| • | Audit of the Company’s annual financial statements and reviews of quarterly financial statements. | (b) | Fees for audit services for Spitfire Controls, Inc. annual financial statements for calendar years 2010 and review of quarterly financial statements.2011. |
| | | | (b) | Fees for audit-related services consisted of services for audit of the Company’s Employee 401(k) Retirement Plan. |
| | | | (c) | Fees for tax services for foreign entities tax returns and estimated tax payments. |
As described in the 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 registered public accountants.
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III. APPROVAL OF 2011 EMPLOYEE STOCK OPTION PLAN
On July 8, 2011, the Board of Directors The Audit Committee pre-approved 100% of the Company adopted, subject to stockholder approval, the SigmaTron International, Inc. 2011 Employee Stock Option Plan (the “2011 Employee Plan”). The purpose of the 2011 Employee Plan is to permit the Company and its subsidiaries to attract and retain as employees individuals of initiative and ability and to provide additional employee incentives to existing employees. If the 2011 Employee Plan is not approved by stockholders, options will be granted under the 1993 and 2004 Employee Stock Option Plans, which includes a total of 55,864 options available for grant.
On July 22, 2011 the last reported sale price of the Company’s Common Stock on the Nasdaq Small-Cap Market, on which the Company’s stock is listed, was $4.80 per share.
Summary of 2011 Employee Plan
The 2011 Employee Plan will be construed, interpreted and administered by the Compensation Committee (“the Committee”). The Committee has the discretion to determine the individuals to whom options are granted, the number of shares subject to the options, the exercise price of the options (but in no event less than the minimum required in order to comply with applicable law), the period over which the options become exercisable, the term of the options (including the period after termination of employment during which an option may be exercised) and certain other provisions related to the options. Individuals who are selected to receive options will sign an option agreementservices associated with the Company setting forth the terms and restrictions applicable to their options.
Under the 2011 Employee Plan, the Committee may grant options for an aggregate maximum of 150,000 shares of the Company’s Common Stock to employees of the Company and its subsidiaries, including the Company’s executive officers. The number of shares available for the grant of options under the Plan and the number of shares included in each outstanding option are subject to adjustment upon recapitalizations, stock splits or other similar events that cause changes in the Company’s Common Stock. The Company must retain sufficient authorized but unissued shares of Common Stock to assure itself of its ability to perform its obligations under the 2011 Employee Plan. Shares of Common Stock underlying options that expire unexercised will be available for future option grants under the Plan.
The plan provides for the grant of incentive stock options (“Incentive Options”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), and non-statutory stock options that do not qualify as Incentive Options.
The option exercise price per share for each option granted under the 2011 Employee Plan shall be not less than the closing price of the Common Stock on the Nasdaq Small-Cap Market on the trading day immediately preceding the date of grant. An option may be exercised by the payment of the exercise price (i) in cash or by check, (ii) through the exchange of shares of Common Stock already owned by the optionee having a fair market value equal to the exercise price, (iii) through a broker-assisted “cashless” exercise transaction, through a broker selected by the employee without assistance of the Company in arranging such transaction, or (iv) by any other payment means approved by the Committee.
The maximum term of any options granted under the 2011 Employee Plan is ten years. Subject to that limitation, the Committee has discretion to decide the period over which options may be vested and exercised. In addition, unvested options will terminate immediately upon termination of employment, disability or death. All outstanding options granted under the 2011 Employee Plan shall immediately become exercisable in full upon a Corporate Transaction (as defined in the Plan and generally covering a sale of the Company) provided that the Corporate Transaction closes. Any options not exercised within that period expire.
An optionee may exercise a Non-Statutory Option that has vested if the optionee has been employed by the Company continuously since the date the option was granted. If an optionee’s employment is terminated for cause (as defined in the 2011 Employee Plan), the optionee has three months (or the remainder of the original term of the exercise period, whichever is shorter) to exercise any Non-Statutory Options vested as of the date of termination; all unvested Non-Statutory Options expire. If an optionee’s employment is terminated for a reason other than for cause, including voluntary termination, death or disability, all unvested Non-Statutory Options expire while all vested Non-Statutory Options may be exercised for the remainder of their terms. The same provisions apply to Incentive
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CORPORATE GOVERNANCEOptions except that an optionee whose employment is terminated must exercise vested Incentive Options within three months after the date of termination or the expiration of the original exercise period, whichever is shorter.
Except as otherwise provided in the applicable option agreement, all options granted under the 2011 Employee Plan shall not be transferable unless (a) the transfer is (i) by will or the laws of descent and distribution, (ii) pursuant to a qualified domestic relations order, (iii) to a Permitted Transferee, (as defined in the 2011 Employee Plan), or (iv) to a trust or other entity controlled by the optionee or a Family Member (as defined in the 2011 Employee Plan; generally family members or trusts or other entities controlled by the optionee or a family member); (b) the transfer is a gift; and (c) the option continues to be subject to the same terms as before the transfer.
