UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 Section 240.14a-12
Sigmatron International, Inc.
--------------------------------------------------------------------------------
(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:
--------------------------------------------------------------------------------
PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
SIGMATRON INTERNATIONAL, INC.
2201 LANDMEIER ROAD
ELK GROVE VILLAGE, IL 60007
August 16, 2005
Notice of Annual Stockholders Meeting:
You are hereby notified that the 2005 Annual Meeting of Stockholders of
SigmaTron International, Inc. (the "Company") will be held at the Holiday Inn
located at 1000 Busse Road, Elk Grove Village, Illinois 60007 at 10:00 a.m.
local time, on Friday, September 16, 2005, for the following purposes:
1. To elect three Class III directors to hold office until the 2008
Annual Meeting.
2. To consider a proposal to ratify the selection of Grant Thornton LLP
as independent auditors of the Company for the fiscal year ending
April 30, 2006.
3. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on July 29, 2005 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Meeting and/or adjournments thereof.
You are urged to attend the Meeting in person. Whether or not you expect to
be present in person at the Meeting, please mark, date, sign and return the
enclosed proxy in the envelope provided.
By Order of the Board of Directors
LINDA K. BLAKE
Secretary
SIGMATRON INTERNATIONAL, INC.
2201 LANDMEIER ROAD
ELK GROVE VILLAGE, IL 60007
2005 ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 16, 2005
PROXY STATEMENT
GENERAL
This Proxy Statement and the accompanying proxy are furnished to
stockholders of SigmaTron International, Inc. (the "Company") in connection with
the solicitation of proxies by the Company's Board of Directors for use at the
2005 Annual Meeting of Stockholders (the "Meeting") to be held at the Holiday
Inn located at 1000 Busse Road, Elk Grove Village, Illinois, 60007 at 10:00 a.m.
local time, on Friday, September 16, 2005, for the purposes set forth in the
accompanying Notice of Meeting. This Proxy Statement, the form of proxy included
herewith and the Company's Annual Report to Stockholders for the fiscal year
ended April 30, 2005 are being mailed to stockholders on or about August 16,
2005.
Stockholders of record at the close of business on July 29, 2005 are
entitled to notice of and to vote at the Meeting. On such date there were
outstanding 3,752,054 shares of Common Stock, par value $.01 per share (the
"Common Stock"). The presence, in person or by proxy, of the holders of a
majority of the shares of Common Stock outstanding and entitled to vote at the
Meeting is necessary to constitute a quorum. In deciding all questions, each
holder of Common Stock shall be entitled to one vote, in person or by proxy, for
each share held on the record date.
If you are a stockholder of record (that is, if you hold your shares in
certificate form registered in your name on the books of the Company's transfer
agent, American Stock Transfer and Trust Company, as of the close of business on
July 29, 2005), and attend the Meeting, you may deliver your completed proxy
card in person. However, if you hold your shares in "street name" (that is, not
certificate form) (a) you must return your voting instructions to your broker or
nominee so that the holder of record can be instructed how to vote those shares
or (b) if you wish to attend the Meeting and vote in person, you must obtain and
bring to the Meeting a proxy signed by the record holder giving you the right to
vote the shares in order to be able to vote at the Meeting. (You may not use the
voting instruction form provided by your broker or nominee to vote in person at
the Meeting.)
Votes cast by proxy or in person at the Meeting will be tabulated by the
election inspector appointed for the Meeting and will determine whether or not a
quorum is present. The election inspector will treat abstentions as shares that
are present and entitled to vote but as not voted for purposes of determining
the approval of any matter submitted to the stockholders for a vote. Abstentions
will have the same effect as negative votes. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter ("Broker Non-Votes"), those shares will not be considered as
present and entitled to vote with respect to that matter.
Properly executed proxies will be voted in the manner directed by the
stockholders. If no direction is indicated, such proxies will be voted FOR the
election of all nominees named under the caption "Election of Directors" as set
forth therein as directors of the Company, and FOR the ratification of the
selection of Grant Thornton LLP as the Company's Independent Auditors. If a
quorum is present at the Meeting, directors will be elected by a plurality of
the votes cast. The ratification of the selection of auditors requires an
affirmative vote by holders of a majority of the shares present at the Meeting
in person or by proxy and entitled to vote. Any proxy may be revoked by the
stockholder at any time prior to the voting thereof by notice in writing to the
Secretary of the Company, either prior to the Meeting (at the above address) or
at the Meeting if the stockholder attends in person. A later dated proxy will
revoke a prior dated proxy.
As of the date of this Proxy Statement, the Board of Directors knows of no
other business which will be presented for consideration at the Meeting. If
other proper matters are presented at the Meeting, however, it is the intention
of the proxy holders named in the enclosed form of proxy to take such actions as
shall be in accordance with their best judgment.
The information contained in this Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company and
their transactions with the Company is based upon information received from each
individual as of July 15, 2005.
HOLDINGS OF STOCKHOLDERS, DIRECTORS
AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of July 15, 2005 by (i) each director of the
Company and each nominee, (ii) each executive officer of the Company, (iii) each
person (including any "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934 (the "Exchange Act")) who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, and (iv) all
directors and executive officers as a group. The address of directors and
executive officers is c/o SigmaTron International, Inc., 2201 Landmeier Road,
Elk Grove Village, Illinois 60007.
BENEFICIAL OWNERSHIP
NUMBER OF
NAME SHARES(1) PERCENT
---- --------- -------
BENEFICIAL OWNERS OF AT LEAST 5% OF THE OUTSTANDING CAPITAL
STOCK
Kennedy Capital Management, Inc.(2)......................... 433,132 11.5%
10829 Olive Blvd.
St. Louis, MO 63141
Cyrus Tang Revocable Trust(3)............................... 397,063 10.6%
3773 Howard Hughes Pkwy., Ste. 350N
Las Vegas, NV 89109
Fidelity Low-Price Stock Fund(4)............................ 371,000 9.9%
82 Devonshire St.
Boston, MA 02109
Tang Foundation for the Research of Traditional Chinese
Medicine(3)............................................... 252,099 6.7%
3773 Howard Hughes Pkwy., Ste. 350N
Las Vegas, NV 89109
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
Gary R. Fairhead(5)......................................... 78,203 2.1%
Gregory A. Fairhead(5)...................................... 40,807 1.1%
John P. Sheehan(5).......................................... 26,566 *
Linda K. Blake(5)........................................... 12,428 *
Daniel P. Camp(5)........................................... 21,167 *
Raj B. Upadhyaya............................................ 0 *
John P. Chen(6)............................................. 5,200 *
Thomas W. Rieck(6)(7)(8).................................... 9,099 *
Franklin D. Sove(6)......................................... 6,000 *
Carl A. Zemenick(6)......................................... 5,000 *
William L. McClelland(6).................................... 5,000 *
Dilip S. Vyas(6)............................................ 5,000 *
All directors and executive officers as a group(9).......... 214,470 5.5%
---------------
* Less than 1 percent.
