<PAGE> 1
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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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
N-VIRO INTERNATIONAL CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXX
(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)(1) 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: ...........................................................
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<PAGE> 2
N-VIRO INTERNATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
AND
PROXY STATEMENT
MEETING DATE
JUNE 3, 1998
--------------
YOUR VOTE IS IMPORTANT!
YOU ARE URGED TO SIGN, DATE, AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE> 3
N-VIRO INTERNATIONAL CORPORATION
3450 W. Central Avenue, Suite 328
Toledo, Ohio 43606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 3, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
N-Viro International Corporation will be held in the Corinthian Room of the
Toledo Club, 235 14th Street, Toledo, Ohio on June 3, 1998. 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 Class II Directors for a term of three
years.
2. The ratification of the appointment of McGladrey & Pullen, LLP
to serve as independent auditors for the Company for its year
ended 1998.
3. The amendment of the Certificate of Incorporation of the
Company to reduce the authorized capital stock of the Company
in order to significantly reduce the corporate franchise tax
obligations of the Company in the State of Delaware.
4. The amendment to the Certificate of Incorporation of the
Company to include a super majority requirement to ratify any
takeover proposals presented to the Company.
5. The increase in the number of shares of common stock available
in the Company's stock option plan to 600,000.
Stockholders of record at the close of business on April 1, 1998, 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
May 1, 1998
- --------------------------------------------------------------------------------
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> 4
N-VIRO INTERNATIONAL CORPORATION
3450 W. CENTRAL AVENUE, SUITE 328
TOLEDO, OHIO 43606
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
June 3, 1998
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 WEDNESDAY, JUNE 3, 1998 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 Class II Directors, ratify the
appointment of McGladrey & Pullen, LLP to serve as independent auditors of the
Company, amend the Certificate of Incorporation of the Company to reduce the
number of shares of authorized capital stock of the Company and to include a
super majority requirement to approve any takeover proposals presented to the
Company, increase the number of shares of common stock available in the
Company's stock option plan to 600,000 shares 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 Class II
Directors who receive the highest number of votes therefor at the Annual Meeting
shall be elected as Class II Directors. The ratification of the appointment of
McGladrey & Pullen, LLP as independent auditors shall require the affirmative
vote of a majority of the holders of shares of common stock present or
represented by proxy at the Annual Meeting. The amendment to the Certificate of
the Incorporation of the Company to reduce the amount of authorized capital
stock of the Company and to include a super majority requirement to approve any
takeover proposals presented to the Company shall require the affirmative vote
of the holders of the majority of the outstanding shares of common stock of the
Company. The increase in the number of shares of stock available in the
Company's stock option plan to 600,000 shall require the affirmative vote of a
majority of the holders of shares of common stock present or represented by
proxy at the Annual Meeting.
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
May 11, 1998. A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 1997, INCLUDING THE FINANCIAL STATEMENTS, MAY BE OBTAINED
WITHOUT CHARGE BY WRITING TO THE CORPORATE SECRETARY, N-VIRO INTERNATIONAL
CORPORATION AT THE ABOVE ADDRESS.
THE DATE OF THIS PROXY STATEMENT IS MAY 1, 1998.
<PAGE> 5
VOTING SECURITIES OUTSTANDING
AND PRINCIPAL HOLDERS THEREOF
The Company had outstanding 2,755,733 shares of common stock, $.01 par
value per share (the "shares of common stock"), on April 1, 1998. 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 April 1, 1998
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 April 1, 1998, 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>
- --------------------------------------------- --------------------------------- ------------------------------------
Shares of Common Stock Percentage of Outstanding Shares
Name and Address of Beneficial Owner Beneficially Owned of Common Stock as of April 1, 1998
- --------------------------------------------- --------------------------------- ------------------------------------
<S> <C> <C>
N-Viro Energy Systems, Ltd.(1) 1,018,357(2) 36.95%
3450 West Central Avenue, Suite 328
Toledo, Ohio 43606
- --------------------------------------------- --------------------------------- ------------------------------------
Heartland Advisors, Inc. 250,000(3) 9.07%
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 Class II 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 Class II 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 Class II Directors.
- ------------------
(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 on January 29, 1998 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) 250,000 shares of common stock.
-2-
<PAGE> 6
CLASS II
DIRECTORS TO BE ELECTED
TERRY J. LOGAN, PH.D., AGE 55. 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 and
Finance Committees.
JAMES D. O'NEIL, P.E., AGE 67. Mr. O'Neil has served as the Vice-President of
Engineering and Operations since May, 1993. Prior to that date, Mr. O'Neil was
Vice-President and General Manager of Leon Boulton & Son, Inc., for 14 years,
and subsequently self-employed as an engineering consultant. Mr. O'Neil has been
a member of the Board since August, 1997 and is a member of the Board's
Nominating Committee.
MICHAEL G. NICHOLSON, AGE 31. Mr. Nicholson has served as the 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. Mr. Nicholson is the son of J. Patrick Nicholson, Chairman, Chief
Executive Officer and President of the Company. Mr. Nicholson has been a member
of the Board since February, 1998.
CLASS III
DIRECTORS WHOSE TERMS CONTINUE(1)
WALLACE G. IRMSCHER, AGE 75. 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 and Finance Committees.
