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EXHIBIT 4.1
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SUBSCRIPTION AGREEMENT
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This Subscription Agreement (the "Subscription Agreement") is
made and entered into as of the 17th day of March, 1999 (the "Subscription
Date"), by and between N-Viro International Corporation, a Delaware corporation
(the "Company"), and The Xxxxx Family Trust (Purchaser), whose mailing address
is 00 Xxxxxxxx Xxxxx, Xxxxxxxxxxxx, XX 00000 by its trustees, Xxxx X. Xxxxx and
R. Xxxxxxx XxXxxxx.
W I T N E S S E T H:
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WHEREAS, Purchaser desires to purchase from the Company, and
the Company desires to sell and issue to Purchaser, One Hundred Thousand
(100,000) shares ("Purchased Shares") of common stock, $.01 par value per share,
of the Company (the "Common Stock"), 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 $2.00 per
share or the total sum of $200,000 (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 or before such date
as is one hundred eighty (180) days following the date hereof.
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 ten (10) business days of
the receipt by the Company from the Purchaser of this Subscription Agreement as
executed by the Purchaser.
5. REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENTS 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:
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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 DOMICILE AND PRINCIPAL PLACE OF BUSINESS. The
domicile and principal place of business 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, 1997; (ii) the Company's Forms 10-Q for the quarters ended
June 31, 1998 and September 30, 1998, respectively; (iii) the Company's
Notice of Annual Meeting of Stockholders and Proxy Statement with
respect to the annual meeting held on June 2, 1998; 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. Additionally the certificates representing the
Purchased Shares shall bear a legend, in form and substance acceptable
to the Company in its sole discretion, evidencing
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that the Purchased Shares are (1) restricted and (2) are partly paid
shares under Section 156 of the Delaware General Corporation law.
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 its
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 hold the Purchased Shares for an indefinite
period of time and whether, at this time, Purchaser can afford a
complete loss of its 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);
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(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. Notwithstanding any provision
herein to the contrary, Purchaser shall have the right to demand the
inclusion of all or a portion of the Purchased Shares in any
registration statement originally filed by the Company on or after such
date as is one hundred twenty (120) days following the date hereof,
under and pursuant to the terms of the 1933 Act (the "Registration
Rights"). The specific terms and conditions with respect to the
Registration Rights shall be set forth in a Registration Rights
Agreement (the "Registration Rights Agreement"), a copy of which shall
be attached hereto as EXHIBIT B and made a part hereof. In the event of
conflict between the terms and conditions set forth herein and in the
Registration Rights Agreement, the terms and conditions set forth in
the Registration Rights Agreement shall be dispositive of the issue in
dispute.
5.11 COMMITMENTS. Purchaser's overall commitment to
investments which are not readily marketable is not disproportionate to
its net worth.
5.12 LIQUIDITY. Purchaser has adequate means of
providing for its current needs and contingencies and has no need for
liquidity in its investment in the Purchased Shares.
5.13 OBJECTIVE. The objectives of the Company are
compatible with Purchaser's investment goals.
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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 it should consult its own legal counsel, accountant or
business advisor as to the legal, tax and other matters concerning its
purchase of the Purchased Shares and its 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 it 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 its 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, ACKNOWLEDGMENTS 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:
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
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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 non-assessable.
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, together with the
Registration Rights Agreement, 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 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
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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
/s/ Xxxxxx Xxxxxxxxx By /s/ J. Xxxxxxx Xxxxxxxxx
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Witness J. Xxxxxxx Xxxxxxxxx, Chairman, Chief
Executive Officer and President
XXXX FAMILY TRUST
/s/ R. Xxxxxxx XxXxxxx, Trustee
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/s/ Xxxx X. Xxxxx, Trustee
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