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. 2)
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FILED
BY THE REGISTRANT |
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FILED
BY A PARTY OTHER THAN THE REGISTRANT |
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Check the
appropriate box:
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Preliminary
Proxy Statement
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Confidential,
For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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/X/
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to § 240.14a-11(c) or § 240.14a-12
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SUTRON
CORPORATION
(Name
of Registrant as Specified In Its Charter)
Not
Applicable
(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
PAYMENT
OF FILING FEE (CHECK THE APPROPRIATE BOX):
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required.
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computed on table below per Exchange Act Rules 14a-6(i)(4) and
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1
SUTRON
CORPORATION
21300
Ridgetop Circle
Sterling,
Virginia 20166
(703)
406-2800
May 18,
2005
Dear
Sutron Shareholder:
You are
cordially invited to our Annual Meeting of Shareholders on Wednesday, June 1,
2005, beginning at 1:30 p.m., local time, at Sutron’s corporate headquarters,
21300 Ridgetop Circle, Sterling, Virginia. The Annual Meeting of Shareholders
was originally scheduled for May 20, 2005 at 1:30 p.m., local time. The meeting
was postponed to allow the Company to send to its shareholders revised proxy
materials containing information that was inadvertently omitted from the
previously delivered proxy materials. The revised proxy materials do not include
any new proposals.
The March
28, 2005 record date has not changed. Accordingly, shareholders of record at the
close of business on March 28, 2005 are entitled to notice of and vote at the
meeting. The enclosed notice of annual meeting sets forth the proposals that
will be presented at the meeting, which are described in more detail in the
enclosed proxy statement. The Board of Directors recommends that shareholders
vote “FOR” these proposals.
Although
shareholders are not required to complete and execute a new proxy card, a
shareholder will be entitled to revoke its previously mailed proxy by (i)
submitting a later dated proxy card; (ii) written request that is received by
the Secretary of the Company prior to the meeting date, or (iii) voting in
person at the meeting.
We look
forward to seeing you there.
| Very truly yours, | ||
| |
 | |
| Raul S. McQuivey | ||
| Chairman of the Board and | ||
|
Chief
Executive Officer | ||
Page
2
SUTRON
CORPORATION
21300
Ridgetop Circle
Sterling,
Virginia 20166
(703)
406-2800
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON June 1, 2005
To
the Holders of Common Stock of Sutron Corporation,
Notice is
hereby given that the Annual Meeting of Shareholders of Sutron Corporation (the
"Company") will be held at 21300 Ridgetop Circle, Sterling, Virginia, on
Wednesday, June 1, 2005, at 1:30 p.m., local time, for the following
purposes:
| 1. |
To
elect five directors to hold office until the next annual election of
directors and until their successors shall have been duly elected and
qualified; |
| 2. |
To
ratify the appointment of Thompson, Greenspon & Co., P.C. as
independent accountants for fiscal year 2005;
and |
| 3. |
To
transact such other business as may properly come before the meeting and
any adjournments thereof. |
Shareholders
of record at the close of business on Monday, March 28, 2005, are entitled to
notice of and to vote at the meeting.
All
shareholders are cordially invited to attend the meeting in person. However, to
assure your representation at the meeting, we urge you to complete, sign, date
and return the enclosed proxy card in the enclosed envelope as promptly as
possible. If you attend the meeting, you may vote in person even if you have
returned a proxy.
| By Order of the Board of Directors, | ||
| |
 | |
| Thomas N. Keefer | ||
|
Secretary | ||
| May 18, 2005 |
| |
Page
3
SUTRON
CORPORATION
21300
Ridgetop Circle
Sterling,
Virginia 20166
(703)
406-2800
PROXY
STATEMENT
The
enclosed Proxy is solicited on behalf of the Board of Directors of Sutron
Corporation (the "Company") for use at its Annual Meeting of Shareholders to be
held on Wednesday, June 1, 2005 at 1:30 p.m., local time, and at any
adjournments thereof. The purposes of the meeting are set forth herein and in
the accompanying Notice of Annual Meeting of Shareholders. The meeting will be
held at the principal executive offices of the Company, 21300 Ridgetop Circle,
Sterling, Virginia 20166. The approximate date on which this Proxy Statement and
the Proxy Card were first sent to shareholders of the Company is May 18,
2005.
After the
enclosed Proxy Card is duly executed and returned, a shareholder may revoke the
proxy at any time by written request that is received by the Secretary of the
Company prior to the meeting or by voting in person at the meeting or by
executing a later dated Proxy Card. The Proxy Card is in ballot form so that a
specification may be made to vote for, or to withhold authority to vote for, the
nominees for election as directors, or any of them, and to indicate whether the
shareholder wishes to vote for or against, or abstain from voting upon the other
proposal.
RECORD
DATE AND VOTING RIGHTS
Shareholders
of record at the close of business on Monday, March 28, 2005 are entitled to
notice of and to vote at the meeting. On March 28, 2005, the Company had
outstanding and entitled to vote 4,289,551 shares of Common Stock. Each share of
Common Stock entitles the holder to one vote on each matter to be voted upon at
the meeting.
The
By-laws of the Company require that the holders of a majority of the outstanding
shares of the Company’s Common Stock entitled to vote at the Annual Meeting be
present in person or represented by proxy in order for a quorum to exist for the
transaction of business at that meeting. Abstentions and “broker non-votes”
(which occur if a broker or other nominee does not have discretionary authority
and has not received voting instructions from the beneficial owner with respect
to the particular item) are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Assuming that a quorum is
present for the Annual Meeting, the five nominees for director who receive the
highest number of votes cast will be elected. Abstentions and broker non-votes
will have no effect on the outcome of the election of directors.