CHARLES B. KAISER, JR., AGE 74. 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
Committee.
FREDERICK H. KURTZ, AGE 63. 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 Compensation and Nominating Committees.
CLASS I
DIRECTORS WHOSE TERMS CONTINUE(2)
BOBBY B. CARROLL, AGE 64. 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. Mr. Carroll has
served as a Director of the Company since May 1997 and is a member of the
Board's Finance Committee.
J. PATRICK NICHOLSON, AGE 61. 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.
- --------------------
(1) The terms of Messrs. Irmscher, Kaiser and Kurtz expire in 1999.
(2) The terms of Messrs. Carroll, J. Nicholson and Copeland expire in 2000.
-3-
<PAGE> 7
B.K. WESLEY COPELAND, AGE 64. Mr. Copeland, a physical chemist, was the Founder
of the International Science and Technology Institute, Inc., as well as Founder
and CEO of the Foundation for Economic Development. Mr. Copeland has served as a
Director of the Company since May 1997 and is a member of the Board's
Compensation 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 FOR CLASS II
DIRECTORS. 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 five times during the year ended December 31,
1997. The Board has appointed standing Audit, Compensation, Finance and
Nominating Committees. In 1997, 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 five times during the year ended December 31, 1997. 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 twice during the year ended December 31, 1997. 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, 1997. 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, 1997. 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 1999 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 January 10, 1999.
-4-
<PAGE> 8
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth as of April 1, 1998, 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 Percent of Class
Name of Beneficial Owner Common Stock as of April 1,
1998
- ----------------------------------------- ------------------------------ ------------------------
<S> <C> <C>
Bobby B. Carroll 96,100(1)(2) 3.48%
- ----------------------------------------- ------------------------------ ------------------------
B.K. Wesley Copeland 6,000(2) .22%
- ----------------------------------------- ------------------------------ ------------------------
Wallace G. Irmscher 7,525(2) .27%
- ----------------------------------------- ------------------------------ ------------------------
Charles B. Kaiser, Jr. 7,650(2) .28%
- ----------------------------------------- ------------------------------ ------------------------
Frederick H. Kurtz 80,200(2) 2.91%
- ----------------------------------------- ------------------------------ ------------------------
Terry L. Logan 21,987(2)(3) .80%
- ----------------------------------------- ------------------------------ ------------------------
James K. McHugh 9,351(2)(3) .34%
- ----------------------------------------- ------------------------------ ------------------------
J. Patrick Nicholson 1,177,737(2)(4) 42.74%
- ----------------------------------------- ------------------------------ ------------------------
Michael G. Nicholson 15,942(2)(3) .58%
- ----------------------------------------- ------------------------------ ------------------------
James D. O'Neil 9,425(2) .34%
- ----------------------------------------- ------------------------------ ------------------------
- ----------------------------------------- ------------------------------ ------------------------
All Directors and Executive Officers as 1,431,917(5)(6) 51.96%
a group (10 persons)
- ----------------------------------------- ------------------------------ ------------------------
</TABLE>
- --------------------------------
(1) Includes 44,600 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
April 1, 1998, 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 1,018,357 shares owned by the Partnership, of which
Mr. Nicholson is a general partner, and 69,748 shares owned by
N-Viro Energy Systems, Inc., a corporation of which Mr.
Nicholson is the controlling shareholder.
(5) Includes an aggregate of 131,325 shares not actually owned by
such Directors and Executive Officers as of April 1, 1998, 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 780 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.
-5-
<PAGE> 9
EXECUTIVE OFFICERS OF THE COMPANY
The following information is furnished as to the Executive Officers of
the Company:
J. PATRICK NICHOLSON, AGE 61. 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 39. 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 1996 and 1997.
There were no other Executive Officers of the Company who were serving at the
end of 1997 and whose total annual salary and bonus, if any, exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term
Year ------------------- Compensation All Other
Name and Principal Position Salary ($) Bonus ($) Options (#)(2) Compensation ($)(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
J. Patrick Nicholson 1997 $ 125,600 -0- 5,000 -0-
Chairman, Chief 1996 $ 147,500 -0- -0- -0-
Executive Officer 1995 $ 149,167 -0- -0- $ 1,575
and President
</TABLE>
- --------------------------------
(1) Amounts shown consist of term life insurance premiums paid by
the Company for the benefit of Mr. Nicholson.
(2) The numbers shown represent the number of shares of common
stock for which options were granted to the named Executive
Officer in 1995 and 1997.
EMPLOYMENT AGREEMENTS
On July 1, 1993, Mr. Nicholson entered into a three-year employment
agreement with the Company providing for automatic one-year renewals and minimum
annual salary of $250,000. Such agreement also provides that Mr. Nicholson shall
be entitled to (i) bonuses to be payable 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, 1998, Mr. Nicholson has voluntarily agreed to reduce his
minimum annual salary to $131,250 for the year ended December 31, 1998.