The Committee is authorized to condition the grant of options upon the receipt of the agreement by the optionee not to compete with the Company during the term of employment and for such period thereafter and containing such other terms as are determined by the Committee.
No options have been granted under the 2011 Employee Plan.
Income Tax Consequences
Generally, for federal income tax purposes, Non-Statutory Options will not result in any taxable income to the optionee at the time of grant. The optionee will realize ordinary income, however, at the time of the exercise of the option, in an amount measured by the excess of the fair market value of the optioned shares at the time of exercise over the option exercise price, regardless of whether the exercise price is paid in cash or shares.
Where ordinary income is recognized in connection with the exercise of an option, the Company will be entitled to a deduction in the amount of ordinary income so recognized, provided, among other things, that the Company complies with applicable tax withholding requirements.
No income is recognized for federal income tax purposes when an Incentive Option is exercised and no deduction is available to the Company. Incentive Options will be taxed as Non-Statutory Options if shares of Common Stock purchased upon exercise of the Incentive Option are sold within one year after the exercise or two years after the date the Incentive Option is granted.
The Board of Directors recommends that the stockholders vote FOR the adoption of the 2011 Employee Plan.
The adoption of the 2011 Employee Plan 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. Broker Non-Votes, while considered present at a meeting and included in the determination of whether a quorum exists, are not entitled to vote. Thus, Broker Non-Votes will have no effect. Abstentions will have the same effect as negative votes.
Corporate Governance
Our Board of Directors determined that each of Messrs. Chen,Horek, Mantia, Plante, Rieck Vyas and ZemenickVyas are independent under the rules of the Nasdaq Stock Market, Inc.Nasdaq. As a result, our Board of Directors currently has a majority of independent directorsDirectors under the rules of the Nasdaq Stock Market, Inc.Nasdaq. Our Board of Directors has determined that our independent directorsDirectors shall have regularly scheduled meetings at which only the independent directorsDirectors are present. Generally, the independent directorsDirectors meet separately at each regularly scheduled boardBoard meeting. Director Committees; Board Meetings TheIn accordance with the requirements of the Exchange Act and rules promulgated thereunder, the Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating Committee. The 11
Audit Committee Charter, Compensation Committee Charter and the Nominating Committee Charter are available on the Company’s website atwww.sigmatronintl.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 current listing standards of the Nasdaq Stock Market, Inc. and the Securities and Exchange Commission’s rules and regulations promulgated under the Sarbanes-Oxley Act of 2002 as set forth below.
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The functions of the Audit Committee are to: (1) Selectselect and evaluate the performance of the independent accountants.accountants; (2) review the audits of the financial statements of the Company and the scope of the audit; (3) review with the independent accountants the corporate accounting and financial reporting practices and policies and recommend to whom reports should be submitted within the Company; (4) review with the independent accountants their final report; (5) review with the internal and independent accountants overall accounting and financial controls; and (6) be available to the independent accountants and management for consultation purposes. The Audit Committee is currently comprised of three members: Messrs. Rieck (Chairman), ZemenickHorek and Vyas.Plante. The Board of Directors has determined that each of the members of the Audit Committee both currently and after the 2010 Annual Meeting of Stockholders, is independent under the rules of the Securities and Exchange Commission.Commission and Nasdaq. Mr. Rieck has been determined to be an Audit Committee financial expert as defined in Item 407 ofRegulation S-K promulgated under the Exchange Act. The Board of Directors has adopted a written charter for the Audit Committee, which was revised and restated as of July 12, 201111, 2013, and is attached as Appendix A.available on the Company’s website atwww.sigmatronintl.com. The report of the Audit Committee to the Stockholders is included in this Proxy Statement 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 officersExecutive Officers of the Company, to review and recommend to the Board of Directors compensation for the Directors, to review 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. While the Chief Executive Officer of the Company may make recommendations regarding such salaries, compensation and terms and conditions of employment, the Compensation Committee reviews any such recommendations independently and is responsible for making final recommendations to the full Board of Directors. Messrs. ZemenickMantia (Chairman), Rieck,Plante, and ChenVyas are members of the Compensation Committee. The Board of Directors has determined that each of the members of the Compensation Committee is independent under the listing standards of the Nasdaq Stock Market, Inc. Nasdaq. The Compensation Committee reserveshas authority to select and hire outside consultants and shall have full access to the rightHuman Resources Department or other Company employees to assist in the evaluation of executive officer compensation and may approve the fees and other retention terms of any consultants hired by the Compensation Committee. The Compensation Committee may also obtain advice and assistance from time to time to utilizelegal, accounting or other advisors selected by the servicesCompensation Committee. The Board of an independent advisor to provide guidance in association with significant executive compensation decisions. For the 2011 fiscal