UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
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:
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-12
N-VIRO INTERNATIONAL CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(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:
--------------------------------------------------------------------------------
[N-Viro International Corporation logo]
May 4, 2007
To all Our Stockholders:
The Board of Directors joins us in cordially inviting you to attend our
Annual Meeting of Stockholders. The meeting will be held at Brandywine Country
Club, 6904 Salisbury Road, Maumee, Ohio, 43537, on June 8, 2007. The meeting
will begin at 10:00 a.m. (local time) and registration will begin at 9:30 a.m.
Refreshments will be served before the meeting.
In addition to the matters described in the attached Proxy Statement, we
will report on our business and progress during 2006 and the first quarter of
2007. Our performance for the year ended December 31, 2006 is discussed in the
enclosed 2006 Annual Report to Stockholders.
We hope you will be able to attend the meeting and look forward to seeing
you there.
Sincerely,
/s/ Timothy R. Kasmoch
--------------------------
Timothy R. Kasmoch
President and Chief Executive Officer
N-VIRO INTERNATIONAL CORPORATION
3450 W. Central Avenue, Suite 328
Toledo, Ohio 43606
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 2007
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that our Annual Meeting of Stockholders will be held
at Brandywine Country Club, 6904 Salisbury Road, Maumee, Ohio, 43537, on June 8,
2007. The Annual Meeting will begin at 10:00 a.m. (local time), for the
following purposes:
1. To elect four Class I Directors for a term of two years, until their
successors are elected and qualified or until their earlier resignation,
removal from office or death.
2. To ratify the appointment of UHY LLP to serve as our independent auditors
for our year ended 2006.
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Your attention is directed to the Proxy Statement accompanying this Notice
for a more complete description of the matters to be acted upon at the Annual
Meeting. Our 2006 Annual Report is also enclosed. Stockholders of record as of
the close of business on April 16, 2007 will be entitled to notice of, and to
vote at, the Annual Meeting or any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James K. McHugh
--------------------------------
James K. McHugh
Chief Financial Officer, Secretary and Treasurer
Toledo, Ohio
May 4, 2007
YOUR VOTE IS IMPORTANT. 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 TO ASSURE THE PRESENCE OF A QUORUM. 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. YOU ALSO MAY VOTE YOUR SHARES VIA THE
TELEPHONE BY ACCESSING THE TOLL-FREE NUMBER INDICATED ON YOUR PROXY CARD OR VIA
THE INTERNET BY ACCESSING THE WORLDWIDE WEBSITE INDICATED ON YOUR PROXY CARD.
N-VIRO INTERNATIONAL CORPORATION
3450 W. CENTRAL AVENUE, SUITE 328
TOLEDO, OHIO 43606
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 2007
SOLICITATION OF PROXIES AND DATE, TIME AND PLACE OF ANNUAL MEETING
THIS PROXY STATEMENT IS FIRST BEING SENT TO THE STOCKHOLDERS OF N-VIRO
INTERNATIONAL CORPORATION ON OR ABOUT MAY 4, 2007, IN CONNECTION WITH THE
SOLICITATION OF PROXIES BY OUR BOARD OF DIRECTORS TO BE VOTED AT OUR ANNUAL
MEETING OF STOCKHOLDERS, OR THE ANNUAL MEETING, WHICH IS SCHEDULED TO BE HELD ON
FRIDAY, JUNE 8, 2007 AT 10:00 A.M. (LOCAL TIME) AS SET FORTH IN THE ATTACHED
NOTICE. A PROXY CARD IS ENCLOSED.
RECORD DATE
The record date for our Annual Meeting is the close of business on April
16, 2007. Only holders of record of our Common Stock on the record date are
entitled to notice of the Annual Meeting and to vote at the Annual Meeting. On
the record date, there were 3,916,559 shares of Common Stock outstanding.
HOW DO I VOTE?
A share of our Common Stock cannot be voted at the Annual Meeting unless
the holder thereof is present or represented by proxy. Whether or not you plan
to attend the Annual Meeting in person, please sign, date and return the
enclosed proxy card as promptly as possible in the postage paid envelope
provided to ensure that there is a quorum and that your shares will be voted at
the Annual Meeting. 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 approval of the proposals: (i) to elect four
Class I Directors to serve for a term of two years and until their successors
are elected and qualified or until their earlier resignation, removal from
office or death, and, (ii) to ratify the appointment of UHY LLP to serve as our
independent auditors for the year ending December 31, 2007. You may also vote
your shares via the telephone by accessing the toll-free number indicated on
your proxy card or via the internet by accessing the worldwide website indicated
on your proxy card.
If you hold shares through a bank, broker or other nominee, they will give
you separate instructions on voting your shares.
HOW DO I REVOKE MY PROXY?
Any stockholder giving a proxy has the right to revoke it any time before
it is voted by filing with our Secretary 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 our Secretary at the address of the company set
forth above.
WHAT CONSTITUTES A QUORUM?
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 will constitute a quorum for the transaction of business by such
holders at the Annual Meeting. Abstentions will be counted as shares that are
present and entitled to vote for purposes of determining whether a quorum is
present. Shares held by nominees for beneficial owners also will be counted for
purposes of determining whether a quorum is present if the nominee has the
discretion to vote on at least one of the matters presented, even though the
nominee may not exercise discretionary voting power with respect to other
matters and even though voting instructions have not been received from the
beneficial owner (a "broker non-vote").
WHAT ARE MY VOTING RIGHTS?
Holders of the Common Stock have one vote for each share on any matter that
may be presented for consideration and action by the stockholders at the Annual
Meeting. Stockholders are not entitled to cumulative voting in the election of
directors. The election of directors will require the affirmative vote of the
holders of a majority of the shares of the Common Stock present or represented
by proxy at the Annual Meeting. The ratification of the appointment of UHY LLP
as independent auditors will also require the affirmative vote of the holders of
a majority of the shares of the Common Stock present or represented by proxy at
the Annual Meeting. For all proposals, abstentions and broker non-votes will
not be counted in determining whether a proposal has been approved.
COST OF SOLICITATION
We will bear the cost of solicitation of proxies. In addition to
solicitation by mail, directors and officers may solicit proxies by telephone,
facsimile or personal interview. We will reimburse directors and officers for
their reasonable out-of-pocket expenses in connection with such solicitation.
We will request brokers and nominees who hold shares in their names to furnish
these proxy materials 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.
EXECUTIVE OFFICE
Our executive office is located at 3450 West Central Avenue, Suite 328,
Toledo, Ohio 43606. Our telephone number is (419) 535-6374.
FORM 10-KSB AVAILABLE
A COPY OF OUR ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31,
2006, INCLUDING THE FINANCIAL STATEMENTS, MAY BE OBTAINED WITHOUT CHARGE BY
WRITING TO JAMES MCHUGH, OUR CORPORATE SECRETARY, AT THE ABOVE ADDRESS. The
Annual Report is also available on our website at www.nviro.com under "Investor
-------------
Information".
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors, pursuant to our Certificate of Incorporation and
By-Laws, has set the number of directors to serve for the next year at seven,
four of whom are to be elected at the Annual Meeting to serve as Class I
Directors. Our Certificate of Incorporation provides for a classified Board
consisting of two classes of equal or approximately equal number based on the
total number of directors fixed and determined by a vote of a majority of our
entire Board serving at the time of such vote; provided, that the authorized
number of directors shall be no less than seven and no more than nine. The
number of directors is currently set at seven. The directors are elected for a
two-year term or until the election of their respective successors or until
their resignation, removal from office or death.
The Board is currently composed of four Class I Directors; R. Francis
DiPrete, Carl Richard, Joseph H. Scheib and Mark D. Hagans; and three Class II
Directors: James H. Hartung, Timothy R. Kasmoch and Thomas L. Kovacik (whose
terms will expire upon the election and qualification of directors at the annual
meetings of stockholders to be held in 2007 and 2008, respectively). At each
annual meeting of stockholders, directors will be elected for a full term of two
years to succeed those directors whose terms are expiring.
Each of our Class I Directors - R. Francis DiPrete, Carl Richard, Joseph H.
Scheib and Mark D. Hagans - is presently standing for re-election to the Board.
If elected, the nominees each will serve for a term of two-years and until their
respective successors are elected or until their earlier resignation, removal
from office or death.