The
appointment of the independent public accountants must be approved by the
affirmative vote of a majority of the shares present in person or by proxy at
the Annual Meeting and entitled to vote thereon. For purposes of this Proposal,
abstentions are counted for purposes of calculating shares entitled to vote but
are not counted as shares voting and therefore have the effect of a vote against
such proposal. For purposes of this Proposal, broker non-votes are not counted
as shares entitled to vote and therefore have no effect with respect to such
proposal.
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4
Any Proxy
Card which is returned by a Shareholder properly completed and which is not
revoked will be voted at the Annual Meeting in the manner specified therein.
Unless contrary instructions are given, the persons designated as proxy holders
in the accompanying Proxy Card (or their substitutes) will vote “FOR” the
election of the Board of Directors’ nominees and “FOR” the ratification of the
appointment of Thompson, Greenspon & Co., P.C. as independent accountants,
and in the proxy holders’ discretion with regard to all other matters properly
brought before the meeting. Any unmarked proxies, including those submitted by
brokers (other than broker non-votes) or nominees will be voted in favor of the
nominees for the Board of Directors and other proposals, as indicated in the
accompanying proxy card. We
urge you to vote your shares without delay.
The
Company will bear the cost of preparing this Proxy Statement and the other costs
of soliciting Proxies for the 2005 Annual Shareholders Meeting. In addition to
solicitation by mail, solicitations may be made by personal interview or
telephone by officers and employees of the Company, acting without additional
compensation. Sutron anticipates that banks, brokerage houses, and other
custodians, nominees, and fiduciaries will forward this material to beneficial
owners of shares of Common Stock entitled to vote at the Annual Meeting, and
such persons will be reimbursed by Sutron for the out-of-pocket expenses
incurred by them.
PRINCIPAL
SHAREHOLDERS
The
following table sets forth the names and addresses of all persons who
beneficially owned, to the knowledge of the Company, more than 5% of the issued
and outstanding shares of the Company's Common Stock on March 28,
2005.
|
Percentage | |||
|
Name
and Address of |
Number
of Shares |
Of
Shares | |
|
Beneficial
Owner |
Beneficially
Owned |
Outstanding(1) | |
|
Raul
S. McQuivey, Ph.D. |
882,186(2) |
19.9% | |
|
Kenneth
W. Whitt |
687,000(3) |
15.2% | |
|
Thomas
N. Keefer, Ph.D. |
506,775(4) |
11.8% | |
|
Daniel
W. Farrell |
295,660(5) |
6.8% | |
(1) As of
March 28, 2005, the Company had 4,289,551 shares of Common Stock outstanding. In
computing the number of shares beneficially owned by a person and the percentage
ownership of that person, shares of Common Stock, which that person could
purchase by exercising outstanding options and options that will become
exercisable within 60 days of March 28, 2005, are deemed outstanding. Such
shares, however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. Each person named in the table above
has an address in care of Sutron Corporation, 21300 Ridgetop Circle, Sterling,
Virginia 20166.
(2) Dr.
McQuivey’s holdings consist of 714,586 shares held by Dr. Raul S. McQuivey and
Karen T. McQuivey, Dr. McQuivey’s wife, as Trustees for the Raul S. McQuivey
Trust and the Karen T. McQuivey Trust, 30,000 shares held directly by Dr.
McQuivey and 137,600 shares subject to options exercisable within 60 days after
March 28, 2005.
(3) Mr.
Whitt’s holdings consist of 687,000 shares owned by Kenneth W. Whitt and Eva D.
Whitt, Mr. Whitt's wife, as Joint Tenants with a Right of
Survivorship.
Page
5
(4) Dr.
Keefer’s holdings consist of 500,775 shares are held by Dr. Thomas N. Keefer and
Sally E. Keefer, Dr. Keefer's wife, as Joint Tenants with a Right of
Survivorship and 6,000 shares subject to options exercisable within 60 days
after March 28, 2005.
(5) Mr.
Farrell’s holdings consist of 219,460 shares, of which 214,300 shares are owned
by Daniel W. Farrell and Jill E. Farrell, Mr. Farrell's wife, as Joint Tenants
with a Right of Survivorship and 76,200 shares subject to options exercisable
within 60 days after March 28, 2005.
ELECTION
OF DIRECTORS
The
nominees for directors are Dr. Raul S. McQuivey, Daniel W. Farrell, Robert F.
Roberts, Jr., Andrew D. Lipman and Thomas R. Porter. Dr. McQuivey, Mr. Farrell
and Mr. Roberts are presently Directors of the Company. Mr. Lipman and Mr.
Porter are new nominees for Director. Mr. Roberts, Mr. Lipman and Mr. Porter are
non-employees of the Company and are independent as defined by Nasdaq listing
standards. If Mr. Lipman and Mr. Porter are elected, a majority of the Company’s
Board of Directors will be independent in accordance with Nasdaq listing
standards. Sidney C. Hooper and Thomas N. Keefer, both Executive Officers of the
Company, are not standing for re-election.
The Board
of Directors of the Company recommends the election of the nominees to serve as
directors of Sutron until the fiscal year 2006 Annual Meeting of Shareholders
and until their successors have been duly elected and qualified or until the
director's earlier death, resignation or removal. In the event that any nominees
for directors should be unavailable to serve, which is not anticipated, the
Board of Directors, in its discretion, may designate substitute nominees, in
which event Proxies received by the Board of Directors will be voted for such
substitute nominees.
