OMB APPROVAL
--------------------------
OMB Number: 3235-0059
Expires: January 31, 2008
Estimated average burden
hours per response......14
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 15, 2006
Notice of Annual Stockholders Meeting:
You are hereby notified that the 2006 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 15, 2006, for the following purposes:
1. To elect one Class I director to hold office until the 2009 Annual
Meeting.
2. To consider a proposal to ratify the selection of BDO Seidman, LLP
as independent auditors of the Company for the fiscal year ending
April 30, 2007.
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 27, 2006 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
/s/ LINDA K. BLAKE
LINDA K. BLAKE
Secretary
SIGMATRON INTERNATIONAL, INC.
2201 LANDMEIER ROAD
ELK GROVE VILLAGE, IL 60007
2006 ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 15, 2006
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
2006 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 15, 2006, 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, 2006 are being mailed to stockholders on or about August 15,
2006.
Stockholders of record at the close of business on July 27, 2006 are
entitled to notice of and to vote at the Meeting. On such date there were
outstanding 3,786,956 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 27, 2006), 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 the nominee named under the caption "Election of Director" as set
forth therein as a director of the Company, and FOR the ratification of the
selection of BDO Seidman, 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 14, 2006.
HOLDINGS OF STOCKHOLDERS, DIRECTORS
AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding beneficial
ownership of Common Stock as of July 14, 2006 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
Cyrus Tang Foundation(3)...................................... 397,063 10.5%
8960 Spanish Ridge Ave.
Las Vegas, NV 89148
Fidelity Low-Price Stock Fund(4).............................. 371,000 9.8%
82 Devonshire St.
Boston, MA 02109
Royce & Associates, LLC(10)................................... 340,500 9.0%
1414 Avenue of the Americas
New York, NY 10019
Tang Foundation for the Research of Traditional Chinese
Medicine(3)................................................. 252,099 6.7%
8960 Spanish Ridge Ave.
Las Vegas, NV 89148
Kennedy Capital Management, Inc.(2)........................... 229,856 6.1%
10829 Olive Blvd.
St. Louis, MO 63141
Zeff Holding Company, LLC(11)................................. 210,338 5.6%
50 California St., Ste. 1500
San Francisco, CA 94111
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
Gary R. Fairhead(5)........................................... 108,203 2.8%
Gregory A. Fairhead(5)........................................ 68,307 1.8%
John P. Sheehan(5)............................................ 51,566 1.3%
Linda K. Blake(5)............................................. 37,468 1.0%
Daniel P. Camp(5)............................................. 49,500 1.3%
Raj B. Upadhyaya(5)........................................... 22,500 *
John P. Chen(6)............................................... 10,200 *
Thomas W. Rieck(6)(7)(8)...................................... 14,099 *
Franklin D. Sove(6)........................................... 11,000 *
Carl A. Zemenick(6)........................................... 10,000 *
William L. McClelland(6)...................................... 10,000 *
Dilip S. Vyas(6).............................................. 10,000 *
All directors and executive officers as a group(9)............ 402,843 9.8%
--------
* 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
2
of July 14, 2006, 3,786,956 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) Number of shares owned by Kennedy Capital Management, Inc., at December
31, 2005, as reported on Schedule 13G on February 14, 2006.
(3) The Tang Foundation and Tang Foundation for the Research of Traditional
Chinese Medicine are not-for-profit foundations. The entities, whose
combined ownership represents in excess of 16% 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 Schedule 13G on February 14, 2005 and
subsequently confirmed by Form 13F-HR/A filed by FMR Corp. with the
Securities and Exchange Commission on May 22, 2006.
(5) The number of shares includes 30,000, 56,650, 51,566, 37,068, 49,500 and
22,500 shares issuable upon the exercise of stock options granted to Gary
R. Fairhead, Gregory A. Fairhead, John P. Sheehan, Linda K. Blake, Daniel
P. Camp and Raj Upadhyaya, respectively. Said options are deemed
exercised solely for purposes of showing total shares owned by such
employees, respectively.
(6) Includes 10,000 shares issuable upon the exercise of director stock
options granted on September 2004 and September 2005. 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 14, 2006. Mr. Rieck abstains from all voting and
investment decisions with respect to such shares.
(9) For purposes of calculating the total number of shares for all directors
and executive officers as a group, 63,257 of shares and 311,383 options
are deemed exercised.
