<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
N-VIRO INTERNATIONAL CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
N-VIRO INTERNATIONAL CORPORATION
3450 W. CENTRAL AVENUE, SUITE 328
TOLEDO, OHIO 43606
April 23, 1997
To all N-Viro International Corporation Stockholders:
The Board of Directors joins us in inviting you to attend the Annual
Meeting of Stockholders. The meeting will be held in the Garden Room of the
Toledo Club, 235 14th Street, Toledo, Ohio on May 9, 1997. The meeting will
begin at 3:00 p.m. (local time). Registration will begin at 2:30 p.m.
Refreshments will be served before the meeting.
In addition to the matters described in the attached Proxy Statement,
we will report on the business and progress of N-Viro during 1996 and for the
first quarter of 1997. N-Viro's performance for the year ended December 31,
1996 is discussed in the enclosed 1996 Annual Report to Stockholders. We
believe you will agree that it is interesting and informative.
We hope you will be able to attend the meeting and look forward to
seeing you there.
Sincerely,
J. PATRICK NICHOLSON
Chairman of the Board of Directors
and Chief Executive Officer
JAMES K. MCHUGH
Chief Financial Officer and
Secretary/Treasurer
<PAGE> 3
N-VIRO INTERNATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
AND
PROXY STATEMENT
MEETING DATE
MAY 9, 1997
--------------
YOUR VOTE IS IMPORTANT!
YOU ARE URGED TO SIGN, DATE, AND RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE.
<PAGE> 4
N-VIRO INTERNATIONAL CORPORATION
3450 W. Central Avenue, Suite 328
Toledo, Ohio 43606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
N-Viro International Corporation will be held in the Garden Room of the Toledo
Club, 235 14th Street, Toledo, Ohio on May 9, 1997. The Annual Meeting will
begin at 3:00 p.m. (local time), for the purpose of considering and acting
upon:
1. The election of three Directors for a term of three years;
and
2. The ratification of the appointment of McGladrey & Pullen,
LLP as independent auditors for the fiscal year 1997.
Stockholders of record at the close of business on March 28, 1997,
will be entitled to notice of, and to vote at, such Annual Meeting or any
adjournment thereof. Information relating to matters to be considered and voted
on at the Annual Meeting is set forth in the Proxy Statement accompanying this
notice.
BY ORDER OF THE BOARD OF DIRECTORS
James K. McHugh
Chief Financial Officer, Secretary and
Treasurer
Toledo, Ohio
April 23, 1997
- -------------------------------------------------------------------------------
PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN
THE ENVELOPE PROVIDED WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. THE
PROXY MAY BE REVOKED BY YOU AT ANY TIME, AND GIVING YOUR PROXY WILL NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE ANNUAL MEETING.
- -------------------------------------------------------------------------------
<PAGE> 5
N-VIRO INTERNATIONAL CORPORATION
3450 W. CENTRAL AVENUE, SUITE 328
TOLEDO, OHIO 43606
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
May 9, 1997
GENERAL
THIS PROXY STATEMENT IS FURNISHED TO THE STOCKHOLDERS OF N-VIRO
INTERNATIONAL CORPORATION (THE "COMPANY") BY ITS MANAGEMENT AND THE BOARD OF
DIRECTORS IN CONNECTION WITH THE SOLICITATION OF PROXIES IN THE ENCLOSED FORM
TO BE USED IN VOTING AT THE ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL
MEETING"), WHICH IS SCHEDULED TO BE HELD ON FRIDAY, MAY 9, 1997 AT 3:00 P.M.
(LOCAL TIME) AS SET FORTH IN THE FOREGOING NOTICE. At the Annual Meeting, the
stockholders will be asked to elect three Directors, ratify the appointment of
McGladrey & Pullen, LLP as independent auditors and transact such other
business as may properly come before the Annual Meeting or any adjournment
thereof.
A share cannot be voted at the Annual Meeting unless the holder
thereof is present or represented by proxy. When proxies in the accompanying
form are returned properly executed and dated, the shares represented thereby
will be voted at the Annual Meeting. If a choice is specified in the proxy, the
shares represented thereby will be voted in accordance with such specification.
If no specification is made, the proxy will be voted FOR the action proposed.
Any stockholder giving a proxy has the right to revoke it any time before it is
voted by filing with the Secretary/Treasurer of the Company a written
revocation, or by filing a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. The revocation of a proxy
will not be effective until notice thereof has been received by the
Secretary/Treasurer of the Company.