year,Directors has adopted a written charter for the Compensation Committee, has utilizedwhich was revised and restated as of July 11, 2013, and is available on the services of Tandehill Human Capital to provide advisory services concerning base salary compensation of executive officers. The Compensation Committee retains sole responsibility for engaging any advisor and meeting with such advisor, as needed, in the Committee’s sole discretion. Company’s website atwww.sigmatronintl.com.The functions of the Nominating Committee shall includeare to: (1) review and recommend to the Board of Directors the size and composition of the Board of Directors 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;Directors; (3) identify and recommend to the Board of Directors candidates to fill appointments to Board committees; (4) develop, assess and make recommendations to the Board of Directors concerning appropriate corporate governance policies; (5) identify and recommend to the Board of Directors candidates to fill a vacancy in the offices of President and Chief Executive;Executive Officer; and (6) review nominations by stockholders with regard to the nomination process and to establish the procedures by which stockholder candidates will be considered. The members of the Nominating Committee are Messrs. Vyas (Chairman), ChenHorek and Zemenick.Rieck. The Board of Directors has determined that each of the members of the Nominating Committee is independent under the Nasdaq Stock Market, Inc. listing standards. The Nominating Committee begins the process of identifying Director candidates by evaluating the current composition of the Board, the Company’s operating requirements, and the long-term interests of the Company’s stockholders. The Nominating Committee then uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates 12
after considering the function and needs of the Board. In the case of incumbent Directors whose terms of office are set to expire, the Nominating Committee reviews such Directors’ overall service during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such Directors’ independence. The Nominating Committee meets to discuss and consider each candidate’s qualifications and then selects those it considers to be appropriate nominees by majority vote for recommendation to the Board. To date, the Nominating Committee has not paid a fee to any third party to assist in the process of identifying or evaluating Director candidates. In evaluating and determingdetermining 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;Directors; personal and professional integrity of the candidate; the level of educationand/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 Nominating Committee will use these criteria to evaluate all potential nominees.
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The Company does not have a diversity policy with respect to its directors.Directors. However, in considering whether to recommend any directorDirector nominee, including candidates recommended by stockholders, the Nominating Committee will consider the factors above, including the candidate’s diversity of experiences, expertise, ethnicity, gender and background. The Nominating Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all prospective nominees. The Company believes that the backgrounds and qualifications of the directors,Directors, considered as a group, should provide a significant mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its responsibilities. 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 Nominating Committee’s process for considering informationstockholder nominees 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,adopted, including whether 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. Board Meetings The Board of Directors held 13 meetings either in person or by telephone conference during the fiscal year ended April 30, 2011.2014. The Compensation Committee held 9 meeting7 meetings in person or by telephone conference and the Audit Committee held 65 meetings in person or by telephone conference during the fiscal year 2011.2014. The Nominating Committee held one1 meeting during the fiscal year 2011.2014. All directorsDirectors attended at least 75% of the meetings of the boardBoard and each of the committees of which they were members. In fact, all Directors attended at least 90% of the meetings of the Board and each of the committees of which they were members. The Company has a policy of encouraging all directorsDirectors to attend in person the Annual Meeting of Stockholders. All directorsDirectors attended the Company’s 20102013 Annual Meeting of Stockholders. Board Leadership Structure and Role in Risk Oversight The Board of Directors has determinedCompany believes that the positionsservice of Gary R. Fairhead as both Chairman of the Board and Chief Executive Officer is in the best interest of Directorsthe Company and its stockholders. Mr. Fairhead possesses detailed and in-depth knowledge of the President/CEO should be held by different persons. John P. Chenopportunities and challenges facing the Company, and is thus best positioned to develop agendas that ensure that the non-executiveBoard’s time and attention are focused on the most critical matters. The Board believes his role as Chairman of the Board and Chief Executive Officer promotes consistent leadership, 13
engenders accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to its stockholders, employees, and customers. The Company believes the Board’s administration of its risk oversight function to date has had a positive effect on the Board’s leadership structure. Consistent with the Company’s corporate governance guidelines and because Mr. Fairhead is the Chairman of the Board as well as Chief Executive Officer, the Board has designated one of its members to serve as a Lead Independent Director (“Lead Independent Director”). Dilip S. Vyas was appointed Lead Independent Director by all the Directors in September, 2011, and he continues to serve as Lead Independent Director. Mr. Vyas’ responsibilities include the following roles: | 1. | to preside over executive sessions of the independent Directors; |