Each of the nominees has consented to serve until his term expires if
elected at the Annual Meeting as a Class I Director. If any nominee declines or
is unable to accept such nomination to serve as a Class I Director, events which
the Board does not now expect, the Board may designate a substitute nominee, in
which event the proxies reserve the right to vote for such substitute nominee.
The proxy solicited hereby will not be voted to elect more than four Class I
Directors.
Under our By-laws, a nominee for Class I Director must be elected by a
majority of the votes cast, meaning that the number of shares entitled to vote
on the election of directors and represented in person or by proxy at the Annual
Meeting casting their vote "FOR" a director must exceed the number of such votes
"WITHHELD" from that director. Under Delaware law, if an incumbent nominee for
director in an uncontested election does not receive the requisite votes for
reelection, the director remains in office as a "holdover" director until a
successor is elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS THAT MESSRS. DIPRETE, RICHARD, SCHEIB AND
HAGANS BE ELECTED AT THE ANNUAL MEETING AS CLASS I DIRECTORS. The Board intends
to vote proxies received from stockholders for the election of the four Class I
Directors named above.
Certain information about all of the directors and nominees for director is
furnished below.
DIRECTORS OF THE COMPANY
The following table sets forth (i) the names and ages of our directors and
executive officers and the positions they hold, and (ii) the names and ages of
the nominees for director listed herein.
Name Age Position
---------------------------- --- --------------------------------------------------------
R. Francis DiPrete 52 Class I Director *
Mark D. Hagans 40 Class I Director *
James H. Hartung 64 Class II Director
Timothy R. Kasmoch 45 Class II Director, President and Chief Executive Officer
Thomas L. Kovacik 59 Class II Director
Carl Richard 80 Class I Director *
Joseph H. Scheib 50 Class I Director *
_____________
* Directors currently nominated for re-election.
R. FRANCIS DIPRETE is an attorney and is currently a self-employed business
consultant. From March 1999 until December, 2003, Mr. DiPrete served as
President and Board Chairman of Strategic Asset Management, Inc. (formerly
Worldtech Waste Management, Inc.), a Nevada corporation and holding company that
provides business and financial consulting advisory services to, and control and
operation of, businesses. From August 2003 until December 2003, Mr. DiPrete
served as President and director of Ophir Holdings, Inc., a Nevada corporation
and consulting firm specializing in public and shareholder relations. Mr.
DiPrete is a graduate of Rutgers University and Roger Williams University,
School of Law. Mr. DiPrete has served as our Director since May 2000, and is a
member of the Board's Audit and Compensation Committees.
MARK D. HAGANS is an attorney and partner with the law firm of Plassman, Rupp,
Short & Hagans, of Archbold, Ohio, and his practice focuses on corporation,
taxation and banking law. Mr. Hagans serves on numerous boards of directors,
including the Fulton County Health Center, where he is presently chair of the
Finance Committee. Mr. Hagans earned his law degree from the University of
Toledo. Mr. Hagans has served as our Director since December 2006 and is a
member of the Board's Audit and Finance Committees.
JAMES H. HARTUNG is the President and Chief Executive Officer of the
Toledo-Lucas County (Ohio) Port Authority, a position he has held since 1994.
Mr. Hartung has served as our Director since January 2006 and is a member of the
Board's Compensation and Nominating Committees. Mr. Hartung's son, Howard, is
our Chief Operating Officer.
TIMOTHY R. KASMOCH has been our President and Chief Executive Officer since
February 2006 and a Director since January 2006. Mr. Kasmoch is also President
and CEO of Tri-State Garden Supply, d/b/a Gardenscape, a bagger and distributor
of lawn and garden products, which provides trucking services to our Company.
Mr. Kasmoch is a graduate of Penn State University. Mr. Kasmoch is a member of
the Board's Finance Committee.
THOMAS L. KOVACIK is presently employed as the Executive Director of
Transportation Advocacy Group of Northwest Ohio ("TAGNO"), a strategic planning
organization working with local and Ohio transportation and economic development
officials. Mr. Kovacik was previously employed by us from 1992 to 1995 as
President of Great Lakes N-Viro, at the time one of our divisions. Mr. Kovacik
has also held various positions with local government, utilities and
environmental companies, and earned a masters degree from Bowling Green State
University in Geochemistry. Mr. Kovacik has served as our Director since
December 2006, and is a member of the Board's Compensation Committee.
CARL RICHARD is currently an Executive Vice-President of P.R. Transportation, a
trucking company located in Toledo, Ohio, and our consultant. Mr. Richard served
as Vice-President of C.A. Transportation from 1988 through 2000 and as
Vice-President of R.O.S.S. Investments, a real estate holding company, from 1980
through 2000. Mr. Richard has served as our Director since December 2004 and is
a member of the Board's Nominating Committee.
JOSEPH H. SCHEIB is the Chief Financial Officer of Broad Street Software Group,
a comprehensive software technology company located in Edenton, North Carolina,
a position he has held since June 2003. From May 2000 until February 2003, Mr.
Scheib was the Financial Operation Principal/Compliance Officer of Triangle
Securities, LLC of Raleigh, North Carolina, an asset management, brokerage and
investment banking firm. Mr. Scheib is a CPA and a graduate of East Carolina
University with a degree in accounting. Mr. Scheib has served as our Director
since December 2004, and is a member of the Board's Audit, Finance and
Nomination Committees.
KEY RELATIONSHIPS
Until March 2005, R. Francis DiPrete was co-trustee of the Cooke Family
Trust, a reporting beneficial owner of more than 5% of our outstanding common
stock.
James Hartung, a member of our Board of Directors, the father of Howard
Hartung, our Chief Operating Officer and one of our executive officers.
CORPORATE GOVERNANCE AND BOARD MATTERS
MEETINGS OF THE BOARD OF DIRECTORS
Our business, property and affairs are managed under the direction of our
Board. The Board presently consists of seven members. Our Board held nine formal
meetings during 2006, consisting of three regular meetings and six special
meetings. Each director attended at least 75% of the aggregate number of
meetings held by the Board of Directors and the Committees of the Board of
Directors on which he served. It is the policy of the Company that the members
of the Board attend our annual stockholder meeting. Failure to attend annual
meetings without good reason is a factor the Nominating Committee will consider
in determining whether to renominate a current board member. Six out of the
seven members of the Board attended the 2006 Annual Meeting.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
We encourage stockholder communications with directors. Stockholders may
communicate with a particular director, all directors or the Chairman of the
Board by mail or courier addressed to him or the entire Board in care of James
K. McHugh, Corporate Secretary, N-Viro International Corporation, 3450 West
Central Avenue, Suite #328, Toledo, OH 43606. All correspondence should be in a
sealed envelope marked "Confidential" and will be forwarded unopened to the
director as appropriate.
BOARD INDEPENDENCE
Although we are not subject to the listing requirements of any stock
exchange, we are committed to a Board in which a majority of its members consist
of independent directors, as defined under the New York Stock Exchange ("NYSE")
listed company standards. The Board has reviewed the independence of its
members, applying the NYSE standards and considering other commercial, legal,
accounting and familial relationships between the directors and us. The Board
has determined that all of the directors are independent other than Mr. Kasmoch,
who is not an independent director by virtue of his current position as our
executive officer, and Mr. Hartung, who is not independent by virtue of his son,
Howard Hartung, serving as one of our executive officers.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has the following standing committees: the Audit Committee, the
Compensation Committee, the Finance Committee and the Nominating Committee. The
composition and function of each Committee is set forth below:
DIRECTOR AUDIT COMPENSATION NOMINATING FINANCE
---------------------------- ----- ------------ ---------- -------
R. Francis DiPrete X X
Mark D. Hagans X X *
James H. Hartung X X
Timothy R. Kasmoch X
Thomas L. Kovacik X *
Carl Richard X
Joseph H. Scheib X * X * X
* Committee Chair
AUDIT COMMITTEE
The Audit Committee, consisting of Messrs. Scheib, DiPrete and Hagans,
recommends the appointment of the outside auditor, oversees our accounting and
internal audit functions and reviews and approves the terms of transactions
between us and related party entities. The directors who serve on the Committee
are all "independent" as determined under the relevant SEC standards. That is,
the Board of Directors has determined that none of them has a relationship with
us that may interfere with their independence from us and our management. The
Board of Directors has determined that Mr. Scheib qualifies as a "financial
expert" as defined by the SEC. During 2006, the Audit Committee met three times.
