UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
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Soliciting Material Pursuant to Sec.240.14a-12
N-VIRO INTERNATIONAL CORPORATION
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July , 2011
To all Our Stockholders:
The Board of Directors cordially invites you to attend our Annual Meeting
of Stockholders. The meeting will be held at the Toledo Yacht Club, 3900 North
Summit Street #2, Toledo, Ohio, 43611, on August 4, 2011. 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 2010 and the first quarter of
2011. Our performance for the year ended December 31, 2010 is discussed in the
enclosed 2010 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
2254 Centennial Road
Toledo, Ohio 43617
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 4, 2011
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that our Annual Meeting of Stockholders will be held
at the Toledo Yacht Club, 3900 North Summit Street, Toledo, Ohio, 43611, on
August 4, 2011. 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 December 31, 2011.
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 2010 Annual Report is also enclosed. Stockholders of record as of
the close of business on June 6, 2011 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
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James K. McHugh
Chief Financial Officer, Secretary and Treasurer
Toledo, Ohio
July _, 2011
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
2254 CENTENNIAL ROAD
TOLEDO, OHIO 43617
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 4, 2011
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 (THE "COMPANY") ON OR ABOUT JULY __, 2011, IN
CONNECTION WITH THE SOLICITATION OF PROXIES BY OUR BOARD OF DIRECTORS TO BE
VOTED AT OUR ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL MEETING"), WHICH IS
SCHEDULED TO BE HELD ON THURSDAY, AUGUST 4, 2011 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 June 6,
2011. 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 5,967,928 shares of Common Stock outstanding.
WHAT VOTE IS REQUIRED TO APPROVE EACH MATTER?
Proposal One - Election of Directors - Directors will be elected by a
majority of the votes cast, meaning that the number of votes cast "for" a
director nominee must exceed the number of votes cast "against" that director
nominee.
Proposal Two - Ratification of the Selection of UHY LLP - The affirmative
vote of a majority of the shares of Common Stock present or represented by proxy
at the meeting is needed to ratify the selection of UHY LLP as our independent
registered public accounting firm for the fiscal year ending December 31, 2011.
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 all two proposals. 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, such entity
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 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. All of the proposals 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.
WHAT EFFECT WILL ABSTENTIONS AND BROKER NON-VOTES HAVE ON THE PROPOSALS?
Shares not present at the meeting and shares voting "abstain" have no
effect on the election of directors. For the other proposal, abstentions have
the same effect as negative votes. Broker non-votes (shares held by brokers
that do not have discretionary authority to vote on a matter and have not
received voting instructions from their clients) will have no effect on the
other proposal.
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 changed effective May 1, 2011 and is now located at
2254 Centennial Road, Toledo, Ohio 43611. Our telephone number remains (419)
535-6374.
FORM 10-K AVAILABLE
A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2010, 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 "Financial
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Reporting".
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors, pursuant to our Third Amended and Restated
Certificate of Incorporation and Second Amended and Restated 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 By-Laws
provide 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. 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 seven directors - four Class I
Directors: Mark D. Hagans, Carl Richard, Joseph H. Scheib and Joan B. Wills;
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 2011 and 2012,
respectively).
Each of our current Class I Directors - Mark D. Hagans, Carl Richard,
Joseph H. Scheib and Joan B. Wills - 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 a Class I Director must be elected by a
majority of the votes cast, meaning that the number of votes cast "for" a
director nominee must exceed the number of votes cast "against" that director
nominee. 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.
However, our Board has adopted a policy under which the Board will nominate
for election or re-election as a director only candidates who agree to tender,
promptly following their failure to receive the required vote for election or
re-election at the next meeting at which they would face election or
re-election, an irrevocable resignation that will be effective upon acceptance
by the Board. In addition, the Board will fill director vacancies and new
directorships only with candidates who agree to tender the same form of
resignation, promptly following their appointment to the Board. Each of Messrs.
Hagans, Richard and Scheib and Ms. Wills has submitted such a resignation to the
Board.
THE BOARD OF DIRECTORS RECOMMENDS THAT MESSRS. HAGANS, RICHARD AND SCHEIB
AND MS. WILLS 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 Board is currently composed of four Class I Directors: Mark D. Hagans,
Carl Richard, Joseph H. Scheib and Joan B. Wills; 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 2011 and 2012, 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.
The following table sets forth the names and ages of our directors.
Name Age Position
------------------ --- --------------------------------------------------------
Mark D. Hagans 44 Class I Director*
James H. Hartung 68 Class II Director, Chairman of the Board
Timothy R. Kasmoch 49 Class II Director, President and Chief Executive Officer
Thomas L. Kovacik 63 Class II Director
Carl Richard 84 Class I Director*
Joseph H. Scheib 54 Class I Director*
Joan B. Wills 58 Class I Director*
_____________
* Directors currently nominated for re-election.
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, Finance and Technology Committees. Mr. Hagans'
experience as a lawyer and businessman enables him to bring valuable resources
to the Board.