(1) Unless otherwise indicated in the footnotes to this table, the Company
believes the persons named in this table have sole voting and investment
power with respect to all shares of Common Stock reflected in this table. As
of July 15, 2005, 3,755,420 shares were outstanding, not including certain
options held by various directors and officers as noted in subsequent
footnotes. This table is based on information supplied by the Company's
officers, directors and principal stockholders and by Schedules 13D and 13G
filed with the Securities and Exchange Commission.
2
(2) Number of shares owned by Kennedy Capital Management, Inc., at November 30,
2004, as reported on Schedule 13G on December 9, 2004.
(3) The sole beneficiary and trustee of Cyrus Tang Revocable Trust dated March
17, 1997 (the "Trust") is Cyrus Tang. Tang Foundation for the Research of
Traditional Chinese Medicine is a not-for-profit foundation. This entity, as
well as the Trust, whose combined ownership represents in excess of 17% of
the outstanding Common Stock, is controlled by Cyrus Tang.
(4) Number of shares owned by Fidelity Low-Price Stock Fund at December 31, 2004
as reported by FMR Corp. on Amended Scheduled 13G on February 14, 2005.
(5) The number of shares includes 28,203, 29,150, 26,565, 12,028 and 21,167
shares issuable upon the exercise of stock options granted to Gary R.
Fairhead, Gregory A. Fairhead, John P. Sheehan, Linda K. Blake and Daniel P.
Camp, respectively. Said options are deemed exercised solely for purposes of
showing total shares owned by such employees, respectively.
(6) Includes 5,000 shares issuable upon the exercise of director stock options
granted on September 2004. Said options are deemed exercised solely for
purposes of showing total shares by such non-employee director.
(7) Includes 4,099 shares issuable upon the exercise of director stock options
granted in December 2001. Said options are deemed exercised solely for
purposes of showing total shares owned by such non-employee directors.
(8) In addition to the number of shares set forth on the Beneficial Ownership
table, Mr. Rieck is also one of three trustees of Rieck and Crotty, P.C.'s
profit sharing plan, which owns 4,000 shares of the Company's Common Stock
as of July 15, 2005. Mr. Rieck abstains from all voting and investment
decisions with respects to such shares.
(9) For purposes of calculating the total number of shares for all directors and
executive officers as a group consists of 63,258 of shares and 151,212 of
options are deemed exercised.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company is required to report to stockholders those directors, officers
and beneficial owners of more than 10% of any class of the Company's equity
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), who fail to file timely reports of
beneficial ownership and changes in beneficial ownership, as required by Section
16(a) of the Exchange Act. Based solely upon a review of copies of such reports
furnished to the Company, the Company believes that all persons subject to the
reporting requirements of Section 16(a) of the Exchange Act timely filed all
necessary reports during the fiscal year ended April 30, 2005, except that each
of our non-employee directors, Mssers. Chen, McClelland, Rieck, Sove and Vyas
each filed one late routine report in connection with stock options granted to
them, and Mr. Upadhyaya filed one late report in connection with his initial
classification as an executive officer of the Company.
I. ELECTION OF DIRECTORS
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors is divided into three classes of directors, each serving overlapping
three-year terms. The terms of Class I directors (Messrs. Rieck and McClelland)
expire in 2006; the terms of Class II directors (Messrs. Chen and Zemenick)
expire in 2007; and the terms of Class III directors (Messrs. Gary Fairhead,
Sove and Vyas) expire in 2005. All directors of each class will hold their
positions until the annual meeting of stockholders in the year indicated above,
at which time the terms of the directors in such class expire, or until their
respective successors are elected and qualify, subject in all cases to any such
director's earlier death, resignation or removal.
3
NOMINEES FOR ELECTION AS CLASS III DIRECTORS AT THE MEETING
If a quorum is present at the Meeting, three Class III directors will be
elected by a plurality of the stockholder votes cast at the Meeting, to serve
until the 2008 annual meeting of stockholders or until their successors shall be
elected and shall qualify, subject to their earlier death, resignation or
removal. Abstentions and Broker Non-Votes will have no effect on the vote.
Shares represented by executed proxies will be voted, if the authority to do so
is not withheld, for the election of the three nominees named below. The
stockholders do not have cumulative voting rights with respect to the election
of directors. The following persons have been nominated:
DIRECTOR OF
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS COMPANY
NAME AGE AND OTHER PUBLIC DIRECTORSHIPS SINCE
---- --- ---------------------------------------------- -----------
Gary R. Fairhead..................... 53 President and Chief Executive Officer. Gary R. 1994
Class III Fairhead has been President of the Company
since 1990. Gary R. Fairhead and Gregory A.
Fairhead, the Executive Vice President and
Assistant Secretary of the Company, are
brothers.
Franklin D. Sove..................... 71 Mr. Sove was Vice President of Tang Industries, 1994
Class III Inc., a privately held company that
manufactures and distributes industrial
products, until his retirement in December
2002.
Dilip S. Vyas........................ 57 Mr. Vyas has been self-employed since December 1994
Class III 2004 and from June 2004 to November 2004 was
President of Wave Zero Manufacturing LLC, a
manufacturer of shielding devices for
components used in the electronic industry. Mr.
Vyas was self-employed from September 1998 to
June 2004 and was a Director and Vice President
of Circuit Systems, Inc. (CSI) until September
1998. CSI filed a petition for relief under
Chapter 11 of the Bankruptcy Code in September
2000 and ceased to exist in 2003.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF EACH OF THE
NOMINEES NAMED ABOVE.
The Board of Directors knows of no reason why any of the foregoing nominees
will be unavailable or will decline to serve, but, in the event of any such
unavailability, the proxies received will be voted for such substitute nominees
as the Board of Directors may recommend. THE ENCLOSED PROXY CANNOT BE VOTED FOR
A GREATER NUMBER OF PERSONS THAN THREE, THE NUMBER OF NOMINEES NAMED IN THIS
PROXY STATEMENT.
4
DIRECTOR WHOSE TERMS EXTEND BEYOND THE MEETING DIRECTOR OF
PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS COMPANY
NAME AGE AND OTHER PUBLIC DIRECTORSHIPS SINCE
---- --- ---------------------------------------------- -----------
Thomas W. Rieck...................... 60 Attorney and President of Rieck and Crotty, 1994
Class I P.C. Mr. Rieck was an executive officer of CSI.
William L. McClelland................ 76 Partner in Tower Extrusion LTD, an aluminum 2001
Class I extrusion, finishing and remelt company from
1977 until his retirement in 2001.
John P. Chen......................... 51 Chief Financial Officer since 1994 of National 1994
Class II Material L.P., a steel processing, stamping and
distribution company.
Carl A. Zemenick..................... 60 President and CEO from June 1990 to June 2005 2001
Class II of GF Office Furniture, Ltd. LP, a furniture
manufacturer.