| 2. | to chair meetings of the Board of Directors in the absence of the Chairman of the Board; |
| 3. | to act as a liaison between the independent Directors and the Chairman of the Board; |
| 4. | to coordinate with the Chairman of the Board regarding meeting agendas and schedules; |
| 5. | to coordinate with the Chairman of the Board regarding information flow to the Board; |
| 6. | to be available for consultation and communication with stockholders, as appropriate; and |
| 7. | to call meetings of the independent Directors as appropriate. |
The Company believes that it maintains strong corporate governance processes intended to ensure that its independent Directors will continue to effectively monitor management and provide leadership on key issues such as strategy, risk and integrity. The Board has primary responsibility for the oversight of risks to the Company and has assigned to its committees the oversight of risks applicable to their particular area. Each committee of the Board is comprised solely of independent Directors. Consequently, independent Directors oversee such critical matters as the integrity of financial statements; the compensation of Executive Officers, including the Chief Executive Officer; financial commitments for capital projects; the selection and evaluation of Directors and has been determined byExecutive Officers; and the development and implementation of corporate governance programs. Each Board to becommittee and the independent under Nasdaq Stock Market, Inc., listing standards and Gary R. Fairhead is the President and CEO. The Board of Directors believes that such separation of roles increases the Board’s independence from and oversight of the Company’sas a group routinely have independent sessions without management and enhances its ability to carry out its roles and responsibilities on behalf of the stockholders. present.Management, the Company’s Corporate Counsel, and the Board of Directors discuss risks, both during and outside of boardBoard meetings. These discussions identify Company risks which are prioritized and assigned to the appropriate boardBoard committee or the full boardBoard for oversight. Internal control and financial risks are overseen by the Audit Committee; compensation risks are overseen by the Compensation Committee; CEOChief Executive Officer succession planning is overseen by the Nominating Committee and reviewed by the independent directors;Directors; compliance risks are typically referred to the full Board; and matters arising under the Company’s Code of Conduct or Code of Ethics for Senior Financial Management are handled by Corporate Counsel. Management regularly reports on each risk to the relevant committee or the Board, and material risks identified by a relevant committee are then presented to the full Board. The Company’s risk management program as a whole is reviewed annually at a meeting of the Board. Additional review or reporting on Company risks is conducted as needed or as requested by the boardBoard or committee.Committee. Coordination of management’s review of these risks is performed by the Company’s Corporate Counsel. Stockholder Communications with the Board of Directors Stockholders can contact the Board of Directors or any of the individual directorsDirectors by contacting: Henry J. Underwood, Corporate Counsel, Howard & Howard Attorneys PLLC, by regular mail at 200 South Michigan Avenue, Chicago, IL 60604. Inquiries will be reviewed, sorted and summarized by the Corporate Counsel of the Board of Directors before they will be forwarded to the Board of Directors or to an individual director.
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Compensation of Directors
The Company pays non-employee directors $2,500 per month. Directors who serve on the Audit Committee are paid an additional $1,500 per month. Directors who serve on the Compensation Committee or the Nominating Committee are paid an additional $250 per month per committee. The Chairman of the Board receives monthly the greater of $4,000 or the amount paid to the most highly compensated non-employee director. The directors voluntarily reduced the above compensation scale by 20 percent beginning February 2009 due to the Company’s cost reduction program in response to the downturn in the economy. Due to the improvement in the Company’s financial performance, the directors were paid back 95% of the 2010 fee reduction which was initiated in February 2009. Effective July 2010, the monthly director fees were reinstated at the regular compensation scale set forth above.
In addition, under the 2000 Directors’ Stock Option Plan, each director who was neither a full-time employee of, nor a consultant to, the Company 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, each director who was neither a full-time employee of, nor a consultant to, the Company received a grant of options to acquire 5,000 shares of common stock at each of the September 2004 and September 2005 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.
EXECUTIVE COMPENSATION Set forth below is information on the compensation of the Company’s Chief Executive Officer and its two other most highly compensated Named Executive Officers who served in such capacities during fiscal year 2011 based on total compensation for the last completed fiscal year. In view of the depressed economic environment and the Company’s reduced profitability during late 2008 and much of calendar year 2009, the Named Executive Officers (together with all the other officers and non-union U.S. employees of the Company) participated in salary reductions which took effect on February 1, 2009, and no bonuses were awarded during fiscal year 2009. In light of the Company’s improved financial performance during fiscal year 2010, all non-union U.S. employees received a partial repayment of those salary reductions and the Named Executive Officers received in the aggregate repayments of $47,267. Salaries of all non-union employees, including Named Executive Officers, remained at the reduced levels throughout fiscal year 2010. At the end of fiscal year 2010, the Company awarded bonuses to all of its non-union U.S. employees.
