Exhibit 99.1
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SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this "Agreement") is dated December 28th,
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2006, between N-Viro International Corporation, a Delaware corporation
("Purchaser"), and VFL Technology Corporation ("Seller"), a Pennsylvania
corporation. The Purchaser and the Seller may be collectively referred to as
the "Parties" or individually as a "Party".
RECITALS
Seller is the owner of 51.45% of the outstanding membership shares of
Florida N-.Viro L.P. (the "Partnership").
Seller is the owner of fifty-two and one half percent (52.5%) of the
outstanding membership interests of Florida N-Viro Management, LLC (the "LLC").
Purchaser is the owner of the remaining outstanding membership shares in
the Partnership and of the remaining outstanding membership interests in the
LLC.
The outstanding membership shares in the Partnership owned by Seller and
the outstanding membership interest in the LLC owned by Seller will be
collectively referred to herein as the "Purchased Shares".
The Seller owns and desires to sell to Purchaser and Purchaser desires to
buy from the Seller the Purchased Shares.
Unless otherwise defined in this Agreement, the capitalized terms used in
this Agreement have the meanings given in Article V below.
In consideration of the mutual covenants and agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto agree as set forth herein.
ARTICLE I
1 SALE OF PURCHASED SHARES; CLOSING; DISCLAIMER OF WARRANTY
1.1 Purchase and Sale. At the Closing, on the terms and conditions set
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forth in this Agreement, the Seller will sell to Purchaser, and Purchaser will
purchase from the Seller, the Purchased Shares, which include all rights, title
and interest therein.
1.2 Purchase Price.
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1.2.1 The purchase price (the "Purchase Price") for the Purchased
Shares is Five
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Hundred Thousand dollars ($500,000.00). At the Closing, Purchaser shall pay
Seller One Hundred Thousand dollars ($100,000.00) in cash (the "Down Payment"),
with the balance of Four Hundred Thousand dollars ($400,000.00) (the "Payment
Balance") to be paid in ten annual payments of Fifty Nine Thousand Six Hundred
Eleven Dollars ($59,611.80) (the "Annual Payment") payable in accordance with
the terms of the promissory note (the "Note") attached hereto as Exhibit A at
eight percent (8%) interest.
1.2.2 The Annual Payment shall be off-set annually by the amount owed
by the Seller to Purchaser under the PATENT LICENSE AGREEMENT dated April 16,
1991 between the Seller and the Purchaser's predecessor N-Viro Energy Systems,
LTD., for royalties owed under such agreement.
1.2.2.1 Within thirty days following the first anniversary of this
Agreement, the Seller will provide the Purchaser with a calculation of the
amount, if any, that should be offset against the Annual Payment under Section
1.2.2 (the "Calculation"). If the Purchaser, within thirty days of receiving the
Calculation, disagrees with the Calculation, then the Parties will try to
resolve the dispute. Payment of the Annual Payment shall be suspended pending
resolution of the dispute as set forth in this Section 1.2.2.1. If the Parties
are unable to resolve the dispute within thirty days, then the Parties shall
agree upon and jointly engage an independent accounting firm to review the
Calculation. Within forty-five (45) days after the matter is referred to the
accounting firm, the accounting firm will prepare and deliver a report to the
Parties which will detail whether an offset against the Annual Payment is
necessary. The report will be final and binding on the Parties, absent fraud or
clear error. The Parties each shall be responsible for one-half (1/2) of the
cost of the accounting firm.
1.2.2.2 If the Purchaser agrees with the Calculation, or following
resolution of a dispute over the Calculation in accordance with Section 1.2.2.1,
then the offset against the Annual Payment shall be made.
1.2.2.3 The process described in Sections 1.2.2.1 and 1.2.2.2 shall be
repeated annually on each subsequent anniversary thereafter until the Payment
Balance has been discharged,
1.3 Closing and Deliveries at Closing. The Closing (the "Closing") of
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the purchase and sale of the Purchased Shares will take place upon the exchange
of all the deliverables by the Parties as set forth in Sections 1.3 and 1.4
herein on the later of:
1.3.1 midnight on December 31, 2006;
1.3.2 or at such other time as Purchaser and the Seller shall mutually
agree (the "Closing Date").
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At the Closing:
1.3.3 Seller shall deliver to Purchaser:
1.3.3.1 Any further documents and instruments necessary to transfer
title to the Purchased Shares to Purchaser;
1.3.3.2 All books and records of the Partnership and the LLC; and
1.3.3.3 From each of the banks and other financial institutions listed
on Schedule 2.21 an original statement signed by each of the currently
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authorized signatories on all accounts removing themselves as signatories on the
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accounts, to be effective as of the Closing Date.
1.3.4 The Parties shall also deliver any other documents and
instruments to be delivered pursuant to this Agreement.
1.4 Payment of Purchase Price & Operating Capital. At the Closing,
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Purchaser will pay the Down Payment to the Seller by wire transfer to such
account(s) as the Seller may direct by written notice delivered to Purchaser by
the Seller at least three (3) days before the Closing Date. Simultaneously, the
Seller will sell and convey to Purchaser the Purchased Shares free and clear of
all Liens. Seller agrees to leave an operating balance of Eighty Thousand
Dollars ($80,000.00) in the Partnership. From and after the Closing Date, Seller
shall not have any right, title or interest in or to the Purchased Shares or any
assets of the Partnership or the LLC.