II. PROPOSAL TO RATIFY SELECTION OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors will recommend at the Meeting that the stockholders
ratify the appointment of the firm of Grant Thornton LLP to audit the accounts
of the Company for the current fiscal year. Representatives of that firm are
expected to be present at the Meeting, have the opportunity to make a statement
if they desire to do so, and be available to respond to appropriate questions.
Grant Thornton LLP was recommended by the Audit Committee and the Board of
Directors for the fiscal year 2006.
The ratification of the selection of auditors requires an affirmative vote
by holders of a majority of the shares present at the Meeting in person or by
proxy and entitled to vote. Abstentions and Broker Non-Votes will have the same
effect as negative votes.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF RATIFICATION OF THE
SELECTION OF GRANT THORNTON LLP.
FISCAL 2005 AND 2004 AUDIT FIRM FEE SUMMARY
During fiscal years 2005 and 2004, the Company retained its auditor, Grant
Thornton LLP, to provide services in the following categories and amounts. The
following amounts were invoiced by Grant Thornton in fiscal years 2005 and 2004.
2005 2004
-------- --------
Audit Fees (a).............................................. $ 71,050 $142,243
Audit-Related Fees (b)...................................... 59,397 31,178
Tax Fees (c)................................................ 132,119 91,675
All Other Fees (d).......................................... 12,851 10,038
(a) Fees for audit services billed in 2005 and 2004 consisted of:
- Audit of the Company's annual financial statements
- Reviews of the Company's quarterly financial statements
- Statutory and regulatory audits, consents and other services related
to Securities and Exchange Commission matters
(b) Fees for audit-related services consisted primarily of services for
Employee 401(k) Retirement Plan, consolidation issues, startup of a
wholly-owned foreign enterprise and acquisitions.
5
(c) Fees for tax services billed in 2005 and 2004 consisted of tax
compliance and tax planning and advice. Fees for tax compliance
services totaled $132,119 and $91,675 in 2005 and 2004, respectively.
Tax compliance services consisted of:
- Federal, state and local income tax return preparation
- Assistance with tax return filings and compliance in certain foreign
jurisdictions
- Assistance with tax audits and amended tax returns
(d) All other fees are general out of pocket expenses for administrative
costs.
As described in Audit Committee Charter, it is the Audit Committee's policy
and procedure to review and consider and ultimately pre-approve, where
appropriate, all audit and non-audit engagement services to be performed by the
independent auditors. The Audit Committee's pre-approval policy is included in
the Audit Committee Charter which has been attached as Appendix A here to.
CORPORATE GOVERNANCE
Our Board of Directors determined that each of Messrs. Chen, McClelland,
Rieck, Sove and Zemenick are independent under the rules of the Nasdaq Stock
Market, Inc. As a result, our Board currently has a majority of independent
directors under the rules of the Nasdaq Stock Market, Inc. Our Board of
Directors has determined that our independent directors shall have regularly
scheduled meetings during each fiscal year at which only the independent
directors are present.
DIRECTOR COMMITTEES; BOARD MEETINGS
The Board of Directors has established an Audit Committee, a Compensation
Committee and a Nominating Committee. A copy of the Audit Committee charter is
included in this Proxy Statement as Appendices A and the Nominating Committee
charter is available on the Company's website at www.sgmaintl.com. The Company
believes that the composition of these committees meets the criteria for
independence under, and the functioning of these committees complies with, the
applicable requirements of, the Sarbanes-Oxley Act of 2002, the current listing
standards of the Nasdaq Stock Market, Inc. and Securities and the Exchange
Commission rules and regulations.
The functions of the Audit Committee include: (1) selection, evaluation,
and where appropriate, replacement of the Company's independent accountants; (2)
pre-approval of audit and permitted non-audit services to be performed by the
independent accountants; (3) review of the scope of the audit; (4) reviewing,
with the independent accountants, the corporate accounting practices and
policies and recommending to whom reports should be submitted within the
Company; (5) reviewing the final report of the independent accountants; (6)
reviewing accounting controls; and (7) being available to the independent
accountants and management for consultation purposes. The Audit Committee is
comprised of three members: Messrs. Rieck, Sove (Chairman) and Vyas. The Board
of Directors has determined that each of the members of the Audit Committee is
independent as defined by the Rules of the Securities and Exchange Commission.
The Board also determined that Messrs. Rieck and Sove are independent and Mr.
Vyas is not independent under the rules of the Nasdaq Stock Market, Inc. based
upon Mr. Vyas' role as a manager of SMD International L.L.C., which sold real
estate to the Company in November 2003. The Board of Directors has further
determined that membership of Mr. Vyas on the Audit Committee is in the best
interest of the Company and its stockholders, based upon Mr. Vyas' experience in
finance at another public company and his acumen developed in connection with
his own business ventures. Mr. Rieck has been determined to be an Audit
Committee financial expert as defined in Item 401 of Regulation S-K promulgated
under the Exchange Act. The Board of Directors has adopted a written charter for
the Audit Committee, a copy of which is included as Appendix A to this Proxy
Statement. The report of the Audit Committee to the Stockholders is included in
this Proxy Statement below under the heading "Report of the Audit Committee."
The functions of the Compensation Committee are to review and recommend to
the Board of Directors annual salaries and bonuses for all executive officers of
the Company, to review, approve and recommend to
6
the Board of Directors the terms and conditions of all employee benefit plans or
changes thereto and to administer the Company's stock option plans. Messrs.
Rieck (Chairman), Chen and Zemenick are members of the Compensation Committee.
The Board of Directors has determined that each of the members of the
Compensation Committee are independent under listing standards of the Nasdaq
Stock Market, Inc.
The functions of the Nominating Committee are to (1) review and recommend
to the Board of Directors the size and composition of the Board and a slate of
nominees for each election of members to the Board of Directors; (2) review and
recommend changes to the number, classification, and term of directors; (3)
identify and recommend to the Board candidates to fill appointments to Board
committees; and (4) develop, assess and make recommendations to the Board
concerning appropriate corporate policies to identify and recommend to the Board
candidates to fill a vacancy in the offices of President and Chief Executive, to
receive and review nominations by stockholders with regard to the nomination
process. The members of the Nominating Committee are Messrs. Chen (Chairman),
McClelland and Zemenick. The Board of Directors has determined that each of the
members is independent under the Nasdaq Stock Market, Inc. The charter for the
Nominating Committee is available on the Company's website at www.sgmaintl.com.
In evaluating and determing whether to recommend a person as a candidate
for election as a director, the Nominating Committee's criteria reflects the
requirements of the recently adopted Nasdaq rules with respect to independence
as well as the following factors: the needs of the Company with respect to the
particular talents and experience of its directors; personal and professional
integrity of the candidate; the level of education and/or business experience of
the candidate; broad-based business acumen of the candidate; the candidate's
level of understanding of the Company's business and the electronic
manufacturing services industry; the candidate's abilities for strategic
thinking and willingness to share ideas; and the Board of Directors' need for
diversity of experiences, expertise and background. The Committee will use these
criteria to evaluate all potential nominees.
