement constitutes the legally valid and binding obligation of the Company enforceable against the Company in accordance with its terms. The company covenants to seek Board approval of this Subscription Agreement within ten (10) days of the date of receipt by the Company from the Purchaser of this Subscription Agreement executed by the Purchaser and the Purchase Price (the "Payment Date"). In the event that the Board does not approve this Subscription Agreement within ten (10) business days of the Payment Date, then the Company shall return the entire Purchase Price to the Purchaser as soon as practicable after the expiration of such ten (10) business day period. 7.03 RECEIPT. Upon receipt by the Company of the Purchase Price from Purchaser and the delivery of the certificate(s) for the Purchased Shares to Purchaser, the Purchased Shares will be validly issued, fully paid and nonassessable. 8. FURTHER ACTION. The parties hereto hereby agree that they will, at any time and from time to time, after the date hereof, upon request of any other party hereto, do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, all such further acts, assignments, transfers, agreements, assurances and powers of attorney as may be reasonably required to carry out the transactions herein contemplated. 9. WAIVER OF BREACH. The waiver of any party hereto of a breach of any provision of this Subscription Agreement shall not operate or be construed as a waiver of any subsequent breach by any party hereto. 10. BINDING EFFECT. This Subscription Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, personal representatives, successors and permitted assigns. 11. AMENDMENTS. No amendments or variations of the terms and conditions of this Subscription Agreement shall be valid unless the same is in writing and signed by the parties hereto. 12. HEADINGS. The paragraph headings contained herein are for convenience only and shall not, in any way, affect the interpretation or enforceability of any provision of this Subscription Agreement. 13. GOVERNING LAW. This Subscription Agreement shall be construed and enforced pursuant to the laws of the State of Delaware. 14. ENTIRE AGREEMENT. This instrument contains the entire agreement between the parties hereto with respect to the transactions contemplated in this Subscription Agreement. 15. SEVERABILITY. The validity or unenforceability of any provision of this Subscription Agreement shall not affect the enforceability or validity of any other provision of this 6 Subscription Agreement and such provisions shall remain valid and binding on the parties to this Subscription Agreement. 16. GENDER. Unless the context otherwise requires a different meaning, words of a masculine gender shall be deemed and construed to include correlative words of the feminine and neuter genders, words importing the singular number shall include the plural number, and vice versa, and the terms "hereof", "hereby", "hereto", "hereunder", "herein" and similar terms mean this Subscription Agreement. 17. ASSIGNMENT. None of the parties hereto may assign, transfer or otherwise dispose of any of their rights or obligations under this Subscription Agreement. 18. REMEDIES. The rights and obligations under this Subscription Agreement are several, with each party being completely free to enforce any or all rights or obligations under this Subscription Agreement against any other party with or without the concurrence or joinder of any other party hereto. 19. COUNTERPARTS. This Subscription Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one document. IN WITNESS WHEREOF, the undersigned have executed this Subscription Agreement in three (3) counterparts effective as of the Subscription Date. N-VIRO INTERNATIONAL CORPORATION By /s/ J. Patrick Nicholson ------------------------------------- J. Patrick Nicholson, Chairman, Chief Executive Officer and President /s/ Gregory Meyer -------------------------------------- Gregory Meyer, Purchaser [Notary Stamp - Joyce L. Escalante Notary Public of New Jersey - Comm. exp 10/10/2000] EX-2 3 EXHIBIT 2 1 EXHIBIT 2 --------- STOCK PURCHASE AGREEMENT N-VIRO INTERNATIONAL CORPORATION This Stock Purchase Agreement (the "Agreement") is made this 23rd day of September, 1997, by and between N-Viro International Corporation, a Delaware corporation ("Seller"), and Heartland Limited Partnership I, a Wisconsin limited partnership (the "Purchaser"). In consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows: I. STOCK PURCHASE 1.1 STOCK PURCHASE. Subject to the terms and conditions hereof and in reliance upon the representations and warranties contained herein, Seller will issue and sell to the Purchaser, and the Purchaser will purchase from Seller, 158,000 shares of common stock of Seller, $.01 par value per share (the "Shares"), for a purchase price of $1.75 per Share, for an aggregate purchase price for the Shares of $276,500. 1.2 PAYMENT FOR AND DELIVERY OF THE SHARES. At the Closing, which shall be on September 22, 1997, or such other date as the parties may agree, Purchaser shall pay the $276,500 total purchase price for the Shares (the "Purchase Price") to Seller by wire transfer of immediately available funds to such account or accounts as Seller shall designate to Purchaser in writing at least two business days prior to the Closing Date, and Seller shall deposit with Federal Express for overnight delivery to Furnam Selz LLC, Attn: Andrew Tonge, 230 Park Avenue, 12th Floor, New York, NY 10169, the custodian for the Purchaser two days prior to Closing for release upon payment one or more certificates for the Shares duly registered in the name of Purchaser. 1.3 RESTRICTIONS ON SHARES. Purchaser acknowledges and agrees that: (a) The offer and sale of the Shares has not been registered under the Securities Act of 1933 (the "Act"), any state securities laws or the laws of any foreign jurisdiction, but rather are being made privately by Seller pursuant to the exemption from registration provided by Rule 506 of Regulation D promulgated under the Act and applicable state law exemptions. 