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EXHIBIT 3
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REGISTRATION RIGHTS AGREEMENT
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This Registration Rights Agreement (this "Agreement") is entered into
as of September 23, 1997, by and among N-Viro International Corporation, its
successors and assigns (the "Company"), and Heartland Limited Partnership I (the
"Holder").
WHEREAS, this Agreement is made in connection with the sale by the
Company to Holder of 120,000 shares of the Common Stock of the Company (the
"Shares") pursuant to that certain Stock Purchase Agreement dated September 23,
1997 (the "Purchase Agreement"), the terms of which require the Company to
provide Holder certain registration rights with respect to the Shares.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
REGISTRATION RIGHTS
Section 1.01 CERTAIN DEFINITIONS. In addition to the other terms
defined elsewhere in this Agreement and the Stock Purchase Agreement to which it
is attached, as used in this Agreement, the following terms shall have the
following respective meanings:
(a) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the same time.
(c) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the same time.
(d) "Registrable Securities" means any of the following shares which
have not been sold to the public or which have not lost their registration
rights as provided herein: (i) the Shares and (ii) any shares of Common Stock
of the Company, and any securities of the Company or any other corporation,
issued as a dividend or other distribution with respect to or in replacement of
or exchange for the Shares. Notwithstanding the foregoing, the Shares, as well
as all other securities of the Seller held by Holder or any party purchasing
the Shares, either directly or indirectly, from the Holder, shall cease to be
Registrable Securities when such Shares or
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securities, as the case may be, may be distributed to the public pursuant to
Rule 144(k) (or any similar provision then in force) promulgated under the
Securities Act.
(e) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
(f) "Registration Expenses" shall mean all expenses incurred by the
Company in complying with Article I hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for the Company and Holder's counsel, blue sky fees
and expenses and the expense of any audits incident to or required by any such
registration, but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company.
(g) "Seller Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of the Registrable Securities.
Section 1.02 REGISTRATION OF REGISTERABLE SECURITIES.
(a) DEMAND REGISTRATION RIGHTS.
(1) REGISTRATION. The Company will file a registration
statement with the Commission with respect to all or a portion of the
Registrable Securities within 30 days of a request made by Holder at any time
after March 31, 1998. Purchaser may exercise this demand registration right up
to the earlier of (i) two years from the date of this Agreement, (ii) the
period of time after which restrictions on sales of the Company's securities by
persons other than affiliates pursuant to Commission Rule 144(k) (or any
successor provision) terminate, or (iii) until the Holder no longer owns any of
the Registrable Securities;
(2) REGISTRATION STATEMENT FORM. The Company may, if
permitted by law, effect the registration pursuant to Section 1.02 by filing a
registration statement on Form S-3 or any successor or similar short form
registration statement (or Form S-1 if Form S-3 is not available). The Company
may effect the registration by filing a shelf registration statement with the
Commission pursuant to Rule 415 under the Securities Act covering the
Registrable Securities. The Company may, in its discretion, register under such
registration, in addition to the Registrable Securities, shares of Common Stock
of the Company held by others.
(3) DELAY OR SUSPENSION OF EFFECTIVENESS. Seller shall have
the right (i) to defer its request for acceleration of effectiveness or, after
effectiveness, to suspend effectiveness
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of the registration statement if, in the good faith judgment of the Board of
Directors of the Seller and an opinion of counsel acceptable to Buyer, such
delay in requesting acceleration of effectiveness or suspension of effectiveness
is necessary in light of the existence of material non-public information
(financial or otherwise) concerning the Seller and/or any other entity in which
the Seller has, or is proposing to acquire an equity interest provided further
that the period of such delay or suspension shall not exceed the lesser of 60
days or the time at which the information either becomes public or non-material;
and provided further that the aggregate of any such delay and/or suspension
periods shall not exceed 120 days.