1.5 Disclaimer of Warranty. Except for the representations and warranties
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made by Seller in Article II below, (i) neither Seller nor any person acting on
behalf of the Seller makes any representation or warranty, express or implied,
and (ii) SELLER HEREBY EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS
AND/OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE WARRANTIES OF MERCHANTABILITY
AND/OR FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE II
2 REPRESENTATIONS AND WARRANTIES OF THE SELLER
Seller represents and warrants to Purchaser, as of the Closing Date and to
Seller's Knowledge, as follows:
2.1 Interests. The Seller represents that there have never been any
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certificates or other documents issued representing ownership of the Purchased
Shares and the Purchaser acknowledges such. The Seller represents that it owns
the Purchased Shares, free and clear of all liens.
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2.2 Authority Relative to This Agreement. The Seller has full corporate power
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and authority to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by Seller and the consummation by Seller of
the transactions contemplated hereby have been duly and validly approved by its
board of directors and no other corporate proceedings on the part of Seller or
its stockholders are necessary to authorize the execution, delivery and
performance of this Agreement by Seller and the consummation by Seller of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Seller and constitutes the legal, valid and
binding obligations of the Seller, enforceable against it in accordance with its
terms.
2.3 Brokers. No agent, broker, finder, investment banker, financial advisor
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or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement on the basis of any act or statement made by Seller.
2.4 Consents and Approvals. No consent, authorization or approval of,
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filing or registration with, or cooperation from, any governmental authority or
any other person not a party to this Agreement is necessary in connection with
the execution, delivery and performance by Seller of this Agreement.
2.5 No Conflict or Default. The execution, delivery and performance by
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Seller of this Agreement will not, (i) to Seller's knowledge, violate any law;
(ii) violate or conflict with, result in a breach or termination of, constitute
a default or give any third party any additional right (including a termination
right) under, permit cancellation of, result in the creation of any lien upon
Seller's Purchased Shares under, or result in or constitute a circumstance
which, with or without notice or lapse of time or both, would constitute any of
the foregoing under, any contract or instrument of any kind to which Seller is a
party or by which Seller or Seller's assets are bound; or (iii) permit the
acceleration of the maturity of any indebtedness of Seller or indebtedness
secured by Seller's assets.
2.6 Financial Statements~ Undisclosed Liabilities.
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2.6.1 Attached as Schedule 2.6.1 are copies of balance sheets and
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statements of income and cash flow for the Partnership and the LLC as of and for
the fiscal years ended December 31, 2003, 2004 and 2005 and for the period from
January 1, 2006 through September 30, 2006 (the September 30, 2006 information
excludes footnote disclosures and statements of cash flow) (the "Financial
Statements"). The Financial Statements (including the notes contained therein)
have been prepared on an accrual basis, consistently applied throughout the
covered periods, present fairly the financial condition of the Partnership and
the LLC as of such dates and the results of operations of the Partnership and
the LLC for such periods, are correct and complete, and are consistent with the
books and records of the Partnership and the LLC (which books and records are
correct and complete). The Financial Statements do not reflect any transactions
that are not bona fide transactions and do not contain any untrue statement of a
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material fact or omit to state any material fact necessary to make the
statements, in light of the circumstances in which they were made, not
misleading.
2.6.2 Except as set forth in Schedule 2.6.2. the Partnership and the
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LLC have incurred no liabilities, debts, claims or obligations, whether accrued,
absolute, contingent or otherwise, whether due or to become due, other than
trade payables and accrued expenses incurred in the ordinary course of business
since September 30, 2006.