2 (b) All stock certificates evidencing the Shares shall bear a restrictive legend in substantially the language set forth below. The shares represented by this Certificate have not been registered pursuant to the Securities Act of 1933 (the "Act") and are "restricted securities" as that term is defined in Rule 144 under the Act. These shares may not be offered for sale, sold, or otherwise transferred except pursuant to an effective registration statement under the Act or pursuant to an exemption from registration under the Act. II. REPRESENTATIONS AND WARRANTIES OF PURCHASER KNOWLEDGE AND EXPERIENCE. Purchaser hereby represents, warrants and agrees that it is an "Accredited Investor" as that term is defined in Rule 501(a) of Regulation D promulgated under the Act by virtue of having assets in excess of $5,000,000 and not being formed for the purpose of acquiring the Shares. INFORMATION PROVIDED RESPECTING SELLER. Purchaser has been supplied with information and materials concerning Seller consisting of its filings with the United States Securities and Exchange Commission during the past 18 months. Seller has provided Purchaser with the opportunity to discuss with and ask questions of Seller's representatives concerning Seller's business and business plan. Purchaser has had the opportunity to ask questions of and receive answers from management of Seller concerning the terms and conditions of this Agreement, and to obtain from Seller any additional information which Seller possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy of the information provided to such Purchaser. SHARES ACQUIRED BY PURCHASER. Purchaser represents and warrants that: (a) Purchaser is acquiring the Shares for the Purchaser's own account and not for or on behalf of any other person; (b) The Shares have not been acquired with a view towards distribution or redistribution or with the intent to divide Purchaser's participation with others; (c) Purchaser will only resell the Shares pursuant to registration under the Act and the laws of any applicable states or pursuant to an available exemption from registration. The only registration rights which Purchaser has with respect to the Shares are set forth in the Registration Rights Agreement. 3 NON-DISCLOSURE. Purchaser has not distributed any written materials furnished to Purchaser by Seller to anyone other than the Purchaser's professional advisors. KNOWLEDGE AND EXPERIENCE. Purchaser has such knowledge and experience in financial and business mattes in general to evaluate the merits and risks of the prospective investment and to make an informed investment decision. NO GOVERNMENTAL FINDINGS. Purchaser understands that no federal or state agency has made any finding or determination regarding the fairness of the Shares or any recommendation or endorsement concerning an investment in the Shares. ORGANIZATION. Purchaser is a limited partnership duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite power and authority to own its properties and carry out its business as now being conducted. CAPACITY, AUTHORIZATION AND ENFORCEABILITY OF AGREEMENT. Purchaser has the requisite power and authority to enter into this Agreement and to perform its obligations hereunder. This Agreement has been duly authorized, executed and delivered by Purchaser and constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms. PLACE OF BUSINESS. Purchaser's principal place of business is, and shall be at the time of delivery and acceptance of the Shares, the State of Wisconsin. SPECULATIVE INVESTMENT. Purchase recognizes the speculative nature of an investment in the Shares. 2.11 NO PREPRESENTATIONS. Purchaser acknowledges and agrees that Seller has made no oral or written representations or warranties to Purchaser, either directly or indirectly, through its officers, directors, employees or agents, with respect to Seller or the Shares, other than those representations and warranties set forth herein. Purchaser further acknowledges and agrees that, in making its decision to execute this Agreement and purchase the Shares, Purchaser has not relied upon on any disclosures of Seller, its officers, directors, employees or agents, other than such disclosures as are set forth herein and in the SEC Reports (as hereinafter defined). III. REPRESENTATION, WARRANTIES AND COVENANTS OF SELLER Seller represents, warrants and agrees with Purchaser as follows: 3.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has the requisite corporate power and authority to own or lease all material property that it purports to own or lease and to carry on its business as now being 4 conducted. Seller is duly qualified as a foreign corporation, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities make such qualification necessary, except to the extent that the failure to so qualify would not have a material adverse effect on the business or financial condition of Seller. 3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Seller has heretofore furnished to Purchaser or its counsel a complete and correct copy of its Certificate of Incorporation, as amended, and the Bylaws, as amended, of Seller, as presently in effect. 3.3 CAPITALIZATION. As of the date hereof, the authorized capital stock of Seller consists of 45,000,000 shares of common stock $.01 par value of which 2,642,750 shares are issued and outstanding. There are 250,000 shares of Common Stock reserved for issuance upon exercise of stock options granted by Seller. Except for this Agreement and as described in Schedule 3.3 hereto, there are no options, warrants or other rights, agreements or commitments that do or may obligate Seller to issue any shares of its capital stock. The Shares, upon issuance on the terms and conditions specified herein, will be duly authorized, validly issued, fully paid and nonassessable, and free of preemptive rights. Upon delivery of the Shares, in consideration of the purchase price, the Purchaser will acquire valid and marketable title to the Shares free and clear of any encumbrances and restrictions except for the transfer restrictions described in Section 1.3 of this Agreement. 