The five
nominees for director who receive the highest number of votes cast by the
holders of shares entitled to vote in the election of Directors at the Annual
Meeting will be elected. All duly submitted and unrevoked Proxy Cards will be
voted “FOR” the nominees selected by the Board of Directors except where
authorization to vote is withheld.
NOMINEES
FOR DIRECTORS
Set forth
below, for each nominee, are his name and age, his positions with the Company,
his principal occupation and business experience during at least the past five
years and the year of the commencement of his term as a director of the Company:
Raul S.
McQuivey, Ph.D., age 66, has served as a director since 1976 and as President,
Chief Executive Officer, and Chairman of the Board of Directors since January
1989. Dr. McQuivey served as Executive Vice President from September 1980 to
January 1989, Treasurer of the Company from March 1983 to March 1984 and as
Secretary from March 1983 until September 1989. Dr. McQuivey earned a B.S. in
Civil Engineering from Utah State University in 1961, an M.S. in Civil
Engineering (Hydraulics) from Colorado State University in 1963, and a Ph.D. in
Civil Engineering (Hydraulics, Hydrology and Fluid Mechanics) from Colorado
State University in 1967. He is a Registered Professional Engineer.
Daniel W.
Farrell, age 52, has served as a director since 1988 and as Vice President of
the Company since March 2, 1984 and Secretary since September 1, 1989. Mr.
Farrell joined the Company in September 1976 as a staff scientist. He was
promoted to the position of Director of
Page
6
Engineering
in August 1989. Mr. Farrell received a B.S. in Chemistry from Brigham Young
University in 1976.
Robert F.
Roberts, Jr., age 54, has served as a director since 2003. Mr Roberts was the
founder, CEO and Chairman of Concepts Automation from 1975 to 1995. Concepts
Automation, a computer systems integrator, grew from a one-man operation to
employing over 220 people in six offices. Federal and state government agencies
and Fortune 1000 companies were the primary clients. Sales in 1995 were in
excess of $100 million when the company was sold. Mr. Roberts has served as a
Director for Colgan Airways, a regional commuter airline from 1990 to present,
as a Principal for Foresight Funding that manages private investments in tax
free bonds, real estate and corporate obligations from 1995 to present and as
Chairman, Trustee of Wakefield School, a private school that offers a classical
curriculum for grades Pre-K to 12 from 1990 to present. Mr. Roberts received an
Associates degree in Business Management from Northern Virginia Community
College.
Andrew D.
Lipman, age 53, has been a partner and head of the Telecommunications Group of
Swidler Berlin Shereff Friedman, LLP, a Washington D.C. law firm since 1988. He
is currently Vice Chairman of the firm. From 1987 to 1997, Mr. Lipman also
served as Senior Vice President for Legal and Regulatory Affairs for MFS
Communications, Co., a competitive telecommunications provider. He also
currently serves as a member of the boards of directors of MPower
Communications, a competitive telecom carrier; TMNG Inc., a
telecommunications-related consulting firm and Nu Skin Enterprises, a personal
care and nutritional supplements provider. He received a B.A. degree from the
University of Rochester and a J.D. degree from Stanford University.
Thomas R.
Porter, age 54, co-founded Value Consultants, LLC, a firm specializing in the
provision of expert witness and litigation consulting services in 1996. Mr.
Porter worked in the Defense Consulting Group of Peat, Marwick Mitchell &
Co. from 1978-1983. From 1983 to 1989, he worked for the firm Laventhol &
Horwath, CPAs and rose to the level of principal. From 1989 to 1993, Mr. Porter
was the president of a management company and the chief financial officer of a
privately-held distributor of building products. He was Director of Litigation
Services for the Washington, D.C. office of Grant Thornton, LLP from 1993 until
1996. Mr. Porter is a Certified Public Accountant’ an attorney, a Certified
Forensic Financial Analyst and a Certified Valuation Analyst. He received a B.S.
and a M.S. in Industrial Engineering from the Georgia Institute of Technology
and a J.D. degree from the George Washington University.
BOARD
AND COMMITTEE
MEETINGS
During
the year ended December 31, 2004, the Board of Directors held three meetings.
Each director attended all of the meetings of the Board. Although the Board
currently does not have a standing audit committee or nominating committee
because the Board historically performed the functions customarily assigned to
those committees, the Board intends to form such committees in 2005.
The
Board of Directors has determined that none of the current directors qualifies
as an Audit Committee Financial Expert as defined under applicable law, and only
Mr. Roberts met the standards of independence under Nasdaq listing standards.
The
compensation committee consisted of Dr. McQuivey and Mr. Roberts. They met twice
during 2004.
Page
7
As noted
above, the Company currently does not have an Audit Committee and, accordingly,
it also does not have an Audit Committee charter. The Board, however, expects to
form an Audit Committee and adopt an Audit Committee charter in fiscal 2005. It
is expected that the Audit Committee will consist of solely independent
directors, as such term is defined in the Nasdaq listing standards, and, if
elected, that Mr. Lipman, Mr. Roberts and Mr. Porter will be appointed as the
members of the Audit Committee, with Mr. Porter serving as the chair of the
Audit Committee. The Board of Directors has determined that Mr. Porter qualifies
as an Audit Committee Financial Expert as defined applicable law. The Audit
Committee’s primary responsibilities will be to provide oversight of the
Company’s accounting and financial controls, review the scope of and procedures
to be used in the annual audit, review the financial statements and results of
the annual audit, and retain and evaluate the performance of the independent
accountants and the Company’s financial and accounting personnel.