-6-
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
--------------------------- -------------- ------------- ------------- -------------- ---------------------------
% of Total
Options Potential Realizable
Number of Granted to Value at Assumed Annual
Securities Employees Rates of Stock Price
Underlying in Fiscal Exercise or Appreciation for Option
Options Year Base Price Expiration Term(1)
Name Granted(2) ($/share) Date 5% ($) 10% ($)
--------------------------- -------------- ------------- ------------- -------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
J. Patrick Nicholson 5,000 5.2% $1.5625 11/9/2007 $4,938 $12,438
--------------------------- -------------- ------------- ------------- -------------- ------------- -------------
25,000 26.1% $ 4.00 11/3/2003 $0 $10,723
--------------------------- -------------- ------------- ------------- -------------- ------------- -------------
</TABLE>
- --------------------------------
(1) The potential realizable value through the expiration date of
each option has been determined on the basis of the closing
price on May 9, 1997, compounded annually over the term of the
option, net of the exercise price. These values have been
determined based upon assumed rates of appreciation and are
not intended to forecast the possible future appreciation, if
any, of the price or value of the Company's common stock.
(2) All options have been granted pursuant to the N-Viro
International Stock Option Plan. Options granted are
exercisable on the date of grant and on each succeeding
anniversary thereof as to 20% of the shares of common stock
issuable with respect to such options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
- -------------------------- ------------- ------------- ------------------------------ ------------------------------
Shares Value Number of Unexercised Value of Unexercised
Acquired On Realized Options at Fiscal Year End(2) In-The-Money Options at
Exercise(1) ($)(1) Fiscal Year End ($)(3)
Name
- -------------------------- ------------- ------------- ------------------------------ ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- ------------- ------------- ------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
J. Patrick Nicholson -0- $0 26,000 4,000 $0 $12,500
- -------------------------- ------------- ------------- ------------- ---------------- ------------- ----------------
</TABLE>
- --------------------------------
(1) No options were exercised by the named Executive Officers in
1997.
(2) All options have been adjusted to reflect a one-for-four
reverse stock split effective October 31, 1995.
(3) Options are "in-the-money" only if the closing market price of
the common stock on December 31, 1997 exceeded the exercise
price of the options. There were 8,000 "in-the-money" options
held by Executive Officers of the Company on December 31, 1997
at $2.50 per share closing price.
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 500 shares of Common Stock of the Company per each meeting attended, as
approved by the Compensation Committee on May 9, 1997. 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 1997, the members of the Compensation Committee consisted of Mr.
Copeland, Mr. Carroll and Mr. Kaiser, each of whom is a non-employee Director of
the Company.
-7-
<PAGE> 11
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 1997 was $125,000. 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 four preceding years, but will be paid an annual
minimum base salary of $131,250 for 1998. 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.
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 1997. As
the founder and the largest beneficial owner (42.74% 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
Bobby B. Carroll
B.K. Wesley Copeland
Frederick H. Kurtz
-8-
<PAGE> 12
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, 1997. The calculation assumes
that $100 was invested at the close of business on October 12, 1993 and all
dividends are assumed to be reinvested.
[GRAPHIC]
<TABLE>
<CAPTION>
================================================================================================================
10/12/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NASDAQ Index 100.00 100.7 98.4 139.2 171.2 210.2
----------------------------------------------------------------------------------------------------------------
Company 100.00 65.8 18.4 5.3 5.9 6.6
----------------------------------------------------------------------------------------------------------------
Peer Group 100.00 94.2 57.7 84.3 50.8 53.9
================================================================================================================
</TABLE>
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 general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). This information shall
not otherwise be deemed filed under such Acts.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Exchange Act 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, 1997.
-9-
<PAGE> 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Bobby B. Carroll, a consultant to and 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 $31,000 in 1997.
In June of 1997, the Company reached agreements with three trade
creditors to eliminate, in the aggregate, $259,500 of the Company's short-term
debt in exchange for the Company's issuance and delivery to such creditors, in
the aggregate, 86,500 shares of common sock. All three trade creditors are
current members of the Board of Directors of the Company, J. Patrick Nicholson,
Bobby Carroll and Frederick Kurtz. Additionally, Mr. Nicholson is the Chairman
of the Board, Chief Executive Officer and President of the Company. The number
of shares of common stock issued to, and the corresponding amount of short-term
debt forgiven by, Mr. Nicholson, Mr. Carroll and Mr. Kurtz is set forth in the
table below:
<TABLE>
<CAPTION>
============================================================================================================
Creditor Amount of Canceled Debt No. of Shares Issued in Exchange
- ------------------------------------- --------------------------------- ------------------------------------
<S> <C> <C>
J. Patrick Nicholson $ 48,000 16,000
- ------------------------------------- --------------------------------- ------------------------------------
Bobby Carroll $150,000 50,000
- ------------------------------------- --------------------------------- ------------------------------------
Frederick Kurtz $ 61,500 20,500
============================================================================================================
</TABLE>
All such shares of common stock were issued and delivered to the Company's
creditors pursuant to appropriate exemptions from registration under federal and
state securities laws. All of the exchanges were evidenced by written Share
Exchange Agreements between the Company and each of the creditors. Copies of
such Share Exchange Agreements were filed as Exhibits to the Company's Form 8-K
filed on July 18, 1997 which has been incorporated herein by reference.