JAMES H. HARTUNG is the former President and Chief Executive Officer of the
Toledo-Lucas County (Ohio) Port Authority, a position he held from 1994 until
2008. Mr. Hartung has served as our Director since January 2006 and is a member
of the Board's Compensation and Nominating Committees. Mr. Hartung presently
also serves as the Chairman of the Board/Executive Vice-President at Seasnake
World Wide Marketing LLC, a marketing concern commercializing the Seasnake
shipping system for the marine transportation of liquid, dry bulk, break-bulk
and inter-modal container cargo; and Senior Associate at James A. Poure &
Associates, which provides diverse management consultant services to small to
medium size business, family owned business and entrepreneurial start-ups. Mr.
Hartung's qualifications to serve as a director and our Chairman of the Board
consist of several years experience as a businessman, as an organizational
leader and community organizer, and in dealings with local government and
related agencies that enable him to bring valuable insights to the Board.
TIMOTHY R. KASMOCH has been our President and Chief Executive Officer since
February 2006 and a director since January 2006. Until April 1, 2007, Mr.
Kasmoch was also President and CEO of Tri-State Garden Supply, d/b/a
Gardenscape, a bagger and distributor of lawn and garden products, which has
provided trucking services to our Company. Mr. Kasmoch is a graduate of Penn
State University. Mr. Kasmoch is a member of the Board's Finance and Technology
Committees. Mr. Kasmoch's qualifications to serve as a director of the Company
consist of his experience in the soil and distribution business as well as an
extensive knowledge of the transportation and trucking industry. Mr. Kasmoch's
strength is in strategic planning and he possesses a broad, fundamental
understanding of the business drivers affecting us. He is the only "insider" on
the Board.
THOMAS L. KOVACIK is 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, and the President of
Kovacik Consulting, a business consulting company. 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
and Technology Committees. Mr. Kovacik's qualifications to serve as a director
of the Company consist of his experience in the environmental, government and
utilities industries, and his prior position with us as a divisional president.
His strength in strategic planning and transactional experience offers a unique
perspective to the Board.
CARL RICHARD is the former Executive Vice-President of P.R. Transportation, a
trucking company located in Toledo, Ohio, and was a consultant to us from
January 2006 to April 2007. 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. Mr. Richard's qualifications to serve as a director of
the Company consist of his extensive experience in the transportation and
trucking industry.
JOSEPH H. SCHEIB is a Certified Public Accountant and is the Financial
Controller for Verity Investments, Inc., a registered investment advisory firm
in Durham, North Carolina. From February 2003 until 2010, Mr. Scheib was the
Chief Financial Officer of Broad Street Software Group in Edenton, North
Carolina, and from May 2000 until February 2003 he 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 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 Nominating Committees. Mr. Scheib's
qualifications to serve as a director of the Company consist of his strong
financial and asset management experience and serving the Company in a financial
oversight role as the Chair of the Audit Committee. Given his extensive
knowledge and experience in finance, Mr. Scheib has been determined to be an
audit committee financial expert by the Board.
JOAN B. WILLS is currently legal counsel for The Narragansett Bay Commission, a
regional sewer authority located in Providence, Rhode Island, a position she has
held since 2008. Also, Ms. Wills is currently Co-Trustee of the Cooke Family
Trust, an owner of more than 5% of N-Viro International Corporation common
stock. From 2006 until 2008, Ms. Wills provided legal counsel to the Rhode
Island Office of Legislative Counsel, an agency involved in drafting new
legislation and amendments to the State of Rhode Island. Ms. Wills has been a
practicing attorney at various points in her career, and holds a Bachelor of
Arts degree from the University of Rhode Island and a Juris Doctorate from
Suffolk University Law School in Boston. Ms. Wills has served as our Director
since August 2009 and is a member of the Compensation Committee. Ms. Wills'
qualifications to serve as a director of the Company consist of her experience
as an attorney in the utilities industry.
KEY RELATIONSHIPS
Joan Wills is currently Co-Trustee of the Cooke Family Trust, an owner of
more than 5% of our common stock.
CORPORATE GOVERNANCE AND BOARD MATTERS
OUR BOARD OF DIRECTORS
Our business, property and affairs are managed under the direction of our
Board. We have determined that the Company's interests are best served by
having a Chairman of the Board who is independent of the management of the
Company because it is our view this inherently strengthens board independence in
dealing with issues that closely involve management. Our Chief Executive
Officer has responsibility for setting our strategic direction and the
day-to-day leadership and performance, while the Chairman of the Board has a
greater focus on long-range Company goals and plans and governance of our Board
of Directors. This balance between the two positions enables Mr. Kasmoch to
focus on the operational and strategic challenges we presently face, with Mr.
Hartung providing board leadership on matters of governance and management
oversight.
Our Board, as a whole, has the responsibility for risk oversight of
management. The role of our Board of Directors is to oversee the President and
Chief Executive Officer, the Executive Vice President and the Chief Financial
Officer in the operation of the Company, including management's establishment
and implementation of appropriate practices and policies with respect to areas
of potentially significant risk to us. Our Board considers risks to the Company
as part of the strategic planning process and thorough review of compliance
issues in committees of our Board, as appropriate. While the Board has the
ultimate oversight responsibility for such risk management process, various
committees of the Board are structured to oversee specific risks in the areas
covered by their respective assignments such as audits or compensation. In
addition, our Board may retain, on such terms as determined by the Board and in
its sole discretion, independent legal, financial and other consultants and
advisors to advise and assist the Board in fulfilling its oversight
responsibilities. Currently, there are no such consultants in any category
assisting or advising the Company.