3.4 CAPACITY, AUTHORIZATION AND ENFORCEABILITY OF AGREEMENT. Seller has the requisite corporate power and authority to enter into this Agreement, including the Registration of Rights Agreement, and to perform its obligations hereunder and thereunder. This Agreement has been duly authorized, executed and delivered by Seller and constitutes a legal, valid and binding obligation of Seller enforceable against the Seller in accordance with its terms. The Registration Rights Agreement has been duly authorized by Seller and, upon due execution and delivery by Seller of this Agreement, will constitute a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms. 3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. The execution and delivery of this Agreement and the attached Registration Rights Agreement and the consummation of the transactions herein and therein contemplated will not conflict with or violate any law, regulation, court order, judgment or decree applicable to Seller or by which its property is bound or affected, or conflict with or result in any breach of or constitute a default (or any event which with or without notice or lapse of time or both could become a default) under, or give to others any rights of termination or cancellation of, or result in the creation of any lien or encumbrance on any of the properties or assets of Seller pursuant to: (a) the Certificate of Incorporation or Bylaws of Seller or (b) any material contract, instrument, permit, license or franchise to which Seller is a party or by which Seller or its property is bound or affected. Except for applicable requirements, if any, of the Securities Exchange Act of 1934 (the "Exchange Act"), the Employee Retirement 5 Income Security Act of 1974, state securities laws ("Blue Sky Laws") and the Nasdaq Stock Market, (i) Seller is not required to submit any notice, report or other filing with any governmental or regulatory authority, domestic or foreign, in connection with the execution, delivery or consummation of this Agreement, the Registration Rights Agreement and the transactions contemplated thereby; and (ii) no waiver, consent, approval or authorization of any governmental or regulatory authority, domestic or foreign, is required to be obtained or made by Seller in connection with its execution or delivery of this Agreement, the Registration Rights Agreement or the consummation of the transactions intended hereby. 3.6 FINANCIAL STATEMENTS; SEC REPORTS. Seller has previously furnished or will furnish to Purchaser prior to the Closing with true and complete copies of any registration statements filed pursuant to the Securities Act of 1933 since January 1, 1997 (the "Registration Statements"); and its Annual Report on Form 10-K for the fiscal year ended December 31, 1996, its Forms 10-Q for the quarters ended March 31, 1997 and June 30, 1997, its definitive proxy statement for the 1997 Annual Meeting of Shareholders, any reports on Form 8-K, and any amendments to any of the foregoing, in each case as filed with or furnished to the SEC (collectively the "SEC Reports"). The financial statements and schedules contained in the SEC Reports and Registration Statements (or incorporated therein by reference) were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as specifically disclosed therein) and fairly present the information purported to be included therein. Except as set forth on Schedule 3.6 attached hereto and made a part hereof, each such SEC Report was filed with or furnished to the SEC on a timely basis and, on the date of filing thereof, complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC thereunder. Subject to the matters referred to in that certain letter from the SEC to Seller dated August 22, 1997, a copy of which is attached hereto and made a part hereof, neither the SEC Reports or the Registration Statements, at the time they were filed with SEC, contained any untrue statement of a material fact or omitted to state material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.7 COMPLIANCE WITH LAW. Seller is in compliance in all material respects with all laws and regulations applicable to its operations or with respect to which compliance is a condition of engaging in the business thereof, except to the extent that failure to comply would not have a material adverse effect on the business or financial condition of Seller. 3.8 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC Reports, Registration Statements, Schedule 3.8 attached hereto, or as contemplated by this Agreement, since January 1, 1997, there has not been: (a) any material adverse change in the business, assets, condition (financial or otherwise), operations or prospects of Seller; 6 (b) any damage, destruction or loss, whether covered by insurance or not, having a material adverse effect on the business or financial condition of Seller; (c) any issuance of capital stock or of rights to acquire capital stock or securities convertible into capital stock, or any agreements relating to such issuance, other than the issuance of Common Stock upon the exercise of stock options under the option plans of Seller; (d) any redemption, repurchase or other acquisition of Common Stock of Seller or any declaration or payment of any dividend or other distribution in cash, stock or property with respect to Common Stock, or any amendment to the Certificate of Incorporation or Bylaws or comparable documents of Seller. (e) any labor dispute, other than routine individual grievances that are not, singly or in the aggregate, material to the business, assets, condition (financial or otherwise), operations or prospects of Seller; (f) any entry into any material commitment or transaction including, without limitation, any borrowing, repayment of indebtedness, capital expenditure or business combination, other than in the ordinary course of business consistent with past practice or as contemplated by this Agreement; (g) any transfer of or rights granted under any material leases, licenses, agreements, patents, trademarks, trade names or copyrights other than those transferred or granted in the ordinary course of business; (h) any change by Seller in accounting principles or methods except insofar as may have been required by a change in generally accepted accounting principles; (i) any contract, agreement, commitment or arrangement with respect to any of the foregoing; or (j) any pending or, to the knowledge of Seller, threatened litigation or investigation against Seller which individually or in the aggregate might result in any material adverse change in the business, assets, condition (financial or otherwise), operations or prospects of Seller. 