In addition to the share exchanges described above, the Company, in
June of 1997, also reached agreement with the Partnership (the holder of 45% of
the issued and outstanding shares of the common stock of the Company) to cancel
$150,000 of the Company's short-term debt to the Partnership in exchange for the
Company's issuance and delivery to the Partnership of 50,000 shares of common
stock. At the time of this agreement, the Company's total indebtedness to the
Partnership was $176,500. Such indebtedness was evidenced by three promissory
notes in the aggregate amount of $191,500. In exchange for the cancellation of
the three original promissory notes, the Company agreed to issue and deliver to
the Partnership (i) 50,000 shares of common stock and (ii) a promissory note in
the amount of $26,500. The shares of common stock issued and delivered to the
Partnership were issued and delivered pursuant to applicable exemptions from
registration under the Securities Act and state securities laws. Further, this
exchange was evidenced by a written Share Exchange Agreement which was filed by
the Company as an Exhibit to the Company's Form 8-K filed on July 18, 1997.
Dr. Terry J. Logan, Ph.D., a consultant to and Director of the Company,
received consulting fees in the amounts of $41,333 in 1997 and $35,127 in 1996.
Dr. Logan is also the controlling shareholder of Logan Environmental, Inc., an
environmental consulting firm which performs consulting services for the Company
from time to time.
Charles Kaiser, a consultant to and Director of the Company, received
consulting fees in the amounts of $3,500 in 1997 and $-0- in 1996.
James D. O'Neil, a Director of the Company, has been employed as
Vice-President of Engineering and Operations of the Company since March, 1993.
Prior to that date, Mr. O'Neil was Vice-President and General Manager of Leon
Boulton + Son, Inc. for 14 years, and subsequently self-employed as an
engineering consultant. For the year ended 1997 and 1996, Mr. O'Neil earned
$76,100 and $65,000, respectively, from the Company.
-10-
<PAGE> 14
Michael Nicholson, a Director of the Company, 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 1997 and 1996, Mr. Nicholson
earned $73,400 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.
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, 1997 and has been selected by the
Company to serve as its independent auditors for the year ending December 31,
1998. 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 1999 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, 1997 included the audit of the financial statements of the Company included
in the Annual Report to Shareholders for 1997, services related to filings with
the Securities and Exchange Commission and consultation and assistance on
accounting related matters.
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.
PROPOSAL 3 - REDUCTION OF THE AUTHORIZED CAPITAL STOCK OF THE COMPANY
The Board has approved the submission to the Stockholders of the
Company of a proposal to amend the Certificate of Incorporation of the Company
to reduce the amount of its authorized capital stock. A reduction in the amount
of authorized capital stock of the Company will significantly reduce its
corporate franchise tax obligations in the State of Delaware.
The Certificate of Incorporation of the Company currently authorizes
45,000,000 shares of common stock, $.01 par value per share (the "Common
Stock"), and 5,000,000 shares of preferred stock, $.01 par value per share (the
"Preferred Stock"). As of the date of this Proxy Statement, there are 2,448,483
shares of Common Stock and no shares of Preferred Stock issued and outstanding.
The Board proposes to reduce the amount of authorized capital stock of
the Company in the following manner: (1) reduce the number of shares of
authorized Common Stock to 7,000,000 shares; and (2) reduce the number of shares
of authorized Preferred Stock to 2,000,000 shares. This reduction in authorized
capital stock will save the Company approximately $18,000 in annual corporate
franchise taxes due to the State of Delaware.
The Board feels that such an amendment to the Company's Certificate of
Incorporation is in the best interest of the Company and its Stockholders as it
will permit the Company to save a significant amount of money. This proposed
amendment to the Company's Certificate of Incorporation is set forth in Appendix
A to this Proxy Statement and incorporated herein by reference.
The Board does not anticipate any immediate need for the authorized
shares of Common Stock and Preferred Stock that are being eliminated. Provided
that there are no future amendments to the Delaware General Corporate Law to the
contrary, if a need for a greater number of shares of authorized capital stock
arises, the Company will be free to amend its Certificate of Incorporation to
authorize such shares, subject to the approval of the Stockholders.
-11-
<PAGE> 15
The above summary relating to the amendment to the Certificate of
Incorporation of the Company to reduce the authorized capital stock of the
Company is qualified in its entirety by the more detailed information appearing
in the appendices to this Proxy Statement which are incorporated herein by
reference.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF THE COMPANY TO
REDUCE THE AMOUNT OF ITS AUTHORIZED CAPITAL STOCK. The affirmative vote of a
majority of the holders of all of the issued and outstanding Common Stock of the
Company will be required for such amendment to the Certificate of Incorporation
of the Company.
PROPOSAL 4 - ADOPTION OF ANTI-TAKEOVER PROVISION
The Board has approved the submission to the Stockholders of the
Company of a proposal to amend the Certificate of Incorporation of the Company
to include a provision whereby the affirmative vote of not less than
seventy-five percent (75%) of all of the holders of all of the issued and
outstanding Common Stock will be required to approve any "business combination"
relating to the Company. This super majority requirement would not be applicable
to any business combination that is approved by a majority of disinterested
directors of the Board. In such case, only the Stockholder vote as set forth
under the Company's Certificate of Incorporation, By-Laws or any applicable
corporate law including, but not limited to, the rules and regulations of any
national securities exchange shall be required for approval of such business
combination.
Generally, any "business combination" would include any merger or
consolidation of the Company into or with another related or unrelated entity,
any disposition of a material portion of the Company's assets or capital stock,
any significant reclassification or recapitalization of the capital stock of the
Company or any similar arrangement affecting the ownership of a material portion
of the Company's assets or capital stock. This proposed amendment to the
Company's Certificate of Incorporation is set forth in Appendix B to this Proxy
Statement and incorporated herein by reference.