(10) Number of shares owned by Royce & Associates LLC, at January 31, 2006, as
reported on Schedule 13G on January 31, 2006.
(11) Number of shares owned by Zeff Holding Company LLC, at December 31, 2005,
as reported on Schedule 13G on February 3, 2006.
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, 2006.
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. Fairhead, Sove and
Vyas) expire in 2008. 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
3
expire, or until their respective successors are elected and qualify, subject in
all cases to any such director's earlier death, resignation or removal.
On June 20, 2006, William L. McClelland notified the Board of Directors of
the Company that he does not intend to stand for reelection when his current
term as a Class I director expires at the 2006 Annual Meeting of Stockholders.
Mr. McClelland has been a member of the Board of Directors since 2001 and served
as a member of its Nominating Committee through June 20, 2006. Mr. McClelland's
decision not to stand for reelection was not a result of a disagreement with
management regarding the Company's operations, policies, practices or otherwise.
The Board of Directors does not currently intend to fill the vacancy left
by the upcoming departure of Mr. McClelland. Accordingly, the Board of Directors
has decided to reduce the number of directors from seven members to six members
and to re-designate as of the 2008 Annual Meeting of Stockholders one of the
Class III directors as a Class I director. Upon redesignation as a Class I
director in 2008, that director will hold office until the expiration of the
term of the current Class I directors at the 2009 Annual Meeting of
Stockholders.
NOMINEE FOR ELECTION AS CLASS I DIRECTOR AT THE MEETING
If a quorum is present at the Meeting, one Class I director will be elected
by a plurality of the stockholder votes cast at the Meeting, to serve until the
2009 annual meeting of stockholders or until his successor shall be elected and
qualified, 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 nominee named below. The stockholders do not have cumulative
voting rights with respect to the election of directors. The following person
has been nominated:
DIRECTOR OF
COMPANY
NAME AGE SINCE
---- --- -----------
Thomas W. Rieck.................... 61 Attorney and President of Rieck and 1994
Class I Crotty, P.C. Mr. Rieck was an
executive officer of CSI.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE NOMINEE
NAMED ABOVE.
The Board of Directors knows of no reason why the foregoing nominee 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 nominee
as the Board of Directors may recommend. THE ENCLOSED PROXY CANNOT BE VOTED FOR
A GREATER NUMBER OF PERSONS THAN ONE, THE NUMBER OF NOMINEES NAMED IN THIS PROXY
STATEMENT.
4
DIRECTOR WHOSE TERMS EXTEND BEYOND THE
MEETING
PRINCIPAL OCCUPATION(S) DURING PAST DIRECTOR OF
FIVE YEARS COMPANY
NAME AGE AND OTHER PUBLIC DIRECTORSHIPS SINCE
---- --- -------------------------------------- -----------
John P. Chen............. 52 President SKD Automotive Group from 1994
Class II January 2006 to present. Chief
Financial Officer from 1994 to 2005 of
National Material L.P., a steel
processing, stamping and distribution
company.
Carl A. Zemenick......... 61 President and CEO from June 1990 until 2001
Class II his retirement in 6/05 of GF Office
Furniture, Ltd. LP, a furniture
manufacturer.
Gary R. Fairhead......... 54 President and Chief Executive Officer. 1994
Class III Gary R. 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......... 72 Mr. Sove was Vice President of Tang 1994
Class III Industries, Inc., a privately held
company that manufactures and
distributes industrial products, until
his retirement in December 2002.
Dilip S. Vyas............ 58 Mr. Vyas has been self-employed since 1994
Class III December 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.
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 BDO Seidman, 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.
BDO Seidman, LLP was recommended by the Audit Committee and the Board of
Directors for the fiscal year 2007. The decisions to dismiss Grant Thornton LLP
and engage BDO Seidman, LLP were approved by the Board of Directors effective
March 15, 2006 and March 31, 2006, respectively. The principal accountant's
report on the financial statements was unqualified for fiscal year 2005 and
2006.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF RATIFICATION OF THE
SELECTION OF BDO SEIDMAN, LLP.
In connection with the audits for the years ended April 30, 2006 and 2005,
the Company has had no disagreements with BDO Seidman, LLP or Grant Thornton LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of BDO Seidman, LLP and Grant Thornton LLP would have caused
it to make reference thereto in its report on the consolidated financial
statements for 2006 and 2005.
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.