The Nominating Committee will consider proposed nominees whose names are
submitted to it by stockholders. The Nominating Committee has not adopted a
formal process for that purpose because it believes that the Committee's process
for considering information has been and remains adequate. Historically,
stockholders have not proposed any nominees. The Nominating Committee intends to
review periodically whether a formal process should be adopted. To be
considered, all stockholder nominations must comply with the notice provisions
of the Company's by-laws, which generally require that such notice be received
by the Secretary of the Company not less than 60 days and not more than 90 days
prior to a regularly scheduled annual meeting of stockholders, or within 10 days
after receipt of notice of an annual meeting of stockholders if the date of such
meeting has not been publicly disclosed within 70 days prior to the meeting
date.
The Board of Directors held 13 meetings either in person or by telephone
conference during the fiscal year ended April 30, 2005. The Compensation
Committee held four meetings in person or by telephone conference and the Audit
Committee held five meetings in person or by telephone conference during fiscal
2005. The Nominating Committee held one meeting during fiscal 2005. All
directors attended at least 75% of the meetings of the board and each of the
committees of which they were members. The Company has a policy of encouraging
all directors to attend the annual meeting of stockholders. All directors
attended the Company's 2004 annual meeting of stockholders.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Stockholders can contact the Board of Directors or any of the individual
directors by contacting: Franklin D. Sove, Chairman of the Board, by e-mail at
invest1@sgmaintl.com. Inquiries will be reviewed, sorted and summarized by the
Chairman of the Board before they will be forwarded to the Board or to an
individual director.
COMPENSATION OF DIRECTORS
The Company pays non-employee directors $1,750 per month. Directors who
serve on the Audit Committee are paid an additional $1,000 per month, and
directors who serve on the Compensation Committee
7
are paid an additional $250 per month. Directors who serve on the Nominating
Committee are paid an additional $250 per month. In addition, under the 2000
Directors' Stock Option Plan, non-employee directors received a grant of options
to acquire 7,500 shares of Common Stock at each of the September 2000, December
2001 and September 2002 annual stockholders' meetings. Such options are
exercisable for ten years from the respective date of grant at a price based on
the price of the Common Stock on the respective grant dates. In addition, under
the 2004 Directors' Stock Option Plan, non-employee directors received a grant
of options to acquire 5,000 shares of Common Stock at the September 2004 annual
stockholders' meeting and will receive a grant of options to acquire 5,000
shares of Common Stock at the September 2005 annual stockholders' meeting. Such
options are exercisable for ten years from the respective date of grant at a
price based on the price of the Common Stock on the respective grant dates.
EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation paid by the
Company for its fiscal years ended April 30, 2005, 2004 and 2003 to the
Company's President and Chief Executive Officer and each executive officer of
the Company whose total annual salary and bonus for such year exceeded $100,000:
ANNUAL COMPENSATION LONG-TERM
------------------- COMPENSATION ALL OTHER
SALARY BONUS AWARDS COMPENSATION
NAME AND PRINCIPAL POSITION ($) ($) OPTIONS(#) 4($)
--------------------------- -------- -------- ------------ ------------
Gary R. Fairhead.......................... 2005 173,000 160,000(1) 0 2,350
President and Chief Executive Officer 2004 172,308 310,000(2) 0 300
2003 172,563 310,000(3) 0 300
Gregory A. Fairhead....................... 2005 163,770 145,000(1) 0 2,350
Executive Vice President -- Operations
and 2004 162,669 285,000(2) 0 300
Assistant Secretary 2003 160,428 260,500(3) 0 300
John P. Sheehan........................... 2005 126,300 110,000(1) 0 2,350
Vice President-Director of Materials and 2004 125,446 220,000(2) 0 300
Assistant Secretary 2003 122,599 210,000(3) 0 300
Linda K. Blake............................ 2005 121,330 110,000(1) 0 2,350
Chief Financial Officer, Vice President- 2004 118,785 220,000(2) 0 300
Finance, Treasurer and Secretary 2003 110,289 210,000(3) 0 300
Daniel P. Camp............................ 2005 140,600 110,000(1) 0 2,350
Vice President-China Operations 2004 139,654 175,000(2) 0 300
2003 136,500 160,000(3) 10,000 300
---------------
(1) Represents bonus earned in fiscal 2005 and paid in fiscal 2006 and 2005.
(2) Represents bonus earned in fiscal 2004 and paid in fiscal 2004 and 2003.
(3) Represents bonus earned in fiscal 2003 and paid in fiscal 2003 and 2002.
(4) Represents the match and contributions to the Company's 401(k) plan made on
behalf of the Company.
8
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no options or stock appreciation rights granted to executive
officers of the Company in fiscal 2005.
OPTION/SAR EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information with respect to each
named executive officer of the Company concerning the exercise of options during
the fiscal year ended April 30, 2005, as well as any unexercised options held as
of the end of such fiscal year. The Company has not granted any stock
appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ----------- ---------------------- ------------------------
Gary R. Fairhead............... -- -- 28,203/28,203 246,212/246,212
Gregory A. Fairhead............ -- -- 29,150/29,150 254,480/254,480
John P. Sheehan................ -- -- 26,566/26,566 231,921/231,921
Linda K. Blake................. -- -- 12,068/12,068 105,354/105,354
Daniel P. Camp................. -- -- 21,167/ 3,333 171,521/22,464
9
EQUITY COMPENSATION PLAN INFORMATION
The following tables provides information as of the fiscal year ended April
30, 2005 with respect to shares of Common Stock that may be issued under the
Company's existing equity compensation plans, as detailed below:
(A) (B) (C)
--- --- ---
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES FUTURE ISSUANCE UNDER
TO BE ISSUED UPON WEIGHTED-AVERAGE EQUITY COMPENSATION
EXERCISE OF OUTSTANDING EXERCISE PRICE OF PLANS (EXCLUDING
OPTIONS, WARRANTS OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY AND RIGHTS WARRANTS AND RIGHTS COLUMN (A)
------------- ----------------------- -------------------- -----------------------
Equity compensation plans approved by
security holders
--Employee Stock Option Plan 1993..... 6,000 $ 8.71 178,154
--Employee Stock Option Plan 2000..... 136,053 $ 2.38 0
--Employee Stock Option Plan 2004..... 0 N/A 240,000
--Director Stock Option Plan 2000..... 4,099 $ 3.69 0
--Director Stock Option Plan 2004..... 30,000 $11.00 30,000
------- ------ -------
Equity compensation plans not approved
by Security holders................. * * *
------- ------ -------
Total.......................... 176,152 448,154
---------------
* Not applicable.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
The Company adopted an Amended and Restated Change-in-Control Severance
Payment Plan on May 30, 2002 (the "CIC Plan"), which covers Executive Officers
an Vice Presidents of the Company (each a "CIC Participant"). Under the terms of
the CIC Plan, each CIC Participant is entitled to the payment of severance pay
in the event such CIC Participant's employment with the Company is involuntarily
terminated within twenty-four months of a change of control of the Company.