The cost of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, Directors and officers of the Company may
solicit proxies by telephone, telegraph or personal interview. The Company will
reimburse Directors and officers for their reasonable out-of-pocket expenses in
connection with such solicitation. The Company will request brokers and
nominees who hold shares in their names to furnish this proxy material to the
persons for whom they hold shares and will reimburse such brokers and nominees
for their reasonable out-of-pocket expenses in connection therewith. The
Company has hired Corporate Investors Communications to solicit proxies for a
fee not to exceed $3,000, plus expenses and other customary charges.
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the total number of shares of common stock outstanding
on the record date shall constitute a quorum for the transaction of business by
such holders at the Annual Meeting. The three nominees for election as
Directors who receive the highest number of votes therefor at the Annual
Meeting shall be elected as Directors. The ratification of the appointment of
McGladrey & Pullen, LLP as independent auditors shall require the affirmative
vote of a majority of the shares of common stock present or represented by
proxy.
The executive offices of the Company are located at 3450 West Central
Avenue, Suite 328, Toledo, Ohio 43606. The telephone number is (419) 535-6374.
The approximate date on which this material was first sent to stockholders was
April 23, 1997. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1996, INCLUDING THE FINANCIAL STATEMENTS, MAY BE OBTAINED
WITHOUT CHARGE BY WRITING TO THE CORPORATE SECRETARY, N-VIRO INTERNATIONAL
CORPORATION AT THE ABOVE ADDRESS.
-1-
<PAGE> 6
VOTING SECURITIES OUTSTANDING
AND PRINCIPAL HOLDERS THEREOF
The Company had outstanding 2,036,983 shares of common stock, $.01 par
value per share (the "shares of common stock"), on March 28, 1997. These shares
of common stock constitute the only class of outstanding voting securities of
the Company. Stockholders of record at the close of business on March 28, 1997
are entitled to notice of, and to vote at, the Annual Meeting and any
adjournments thereof. Each share of common stock is entitled to one vote on all
matters to come before the Annual Meeting. Stockholders are not permitted to
cumulate votes for the purpose of electing directors or otherwise.
At March 28, 1997, the following were the only persons known to the
Company to own beneficially more than 5% of the outstanding shares of common
stock:
<TABLE>
<CAPTION>
- --------------------------------------------- --------------------------------- ------------------------------------
Percentage of Outstanding Shares
Name and Address of Beneficial Owner Shares of Common Stock of Common Stock as of March 28,
Beneficially Owned 1997
- --------------------------------------------- --------------------------------- ------------------------------------
<S> <C> <C>
N-Viro Energy Systems, Ltd.(1) 1,096,228(2) 53.82%
3450 West Central Avenue, Suite 328
Toledo, Ohio 43606
- --------------------------------------------- --------------------------------- ------------------------------------
Heartland Advisors, Inc. 105,000(3) 5.15%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
- --------------------------------------------- --------------------------------- ------------------------------------
</TABLE>
PROPOSAL 1 - ELECTION OF THREE DIRECTORS
The By-Laws of the Company provide that the Board of Directors shall
be divided into three classes of equal or approximately equal number and that
the number of Directors shall from time to time be fixed and determined by a
vote of a majority of the Company's entire Board of Directors serving at the
time of such vote. The Directors are elected for a three-year term or until the
election and qualification of their respective successors. It is intended by
the Board that proxies received will be voted to elect the three Directors
named below to serve for a three-year term until their respective successors
are elected and have qualified or until their earlier resignation or removal.
If any nominee declines or is unable to accept such nomination to
serve as a Director, events which the Board does not now expect, the proxies
reserve the right to substitute another person as a Board nominee, or to reduce
the number of Board nominees, as they shall deem advisable. The Proxy solicited
hereby will not be voted to elect more than three Directors.
[FN]
_________________________
(1) N-Viro Energy Systems, Ltd. (the "Partnership") is a limited
partnership and was one of the predecessor entities that combined to
form the Company in October 1993. The general partners of the
Partnership are J. Patrick Nicholson, Chairman, Chief Executive
Officer and President of the Company, N-Viro Energy Systems, Inc., a
corporation of which Mr. Nicholson is the controlling stockholder,
and four trusts established for the benefit of Mr. Nicholson's
children. Under the limited partnership agreement for the
Partnership, Mr. Nicholson, as general partner, has the voting and
dispositive power over the shares of common stock held by the
Partnership.