Management is responsible for N-Viro's day-to-day risk management, and the
entire Board's role is to engage in informed oversight. Our Chief Executive
Officer is a member of the Board of Directors, and our Chief Financial Officer
and Executive Vice President/General Counsel regularly attend Board meetings,
which helps facilitate discussions regarding risk between the Board and our
senior management, as well as the exchange of risk-related information or
concerns between the Board and the senior management. The Board believes Mr.
Kasmoch's service as Chief Executive Officer and on the Board is appropriate
because it bridges a critical gap between our management and the Board, enabling
the Board to benefit from management's perspective on our business while the
Board performs its oversight function.
The Company's philosophy about diversity among its Board members is
discussed below under "Nominating Committee."
MEETINGS OF THE BOARD OF DIRECTORS
Our Board held eight meetings during 2010, consisting of one regular
meeting and seven special meetings. Each director attended 100% 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
and Board will consider in determining whether or not to renominate a current
Board member. All members of the Board serving at the time attended the 2010
Annual Meeting, except Mr. Scheib.
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, 2254
Centennial Road, Toledo, OH 43611. 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 our members consist
of independent directors, as defined under the NASDAQ rules. The Board has
reviewed the independence of its members, applying the NASDAQ standards and
considering other commercial, legal, accounting and familial relationships
between the directors and us. The Board has determined that all of the
directors and director nominees are independent other than Mr. Kasmoch, who is
not an independent director by virtue of his current position as our Chief
Executive Officer.
CODE OF ETHICS
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 was attached as Exhibit
14.1 to the Annual Report on Form 10-K for the year ended December 31, 2010, and
is posted on our web site at www.nviro.com.
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COMMITTEES OF THE BOARD OF DIRECTORS
The Board has the following standing committees: the Audit Committee, the
Compensation Committee, the Finance Committee, the Nominating Committee and the
Technology Committee. The composition and function of each Committee is set
forth below:
DIRECTOR AUDIT COMPENSATION NOMINATING FINANCE TECHNOLOGY
------------------ ----- ------------ ---------- ------- ----------
Mark D. Hagans X X* X
James H. Hartung X X
Timothy R. Kasmoch X X*
Thomas L. Kovacik X* X
Carl Richard X
Joseph H. Scheib X* X* X
Joan B. Wills X
* Committee Chair
AUDIT COMMITTEE
Our Audit Committee consisted of Messrs. Scheib and Hagans. In accordance
with our Audit Committee Charter, each of the Audit Committee members must be
"independent" as determined under the NASDAQ rules. The Audit Committee
currently is not subject to, and does not follow, the independence criteria set
forth in Section 10A of the Securities Exchange Act 1934, as amended. The Board
has determined that each of the directors who serve on the Audit Committee are
"independent" under the NASDAQ rules, meaning that neither of them has a
relationship with us that may interfere with their independence from us and our
management. Further, the Board has determined that Mr. Scheib qualifies as a
"financial expert" as defined by the Securities and Exchange Commission (the
"SEC").
The Audit Committee 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. During 2010,
the Audit Committee met three times. The Audit Committee has retained UHY LLP
to conduct the audit for the year ended December 31, 2011. The Audit Committee
is governed by a written charter, a copy of which was attached to the Proxy
Statement for our annual meeting held on June 8, 2007.
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 consists of Messrs. Kovacik and Hartung and Ms. Wills. The
Compensation Committee met three times during 2010.
The Board has determined that all of the members of the committee are
"independent" as determined under the NASDAQ standards.
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. The Finance Committee met two times during 2010.
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 Nominating Committee met one time during 2010.
The Board has determined that all of the members of the committee are
"independent" as determined under the NASDAQ standards.
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. Presently, the Nominating
Committee does not consider diversity as a characteristic in its selection of
candidates except to the extent that the Nominating Committee seeks to expand
the range of categories of experience and relationships in different aspects of
the waste management process the Company requires for the different foci of its
business and potential contacts with sources of business opportunity for the
Company.
The Nominating Committee will consider all stockholder recommendations of
proposed director nominees, if such recommendations are timely received under
applicable SEC regulations and include all of the information required to be
included as set forth in the By-Laws. To be considered "timely received,"
recommendations must be received in writing at our principal executive offices,
at N-Viro International Corporation, 2254 Centennial Road, Toledo, Ohio 43611,
Attention: Chairman, Nominating Committee, c/o James K. McHugh, Corporate
Secretary, no later than February 25, 2012.
All candidates recommended by stockholders 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. 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" under the NASDAQ
standards. 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; consents to serve on the
Board if elected; and a statement whether such candidate, if elected, intends to
tender, promptly following such person's election or re-election, an irrevocable
resignation effective upon such person's failure to receive the required vote
for re-election at the next meeting at which such person would face re-election.