2.7 No Material Adverse Effects or Changes. Except as set forth on Schedule
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2.7, since September 30, 2006 to the Closing Date, the Partnership and the LLC
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have not:
2.7.1 Suffered any material adverse effect or any material adverse
change;
2.7.2 Suffered any material damage, destruction or loss to any of its
assets or properties (whether or not covered by insurance);
2.7.3 Incurred any obligation or entered into any contract not in the
ordinary course of business which required a payment to any person in excess of,
or a series of payments which in the aggregate exceed $25,000 or provides for
the delivery of goods or performance of services, or any combination thereof,
having a value in excess of $25,000;
2.7.4 Taken any action, or entered into or authorized any contract or
transaction other than in the ordinary course of business;
2.7.5 Sold, transferred, conveyed, assigned or otherwise disposed of
any of its assets or properties, except in the ordinary course of business;
2.7.6 Waived, released or canceled any claims against third parties or
debts owing to the Partnership and the LLC, or any rights that have any material
value;
2.7.7 Made any material changes in its accounting systems, policies,
principles or practices;
2.7.8 Entered into, authorized, or permitted any significant
transaction with Seller or any affiliate of any of Seller;
2.7.9 Authorized for issuance, issued, sold, delivered or agreed or
committed to issue, sell or deliver (whether through the issuance or granting of
options, warrants, convertible or exchangeable securities, commitments,
subscriptions, rights to purchase or otherwise) any interests in the Partnership
or the LLC;
2.7.10 Except for existing borrowings, made any borrowings, incurred
any debt (other than trade payables in the ordinary course of business and
employee-related expenses such as payroll, insurance and benefits), or assumed,
guaranteed, endorsed (except for the negotiation or collection of negotiable
instruments in transactions in the ordinary course of business) or
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otherwise become liable (whether directly, contingently or otherwise) for the
obligations of any other person, or made any payment or repayment in respect of
any indebtedness (other than trade payables and accrued expenses in the ordinary
course of business) in excess of $25,000 in the aggregate;
2.7.11 Made any loans, advances or capital contributions to, or
investments in, any other person;
2.7.12 Acquired, leased or encumbered any assets outside the ordinary
course of business or any assets which are material to the Partnership or the
LLC;
2.7.13 Authorized or made any capital expenditure which is individually
in excess of $5,000;
2.7.14 Made any tax election or settled or compromised any federal,
state, local or foreign tax liability, or waived or extended the statute of
limitations in respect of any such taxes;
2.7.15 Paid any amount, performed any obligation or agreed to pay any
amount or perform any obligation, in settlement or compromise of any suits
against the Partnership or the LLC or any of its partners, members, employees or
agents;
2.7.16 Paid in excess of $5,000, performed any obligation or agreed to
pay in excess of $5,000 or perform any obligation, in settlement or compromise
of any claims of liability against the Partnership or the LLC or any of its
partners, members, employees or agents; or
2.7.17 Terminated, modified, amended or otherwise altered or changed
any of the terms or provisions of any contract, or paid any amount not required
by law or by any contract, other than in the ordinary course of business.
2.8 Title to Properties. The Partnership and the LLC have good and
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marketable title to, and is the lawful owner of, all of the tangible and
intangible assets, properties and rights used in connection with its business
and all of the tangible and intangible assets, properties and rights reflected
in the Partnership and the XXX xxxxx and records and in the Financial
Statements.
2.9 Condition and Sufficiency of Assets. All of the tangible assets and
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properties of the Partnership and the LLC, whether real or personal, owned or
leased, and currently used and useful in the ordinary course of business, are
listed on Schedule 2.9 attached hereto, and will be available at Closing in
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their then-current, "AS IS" condition. The Partnership and the LLC own or have a
current right to use all the assets, properties, rights, know-how, intellectual
property, processes and ability which are required for or currently used in
connection with the operation of its business as it is presently conducted. Such
assets, properties, rights and intellectual property were sufficient to produce
the income for the fiscal year ended December 31, 2005, as shown on the
Financial Statements. The Partnership and the LLC have no liabilities respecting
its assets
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and properties not directly related to, and that did not arise directly out of,
the business of the Partnership and the LLC.
2.10 Leased Real Property.
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2.10.1 The Partnership and the LLC do not hold legal title to or own
any real property. Schedule 2.10.1 attached lists all leases pursuant to which
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the Partnership and the LLC hold, occupy or use any real property (the "Real
Property Leases"). The Partnership and the LLC do not hold, occupy or use any
real property except for the real property subject to the Real Property Leases
(the "Leased Real Property"). True and complete copies of the Real Property
Leases listed in Schedule 2.10.1 have been provided to Purchaser. The activities
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carried on by the Partnership and the LLC in the buildings and facilities at the
Leased Real Property are not in violation of, or in conflict with, any
applicable zoning, environmental health and safety requirements, or ordinance or
any other similar law.
2.10.2 Each Leased Real Property and any improvements located on such
property are served by water, storm and septic sewer facilities, telephone,
electricity, and drainage, all of which are adequate for such property's present
and continued use in the usual and normal conduct of the Partnership and the LLC
business and operations, and have adequate parking facilities that meet all
requirements imposed by applicable laws.
2.10.3 There is no pending, threatened or proposed proceeding or
governmental action to modify the zoning classification of, or to condemn or
take by the power of eminent domain (or to purchase), or to classify as a
landmark, or to impose special assessments on, or otherwise to take or restrict
in any way the right to use all or any part of the Leased Real Property.
2.10.4 All the Real Property Leases are in full force and effect, valid
and enforceable in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy or other laws affecting
creditors' rights generally and except as enforceability is subject to general
principles of equity. None of the Real Property Leases have been amended or
modified since September 30, 2006, and there are no agreements, written or oral,
between the Partnership or the LLC and the owner of the Leased Real Property,
other than the Real Property Leases. The Partnership and the LLC have not
received any notice of any, and there exists no, dispute, claim, event of
default or event which constitutes or would constitute (with notice or lapse of
time or both) a default under any Real Property Lease. All rent and other
amounts due and payable with respect to the Real Property Leases have been paid
through the date of this Agreement. All landlords/lessors under the Real
Property Leases have consented (where such consent is necessary) to the
consummation of the transactions contemplated by this Agreement.
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2.11 Personal Property~ Liens and Encumbrances.
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2.11.1 Each of the personal property leases and agreements to which the
Partnership and the LLC are a party is in full force and effect and constitutes
the legal, valid and binding obligation of the parties thereto.