The Board feels that such an Amendment to the Company's Certificate of
Incorporation is in the best interest of the Company and its Stockholders as it
will permit the Stockholders of the Company to play a significant role in
preventing any hostile takeover bids as well as allowing the Stockholders to
evaluate the merits of any legitimate takeover offers for the Company.
The above summary relating to the amendment to the Certificate of
Incorporation of the Company to include an anti-takeover provision is qualified
in its entirety by the more detailed information appearing in the appendices to
this Proxy Statement which are incorporated herein by reference.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF THE COMPANY TO
INCLUDE AN ANTI-TAKEOVER PROVISION. The affirmative vote of a majority of the
holders of all of the issued and outstanding Common Stock of the Company will be
required for such amendment to the Certificate of Incorporation of the Company.
PROPOSAL 5 - INCREASE IN THE AMOUNT OF SHARES AVAILABLE
UNDER THE COMPANY'S STOCK OPTION PLAN
The Board has determined that it is necessary to amend the Company's
Amended and Restated Stock Option Plan (the "Plan") to increase the number of
shares of Common Stock that may be issued under the Stock Option Plan. The Plan,
as originally approved, authorized 1,000,000 shares of the Common Stock to be
issued to eligible employees, consultants and directors of the Company and its
subsidiaries upon the exercise of stock options. In connection with the stock
split affecting the Common Stock, the total number of shares authorized under
the Stock Option Plan was adjusted to 250,000 shares. Between 1992 and the end
of 1997, the number of employees eligible to participate in the Plan, and the
number of options granted, increased. As of April 30, 1998, stock options to
purchase a total of 163,825 shares had been granted to an aggregate of 7
eligible employees, 6 non-employee directors and 4 outside non-employee
consultants. Only 86,175 shares remain available for awards to any additional
officers, directors, outside consultants or key employees first employed or
retained by the Company during 1998 or subsequent years. The proposed amendment
would immediately increase the number of shares available under the Plan by
350,000 shares, to a total of 600,000 shares. If approved, this amendment
authorize sufficient shares to provide for the awards the Company currently
anticipates it will need over the next several years in order to continue to
provide
-12-
<PAGE> 16
adequate stock option and other equity-based awards to the Company's key
personnel and to new key employees the Company would need to hire as it
continues to expand its operations.
The Plan authorizes the Company to grant eligible officers, key
employees, consultants and directors of the Company awards consisting of options
to purchase shares of Common Stock or shares of restricted stock. The Stock
Option Plan Committee of the Board has the discretion to select the particular
officers, key employees and consultants who will receive awards. At April 30,
1998, approximately 7 officers and key employees, 3 outside non-employee
consultants and 6 non-employee directors of the Company were eligible to
participate.
The particular terms of the stock options and other awards granted to
eligible employees will be established by the Stock Option Plan Committee within
the limitations set forth in the provisions of the Plan. Eligible employees and
other participants generally are not required to provide the Company with
consideration for the awards (other than their services), but stock options will
require the optionees to pay an option exercise price based on the fair market
value of the shares of common stock at the time the grant of the options was
approved by the Stock Option Plan Committee. Stock options granted to employees
under the Plan may be either stock options intended to qualify as Incentive
Stock Options under Section 422 of the Internal Revenue Code or non-statutory
stock options which do not so qualify. Stock options granted to non-employee
directors or consultants will be non-statutory stock options. Stock options will
expire no later than the tenth anniversary of the date of grant and become
exercisable under such vesting schedules as may be established by the Stock
Option Plan Committee. Vesting of the awards granted under the Plan may be
accelerated in the event of a change in corporate control, as defined in the
terms of the Plan. The Stock Option Plan Committee has discretionary authority
to accelerate the vesting of stock options and other awards in any other
circumstances it determines to be appropriate, and the stock option agreements
under the Plan may provide for accelerated vesting upon death, disability, and,
in some cases, termination of employment without cause.
The Plan can be amended by the Board from time to time in any manner
the Board deems to be advisable, except that the Board must obtain shareholder
approval for amendments that require shareholder approval under the federal tax
or securities laws or the listing requirements for the NASDAQ stock exchange,
including amendments to increase the aggregate number of shares available for
issuance under the Plan.
The stock options provided to eligible officers, employees, and
directors under the Plan will permit these individuals to purchase shares of the
Common Stock at an option purchase price equal to the fair market value of a
share of the Common Stock as of the date the option was granted. As of April 29,
1998, the market value quoted for shares of the Common Stock on the NASDAQ
Smallcaps stock market was $2.4375 per share. Since the granting of future
options will be at the discretion of the Compensation Committee of the Board, it
is not possible to determine at the present time when and how awards will be
made with the additional shares that will become available if the proposed
amendment to the Plan is approved.
TAX TREATMENT OF STOCK OPTIONS. In general: (i) a participant will not
recognize taxable income at the time he or she is granted non-statutory options;
(ii) at the time of exercise of a non-statutory option, ordinary income will be
recognized by the participant in an amount equal to the difference between the
option price paid for the shares of Common Stock and the fair market value of
such shares; and (iii) at the time of sale of shares of Common Stock acquired
pursuant to the exercise of a non-statutory option, any appreciation (or
depreciation) in the value of the shares of Common Stock after the date of
exercise will be treated as either short-term or long-term capital gain (or
loss) depending on how long such shares have been held.