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 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 both our current stock option plans (the N-Viro International
Corporation Second Amended and Restated 2004 Stock Option Plan ["2004 Plan"] and
the N-Viro International Corporation 2010 Stock Option Plan ["2010 Plan"]), each
non-employee Director automatically receives a grant of options to purchase
2,500 or 5,000 shares, respectively, of Common Stock for each regular meeting
attended, and an option to purchase 1,250 or 2,500 shares, respectively, of
Common Stock for each special meeting attended, subject to a maximum of 15,000
or 30,000 options, respectively, in any calendar year.
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 either the 2004 Plan or the 2010 Plan.
See "Certain Relationships and Related Transactions" for additional
compensation to directors.
DIRECTOR COMPENSATION
Fees Non-Equity Non-Qualified Non-Qualified
Earned or Incentive Incentive Deferred All
Paid in Stock Option Plan Plan Compensation Other
Name Cash Awards Awards Compensation Compensation Earnings Compensation (1) TOTAL
------------------ ---------- ------- -------- ------------- -------------- -------------- ----------------- -------
Joseph H. Scheib $ 3,000 - $ 34,785 - - - - $ 37,785
Carl Richard $ 3,000 - $ 34,785 - - - - $ 37,785
James H. Hartung $ 3,000 - $ 34,785 - - - - $ 37,785
Mark D. Hagans $ 3,000 - $ 34,785 - - - - $ 37,785
Thomas L. Kovacik $ 3,000 - $ 34,785 - - - $ 31,421 $ 69,206
Joan B. Wills $ 3,000 - $ 34,785 - - - - $ 37,785
Timothy R. Kasmoch - - - - - - - $ 0
---------- ------- -------- ------------- -------------- -------------- ----------------- --------
$ 18,000 $ 0 $208,710 $ 0 $ 0 $ 0 $ 31,421 $258,131
========== ======= ======== ============= ============== ============== ================= ========
(1) represents a consulting fee paid to Mr. Kovacik in 2010 with 10,000 stock options.
PROPOSAL 2 - RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS
The firm of UHY LLP served as independent auditors for the year ended
December 31, 2010 and has been selected by us to serve as our independent
auditors for the year ending December 31, 2011. 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 2012 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, 2010 and 2009 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, 2011.
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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We had outstanding 5,967,928 shares of Common Stock, $.01 par value per
share, or the Common Stock, on June 6, 2011, which constitutes the only class of
our outstanding voting securities.
FIVE PERCENT STOCKHOLDERS
At June 6, 2011, the following were the only persons known to us to own
beneficially more than 5% of the outstanding shares of Common Stock:
Title Name and Amount and Percentage of
of Address of Nature of Outstanding Shares
Class Beneficial Owner Beneficial Ownership of Common Stock
------------ ------------------------------ --------------------- -------------------
Cooke Family Trust
90 Grande Brook Circle, #1526
Common Stock Wakefield, Rhode Island 02879 673,221 (1) 11.1%
----------------------------------------------------------------------------------------
VC Energy I, LLC
3900 Paradise Road, Suite U
Common Stock Las Vegas, NV 89169 800,000 (2) 12.6%
1. The shares attributed to the Cooke Family Trust include 573,221 shares owned
beneficially and 100,000 in Common Stock warrants exercisable to purchase an equal
number of shares of Common Stock. This information was derived from communication with
the Cooke Family Trust.
2. The shares attributed to VC Energy I, LLC include 400,000 shares owned
beneficially and 400,000 in Common Stock warrants exercisable to purchase an equal
number of shares of Common Stock. This information was derived from the Schedule 13G
filed on July 8, 2010.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of June 6, 2011, 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 5,967,928 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.
Amount and Nature of Percent of Class
Title of Class Name of Beneficial Owner Beneficial Ownership 1 Class
-------------- ----------------------------------------------------------- -------------------- -- -----------------
Common Stock Mark D. Hagans 44,150 2 0.74%
Common Stock James H. Hartung 62,250 3 1.04%
Common Stock Timothy R. Kasmoch 866,500 4 12.94%
Common Stock Thomas L. Kovacik 52,500 5 0.88%
Common Stock Carl Richard 183,040 6 3.01%
Common Stock Joseph H. Scheib 241,072 7 3.98%
Common Stock Joan B. Wills 699,471 8 11.69%
Common Stock Robert W. Bohmer 423,600 9 6.66%
Common Stock James K. McHugh 218,920 10 3.56%
Common Stock All directors and executive officers as a group (9 persons) 2,791,503 11 36.01%
1. Except as otherwise indicated, all shares are directly owned with voting
and investment power held by the person named.
2. Represents 4,450 shares of Common Stock owned by Mr. Hagans and 39,700
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $1.94 to $3.90 per share.
3. Represents 2,610 shares of Common Stock owned by Mr. Hartung, 48,750
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $1.42 to $3.90 per share and 10,890 unregistered shares
issuable upon exercise of warrants which are currently exercisable at $2.00 per
share.
4. Represents 100,000 unregistered shares and 8,000 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
708,500 shares issuable upon exercise of options which are currently exercisable
at prices ranging from $1.70 to $3.27 per share.