(2) Includes 4,216 shares of common stock to be distributed to certain
persons by the Partnership pursuant to the N-Viro International Stock
Bonus Plan dated October 1, 1993. These shares of common stock became
vested in such participants on January 1, 1997.
(3) Information derived from a Schedule 13G filed in February 12, 1997 by
Heartland Advisors, Inc., an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940. Such firm has
both sole power to vote (or to direct the vote) and sole power to
dispose of (or to direct the disposition of) 105,000 shares of common
stock.
-2-
<PAGE> 7
CLASS I
DIRECTORS TO BE ELECTED
ROBERT B. CARROLL, AGE 63. Mr. Carroll is the President and Chief Executive
Officer of Pozzolanic Contracting & Supply Co., a supplier of roadway
construction materials in the Southeast U.S.. Mr. Carroll also acts as a
consultant to the Company with respect to various matters.
J. PATRICK NICHOLSON, AGE 60. Mr. Nicholson became Chairman, Chief Executive
Officer of the Company in May 1993. In 1979, he founded the "Partnership" one
of the predecessor entities that combined to form the Company in October 1993.
From the Partnership's inception to present, Mr. Nicholson has served as one of
its general partners and is the controlling stockholder of N-Viro Energy
Systems, Inc., the corporate general partner of the Partnership. Mr. Nicholson
has served as a Director of the Company since May 1993 and is a member of the
Board's Finance and Nominating Committees.
John N. Graham resigned as a Director of the Company on April 18,
1997. Due to the recent resignation of Mr. Graham, the Nominating Committee of
the Board has not had an opportunity to set forth a suitable nominee for his
seat on the Board. The Nominating Committee anticipates having such a nominee
by the time of the Annual Meeting. In the event that a nominee has not been
appointed by the time of the Annual Meeting, the floor will be open to
nominations from the stockholders.
CLASS II
DIRECTORS WHOSE TERMS CONTINUE(1)
TERRY J. LOGAN, PH.D., AGE 54. Dr. Logan is a professor of Agronomy at The Ohio
State University. Dr. Logan served as President of Pan-American N-Viro Inc.
(affiliate of the Company) from 1994 through 1995 and is the President of Logan
Environmental, Inc. (environmental consulting firm). Dr. Logan also acts as a
consultant to the Company with respect to various matters. Dr. Logan has been a
member of the Board since May 1993 and is a member of the Board's Audit
Committee.
The By-Laws of the Company provide that the Board of Directors of the
Company may fill vacancies left on the Board of Directors. The Company
currently has two vacancies on the Board for Class II Directors due to the
resignations of Christopher Mahoney and Bruce Douglas during the prior fiscal
year. The Board reasonably anticipates filling these vacancies before the
Annual Meeting or shortly thereafter.
CLASS III
DIRECTORS WHOSE TERMS CONTINUE(2)
WALLACE G. IRMSCHER, AGE 74. Mr. Irmscher has been self-employed as a
consultant in the construction and construction materials industry since 1995.
Prior to the time, Mr. Irmscher was an officer and Director of Newfoundland
Resources and Mining Limited (quarry operation), an entity that was the subject
of bankruptcy proceedings in 1995. Mr. Irmscher is a Director of United States
Lime and Minerals (publicly traded company), has served as a Director of the
Company since May 1995 and is a member of the Board's Audit Committee.
CHARLES B. KAISER, JR., AGE 73. From 1957 until his retirement in 1990, Mr.
Kaiser was general counsel to the St. Louis Metropolitan Sewer District. Mr.
Kaiser is also a former President of both the Water Environment Federation and
the Association of Metropolitan Sewerage Agencies. Mr. Kaiser has served as a
Director of the Company since May 1993 and is a member of the Board's Audit and
Compensation Committees.
____________________
(1) The terms of Dr. Logan and those Directors to be appointed by the
Board expire in 1998.
(2) The terms of Messrs. Irmscher, Kaiser and Kurtz expire in 1999.
-3-
<PAGE> 8
FREDERICK H. KURTZ, AGE 62. Mr. Kurtz is President of PARCOR Incorporated
(consulting firm). From May 1993 to June 1995, Mr. Kurtz was the Chief
Operating Officer of the Company and was the Executive Director of the
Middlesex County Utility Authority from 1986 to 1993. Mr. Kurtz has served as
Director of the Company since May 1993, is currently Vice Chairman of the Board
and is a member of the Board's Finance and Nominating Committees.