In contrast, if an employee's stock options have been designated as
Incentive Stock Options, income will not be recognized by an employee upon
either the grant or the exercise of the Incentive Stock Options. If the shares
of Common Stock issued to an employee pursuant to the exercise of an Incentive
Stock Option and the shares are not sold or otherwise transferred by the
employee within two years after the date of grant or within one year after the
transfer of the shares to the employee, then upon the sale of the shares any
amount realized in excess of the option price will be taxed to the employee as
long-term capital loss.
MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
RECOMMEND THAT YOU VOTE "FOR" APPROVAL OF THE PROPOSED AMENDMENT TO THE
COMPANY'S AMENDED AND RESTATED STOCK OPTION PLAN. The affirmative vote of the
holders of a majority of the shares present in person or represented by proxy at
the annual meeting of stockholders will be required for such approval.
-13-
<PAGE> 17
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 1999 Annual
Meeting of Stockholders must be received by the Company no later than January
10, 1999 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
-14-
<PAGE> 18
APPENDIX A
TO
N-VIRO INTERNATIONAL CORPORATION (THE "CORPORATION")
1998 PROXY STATEMENT
Proposal to Amend the Certificate of Incorporation to
-----------------------------------------------------
Reduce the Number of Authorized Shares
--------------------------------------
The first paragraph of Article Four of the
Corporation's Certificate of Incorporation shall be amended in its
entirety to read as follows:
The total number of all classes of stock which the
Corporation shall have authority to issue is seven million (7,000,000)
shares, of which five million (5,000,000) shares designated as
Preferred Stock, shall have a par value of one cent ($.01) per share
(the "Preferred Stock"), and two million (2,000,000) shares designated
as Common Stock, shall have a par value of one cent ($.01) per share
(the "Common Stock").
<PAGE> 19
APPENDIX B
TO
N-VIRO INTERNATIONAL CORPORATION (THE "CORPORATION")
1998 PROXY STATEMENT
Proposal to Amend the Certificate of Incorporation to
-----------------------------------------------------
Adopt an Anti-Takeover Provision
--------------------------------
Following Article Ten of the Corporation's Certificate of
Incorporation, a new Article Eleven shall be added to read as follows:
ARTICLE ELEVEN
BUSINESS COMBINATION.
---------------------
(A) SPECIAL VOTE BY STOCKHOLDERS. In addition to any
affirmative vote required by law or this Certificate of Incorporation
or the Bylaws of the Corporation, and except as otherwise expressly
provided in Section 11(B) of this Certificate of Incorporation, a
Business Combination (as hereinafter defined) with, or proposed by or
on behalf of, any Interested Stockholder (as hereinafter defined) or
any Affiliate or Associate (as hereinafter defined) of any Interested
Stockholder or any person who thereafter would be an Affiliate or
Associate of such Interested Stockholder shall require the affirmative
vote of not less than seventy-five percent (75%) of the votes entitled
to be cast by the holders of all the then outstanding shares of Voting
Stock (as hereinafter defined), voting together as a single class,
excluding Voting Stock beneficially owned by such Interested
Stockholder. Such affirmative vote shall be required notwithstanding
the fact that no vote may be required, or that a lesser percentage or
separate class vote may be specified, by law or in any agreement with
any national securities exchange or otherwise.
(B) REGULAR VOTE BY STOCKHOLDERS. The provisions of Section
11(A) of this Certificate of Incorporation shall not be applicable to
any particular Business Combination, and such Business Combination
shall require only such affirmative vote, if any, as is required by law
or by any other provision of this Certificate of Incorporation or the
Bylaws of the Corporation, or any agreement with any national
securities exchange, if the Business Combination shall have been
approved either specifically or as a transaction which is within an
approved category of transactions, by a majority (whether such approval
is made prior to or subsequent to the acquisition of, or announcement
or public disclosure of the intention to acquire, beneficial ownership
of the Voting Stock that caused the Interested Stockholder to become an
Interested Stockholder) of the Continuing Directors (as hereinafter
defined).