In general, for purposes of the CIC Plan, a change of control will be
deemed to have occurred when (a) any entity, person or group other than Cyrus
Tang or his affiliates, acquires more than thirty percent of the outstanding
stock entitled to vote for directors of the Company, (b) as a result of or in
connection with certain corporate transactions identified in the CIC Plan, the
identity of a majority of the members of the Board of Directors immediately
before such transaction changes immediately after the transaction, (c) the
merger, consolidation, or share exchange of the Company, or (d) a sale of all or
substantially all of the Company's assets. In general, a CIC Participant's
employment will be deemed to have been involuntarily terminated under the CIC
Plan, in the event of such employee's termination by the Company for a reason
other than (w) for cause (as defined in the Plan), (x) death, (y) disability, or
(z) that employee's voluntary retirement or resignation except on account of the
reasons set forth in the agreement (which in general would result in a
constructive discharge).
Disputes concerning the CIC Plan and benefits under the CIC Plan are
subject to arbitration.
The CIC Plan provides for automatic reduction of the amounts to be paid out
under the plan in the event such amounts would constitute "parachute payments"
under the Internal Revenue Code. Payments under the CIC Plan are also subject to
an aggregate cap equal to 15% of the market value of the Company's outstanding
capital stock on such date in the event the employment of one or more of the CIC
Participants is terminated voluntarily or involuntarily within seven days after
the change-in-control. The Plan is filed as Exhibit 10.15 to the Company's
Annual Report on Form 10-K for the year ended April 30, 2005, filed on July 27,
2005.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee during the 2005 fiscal year was comprised of
Messrs. Rieck, Chen, and Zemenick. None of the members of the Compensation
Committee has ever been an officer or employee of the Company. No Compensation
Committee interlocking relationships exist as to Messrs. Rieck, Chen and
Zemenick.
10
REPORT OF THE AUDIT COMMITTEE
The functions of the Audit Committee include: (1) selection, evaluation,
and where appropriate, replacement of the independent accountants; (2)
pre-approval of audit and permitted non-audit services to be performed by the
independent accountants; (3) review of the scope of the audit; (4) reviewing,
with the independent accountants, the corporate accounting practices and
policies and recommending to whom reports should be submitted within the
Company; (5) reviewing the final report of the independent accountants; (6)
reviewing accounting controls; and (7) being available to the independent
accountants and management for consultation purposes. The Audit Committee is
comprised of three members: Messrs. Rieck, Sove (Chairman) and Vyas. The Board
of Directors has determined that each of the members is independent as defined
by the Rules of the Securities and Exchange Commission. The Board also
determined that Messrs. Rieck and Sove are independent and Mr. Vyas is not
independent under the Nasdaq Stock Market, Inc. listing standards based upon Mr.
Vyas' role as a manager of SMD International L.L.C., which sold real estate to
the Company in November 2003. The Board of Directors has further determined that
membership of Mr. Vyas on the Audit Committee is in the best interest of the
Company and its stockholders, based upon Mr. Vyas' experience in finance at
another public company and his acumen developed in connection with his own
business ventures. Mr. Rieck has been determined to be an Audit Committee
financial expert as defined in Item 401 of Regulation S-K. The Board of
Directors has adopted a written charter for the Audit Committee, a copy of which
is included as Appendix A to this Proxy Statement.
The Audit Committee has reviewed and discussed the audited financial
statements with management, and discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards (SAS) No. 61
(Codification of Statements on Auditing Standards, AU sec. 380), as the same has
been modified or supplemented. The Audit Committee has received the written
disclosures and the letter from the independent accountants required by
Independence Standards Board Standard No. 1, as the same has been modified or
supplemented, and has discussed with the independent accountants the independent
accountants' independence. Based on the review and discussions referred to
herein, the Audit Committee recommended to the Board of Directors that the
audited financial statements be included in the Company's Annual Report on Form
10-K for the last fiscal year for filing with the Securities and Exchange
Commission.
THIS REPORT IS SUBMITTED BY THE MEMBERS OF THE COMMITTEE.
Franklin D. Sove (Chairman)
Thomas W. Rieck
Dilip S. Vyas
11
STOCK PRICE PERFORMANCE GRAPH
The following performance graph compares the percentage change in the
cumulative total stockholder return on the Company's Common Stock during the
period from May 2001 through April 2005 with the cumulative total return on (i)
a group consisting of the Company's peer corporations on a line-of-business (the
"Peer Group") and (ii) the Nasdaq Composite Index (Total Return). The comparison
assumes $100 was invested on May 1, 2001 in the Company's Common Stock, the Peer
Group (allocated equally among each of the Peer Group members), and the Nasdaq
Composite Index and assumes reinvestment of dividends, if any. The Peer Group
consists of IEC Electronics Corp., Nortech Systems Inc., SMTEK International,
Inc., and Simclar Inc. (formerly known as Techdyne, Inc.)
Comparison of five year cumulative total among SigmaTron International,
Inc., the Peer Group, and the Nasdaq Composite Index (Total Return).
[PERFORMANCE GRAPH]
---------------------------------------------------------------------------------------------------------------------
BASE
PERIOD
COMPANY NAME/INDEX APR 00 APR 01 APR 02 APR 03 APR 04 APR 05
---------------------------------------------------------------------------------------------------------------------
SIGMATRON INTERNATIONAL INC 100 22.48 78.22 131.90 231.91 246.14
---------------------------------------------------------------------------------------------------------------------
NASDAQ U.S. INDEX 100 54.70 43.98 38.41 50.24 50.41
---------------------------------------------------------------------------------------------------------------------
PEER GROUP 100 96.26 85.89 55.29 120.87 107.94
---------------------------------------------------------------------------------------------------------------------
12
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Company's executive compensation policy is to provide a total
compensation and benefit package to enable it to attract, retain and incentivize
talented executives. Total compensation includes base salary, annual cash
bonuses, long-term incentives and employee benefits. Guiding principles include
offering an overall competitive package consisting of (a) base salary and
employee benefits; and (b) performance-based incentives designed to assure that
management's interests are closely aligned with those of shareholders, including
annual cash bonuses and long-term stock-based incentives based on overall
Company financial results and individual contributions thereto. The Company
seeks to reward outstanding executive performance that contributes to superior
Company operating results and enhanced shareholder value.
The Board of Directors administers the Company's executive compensation
policy through the Compensation Committee. The base salary and annual cash
bonuses of the President and the Chief Executive Officer and the executive
officers of the Company are determined by the Board of Directors acting on the
recommendations of its Compensation Committee. Annual cash bonuses are based, in
large part, upon an informal plan that generates a bonus pool based upon return
on net assets deployed in the business, and then the bonus pool is allocated
among all of the Company's employees. Stock options may also be granted to
employees of the Company as determined by the Compensation Committee pursuant to
the Company's stock option plans. The President and Chief Executive Officer
recommends to the Compensation Committee the base salaries and annual cash
bonuses to be paid, and, in the case of stock options, to be awarded, to all
executive officers, based upon guidelines prescribed by the Committee.