During
fiscal year 2004, the Compensation Committee was comprised of Dr. McQuivey
and Mr. Roberts, and only
Mr. Roberts was independent as defined in the Nasdaq listing
standards. The
Compensation Committee does not have a charter but expects to adopt a charter in
fiscal 2005. It is expected that the Compensation Committee will consist of
solely independent directors, as such term is defined in Nasdaq listing
standards, and, if elected, Mr. Lipman, Mr. Roberts and Mr. Porter will be
appointed as members of the Compensation Committee, with Mr. Roberts serving as
chair the Compensation Committee. The Compensation Committee approves goals
related to executive compensation and adjusts compensation paid to the President
and CEO of the Company and all executive officers, and administers the Company’s
incentive compensation plans, including cash bonus and stock option plans.
As noted
above, the Company currently does not have a Nominating Committee and,
accordingly, it also does not have a Nominating Committee charter. The Board,
however, expects to form a Nominating Committee and adopt a Nominating Committee
charter in fiscal 2005. It is expected that the Nominating Committee will
consist of solely independent directors, as such term is defined in Nasdaq
listing standards, and, if elected, that Mr. Lipman, Mr. Roberts and Mr. Porter
will be appointed as the members of the Nominating Committee, with Mr. Lipman
serving as the chair of the Nominating Committee. The
Company did not engage a third party to assist in identifying and evaluating the
individuals nominated for election as directors at this meeting. Historically,
the Board has relied on recommendations from its members to identify
nominee. Dr.
McQuivey, Sutron’s Chief Executive Officer, recommended Mr. Lipman as a nominee
for director and Mr. Roberts, a non-management director, recommended Mr. Porter
as a nominee for director.
In
considering whether to nominate any particular candidate for election to the
Board, the Board uses various criteria to evaluate each candidate, including an
evaluation of each candidate’s integrity, business acumen, knowledge of the
Company’s business and industry, experience, diligence, conflicts of interest
and the ability to act in the interests of the Company’s shareholders. The Board
does evaluate biographical information and interview selected candidates. The
Board also considers whether a potential nominee would satisfy the Nasdaq
listing standards for “independence” and the SEC’s definition of “audit
committee financial expert.” The Board does not assign specific weights to
particular criteria and no particular criterion is a prerequisite for each
prospective nominee. The Company believes that the backgrounds and
qualifications of its directors, considered as a group, should provide a
composite mix of
experience, knowledge and abilities that will allow the Board to fulfill its
responsibilities.
Page
8
The
Company does not have a formal policy with regard to the consideration of
director candidates recommended by its shareholders; however shareholder
recommendations relating to director nominees may be submitted in accordance
with the procedures set forth below under the heading “Communicating with the
Board of Directors”.
COMMUNICATING
WITH THE BOARD OF DIRECTORS
Shareholders
who wish to send communications to the Board may do so by writing to the
Secretary of the Company, Sutron Corporation, 21300 Ridgetop Circle, Sterling,
Virginia 20166. The mailing envelope must contain a clear notation indicating
that the enclosed letter is a “Shareholder-Board Communication.” All such
letters must identify the author as a shareholder and must include the
shareholder’s full name, address and a valid telephone number. The name of any
specific intended Board recipient should be noted in the communication. The
Secretary will forward any such correspondence to the intended recipients;
however, prior to forwarding any such correspondence, the Secretary or his
designee will review such correspondence, and in his or her discretion, may not
forward communications that relate to ordinary business affairs, communications
that are primarily commercial in nature, personal grievances or communications
that relate to an improper or irrelevant topic or are otherwise inappropriate
for the Board’s consideration.
DIRECTOR
ATTENDANCE AT ANNUAL MEETING OF SHAREHOLDERS
Although
the Company does not have a policy with regard to Board members’ attendance at
the Company’s annual meeting of shareholders, all directors are encouraged to
attend the annual meeting. Four of the five members of the Board of Directors
attended the 2004 Annual Meeting of Shareholders.
COMPENSATION
OF DIRECTORS
The
Company has no arrangement by which any of its officers are compensated for
their services as directors and, therefore, Mr. Farrell and Dr. McQuivey did not
and will not receive any additional remuneration for their services as
directors. Mr. Roberts received compensation of $1,000 for attending board
meetings in fiscal 2004 and received a stock option totaling 10,000 shares that
vested immediately upon grant. Independent director fees will be increased to
$1,500 per board meeting in fiscal 2005. The terms of any future stock option
grants to the non-employee directors have not yet been determined for fiscal
year 2005. Option agreements generally provide for immediate vesting of all
unvested stock options in the event of a change in control of the
Company.
CODE
OF ETHICS
The
Company has adopted a Code of Ethics that applies to all directors and
employees, including the Company’s principal executive officer, principal
financial officer, principal accounting officer and controller. The Code of
Ethics is posted on the Company’s website at www.sutron.com under
investors relations.