(C) DEFINITIONS. The following definitions shall apply with
respect to this Article 11:
(1) The term "Business Combination" shall
mean: (i) any merger or consolidation of the Corporation or
any Subsidiary (as hereinafter defined) with (x) any
Interested Stockholder or (y) any other corporation (whether
or not itself an Interested Stockholder) which is or after
such merger or consolidation would be an Affiliate or
Associate of an Interested Stockholder; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition or
security arrangement, investment, loan, advance, guarantee,
agreement to purchase, agreement to pay, extension of credit,
joint venture participation or other arrangement (in one
transaction or a series of transactions) with or for the
benefit of any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder which, together with
all other such arrangements (including all contemplated future
events), has an aggregate Fair Market Value and/or involves
aggregate commitments of $500,000 or more or constitutes more
than ten percent (10%) of the book value of the total assets
(in the case of transactions involving assets or commitments
other than Capital Stock (as
<PAGE> 20
hereinafter defined)) or ten percent (10%) of the
stockholders' equity (in the case of transactions in Capital
Stock) of the entity in question (the "Substantial Part"), as
reflected in the most recent fiscal year-end consolidated
balance sheet of such entity existing at the time the
stockholders of the Corporation would be required to approve
or authorize the Business Combination involving the assets,
securities and/or commitments constituting any Substantial
Part; (iii) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation or for any
amendment to the Corporation's Bylaws or to this Certificate
of Incorporation proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of any Interested
Stockholder; (iv) any reclassification of securities
(including any reverse stock split), or recapitalization of
the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction (whether or not with or otherwise involving an
Interested Stockholder) that has the effect, directly or
indirectly, of increasing the proportionate share of any class
or series of Capital Stock, or any securities convertible into
Capital Stock or into equity securities of any Subsidiary,
that is beneficially owned by any Interested Stockholder or
any Affiliate or Associate of any Interested Stockholder; or
(v) any agreement, contract or other arrangement providing for
any one or more of the actions specified in the foregoing
clauses (i) to (iv).
(2) The term "Capital Stock" shall mean all Capital
Stock of the Corporation authorized to be issued from time to
time under Article 4 of this Certificate of Incorporation, and
the term "Voting Stock" shall mean all Capital Stock which by
its terms may be voted on all matters submitted to
stockholders of the Corporation generally.
(3) The term "person" shall mean any individual,
firm, corporation or other entity and shall include any group
comprised of any person and any other person with whom such
person or any Affiliate or Associate of such person has any
agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or
disposing of Capital Stock.
(4) The term "Interested Stockholder" shall mean any
person (other than the Corporation or any Subsidiary and other
than any profit-sharing, employee stock ownership or other
employee benefit plan of the Corporation or any Subsidiary or
any trustee of or fiduciary with respect to any such plan when
acting in such capacity or any stockholder of the Corporation
prior to the adoption of this Certificate of Incorporation)
who (a) is or has announced or publicly disclosed a plan or
intention to become the beneficial owner of Voting Stock
representing ten percent (10%) or more of the votes entitled
to be cast by the holders of all then outstanding shares of
Voting Stock; or (b) is an Affiliate or Associate (other than
any stockholder prior to the adoption of this Certificate of
Incorporation) of the Corporation and at any time within the
two-year period immediately prior to the date in question was
the beneficial owner of Voting Stock representing ten percent
(10%) or more of the votes entitled to be cast by the holders
of all then outstanding shares of Voting Stock.
(5) A person shall be a "beneficial owner" of any
Capital Stock (a) which such person or any of its Affiliates
or Associates beneficially owns, directly or indirectly; (b)
which such person or any of its Affiliates or Associates has,
directly or indirectly, (i) the right to acquire (whether such
right is exercisable immediately or subject only to the
passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding; or (c) which is beneficially owned, directly or
indirectly, by any other person with which such person or any
of its Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of Capital Stock. For the purpose
of determining whether a person is an Interested Stockholder
pursuant to Section 11(C)(4) of this Certificate of
Incorporation, the number of shares of Capital Stock deemed to
be outstanding shall include shares deemed beneficially owned
by such person through application of this Section 11(C)(5),
but shall not include any other shares of
<PAGE> 21
Capital Stock that may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(6) The terms "Affiliate" and "Associate" shall have
the respective meanings ascribed to such terms in Rule 12b-2
under the Exchange Act as in effect on the date of filing of
this Certificate of Incorporation with the Secretary of State
of the State of Delaware (the term "registrant" in said Rule
12b-2 meaning in this case the Corporation).
(7) The term "Subsidiary" means any company of which
a majority of any class of equity security is beneficially
owned by the Corporation; PROVIDED, HOWEVER, that for purposes
of the definition of Interested Stockholder set forth in
Section 11(C)(4) of this Certificate of Incorporation, the
term "Subsidiary" shall mean only a company of which a
majority of each class of equity security is beneficially
owned by the Corporation.
(8) The term "Continuing Director" means any member
of the Board of Directors, while such person is a member of
the Board of Directors, who is not an Affiliate or Associate
or representative of the Interested Stockholder and was a
member of the Board of Directors prior to the time that an
Interested Stockholder became an Interested Stockholder, and
any successor of a Continuing Director while such successor is
a member of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder and
is recommended or elected to succeed the Continuing Director
by a majority of Continuing Directors.
(9) The term "Fair Market Value" means (a) in the
case of cash, the amount of such cash; (b) in the case of
stock, the highest closing sale price during the 30-day period
immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange-Listed
Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not
listed on the New York Stock Exchange, on the principal United
States securities exchange registered, or, if such stock is
not listed on any such exchange, the highest closing bid
quotation with respect to a share of such stock during the
30-day period preceding the date in question on the National
Association of Securities Dealers, Inc. Automated Quotations
Systems or any similar system then in use, or, if no such
quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority
of the Continuing Directors in good faith; and (c) in the case
of property other than cash or stock, the Fair Market Value of
such property on the date in question as determined in good
faith by a majority of the Continuing Directors.