2.11.2 Except as disclosed in the Financial Statements or set forth on
Schedule
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2.11.2, the Partnership and the LLC have good and marketable title to all
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properties and assets, (real, personal or mixed, tangible and intangible) owned
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by it and a good and valid leasehold interest in all property (real, personal
and mixed, tangible and intangible) leased by it, free and clear of all
mortgages, liens, pledges, security interests, charges, conditional sales
agreements and encumbrances of any nature whatsoever, except for liens for
taxes, assessments, governmental charges or levies which are not yet due and
payable.
2.11.3 Except as set forth on Schedule 2.11.3, the personal property,
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machinery and equipment of the Partnership and the LLC currently used and useful
in the ordinary course of business are in good operating condition and, subject
to routine maintenance and ordinary wear and tear, have been maintained in a
commercially reasonable manner and are suitable for the purpose for which they
are used.
2.12 Accounts Receivable and Advances. All accounts receivable of the
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Partnership and the LLC, whether reflected in the Financial Statements or
otherwise, represent sales made or services performed in the ordinary course of
business, at the aggregate recorded amounts thereof, subject to no valid
counterclaims or setoffs, except to the extent reserved against in the Financial
Statements or otherwise in the books and records of the Partnership and the LLC
on a basis and in amounts consistent with past practice.
2.13 Inventory. All of the supplies inventory and products inventory of the
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Partnership and the LLC can be used or consumed in the ordinary course of
business as now conducted and are not in amounts in excess of normal
requirements. Since September 30, 2006, there has been no change in the amount
of such inventory of the Partnership and the LLC except for changes as a result
of the purchase and sale of, or adjustment to, inventory in the ordinary course
of business.
2.14 Relationships with Suppliers and Customers. No significant percentage
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or portion of the Partnership and the LLC customers or suppliers has terminated
or plans to terminate any of its normal business relations with the Partnership
and the LLC or would do so as a result of the transactions contemplated by this
Agreement.
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2.15 Material Contracts. Schedule 2.15 contains a complete and correct list of
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all agreements, contracts and commitments to which the Partnership and the LLC
are a party, under which it has any rights or by which it or any of its assets
or properties is bound. Except as disclosed in Schedule 2.15, none of the
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obligations of the business of the Partnership and the LLC have been guaranteed
by any person.
2.16 Agreements in Force and Effect.
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2.16.1 Except as set forth in Schedule 2.16, each contract, agreement,
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lease, instrument and commitment required to be described in the Schedules
hereto is, on the date hereof, and will be on the Closing Date, in full force
and effect and is and will constitute a valid and binding obligation of the
Partnership and the LLC, as the case may be, and the respective parties to such
agreements, and there is not, under any such contract, agreement, lease,
instrument or commitment, any existing material default by the Partnership or
the LLC or such other parties or any event that, with notice, lapse of time or
both, would constitute a material default by the Partnership or the LLC or such
other parties in respect of which adequate steps have not been taken to cure
such default or to prevent such a default from occurring or continuing.
2.16.2 Purchaser has been supplied with, or given access to, true,
complete and correct copies of all written agreements, contracts, commitments,
obligations and undertakings, together with all amendments thereto, listed on
the Schedules hereto, and such Schedules contain accurate descriptions of all
oral agreements listed on such Schedules.
2.17 Insurance.
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2.17.1 Schedule 2.17, attached, contains an accurate and complete list
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of all policies of fire, liability, workers' compensation, title, errors and
omissions, directors and officers, and other forms of insurance owned, held by
or applicable to the Partnership and the LLC (or its assets or business)
including name of carrier, policy number, expiration date, type and amount of
insurance, and Seller has delivered to Purchaser a true and complete copy of all
such policies, including all occurrence-based policies applicable to the
Partnership and the LLC (or its business) for all periods immediately prior to
the Closing Date. All such policies are in full force and effect, all premiums
covering all periods up to and including the Closing Date have been paid, and no
notice of cancellation or termination has been received with respect to any
policy. Such policies are sufficient for compliance with (i) all requirements of
law and (ii) all contracts to which the Partnership and the LLC is a party, and
are valid, outstanding and enforceable policies. The Partnership and the LLC
have not been refused any insurance with respect to its assets or operations,
and its coverage has not been limited by any insurance carrier to which it has
applied for any such insurance or with which it has carried insurance, during
the last three years.
2.17.2 Schedule 2.17 also sets forth a list of all claims, which have
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been made by or against the Partnership and the LLC in the last three years
under any of the insurance programs
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or policies identified in Schedule 2.17. Except as set forth on Schedule 2.17,
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there are no pending or threatened claims under any such insurance policy or
program. Such claim information includes the following information with respect
to each accident, loss, or other event: (1) the identity of the claimant; (ii)
the nature of the claim; (iii) the date of the occurrence; (iv) the status as of
the report date; and (v) the amounts paid or expected to be paid or recovered.
2.17.3 Purchaser acknowledges that as of the Closing Date the
Partnership and the LLC shall be removed from coverage under the policies listed
on Schedule 2.17 and Purchaser shall be solely responsible for procuring
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insurance coverage for the Partnership and the LLC.
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2.18 Taxes.