(b) PIGGY-BACK REGISTRATION. If the Company proposes to file a
registration statement under the Securities Act with respect to an offering by
the Company for its own account or for the account of any other person or entity
of any class of equity security, including any security convertible into or
exchangeable for any equity securities (other than (a) a registration statement
on Form S-4 or S-8 (or any substitute form for comparable purposes that may be
adopted by the Commission), (b) a registration statement filed in connection
with an exchange offer or an offering of securities solely to the Company's
existing security holders, or (c) in connection with a registration statement
that is on a form pursuant to which an offering of the Registrable Securities
cannot be registered), then the Company shall in each case give written notice
of such proposed filing to the Holder at least 20 days before the anticipated
filing date. Such notice shall offer the Holder the opportunity to register such
number of Registrable Securities as Holder may request. Upon written request of
Holder received by the Company within 10 business days after the date of the
Company's delivery of its notice to the Holder of its intention to file such a
registration statement, subject to the conditions and in accordance with the
procedures set forth herein, the Company shall use its best efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the Registrable Securities requested by Holder to be included in the
registration statement for such offering on the same terms and conditions as any
similar securities of the Company included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of such offering
indicates in writing to the Holder its reasonable belief that because of the
size of the offering intended to be made, the inclusion of the Registrable
Securities requested to be included might reasonably be expected to jeopardize
the success of the offering of the securities of the Company to be offered and
sold by the Company for its own account, then the amount of securities to be
offered for the account of the Holder shall be reduced on a pro rata basis with
all other sellers other than the Company, to the extent necessary to reduce the
total amount of securities to be included in such offering to an amount
recommended by such managing underwriter or underwriters.
Section 1.03 EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 1.02 shall be
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borne by the Company. Unless otherwise stated, all Seller Expenses related to
securities registered by the Holder shall be borne by Holder.
Section 1.04 REGISTRATION PROCEDURES. The Company will:
(a) use its best efforts to cause the registration statement filed
pursuant to Section 1.02 to become and remain effective;
(b) furnish to Holder such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as Holder may reasonably request to facilitate the public offering of
the registrable Securities;
(c) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such state securities
or Blue Sky laws of such jurisdictions as Holder may reasonably request,
provided that the Company shall not be obligated to take any action to effect
any such registration or qualification pursuant to Section 1.04(d) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration or
qualification unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act;
(d) notify counsel for Holder, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective
under the Securities Act or a supplement to any prospectus forming a part of
such registration statement has been filed;
(e) notify counsel for Holder promptly of any request by the
Commission for the amending or supplementing of such registration statement or
prospectus or for additional information;
(f) prepare and file with the Commission, promptly upon the request of
Holder, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for Holder (and concurred in by
counsel for the Company), is required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of the Registerable
Securities;
(g) prepare and promptly file with the Commission and promptly notify
counsel for Holder of the filing of such amendment or supplement to any such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act,
any event shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state
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any material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
(h) advise counsel for Holder, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement under
the Securities Act or the initiation or threatening of any proceeding for such
purpose, and promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be issued, with it
being provided further that the effective requirements for the registration
statement referred to in Section 1.04(a) will be extended for any such time as
there shall exist any stop order in respect of the registration statement; and
(i) not file any amendment or supplement to such registration
statement or prospectus if, in the opinion of counsel for Holder, such
amendment or supplement does not comply in all material respects with the
requirements of the Securities Act or the rules and regulations thereunder,
after having been furnished with a copy substantially in the form thereof at
least two business days before the filing thereof; provided, however, that if
in the opinion of counsel for the Company the filing of such amendment or
supplement is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not violate
applicable law, the Company may make such filings.
Section 1.05 INDEMNIFICATION.
(a) The Company will indemnify, hold harmless and defend Holder, its
officers, partners, legal counsel and accountants, each underwriter of the
Registrable Securities and each person who controls Holder or any underwriter
within the meaning of Section 15 of the Securities Act against any and all
expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any registration or qualification
of the Registrable Securities, or which arise out of or are based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act or any
state securities laws applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such indemnified party for
any legal and any other expenses
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reasonably incurred by them in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable, in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission, made in reliance upon and in conformity with information
furnished to the Seller by or on behalf of Holder or any such underwriter for
use therein.
(b) Holder will, if Registerable Securities held by Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, and each of its officers,
directors, legal counsel and accountants, and each person who controls the
Company within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such indemnified person for any
legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
information furnished to the Seller by or on behalf of Holder for use therein.
(c) Each person to be indemnified pursuant to this Section 1.05 (the
"Indemnified Party") will, promptly after receipt of written notice of the
commencement of any action against such Indemnified Party in respect of which
indemnity may be sought from an indemnifying person under this Section 1.05
(the "Indemnifying Party") notify the Indemnifying Party in writing of the
commencement thereof, provided, however, that the failure of any person to give
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement except to the extent that such Indemnifying
Party is actually prejudiced by such failure to give notice. If any such action
shall be brought against any Indemnified Party and it shall notify an
Indemnifying Party of the commencement thereof, the Indemnifying Party will be
entitled to participate therein and, to the extent it may desire, jointly with
any other Indemnifying Party similarly notified, to assume the defense thereof
with counsel satisfactory to such Indemnified Party, and after notice from the
Indemnifying Party to such Indemnified Party of its election to assume the
defense thereof, the Indemnifying Party will not be liable to such Indemnified
Party under Section 1.05 for any other legal or other expenses subsequently
incurred by such Indemnified Party in connection with the defense thereof other
than reasonable costs of investigation unless (i) the Indemnified Party shall
have employed counsel in an action in which the Indemnified Party and
Indemnifying Party are both defendants and there is a conflict of
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interest between such parties that would prevent counsel from adequately
representing both parties, (ii) the Indemnifying Party shall not have employed
counsel satisfactory within the exercise of reasonable judgment of the
Indemnified Party to represent the Indemnified Party within a reasonable time
after the notice of the commencement of the action or (iii) the Indemnifying
Party has authorized the employment of counsel for the Indemnified Party at the
expense of the Indemnifying Party. The undertaking contained in this Section
1.05 shall be in addition to any liabilities which the Indemnifying Party may
have pursuant to law.