5. Represents 1,000 shares of Common Stock owned by Mr. Kovacik and 51,500
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $1.82 to $3.90 per share.
6. Represents 65,601 shares of Common Stock owned by Mr. Richard, 60,000
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $0.70 to $3.90 per share and 57,439 unregistered shares
issuable upon exercise of warrants which are currently exercisable at prices
ranging from $1.85 to $2.00 per share.
7. Represents 124,922 shares of Common Stock owned by Mr. Scheib, 61,250
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $0.70 to $3.90 per share, 600 shares owned by a family
member over which Mr. Scheib acts as custodian and 54,300 unregistered shares
issuable upon exercise of warrants which are currently exercisable at prices
ranging from $1.85 to $2.52 per share.
8. Represents 10,000 shares of Common Stock owned by Ms. Wills, 16,250
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $2.66 to $3.53 per share and 673,221 shares of Common Stock
owned beneficially by the Cooke Family Trust, a more than 5% stockholder of
which Ms. Wills is a trustee. See further information in the section "Five
Percent Stockholders".
9. Represents 2,600 shares of Common Stock owned by Mr. Bohmer and 421,000
shares issuable upon exercise of options which are currently exercisable at
prices ranging from $1.94 to $3.27 per share.
10. Represents 13,920 shares of Common Stock owned by Mr. McHugh and a total
of 205,000 shares issuable upon exercise of options which are currently
exercisable at prices ranging from $1.50 to $3.27 per share.
11. Represents 333,103 shares of Common Stock owned by the directors and
officers, 673,821 shares owned indirectly, 1,611,950 shares issuable upon
exercise of options which are currently exercisable at prices ranging from $0.70
to $3.90 per share and a total of 172,629 unregistered shares issuable upon
exercise of warrants which are currently exercisable at prices ranging from
$1.85 to $2.52 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 49 President and Chief Executive Officer
Robert W. Bohmer 41 Executive Vice-President and General Counsel
James K. McHugh 52 Chief Financial Officer, Secretary and Treasurer
ROBERT W. BOHMER has been our Executive Vice-President and General Counsel since
July 2007. From 1996 until joining the Company, Mr. Bohmer had been a partner
with the law firm of Watkins, Bates and Carey, LLP, Toledo, Ohio. From 2005
through June 2007, Mr. Bohmer had served as general outside counsel to the
Company.
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
in various financial positions since April 1992, and was a key member of the
team that took the Company public in 1993.
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table presents the total compensation paid to our Chief
Executive Officer, Executive Vice President and Chief Financial Officer during
2010 and 2009. There were no other executive officers who were serving at the
end of 2010 or 2009 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 (4) Compensation Earnings Compensation TOTAL
--------------------------- ---- -------- ------ ------ ----------- ------------ ------------ ------------- --------
TIMOTHY R. KASMOCH 2010 $150,000 - - $ 446,152 - - $ 21,518 $617,670
President and Chief 2009 $150,000 - - $ 570,376 - - $ 11,000 $731,376
Executive Officer (1)
ROBERT W. BOHMER 2010 $150,000 - - $ 373,763 - - $ 0 $523,763
Executive Vice-President + 2009 $150,000 - - $ 454,344 - - $ 0 $604,344
General Counsel (2)
JAMES K. MCHUGH 2010 $125,000 $7,810 - $ 94,926 - - $ 399 $228,135
Chief Financial Officer, 2009 $116,688 - - $ 190,746 - - $ 399 $307,833
Secretary + Treasurer (3)
(1) For the "All Other Compensation" column, Mr. Kasmoch's spouse was
compensated for outside consulting services rendered to the Company at various
times during 2009 and 2010, in addition to wages paid in the last quarter of
2010 after her hiring as a full time employee. All compensation was in cash.
(2) Mr. Bohmer's value of the 2009 Option Award includes the 2007 Option
Award recorded as an expense in the amount of $46,667. The value of the 2010
Option Award includes the 2007 Option Award recorded as an expense in the amount
of $70,000.
(3) For the "All Other Compensation" column, Mr. McHugh is taxed on the
imputed benefit of a life insurance policy that benefits his personal
beneficiary for one-half the face value of the policy and N-Viro International
Corporation for the other one-half.
(4) The amounts included in the Option Awards column include the aggregate
grant date fair value of options granted in the fiscal year computed in
accordance with FASB ASC Topic 718. We continue to use the Black-Scholes model
to measure the grant date fair value of stock options. For a discussion of the
valuation assumptions used to value the options, see Note 5 to our Consolidated
Financial Statements included in this annual report on Form 10-K for the fiscal
year ended December 31, 2010.
2010 GRANTS OF PLAN BASED AWARDS
Estimated Future Payouts Under Estimated Future Payouts Under
Non-Equity Incentive Plan Awards Equity Incentive Plan Awards
Grant Approval -------------------------------------- --------------------------------------
Name Date (1) Date Threshold ($) Target ($) Maximum ($) Threshold (#) Target (#) Maximum (#)
------------------ ---------- --------- ------------- ---------- ----------- ------------- ---------- -----------
Timothy R. Kasmoch 3/17/2010 3/17/2010 - - - - - 470,000
Robert W. Bohmer 3/17/2010 3/17/2010 - - - - - 320,000
James K. McHugh 3/17/2010 3/17/2010 - - - - - 100,000
Full Grant Base Price of
Date Fair Option
Name Value ($) Awards ($/shr.)