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2.18.1 The amounts provided as a liability on the Financial Statements
for all taxes are adequate to cover all unpaid liabilities for all taxes,
whether or not disputed, that have accrued with respect to or are applicable to
the period ended on and including the Closing Date or to any years and periods
prior to the Closing Date and for which the Partnership or the LLC may be
directly or contingently liable in its own right or as a transferee of the
assets of, or successor to, any person. The Partnership and the LLC have not
incurred any tax liabilities other than in the ordinary course of business for
any taxable year for which the applicable statute of limitations has not
expired; there are no tax liens (other than liens for current taxes not yet due
and payable) upon the properties or assets of the Partnership or the LLC. The
Partnership and the LLC have not granted or been requested to grant any waiver
of any statutes of limitations applicable to any claim for taxes.
2.18.2 All federal, state, local and foreign income, corporation and
other tax returns have been filed for the Partnership and the LLC, and all other
filings in respect of taxes have been made for the Partnership and the LLC, for
all periods required to be reported through and including the Closing Date as
required by law. All taxes shown as due on all such tax returns and other
filings have been paid. Each such tax return and filing is true and correct and
the Partnership and the LLC will not have any additional liability for taxes
with respect to any tax return or other filing filed or which was required by
law to be filed, other than as reflected as liabilities on the Financial
Statements. None of the tax returns or other filings that include the operations
of the Partnership and the LLC has ever been audited or, to Sellers' knowledge,
investigated by any governmental authority, and no facts exist which would
constitute grounds for the assessment of any additional taxes by any
governmental authority with respect to the taxable years covered in such tax
returns and filings. No material issues have been raised in any examination by
any governmental authority with respect to the business and operations of the
Partnership and the LLC which, by application of similar principles, reasonably
could be expected to result in a proposed adjustment to the liability for taxes
for any other period not so examined. All taxes which the Partnership and the
LLC are required by law to withhold or collect, including without limitation,
sales and use taxes, and amounts required to be withheld for taxes of employees
and other withholding taxes, have been duly withheld or collected and, to the
extent required, have been paid over to the proper governmental authorities or
are held in separate bank accounts for such purpose. All information returns
required to be filed by the
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Partnership and the LLC prior to the Closing Date have been (or will be) filed,
and all statements required to be furnished to payees by the Partnership and the
LLC prior to the Closing Date have been furnished to such payees, and the
information set forth on such information returns and statements is true,
complete and correct.
2.19 Non-Contravention. Without limiting in any way the more specific
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representations and warranties contained in other provisions of this Agreement
with respect to specific laws, the Partnership and the LLC are in material
compliance with, and no material violation exists under, any and all laws
applicable to the Partnership and the LLC, and no notice from any governmental
authority has been received by the Partnership or the LLC or Seller claiming any
material violation of any law.
2.20 Litigation. Except as set forth in Schedule 2.20, there are no
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actions, suits, arbitrations, regulatory proceedings or other litigation,
proceedings or governmental investigations pending or threatened against or
affecting the Partnership or the LLC or any of its partners, members, employees
or agents, or any of the Partnership or the LLC properties or businesses, and to
Seller's knowledge, there are no facts or circumstances which may give rise to
any such action. The Partnership and the LLC are not subject to any order,
judgment, decree, injunction, stipulation or consent order of or with any court
or other governmental authority. The Partnership and the LLC have not entered
into any agreement to settle or compromise any proceeding pending or threatened
against it which has involved any obligation other than the payment of money or
for which the Partnership or the LLC have any continuing obligation.
2.21 Bank Accounts. Schedule 2.21 sets forth the names and locations of
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each bank or other financial institution at which the Partnership and the LLC
have an account (giving the account numbers) or safe deposit box and the names
of all persons authorized to have access to or to draw on such accounts, and the
names of all persons, if any, now holding powers of attorney or comparable
delegation of authority from the Partnership or the LLC and a summary statement
of such powers.
2.22 Licenses: Accreditations: Permits. Except as disclosed in Schedule
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2.22, the Partnership and the LLC are not required to have or maintain any
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licenses, accreditations or permits to operate its business at any of its sites.
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The Partnership and the LLC have and maintain all of the public, governmental,
and private licenses, accreditations, and permits which are necessary to operate
its facilities and its business at its various sites, and said licenses,
accreditations and permits are all valid, in good standing and are not under
threat of revocation, suspension or other restriction. There are no proceedings
or sanctions pending or, to Seller's knowledge, threatened by any individual or
entity which seek to limit, restrict, suspend, revoke or terminate any license,
accreditation, or permit at or relating to any of the Partnership and the LLC
sites or to impose any other remedy with respect to such licensure,
accreditation or permit; nor, to Seller's knowledge, do there exist any grounds
for such limitation, restriction or termination.
2.22.1 No licensure, accreditation or permitting entity or agency must
be notified in advance of or as a result of the transactions contemplated by
this Agreement; nor will said
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transactions require the modification or renewal, or any other action with
respect to any license, accreditation or permit held or required by the
Partnership or the LLC or any of its sites. If any licensure, accreditation or
permitting entity or agency should request a modification or renewal or any
other action with respect to any license, accreditation or permit held by the
Partnership or the LLC or any of its sites as a result of this Agreement, Seller
will reasonably assist and cooperate with Purchaser in taking any necessary
action.
2.23 Powers of Attorney. There are no persons, firms, associations,
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corporations or business organizations holding general or special powers of
attorney from the Partnership of the
LLC.