The Audit Committee has retained UHY LLP to conduct the audit for the year ended
2December 31, 2007. The Audit committee is governed by a written charter, a copy
of which is attached as Exhibit A to this Proxy Statement.
----------
We have adopted a Code of Ethics which covers the Chief Executive Officer
and Chief Financial Officer, which is administered and monitored by the Audit
Committee of the Board. A copy of the Code of Ethics is attached as Exhibit 14.1
to our Annual Report on Form 10-KSB for the year ended December 31, 2006, and is
posted on our web site.
AUDIT COMMITTEE REPORT
The following report was prepared by Joseph Scheib, R. Francis DiPrete and
Mark Hagans, as members of our Audit Committee.
The Audit Committee oversees our financial reporting process on behalf of
the Board. We meet with management periodically to consider the adequacy of our
internal controls and the objectivity of our financial reporting. We discuss
these matters with our independent auditors and with appropriate financial
personnel and internal auditors. We regularly meet privately with both the
independent auditors and the internal auditors, each of whom has unrestricted
access to the Committee, and recommend to the Board the appointment of the
independent auditors and review periodically their performance and independence
from management. In addition, the Committee reviews our financing plans and
reports recommendations to the full Board for approval and to authorize action.
Management has primary responsibility of our financial statements and the
overall reporting process, including our system of internal controls. The
independent auditors audit the annual financial statements prepared by
management, express an opinion as to whether those financial statements fairly
present our financial position, results of operations and cash flows in
conformity with generally accepted accounting principles and discuss with the
Audit Committee any issues they believe should be raised.
This year, the Audit Committee reviewed our audited financial statements
and met with both management and UHY LLP, our independent auditors, to discuss
those financial statements. Management has represented to us that the financial
statements were prepared in accordance with generally accepted accounting
principles.
The Audit Committee has received from and discussed with UHY LLP, the
written disclosure and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees). These items
related to that firm's independence from us. The Audit Committee also discussed
with UHY LLP, any matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees).
Based on these reviews and discussions, the Audit Committee recommended to
the Board that our audited financial statements be included in our Annual Report
on Form 10-KSB for the year ended December31, 2006.
Joseph H. Scheib
R. Francis DiPrete
Mark D. Hagans
COMPENSATION COMMITTEE
The Compensation Committee determines officers' salaries and bonuses and
administers the grant of stock options pursuant to our stock option plans. The
Compensation Committee does not have a written charter. The Compensation
Committee currently consists of Messrs. Kovacik, DiPrete and Hartung. Until
February of 2006, the members of the Compensation Committee consisted of Mr.
Phillip Levin, Mr. Richard and Mr. DiPrete. In February, Mr. Hartung was added
to the Committee. Effective on November 13, 2006, Mr. Levin resigned from the
Board and the Committee. In December 2006, Mr. Kovacik was appointed to the
Committee after his election to the Board and Mr. Richard resigned from the
Committee. The Compensation Committee met two times during 2006.
The Board has determined that a majority of the members of the committee
are "independent" as determined under the NYSE standards. Mr. Hartung is not
"independent" due to his son, Howard Hartung, serving as one of our executive
officers. Despite his lack of "independence," the Board has determined that Mr.
Hartung's exercise of independent judgment will not be affected by this
relationship.
COMPENSATION COMMITTEE REPORT
The following report was prepared by Thomas L. Kovacik, R. Francis DiPrete
and James H. Hartung as members of our Compensation Committee.
The compensation of our executive officers is determined by the
Compensation Committee of the Board.
The Compensation Committee's 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 us in attracting, retaining
and motivating executives with superior leadership and management abilities.
Consistent with this philosophy, the Compensation 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 Compensation Committee establishes salary recommendations to the Board
at a level intended to be competitive with the average salaries of executive
officers in comparable companies with adjustments made to reflect our financial
health. Bonuses are intended to provide executives with an opportunity to
receive additional cash compensation, but only if they earn it through
individual performance and our performance.
Long-term incentives are provided through stock options granted under our
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 Compensation Committee, subject to any employment agreements in effect
with its executive officers, reviews and recommends to the Board for approval
the salaries, bonuses and long-term incentives of our officers, including its
most highly compensated executive officers. In addition, the Committee
recommends to the Board the granting of stock options under our Stock Option
Plan to executive officers and other selected employees, directors and to
consultants, and otherwise administers our Stock Option Plan.
With respect to Chief Executive Officer compensation, Mr. Kasmoch's 2006
base salary was determined by his Employment Agreement with us dated February
14, 2006, which entitled him to an annual base salary of $60,000 plus 50,000
unregistered shares of our stock, both over a period of one year. For 2007, a
new Employment Agreement dated February 13, 2007 was agreed upon. See
"Employment Agreements."
The Compensation Committee is also responsible for recommending to the
Board bonus amounts, if any, payable to Mr. Kasmoch, the Chief Executive
Officer. Any bonuses payable will be determined by the Compensation Committee,
based on the same elements and factors relating to our other Executive Officers.
The Compensation Committee has not formulated any policy regarding
qualifying compensation paid to our Executive Officers for deductibility under
the limits of Section 162(m) of the Internal Revenue Code of 1986, as amended,
because the Compensation Committee does not anticipate that any executive
officers would receive compensation in excess of such limits in the foreseeable
future.
Thomas L. Kovacik
R. Francis DiPrete
James H. Hartung
FINANCE COMMITTEE
The Finance Committee, consisting of Messrs. Hagans, Kasmoch and Scheib,
assists in monitoring our cash flow requirements and approves any internal or
external financing or leasing arrangements. The Finance Committee does not have
a written charter. This committee met once during 2006.
NOMINATING COMMITTEE
The Nominating Committee, consisting of Messrs. Scheib, Richard and
Hartung, considers and recommends to the Board qualified candidates for election
as Board members, and establishes and periodically reviews criteria for
selection of directors. The Nominating Committee does not have a written
charter. The committee met three times during 2006.
The Board has determined that a majority of the members of the committee
are "independent" as determined under the NYSE standards. Mr. Hartung is not
"independent," however, the Board has determined that Mr. Hartung's exercise of
independent judgment will not be affected by this relationship.
The Nominating Committee will consider candidates recommended by
stockholders, directors, officers, third-party search firms and other sources
for nomination as a director. The Committee considers the needs of the Board
and evaluates each director candidate in light of, among other things, the
candidate's qualifications. Recommended candidates must be of the highest
character and integrity, free of any conflicts of interest and possess the
ability to work collaboratively with others, and have the time to devote to
Board activities. All candidates will be reviewed in the same manner,
regardless of the source of the recommendation.
It is generally the policy of the Board to consider the stockholder
recommendations of proposed director nominees, if such recommendations are
seriously made and timely received. All stockholder recommended candidates
should be independent and possess substantial and significant experience which
would be of value to us in the performance of the duties of a director. To be
considered "timely received," recommendations must be received in writing at our
principal executive offices, at N-Viro International Corporation, 3450 W.
Central Avenue, Suite 328, Toledo, Ohio 43606, Attention: Chairman, Nominating
Committee, c/o James K. McHugh, Corporate Secretary, no later than February 9,
2008, the date that is less than 120 days before June 8, 2008. In addition, any
stockholder director nominee recommendation must include, at a minimum, the
following information: the stockholder's name; address; the number and class of
shares owned; the candidate's biographical information, including name,
residential and business address, telephone number, age, education,
accomplishments, employment history (including positions held and current
position), and current and former directorships; and the stockholder's opinion
as to whether the stockholder recommended candidate meets the definitions of
"independent" and "financially literate" under the NYSE Rules. In addition, the
recommendation letter must provide the information that would be required to be
disclosed in the solicitation of proxies for election of directors under federal
securities laws. The stockholder must include the candidate's statement that
he/she meets these requirements; is willing to promptly complete the
Questionnaire required of all officers, directors and candidates for nomination
to the Board; will provide such other information as the Committee may
reasonably request; and consents to serve on the Board if elected.