THE MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
RECOMMEND THAT YOU VOTE "FOR" THE ELECTION OF THE ABOVE NOMINEES. The nominees
who receive the highest number of votes at the Annual Meeting shall be elected
as Directors.
BOARD AND COMMITTEES
Pursuant to Delaware law, under which the Company is organized, the
Company's business, property and affairs are managed under the direction of the
Board of Directors. The Board met four times during the year ended December 31,
1996. The Board has appointed standing Audit, Compensation, Finance and
Nominating Committees. In 1996, except for Mr. Kurtz, each incumbent Director
attended at least 75% of the aggregate meetings of the Board and the Committees
on which they served.
The Audit Committee of the Board of Directors currently consists of
three members and met twice during the year ended December 31, 1996. The Audit
Committee recommends the appointment of auditors and oversees the accounting
and internal audit functions of the Company.
The Compensation Committee of the Board of Directors currently
consists of three members and met once during the year ended December 31, 1996.
The Compensation Committee determines officers' salaries and bonuses and
administers the grant of stock options pursuant to the Company's Stock Option
Plan.
The Finance Committee of the Board of Directors currently consists of
three members and met once during the year ended December 31, 1996. The Finance
Committee assists in monitoring cash flow requirements of the Company and
approves any internal or external financing or leasing arrangements.
The Nominating Committee of the Board of Directors currently consists
of three members and met twice during year ended December 31, 1996. The
Nominating Committee considers and recommends to the Board of Directors
nominees for election to the Board of Directors. The Nominating Committee may,
in its discretion, consider nominations by stockholders proposed for the 1998
Annual Meeting. All stockholder nominations should be directed to N-Viro
International Corporation, 3450 W. Central Avenue, Suite 328, Toledo, Ohio
43606, Attention: Secretary/Treasurer. Such stockholder recommendations must be
in writing, contain a description of the nominee's qualifications and his or
her consent to serve and must be received by the Company no later than December
21, 1997.
-4-
<PAGE> 9
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth as of March 28, 1997, unless otherwise
specified, certain information with respect to the beneficial ownership of the
Company's shares of common stock by each person who is a Director of the
Company, a nominee for the Board, each of the named Executive Officers, and by
the Directors and Executive Officers of the Company as a group.
<TABLE>
<CAPTION>
- ----------------------------------------- ------------------------------------- ------------------------
Beneficial Ownership of Common Percent of Class
Name of Beneficial Owner Stock as of March 28, 1997
- ----------------------------------------- ------------------------------------- ------------------------
<S> <C> <C>
Robert B. Carroll 41,600(1) 2.04%
- ----------------------------------------- ------------------------------------- ------------------------
Wallace G. Irmscher 3,225(2) .15%
- ----------------------------------------- ------------------------------------- ------------------------
Charles B. Kaiser, Jr. 3,350(2) .16%
- ----------------------------------------- ------------------------------------- ------------------------
Frederick H. Kurtz 53,200(2) 2.61%
- ----------------------------------------- ------------------------------------- ------------------------
Terry L. Logan 15,625(2)(3) .77%
- ----------------------------------------- ------------------------------------- ------------------------
James K. McHugh 231(3) *
- ----------------------------------------- ------------------------------------- ------------------------
J. Patrick Nicholson 1,163,576(2)(4) 57.12%
- ----------------------------------------- ------------------------------------- ------------------------
- ----------------------------------------- ------------------------------------- ------------------------
All Directors and Executive Officers as 1,280,807(5)(6) 62.88%
a group (7 persons)
- ----------------------------------------- ------------------------------------- ------------------------
<FN>
* Less than 0.10%
(1) Includes 41,600 Shares actually owned by Pozzolanic Contracting &
Supply Co., a company of which Mr. Carroll is the controlling
shareholder.
(2) Includes shares not actually owned by such individuals as of March
28, 1997, but of which beneficial ownership could be acquired
currently by such individuals upon the exercise of outstanding
options.
(3) Includes shares vested January 1, 1997 to be received from the
Partnership as part of the Company's Stock Bonus Plan dated October
1, 1993.
(4) Includes 1,096,228 shares owned by the Partnership, of which Mr.
Nicholson is a general partner, and 35,224 shares owned by N-Viro
Energy Systems, Inc., a corporation of which Mr. Nicholson is the
controlling shareholder.
(5) Includes an aggregate of 70,425 shares not actually owned by such
Directors and Executive Officers as of March 28, 1997, but of which
beneficial ownership could be acquired currently by such Directors
and Executive Officers upon the exercise of outstanding options.