MANAGEMENT
OWNERSHIP OF COMMON STOCK
Set forth
below is information concerning stock ownership of each named executive officer,
director and director nominee, and all directors and executive officers of the
Company as a group, as of March 28, 2005. The information as to securities
beneficially owned are, in each
Page
9
instance,
based upon information furnished by each individual. As to the shares shown to
be beneficially owned, the owner has sole investment and voting power, unless
otherwise indicated.
|
Beneficial
Owner |
Number
of Shares Beneficially Owned |
Percent
of Class (1) |
|||||
Raul
S. McQuivey, Ph.D. (2) |
882,186 |
19.9% |
|||||
Thomas
N. Keefer, Ph.D. (3) |
506,775 |
11.8% |
|||||
Daniel
W. Farrell (4) |
295,660 |
6.8% |
|||||
Sidney
C. Hooper (5) |
126,200 |
2.9% |
|||||
Robert
F. Roberts (6) |
20,000 |
.5% |
|||||
Andrew
D. Lipman |
0 |
— |
|||||
Thomas
R. Porter |
0 |
— |
|||||
All
executive officers and directors as a group (7 in number) |
1,830,821 |
41.9% |
|||||
(1) See Note
1 under "PRINCIPAL SHAREHOLDERS".
(2) See Note
2 under "PRINCIPAL SHAREHOLDERS".
(3) See Note
4 under
"PRINCIPAL SHAREHOLDERS".
(4) See Note
5 under
"PRINCIPAL SHAREHOLDERS".
(5) Includes
38,000 shares owned by Sidney C. Hooper and Malissa C. Hooper, Mr. Hooper's
wife, as Joint Tenants with a Right of Survivorship and 88,200 shares subject to
options exercisable within 60 days after March 28, 2005.
(6) Includes
20,000 shares subject to options exercisable within 60 days after March 28,
2005.
EXECUTIVE
OFFICERS
The
following table furnishes information concerning Sutron’s executive officers as
of March 28, 2005.
|
Name |
Age |
Title |
|
Raul
S. McQuivey |
66 |
Chief
Executive Officer and President |
|
Daniel
W. Farrell |
52 |
Vice
President |
|
Sidney
C. Hooper |
46 |
Chief
Financial Officer and Treasurer |
|
Thomas
N. Keefer |
60 |
Vice
President and Secretary |
Sidney C.
Hooper, age 46, has served as the Chief Financial Officer of the Company since
2003 and Treasurer of the Company since May 1993. Mr. Hooper joined the Company
in August 1989 and was promoted to the position of Controller in January 1990.
Prior to joining the Company, Mr. Hooper served as a Senior Accountant with
Arthur Andersen & Company. Mr. Hooper received a B.S. in Accounting from
Brigham Young University in 1983 and a Master of Accountancy from Brigham Young
University in 1984.
Thomas N.
Keefer, Ph.D., age 60, has served as Vice President of Software Services since
1997. He joined the Company in January 1977, as a Project Engineer and served as
the Vice President of the Water Resources Division and the Integrated Systems
Division from 1981
Page
10
to 1997.
Dr. Keefer has earned three degrees from Colorado State University, a B.S. in
Civil Engineering in 1967, an M.S. in Civil Engineering (Hydraulics) in 1969 and
a Ph.D. in Civil Engineering (Hydraulics, Hydrology and Fluid Mechanics) in
1971. He is a Registered Professional Engineer.
EXECUTIVE
COMPENSATION
The
following summary compensation table sets forth information concerning the
annual and long-term compensation paid by us during the last three completed
years to our chief executive officer, and other executive officers, whom we
refer to as our “Named Executive Officers”.
SUMMARY
COMPENSATION TABLE
|
Long
Term Compensation |
|||||||||||||||||||||||||
|
Annual
Compensation |
Awards |
Payouts |
|||||||||||||||||||||||
|
Other |
Securities |
All
Other |
|||||||||||||||||||||||
Name
and |
Annual |
Restricted |
Underlying |
LTIP |
Compen- |
||||||||||||||||||||
Principal |
Compen- |
Stock |
Options/ |
Payouts |
sation |
||||||||||||||||||||
|
Position |
Year |
Salary |
Bonus |
sation |
Awards |
SARs(#) |
($) |
($) |
|||||||||||||||||
|
Raul
S. McQuivey |
2004 |
$ |
167,556 |
$ |
32,270 |
— |
— |
— |
— |
$ |
14,890
(1 |
) | |||||||||||||
|
CEO |
2003 |
$ |
164,317 |
— |
— |
— |
— |
— |
$ |
3,148
(1 |
) | ||||||||||||||
|
2002 |
$ |
164,317 |
— |
— |
— |
110,000 |
— |
$ |
3,148
(1 |
) | |||||||||||||||
|
Daniel
W. Farrell |
2004 |
$ |
141,781 |
$ |
27,306 |
— |
— |
— |
— |
$ |
13,606
(2 |
) | |||||||||||||
|
Vice
President |
2003 |
$ |
136,377 |
— |
— |
— |
— |
— |
$ |
3,133
(2 |
) | ||||||||||||||
|
2002 |
$ |
136,377 |
— |
— |
— |
90,000 |
— |
$ |
1,243
(2 |
) | |||||||||||||||
|
Sidney
C. Hooper |
2004 |
$ |
125,807 |
$ |
25,000 |
— |
— |
— |
— |
$ |
12,464
(3 |
) | |||||||||||||
|
CFO
and Treasurer |
2003 |
$ |
114,250 |
— |
— |
— |
— |
— |
$ |
4,519
(3 |
) | ||||||||||||||
|
2002 |
$ |
114,250 |
— |
— |
— |
120,000 |
— |
$ |
4,445
(3 |
) | |||||||||||||||
|
Thomas
N. Keefer |
2004 |
$ |
100,000 |
$ |
10,000 |
— |
— |
— |
— |
$ |
6,
827 (4 |
) | |||||||||||||
|
Vice
President |
2003 |
$ |
98,500 |
— |
— |
— |
— |
— |
$ |
3,133
(4 |
) | ||||||||||||||
|
2002 |
$ |
98,500 |
— |
— |
— |
15,000 |
— |
$ |
1,243
(4 |
) | |||||||||||||||
| (1) | The amounts shown in this column for Dr. McQuivey are comprised of the following: (i) in 2004, 2003 and 2002 a payment of $3,148 for life insurance premiums on term life insurance and (ii) in 2004 a contribution of $11,742 to the Company’s 401(k) Plan on behalf of Dr. McQuivey. |