REPORT OF 2005 COMPENSATION OF EXECUTIVE OFFICERS
The President and Chief Executive Officer recommended to the Compensation
Committee the base salaries and cash bonuses to be paid to the executive
officers for fiscal year 2006. After discussion, the Compensation Committee
approved the base salaries and cash bonuses recommended, and then the entire
Board of Directors adopted the recommendation. The Committee did not grant
additional stock options to executive officers during fiscal 2005.
REPORT OF 2005 COMPENSATION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
The compensation for the Company's President and Chief Executive Officer is
set within the philosophy and policy identified above for all executive
officers. In setting the salary and determining the cash bonus of the President
and Chief Executive Officer of the Company, the Compensation Committee
considered many factors, including but not limited to, industry and economic
conditions, achievement of Company and personal goals, and effort, but with
emphasis placed on the Company's financial results. The President and Chief
Executive Officer's salary was increased for cost of living, similar to the
other executive officers. The President and Chief Executive Officer's bonus was
reduced by approximately 50% from the prior year, also similar to the other
executive officers of the Company, and more than rank and file employee
decreases, because of a smaller bonus pool as a result of the decrease in the
Company's net income of approximately 15% from the prior year. Notwithstanding
the decrease in the bonus, the Compensation Committee remains impressed with his
overall performance.
THIS REPORT IS SUBMITTED BY THE MEMBERS OF THE COMMITTEE.
Thomas W. Rieck (Chairman)
John P. Chen
Carl A. Zemenick
13
CERTAIN TRANSACTIONS
The Company had a related-party transaction with Circuit Systems, Inc., a
former shareholder of the Company which filed for protection under Chapter 11 of
the Federal bankruptcy code, and is now known as Circuit Systems, Inc.
Liquidating Grantor's Trust, dated October 14, 2001 ("CSI"). CSI divested itself
of the investment in common stock of the Company in April 2001. The transaction
primarily involved the leasing of operating space. The Company leased space in
Elk Grove Village, Illinois, at a base rental of $33,800 per month, with an
additional $7,000 per month for property taxes. The lease required the Company
to pay maintenance and utility expenses. CSI subsequently, sold the building to
a non-related party. Rent and property tax expense related to the agreement
totaled approximately $270,000 from May 2003 through mid-November 2003 and
$495,000 for the year ended April 30, 2003.
During 1996, the Company invested $1,200 in exchange for a 12% limited
partnership interest in Lighting Components, L.P. ("LC") and invested $1,300 in
Lighting Components, Inc., which is the general partner of LC, in exchange for
13% of its capital stock. At April 30, 1998, the Company had also made advances
to LC in exchange for subordinated debentures and promissory notes totaling
$280,000. The subordinated debentures and promissory notes totaling $280,000
were fully reserved at April 30, 1998.
In addition to the subordinated debentures and promissory notes, at April
30, 2000, the Company had recorded miscellaneous receivables, interest and trade
receivables from LC of $1,560,000, against which a reserve of $789,000 was
recorded. The Company wrote off its investment in LC of $2,500 in the statement
of operations for the year ended April 30, 2001. In April 2001, LC sold certain
assets to a third party. In connection with the asset sale, the Company received
a $400,000 promissory note receivable from a third party. Payments were due on
the promissory note as follows: $125,000 plus accrued interest due January 1,
2002, $125,000 plus accrued interest due January 1, 2003, and $150,000 plus
accrued interest due January 1, 2004. The payment obligations for $125,000 due
January 1, 2003, and 2002, plus accrued interest were paid in December 2002 and
2001, respectively. The payment obligation of $150,000 due January 1, 2004 was
paid in January 2004 plus accrued interest. Interest on the promissory note
accrued at 5% per annum. The third party also agreed to pay to LC royalties on
certain sales derived from the purchase of the acquired assets as defined in the
agreement. LC or its successor are entitled to receive royalty payments through
April 30, 2007. Per the terms of a separate agreement, the Company will receive
its share of the royalty payments. These royalty payments, if any, will be
recorded by the Company as received and reflected as payments on the notes. At
April 30, 2005 a royalty receivable of $50,740 was recorded. The receivable was
paid subsequent to April 30, 2005.
In August and September 2004 the Company acquired the interests of all the
outside investors in its affiliate SMT Unlimited L.P. ("SMTU") and the general
partner of SMTU, SMT Unlimited, Inc. On October 1, 2004 SMT Unlimited, Inc. was
merged into the Company, and SMTU was liquidated, thereby becoming an operating
division of the Company. Prior to the acquisition by the Company, SMTU was
consolidated under FASB Interpretation No. 46, Consolidation of Variable
Interest Entities ("FIN 46R"). The aggregate price paid for all the interests
was $2,814,699. This aggregate price was paid with $1,330,000 in notes with
terms of up to 2 years and cash in the amount of $1,338,858 and the forgiveness
of interest expense of $145,841. The acquisition was treated as a step
acquisition and resulted in goodwill of $756,959 from one step and negative
goodwill of $452,087 from the second transaction. This was treated as a
reduction in the acquired long-lived assets from SMTU. On October 1, 2004 SMT
Unlimited, Inc. was merged into the Company, and SMTU was liquidated, thereby
becoming an operating division of the Company. Prior to the Company's
acquisition, SMTU was consolidated under FIN 46R. The Company purchased the
outstanding interest of SMTU in order to provide seamless service to its
customers.
MISCELLANEOUS
The Company's 2005 Annual Report to Stockholders is being mailed to
stockholders contemporaneously with this Proxy Statement.
14
COST OF SOLICITATION
All expenses incurred in the solicitation of proxies will be borne by the
Company. In addition to the use of the mail, proxies may be solicited on behalf
of the Company by directors, officers and employees of the Company by telephone
or telecopy. The Company will reimburse brokers and others holding Common Stock
as nominees for their expenses in sending proxy material to the beneficial
owners of such Common Stock and obtaining their proxies.
PROPOSALS OF STOCKHOLDERS
In accordance with the rules of the Securities and Exchange Commission, any
proposal of a stockholder intended to be presented at the Company's 2006 Annual
Meeting of Stockholders must be received by the Secretary of the Company before
April 18, 2006 in order for the proposal to be considered for inclusion in the
Company's notice of meeting, proxy statement and proxy relating to the 2006
Annual Meeting.
Stockholders may present proposals that are proper subjects for
consideration at an annual meeting, even if the proposal is not submitted by the
deadline for inclusion in the proxy statement. The stockholder must comply with
the procedures specified by the Company's by-laws which require all stockholders
who intend to make proposals at an annual stockholders meeting to send a proper
notice which is received by the Secretary not less than 120 or more than 150
days prior to the first anniversary of the date of the Company's consent
solicitation or proxy statement released to stockholders in connection with the
previous year's election of directors or meeting of stockholders; provided, that
if no annual meeting of stockholders or election by consent was held in the
previous year, or if the date of the annual meeting has been changed from the
previous year's meeting, a proposal must be received by the Secretary within 10
days after the Company has publicly disclosed the date of such meeting.