(6) Includes an aggregate of 468 shares vested in January 1, 1997 to be
received from the Partnership by such Directors and Executive
Officers as part of the Company's Stock Bonus Plan dated October 1,
1993.
</TABLE>
-5-
<PAGE> 10
EXECUTIVE OFFICERS OF THE COMPANY
The following information is furnished as to the Executive Officers of
the Company:
J. PATRICK NICHOLSON, AGE 60. Mr. Nicholson has served as Chairman, Chief
Executive Officer and President of the Company since its inception in May 1993.
As described above, Mr. Nicholson served in a similar capacity to the
Partnership prior to that date.
JAMES K. MCHUGH, AGE 38. Mr. McHugh has served as Chief Financial Officer,
Secretary and Treasurer of the Company since January 1997. Prior to that date,
Mr. McHugh served the Company and the Partnership in various capacities
including Controller and Director of Accounting and Taxation.
REMUNERATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table presents the total compensation awarded to, earned
by, or paid to, the Chief Executive Officer of the Company during 1995 and
1996, and the total compensation awarded, earned, or paid during 1995 and 1996
to the Company's most highly compensated Executive Officers who were serving at
the end of 1996, and whose total annual salary and bonus, if any, exceeded
$100,000. Additionally, the table sets forth the total compensation paid to
Christopher T. Mahoney and Patrick T. Karney who both would have been among the
Company's most highly compensated Executive Officers but for the fact that
neither was serving as an Executive Officer at the end of 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term All Other
Year Annual Compensation Compensation Compensation ($)(1)
-------------------
Name and Principal Position Salary ($) Bonus ($) Options (#)(4)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
J. Patrick Nicholson 1996 $ 147,500 -0- -0- -0-
Chairman, Chief 1995 $ 149,167 -0- -0- $ 1,575
Executive Officer 1994 $ 173,125 -0- -0- $ 1,350
and President
Christopher T. Mahoney(2) 1996 $ 132,200 -0- 5,000 -0-
Former Chief Operating 1995 $ 116,992 -0- -0- $ 231
Officer and Executive 1994 $ 129,919 -0- -0- $ 198
Vice President
Patrick T. Karney(3) 1996 $ 127,442 $ 40,000 -0- -0-
Former President of 1995 $ 117,200 $ 10,000 -0- $ 609
the Company's Southern 1994 $ 127,200 -0- -0- $ 435
Division
- -------------------
<FN>
(1) Amounts shown consist of term life insurance premiums paid by the
Company for the benefit of the named Executive Officers.
(2) Mr. Mahoney resigned as an Executive Officer and employee of the
Company effective November 30, 1996, but will be paid the balance of
his salary under his Employment Agreement through June 1997.
(3) Effective March 1, 1996, Mr. Karney was no longer employed by the
Company, but was paid the balance of his salary under his Employment
Agreement through December 31, 1996.
(4) The numbers shown represent the number of shares of common stock for
which options were granted to the named Executive Officers in 1995.
</TABLE>
-6-
<PAGE> 11
EMPLOYMENT AGREEMENTS
On July 1, 1993, Mr. Nicholson and Mr. Mahoney entered into three-year
employment agreements with the Company providing for automatic one-year
renewals and minimum annual salaries of $200,000 and $125,000, respectively.
Each of such agreements also provides that such employee shall be entitled to
(i) bonuses to be payable to such employee at the discretion of the Board of
Directors, and (ii) such medical and other benefits, including insurance and
pension plan, as are provided to other Executive Officers of the Company.
Effective March 1, 1997, Mr. Nicholson has voluntarily agreed to reduce his
minimum annual salary to $125,000. Mr. Mahoney is being paid at his contract
rate of $125,000, as part of his severance agreement with the Company, through
June 30, 1997. Mr. Mahoney will also receive certain benefits under his
employment agreement for that period.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
--------------------------- -------------- ------------- ------------- -------------- ---------------------------
% of Total
Options Potential Realizable
Number of Granted to Value at Assumed Annual
Securities Employees Rates of Stock Price
Underlying in Fiscal Exercise or Appreciation for Option
Options Year Base Price Expiration Term(1)
Name Granted(2) ($/share) Date 5% ($) 10% ($)
--------------------------- -------------- ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Patrick Nicholson 0 0% $ .00 n/a $0 $0
--------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Christopher T. Mahoney(3) 5,000 22.7% $4.75 11/10/2006 $14,950 $37,850
--------------------------- -------------- ------------- ------------- -------------- ------------- -------------
Patrick T. Karney 0 0% $ .00 n/a $0 $0
--------------------------- -------------- ------------- ------------- -------------- ------------- -------------
<FN>
(1) The potential realizable value through the expiration date of
each option has been determined on the basis of the closing
price on May 10, 1996, compounded annually over the term of the
option, net of the exercise price. These value have been
determined based upon assumed rates of appreciation and are not
intended to forecast the possible future appreciation, if any,
of the price or value of the Company's common stock.