2.24 Accuracy. No representation, warranty, covenant or statement by Seller
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in this Agreement, attachments to this Agreement or the documents furnished to
Purchaser pursuant to this Agreement, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
required to be stated or necessary to make the statements or in light of the
circumstances under which they were made, not false or materially misleading.
ARTICLE III
3 REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser, to its best knowledge, represents and warrants to the Seller as
follows:
3.1 Authority Relative to this Agreement. Purchaser has full corporate
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power and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby have been duly and validly
approved by its board of directors and no other corporate proceedings on the
part of Purchaser or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by Purchaser and the consummation by
Purchaser of the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and constitutes a legal, valid
and binding obligation of Purchaser enforceable against Purchaser in accordance
with its terms.
3.2 Brokers. No agent, broker, finder, investment banker, financial advisor
-------
or other similar Person will be entitled to any fee, commission or other
compensation in connection with any of the transactions contemplated by this
Agreement on the basis of any act or statement made by Purchaser.
3.3 Purchase for Investment. The Purchased Shares will be acquired by
------------ ----------
Purchaser for its own account for the purpose of investment and not with a view
to the resale or distribution of all or any part of the Purchased Shares in
violation of the Securities Act.
12
3.4 Purchaser's Investment Decision. The Purchaser having existing ownership in
-------------------------------
both the Partnership and the LLC acknowledges and represents that it has
sufficient knowledge about the Partnership and the LLC and is able to bear the
economic risk of the investment contemplated by this Agreement. The Purchaser
has had access to the officers, directors, and certain books and records of the
Partnership and the LLC, and deems such examination and investigation sufficient
for the purpose of making its investment decision.
ARTICLE IV
4 COVENANTS
4.1 Covenants by the Seller. From and after the Closing Date, neither
------------ ----------
Seller nor any affiliate of Seller will directly or indirectly use in any manner
any trade name, trademark, service xxxx or logo used by the Partnership or the
LLC or any word or logo that is similar in sound or appearance, and specifically
will not use the word "N-Viro" or any variant thereof unless otherwise licensed
to Seller for its use by Purchaser or any affiliate thereof.
4.2 Covenants by the Purchaser
--------- -- --- ---------
4.2.1 Purchase of Reagent.
-------- -- -------
4.2.1 Purchaser covenants to cause the Partnership, its successors in
interest or assignee to procure all of its requirements for fly ash or other
reagent for use in its existing facility located at 0000 Xxxxxx Xxxxx Xx.,
Xxxxxxx Xxxxx, Xxxxxxx 00000 until payment in full of the Payment Balance only
from Headwaters Resources, Inc. or its successor ("HRI"). HRI shall provide to
Purchaser fly ash produced at the Cedar Bay Generating Station, located at 0000
Xxxxxxxx Xxxx, Xxxxxxxxxxxx Xxxxxxx 00000 for use as a reagent. The purchase or
other procurement of any fly ash or reagent by the Partnership, or any successor
or assign, from any source other than HRI for use in its existing facility
located at 0000 Xxxxxx Xxxxx Xx., Xxxxxxx Xxxxx, Xxxxxxx until payment in full
of the Payment Balance, unless HRJ cannot supply the requirements of the
Partnership for fly ash of reagent, is strictly prohibited and shall cause the
Payment Balance to become immediately due and payable. The price for which HRI
shall pay the Partnership per ton of fly ash taken by the Partnership shall be
the following:
Years 2007 - 2008*
--------------------- --------------
0 - 10,000 tons $12.00 per ton
10,001 - 20,000 tons $11.00 per ton
20,001 + tons $10.00 per ton
Years 2009 and beyond
--------------------- --------------
0 - 30,000 tons $10.00 per ton
30,000 +tons $12.00 per ton
*Beyond 2008 the price per ton shall be escalated using the CPI all urban index
as measured on each December 31st as compared to the base index on
dateYear2007Day31Month12December 31, 2007.
'
13
ARTICLE V
5 INDEMNIFICATION
5.1 Indemnification by Seller. Seller shall indemnify, defend, protect and
-------------------------
hold harmless Purchaser and its officers, directors, shareholders, employees,
agents, representatives and affiliates from and against, any and all losses
caused by or to the extent arising out of or in connection with any breach of or
any inaccuracy in any representation or warranty made by Seller under Section 2
or any breach or failure by Seller or any affiliate of Seller to perform any
covenants and obligations under this Agreement.
5.2 Indemnification by Purchaser. Purchaser agrees to indemnify, defend,
--------------- ------------
protect and hold Seller and its officers, directors, shareholders, employees,
agents, representatives and affiliates from and against any and all losses
caused by or to the extent arising out of or in connection with any breach of or
any inaccuracy in any representation or warranty made by Purchaser in Section 3
or any breach of or failure by Purchaser to perform any covenant or obligation
of Purchaser under this Agreement.
5.3 Matters Involving Third Parties.
-------------------------------
5.3.1 If any third party shall notify any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give rise
to a claim for indemnification against any other party to this Agreement (the
"Indemnifying Party") under this Section 5, then the Indemnified Party shall
promptly notify each Indemnifying Party in writing; provided, however, that no
delay on the part of the Indemnified Party in notifying any Indemnifying Party
shall relieve the Indemnifying Party from any obligation unless (and then solely
to the extent) the Indemnifying Party is prejudiced by such failure.