| (2) |
|
The
amounts shown in this column for Mr. Farrell are comprised of the
following: (i) in 2004 a payment of $1,418 for life insurance premiums on
term life insurance, in 2003 a payment of $1,175 for life insurance
premiums on term life insurance and in 2002 a payment of $385 for life
insurance premiums on term life insurance, (ii) in 2004 a contribution of
$8,304 to the Company’s 401(k) Plan on behalf of Mr. Farrell, and (iii) in
2004 value of auto allowance relating to personal use of $3,884, in 2003
value of auto allowance relating to personal use of $1,958 and in 2002
value of auto allowance relating to personal use of
$858. |
Page
11
|
(3) |
|
The
amounts shown in this column for Mr. Hooper are comprised of the
following: in 2004, 2003 and 2002 a payment of $355 for life insurance
premiums on term life insurance, (ii) in 2004 a contribution of $7,984 to
the Company’s 401(k) Plan on behalf of Mr. Hooper, and (iii) in 2004 value
of auto allowance relating to personal use of $4,125, in 2003 value of
auto allowance relating to personal use of $4,164 and in 2002 value of
auto allowance relating to personal use of
$4,090. |
| (4) | The amounts shown in this column for Dr. Keefer are comprised of the following: (i) in 2004 a payment of $743 for life insurance premiums on term life insurance, in 2003 a payment of $3,133 for life insurance premiums on term life insurance, and in 2002 a payment of $1,243 for life insurance premiums on term life insurance and (ii) in 2004 a contribution of $6,084 to the Company’s 401(k) Plan on behalf of Dr. Keefer. |
OPTION/SAR
GRANTS IN LAST FISCAL YEAR
There
were no options/SAR grants for the year ended December 31, 2004 to the Named
Executive Officers.
AGGREGATED
OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND
FISCAL YEAR-END OPTION/SAR VALUE
The
following table summarizes information relating to stock exercises during the
fiscal year ended December 31, 2004 by the Named Executive
Officers.
|
Name |
Shares
Acquired
on
Exercise
(#) |
Value
Realized
($) |
Number
of Securities
Underlying
Unexercised
Options/SARs
at FY-End
(#)Exercisable/
Unexercisable |
Value
of Unexercised
In-the-Money
Options/SARs
at FY-
End
($) (1)
Exercisable/
Unexercisable |
|
Raul
S. McQuivey |
0 |
0 |
137,600/66,000 |
$1,095,140/$551,100 |
|
Daniel
W. Farrell |
0 |
0 |
76,200/54,000 |
$613,155/$450,900 |
|
Sidney
C. Hooper |
0 |
0 |
88,200/72,000 |
$713,355/$601,200 |
|
Thomas
N. Keefer |
0 |
0 |
6,000/9,000 |
$50,100/$75,150 |
(1) On
December 31, 2004, the closing price of the Company’s Common Stock on the
Electronic Bulletin Board was $8.90.
LONG-TERM
INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
The
Company did not award long-term incentive plan awards to the Named Executive
Officers during the fiscal year 2004.
Page
12
EQUITY
COMPENSATION PLAN INFORMATION
The
following table provides information about the securities authorized for
issuance under the Company’s equity compensation plans as of December 31, 2004:
(a) |
(b) |
(c) | |
|
Plan
category |
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
(1) |
Weighted
Average
exercise
price of
outstanding
options,
warrants
and rights |
Number
of securities
remaining
available
for
future issuance
under
equity
compensation
plans
(excluding
securities
reflected
in column
(a))
(2) (3) |
|
Equity
compensation plans approved by shareholders |
— |
— |
— |
|
Equity
compensation plans not approved by shareholders |
719,000 |
$
.76 |
1,000 |
|
Total |
| (1) | Includes the Company’s 1996 Stock Option Plan, 1997 Stock Option Plan and 2002 Stock Option Plan. |
| (2) | Consists solely of shares issuable under the 1996 Stock Plan. |
| (3) | Excludes an additional 250,000 authorized under the Amended and Restated 2002 Stock Option Plan. The 2002 Stock Option Plan was amended in April 2005 to, among other things, increase the authorized shares from 400,000 shares to 650,000 shares. |
EMPLOYMENT
AGREEMENTS
The
Company does not have any Employment Agreements and has no other plan or
arrangement which would result in any executive officer receiving compensation
as a result of their resignation, retirement or any other
termination of employment with the Company. Option agreements do provide for the
immediate vesting of all unvested stock options in the event of a change in
control of the Company.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
In 2003,
the Company changed its banking relationship from M&T Bank to BB&T Bank.
One aspect of the change was a reduction in the borrowing base amount due to the
exclusion of inventory as collateral for borrowings. The Company obtained
additional funds in the amount of $330,000 that were used for working capital by
issuing promissory notes to Robert F. Roberts, Jr., Raul S. McQuivey and Thomas
N. Keefer. These notes were payable on April 12, 2004. Mr. Roberts note was
repaid in April 2004 including interest in the amount of $8,422. Mr. McQuivey
and Mr. Keefer’s notes were repaid in September 2004 including interest of
$6,213 and $3,575, respectively.