------------------ ---------- ---------------
Timothy R. Kasmoch 1,245,074 3.27
Robert W. Bohmer 847,710 3.27
James K. McHugh 264,909 3.27
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 250,000 - - $ 2.00 12/31/11 - -
Timothy R. Kasmoch 2,500 - - $ 1.70 2/15/16 - -
Timothy R. Kasmoch 25,000 - - $ 1.94 7/11/19 - -
Timothy R. Kasmoch 243,000 - - $ 2.23 7/22/19 - -
Timothy R. Kasmoch 188,000 282,000 - $ 3.27 3/18/20 - -
Robert W. Bohmer 100,000 - - $ 2.80 6/13/17 - -
Robert W. Bohmer 25,000 - - $ 1.94 7/11/19 - -
Robert W. Bohmer 168,000 - - $ 2.23 7/22/19 - -
Robert W. Bohmer 128,000 192,000 - $ 3.27 3/18/20 - -
James K. McHugh 10,000 - - $ 1.50 12/7/11 - -
James K. McHugh 12,000 - - $ 2.10 11/11/14 - -
James K. McHugh 50,000 - - $ 2.00 12/31/16 - -
James K. McHugh 25,000 - - $ 1.94 7/11/19 - -
James K. McHugh 68,000 - - $ 2.23 7/22/19 - -
James K. McHugh 40,000 60,000 - $ 3.27 3/18/20 - -
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 - -
Timothy R. Kasmoch - -
Timothy R. Kasmoch - -
Timothy R. Kasmoch - -
Robert W. Bohmer - -
Robert W. Bohmer - -
Robert W. Bohmer - -
Robert W. Bohmer - -
James K. McHugh - -
James K. McHugh - -
James K. McHugh - -
James K. McHugh - -
James K. McHugh - -
James K. McHugh - -
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 13, 2007, we entered into an employment agreement with Mr.
Timothy R. Kasmoch as our President and Chief Executive Officer. Mr. Kasmoch's
employment agreement was for a two-year term commencing on February 13, 2007 and
provided for automatic renewal of successive one-year terms unless notice was
provided ninety (90) days prior to the expiration of the then current term. The
agreement provided that Mr. Kasmoch was to receive an annual base salary of
$150,000, subject to an annual increase at the discretion of the Board. In
addition, Mr. Kasmoch was eligible for an annual cash bonus in an amount to be
determined by, and otherwise subject to the discretion of, the Board.
Generally, Mr. Kasmoch's employment agreement was subject to termination by us
with or without cause or by the Employee for any reason. If the agreement was
terminated by us without cause (other than by reason of the death or disability
of Mr. Kasmoch), Mr. Kasmoch would have continued 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 was terminated for any other reason by
either party, Mr. Kasmoch was entitled to receive his base salary through the
effective date of the termination plus any bonus or incentive compensation which
had been earned or payable through the termination date, as provided for in the
agreement. A copy of Mr. Kasmoch's employment agreement was attached to a Form
8-K as Exhibit 10.1, filed by us on March 12, 2007.
Effective April 2, 2008, we entered into a first amendment to the
employment agreement with Mr. Kasmoch. The amendment extended the term of Mr.
Kasmoch's employment agreement for an additional two years. As a result, the
term of Mr. Kasmoch's employment agreement was set to expire on February 12,
2011, instead of February 12, 2009 as provided for in the original employment
agreement. A copy of the amendment to Mr. Kasmoch's employment agreement was
attached to a Form 8-K as Exhibit 10.1, filed by us on April 7, 2008.
Effective March 17, 2010, we entered into a new Employment Agreement (the
"Agreement") with Mr. Kasmoch commencing February 26, 2010. The Agreement is for
a five-year term commencing on February 26, 2010 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 our Board of Directors. In addition, Mr. Kasmoch
is eligible for an annual cash bonus in an amount to be determined by, and
otherwise subject to the discretion of the Board of Directors. Under the
agreement, this determination is to be based upon the Board of Directors review
of Mr. Kasmoch's performance. The Agreement also provides for a stock option
grant of 470,000 options that vest over a five year period, pursuant to the
Second Amended and Restated 2004 Stock Option Plan. While employed with the
Company, the Agreement allows Mr. Kasmoch to engage in other limited business
activities that are not competitive with and do not involve the Company, subject
to the prior disclosure to the Company's Audit Committee. The Employment
Agreement permits Mr. Kasmoch to terminate his employment in the event of a
change of control or certain enumerated material breaches thereof by the
Company. A copy of this employment agreement was attached to a Form 8-K as
Exhibit 10.1, filed by us on March 19, 2010.