See "Certain Relationships and Related Transactions" for additional
information on certain members of the Board and management.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers, and persons who own beneficially more than
ten percent (10%) of the shares of our Common Stock, to file reports of
ownership and changes of ownership with the Securities and Exchange Commission,
or SEC. Copies of all filed reports are required to be furnished to us pursuant
to Section 16(a). Based solely on the reports received by us and on written
representations from reporting persons, we believe that the current directors
and executive officers complied with all applicable filing requirements during
the fiscal year ended December 31, 2006, with the following exceptions:
Former Director Phillip Levin filed a report of beneficial ownership on
June 1, 2006, reporting late three sales of common stock on February 7, 2006.
Former Director Phillip Levin filed a report of beneficial ownership on
June 1, 2006, reporting late three sales of common stock on February 8, 2006.
Former Director Phillip Levin filed a report of beneficial ownership on
June 1, 2006, reporting late one sale of common stock on February 13, 2006.
Former Director Phillip Levin filed a report of beneficial ownership on
June 1, 2006, reporting late two sales of common stock on March 2, 2006.
Former Director Phillip Levin has not, to date, filed a report of
beneficial ownership to report sale(s) of common stock during November 2006. We
disclaim any responsibility to file these reports on behalf of Mr. Levin, citing
lack of further details and non-communication from Mr. Levin on the
transaction(s).
Joseph Scheib filed a report of beneficial ownership on September 14, 2006,
reporting late one sale of common stock on September 8, 2006.
Timothy R. Kasmoch filed a report of beneficial ownership on September 20,
2006, reporting late one purchase of common stock on September 15, 2006.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We had outstanding 3,916,559 shares of common stock, $.01 par value per
share, or the Common Stock, on April 16, 2007, which constitutes the only class
of our outstanding voting securities.
FIVE PERCENT STOCKHOLDERS
At April 16, 2007, the following were the only persons known to us to own
beneficially more than 5% of the outstanding shares of Common Stock:
Name Amount and Percentage of
Title of and Address of Nature of Outstanding Shares
Class Beneficial Owner Beneficial Ownership of Common Stock
Cooke Family Trust (1)
90 Grande Brook Circle, #1526
Common Stock Wakefield, Rhode Island 02879 873,886 21.13%
------------ ----------------------------------------------------- -------------------- -------------------
J. Patrick Nicholson (2)
2306 Birch Run Court
Common Stock Sylvania, OH 43560 211,171 5.39%
------------ ----------------------------------------------------- -------------------- -------------------
N-Viro Energy Systems, Inc. (3)
2306 Birch Run Court
Common Stock Sylvania, OH 43560 211,171 5.39%
------------ ----------------------------------------------------- -------------------- -------------------
_________________
1. The shares attributed to the Cooke Family Trust include 653,886 shares owned
beneficially and 220,000 in common stock purchase warrants exercisable to
purchase an equal number of shares of common stock. This information was derived
from the Schedule 13D Amendment #3 filed on September 6, 2006.
2. The shares attributed to Mr. Nicholson include -0- shares owned directly and
211,171 shares owned beneficially by N-Viro Energy Systems, Inc. Mr. Nicholson
resigned as our director on August 28, 2003, and was terminated as our
consultant on July 13, 2005. This information was derived from the Schedule 13D
Amendment #5 filed on January 2, 2007.
3. N-Viro Energy Systems, Inc. was the corporate general partner of N-Viro
Energy Systems, Limited, a limited partnership that was terminated as of
December 31, 2001 and one of the predecessor entities that combined to form the
Company in October 1993. The general partners of N-Viro Energy Systems, Limited
were J. Patrick Nicholson, 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. N-Viro Energy Systems, Inc. has
dispositive power over all 211,171 shares, per the Form 13D Amendment #5 filed
on January 2, 2007.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 16, 2007, unless otherwise
specified, certain information with respect to the beneficial ownership of our
shares of Common Stock by each person who is our director, a nominee for the
Board, each of the Named Executive Officers, and by our directors and executive
officers as a group. Unless otherwise noted, each person has voting and
investment power, with respect to all such shares, based on 3,916,559 shares of
Common Stock outstanding on the record date. Pursuant to the rules of the SEC,
shares of Common Stock which a person has the right to acquire within 60 days of
the date hereof pursuant to the exercise of stock options are deemed to be
outstanding for the purpose of computing the percentage ownership of such person
but are not deemed outstanding for the purpose of computing the percentage
ownership of any other person.
Name of Amount and Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership (1) Class
-------------- ------------------------------------------------------------ ------------------------ -----------
Common Stock R. Francis DiPrete 149,190 (2) 3.68%
Common Stock Mark D. Hagans 1,250 (3) 0.03%
Common Stock James H. Hartung 21,000 (4) 0.53%
Common Stock Timothy R. Kasmoch 405,000 (5) 9.60%
Common Stock Thomas L. Kovacik 1,250 (6) 0.03%
Common Stock Carl Richard 130,350 (7) 3.26%
Common Stock Joseph H. Scheib 163,163 (8) 4.10%
Common Stock Howard E. Hartung 10,000 (9) 0.25%
Common Stock James K. McHugh 111,651 (10) 2.77%
Common Stock Michael G. Nicholson 84,084 (11) 3.26%
Common Stock All directors and executive officers as a group (10 persons) 1,076,938 (12) 22.84%
______________________
(1.) Except as otherwise indicated, all shares are directly owned with voting
and investment power held by the person named.
(2.) Represents 16,340 shares of Common Stock owned by Mr. DiPrete, 57,850
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $0.70 to $3.05 per share, and 75,000 unregistered shares
issuable upon exercise of warrants which are currently exercisable at $2.00 per
share.
(3.) Represents -0- shares of Common Stock owned by Mr. Hagans, and 1,250 shares
issuable upon exercise of options which are currently exercisable at $2.00 per
share.
(4.) Represents -0- shares of Common Stock owned by Mr. J. Hartung, 10,000
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $0.70 to $2.00 per share, and 11,000 unregistered shares
issuable upon exercise of warrants which are currently exercisable at $2.00 per
share.
(5.) Represents 100,000 unregistered shares and 2,500 registered shares of
Common Stock owned by Mr. Kasmoch, 50,000 unregistered shares issuable upon
exercise of warrants which are currently exercisable at $1.85 per share, and
252,500 shares issuable upon exercise of options which are currently exercisable
at prices ranging from $1.70 to $2.00 per share.
(6.) Represents -0- shares of Common Stock owned by Mr. Kovacik, and 1,250
shares issuable upon exercise of options which are currently exercisable at
$2.00 per share.
(7.) Represents 51,000 shares of Common Stock owned by Mr. Richard, 18,750
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $0.70 to $2.45 per share, 2,500 shares owned by family
members and 58,100 unregistered shares issuable upon exercise of warrants which
are currently exercisable at prices ranging from $1.85 to $2.00 per share.
(8.) Represents 104,063 shares of Common Stock owned by Mr. Scheib, 22,500
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $0.70 to $2.45 per share, 600 shares owned by a family
member and over which Mr. Scheib acts as custodian, and 36,000 unregistered
shares issuable upon exercise of warrants which are currently exercisable at
prices ranging from $1.85 to $2.00 per share.
(9.) Represents -0- shares of Common Stock owned by Mr. H. Hartung, and 10,000
shares issuable upon exercise of options which are currently exercisable at
$2.00 per share.
(10.) Represents 651 shares of Common Stock owned by Mr. McHugh, and a total of
111,000 shares issuable upon exercise of options which are currently exercisable
at prices ranging from $1.50 to $5.00 per share.
(11.) Represents 84 shares of Common Stock owned by Mr. Nicholson, and a total
of 84,000 shares issuable upon exercise of options which are currently
exercisable at prices ranging from $1.50 to $5.00 per share. Mr. Nicholson
disavows ownership of 50,000 shares owned jointly by Mr. Nicholson, his father,
J. Patrick Nicholson, and his brothers, Robert F. Nicholson and Timothy J.
Nicholson, and accordingly these shares are not included in the totals in the
table above. J. Patrick is a more than 5% beneficial owner and former consultant
to us, Timothy and Robert are former employees.
(12.) Represents 274,638 shares of Common Stock owned by the Directors and
Officers, 3,100 shares owned indirectly, 569,100 shares issuable upon exercise
of options which are currently exercisable at prices ranging from $0.90 to $5.00
per share and a total of 230,100 unregistered shares issuable upon exercise of
warrants which are currently exercisable at prices ranging from $1.85 to $2.00
per share.