The Employee Plan: On November 1, 2010,May 21, 2013, the Board of Directors adopted (a) the SigmaTron International, Inc. 2014 Employee and Director Bonus Plan (the “Company(“Employee Plan”) and (b) the SigmaTron International, Inc. 2011 Officer Bonus Plan (the “2011 Officer Plan”) and, collectively with the Company Plan, the “Plans”), were adopted by the Company on November 1, 2010 and copies of each of which were filed with the SEC with a Current Report onForm 8-K on November 4, 2010. The following is only a summary of the Plans, and in the event of any inconsistencies between the summary below and the Plans themselves, the Plans shall control. The stated purposes of the Plans are to align stockholder, employee and director objectives, to motivate employees and directors of the Company and to increase shareholder value. The Plans are administered and interpreted by the Compensation Committee, the rules for the administration, interpretation and application of each Plan being subject to adoption, modification and revocation by the Board. Each Plan, as a whole, is also subject to amendment, suspension or termination by the Board. The Company Plan:
The Company Plan appliesapplicable to all U.S. payroll non-union employees of the Company (“Employee Participants”), all full-time employees of the Company with a corporate position of vice president or higher (“Officers”) and all membersemployees designated by the Company as an executive officer pursuant to the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (“Executive Officers”).The stated purposes of the Board of Directors of the Company who are not alsoEmployee Plan is to align stockholder, employee and officer objectives, to motivate employees of the Company (“Directors”). and to increase shareholder value. The Employee Plan is administered and interpreted by the Board and, as a whole, is subject to amendment, suspension or termination by the Board.Pursuant to the CompanyEmployee Plan, a Bonus Pool, shall be created if the Company’s return on net assetscalculated as a percentage of Pre-Tax Income (as calculateddefined in the mannerEmployee Plan) pursuant to the scale set forth in the CompanyEmployee Plan, was created. The Company’s Chief Executive Officer submitted to the Compensation Committee a recommendation (i) of target objectives for each Executive Officer and referred to herein and in the Company Plan as “RONA”)
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(ii) for a particular fiscal year approaches, meetsspecified percentage or exceeds the Target. The Board has initially established the Target at the point when RONA equals 7%. The sizedollar allocation of the Bonus Pool is calculated based upon a percentagefor each Executive Officer and Officer, individually, and all of the Company’s adjusted Pre-Tax Income reduced byEmployee Participants, in the amount of the Officer Plan Bonus Pool, discussed below (which was $200,000aggregate. The Compensation Committee reviewed such submissions for the 2011 fiscal year) for the fiscal year in question, which percentage is also set byrecommendation to the Board. The Board has initially established thatAwards to Executive Officers under the Bonus Pool will equal 10% of the Company’s Pre-Tax Income if RONA equals 80% of the Target (i.e., when RONA equals 5.6%,Employee Plan were based, in part, on the current Target), climbingExecutive Officer achieving the Executive Officer’s specified target objectives and, in steps to 25% of the Company’s adjusted Pre-Tax Income if RONA equals or exceeds 26%. The Company’s adjusted Pre-Tax Income for the 2011 fiscal year was $4,382,857, resulting in a Bonus Pool of $438,286. Pursuant to the Company Plan, the Bonus Pool was subdivided into a Fixed Bonus Pool ($350,629, equal to 80% of the overall Bonus Pool) and a Discretionary Bonus Pool ($87,657, equal to the remaining 20% of the overall Bonus Pool). The Fixed Bonus Pool for the 2011 fiscal year was distributed as follows: | | | | • | 55% to Officers, 80% of which was distributed to the Officers based upon each Officer’s position and responsibility and is non-discretionary; the remainder of this portion was distributed as determined by the Committee, with certain input from the CEO. | | | • | 35% to Employee Participants who are neither Officers of the Company nor direct or indirect labor employees of the Company located in California, allocated as determined by the CEO. | | | • | 10% to Directors, allocated in equal portions to each Director. |
The CEO determined the amount of the Discretionary Bonus Pool to be allocated to the Officers,any event, were subject to the Committee’s approval. The remaindersole discretion of the Discretionary Bonus Pool was allocatedBoard. Awards to and distributed to the other Employee Participants as determined byunder the CEO.
The 2011 Officer Plan:
The 2011 OfficerEmployee Plan applied to all full-time employees ofwere contingent upon the Company with a corporate position of vice president or higher (“Participants”), and established the terms and conditions upon which the Company intended to pay cash bonuses in the aggregate totaling $200,000 to eligible Participants for the Company’s 2011 fiscal year. Bonuses under the 2011 Officer Plan were to be paid only if (1) the Company’s Pre-Tax Income for the 2011 fiscal year equals or exceeds $1,500,000 and (2) the Company isbeing in compliance with all of the Company’s covenants under the Company’sits primary credit facility (currently with Wells Fargo Bank, N.A.), or having obtained a waiver thereof, at the end of the 2011Company’s 2014 fiscal year without obtaining a waiver from the lender. Both conditions were satisfied and the $200,000 Bonus Pool was distributed among the eligible Participants by the Committee, which reviewed a proposal submitted to it by the CEO, and is responsible for making a Bonus Pool allocation recommendation to the Board.
year.At the end of fiscal year 2011,2014, the Company awarded bonuses pursuant to the Plans,Employee Plan discussed above. Bonuses earned in fiscal year 20112014 and paid to Named Executive Officers in fiscal 20122015 are listed in the Summary Compensation Table on the following compensation table. page.