The Company currently anticipates the 2006 Annual Meeting of stockholders
will be held September 15, 2006.
The by-laws also provide that nominations for director may only be made by
or at the direction of the Board of Directors or by a stockholder entitled to
vote who sends a proper notice which is received by the Secretary no less than
60 or more than 90 days prior to the meeting; provided, however, that if the
Company has not publicly disclosed the date of the meeting at least 70 days
prior to the meeting date, notice may be timely made by a stockholder if
received by the Secretary no later than the close of business on the 10th day
following the day on which the Company publicly disclosed the meeting date.
Some brokers and other nominee record holders may be participating in the
practice of "householding" corporate communications to stockholders, such as
proxy statements and annual reports. This means that only one copy of this proxy
statement may have been sent to multiple stockholders in your household. The
Company will promptly deliver a separate copy of this proxy statement to you if
you call or write us at the following address or phone number: SigmaTron
International, Inc., 2201 Landmeier Road, Elk Grove Village, Illinois 60007,
Telephone: (800) 700-9095. If you want to receive separate copies of our
corporate communications to stockholders such as proxy statements and annual
reports in the future, or if you are receiving multiple copies and would like to
receive only one copy for your household, you should contact your broker or
other nominee record holders, or you may contact the Company at the above
address and phone number.
By order of the Board of Directors
LINDA K. BLAKE
Secretary
Dated: August 16, 2005
15
APPENDIX A
CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
SIGMATRON INTERNATIONAL, INC.
I. FUNCTIONS
The functions of the Audit Committee (the "Committee") of SigmaTron
International, Inc. (the "Company") shall include: (1) review of the scope of
the audit; (2) review with the independent accountants the corporate accounting
practices and policies and recommend to whom reports should be submitted within
the Company; (3) review with the independent accountants their final report; (4)
review with the internal and independent accountants overall accounting and
financial controls; and (5) being available to the independent accountants and
management for consultation purposes.
II. COMPOSITION
The Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall satisfy the independence requirements under
applicable law, rules and regulations, including the rules of the Nasdaq Stock
Market, Inc. ("Nasdaq"). Notwithstanding the foregoing, one director who (a) is
not independent as defined in Nasdaq Rule 4200, (b) meets the criteria set in
Section 301 in the Sarbanes-Oxley Act of 2002 and the rules and regulations
thereunder, (c) does not own or control 20% or more of the Company's voting
securities, and (d) is not a current officer or employee or a family member of
such officer or employee, may be appointed to the Committee, if the Board, under
exceptional and limited circumstances, determines that membership on the
Committee by the individual is required by the best interests of the Company and
its shareholders, and the Board discloses, in the next annual proxy statement
subsequent to such determination, the nature of the relationship and the reasons
for that determination. A member appointed under this exception may not serve
longer than two years and may not chair the Committee.
Each member of the Committee shall be able to read and understand
fundamental financial statements, including a 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 any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities. Committee members may enhance
their familiarity with finance and accounting by participating in educational
programs conducted by the Company or an outside consultant.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board and shall serve in such capacity until the
next annual organizational meeting of the Board or until their successors shall
be duly elected and qualified. Unless a Chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the full
committee membership.
III. MEETINGS
The Committee shall meet at least four times annually, and more frequently
as circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with the chief financial officer and the
independent accountants to discuss any matters that the Committee or either of
these groups believe should be discussed privately. In addition, the Committee
or its Chair should meet in person or by telephone conference call with the
independent accountants and management quarterly to review the Company's
financials consistent with IV.3 below.
16
IV. RESPONSIBILITIES
The Audit Committee shall have the following responsibilities:
Documents/Reports Review
1. Review this Charter annually and update it as conditions dictate.
2. Review the Company's annual financial reports and other financial
information submitted to the Securities and Exchange Commission (the
"SEC"), or the public, including any certification, attestation,
report, opinion or review rendered by the independent accountants, and
the independent accountants' judgment as to the quality of the
Company's accounting principles.
3. Review with the chief financial officer or his/her delegate and, if
the Committee believes it to be advisable, the independent
accountants, quarterly reports on Form 10-Q prior to its filing or
prior to the release of earnings. The Chair of the Committee may
represent the entire Committee for purposes of this review.
4. Issue a report to the Board disclosing whether (a) the Committee has
reviewed and discussed the audited financial statements with
management; (b) the Committee has discussed with the independent
accountants the matters required to be discussed by SAS 61, as may be
modified or supplemented; (c) the Committee has received the written
disclosures and the letter from the independent accountants required
by ISB Standard No. 1, as may be modified or supplemented, and has
discussed with the accountants the accountants' independence; and (d)
whether, based on the review and discussions referred to in (a) -- (c)
above, the Committee recommended to the Board that the financial
statements be included in the Annual Report on Form 10-K or 10-KSB for
the last fiscal year for filing with the SEC. These disclosures shall
appear over the printed names of each member of the Committee, and
shall be included in the Company's proxy statement, if said proxy
statement relates to an annual meeting of shareholders at which
directors are to be elected (or special meeting or written consents in
lieu of such meeting). The disclosures shall be made at least once a
year.
Independent Accountants
5. Select, evaluate, and, where appropriate, replace the independent
accountants, and, if appropriate, nominate the independent accountants
to be proposed for shareholder ratification or approval in any proxy
statement. The independent accountants are ultimately accountable to
the Committee, which has the sole authority and responsibility to
select, evaluate and, where appropriate, replace the independent
accountants.
6. Pre-approve all audit and permitted non-audit services to be performed
by the independent accountants (subject to the de minimis exceptions
under applicable law, rules and regulations). However, the Committee
may delegate to one or more designated members of the Committee the
authority to grant such pre-approvals, and the decisions of any member
to whom such authority is delegated shall be presented to the full
Committee at its next regularly scheduled meeting. In determining
whether to pre-approve permitted non-audit services, the Committee (or
the members with authority to pre-approve) shall consider whether the
independent accountants' performance of such services is compatible
with independence.
7. Approve the fees and other compensation to be paid to the independent
accountants. On at least an annual basis, to determine the
accountants' independence, the Committee should discuss with the
independent accountants all significant relationships or services the
independent accountants have that may impact their objectivity and
independence, taking into consideration the written statement that
shall be obtained from the accountants to determine the accountants'
independence setting forth the relationships between the independent
accountants and the Company consistent with ISB Standard No. 1.
17
8. Review the performance of the independent accountants and discharge
the independent accountants when circumstances warrant.
9. Receive copies of the annual comments from the independent accountants
on accounting practices and policies and systems of control of the
Company, and review with them any questions, comments or suggestions
they may have relating thereto.