EXECUTIVE OFFICERS OF THE COMPANY
Executive officers of the Company are appointed by the Board of Directors
and hold office at the pleasure of the Board. Set forth below is biographical
and other information on the current executive officers of the Company. Mr.
Kasmoch also serves as a member of the Board and his biographical information is
set forth above under the caption "Directors of the Company."
Name Age Position
------------------------- --- ---------------------------------------------
Timothy R. Kasmoch 45 President and Chief Executive Officer
Howard E. Hartung 36 Chief Operating Officer
James K. McHugh 48 Chief Financial Officer, Secretary, Treasurer
Michael G. Nicholson 40 Chief Development Officer
HOWARD E. HARTUNG has been our Chief Operating Officer since September 2005.
From March 2004 to September 2005, Mr. Hartung served as the International Trade
Representative for the State of Michigan's Michigan Economic Development
Corporation, an economic development arm for the State, located in Lansing,
Michigan. Prior to that, Mr. Hartung served as a Product Development Manager
with a technology development firm and as a lobbyist in Columbus, Ohio. Mr.
Hartung is the son of James H. Hartung, a member of our Board of Directors.
JAMES K. MCHUGH has served as our Chief Financial Officer, Secretary and
Treasurer since January 1997. Prior to that date, Mr. McHugh served the Company
and our predecessor company in various financial positions since April 1992.
MICHAEL G. NICHOLSON has served as our Chief Development Officer since September
2004. Prior to that, Mr. Nicholson served as Chief Operating Officer from May
2002 until September 2004, and Vice-President of Sales and Marketing since
December 1996. Prior to December 1996, Mr. Nicholson served us and our
predecessor company in various sales management positions since 1990. Mr.
Nicholson is the son of J. Patrick Nicholson, a reporting beneficial owner of
more than 5% of our outstanding common stock, who also served as our Director
from February 1998 until his resignation from the Board in December 2006. The
Company is currently involved in litigation with J. Patrick Nicholson, which is
described in our Annual Report on Form 10-KSB for the year ended December 31,
2006.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table presents the total compensation paid to our Chief
Executive Officer(s), Chief Development Officer and Chief Financial Officer
during 2006. There were no other executive officers who were serving at the end
of 2006 and whose total compensation exceeded $100,000.
SUMMARY COMPENSATION TABLE
Non-
Equity Nonqualified
Incentive Deferred
Name and Principal Stock Option Plan Compensation All Other
Position Year Salary Bonus Awards Awards Compensation Earnings Compensation TOTAL
---------------------- ---- -------- ----- ------- -------- ------------- ------------ ------------- --------
Timothy R. Kasmoch 2006 $ 52,500 - $55,125 $379,950 - - $ 1,000 $488,575
President and 2005 - - - - - - - $ 0
CEO (1) (4)
Daniel J. Haslinger 2006 $ 2,250 - - $ 7,551 - - $ 102,000 $111,801
Former President 2005 $ 18,000 - $ 4,000 - $ 16,000 - $ 67,000 $105,000
and CEO (1) , (2), (3)
Michael G. Nicholson 2006 $110,000 - - $ 33,581 - - $ 3,015 $146,596
Chief Development 2005 $110,000 - - $ 21,221 - - $ 3,062 $134,283
Officer (5)
James K. McHugh 2006 $ 87,619 - - $111,720 - - $ 360 $199,699
Chief Financial 2005 $ 81,390 - - - - - $ 360 $ 81,750
Officer (6)
(1) Mr. Haslinger served as Chief Executive Officer from January 1, 2005 until
February 14, 2006, at which time Mr. Timothy Kasmoch was appointed CEO. Mr.
Haslinger's compensation reflects the entire fiscal year 2006.
(2) Mr. Haslinger was owed approximately $16,000 for a commission fee earned in
2005 under and pursuant to the terms of his Memorandum of Employment, entered
into by and between Mr. Haslinger and us in September 2004. Mr. Haslinger also
received, through a company owned by him, $60,000 in 2005 and $7,500 in 2006
(through February 13, 2006), pursuant to the terms of his Memorandum of
Employment, entered into by and between Mr. Haslinger and us in September 2004.
Mr. Haslinger also received, through another company owned by him, $7,000 in
2005 for consulting fees. From January 1 to September 1, 2004, Mr. Haslinger was
compensated in his role as our Director and consultant, and received $4,000 of
unregistered common stock in 2005 for these services. Mr. Haslinger also
received, through another company owned by him, $94,500 in 2006 for consulting
services pursuant to the terms of his consulting agreement dated February 13,
2006.
(3) Mr. Haslinger was granted ten-year stock options pursuant to our 2004 N-Viro
International Corporation Stock Option Plan for outside director fees for
meetings attended in 2006, subsequent to his employment ending on February 14,
2006.
(4) Mr. Kasmoch received $55,125 for the value of unregistered shares of common
stock in 2006, pursuant to the terms of his Employment Agreement signed February
14, 2006. Mr. Kasmoch was granted stock options pursuant to our 2004 N-Viro
International Corporation Stock Option Plan valued at $4,250 and cash of $1,000,
for one meeting as an outside director held before February 14, 2006. Mr.
Kasmoch was also granted three-year stock options under the Plan as an employee,
valued at $375,700 for 250,000 options, in December 2006.
(5) Mr. Nicholson received term life insurance premium payment benefits in
2005 of $1,026 and 2006 of $1,140, for a $1,000,000 term policy with his spouse
named as beneficiary. Mr. Nicholson also received $21,221 in 2005 and 2006 for
the deemed bargain-purchase element of stock options granted in May 2004 under
and pursuant to his employment agreement entered into by and between Mr.
Nicholson and the Company in June 2003 and amended in September 2004,
respectively. Mr. Nicholson also received $2,036 in 2005 and $1,875 in 2006 for
interest and fees in connection with a credit facility agreement between us and
Monroe Bank + Trust, signed in February 2003.
(6) Mr. McHugh received term life insurance premium payment benefits in 2005
and 2006 of $360, for a $250,000 term policy with his spouse named as
beneficiary. Mr. McHugh was also granted ten-year stock options pursuant to our
2004 N-Viro International Corporation Stock Option Plan valued at $96,600 for
50,000 options, in December 2006.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION AWARDS STOCK AWARDS
--------------------------------------------------------------------- --------------------------
Equity
Incentive
Plan Market
# of # of Awards: # of Value of
Securities Securities # Securities Shares or Shares or
Underlying Underlying Underlying Units of Units of
Unexercised Unexercised Unexercised Option Option Stock That Stock That
Options (#) Options (#) Unearned Exercise Expiration Have Not Have Not
Name Exercisable Unexercisable Options (#) Price (#) Date Vested (#) Vested ($)
-------------------- -------------- -------------- ------------- ---------- ---------- ------------- -----------
Timothy R. Kasmoch 2,500 - - $ 1.70 2/14/16 - -
Timothy R. Kasmoch 250,000 - - $ 2.00 12/30/16 - -
Daniel J. Haslinger 1,000 - - $ 2.50 5/13/09 - -
Daniel J. Haslinger 500 - - $ 5.1875 5/11/10 - -
Daniel J. Haslinger 1,400 - - $ 1.50 5/10/11 - -
Daniel J. Haslinger 1,400 - - $ 1.50 5/9/12 - -
Daniel J. Haslinger 2,100 - - $ 0.91 5/9/12 - -
Daniel J. Haslinger 21,250 - - $ 3.05 5/12/14 - -
Daniel J. Haslinger 2,500 - - $ 2.50 5/27/14 - -
Daniel J. Haslinger 1,250 - - $ 1.85 6/8/14 - -
Daniel J. Haslinger 1,250 - - $ 1.20 7/15/14 - -
Daniel J. Haslinger 2,500 - - $ 1.95 8/12/14 - -
Daniel J. Haslinger - 2,500 - $ 0.70 7/17/16 - -
Daniel J. Haslinger - 2,500 - $ 1.42 11/13/16 - -
Daniel J. Haslinger - 1,250 - $ 1.80 12/7/16 - -
James K. McHugh 3,000 - - $ 1.5625 5/9/07 - -
James K. McHugh 25,000 - - $ 2.3125 8/14/08 - -
James K. McHugh 6,000 - - $ 5.00 5/11/10 - -
James K. McHugh 5,000 - - $ 1.50 12/14/10 - -
James K. McHugh 10,000 - - $ 1.50 12/6/11 - -
James K. McHugh 12,000 - - $ 2.10 11/10/14 - -
James K. McHugh 50,000 - - $ 2.00 12/30/16 - -
Michael G. Nicholson 3,000 - - $ 1.5625 5/9/07 - -
Michael G. Nicholson 35,000 - - $ 2.3125 8/14/08 - -
Michael G. Nicholson 6,000 - - $ 5.00 5/11/10 - -
Michael G. Nicholson 5,000 - - $ 1.50 12/14/10 - -
Michael G. Nicholson 15,000 - - $ 1.50 12/6/11 - -
Michael G. Nicholson 30,000 - - $ 0.90 5/12/14 - -
Michael G. Nicholson 20,000 - - $ 1.95 5/12/14 - -
Michael G. Nicholson 8,000 - - $ 1.95 11/10/14 - -
STOCK AWARDS
-------------------------------
Equity Equity
Incentive Incentive
Plan Awards: Plan Awards:
# Unearned Market or
Shares, Payout Value
Units or of Unearned
Other Rights Shares, Units
That Have or Other Rights
Not That Have
Name Vested (#) Not Vested (#)
-------------------- ------------- ----------------
Timothy R. Kasmoch - -
Timothy R. Kasmoch - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
Daniel J. Haslinger - -
James K. McHugh - -
James K. McHugh - -
James K. McHugh - -
James K. McHugh - -
James K. McHugh - -
James K. McHugh - -
James K. McHugh - -
Michael G. Nicholson - -
Michael G. Nicholson - -
Michael G. Nicholson - -
Michael G. Nicholson - -
Michael G. Nicholson - -
Michael G. Nicholson - -
Michael G. Nicholson - -
Michael G. Nicholson - -
All options awards were made granted under the Company's current stock
option plan described under the caption "Equity Compensation Plan Information."