5
FISCAL 2006 AND 2005 AUDIT FIRM FEE SUMMARY
During fiscal year 2005 and the first three quarters of fiscal 2006, the
Company retained its auditor, Grant Thornton LLP, to provide services. BDO
Seidman LLP provided services during the fourth quarter of fiscal 2006 and
completed the audit for fiscal year 2006. The following amounts were charged by
Grant Thornton LLP for services provided in fiscal years 2006 and 2005 and by
BDO Seidman, LLP for services provided.
2006 2005
------------------- --------
BDO GRANT GRANT
SEIDMAN, THORNTON THORNTON
LLP LLP LLP
-------- -------- --------
Audit Fees (a).................................. $90,000 $162,280 $ 71,050
Audit-Related Fees (b).......................... -- 73,961 59,397
Tax Fees (c).................................... 23,255 154,360 132,119
All Other Fees (d).............................. -- 48,872 12,851
(a) Fees for audit services billed in 2006 and 2005 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 and acquisitions.
(c) Fees for tax services billed in 2006 and 2005 consisted of tax
compliance and tax planning and advice. Fees for tax compliance
services totaled $177,615 and $132,119 in 2006 and 2005, 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 fees and change in accounting firm
transition fees.
(e) 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, Vyas 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 Charter, a
Compensation Committee and a Nominating Committee. A copy of the Audit Committee
Charter is included in this Proxy Statement as Appendix A and the Nominating
Committee 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 the Securities and Exchange
Commission's rules and regulations.
The functions of the Audit Committee includes: (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
6
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 Nasdaq Stock Market, Inc.
listing standards and the rules of the Securities and Exchange Commission. 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 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 the 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),
Vyas and Zemenick. During fiscal year 2006 and through June 20, 2006, the
Nominating Committee consisted of Messrs. Chen (Chairman), McClelland and
Zemenick. The current Board of Directors has determined that each of the members
is independent under the Nasdaq Stock Market, Inc. listing standards. The
charter for the Nominating Committee is available on the Company's website at
www.sgmaintl.com.
In evaluating and determining 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 eight meetings either in person or by telephone
conference during the fiscal year ended April 30, 2006. The Compensation
Committee held five meetings in person or by telephone conference and the Audit
Committee held seven meetings in person or by telephone conference during fiscal
2006. The Nominating Committee held one meeting during fiscal 2006. 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
7
attend the annual meeting of stockholders. All directors attended the Company's
2005 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 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 and 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, 2006, 2005 and 2004 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............................... 2006 179,175 0 30,000 2,400
President and Chief Executive 2005 173,000 160,000(2) 0 2,350
Officer 2004 172,308 310,000(3) 0 300
Gregory A. Fairhead............................ 2006 171,200 40,000(1) 27,500 2,400
Executive Vice President, Operations; 2005 163,770 145,000(2) 0 2,350
Assistant Secretary 2004 162,669 285,000(3) 0 300
John P. Sheehan................................ 2006 130,808 10,000(1) 25,000 2,400
Vice President, Director of Materials; 2005 126,300 110,000(2) 0 2,350
Assistant Secretary 2004 125,446 220,000(3) 0 300
Linda K. Blake................................. 2006 125,185 0 25,000 2,400
Chief Financial Officer; Vice President of 2005 121,330 110,000(2) 0 2,350
Finance, Treasurer and Secretary 2004 118,785 220,000(3) 0 300
Daniel P. Camp................................. 2006 137,925 20,000(1) 25,000 2,400
Vice President, China Operations 2005 140,600 110,000(2) 0 2,350
2004 139,654 175,000(3) 0 300
Raj B. Upadhyaya............................... 2006 152,828 60,000(1) 22,500 2,400
Executive Vice President, Hayward and 2005 131,107 10,000(2) 0 1,564
Tijuana Operations 2004 131,523 0(3) 0 500
--------
(1) Represents bonus earned in fiscal 2006 and paid in fiscal 2007.
(2) Represents bonus earned in fiscal 2005 and paid in fiscal 2005 and 2004.
(3) Represents bonus earned in fiscal 2004 and paid in fiscal 2004 and 2003.
(4) Represents the match and contributions to the Company's 401(k) plan made
by the Company.