3.9 BROKERS AND FINDERS. Neither Seller nor any of its officers, directors, employees or agents acting on behalf of the Seller have employed any broker or finder, and none of the foregoing have incurred any liability for any brokerage fees, commissions or finders' fees in connection with this Agreement. 7 3.10 OFFERING. Subject to the accuracy of Purchaser's representations herein, the offer, sale and issuance of the Shares to be issued in conformity with the terms of this Agreement constitute transactions exempt from the registration requirements of Section 5 of the Act. 3.11 USE OF PROCEEDS. The proceeds from the sale of the Shares to the Purchaser shall be used primarily to settle all remaining monetary obligations of Seller to Frank Manchak, Jr., under and pursuant to the terms of the Second Amendment to Settlement Agreement dated as of July 18, 1997, by and among Frank Manchak, Jr., Seller, N-Viro Energy Systems, Ltd., an Ohio limited partnership, N-Viro Energy Systems, Inc., an Ohio corporation, and American N-Viro Resources, Inc., an Ohio corporation. 3.12 CONDUCT OF BUSINESS BY SELLER PENDING THE CLOSING. Prior to the Closing Date, unless Purchaser shall otherwise agree in writing or as otherwise contemplated by this Agreement: (i) Seller agrees to conduct its business only in the ordinary and usual course, and to ensure that the representations of Seller contained hereinabove shall at all times continue to be true. (ii) Seller shall use its best efforts to preserve intact the business organization of Seller, to keep available the services of its current officers and key employees, and to preserve the goodwill of those having a business relationship with Seller. 3.13 ACCESS TO INFORMATION. Prior to the Closing Date, Seller will give Purchaser and its authorized representatives reasonable access during normal business hours to Seller's facilities and to its books and records and will cause its officers promptly to furnish Purchaser with such information with respect to the business and properties of Seller as Purchaser may from time to time reasonably request. Notwithstanding the foregoing, Seller may decline to furnish to Purchaser non-public information to the extent that Seller reasonably concludes that such information is proprietary or otherwise commercially sensitive. IV. FURTHER COVENANTS 4.1 REGISTRATION RIGHTS. On or before the Closing Date, Seller and Purchaser shall enter into a registration rights agreement substantially in the form of Exhibit B (the "Registration Rights Agreement"). 4.2 PUBLIC ANNOUNCEMENTS. Purchaser and Seller will consult with each other before issuing any press release or otherwise making any public statements with respect to any of the transactions contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law. 8 4.3 BEST EFFORTS. Upon the terms and subject to the conditions hereof, and subject to fiduciary obligations under applicable law, each of the parties hereto agrees to use its best efforts to take or cause to be taken all actions and to do or cause to be done all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement, and shall use its best efforts to obtain all necessary registrations and filings, approvals and to effect all necessary registrations and filings, including without limitation filings under the Exchange Act and any Blue Sky Laws. The parties will comply with all applicable rules and regulations of any governmental authority in connection with the execution, delivery and performance of this Agreement and the transactions contemplated hereby. V. CONDITIONS OF PURCHASE AND SALE 5.1 PURCHASER'S CONDITIONS OF CLOSING. Purchaser's obligation to purchase the Shares at the Closing are subject to the fulfillment (or waiver by Purchaser) of the following conditions: 5.1.1 AGREEMENTS AND CONDITIONS COMPLIED WITH. All the terms, agreements and conditions of this Agreement, including execution of the Registration Rights Agreement, to be complied with or performed or fulfilled by Seller at or prior to the Closing Date shall have been complied with, performed and fulfilled in all material respects. 5.1.2 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties of Seller contained herein shall be true and correct in all material respects at and as of the Closing Date as if made at and as of such time, except insofar as any such representations or warranties relate solely to a particular date or period. 5.1.3 CONSENTS AND FILINGS. All filings and registrations with, and notifications to, all federal, state, local and foreign authorities, required for consummation of the sale of Shares shall have been made by Seller, and all waivers, approvals, consents, licenses, permits and authorizations of all federal, state, local and foreign authorities required for consummation of the sale of the Shares shall have been received and shall be in full force and effect, except for such filings, registrations, notifications, approvals, licenses, permits and authorizations, the absence of which would not in the aggregate prevent the sale of the Shares from being consummated or having a material adverse effect on the business or financial condition of Seller. 5.1.4 NO LITIGATION. There shall not have been any action taken nor threatened, or any statute, regulation, judgment, order or injunction enacted or entered, by or before any governmental or regulatory authority or any court, domestic or foreign, which questions the validity of this Agreement, the Registration Rights Agreement or the right of Seller to enter into any such agreement or to consummate the transactions herein contemplated or which would make the transactions herein contemplated illegal or which otherwise seeks to 9 restrain the consummation of the transactions or the exercise by Purchaser of any rights appurtenant to the Shares or which seeks to obtain any damages as a result of the transaction from Purchaser or Seller, which damages, in the case of Seller, would have a material adverse effect on the business or financial condition of Seller taken as a whole. 