EMPLOYMENT AGREEMENTS
On February 14, 2006, in connection with the appointment of Timothy R.
Kasmoch as our President and Chief Executive Officer, we entered into an
employment agreement with Mr. Kasmoch. That agreement was for a one-year term
expiring on February 13, 2007 and provided for a base salary of $60,000 per year
plus 50,000 unregistered shares of our stock. Effective February 13, 2007, we
entered into a new employment agreement with Mr. Kasmoch as our President and
Chief Executive Officer. Mr. Kasmoch's new employment agreement is for a
two-year term commencing on February 13, 2007 and provides for automatic renewal
of successive one-year terms unless notice is provided ninety (90) days prior to
the expiration of the then current term. The agreement provides that Mr. Kasmoch
is to receive an annual base salary of $150,000, subject to annual increase at
the discretion of the Board. In addition, Mr. Kasmoch is eligible for an annual
cash bonus in an amount to be determined, and otherwise subject to the
discretion of, the Board. Under the agreement, this determination is to be based
upon the Board's complete review of Mr. Kasmoch's performance, including the
growth and profitability of the Company.
Generally, Mr. Kasmoch's employment agreement may be terminated by us with
or without cause or by the Employee for any reason. If the agreement is
terminated by us without cause (other than by reason of the death or disability
of Mr. Kasmoch), Mr. Kasmoch will continue to receive his base salary then in
effect for the period between the termination date and the expiration date of
the agreement. If the agreement is terminated for any other reason by either
party, Mr. Kasmoch is entitled to receive his base salary through the effective
date of the termination plus any bonus or incentive compensation which has been
earned or payable through the termination date, as provided for in the
agreement. A copy of Mr. Kasmoch's new Employment Agreement was attached to a
Form 8-K as Exhibit 10.1, filed by us on March 12, 2007.
Prior to Mr. Kasmoch's appointment as President and Chief Executive Officer
effective on February 14, 2006, Daniel J. Haslinger served as our President and
Chief Executive Officer under the terms of a Memorandum of Employment,
originally entered into on September 27, 2004. Under that Memorandum of
Employment, which was terminable "at will," provided for compensation in the
amount of $1,500 per month, retroactive to August 16, 2004. Also on September
27, 2004, we executed a Storage Site Agreement with Micro Macro Integrated
Technologies, Inc., or MMIT, Daniel J. Haslinger and his spouse, Rebecca S.
Haslinger, together referred to as the Haslingers. Mr. Haslinger is Chief
Executive Officer and owner of MMIT. We agreed with MMIT and the Haslingers to
utilize property to transfer material produced at our Toledo Bayview wastewater
treatment facility for $5,000 per month, retroactive to August 16, 2004. At a
meeting of our Board of Directors on February 14, 2006, Mr. Haslinger was
replaced as our President and Chief Executive Officer and the Memorandum of
Employment and the Storage Site Agreement were both terminated. In addition, the
Board approved a consulting agreement with DJH Holdings, LLC, a company owned by
Mr. Haslinger, described under the caption "Certain Relationships and Related
Transactions." The new agreement provides a monthly fee of $9,000 for a minimum
sixty (60) business hours for services rendered as requested by our Chief
Executive Officer, relating to our general business and affairs including
marketing and operations, for an initial period of six months which is renewable
by mutual consent. The consulting agreement was disclosed as Exhibit 10.1 to a
Form 8-K filed on March 20, 2006.
On June 6, 2003, we entered into an Amended and Restated Employment
Agreement, or the 2003 Agreement, with Michael G. Nicholson at a minimum annual
salary of $110,000. The agreement is for a four-year term, subject to periodic
review and termination for breach. The 2003 Agreement also provides that Mr.
Nicholson shall be entitled to (i) bonuses to be payable at the discretion of
the Board, (ii) other benefits, including life and health insurance, (iii) in
the case Mr. Nicholson's employment is terminated before the end of the term and
Mr. Nicholson incurs legal fees in connection with the termination, we will
reimburse him up to $10,000 for legal fees and related expenses, and (iv) stock
options to purchase 50,000 shares of our Common Stock priced as of the date of
execution. In September 2004, we amended the 2003 Agreement with Mr. Nicholson,
primarily to revise the grant of options to provide for an option to purchase
30,000 shares of our Common Stock at $0.90 per share, and an option to purchase
20,000 shares of our common stock at $1.95 per share. All grants were priced
below the fair market value of our stock price at the date of grant, and we are
recognizing an expense over the four-year period to reflect this.
EQUITY COMPENSATION PLAN INFORMATION
The Company maintains a stock option plan for directors, executive officers
and key employees. The current plan was approved by the stockholders in May
2004. The plan authorizes the Board of Directors or a committee thereof, to
grant awards of incentive stock options and non-qualified stock options for up
to a maximum of 1,000,000 shares of common stock. The total number of options
granted as of December 31, 2006 was 749,375, and the number of options available
for future issuance was 250,625. Currently, the plan is administered by the
Compensation Committee.
COMPENSATION OF DIRECTORS
Our Board of Directors has approved the payment of cash compensation to
non-employee directors in exchange for their service on the Board. The amount of
cash compensation to be received by each non-employee director is $1,000 per
regular meeting attended during each calendar year, and $500 per special meeting
attended. Our Board of Directors generally has four regular meetings per
calendar year. The Directors are reimbursed for out-of-pocket expenses incurred
in attending meetings of the Board of Directors or any committees thereof.
Under the Company's stock option plan, approved by the stockholders in May
2004, each non-employee director automatically receives a grant of options to
purchase 2,500 shares of Common Stock for each regular meeting attended, and an
option to purchase 1,250 shares of Common Stock for each special meeting
attended, subject to a maximum of options to purchase 15,000 in any year. This
Plan also provided for the automatic grant to the non-employee Directors to
replace the automatic awards of stock options which were not granted to the
non-employee directors after May 10, 2003 as a result of the termination of the
1998 Plan and the failure of the stockholders to approve the 2003 Stock Option
Plan at the 2003 annual meeting.
Directors who are our employees do not receive any additional compensation
for serving as directors. Directors who are our consultants do not receive any
additional cash compensation for serving as directors, but do receive stock
options per the provisions of the stock option plan.
See "Certain Relationships and Related Transactions" for additional
compensation to directors.