(2) All options have been granted pursuant to the N-Viro
International Stock Option Plan. Options granted are exercisable
on the date of grant and on each succeeding anniversary thereof
as to 20% of the shares of common stock issuable with respect to
such options.
(3) Mr. Mahoney did not exercise any options vested as of the three
month expiration date following his resignation as an employee
and officer on November 30, 1996.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
- -------------------------- ------------- ------------- ------------------------------ ------------------------------
Shares
Acquired On Value Value of Unexercised
Exercise(1) Realized Number of Unexercised In-The-Money Options at
Name ($)(1) Options at Fiscal Year End(2) Fiscal Year End ($)(3)
- -------------------------- ------------- ------------- ------------------------------ ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- ------------- ------------- ------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
J. Patrick Nicholson -0- $0 15,000 10,000 $0 $0
- -------------------------- ------------- ------------- ------------- ---------------- ------------- ----------------
Christopher T. Mahoney -0- $0 7,500 10,000 $0 $0
- -------------------------- ------------- ------------- ------------- ---------------- ------------- ----------------
Patrick T. Karney -0- $0 0 0 $0 $0
- -------------------------- ------------- ------------- ------------- ---------------- ------------- ----------------
<FN>
(1) No options were exercised by the named Executive Officers in
1996.
(2) All options have been adjusted to reflect a one-for-four reverse
stock split effective October 31, 1995.
-7-
<PAGE> 12
(3) Options are "in-the-money" only if the closing market price of
the common stock on December 31, 1996 exceeded the exercise
price of the options. There were no "in-the-money" options held
by Executive Officers of the Company on December 31, 1996..
</TABLE>
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for serving as Directors. Effective April 1, 1994, non-employee
Directors no longer receive cash compensation, but receive stock options
pursuant to the Company's Stock Option Plan. Each Director currently receives a
grant of 400 shares of Common Stock of the Company per each meeting attended,
as approved by the Compensation Committee on May 10, 1996. Directors of the
Company are reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Directors or any committees thereof.
COMPENSATION COMMITTEE INTERLOCKS
During 1996, the members of the Compensation Committee consisted of
Mr. Graham, Mr. Irmscher and Mr. Kaiser, each of whom is a non-employee
Director of the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's Executive Officers is determined by
the Compensation Committee of the Board of Directors.
The Committee's compensation philosophy is to provide competitive
forms and levels of compensation compared to industrial companies of similar
size and business area. This philosophy is intended to assist the Company in
attracting, retaining and motivating executives with superior leadership and
management abilities. Consistent with this philosophy, the Committee determines
a total compensation structure for each officer, consisting primarily of
salary, bonus and stock options. The proportions of the various elements of
compensation vary among the officers depending upon their levels of
responsibility.
The Committee establishes salaries at a level intended to be
competitive with the average salaries of Executive Officers in comparable
companies with adjustments made to reflect the financial health of the Company.
Bonuses are intended to provide executives with an opportunity to receive
additional cash compensation, but only if they earn it through Company and
individual performance.
Long-term incentives are provided through stock options granted under
the Company's Stock Option Plan. The stock options represent an additional
vehicle for aligning management's and stockholders' interest, specifically
motivating executives to remain focused on the market value of the Common Stock
in addition to earnings per share and return on equity goals.
The Committee, subject to any employment agreement in effect with its
Executive Officers reviews and recommends to the Board of Directors for
approval the salaries, bonuses and long-term incentives of the Company's
officers, including its most highly compensated Executive Officers. In
addition, the Committee grants stock options under the Company's Stock Option
Plan to Executive Officers and other selected employees, Directors and to
consultants, and otherwise administers the Company's Stock Option Plan.
The Committee has not yet formulated any policy regarding qualifying
compensation paid to the Company's Executive Officers for deductibility under
the limits of Section 162(m) of the Internal Revenue Code of 1986, as amended.
With respect to Chief Executive Officer Compensation, Mr. Nicholson's
base salary for 1996 was $147,500. Mr. Nicholson's base salary is determined by
his Employment Agreement which entitles him to a minimum annual base salary of
$250,000. See "Employment Agreements." However, Mr. Nicholson has reduced his
base salary in each of the three preceding fiscal years and will be paid an
annual minimum base salary of $125,000 for 1997. Mr. Nicholson will continue to
accept a reduced base salary until such time as the Company's profitability
permits payment of the $250,000 annual minimum base salary provided for in his
Employment Agreement.
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<PAGE> 13
The Committee is also responsible for recommending to the Board of
Directors bonus amounts payable to Mr. Nicholson, the Chief Executive Officer.
Any bonuses payable will be determined by the Committee, based on the same
elements and factors relating to the other Executive Officers of the Company.
No bonuses were paid to Mr. Nicholson or any other Executive Officer in 1996.
As the founder and the largest beneficial owner (57.12% of total shares of
common stock outstanding) of the Company, Mr. Nicholson has a significant
portion of his wealth invested in the Company's stock. Mr. Nicholson's level of
stock ownership continues to provide a strong link between Company performance
and the resulting rewards.
Compensation Committee of the Board of Directors
N-Viro International Corporation
Wallace B. Irmscher
Charles B. Kaiser, Jr.
John N. Graham(1)
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change
and the cumulative total shareholder return on the Company's shares against the
cumulative total return of the NASDAQ Stock Market (U.S. Companies) Index and
an index comprised of Peer Group companies selected by the Company. The Peer
Group consists of six companies considered to be either competitors or similar
to the Company. Upon written request to the Secretary/Treasurer, N-Viro
International Corporation, 3450 West Central Avenue, Suite 328, Toledo, Ohio
43606, the Company shall provide stockholders with the names of the component
issuers. The data is for the period beginning October 12, 1993, the date of the
Company's initial public offering, and ending December 31, 1996. The
calculation assumes that $100 was invested at the close of business on October
12, 1993 and all dividends are assumed to be reinvested.
[GRAPH OMITTED]
<TABLE>
<CAPTION>
===============================================================================================
10/12/93 12/31/93 12/31/94 12/31/95 12/31/96
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NASDAQ Index 100.00 100.7 98.4 139.2 171.2
-----------------------------------------------------------------------------------------------
Company 100.00 65.8 18.4 5.3 5.9
-----------------------------------------------------------------------------------------------
Peer Group 100.00 94.2 57.7 84.4 50.9
===============================================================================================
Except to the extent the Company specifically incorporates this
information by reference, the foregoing Report of the Compensation Committee
and Stock Price Performance Graph shall not be deemed incorporated by reference
by any
<FN>
______________________
(1) Mr. Graham resigned from The Board on April 18, 1997.
</TABLE>
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<PAGE> 14
general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933 or under the Securities Exchange
Act of 1934. This information shall not otherwise be deemed filed under such
Acts.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's Directors and Executive Officers, and persons who own beneficially
more than ten percent (10%) of the shares of common stock of the Company, to
file reports of ownership and changes of ownership with the Securities and
Exchange Commission. Copies of all filed reports are required to be furnished
to the Company pursuant to Section 16(a). Based solely on the reports received
by the Company and on written representations from reporting persons, the
Company believes that the Directors and Executive Officers complied with all
applicable filing requirements during the fiscal year ended December 31, 1996.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Robert B. Carroll, a consultant to and nominee for Director of the
Company, is currently under a consulting contract with the Company that will
pay him $120,000 per year through 1999. In addition, Pozzolanic Contracting &
Supply Co., a company of which Mr. Carroll is the controlling shareholder,
sells materials to the Company in the ordinary course of business, the
aggregate amount of which exceeded $60,000 in 1996.
Frederick H. Kurtz, a consultant to and Director of the Company,
received consulting fees in the amounts of $9,000 in 1996 and $22,500 in 1995
from the Company.
Dr. Terry L. Logan, Ph.D., a consultant to and Director of the
Company, received consulting fees in the amounts of $35,127 in 1996 and $21,032
in 1995.
Michael Nicholson has been employed as Vice-President of Sales and
Marketing of the Company since December, 1996. Prior to that date, Mr.
Nicholson served the Company and the Partnership in various management
positions in sales. For the year ended 1995 and 1996, Mr. Nicholson earned
$62,700 and $67,200, respectively, from the Company. Mr. Nicholson is the son
of J. Patrick Nicholson, Chairman, Chief Executive Officer and President of the
Company.
The Partnership loaned the Company a total of approximately $197,000
during 1996, to help fund operations and debt obligations. The Notes are
unsecured, bear interest at 8.25%, and are due at varying dates through January
1, 1999.
J. Patrick Nicholson, the Chairman, Chief Executive Officer and
President of the Company, loaned the Company $10,000 in 1996, to help fund
operations and debt obligations. The Note was paid off in early 1997. The Note
was unsecured, had an interest rate of 8.25%, and matured on January 1, 1998.
PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The firm of McGladrey & Pullen, LLP served as independent auditors of
the Company for the year ended December 31, 1996 and has been selected by the
Company to serve as its independent auditors for the year ending December 31,
1997. McGladrey & Pullen, LLP became the Company's independent auditors on
January 10, 1996, succeeding Ernst & Young LLP which served as the Company's
independent auditors of the Company since the Company's inception in 1993.
Although the submission of this matter for approval by the stockholders is not
legally required, the Board believes that such submission follows sound
business practice and is in the best interests of the stockholders. If the
appointment is not ratified by the holders of a majority of the shares present
in person or by proxy at the Annual Meeting, the Directors will consider the
selection of another accounting firm. If such a selection were made, it may not
become effective until 1998 because of the difficulty and expense of making
such a substitution. The Company anticipates that a representative of McGladrey
& Pullen, LLP will attend the Annual Meeting.
Audit services of McGladrey & Pullen, LLP for the year ended December
31, 1996 included the audit of the financial statements of the Company included
in the Annual Report to Shareholders for 1996, services related to filings with
the Securities and Exchange Commission and consultation and assistance on
accounting related matters.
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<PAGE> 15
The services furnished by McGladrey & Pullen, LLP have been at
customary rates and terms. There are no existing direct or indirect
understandings or agreements that place a limit on future years' audit fees.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND THAT YOU
VOTE "FOR" THE RATIFICATION OF MCGLADREY & PULLEN, LLP. The affirmative vote of
the holders of a majority of shares of common stock present in person or by
proxy at the Annual Meeting will be required for such ratification.
OTHER MATTERS
The Company is not aware of any matters to be presented for action at
the Annual Meeting other than the matters set forth above. If any other matters
do properly come before the meeting or any adjournment thereof, it is intended
that the persons named in the proxy will vote in accordance with their judgment
on such matters.
STOCKHOLDERS' PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders' proposals intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Company no later than December
21, 1997 for inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
BY THE ORDER OF THE BOARD OF
DIRECTORS
James K. McHugh
Chief Financial Officer, Secretary and
Treasurer
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<PAGE> 16
N-VIRO INTERNATIONAL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Stockholders
To Be Held May 9, 1997
Revoking all prior proxies, the undersigned, a stockholder of N-VIRO
INTERNATIONAL CORPORATION (the "Company"), hereby appoints J. Patrick Nicholson
and James K. McHugh, and each of them, attorneys and agents of the undersigned,
with full power of substitution to vote all shares of the Common Stock, par
value $.01 per share (the "Common Stock"), of the undersigned in the Company at
the Annual Meeting of Stockholders of the Company to be held in the Garden Room
of the Toledo Club, 235 14th Street, Toledo, Ohio on May 9, 1997 at 3:00 p.m.,
local time, and at any adjournment thereof, as fully and effectively as the
undersigned could do if personally present and voting, hereby approving,
ratifying and confirming all that said attorneys and agents or their
substitutes may lawfully do in place of the undersigned as indicated below.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Election of Class I FOR all nominees listed below WITHHOLD AUTHORITY
Directors (Except as marked to the contrary below) [ ] to vote for all nominees listed below [ ]
</TABLE>
Nominees: Bobby B. Carroll and J. Patrick Nicholson
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
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2. Ratify the appointment of McGladrey & Pullen, LLP as independent auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON ANY OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
(CONTINUED AND TO BE SIGNED AND DATED ON THE OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTIONS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE LISTED
NOMINEES AS CLASS I DIRECTORS AND FOR PROPOSAL 2.
Please sign exactly as name appears below.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in the full corporation name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
Dated________________________, 1997
___________________________________
Signature
___________________________________
Signature (if held jointly)
[ ] PLEASE CHECK HERE IF YOU PLAN TO
ATTEND THE ANNUAL MEETING