In June 2007, we executed an employment agreement with Robert W. Bohmer as
our Vice-President of Business Development and General Counsel, which commenced
July 1, 2007. Mr. Bohmer's agreement was for a two-year term at $150,000 per
year plus a stock option grant of 100,000 shares. In addition, Mr. Bohmer was
eligible for an annual cash bonus in an amount to be determined. Generally, the
agreement was subject to termination by us with or without cause or by the
Employee for any reason. A copy of Mr. Bohmer's employment agreement was
attached to a Form 8-K as Exhibit 10.1, filed by us on June 20, 2007.
Effective June 19, 2008, we entered into a first amendment to the
employment agreement with Mr. Bohmer. The amendment extended the term of Mr.
Bohmer's employment agreement for an additional two years. As a result, the term
of Mr. Bohmer's employment agreement was set to expire on July 1, 2011, instead
of July 1, 2009 as provided for in the original employment agreement. Except for
the extension of the term, there were no other changes to Mr. Bohmer's
employment agreement. A copy of the amendment to Mr. Bohmer's employment
agreement was attached to a Form 8-K as Exhibit 10.1, filed by us on June 20,
2008.
Effective March 17, 2010, we entered into a new Employment Agreement (the
"Agreement") with Mr. Bohmer as our Executive Vice President and General
Counsel, commencing February 26, 2010. The Agreement is for a five-year term
commencing on February 26, 2010 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. Bohmer is
to receive an annual base salary of $150,000, subject to an annual increase at
the discretion of our Board of Directors. In addition, Mr. Bohmer is eligible
for an annual cash bonus in an amount to be determined, and otherwise subject to
the discretion of the Board of Directors. Under the agreement, this
determination is to be based upon the President/Chief Executive Officer's and
Board of Directors review of Mr. Bohmer's performance. The Agreement also
provides for a stock option grant of 320,000 options that vest over a five year
period, pursuant to the Second Amended and Restated 2004 Stock Option Plan.
While employed with the Company, the Agreement allows Mr. Bohmer to engage in
other limited business activities that are not competitive with and do not
involve the Company, subject to the prior disclosure to the Company's Audit
Committee. The Employment Agreement permits Mr. Bohmer to terminate his
employment in the event of a change of control or certain enumerated material
breaches thereof by the Company. A copy of this employment agreement was
attached to a Form 8-K as Exhibit 10.1, filed by us on March 19, 2010.
Effective March 17, 2010, we entered into an Employment Agreement (the
"Agreement") with James K. McHugh to serve as the Company's Chief Financial
Officer commencing February 26, 2010. The Agreement is for a five-year term
commencing on February 26, 2010 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. McHugh is
to receive an annual base salary of $125,000, subject to annual increase at the
discretion of the Board of Directors of the Company. In addition, Mr. McHugh is
eligible for an annual cash bonus in an amount to be determined, and otherwise
subject to the discretion of, the Board of Directors. Under the agreement, this
determination is to be based upon the President/Chief Executive Officer's and
Board of Directors review of Mr. McHugh's performance. The Agreement also
provides for a stock option grant of 100,000 shares that vest over a five year
period, pursuant to the Second Amended and Restated 2004 Stock Option Plan.
While employed with the Company, the Agreement allows Mr. McHugh to engage in
other limited business activities that are not competitive with and do not
involve the Company, subject to the prior disclosure to the Company's Audit
Committee. The Employment Agreement permits Mr. McHugh to terminate his
employment in the event of a change of control or certain enumerated material
breaches thereof by the Company. A copy of this employment agreement was
attached to a Form 8-K as Exhibit 10.1, filed by us on March 19, 2010.
EQUITY COMPENSATION PLAN INFORMATION
We maintain three stock option plans (two are able to issue new grants) for
directors, executive officers and key employees. The most recent plan ("2010
Plan") was approved by the stockholders in August 2010. The 2010 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
5,000,000 shares of Common Stock. For all of the plans, the total number of
options granted and outstanding as of June 6, 2011 was 2,450,500, and the number
of options available for future issuance was 4,824,075. Currently, all of the
plans are administered by the Board of Directors via a committee.
THE FOLLOWING REPORTS OF THE AUDIT COMMITTEE AND THE COMPENSATION COMMITTEE
SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE INCORPORATED BY REFERENCE
IN ANY PREVIOUS OR FUTURE DOCUMENTS FILED BY THE COMPANY WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE
ACT OF 1934, EXCEPT TO THE EXTENT THAT THE COMPANY EXPRESSLY INCORPORATES SAID
REPORTS BY REFERENCE IN ANY SUCH DOCUMENT.
COMPENSATION COMMITTEE REPORT
The following report was prepared by Thomas L. Kovacik, James H. Hartung
and Joan B. Wills 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 the Company's 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 compensation of Mr. Timothy R. Kasmoch, our President and
Chief Executive Officer, Mr. Kasmoch's 2010 base salary was determined by his
Employment Agreement with us dated February 13, 2007, which entitled him to an
annual base salary of $150,000 over a period of two years. In 2008, an
amendment dated April 2, 2008 to this Employment Agreement was agreed upon,
effectively extending the Agreement until February 2011. In March 2010, a new
employment agreement was agreed upon between the Company and Mr. Kasmoch. See
"Employment Agreements."
With respect to compensation of Mr. Robert W. Bohmer, our Vice-President of
Business Development and General Counsel, Mr. Bohmer's 2010 base salary was
determined by his Employment Agreement with us dated June 12, 2007, which
entitled him to an annual base salary of $150,000 over a period of two years.
In 2008, an amendment dated June 19, 2008 to this Employment Agreement was
agreed upon, effectively extending the Agreement until July 2011. In March
2010, a new employment agreement was agreed upon between the Company and Mr.
Bohmer. See "Employment Agreements."
With respect to compensation of Mr. James K. McHugh, our Chief Financial
Officer, Secretary and Treasurer, Mr. McHugh's 2010 base salary was determined
by the Board of Directors as recommended by the Chief Executive Officer, which
entitled him to an annual base salary of $125,000 after April 30, 2009,
terminable at will by either party. In March, 2010, the Company and Mr. McHugh
agreed to an employment agreement. 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
James H. Hartung
Joan B. Wills
AUDIT COMMITTEE REPORT
The following report was prepared by Joseph Scheib and Mark Hagans, as
members of our Audit Committee.
The Audit Committee oversees our financial reporting process on behalf of
the Board. The Audit Committee meets with management periodically to consider
the adequacy of our internal controls and the objectivity of our financial
reporting. The Audit Committee discusses these matters with our independent
auditors and with appropriate financial personnel and internal auditors. The
Audit Committee regularly meets privately with both the independent auditors and
the internal auditors, each of whom has unrestricted access to the Audit
Committee, and recommend to the Board the appointment of the independent
auditors and review periodically their performance and independence from
management. In addition, the Audit Committee reviews our financing plans and
report 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 the Company's audited financial statements be included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2010.
Joseph H. Scheib
Mark D. Hagans
INDEPENDENT AUDITORS
AUDIT FEES
Audit services of UHY LLP ("UHY") included the audit of our annual
financial statements for 2010 and 2009, and services related to quarterly
filings with the SEC through the reporting period ended September 30 in each of
those years. Fees for these services totaled approximately $73,500 for 2010 and
$72,000 for 2009.
AUDIT RELATED FEES
There were no fees billed for the years ended December 31, 2010 and
December 31, 2009 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, 2010 and
December 31, 2009 for professional services rendered by UHY for tax compliance,
tax advice, and tax planning.
ALL OTHER FEES
There were no fees billed for the years ended December 31, 2010 and
December 31, 2009 for assistance on accounting related matters.
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.
UHY LLP personnel work under the direct control of UHY LLP partners and are
leased from wholly-owned subsidiaries of UHY Advisors, Inc. in an alternative
practice structure.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
None
DIRECTOR 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 our members consist
of independent directors, as defined under the NASDAQ rules. The Board has
reviewed the independence of its members, applying the NASDAQ standards and
considering other commercial, legal, accounting and familial relationships
between the Directors and us. The Board has determined that all of the
Directors and director nominees are independent other than Mr. Kasmoch, who is
not an independent Director by virtue of his current position as our chief
executive officer.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 2010, with the following exceptions:
Carl Richard was late filing a Form 4 (Statement of Changes of Beneficial
Ownership of Securities) in connection with a purchase of Common Stock on the
open market that occurred on October 18, 2010. The Form 4 was filed on October
27, 2010.
Carl Richard was late filing a Form 4 in connection with six separate purchases
of Common Stock on the open market that occurred between November 7 and November
19, 2010. The Form 4 was filed on November 19, 2010.
Joseph R. Scheib was late filing a Form 4 for an exercise of stock options and
concurrent acquisition of Common Stock that occurred on April 2, 2010. The Form
4 was filed on May 11, 2010.
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 2012
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 March 7, 2012, the date that is not less than 120 days before July 5, 2012.
Further, pursuant to Rule 14a-4, if a stockholder fails to notify us of a
proposal before May 21, 2012, the date that is not less than 45 days before July
5, 2011 (the approximate 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
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James K. McHugh
Chief Financial Officer, Secretary and Treasurer
Appendix A
[N-Viro International Corporation logo]
c/o Corporate Election Services
P. O. Box 1150
Pittsburgh, PA 15230
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VOTE BY TELEPHONE
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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.
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VOTE BY INTERNET
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Have your proxy card available when you access the website www.cesvote.com and
follow the simple instructions to record your vote.
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VOTE BY MAIL
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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
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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.
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[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 AUGUST 4, 2011.
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 the Toledo Yacht
Club, 3900 North Summit Street #2, Toledo, Ohio, 43611, on August 4, 2011 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: ________________________ , 2011
______________________________________
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 or limited liability company, please sign
in partnership or company name by authorized person.
PROXY CARD MUST BE SIGNED AND DATED BELOW.
PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.
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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. Mark D. Hagans FOR AGAINST ABSTAIN
2. Carl Richard FOR AGAINST ABSTAIN
3. Joseph H. Scheib FOR AGAINST ABSTAIN
4. Joan B. Wills FOR AGAINST ABSTAIN
2. To ratify the appointment of UHY LLP as independent auditors for the
Company for 2011.
FOR AGAINST ABSTAIN
____ PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING
Continued and to be signed and dated on the reverse side.