5.2 SELLER'S CONDITIONS TO CLOSING. Seller's obligation to sell and issue the Shares at the Closing is subject to the fulfillment (or waiver by Seller) as of the Closing Date of the following conditions: 5.2.1 AGREEMENTS AND CONDITIONS COMPLIED WITH. All the terms, agreements and conditions of this Agreement to be complied with or performed or fulfilled by Purchaser at or prior to the Closing Date shall have been complied with, performed and fulfilled in all material respects. 5.2.2 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties of Purchaser contained herein shall be true and correct in all material respects at and as of the Closing, except insofar as any such representations or warranties relate solely to a particular date or period. VI. MISCELLANEOUS 6.1 CAPTIONS AND HEADINGS. The Article and Section headings throughout this Agreement are for the convenience of reference only and shall in no way be deemed to define, limit or add to any provision of this Agreement. 6.2 LEGAL FEES. Seller shall reimburse Purchaser for the fees of Purchaser's legal counsel, Quarles & Brady, incurred in connection with this transaction. 6.3 ENTIRE AGREEMENT. This Agreement states the entire agreement and understanding of the parties and shall supersede all prior agreements and understandings. No amendment to this Agreement shall be made without the written approval of the parties. 6.4 SEVERABILITY. The invalidity or unenforceability of any particular provision of this Agreement shall not affect any other provision hereof, which shall be construed in all respects as if such invalid or unenforceable provision were omitted. 6.5 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. 10 6.6 BINDING EFFECT. This Agreement shall inure to the benefit of and be binding upon the parties to this Agreement, their heirs, representatives, successors, agents, assigns, transferees, and all subsequent holders of the Shares purchased by the Purchaser. 6.7 NOTICES. All notices, requests, demands, consents, and other communications hereunder shall be transmitted in writing and shall be deemed to have been duly given when delivered or sent by certified mail, postage prepaid, with return receipt requested, addressed to the parties as follows: Seller at 3450 West Central Avenue, Suite 328, Toledo, Ohio 43606, with a copy to James F. White, Jr., 1000 Jackson Street, Toledo, Ohio 43624; and to Purchaser at 790 North Milwaukee, Milwaukee, Wisconsin 53202, with a copy to Conrad G. Goodkind, Quarles & Brady, 411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. Any party may change its address for purposes of this Section by giving written notice as provided herein. 6.8 INDEMNIFICATION. Purchaser agrees to indemnify and hold harmless Seller and its officers, directors and persons who control Seller, from and against all damages, losses, costs and reasonable expenses (including attorneys' fees) which they may incur by reason of the failure of Purchaser to fulfill any of the terms or conditions of this Agreement, or by reason of any breach of the representations and warranties made by the Purchaser in this Agreement. Seller agrees to indemnify and hold harmless Purchaser and all its partners, officers and persons who control Purchaser from and against all damages, losses, costs and reasonable expenses (including attorneys' fees) which it may incur by reason of the failure of Seller to fulfill any of the terms or conditions of this Agreement, or by reason of any breach of the representations and warranties made by Seller in this Agreement or in any document provided by Seller to the Purchaser. 6.9 SURVIVAL. The representations and warranties of the Purchaser and Seller shall survive the sale of the Shares pursuant to this Agreement. 6.10 COUNTERPARTS. This Agreement may be executed in counterparts, which shall be deemed to constitute one and the same instrument. VII. TERMINATION, AMENDMENT AND WAIVER 7.1 TERMINATION. This Agreement shall continue until the earlier of (a) the termination hereof by the mutual consent of Purchaser and Seller or (b) the close of business on September 25, 1997, in which case this Agreement shall terminate if the transactions contemplated herein have not yet been consummated. 7.2 EFFECT OF TERMINATION. Upon the termination of this Agreement pursuant to Section 7.1, no party hereto shall have any liability or further obligation to any other party except as may result from a breach of this Agreement. 11 7.3 AMENDMENT. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. 7.4 WAIVER. At any time prior to the Closing, any party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other party hereto, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only as set forth in an instrument in writing signed by such party. IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. HEARTLAND LIMITED PARTNERSHIP I By: Heartland Advisors, Inc., General Partner of Heartland Limited Partnership I, by William J. Nasgovitz, President /s/ William J. Nasgovitz, President ------------------------------------------- N-VIRO INTERNATIONAL CORPORATION By: /s/ J. Patrick Nicholson ------------------------------------------- J. Patrick Nicholson President and Chief Executive Officer EX-3 4 EXHIBIT 3 1 EXHIBIT 3 --------- REGISTRATION RIGHTS AGREEMENT ----------------------------- This Registration Rights Agreement (this "Agreement") is entered into as of September 23, 1997, by and among N-Viro International Corporation, its successors and assigns (the "Company"), and Heartland Limited Partnership I (the "Holder"). WHEREAS, this Agreement is made in connection with the sale by the Company to Holder of 120,000 shares of the Common Stock of the Company (the "Shares") pursuant to that certain Stock Purchase Agreement dated September 23, 1997 (the "Purchase Agreement"), the terms of which require the Company to provide Holder certain registration rights with respect to the Shares. NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: ARTICLE I REGISTRATION RIGHTS Section 1.01 CERTAIN DEFINITIONS. In addition to the other terms defined elsewhere in this Agreement and the Stock Purchase Agreement to which it is attached, as used in this Agreement, the following terms shall have the following respective meanings: (a) "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. (b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute and the rules and regulations thereunder, all as the same shall be in effect at the same time. (c) "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute and the rules and regulations thereunder, all as the same shall be in effect at the same time. (d) "Registrable Securities" means any of the following shares which have not been sold to the public or which have not lost their registration rights as provided herein: (i) the Shares and (ii) any shares of Common Stock of the Company, and any securities of the Company or any other corporation, issued as a dividend or other distribution with respect to or in replacement of or exchange for the Shares. Notwithstanding the foregoing, the Shares, as well as all other securities of the Seller held by Holder or any party purchasing the Shares, either directly or indirectly, from the Holder, shall cease to be Registrable Securities when such Shares or 2 securities, as the case may be, may be distributed to the public pursuant to Rule 144(k) (or any similar provision then in force) promulgated under the Securities Act. (e) The terms "register," "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. (f) "Registration Expenses" shall mean all expenses incurred by the Company in complying with Article I hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, fees and disbursements of counsel for the Company and Holder's counsel, blue sky fees and expenses and the expense of any audits incident to or required by any such registration, but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company. (g) "Seller Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale of the Registrable Securities. Section 1.02 REGISTRATION OF REGISTERABLE SECURITIES. (a) DEMAND REGISTRATION RIGHTS. (1) REGISTRATION. The Company will file a registration statement with the Commission with respect to all or a portion of the Registrable Securities within 30 days of a request made by Holder at any time after March 31, 1998. Purchaser may exercise this demand registration right up to the earlier of (i) two years from the date of this Agreement, (ii) the period of time after which restrictions on sales of the Company's securities by persons other than affiliates pursuant to Commission Rule 144(k) (or any successor provision) terminate, or (iii) until the Holder no longer owns any of the Registrable Securities; (2) REGISTRATION STATEMENT FORM. The Company may, if permitted by law, effect the registration pursuant to Section 1.02 by filing a registration statement on Form S-3 or any successor or similar short form registration statement (or Form S-1 if Form S-3 is not available). The Company may effect the registration by filing a shelf registration statement with the Commission pursuant to Rule 415 under the Securities Act covering the Registrable Securities. The Company may, in its discretion, register under such registration, in addition to the Registrable Securities, shares of Common Stock of the Company held by others. (3) DELAY OR SUSPENSION OF EFFECTIVENESS. Seller shall have the right (i) to defer its request for acceleration of effectiveness or, after effectiveness, to suspend effectiveness 3 of the registration statement if, in the good faith judgment of the Board of Directors of the Seller and an opinion of counsel acceptable to Buyer, such delay in requesting acceleration of effectiveness or suspension of effectiveness is necessary in light of the existence of material non-public information (financial or otherwise) concerning the Seller and/or any other entity in which the Seller has, or is proposing to acquire an equity interest provided further that the period of such delay or suspension shall not exceed the lesser of 60 days or the time at which the information either becomes public or non-material; and provided further that the aggregate of any such delay and/or suspension periods shall not exceed 120 days. (b) PIGGY-BACK REGISTRATION. If the Company proposes to file a registration statement under the Securities Act with respect to an offering by the Company for its own account or for the account of any other person or entity of any class of equity security, including any security convertible into or exchangeable for any equity securities (other than (a) a registration statement on Form S-4 or S-8 (or any substitute form for comparable purposes that may be adopted by the Commission), (b) a registration statement filed in connection with an exchange offer or an offering of securities solely to the Company's existing security holders, or (c) in connection with a registration statement that is on a form pursuant to which an offering of the Registrable Securities cannot be registered), then the Company shall in each case give written notice of such proposed filing to the Holder at least 20 days before the anticipated filing date. Such notice shall offer the Holder the opportunity to register such number of Registrable Securities as Holder may request. Upon written request of Holder received by the Company within 10 business days after the date of the Company's delivery of its notice to the Holder of its intention to file such a registration statement, subject to the conditions and in accordance with the procedures set forth herein, the Company shall use its best efforts to cause the managing underwriter or underwriters of a proposed underwritten offering to permit the Registrable Securities requested by Holder to be included in the registration statement for such offering on the same terms and conditions as any similar securities of the Company included therein. Notwithstanding the foregoing, if the managing underwriter or underwriters of such offering indicates in writing to the Holder its reasonable belief that because of the size of the offering intended to be made, the inclusion of the Registrable Securities requested to be included might reasonably be expected to jeopardize the success of the offering of the securities of the Company to be offered and sold by the Company for its own account, then the amount of securities to be offered for the account of the Holder shall be reduced on a pro rata basis with all other sellers other than the Company, to the extent necessary to reduce the total amount of securities to be included in such offering to an amount recommended by such managing underwriter or underwriters. Section 1.03 EXPENSES OF REGISTRATION. All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 1.02 shall be 4 borne by the Company. Unless otherwise stated, all Seller Expenses related to securities registered by the Holder shall be borne by Holder. Section 1.04 REGISTRATION PROCEDURES. The Company will: (a) use its best efforts to cause the registration statement filed pursuant to Section 1.02 to become and remain effective; (b) furnish to Holder such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as Holder may reasonably request to facilitate the public offering of the registrable Securities; (c) use its best efforts to register or qualify the Registrable Securities covered by such registration statement under such state securities or Blue Sky laws of such jurisdictions as Holder may reasonably request, provided that the Company shall not be obligated to take any action to effect any such registration or qualification pursuant to Section 1.04(d) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration or qualification unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; (d) notify counsel for Holder, promptly after it shall receive notice thereof, of the time when such registration statement has become effective under the Securities Act or a supplement to any prospectus forming a part of such registration statement has been filed; (e) notify counsel for Holder promptly of any request by the Commission for the amending or supplementing of such registration statement or prospectus or for additional information; (f) prepare and file with the Commission, promptly upon the request of Holder, any amendments or supplements to such registration statement or prospectus which, in the opinion of counsel for Holder (and concurred in by counsel for the Company), is required under the Securities Act or the rules and regulations thereunder in connection with the distribution of the Registerable Securities; (g) prepare and promptly file with the Commission and promptly notify counsel for Holder of the filing of such amendment or supplement to any such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to the Registrable Securities is required to be delivered under the Securities Act, any event shall have occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state 5 any material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading; (h) advise counsel for Holder, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the Commission suspending the effectiveness of such registration statement under the Securities Act or the initiation or threatening of any proceeding for such purpose, and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued, with it being provided further that the effective requirements for the registration statement referred to in Section 1.04(a) will be extended for any such time as there shall exist any stop order in respect of the registration statement; and (i) not file any amendment or supplement to such registration statement or prospectus if, in the opinion of counsel for Holder, such amendment or supplement does not comply in all material respects with the requirements of the Securities Act or the rules and regulations thereunder, after having been furnished with a copy substantially in the form thereof at least two business days before the filing thereof; provided, however, that if in the opinion of counsel for the Company the filing of such amendment or supplement is reasonably necessary to protect the Company from any liabilities under any applicable federal or state law and such filing will not violate applicable law, the Company may make such filings. Section 1.05 INDEMNIFICATION. (a) The Company will indemnify, hold harmless and defend Holder, its officers, partners, legal counsel and accountants, each underwriter of the Registrable Securities and each person who controls Holder or any underwriter within the meaning of Section 15 of the Securities Act against any and all expenses, claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereof, incident to any registration or qualification of the Registrable Securities, or which arise out of or are based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act or any state securities laws applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each such indemnified party for any legal and any other expenses 6 reasonably incurred by them in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Company will not be liable, in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission, made in reliance upon and in conformity with information furnished to the Seller by or on behalf of Holder or any such underwriter for use therein. (b) Holder will, if Registerable Securities held by Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, and each of its officers, directors, legal counsel and accountants, and each person who controls the Company within the meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each such indemnified person for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with information furnished to the Seller by or on behalf of Holder for use therein. (c) Each person to be indemnified pursuant to this Section 1.05 (the "Indemnified Party") will, promptly after receipt of written notice of the commencement of any action against such Indemnified Party in respect of which indemnity may be sought from an indemnifying person under this Section 1.05 (the "Indemnifying Party") notify the Indemnifying Party in writing of the commencement thereof, provided, however, that the failure of any person to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement except to the extent that such Indemnifying Party is actually prejudiced by such failure to give notice. If any such action shall be brought against any Indemnified Party and it shall notify an Indemnifying Party of the commencement thereof, the Indemnifying Party will be entitled to participate therein and, to the extent it may desire, jointly with any other Indemnifying Party similarly notified, to assume the defense thereof with counsel satisfactory to such Indemnified Party, and after notice from the Indemnifying Party to such Indemnified Party of its election to assume the defense thereof, the Indemnifying Party will not be liable to such Indemnified Party under Section 1.05 for any other legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof other than reasonable costs of investigation unless (i) the Indemnified Party shall have employed counsel in an action in which the Indemnified Party and Indemnifying Party are both defendants and there is a conflict of 7 interest between such parties that would prevent counsel from adequately representing both parties, (ii) the Indemnifying Party shall not have employed counsel satisfactory within the exercise of reasonable judgment of the Indemnified Party to represent the Indemnified Party within a reasonable time after the notice of the commencement of the action or (iii) the Indemnifying Party has authorized the employment of counsel for the Indemnified Party at the expense of the Indemnifying Party. The undertaking contained in this Section 1.05 shall be in addition to any liabilities which the Indemnifying Party may have pursuant to law. (d) If the indemnification provided for in this Section 1.05 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements, actions or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Section 1.06 LOCKUP AGREEMENT. In consideration for the Company agreeing to its obligations under this Article I, Holder agrees in connection with any firmly underwritten public offering of the Company's Common Stock, upon the request of the Company or the underwriters managing such offering, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Registrable Securities without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 30 days) from the effective date of such registration as the Company or the underwriters may specify; provided, however, that Holder shall have no obligation to enter into the agreement described herein unless all executive officers and directors of the Company and all other holders of more than 5% of the Company's outstanding Common Stock enter into similar agreements. Section 1.07 INFORMATION BY HOLDER. Holder shall furnish to the Company such information regarding Holder and the distribution of proceeds by Holder as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in Section 1.02 of this Agreement. 8 Section 1.08 RULE 144 REPORTING. With a view to making available to Holder the benefits of certain rules and regulations of the Commission which at any time permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to: (a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act, at all times; (b) file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and (c) so long as Holder owns any unregistered Registrable Securities, furnish to Holder forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and the Securities Act and Exchange Act, a copy of the most recent annual or quarterly report of the Company and such other reports and documents of the Seller as Holder may reasonably request in availing Holder of any rule or regulation of the Commission allowing the sale of any such securities without registration. Section 1.09 TRANSFER OF REGISTRATION RIGHTS. The rights of Holder to have the Company register the Registrable Securities granted to the Holder by the Company under this Agreement may be assigned by the Holder to not more than five transferees or assignees of any of the Holder's Registrable Securities, provided that the Company is given written notice by the Holder at the time of or within a reasonable time after said transfer, stating the name and address of said transferee or assignee and identifying the securities with respect to which such registration rights are being assigned, provided that no such assignment shall increase the number of registrations that the Company may be required to effect under this Agreement. Any person who, in accordance with the provisions of Section 1.09, becomes a transferee or assignee of any of the Registrable Securities shall, upon agreeing in writing to be bound by the terms of this Agreement, be included in the term "Holder" so long as such person holds such Registrable Securities and shall be entitled to take benefits of this Agreement. ARTICLE II MISCELLANEOUS Section 2.01 AMENDMENT. Any modification, amendment, or waiver of this Agreement or any provision hereof shall be effective only if in writing and executed by Holder and the Company. 9 Section 2.02 GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of Delaware without regard to its conflicts of laws principles. Section 2.03 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, the Provisions hereof shall insure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. Section 2.04 NOTICES. All notices, requests, demands, consents, and other communications hereunder shall be transmitted in writing and shall be deemed to have been duly given when hand delivered or sent by certified mail, postage prepaid, with return receipt requested, addressed to the parties as follows: Seller at 3450 West Central Avenue, Suite 328, Toledo, Ohio 43606; and to Purchaser at 790 North Milwaukee, Milwaukee, Wisconsin 53202, with a copy to Conrad G. Goodkind, Quarles & Brady, 411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. Any party may change its address for the purposes of this Section by giving written notice as provided herein. Section 2.05 SEVERABILITY. If any provision of this Agreement shall be judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. Section 2.06 ENTIRE AGREEMENT. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof. Section 2.07 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective representatives thereunto duly authorized as of the date first above written. N-VIRO INTERNATIONAL CORPORATION By: /s J. Patrick Nicholson ------------------------------------- J. Patrick Nicholson HEARTLAND LIMITED PARTNERSHIP I By: /s/ William J. Nasgovitz ------------------------------------- William J. Nasgovitz, President Heartland Advisors, Inc., General Partner of Heartland Limited Partnership I -----END PRIVACY-ENHANCED MESSAGE-----