Page
13
| Name | Relationship |
Issue
Date |
Note
Amount |
Rate |
|||||||||
| Robert F. Roberts, Jr. |
Director
|
September
15, 2003 |
$ | 200,000.00 |
7.25% |
||||||||
| Raul S. McQuivey |
Officer/Director
|
August
28, 2003 |
$ | 80,000.00 |
7.25% |
||||||||
| Thomas N. Keefer |
Officer/Director
|
September
8, 2003 |
$ | 50,000.00 |
7.25% |
||||||||
| $ | 330,000.00 | ||||||||||||
COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the
securities laws of the United States, the Company's directors and its executive
officers are required to report ownership of the company's Common Stock and any
changes in that ownership to the Securities and Exchange Commission. Specific
due dates for these reports have been established and the Company is required to
disclose in this proxy statement any failure to file by these dates during 2004.
Mr. Roberts was subject to the reporting requirement of Section 16(a) and was
delinquent in filing two required reports on Form 4. Mr. McQuivey, Mr. Keefer
and Mr. Hooper were delinquent in filing one required report on Form
4.
REPORT
OF THE AUDIT COMMITTEE
As noted
above, the Company did not have an Audit Committee in 2004 and, accordingly, it
also did not have an Audit Committee charter. The Board, however, expects to
form an Audit Committee and adopt an Audit Committee charter in fiscal 2005. It
is expected that the Audit Committee will consist of solely independent
directors, as such term is defined in Nasdaq listing standards, and, if elected,
that Mr. Lipman, Mr. Roberts and Mr. Porter will be appointed as the members of
the Audit Committee, with Mr. Porter serving as the chair of the Audit
Committee. The Board of Directors has determined that Mr. Porter qualifies as an
Audit Committee Financial Expert as defined by applicable law. The Audit
Committee’s primary responsibilities will be to provide oversight of the
Company’s accounting and financial controls, review the scope of and procedures
to be used in the annual audit, review the financial statements and results of
the annual audit, and retain and evaluate the performance of the independent
accountants and the Company’s financial and accounting personnel.
In 2004,
the Board oversaw the Company’s financial reporting process. The Company’s
management has the primary responsibility for the financial statements and
reporting process, which includes the Company’s systems for internal control.
Thompson, Greenspon & Co., the Company’s independent auditors, is
responsible for performing an independent audit of the Company’s financial
statements in accordance with standards established by the Public Company
Accounting Oversight Board, expressing an opinion, based on its audit, as to the
conformity of such financial statements with accounting principles generally
accepted in the United States. In carrying out its oversight responsibilities,
the Board met with management and reviewed with management the audited financial
statements included in the Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2004. The review included a discussion of the quality
and acceptability of the Company’s financial reporting and controls, including
the reasonableness of significant judgments and the clarity of disclosures in
the consolidated financial statements.
The Board
also reviewed with Thompson, Greenspon & Co. who are responsible for
expressing an opinion on the conformity of the Company’s audited financial
statements with generally accepted accounting principles, their judgments as to
the quality and the acceptability of the Company’s financial reporting and such
other matters as are required to be discussed with the Board under generally
accepted auditing standards and SAS (Statement on Auditing
Page
14
Standards) 61
as amended by Statement on Auditing Standards No. 90 (Audit Committee
Communications). In addition, the Board discussed with Thompson, Greenspon &
Co. their independence from management and the Company, including the matters in
their written disclosures required by the Independence Standards Board,
including Standard No. 1, and received written disclosures required by that
standard. The Board has considered whether the independent auditors’ provision
of non-audit services to the Company is compatible with the auditors’
independence. The Board held a private session with the Company’s independent
auditors, Thompson, Greenspon & Co., at which candid discussions of
financial management, accounting and internal controls took place.
In
reliance on the reviews and discussions referred to above, the Board recommended
that the audited financial statements be included in the Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2004 for filing
with the Securities and Exchange Commission.
Respectfully
submitted by the Board of Directors.
Raul S.
McQuivey, Chairman
Daniel W.
Farrell
Sidney C.
Hooper
Thomas N.
Keefer
Robert F.
Roberts, Jr.
RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board
of Directors considers it desirable that its appointment of the firm of
Thompson, Greenspon & Co. as independent registered public accounting firm
of the Company for fiscal year 2005 be ratified by the shareholders. Thompson,
Greenspon & Co. has certified the Company's financial statements for all
years beginning in 1976. Representatives of Thompson, Greenspon & Co. will
be present at the Annual Meeting, will be given an opportunity to make a
statement if they so desire, and will be available to respond to appropriate
questions from the shareholders.
The Board
of Directors recommends a vote “FOR” ratification of the appointment of
Thompson, Greenspon & Co. and the enclosed proxy will be so voted unless a
vote against the proposal or an abstention is specifically indicated If this
proposal is not approved at the Annual Meeting, the Audit Committee may
reconsider its selection of Thompson, Greenspon & Co.
Aggregate
fees for professional services rendered to the Company by Thompson, Greenspon
& Co. as of or for the years ended December 31, 2004 and 2003 are summarized
in the table below.
2004 |
2003 |
||||||
| Audit | $ | 50,803 | $ | 43,000 | |||
| Audit Related | 0 | 0 | |||||
| Tax | 5,000 | 5,500 | |||||
| All other | 1,627 | 0 | |||||
| Total | $ | 57,430 | $ | 48,500 | |||
Audit
fees for the years ended December 31, 2004 and 2003, respectively, were for
professional services rendered for the audits of the financial statements of the
Company, income tax provision procedures and assistance with review of documents
filed with the SEC.
Page
15
Tax fees
as of the years ended December 31, 2004 and 2003, respectively, were for
services related to tax compliance, including the preparation of tax returns,
tax planning and tax advice.
All other
services include a transfer pricing review done in regards to income tax filings
for Sutron’s Branch Office in India. The Company did not incur any fees for
audit related work.
AUDIT
COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
During
Fiscal 2004, the Board pre-approved all services (audit and permitted non-audit
services) provided to Sutron by the Company’s independent auditor. The Board
however has not adopted written policies and procedures in regards to
pre-approval of audit and permitted non-audit services. The Board expects that
the new Audit Committee will adopt written pre-approval policies and procedures
in fiscal 2005.
MARKET
FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The
common stock of Sutron Corporation is quoted over the counter through the NASD
Bulletin Board supplied by the National Association of Securities Dealers, Inc.
under the symbol STRN, and through the Pink Sheet Service of the National
Quotation Bureau, Inc. The table below sets forth the high and low sales prices
for the past two years.
|
2004 |
2003 |
||||||||||||
|
HIGH |
LOW |
HIGH |
LOW |
||||||||||
First
Quarter |
$ |
1.70 |
$ |
.65 |
$ |
1.28 |
$ |
.67 |
|||||
Second
Quarter |
3.75 |
1.25 |
1.40 |
.61 |
|||||||||
Third
Quarter |
4.50 |
2.80 |
1.35 |
.60 |
|||||||||
Fourth
Quarter |
12.00 |
3.90 |
1.45 |
.70 |
|||||||||
The
Company has never paid a dividend and any future determination will be at the
discretion of the Board of Directors.
OTHER
MATTERS
The Board
of Directors knows of no other business that will be presented for consideration
at the 2005 Annual Shareholders Meeting. The enclosed Proxy confers upon the
person or persons entitled to vote the shares represented thereby discretionary
authority to vote such shares in accordance with their best judgment with
respect to other business that may come before the 2005 Annual Shareholders
Meeting in addition to the scheduled items of business.
A copy of
the Company's Annual Report for 2004, which includes financial statements and
other information concerning the Company, is included with this Proxy material.
Upon the written request by any shareholder entitled to vote at the 2005 Annual
Shareholders Meeting, the Company will furnish that person without charge a copy
of the Company's Form 10-KSB Annual Report for 2004 which is filed with the
Securities and Exchange Commission, including the financial statements and
schedules thereto, but excluding the exhibits thereto.
Page
16
SHAREHOLDERS
PROPOSALS
Any
shareholder proposals intended to be presented at Sutron's 2006 Annual Meeting
of Shareholders must be received by Sutron at its offices at 21300 Ridgetop
Circle, Sterling, Virginia 20166, on or before December 7, 2005, for
consideration for inclusion in the proxy material for such Annual Meeting of
Shareholders.
If a
shareholder of the Company wishes to present a proposal before the 2006 Annual
Meeting, but does not wish to have the proposal considered for inclusion in the
Company’s proxy statement and proxy card, such shareholder must also give
written notice to the Secretary of the Company at the address noted above. The
Secretary must receive such notice by March 12, 2006, and if a shareholder fails
to provide such timely notice of a proposal to be presented at the 2006 Annual
Meeting, the proxies designated by the Company’s Board of Directors will have
discretionary authority to vote on any such proposal.
|
By
Order of the Board of Directors, | ||
| |
| |
| Thomas N. Keefer | ||
|
Secretary | ||
| May 18, 2005 | ||
THE
BOARD OF DIRECTORS HOPES THAT SHAREHOLDERS WILL ATTEND THE MEETING. WHETHER OF
NOT YOU PLAN TO ATTEND, YOU ARE ENCOURAGED TO COMPLETE, DATE, SIGN, AND RETURN
THE PROXY IN THE ENCLOSED ENVELOPE. SHAREHOLDERS WHO ATTEND THE MEETING MAY VOTE
THEIR STOCK PERSONALLY EVEN IF THEY HAD SENT IN THEIR PROXIES.
Page
17
PROXY
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SUTRON
CORPORATION
The
undersigned hereby appoints Thomas Keefer and Sidney C. Hooper proxies, each
with power to act without the other and with power of substitution, and hereby
authorizes them to represent and vote, as designated on the other side, all the
shares of stock of Sutron Corporation standing in the name of the undersigned
with all powers which the undersigned would possess if present at the Annual
Meeting of Stockholders of the Company to be held at 21300 Ridgetop Circle,
Sterling, Virginia at 1:30 p.m. on June 1, 2005 or any adjournment
thereof.
(Continued,
and to be marked, dated and signed, on the other side)
THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
| 1. | ELECTION OF DIRECTORS |
NOMINEES: Raul S.
McQuivey, Daniel W. Farrell, Robert F. Roberts, Jr., Andrew D. Lipman, Thomas R.
Porter
(INSTRUCTION: To
withhold authority to vote for any individual nominee, write that nominee’s name
in the space provided below.)
For all
nominees listed to the right (except as marked to the contrary) o
WITHHOLD
AUTHORITY to vote for all nominees listed to the right o
| 2. | Ratification of Thompson, Greenspon & Co., P.C. as the independent certified public accountants of the corporation. |
FOR
AGAINST ABSTAIN
o o o
| 3. | In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. |
Please
sign exactly as name appears below. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated: ________________________________________________2005
______________________________________________________
(Signature)
______________________________________________________
(Signature
if held jointly)
PLEASE
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Page
18