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SUMMARY COMPENSATION TABLE The individuals listed in the following table are referred to as our “Named Executive Officers” throughout this proxy statement. The following table sets forth a summary of all compensation paid by the Company for its fiscal years ended April 30, 20112014 and 20102013 to the Company’s Named Executive Officers: | | | | | | | | | | | | | | | | | | | | | | | | | | | Annual Compensation | | All Other
| | Total
| | | | | | Salary
| | Bonus
| | Compensation
| | Compensation
| Name and Principal Position | | | | ($) | | ($) | | ($) | | ($) | | | | Gary R. Fairhead | | | 2011 | | | | 192,307 | (1) | | | 70,000 | (2) | | | 2,785 | (4) | | | 265,092 | | | President and Chief Executive Officer | | | 2010 | | | | 150,000 | (1) | | | 45,000 | (3) | | | 19,993 | (5) | | | 214,993 | | | Rajesh B. Upadhyaya | | | 2011 | | | | 189,000 | | | | 45,000 | (2) | | | 2,680 | (4) | | | 236,680 | | | Executive Vice President, West Coast | | | 2010 | | | | 156,000 | | | | 40,000 | (3) | | | 17,700 | (5) | | | 213,700 | | | Operations since 2005. Mr. Upadhyaya was the Vice President of the Fremont Operation from 2001 until 2005. | | | | | | | | | | | | | | | | | | | | | | Gregory A. Fairhead | | | 2011 | | | | 186,092 | | | | 35,000 | (2) | | | 3,589 | (4) | | | 224,681 | | | Executive Vice President and Assistant | | | 2010 | | | | 153,600 | | | | 40,000 | (3) | | | 15,375 | (5) | | | 208,975 | | Secretary. Gregory A. Fairhead has been
Executive Vice President since February
2000 and Assistant Secretary since
1994. Mr. Fairhead was Vice President —
Acuna Operations for the Company from
February 1990 to February 2000. Gregory
A. Fairhead is the brother of Gary R. Fairhead | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Annual Compensation | | | Option
Awards
($) | | | All Other
Compensation
($) | | | Total
Compensation
($) | | Name and Principal Position | | | | | Salary
($) | | | Bonus
($) | | | | | Gary R. Fairhead | | | 2014 | | | | 250,000 | (1) | | | 53,000 | (2) | | | — | | | | 26,500 | (4)(5) | | | 329,500 | | President and Chief Executive Officer | | | 2013 | | | | 250,000 | (1) | | | 25,000 | (3) | | | 33,900 | (6) | | | 3,300 | (4) | | | 312,200 | | Rajesh B. Upadhyaya | | | 2014 | | | | 217,000 | | | | 35,000 | (2) | | | — | | | | 20,500 | (4)(5) | | | 272,500 | | Executive Vice President, West Coast Operations since 2005. Mr. Upadhyaya was the Vice President of the Fremont Operation from 2001 until 2005. | | | 2013 | | | | 215,846 | | | | 22,500 | (3) | | | 22,600 | (6) | | | 2,940 | (4) | | | 263,886 | | Gregory A. Fairhead | | | 2014 | | | | 202,000 | | | | 25,000 | (2) | | | — | | | | 24,500 | (4)(5) | | | 251,500 | | Executive Vice President and Assistant Secretary. Gregory A. Fairhead has been Executive Vice President since February 2000 and Assistant Secretary since 1994. Mr. Fairhead was Vice President — Acuna Operations for the Company from February 1990 to February 2000. Gregory A. Fairhead is the brother of Gary R. Fairhead | | | 2013 | | | | 201,022 | | | | 15,000 | (3) | | | 22,600 | (6) | | | 2,610 | (4) | | | 241,232 | |
| | | | (1) | | Although Gary R. Fairhead served as a directorDirector in fiscal year ended 20102014 and 2011,2013, he did not receive any compensation for serving in such capacity as it is Company policy to compensate as directorsDirectors only non-employee directors.Directors. | |
| (2) | | Represents bonus earned in fiscal 20112014 and paid in fiscal 2012.2015 pursuant to the 2014 Employee Bonus Plan. | |
| (3) | | Represents bonus earned in fiscal 20102013 and paid in fiscal 2011.2014 pursuant to the SigmaTron International, Inc. 2013 Officer Bonus Plan. | |
| (4) | | RepresentsIncludes match and contributions to the Company’s 401(k) plan made by the Company. | |
| (5) | Includes payments made under the Tender Offer (described below). |
| (6) | Represents 21 weeksthe aggregate grant date fair market values of salary pay backs for wage reductions implementedstock option awards granted on July 19, 2012 computed in February 2009. Includesaccordance with FASB ASC Topic 718. Accordingly, the match and contributions todollar amounts listed do not necessarily reflect the Company’s 401(k) plan madedollar amount of compensation that may be realized by the Company.Named Executive Officers. For a discussion of valuation assumptions used in calculating the amounts reported for fiscal year 2013, see Note P and Note O to our Consolidated Financial Statements included in our Annual Reports on Form 10-K for the fiscal years ended April 30, 2014 and 2013, respectively. |