5.3.2 Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within 15 calendar days after
the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Loss the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim, (ii)
the Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will
14
have the financial resources to defend against the Third Party Claim and fulfill
its indemnification obligations hereunder, (ii) the Third Party Claim involves
only money damages and does not seek an injunction or other equitable relief,
(iv) settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (v) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
5.3.3 So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 5.3.2 above: (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
5.3.4 In the event any of the conditions in Section 5.3.2 above is or
becomes unsatisfied, however: (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Parties will remain responsible for
any Loss the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim to the fullest
extent provided in this Section 5.3.
5.3.4 In determining the amount of loss for purposes of this Section
5.3, full allowance shall be made for any insurance proceeds received by the
Indemnified Party with respect to such loss.
5.4 Limits on Indemnification.
-------------------------
5.4.1 No claim for indemnification under this Section 5 may be made by
any Indemnified Party unless a written notice of the claim is delivered to the
Indemnifying Party within two (2) years after the Closing Date.
5.4.2 No claim for indemnification may be made against an Indemnifying
Party under this Section 5 until and unless, and then only to the extent that,
the aggregate amount of the current and all previous claimed losses subject to
indemnification claims against the Indemnifying Party exceeds Five Thousand
dollars ($5,000) in the aggregate.
15
5.4.3 Any and all claims for indemnification when made against the
Indemnifying Party, when aggregated, shall be limited to Fifty Thousand dollars
($50,000.00).
ARTICLE VI
6 DEFINITIONS
6.1 Definitions. As used in this Agreement, the following defined terms
-----------
shall have the meanings indicated below:
"Affiliate" means, as applied to any Person, (a) any other Person directly
or indirectly owning, owned by, controlling, controlled by or under common
control with, that Person, (b) any director, partner, officer, agent, employee
or relative of such Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by",
and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person.
"Agreement" means this Purchase Agreement and the Note.
"Books and Records" means all files, documents, instruments, papers, books
and records relating to the Partnership and the LLC, including financial
statements, tax returns and related work papers and letters from accountants,
attorneys, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, licenses, customer lists, computer files and programs, legal files,
retrieval programs, operating data and plans and environmental studies and
plans.
"Closing" and "Closing Date" have the meaning ascribed to them in Section
1.3.
"Contract" means any written or oral agreement, lease, guaranty, evidence
of indebtedness, mortgage, indenture, security agreement or other contract of
any nature whatsoever.
"Seller's Knowledge" means the actual knowledge of Seller, after due
inquiry by and of the officers and directors of Seller.
ARTICLE WI
7 MISCELLANEOUS
7.1 Notices. All notices, requests and other communications hereunder must
-------
be in writing and will be deemed to have been duly given only if delivered
personally or mailed by prepaid first class certified mail, return receipt
requested, or sent by prepaid courier, to the parties at the following
addresses:
16
If to Seller, to:
VFL Technology Corporation
00000 X. Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attn.: General Counsel
If to the Purchaser, to:
N-Viro International Corporation
0000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxx 00000
Attn: President/CEO
All such notices, requests and other communications will (i) if delivered
personally or by courier to the address as provided in this Section, be deemed
given upon delivery, (ii) if delivered by mail in the manner described above to
the address as provided in this Section, be deemed given upon the earlier of the
third business day following the date sent or upon receipt. Any party from time
to time may change its address or other information for the purpose of notices
to that party by giving notice specifying such change to the other party hereto.
7.2 Entire Agreement. This Agreement supersedes all prior discussions and
----------------
agreements between the Parties with respect to the subject matter hereof and
thereof and contains the sole and entire agreement between the Parties hereto
with respect to the subject matter hereof and thereof. The Parties further agree
that no existing obligations from the Partnership or the LLC to either Seller or
Purchaser are owing or shall be owed as of the Closing Date.
7.3 Expenses. Except as otherwise expressly provided in this Agreement,
--------
each Party will pay its own costs and expenses incurred in connection with this
Agreement, and the transactions contemplated hereby and thereby.
7.4 Effect of Investigation. Any due diligence review, audit or other
--------- -------------
investigation or inquiry undertaken or performed by or on behalf of Purchaser
shall not limit, qualify, modify or amend the representations, warranties or
covenants of, or indemnities by, Seller made or undertaken pursuant to this
Agreement, irrespective of the knowledge and information received (or which
should have been received) by Purchaser.
7.5 Confidentiality. Purchaser and the Seller will hold in strict
---------------
confidence from any person (other than its Affiliates or representatives) all
documents and information concerning the other party hereto or any of its
Affiliates furnished to it by or on behalf of the other party in
17
connection with this Agreement or the transactions contemplated hereby, except
to the extent the disclosing party can demonstrate that such documents or
information was (a) previously known by the party receiving such documents or
information, (b) in the public domain (either prior to or after the furnishing
of such documents or information hereunder) through no fault of such receiving
party or (c) later acquired by the receiving party from another source if the
receiving party is not aware that such source is under an obligation to another
party hereto to keep such documents and information confidential. Such covenant
of confidentiality will remain in effect unless a party is compelled to disclose
by judicial or administrative process or by other requirements of any applicable
law.