DIRECTOR COMPENSATION
Non- Non- Non-
Fees Equity Qualified Qualified
Earned or Incentive Incentive Deferred All
Paid in Stock Option Plan Plan Compensation Other
Name Cash Awards (1) Awards Compensation Compensation Earnings Compensation (4) TOTAL
---------------------- ---------- ----------- ------- ------------- ------------- ------------- ----------------- --------
Terry J. Logan (3) - - $ 9,550 - - - $ 54,765 $ 64,315
Phillip Levin (3) $ 20,750 - $ 9,550 - - - - $ 30,300
R. Francis DiPrete (2) $ 3,500 $ 112,706 $13,800 - - - $ 1,600 $131,606
Joseph H. Scheib $ 4,000 $ 48,088 $14,170 - - - - $ 66,258
Carl Richard $ 1,000 $ 48,088 $14,170 - - - $ 17,480 $ 80,738
James H. Hartung $ 4,000 $ 16,530 $14,170 - - - - $ 34,700
Mark D. Hagans $ 500 - $ 2,370 - - - - $ 2,870
Thomas L. Kovacik $ 500 - $ 2,370 - - - - $ 2,870
---------- ----------- ------- ------------- ------------- ------------- ----------------- --------
$ 34,250 $ 225,412 $80,150 $ 0 $ 0 $ 0 $ 73,845 $413,657
========== =========== ======= ============= ============= ============= ================= ========
(1) Represents the value of stock warrants issued to Messrs. DiPrete, Scheib,
Richard and Hartung in December 2006. On December 30, 2006, we issued warrants
to purchase shares of our common stock to four members of our Board of Directors
as follows: R. Francis DiPrete (75,000 shares), Joseph Scheib (32,000 shares),
Carl Richard (32,000 shares) and James Hartung (11,000 shares). The award to
each of the directors was based on the recommendation of the Compensation
Committee of the Board of Directors. The Compensation Committee determined these
awards based on a combination of factors, including length of service,
contributions to the recent progress of the Company and extraordinary
contributions as a member of the Board. Each warrant has an exercise price of
$2.00 per share, is exercisable immediately and has an expiration date of
December 30, 2009. A form of the warrant issued to each director (except for the
number of shares which are specified above) was attached as Exhibit 99.2 to the
Form 8-K filed January 31, 2007.
(2) In June 2006, Mr. DiPrete was paid fees of $1,600 for consulting work in
connection with various projects related to sales, and assistance with proxy
solicitations for the 2006 annual stockholders meeting. Mr. DiPrete was also
paid 1,600 stock options valued at $1.33 per share for consulting work performed
in 2005.
(3) Dr. Logan and Mr. Levin resigned from the Board effective
November 14, 2006.
(4) Represents consulting fees paid to Dr. Logan, Mr. DiPrete and Mr.
Richard.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At a meeting of our Board of Directors on February 14, 2006, Mr. Haslinger
was replaced as our President and Chief Executive Officer and the Memorandum of
Employment and the Storage Site Agreement entered into with Mr. Haslinger and
his affiliates were both terminated, as more fully described under the caption
"Employment Agreements." In addition, the Board approved a consulting agreement
with DJH Holdings, LLC, a company owned by Mr. Haslinger. The new agreement
provides a monthly fee of $9,000 for a minimum sixty (60) business hours for
services rendered as requested by our Chief Executive Officer, relating to our
general business and affairs including marketing and operations, for an initial
period of six months which is renewable by mutual consent. The consulting
agreement was disclosed as Exhibit 10.1 to a Form 8-K filed on March 20, 2006.
INDEPENDENT AUDITORS
APPOINTMENT OF UHY LLP
The firm of UHY LLP ("UHY") acts as our principal independent registered
public accounting firm. Through December 31, 2006, UHY had a continuing
relationship with UHY Advisors, Inc. ("Advisors") from which it leased auditing
staff who were full time, permanent employees of Advisors and through which
UHY's partners provide non-audit services. Except for a limited number of
entry-level employees who are required, by applicable regulations, to be direct
employees of UHY in and under the laws of the State of Michigan ("Designated
"Employees"), UHY has no full time employees. Therefore, none of the audit
services performed were provided by permanent full-time employees of UHY, other
than any such services as may have been performed by Designated Employees. UHY
manages and supervises the audit services and audit staff, and is exclusively
responsible for the opinion rendered in connection with its examination.
UHY served as our principal independent registered public accounting firm
for the years ended December 31, 2004 through 2006, and has been selected by us
to serve as our independent auditors for the year ending December 31, 2007. UHY
was approved as our independent auditors by the Board on October 19, 2004.
AUDIT FEES
Audit services of UHY included the audit of our annual financial statements
for 2006 and 2005, and services related to quarterly filings with the SEC
through the reporting period ended September 30, 2006. Fees for these services
totaled approximately $56,600 for 2006 and $53,500 for 2005.
AUDIT RELATED FEES
There were no fees billed for the years ended December 31, 2006 and
December 31, 2005 for assurance and related services by UHY that are reasonably
related to the performance of the audit or review of our financial statements.
TAX FEES
There were no fees billed for the years ended December 31, 2006 and
December 31, 2005 for professional services rendered by UHY for tax compliance,
tax advice, and tax planning.
ALL OTHER FEES
UHY provided assistance on accounting related matters for the year ended
December 31, 2006 totaling $1,375. There were no additional services provided
for the year ended December 31, 2005.
Although the Audit Committee Charter does not explicitly require it, the
Audit Committee approves all engagements of outside auditors before any work is
begun on the engagement.
PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The firm of UHY LLP served as independent auditors for the year ended
December 31, 2006 and has been selected by us to serve as our independent
auditors for the year ending December 31, 2007. 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 2008 because of the
difficulty and expense of making such a substitution. A representative of UHY is
expected to attend the Annual Meeting and therefore will be available to respond
to appropriate questions at the Annual Meeting.
The audit reports of UHY on our consolidated financial statements for the
fiscal years ended December 31, 2006 and 2005 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
audit scope or accounting principles.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF UHY LLP TO SERVE AS OUR INDEPENDENT AUDITORS
FOR THE YEAR ENDING DECEMBER 31, 2007.
OTHER MATTERS
We are 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
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, any
stockholder wishing to have a proposal considered for inclusion in our proxy
solicitation material for the Annual Meeting of Stockholders to be held in 2008
must set forth such proposal in writing and file it with James K. McHugh, Chief
Financial Officer, Treasurer and Corporate Secretary of the Company, no later
than February 9, 2008, the date that is less than 120 days before June 8, 2008.
Further, pursuant to Rule 14a-4, if a stockholder fails to notify us of a
proposal before March 20, 2008, the date that is less than 45 days before May 4,
2008 (the mailing date of this proxy statement), such notice will be considered
untimely and management proxies may use their discretionary voting authority to
vote on any such proposal.
BY THE ORDER OF THE BOARD OF
DIRECTORS
/s/ James K. McHugh
----------------------
James K. McHugh
Chief Financial Officer, Secretary and Treasurer
Exhibit A
---------
N-VIRO INTERNATIONAL CORPORATION
AUDIT COMMITTEE CHARTER
PURPOSE
This Charter has been adopted by the Board of Directors (the "Board") of
N-Viro International Corporation, a Delaware corporation (the "Company"), on
June 5, 2000 for the sole purpose of setting forth the roles and
responsibilities of the Audit Committee (the "Committee") of the Board.
ORGANIZATION AND QUALIFICATION
The Committee shall be composed of not less than three directors, all of
whom shall be designated by the Board from time to time in accordance with the
requirements set forth in this paragraph. Except as otherwise permitted by
applicable laws, rules and regulations and approved by the Board, no director
who is not considered "independent" under the NASDAQ listing standards may be a
member of the Committee and any questions relating to the status of a director
as being "independent" shall be resolved by the Board. Members of the Committee
shall be able to read and understand fundamental financial statements, including
the Company's balance sheet, income statement and cash flow statement. At least
one member of the Committee shall have past employment experience in finance or
accounting, requisite professional certification in accounting or other
comparable experience or background, including a current or past position as a
chief executive or financial officer or other senior officer with financial
oversight responsibilities.
ROLE OF THE COMMITTEE
The Committee shall assist the Board in fulfilling its oversight
responsibilities by monitoring and reviewing the corporate accounting and
reporting practices of the Company.