10. Oversee regular rotation of the lead audit partner, as required by
applicable law, rules and regulations, and consider whether rotation of
the independent accountants or their lead audit partner is necessary to
ensure independence.
11. Take other appropriate action to oversee the independence of the
independent accountants.
Financial Reporting Processes
12. Review with management and the independent accountants not less than
annually the internal controls, disclosure controls and procedures, and
accounting and audit activities of the Company.
13. Review with management and the independent accountants significant
exposure risks and the plans to appropriately control such risks.
14. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the
independent accountants, management, or the internal accounting
department.
15. Review with management and the independent accountants accounting
policies which may be viewed as critical, and review significant
changes in the accounting policies of the Company and accounting and
financial reporting proposals that may have a significant impact on the
Company's financial reports. Review with management accounting
estimates in the event (a) an estimate requires the Company to make
assumptions about matters that are highly uncertain at the time the
accounting estimate is made, and (b) different estimates that the
Company reasonably could have used in the current period, or changes in
the accounting estimates that are reasonably likely to occur from
period to period, would have a material impact on the presentation of
the Company's financial condition, changes in financial condition or
results of operations.
16. Make or cause to be made, from time to time, such other examinations or
reviews as the Committee may deem advisable with respect to the
adequacy of the systems of internal controls, accounting practices,
internal audit procedures, and disclosure controls and procedures of
the Company, taking into account current accounting and regulatory
trends and developments, and take such action with respect thereto as
may be deemed appropriate by the Committee. The Committee shall have
the authority to retain outside advisors to assist it in the conduct of
any investigation, examination or review.
17. Review with management and the independent accountants any material
financial or non-financial arrangements of the Company which do not
appear on the financial statements of the Company.
18. Review communications required to be submitted by the independent
accountants concerning (a) critical accounting policies and practices
used, (b) alternative treatments of financial information within
generally accepted accounting principles ("GAAP") that have been
discussed with management and the ramifications of such alternatives
and the accounting treatment preferred by the independent accountants,
and (c) any other material written communications with management.
19. Review with the independent accountants any problems encountered in the
course of their audit, including any change in the scope of the planned
audit work and any restrictions placed on the scope of such work and
any management letter provided by the independent accountants and
management's response to any such letter.
18
Internal Controls and Process Improvement
20. Evaluate whether senior management is setting the appropriate tone at
the top by reviewing their communication with other personnel of the
Company regarding the importance of internal controls and evaluate
whether the members of senior management possess an understanding of
their roles and responsibilities.
21. Establish a regular system of reporting to the Committee and internally
within the Company by management, the independent accountants and the
internal accounting department.
22. Review the scope of the audit to be performed, and the audit procedures
to be used, by the independent accountants, as a part of the annual
audit process.
23. Review and attempt to resolve disagreements between management and the
independent accountants regarding financial reporting.
24. Review, at least annually, the then current and future programs of the
internal accounting department, including the procedure for assuring
implementation of accepted recommendations made by the independent
accountants, and review the implementation of any accepted
recommendations.
25. Consider and approve, upon the recommendation of management or upon its
own motion, any non-audit services to be performed by providers other
than the independent accountants relating to internal controls or
current or future programs, functions, or services that are the
responsibility of the internal accounting department.
26. Establish procedures in accordance with applicable law, rules and
regulations for (a) receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting
controls or auditing matters and (b) the confidential, anonymous
submission by employees of the Company of concerns regarding
questionable accounting or auditing matters.
Other Responsibilities
27. Review and make approval decisions regarding all related-party
transactions, as required by applicable law, rules and regulations.
28. If appropriate, obtain advice and assistance from outside legal,
accounting or other advisors and determine the funding for such advice
and assistance which shall be paid by the Company.
29. If necessary, institute special investigations and, if appropriate,
hire special counsel or experts to assist.
30. Perform any other activities consistent with this Charter, the
Company's By-laws and governing law, rules or regulations as the
Committee or the Board deems necessary or appropriate.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to prepare financial
statements, plan or conduct audits or determine that the Company's financial
statements are complete and accurate and are in accordance with GAAP. This is
the responsibility of management and the independent accountants.
19
ANNUAL MEETING OF STOCKHOLDERS OF
SIGMATRON INTERNATIONAL, INC
SEPTEMBER 16, 2005
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
v Please detach along perforated line and mail in the envelope provided. v
------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND "FOR" PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
------------------------------------------------------------------------------------------------------------------------------------
1. Election of Directors: FOR AGAINST ABSTAIN
NOMINEES: 2. PROPOSAL TO RATIFY THE SELECTION OF GRANT [ ] [ ] [ ]
[ ] FOR ALL NOMINEES O Gary R. Fairhead THORNTON LLP AS INDEPENDENT AUDITORS
O Franklin D. Sove
[ ] WITHHOLD AUTHORITY O Dilip S. Vyas 3. IN THEIR DISCRETION, ON SUCH OTHER MATTERS [ ] [ ] [ ]
FOR ALL NOMINEES AS MAY PROPERLY COME BEFORE THE MEETING
(which the Board of Directors does not
[ ] FOR ALL EXCEPT know of prior to August 16, 2005)
(See instructions below)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR
DIRECTORS AND FOR THE RATIFICATION OF THE SELECTION OF GRANT
THORNTON LLP AS INDEPENDENT AUDITORS, AND WILL CONFER THE AUTHORITY
IN PARAGRAPH 3.
INSTRUCTION: To withhold authority to vote for any
individual nominee(s), mark "FOR ALL EXCEPT" RECEIPT IS HEREBY ACKNOWLEDGED OF THE NOTICE OF THE MEETING AND
and fill in the circle next to each nominee PROXY STATEMENT DATED AUGUST 16, 2005 AS WELL AS A COPY OF THE 2005
you wish to withhold, as shown here: O ANNUAL REPORT TO STOCKHOLDERS.
-----------------------------------------------------------
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
-----------------------------------------------------------
To change the address on your account, please
check the box at right and indicate your new
address in the address space above. Please note [ ]
that changes to the registered name(s) on the
account may not be submitted via this method.
-----------------------------------------------------------
Signature of Stockholder [_____________________] Date: [________] Signature of Stockholder [_____________________] Date: [________]
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer
is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is
a partnership, please sign in partnership name by authorized person.
SIGMATRON INTERNATIONAL, INC.
2201 LANDMEIER ROAD
ELK GROVE VILLAGE, IL 60007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Gary R. Fairhead, Linda K. Blake and Henry J. Underwood, and each of them, with full power
of substitution, attorneys and proxies to represent the undersigned at the 2005 Annual Meeting of Stockholders of SIGMATRON
INTERNATIONAL, INC. (the "Company") to be held at the Holiday Inn located at 1000 Busse Road, Elk Grove Village, Illinois at 10:00
a.m. local time, on Friday, September 16, 2005 or at any adjournment thereof, with all power which the undersigned would possess if
personally present, and to vote all shares of stock of the Company which the undersigned may be entitled to vote at said Meeting as
follows.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)