8
OPTION GRANT AND EXERCISES IN LAST FISCAL YEAR
The following tables provide certain specified information concerning
options granted to, exercised by and held at April 30, 2006 under the 1993 and
2004 stock option plans by each named executive officer of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL RATE
NUMBER OF OF STOCK PRICE
SHARES % OF TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED (#)(1) FISCAL YR. ($ PER SHARE) DATE 5% ($) 10% ($)
---- -------------- ------------------ ------------- ---------- ------- -------
Gary R. Fairhead.......... 30,000 8.6 9.17 9/15/15 175,318 / 422,116
Gregory A. Fairhead....... 27,500 7.9 9.17 9/15/15 160,709 / 386,939
John P. Sheehan........... 25,000 7.2 9.17 9/15/15 146,099 / 351,763
Linda K. Blake............ 25,000 7.2 9.17 9/15/15 146,099 / 351,763
Daniel P. Camp............ 25,000 7.2 9.17 9/15/15 146,099 / 351,763
Raj B. Upadhyaya.......... 22,500 6.5 9.17 9/15/15 131,489 / 316,587
--------
(1) These options are service-based options and vest over a three-year period
which began in September 2005.
On April 28, 2006, in response to the issuance of SFAS 123R, the Company's
Compensation Committee of the Board of Directors approved accelerating the
vesting of 349,695 unvested stock options held by current employees and
executive officers. Under FIN 44, a modification to accelerate the vesting of a
fixed award effectively results in the renewal of that award if, after the
modification, an employee is able to exercise/vest in an award that, under the
original terms, would have expired unexercisable/vested. If the employee
continues to provide service and would have vested in the awards under the
original vesting provisions, the modification does not cause an effective
renewal of the awards and, accordingly, any incremental compensation expense
measured as of the modification date should not be recognized. The Company
determined approximately 15,900 options were effectively renewed and
compensation expense of $5,248 was recognized in fiscal year 2006.
OPTION/SAR EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth certain information with respect to each
named executive officer of the Company concerning the exercise of options during
the fiscal year ended April 30, 2006, as well as any unexercised options held as
of the end of such fiscal year. The Company has not granted any stock
appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ------------ ------------ ---------------------- --------------------
Gary R. Fairhead................ 28,203 $190,934 30,000/0 9,900/0
Gregory A. Fairhead............. -- -- 56,650/0 221,870/0
John P. Sheehan................. -- -- 51,566/0 202,182/0
Linda K. Blake.................. -- -- 37,068/0 96,346/0
Daniel P. Camp.................. -- -- 49,500/0 169,200/0
Raj B. Upadhyaya................ -- -- 22,500/0 7,425/0
9
EQUITY COMPENSATION PLAN INFORMATION
The following tables provides information as of the fiscal year ended April
30, 2006 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 WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
TO BE ISSUED UPON EXERCISE PRICE EQUITY COMPENSATION
EXERCISE OF OUTSTANDING OF OUTSTANDING PLANS (EXCLUDING
OPTIONS, WARRANTS OPTIONS,WARRANTS SECURITIES REFLECTED IN
PLAN CATEGORY AND RIGHTS AND RIGHTS COLUMN (A)
------------- ----------------------- ---------------- -----------------------
Equity compensation plans approved by
security holders
--Employee Stock Option Plan 1993.... 173,149 $ 9.74 11,005
--Employee Stock Option Plan 2000.... 104,516 $ 2.42 0
--Employee Stock Option Plan 2004.... 181,541 $ 9.17 58,459
--Director Stock Option Plan 2000.... 4,099 $ 3.69 0
--Director Stock Option Plan 2004.... 60,000 $10.08 0
------- ------ ------
Equity compensation plans not
approved by Security holders * * *
------- ------ ------
Total.............................. 523,305 69,464
--------
* 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
and 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee during the 2006 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 and under the Nasdaq
Stock Market, Inc. listing standards. 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 2002 through April 2006 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).
COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN
EPERFORMANCE GRAPHa
TOTAL RETURN TO SHAREHOLDERS
(INCLUDES REINVESTMENT OF DIVIDENDS)
----------------------------------------------------------------------------
ANNUAL RETURN PERCENTAGE
YEARS ENDING
------------------------------------------------------
COMPANY
NAME/INDEX APR 02 APR 03 APR 04 APR 05 APR 06
----------------------------------------------------------------------------
SIGMATRON
INTERNATIONAL INC 247.96 68.62 75.83 6.13 (11.46)
--------------------------------------------------------------------------
NASDAQ U.S. INDEX (19.59) (12.68) 30.82 0.33 21.44
--------------------------------------------------------------------------
PEER GROUP (10.77) (35.62) 118.60 (10.70) 22.61
--------------------------------------------------------------------------
---------------------------------------------------------------------------------------
INDEXED RETURNS
YEARS ENDING
-----------------------------------------------------------------
BASE
PERIOD
COMPANY NAME/INDEX APR 01 APR 02 APR 03 APR 04 APR 05 APR 06
---------------------------------------------------------------------------------------
SIGMATRON
INTERNATIONAL INC 100 347.96 586.73 1031.63 1094.90 969.39
---------------------------------------------------------------------------------------
NASDAQ U.S. INDEX 100 80.41 70.22 91.86 92.16 111.92
---------------------------------------------------------------------------------------
PEER GROUP 100 89.23 57.44 125.57 112.14 137.49
---------------------------------------------------------------------------------------
PEER GROUP COMPANIES
--------------------
IEC ELECTRONICS CORP
NORTECH SYSTEMS INC
SIMCLAR INC
SMTEK INTERNATIONAL INC (Included through 2004. Acquired by CTS Corp 2/2005)
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), to assure that management's interests are closely
aligned with those of shareholders, performance-based incentives, 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 contributing to superior
Company operating results and enhanced shareholder value.
The Board of Directors administers the Company's executive compensation
policy through its Compensation Committee. The base salary and annual cash
bonuses of the President and the Chief Executive Officer and the executive
officers of the Company is 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 employees of the Company eligible to participate. 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 FISCAL 2006 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. After discussion, the Compensation Committee approved the base
salaries and cash bonuses recommended, and then the entire Board of Directors
adopted the recommendation.
REPORT OF 2006 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, but he was not granted a bonus because of, in large
part, the decrease in the Company's net income from the prior year.
Notwithstanding the decision not to recommend a bonus, the Compensation
Committee remains impressed with his tireless efforts, his vision for the
Company, and his management capabilities.
There was discussion and unanimous approval of this report.
THIS REPORT IS SUBMITTED BY THE MEMBERS OF THE COMMITTEE.
Thomas W. Rieck (Chairman)
John P. Chen
Carl Zemenick
13
CERTAIN TRANSACTIONS
During August and September 2004 the Company acquired all the interests of
the outside investors in its affiliate SMT Unlimited L.P. ("SMTU") and the
general partner of SMTU, SMT Unlimited, Inc., including voting interest. 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 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. The negative
goodwill 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. The
Company purchased the outstanding interest of SMTU in order to provide seamless
service to its customers.
MISCELLANEOUS
The Company's 2006 Annual Report to Stockholders is being mailed to
stockholders contemporaneously with this Proxy Statement.
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 17, 2007 in order for the proposal to be considered for inclusion in the
Company's notice of meeting, proxy statement and proxy relating to the 2007
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 2007 Annual Meeting of stockholders
will be held September 21, 2007.
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
14
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
/s/ LINDA K. BLAKE
LINDA K. BLAKE
Secretary
Dated: August 15, 2006
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.
8. Review the performance of the independent accountants and discharge the
independent accountants when circumstances warrant.
17
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.
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
18
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 15, 2006
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
\/ Please detach along perforated line and mail in the envelope provided. \/
------------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTOR 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]
------------------------------------------------------------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
1. Election of Director: 2. PROPOSAL TO RATIFY THE SELECTION OF BDO SEIDMAN, [ ] [ ] [ ]
LLP AS INDEPENDENT AUDITORS
NOMINEE:
[ ] FOR NOMINEE Thomas W. Rieck
[ ] WITHHOLD AUTHORITY 3. IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY [ ] [ ] [ ]
FOR NOMINEE PROPERLY COME BEFORE THE MEETING (which the Board
of Directors does not know of prior to August 15,
2006)
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 THE NOMINEE FOR DIRECTOR AND FOR THE RATIFICATION OF THE
SELECTION OF BDO SEIDMAN, LLP AS INDEPENDENT AUDITORS, AND WILL CONFER THE
AUTHORITY IN PARAGRAPH 3.
RECEIPT IS HEREBY ACKNOWLEDGED OF THE NOTICE OF THE MEETING AND PROXY STATEMENT
DATED AUGUST 15, 2006 AS WELL AS A COPY OF THE 2006 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, as attorneys and proxies to represent the undersigned at the 2006 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 15, 2006 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)