(d) If the indemnification provided for in this Section 1.05 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements, actions or omissions which resulted in
such loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
Section 1.06 LOCKUP AGREEMENT. In consideration for the Company
agreeing to its obligations under this Article I, Holder agrees in connection
with any firmly underwritten public offering of the Company's Common Stock,
upon the request of the Company or the underwriters managing such offering, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Registrable Securities without the prior written
consent of the Company or such underwriters, as the case may be, for such
period of time (not to exceed 30 days) from the effective date of such
registration as the Company or the underwriters may specify; provided, however,
that Holder shall have no obligation to enter into the agreement described
herein unless all executive officers and directors of the Company and all other
holders of more than 5% of the Company's outstanding Common Stock enter into
similar agreements.
Section 1.07 INFORMATION BY HOLDER. Holder shall furnish to the
Company such information regarding Holder and the distribution of proceeds by
Holder as the Company may request in writing and as shall be required in
connection with any registration, qualification or compliance referred to in
Section 1.02 of this Agreement.
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Section 1.08 RULE 144 REPORTING. With a view to making available to
Holder the benefits of certain rules and regulations of the Commission which at
any time permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange
Act; and
(c) so long as Holder owns any unregistered Registrable Securities,
furnish to Holder forthwith upon request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 and the
Securities Act and Exchange Act, a copy of the most recent annual or quarterly
report of the Company and such other reports and documents of the Seller as
Holder may reasonably request in availing Holder of any rule or regulation of
the Commission allowing the sale of any such securities without registration.
Section 1.09 TRANSFER OF REGISTRATION RIGHTS. The rights of Holder to
have the Company register the Registrable Securities granted to the Holder by
the Company under this Agreement may be assigned by the Holder to not more than
five transferees or assignees of any of the Holder's Registrable Securities,
provided that the Company is given written notice by the Holder at the time of
or within a reasonable time after said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned, provided that no such assignment
shall increase the number of registrations that the Company may be required to
effect under this Agreement. Any person who, in accordance with the provisions
of Section 1.09, becomes a transferee or assignee of any of the Registrable
Securities shall, upon agreeing in writing to be bound by the terms of this
Agreement, be included in the term "Holder" so long as such person holds such
Registrable Securities and shall be entitled to take benefits of this Agreement.
ARTICLE II
MISCELLANEOUS
Section 2.01 AMENDMENT. Any modification, amendment, or waiver of this
Agreement or any provision hereof shall be effective only if in writing and
executed by Holder and the Company.
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Section 2.02 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Delaware without regard to its conflicts of
laws principles.
Section 2.03 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, the Provisions hereof shall insure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
Section 2.04 NOTICES. All notices, requests, demands, consents, and
other communications hereunder shall be transmitted in writing and shall be
deemed to have been duly given when hand delivered or sent by certified mail,
postage prepaid, with return receipt requested, addressed to the parties as
follows: Seller at 3450 West Central Avenue, Suite 328, Toledo, Ohio 43606; and
to Purchaser at 790 North Milwaukee, Milwaukee, Wisconsin 53202, with a copy to
Conrad G. Goodkind, Quarles & Brady, 411 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202. Any party may change its address for the purposes of this
Section by giving written notice as provided herein.
Section 2.05 SEVERABILITY. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
Section 2.06 ENTIRE AGREEMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 2.07 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective representatives thereunto duly authorized as of the
date first above written.
N-VIRO INTERNATIONAL CORPORATION
By: /s J. Patrick Nicholson
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J. Patrick Nicholson
HEARTLAND LIMITED PARTNERSHIP I
By: /s/ William J. Nasgovitz
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William J. Nasgovitz, President
Heartland Advisors, Inc., General Partner
of Heartland Limited Partnership I