Tender Offer The Company offered to purchase 395,190 Eligible Options (as defined below) from Eligible Holders (as defined below) subject to the terms and conditions stated in Schedule TO (“TO”) filed with the SEC on October 1, 2013 (“Tender Offer”). The stock options subject to the Tender Offer were those options to purchase the Company’s common stock which had not expired or terminated prior to the Expiration Time (as defined below) having the grant dates and exercise prices set forth in the TO (the “Eligible Options”). Eligible Options, all of which were fully vested at the time of the Tender Offer, were granted under the following Company stock option plans: 1993 Stock Option Plan, 2004 Employee Stock Option Plan, 2000 Directors’ Stock Option Plan and 2004 Directors’ Stock Option Plan. 16
“Eligible Holders” were: (a) those current or former employees, including all officers, who held Eligible Options as of 11:59 p.m., Eastern Time, on October 29, 2013 (the “Expiration Time”); and (b) all current or former directors of the Company who held Eligible Options as of the Expiration Time. The Company offered to pay a cash amount ranging from $0.18 to $1.35 per Eligible Option for a maximum aggregate payment of $301,500, as specifically set forth in the TO. Each Eligible Holder who participated in the Tender Offer received a cash payment (subject to tax and other withholding for employees) for each properly tendered Eligible Option promptly following the Expiration Time. 394,200 Eligible Options were tendered and purchased for a total cash payment of $300,410. The Company paid Gary R. Fairhead, Rajesh B. Upadhyaya and Gregory A. Fairhead, $24,000, $18,000, and $22,000, respectively, for tendered options under the TO in fiscal year 2014. These amounts are included in the Summary Compensation Table on page 16. Employment Contracts, Termination of Employment and Change of Control Agreements The Company adopted an Amended and RestatedChange-in-Control Severance Payment Plan on May 30, 2002March 11, 2014 (the “CIC Plan”), which covers Named Executive Officers and certain other officersOfficers 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. The amount of severance pay to which a CIC Participant may be entitled under the CIC Plan is a function of the value of the common stock ofCIC Participant’s average income paid by the Company as ofto such CIC Participant for five calendar years ending immediately prior to the date on which a change in control of the Company takes place. Change-in-Control.In general, for purposes of the CIC Plan, a change of control will be deemed to have occurred when (a) anythe acquisition by an entity, person or group other than Cyrus Tang or his affiliates, acquiresof beneficial ownership, as that term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, of more than thirty percent20% in the aggregate of the outstanding capital stock of the Company entitled to vote for directorsthe election of the Company,directors, (b) as a result of, or in connection with, certain corporateany cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, identified in the CIC Plan,persons who are directors of the identity ofCompany before the transaction shall cease to constitute a majority of the membersboard or the board of directors of any successor to the Board of Directors immediately before such transaction changes immediately after the transaction,Company, (c) the Company becomes a party to a merger, consolidation or share exchange in which either (i) the Company will not be the surviving company or (ii) the Company will be the surviving company and any outstanding shares of common stock of the Company will be converted into shares of any other company (other than a reincorporation or the establishment of a holding company involving no change of ownership of the Company) or other securities or cash or other property (excluding payments made solely for fractional shares), (d) a salemore than 50% of the assets and business of the Company are sold, transferred or assigned to, or otherwise acquired by, any other unrelated entity or entities, or (e) all or substantially all of the Company’s assets.assets and business of a CIC Participant’s operation are sold, transferred or assigned to, or otherwise acquired by, any other unrelated entity or entities (“Change-in-Control”). 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 CIC Plan (which in general would result in a constructive discharge).