RESPONSIBILITIES OF THE COMMITTEE
The Committee shall be responsible for obtaining the approval of the Board
of this Charter and to review the Charter at least annually and recommend
changes to it as it shall see fit. Specifically, the Committee shall:
- Recommend to the Directors the independent auditors to be selected or
proposed to the stockholders to audit the financial statements of the Company
and its subsidiaries; provided, however, that the Board is ultimately
-------- -------
responsible for the engagement and evaluation of the independent auditors and
the independent auditors shall be accountable to the Board and the Committee.
- Discuss with the independent auditors the matters required to be discussed
by SAS 61 (Codification of Statements on Auditing Standards, AU 380), as it may
be modified or supplemented, receive, in connection with any audit by the
independent auditors of the financial statements of the Company, the written
disclosures and the letter from the independent auditors regarding the
independent auditors' independence required by Independence Standards Board
Standard No. 1, as it may be modified or supplemented, and discuss with the
independent auditors the independent auditors' independence.
- Review the quarterly financial statements of the Company and its
subsidiaries with management and the independent auditors prior to the issuance
of a press release of such results or filing of the Form 10-Q. The Chairman of
the Committee may represent the Committee for this purpose.
- Review the annual financial statements of the Company and its subsidiaries
to be filed on Annual Report Form 10-K with management and the independent
auditors and report the results of the annual audit to the Board and confirm
that the independent auditors are satisfied with the disclosure and content of
the financial statements and the cooperation received from management during the
course of the audit.
- Review with management and the independent auditors any significant
financial reporting issues and practices including any changes in, or adoptions
of, accounting principles and disclosure practices and the adequacy and
effectiveness of the accounting and financial controls of the Company.
- Investigate any matter brought to the attention of the Committee within
the scope of its duties.
- Provide such reports in the proxy statements of the Company as are
required of the Committee by applicable law or exchange regulation (including,
without limitation, pursuant to Item 7(e)(3) of Schedule 14A promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Item
306 of Regulation S-K promulgated under the Exchange Act).
- Based on its reviews, discussions and other actions taken as described
above, determine whether it shall recommend to the Board that the annual
financial statements for any fiscal year of the Company be included in the
Company's Annual Report on Form 10-K for such fiscal year and recommend such
inclusion if the Committee shall determine to do so.
PROCEDURES
The Committee shall meet in accordance with an established schedule and
special meetings may be called by the Chairman of the Committee or by any two
other members as deemed appropriate by them. The Committee shall meet (a) out
of the presence of management, with the independent auditors on a regular basis,
(b) with representatives of senior management quarterly and (c) with other
employees of the Company as the Committee shall determine in connection with the
Company's performance of its internal audit procedures. In addition, but not in
lieu of any of the meetings described in the immediately preceding sentence, the
Committee may take action through further meetings or through a written consent
in lieu of any special meeting.
A number of members of the Committee equal to at least a majority of the
whole Committee shall constitute a quorum for the transaction of any business by
the Committee, whether at a meeting or by written consent.
The Committee shall report its activities to the full Board whenever the
approval of the Board is required or when Committee members determine that a
matter necessitates deliberation or inquiry by the full Board. In addition, the
Board may call for a report of the Committee at any time, as determined by the
Board.
The Committee shall utilize adequate Company resources to conduct, or have
conducted, such regular and special reviews and examinations as are necessary to
fulfill its responsibilities. Additionally, the Committee may retain special
counsel or experts when the circumstances warrant such actions, after notice to
the Chairman of the Board.
LIMITATIONS ON SCOPE
The Committee members shall serve on the Committee from time to time,
subject to the understanding on their part and the part of Company management
and employees and the independent auditors that:
- The Committee members expect the Company's management and employees and
the independent auditors to cooperate with the Committee and to provide the
Committee with prompt and accurate information so that the committee can
discharge its duties properly.
- To the extent permitted by law, the Committee and the members thereof
shall be entitled to rely on the information and opinions of the persons and
entities noted above in carrying out its responsibilities.
- The Committee members, in agreeing to serve on the Committee, do so in
reliance on, among other things, the indemnification and advancement of expenses
provisions of the Company's Certificate of Incorporation and other applicable
indemnification provisions in any agreement between the Company and any member
of the Committee.
- While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty or responsibility of the Committee to plan or
conduct audits or to determine that the Company's financial statements are true
and fair or in accordance with generally accepted accounting principles as
applied in the United States. These are the responsibility of the independent
auditors and the Board, respectively.
- While the Committee is encouraged to act as a link between the independent
auditors, management and the Board, including as a conduit for the independent
auditors and management to raise matters of importance, which may include items
of dispute, and to initiate or request investigations of matters that it
considers necessary or appropriate to carry out its responsibilities under this
Charter, it is not the duty nor the obligation of the Committee to conduct
investigations, to resolve disputes or disagreements, if any, between management
and the independent auditors or to assure compliance with applicable laws and/or
regulations or the Company's Code of Conduct.
PUBLIC FILING OF CHARTER
To the extent required by the rules and regulations of the Securities and
Exchange Commission (including, without limitation, Item 7(e)(3) of Schedule 14A
promulgated under the Exchange Act), this Charter shall be publicly filed as an
appendix to the proxy statements of the Company with respect to Annual Meetings
of the Stockholders of the Company.
MINUTES
The proceedings and decisions of the Committee shall be recorded in
minutes, which shall be circulated to all members of the Committee for approval
prior to their signature by the Chairman of the Committee and then circulation
to the members of the Board. The Company Secretary shall be the Secretary of
the Committee.
[N-Viro International Corporation logo]
c/o Corporate Election Services
P. O. Box 1150
Pittsburgh, PA 15230
--------------------------------------------------------------------------------
VOTE BY TELEPHONE
--------------------------------------------------------------------------------
Have your proxy card available when you call Toll-Free 1-888-693-8683 using a
touch-tone phone and follow the simple instructions to record your vote.
--------------------------------------------------------------------------------
VOTE BY INTERNET
--------------------------------------------------------------------------------
Have your proxy card available when you access the website www.cesvote.com and
follow the simple instructions to record your vote.
--------------------------------------------------------------------------------
VOTE BY MAIL
--------------------------------------------------------------------------------
Please mark, sign and date your proxy card and return it in the postage-paid
envelope provided or return it to: Corporate Election Services, P.O. Box 1150,
Pittsburgh PA 15230-1150.
Vote by Telephone Vote by Internet Vote by Mail
----------------------- ---------------------- -------------------
Call Toll-Free using a Access the Website and Return your proxy
touch-tone telephone: cast your vote: in the postage-paid
1-888-693-8683 www.cesvote.com envelope provided
Vote 24 hours a day, 7 days a week!
If you vote by telephone or internet, please do not send your proxy by mail.
[Graphic Omitted]
Proxy card must be signed and dated below.
Please fold and detach card at perforation before mailing.
--------------------------------------------------------------------------------
[N-Viro International Corporation logo]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 8, 2007.
Revoking all prior proxies, the undersigned, a stockholder of N-VIRO
INTERNATIONAL CORPORATION (the "Company"), hereby appoints Timothy R. Kasmoch
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 at Brandywine
Country Club, 6904 Salisbury Road, Maumee, Ohio, 43537, on June 8, 2007 at 10:00
a.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 on the reverse. In
their discretion, the proxies are authorized to vote upon any other matters
which may properly come before the meeting or any adjournment thereof.
Dated: , 2007
--------------------
-------------------------------------------
Signature
-------------------------------------------
Signature
Please sign exactly as your name appears to the left. 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.
PROXY CARD MUST BE SIGNED AND DATED BELOW.
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
--------------------------------------------------------------------------------
N-VIRO INTERNATIONAL CORPORATION PROXY
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTIONS
ARE INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE LISTED NOMINEES
AS CLASS I DIRECTORS AND FOR PROPOSAL 2.
1. To elect four Class I directors to serve for a term of two years and
until their successors are elected and qualified:
Nominees:
1. R. Francis DiPrete FOR WITHHOLD
2. Carl Richard FOR WITHHOLD
3. Joseph H. Scheib FOR WITHHOLD
4. Mark Hagans FOR WITHHOLD
2. To ratify the appointment of UHY LLP as independent auditors for the
Company for 2007.
FOR AGAINST ABSTAIN
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING
Continued and to be signed and dated on the reverse side.