7.6 Further Assurances~ Post-Closing Cooperation. At any time or from
------- ------------------------------------
time to time after the Closing, the Purchaser or the Seller shall execute and
deliver to the other Party such other documents and instruments, provide such
materials and information and take such other actions as the other party may
reasonably request to consummate the transactions contemplated by this Agreement
and otherwise to cause the Purchaser or the Seller to fulfill their obligations
under this Agreement.
7.7 Waiver. Any term or condition of this Agreement may be waived at
------
any time by the Party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
Party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
7.8 Amendment. This Agreement may be amended, supplemented or modified
---------
only by a written instrument duly executed by or on behalf of the parties
hereto.
7.9 No Third Party Beneficiary. The terms and provisions of this
-------- ----- -----------
Agreement are intended solely for the benefit of the Parties and their
respective successors or permitted assigns, and it is not the intention of the
Parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other person.
7.10 No Assignment Binding Effect. Neither this Agreement nor any
--------------------- ------
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by either Party without the prior written consent of the other
party(ies) and any attempt to do so will be void. Subject to the preceding
sentence, this Agreement is binding upon, inures to the benefit of and is
enforceable by the Parties hereto and their respective successors and assigns.
7.11 Headings. The headings used in this Agreement have been inserted
--------
for convenience of reference only and do not define or limit the provisions
hereof.
7.12 Invalid Provisions. If any provision of this Agreement is held to
------------------
be illegal, invalid
18
or unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (a) such provision will be fully severable, (b) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (c) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
7.13 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the domestic laws of the State of Utah, without giving effect
to any choice of law or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of Utah.
7.14 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth on the first page hereof.
PURCHASER
N-VIRO INTERNATIONAL CORPORATION VFL TECHNOLOGY CORPORATION
/s/ Xxxxxxx X. Xxxxxxx /s/ Xxxxxx X. Xxxxx
----------------------- --------------------
By: Xxxxxxx X. Xxxxxxx By: Xxxxxx X. Xxxxx
------------------- -------------------
Its: C.E.O. President Its: Secretary
----------------- ---------------
19
EXHIBIT A - PROMISSORY NOTE
Date: December __, 2006 $400,000.00
FOR VALUE RECEIVED, the undersigned N-Viro International Corporation,
("Borrower"), with offices at 0000 X. Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxx
00000 promises to pay to the order of VFL Technology Corporation ("VFL"), with
its principal place of business at 10653 5. River Xxxxx Xxxxxxx, Xxxxx 000,
Xxxxx Xxxxxx, Xxxx 00000, or at such other place as the holder hereof may
designate in writing, the principal sum of Four Hundred Thousand Dollars
($400,000.00) with interest from the date hereof on the principal balance
outstanding from time to time at the rate of Eight percent (8%) per annum until
the entire principal indebtedness is paid in full.
The principal balance due hereunder shall be paid over a ten (10) year period
and shall be payable in installments of Fifty Nine Thousand Six Hundred Eleven
Dollars and Eighty Cents ($59,611.80) (the "Annual Payment") per annum beginning
_______________ 2007. The parties agree that the Annual Payment shall be set-off
annually by the amount owed by VFL to Borrower under the Patent License
Agreement dated April 16, 1991 as set forth more fully in the Share Purchase
Agreement between VFL and Borrower.
The maker hereof shall have the right of prepayment in whole or in part at any
time without penalty.
In the event of non-payment following expiration of all applicable time periods
as set forth in Section 1.2.2 of the Share Purchase Agreement, the holder of
this Note may after a five (5) day grace period, at its option and upon written
notice to the undersigned, declare the entire principal balance immediately due
and payable. Failure to exercise this option shall not constitute a waiver of
the right to exercise the same in the event of any subsequent default. In the
event of default or non-payment of this Note, and if it is placed in the hands
of an attorney for collection, the undersigned hereby agrees to pay all
reasonable costs and expenses of collection, including but not limited to,
reasonable attorney's fees.
Presentment, demand, notice of dishonor, and protest are hereby waived.
This Note shall be governed by and construed in accordance with the laws of the
State of Utah.
IN WITNESS WHEREOF, the undersigned has executed this Promissory Note on
the date above written.
Borrower:
___________________________________
20
Index of Schedules
------------------
Schedule 2.6.1 - Balance Sheets and Statements of Income and Cash Flow
Schedule 2.6.2 - Liabilities, Debts, Claims Or Obligations.
Schedule 2.7 - Material Adverse Effects or Changes
Schedule 2.9 - Tangible Assets and Property
Schedule 2.10.1 - Real Property Leases
Schedule 2.11.2 - Personal Property; Liens and Encumbrances
Schedule 2.11.3 - Personal Property, Machinery and Equipment Not In Good
Operating Condition and Not Subject To Routine Maintenance
Schedule 2.15 - Material Contracts
Schedule 2.16 - Agreements That Will Expire Before Closing
Schedule 2.17 - Insurance Policies and Claims
Schedule 2.20 - Litigation
Schedule 2.21 - Bank Accounts and Authorized Signers
Schedule 2.22 - Licenses; Accreditations; Permits