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The CIC Plan provides for automatic reduction of the amounts to be paid out under the planCIC 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 thechange-in-control.Disputes concerning the CIC Plan and benefits under the CIC Plan are subject to arbitration. 17
Potential Severance Payments uponChange-In-Control The following table describes approximate potential severance payments under the CIC Plan to which the Named Executive Officers would be entitled uponchange-in-control Change-In-Control of the Company, assuming that the change in controlChange-In-Control of the Company occurred on April 30, 2011, that2014 and all participants actually participated in the severance payment, and that our common stock is valued at $5.29, which was the closing market price for our common stock on April 30, 2011.payment. The actual amount of payments can only be determined at the time of achange-in-control Change-In-Control and will vary from the estimated amounts in the table below. | | | | | | | | | | | | | | | | | Gary R.
| | Rajesh B.
| | Gregory A.
| | | | Fairhead | | Upadhyaya | | Fairhead | | | Change-In-Control Payment | | $ | 346,682 | | | $ | 335,989 | | | $ | 316,290 | |
OPTION EXERCISES AND STOCK VESTED TABLE
| | | | | | | | | | | | | | | | | | | | | Number of
| | | | Number of
| | | | | | Securities
| | Value
| | Securities
| | Value
| | | | Acquired on
| | Realized on
| | Acquired on
| | Realized on
| Name | | Exercise | | Exercise | | Vesting | | Vesting | | | | Gary R. Fairhead | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | Rajesh B. Upadhyaya | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | Gregory A. Fairhead | | | 29,150 | | | | 56,460 | | | | 0 | | | | 0 | |
| | | | | | | | | | | | | | | | Gary R.
Fairhead | | | Rajesh B.
Upadhyaya | | | Gregory A.
Fairhead | | Change-In-Control Payment | | $ | 761,730 | | | $ | 684,262 | | | $ | 706,730 | |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-ENDYEAR END TABLE The following table sets forth certain information with respect to each Named Executive Officer of the Company concerning any unexercised options held as of the end of such fiscal year. The Company has not granted any stock appreciation rights. No options were granted in fiscal year 2011. | | | | | | | | | | | | | | | | | | | | | Number of
| | Number of
| | | | | | | | Securities
| | Securities
| | | | | | | | Underlying
| | Underlying
| | | | | | | | Unexercised
| | Unexercised
| | Option
| | | | | | Options
| | Options
| | Exercise
| | Option
| | | | (#) | | (#) | | Price
| | Expiration
| Name | | Exercisable | | Unexercisable | | ($) | | Date | | | | Gary R. Fairhead | | | 30,000 | (1) | | | 0 | | | | 9.17 | | | | 9/15/15 | | | Rajesh B. Upadhyaya | | | 22,500 | (2) | | | 0 | | | | 9.17 | | | | 9/15/15 | | | Gregory A. Fairhead | | | 27,500 | (3) | | | 0 | | | | 9.17 | | | | 9/15/15 | |
| | | | | | | | | | | | | | | | | Name | | Number of
Securities
Underlying
Unexercised
Options
(#) | | | Number of
Securities
Underlying
Unexercised
Options
(#) | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | | | | | Exercisable | | | Unexercisable | | | | Gary R. Fairhead | | | 3,400 | (1) | | | 1,700 | | | | 3.60 | | | | 9/15/15 | | Rajesh B. Upadhyaya | | | 6,667 | (1) | | | 1,333 | | | | 3.60 | | | | 9/15/15 | | Gregory A. Fairhead | | | 2,834 | (1) | | | 1,416 | | | | 3.60 | | | | 9/15/15 | |
| | | | (1) | | Stock options granted on September 16, 2005 vestedJuly 19, 2012 and became 100% exercisable on September 15, 2007. | | (2) | | Stock options granted on September 16, 2005 vested and became 100% exercisable on September 15, 2007. | | (3) | | Stock options granted on September 16, 2005 vested and became 100% exercisable on September 15, 2007.vest over a three year period. |
The Company did not grant options or any stock appreciation rights to named executive officers in fiscal 2014. DEFINED CONTRIBUTION PLAN The Company has established a tax-qualified defined contribution 401(k) retirement plan established, a 401(k) plan for U.S. employees, which include officers.includes Officers. The 401(k) Plan provides for Company matching of employee contributions up to $300 per employee per year and the Company has historically made a plan contribution of 1% of an employee’s compensation. On February 1, 2014, the Company implemented the 2013 Employee Stock Purchase Plan (“ESPP”) which was approved by the stockholders at the Company’s 2013 Annual Meeting of Stockholders. Under the ESPP, all eligible employees may purchase shares of the Company’s common stock at three-month intervals at 85% of the lower of the fair market value of the Company’s common stock on the first day or the last day of the offering period (calculated in the manner provided in the ESPP). Eligible participating employees purchase such stock using payroll deductions, which may not be less than 1% nor exceed 15% of their total cash compensation per year.
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COMPENSATION OF DIRECTORS The Company pays non-employee Directors $4,500 per month. The Chairman of the Audit and Compensation Committees are paid an additional $500 and $250 per month, respectively. The Lead Independent Director receives an additional $250 per month. In accordance with Company policy, directors who are also employees of the Company do not receive the remuneration described in this paragraph. DIRECTOR COMPENSATION TABLE | | | | | | | | | | | | | Fees
| | | | | | | | Earned or
| | | | | | | | Paid in
| | | | | | | | Cash
| | | