Exhibit 99.1
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SECURITY UNITS PURCHASE AGREMENT
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SELLER: N-Viro International Corp., of Toledo, Ohio.
PURCHASER: Ophir Holdings, Inc., of North Kingstown, RI (the term
"Purchaser" shall include Ophir and its co-investors).
AGREEMENT DATE: January 30, 2004.
Whereas, the Seller is desirous of obtaining equity financing; and
Whereas the Purchaser is desirous of providing investment capital to the
Seller for the consideration described herein;
Now, therefore, the Parties agree as follows:
AMOUNT OF INVESTMENT
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The Purchaser shall provide at least $375,001.50 and up to $750,001.50, and
the Seller shall receive $750,001.50 (Seven Hundred Fifty Thousand One and
One-half Dollars), in cash or other certified funds, or by wire transfer, to be
delivered to the Seller on the following installment schedule:
$125,000. within two business days of the date on which this Agreement is
countersigned by the Seller and delivered to the Purchaser;
$125,000. on or before February 13, 2004;
$125,000. on or before March 1, 2004; and
$375,001.50 on or before March 31, 2004
subject nevertheless to reduction in the event that qualified investors which
are referred to Purchaser by N-Viro pursuant to Section VI below shall invest
sums up to $375,000 by March 1, 2004 as provided in Section VI.
In the event that an installment payment is not timely made on the
scheduled due date, it shall be "delinquent". In the event that the delinquency
is not cured within two (2) business days (excluding Saturdays, Sundays and
legal and/or bank holidays) after written notice by Seller of the delinquency,
such payment shall be in "default".
In the event of a default, Purchaser shall have a grace period of five (5)
business days to cure the default. However, notwithstanding any curing of a
default, at Seller's sole option, the Approval Right as defined in Section III
below, shall become null, void and non-enforceable. The termination of
Purchaser's private placement approval right as described in Section III shall
be the Seller's sole and exclusive recourse of any breach hereunder by the
Purchaser.
CONSIDERATION
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For each $2.25 delivered to the Seller, the Purchaser shall receive one
security unit (Unit). Each Unit shall be comprised of 1 (one) share of
restricted N-Viro common stock (with piggy-back registration rights as set forth
below) and one 5-year common stock purchase warrant exercisable to purchase one
share of N-Viro common stock at $2.85 per warrant. The warrant shall be
substantially in the form attached hereto with any changes to be mutually agreed
upon by the parties. Seller may aggregate shares and warrants into single
certificates and warrants for the applicable number of shares and warrants to be
issued following the receipt of any installment payment.
LIMITATION ON FUTURE PRIVATE PLACEMENTS
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The Seller agrees that, for so long as the Purchaser remains current with the
terms and conditions of this Agreement, and upon satisfaction of its obligations
herein by the Purchaser, the Seller shall refrain from offering and/or
participating in any private placement of its securities for a period of nine
months, without the prior written consent of the Purchaser (the "Approval
Right").
EXCLUSIVE PRIVATE PLACEMENT
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This Agreement has been entered into as a result of the effort undertaken
by the Seller to sell its securities privately to investors. That attempt by
the Seller was not successful on the stated terms; however, it is the intention
of the Parties to replace that securities offering and any prior N-Viro
authorized private placement securities offering with this Agreement.
The Seller expressly agrees that any and all private securities offerings
authorized by it have been rescinded or cancelled unfunded, and that Seller is
in compliance with Section III above.
The Parties agree that, except in any case where there is a conflict
between this Agreement and the N-Viro Private Placement Information of December
2003, consisting of the fact sheet dated December __, 2003 and the subscription
agreement (the "PPI") in which case the terms herein shall control, the
Purchaser may rely on the information contained in the PPI.
DEBT FOR EQUITY
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The Purchaser acknowledges that the Seller has disclosed that it is negotiating
with certain vendors/creditors to accept shares of N-Viro common stock in lieu
of amounts owed to these vendor creditors. The Purchaser hereby expressly
waives any objection to the Seller's right to exchange up to 400,000 shares of
its stock for debt; provided that the exchange price is not less than $2.25 per
share.
REDUCTION IN INVESTMENT BY PURCHASER
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The Seller hereby agrees that the duty of the Purchaser to invest
$750,001.50 shall be reduced by up to $375,000 as provided in this Section.
Purchaser agrees that, subject to its approval of third-party investors as
provided herein, it shall relinquish from its right to purchase all $750,001.50
worth of the Units, the rights to purchase up to $375,000 worth of the Units.
The purchase of any such relinquished Units would be consummated between such
third party and N-Viro directly on the identical terms as contained herein;
subject however, to Purchaser's consent to participation of such third party.
It is the sole responsibility of N-Viro to refer such third parties to Purchaser
in a timely manner.
To be approved, each referred third party shall meet the following
criteria. That each third party shall:
a) Be an accredited or sophisticated investor.
b) Be recommended as a third party by N-Viro;
c) Be referred and identified not later than February 14, 2004;
d) Be able to deliver a minimum of $50,000 in cash on or before
March 1, 2004;
e) Complete a Private Placement Subscription Agreement;
f) Commit to a one year lock-up agreement, as does Ophir, which
allows N-Viro to retain physical possession of the securities
during the lock-up period;
g) Not have sold N-Viro securities after August 1, 2003;
h) Be in full compliance with all SEC rules and regulations.
i) Indemnify N-Viro and Ophir for any misrepresentation.
Each approved N-Viro referred third party shall execute documents identical to
those required of Purchaser.
Ophir has the right to have up to nine (9) co-investors participate with it
and the term "Purchaser" shall include such co-investors, provided that
Purchaser shall remain primarily liable for Purchaser's obligations
hereunderSuch co-investors shall be able to meet the requirements set forth in
(a), (e), (f), (g), (h) and (i) above for N-Viro-referred third parties.
From the date of this Agreement, and for a nine-month period thereafter,
Ophir shall receive a copy of N-Viro's DTC sheet on a weekly basis.
OVER SUBSCRIPTION
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Should N-Viro-referred subscribers express the interest to purchase more than
$375,000 worth of Units, then each interested party shall receive a pro-rated
amount of the available Units (i.e., $375,000) according to the supply/demand
ratio.
PURCHASER'S REPRESENTATIONS AND WARRANTIES
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Purchaser represents and warrants, and each N-Viro-referred third party
purchaser shall represent and warrant, as follows:
Investment Purpose. Purchaser is acquiring the common stock (the "Restricted
Common Shares"), the warrants, and upon conversion of the warrants, such
additional common stock (collectively, the "Securities") for its own account for
investment only and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, except pursuant to sales registered or
exempted under the Securities Act of 1933, as amended (the "1933 Act");
provided, however, that by making the representations herein, Purchaser reserves
the right to dispose of the Securities at any time in accordance with or
pursuant to an effective registration statement covering the resale of the
Securities or an available exemption from, or in a transaction not subject to,
the registration requirements of the 1933 Act.
Accredited Investor Status. Purchaser is an "Accredited Investor" as that term
is defined in Rule 501(a)(3) of Regulation D.
Reliance on Exemptions. Purchaser understands that the Securities are being
offered and sold to Purchaser in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that Seller is relying in part upon the truth and accuracy of, and Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire such
securities.
Information. Purchaser has been furnished with all materials relating to the
business, finances and operations of Seller and information Purchaser deemed
material to making an informed investment decision regarding its purchase of the
Securities, which have been requested by Purchaser. Purchaser and its advisors,
if any, have been afforded the opportunity to ask questions of Seller and its
management. Purchaser understands that its investment in the Securities
involves a high degree of risk. Purchaser has sought such accounting, legal,
and tax advice, as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
No Governmental Review. Purchaser understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities, or the fairness or
suitability of the investment in the Securities, nor have such authorities
passed upon or endorsed the merits of the offering of the Securities.
Transfer or Resale. Purchaser understands that: (i) none of the Securities have
been or are being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, or (B) Purchaser shall have delivered to
Seller an opinion of counsel, in a generally acceptable form, to the effect that
such securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from the registration requirements of the
1933 Act and any applicable state securities law; (ii) any sale of the
securities made in reliance on Rule 144 under the 1933 Act (or a successor rule
thereto) ("Rule 144") may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) except as otherwise set forth
herein, neither Seller nor any other person is under any obligation to register
such securities under the 1933 Act or any state or provincial securities law or
to comply with the terms and conditions of any exemption thereunder. Seller
reserves the right to place stop transfer instructions against the shares and
certificates representing any of the Securities.
Legends. Purchaser understands that the certificates or other instruments
representing the Securities shall bear a restrictive legend in substantially the
following form (and a stop -transfer order may be placed against transfer of
such stock certificates):
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and Seller shall, within five
(5) business days issue a certificate without such legend to the holder of the
Securities upon which it is stamped, if, unless otherwise required by state
securities laws, (i) in connection with a sale transaction, provided the
Securities are registered under the 1933 Act and any other applicable securities
law or (ii) in connection with a sale transaction, after such holder provides
Seller with an opinion of counsel, in form reasonably acceptable to Seller and
its counsel, to the effect that a public sale, assignment or transfer of the
Securities may be made without registration under the 1933 Act and any other
applicable securities laws.
Authorization; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of Purchaser and is a valid and
binding agreement of Purchaser enforceable in accordance with its terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
Access. Purchaser has had access to all documents, records, and books
pertaining to Seller at its offices upon reasonable notice to Seller and has had
the opportunity to ask questions of and receive answers from the officers of
Seller concerning the operations of Seller and the purchase of the Units.
Due Formation of Purchaser. Purchaser has been formed and validly exists and
has not been organized for the specific purpose of purchasing the Securities and
is not prohibited from doing so.
No Legal Advice From Seller. Purchaser acknowledges, that it had the
opportunity to review this Agreement and the transactions contemplated by this
Agreement with its own legal counsel and investment and tax advisors. Purchaser
is relying solely on such counsel and advisors and not on any statements or
representations of Seller or any of its representatives or agents for legal, tax
or investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any jurisdiction.
General Solicitation. Purchaser is not purchasing the Securities as a result of
any advertisement, article, notice or other communication regarding the
securities published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement.
REGISTRATION RIGHTS
Seller hereby grants the following registration rights to Purchaser, its
coinvestors, and N-Viro referred third parties.
A. If Seller at any time proposes to register any of its securities under
the 1933 Act for sale to the public, whether for its own account or for the
account of other security holders or both, except with respect to registration
statements on Forms S-4, S-8 or another form not available for registering the
Restricted Common Shares for sale to the public, provided the Restricted Common
Shares are not otherwise registered for resale by Purchaser pursuant to an
effective registration statement, each such time it will give at least 15 days'
prior written notice to Purchaser of its intention so to do. Upon the written
request of Purchaser, received by Seller within ten (10) days after the giving
of any such notice by Seller, to register any of the Restricted Common Shares
not previously registered, Seller will cause such Restricted Common Shares as to
which registration shall have been so requested to be included with the
securities to be covered by the registration statement proposed to be filed by
Seller, all to the extent required to permit the sale or other disposition of
the Restricted Common Shares. Notwithstanding the foregoing provisions, Seller
may withdraw or delay or suffer a delay of any registration statement referred
to in this Paragraph IX.A. without thereby incurring any liability to Purchaser.
B. Registration Procedures. If and whenever Seller is required by the
provisions hereof to effect the registration of any of the Restricted Common
Shares under the 1933 Act, Seller will, as expeditiously as possible:
1. subject to the timelines provided in this Agreement, prepare and
file with the SEC a registration statement required by Paragraph IX, with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as herein provided), and promptly provide to
the holders of Restricted Common Shares (the "Holders") copies of all filings
and SEC letters of comment;
2. prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective until such
registration statement has been effective for a period of two (2) years, and
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comply with the provisions of the 1933 Act with respect to the disposition of
all of the Restricted Common Shares covered by such registration statement in
accordance with Holders' intended method of disposition set forth in such
registration statement for such period;
3. furnish to Holders, at the Holders' expense, such number of copies
of the registration statement and the prospectus included therein (including
each preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or their disposition of the securities covered by
such registration statement;
4. use its best efforts to register or qualify the Restricted Common
Shares covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as Holders reasonably require, provided, however,
that Seller shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction;
5. if applicable, list the Restricted Common Shares covered by such
registration statement with any securities exchange on which the common stock of
Seller is then listed;
6. immediately notify Holders, when a prospectus relating thereto is
required to be delivered under the 1933 Act, of the happening of any event of
which Seller has knowledge as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing; and
7. provided same would not be in violation of the provision of
Regulation FD under the 1934 Act, make available for inspection by Holders, and
any attorney, accountant or other agent retained by Holders or underwriter, all
publicly available, non-confidential financial and other records, pertinent
corporate documents and properties of Seller, and cause Seller's officers,
directors and employees to supply all publicly available, non-confidential
information reasonably requested by Holders, attorney, accountant or agent in
connection with such registration statement.
C. Provision of Documents. In connection with each registration described
in this Paragraph IX., Holders will furnish to Seller in writing such
information and representation letters with respect to themselves and the
proposed distribution by them as reasonably shall be necessary in order to
assure compliance with federal and applicable state securities laws.
D. Expenses. All expenses incurred by Seller in complying with this
Paragraph IX., including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for Seller, fees and expenses (including reasonable counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, and costs of insurance are called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Restricted Common Shares, including any fees and
disbursements of any special counsel to Purchaser, are called "Selling
Expenses". Purchaser shall pay the fees of its own additional counsel, if any.
Seller will pay all Registration Expenses in connection with the registration
statement under this Paragraph IX. Selling Expenses in connection with each
registration statement under this Paragraph IX. shall be borne by Purchaser, its
co-investors, and any N-Viro- referred third parties in proportion to the number
of shares sold by each of them.
E. In the event of a registration of any of the Restricted Common Shares
under the 1933 Act pursuant to this Paragraph IX., Purchaser will, to the extent
permitted by law, indemnify and hold harmless Seller, and each person, if any,
who controls Seller within the meaning of the 1933 Act, each officer of Seller
who signs the registration statement, each director of Seller, each underwriter
and each person who controls any underwriter within the meaning of the 1933 Act,
against all losses, claims, damages or liabilities, joint or several, to which
Seller or such officer, director, underwriter or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the registration statement under which such Restricted Common Shares were
registered under the 1933 Act pursuant to this Paragraph IX., any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the 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 Seller and each such
officer, director, underwriter and controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that Purchaser will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
Purchaser, as such, furnished in writing to Seller by Purchaser specifically for
use in such registration statement or prospectus, and provided, further,
however, that the liability of Purchaser hereunder shall be limited to the gross
proceeds received by Purchaser from the sale of Restricted Common Shares covered
by such registration statement.
F. In the event of a registration of any of the Restricted Common Shares
under the 1933 Act pursuant to this Paragraph IX., Seller will, to the extent
permitted by law, indemnify and hold harmless Purchaser (including its
co-investors and any N-Viro-referred third parties), and each person, if any,
who controls Purchaser within the meaning of the 1933 Act, each officer of
Purchaser who signs the registration statement, each director of Purchaser, each
underwriter and each person who controls any underwriter within the meaning of
the 1933 Act, against all losses, claims, damages or liabilities, joint or
several, to which Purchaser or such officer, director, underwriter or
controlling person may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the registration statement under which such
Restricted Common Shares were registered under the 1933 Act pursuant to this
Paragraph IX., any preliminary prospectus or final prospectus contained therein,
or any amendment or supplement thereof, or arise out of or are based upon the
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 Purchaser and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that Seller will be liable hereunder in
any such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made by Seller.
FORUM SELECTION - CHOICE OF LAW
Any dispute arising herefrom shall be resolved by binding arbitration according
to the rules of the AAA. This agreement shall be interpreted according to the
laws of the State of Delaware and Delaware shall be the sole forum for
adjudicating any claim, dispute, or otherwise resulting from this Agreement.
NOTICE
The proper addresses for each Party are as follows:
N-Viro: 0000 X. Xxxxxxx Xxx., Xxx. 000; Xxxxxx, XX 00000;
Ophir : 000 Xxxxxx Xxxx Xxxx, Xx. Kingstown, RI 02852.
FURTHER ASSURANCES
Each Party shall complete, execute, acknowledge, deliver, sign, and return to
the other Party, as soon as practicable, on request by the other Party, any
document, questionnaire, notices and undertakings, as may be required by any
regulatory authorities or applicable law, or as a Party otherwise reasonably
requests.
Intending to be legally bound, signed and acknowledged;
SIGNATURES:
N- Viro International Corp., OPHIR Holdings, Inc.
/s/ Xxxxx X. Xxxxx /s/ Xxxx Xxxxxxxx
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By: Xxxxx X. Xxxxx, President By: Xxxx Xxxxxxxx, President
/s/ Xxxx Xxxxx
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Xxxx Xxxxx, Chairman