(D) AUTHORITY. A majority of the Continuing Directors shall
have the power and duty to determine for the purpose of this Article
11, on the basis of information known to them after reasonable inquiry,
all questions arising under this Article 11, including, without
limitation, (i) whether a person is an Interested Stockholder, (ii) the
number of shares of Capital Stock or other securities beneficially
owned by any person, (iii) whether a person is an Affiliate or
Associate of another, (iv) whether a Proposed Action (as hereinafter
defined) is with, or proposed by, or on behalf of an Interested
Stockholder or an Affiliate or Associate of an interested Stockholder,
(v) whether the assets that are the subject of any Business Combination
have, or the consideration to be received for the issuance or transfer
of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregated Fair Market Value of $500,000 or more
and (vi) whether the assets or securities that are the subject of any
Business Combination constitute a Substantial Part. Any such
determination made in good faith shall be binding and conclusive on all
parties.
(E) FIDUCIARY OBLIGATION. Nothing contained in this Article 11
shall be construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
(F) PROPOSED ACTION. For the purposes of this Article 11, a
Business Combination or any proposal to amend, repeal or adopt any
provision of this Certificate of Incorporation inconsistent with this
Article 11 (collectively, "Proposed Action") is presumed to have been
proposed by, or on
<PAGE> 22
behalf of, an Interested Stockholder or a person who thereafter would
become such if (i) after the Interested Stockholder became such, the
Proposed Action is proposed following the election of any director of
the Corporation who, with respect to such Interested Stockholder, would
not qualify to serve as a Continuing Director or (ii) such Interested
Stockholder, Affiliate, Associate or person votes for or consents to
the adoption of any such Proposed Action, unless as to such Interested
Stockholder, Affiliate, Associate or person, a majority of the
Continuing Directors makes a good-faith determination that such
Proposed Action is not proposed by or on behalf of such Interested
Stockholder, Affiliate, Associate or person, based on information known
to them after reasonable inquiry.
(G) AMENDMENT. Notwithstanding any other provisions of this
Certificate of Incorporation or the Bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage or separate class
vote may be specified by law, this Certificate of Incorporation or the
Bylaws of the Corporation), the affirmative vote of the holders of not
less than seventy-five percent (75%) of the votes entitled to be cast
by the holders of all the then outstanding shares of Voting Stock,
voting together as a single class, excluding Voting Stock beneficially
owned by such Interested Stockholder, shall be required to amend or
repeal, or adopt any provisions inconsistent with, this Article 11;
PROVIDED, HOWEVER, that this Section 11(H) shall not apply to, and such
seventy-five percent (75%) vote shall not be required for, any
amendment, repeal or adoption unanimously recommended by the Board of
Directors if all of such directors are persons who would be eligible to
serve as Continuing Directors within the meaning of Section 11(C)(8) of
this Certificate of Incorporation.
<PAGE> 23
PRELIMINARY PROXY: FOR THE INFORMATION OF THE
---------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
PROXY
N-VIRO INTERNATIONAL CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Patrick Nicholson, with full power
of substitution, to vote all shares of Common Stock, $.01 par value, of N-Viro
International Corporation (the "Company") that the undersigned is entitled to
vote at the Annual Meeting of the Shareholders of the Company to be held on
Wednesday, June 3, 1998, or any adjournments thereof.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE
TAKING OF A VOTE ON THE MATTERS HEREIN.
Returned proxy cards will be voted: (1) as specified on the matters
listed below; (2) in accordance with the Directors' recommendations where a
choice is not specified; and (3) in accordance with the judgment of the proxies
on any other matters that may properly come before the meeting.
THE MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMEND
VOTES "FOR" ALL OF THE FOLLOWING:
1. Election of three Directors for a term of three years: Terry J.
Logan, James D. O'Neil and Michael G. Nicholson.
FOR ALL NOMINEES LISTED (except as marked to the contrary)
- --------
WITHHOLD AUTHORITY to vote for all nominees
- --------
To withhold authority to vote for any individual nominee, please write the
person's name in the following space:
- ---------------------------
2. Ratification of the appointment of McGladrey & Pullen, LLP to serve
as independent auditors for the Company for its fiscal year ended 1998.
FOR AGAINST ABSTAIN
- -------- -------- --------
3. The approval of an amendment to the Company's Certificate of
Incorporation to reduce the authorized capital stock of the Company.
FOR AGAINST ABSTAIN
- -------- -------- --------
4. The approval of an amendment to the Company's Certificate of
Incorporation to include a super-majority requirement to ratify any takeover
proposals presented to the Company.
FOR AGAINST ABSTAIN
- -------- -------- --------
5. The approval of a proposal to increase the number of shares of
common stock available in the Company's stock option plan to 600,000.
FOR AGAINST ABSTAIN
- -------- -------- --------
<PAGE> 24
6. With discretionary authority on any other business that may properly
come before the meeting or any adjournment thereof.
Dated: ________________, 1998
-----------------------------------------
Signature
-----------------------------------------
Signature if Held Jointly
PLEASE MARK, SIGN, DATE Please sign exactly as your name appears
AND RETURN THE PROXY CARD hereon. Joint owners should each sign.
PROMPTLY USING THE When signing as attorney, executor,
ENCLOSED ENVELOPE. PLEASE administrator, trustee or guardian,
MARK YOUR CHOICE LIKE please give full title as such. Corporate
THIS ____ IN BLUE OR BLACK or partnership proxies should be signed
INK. by an authorized person with the person's
title indicated.
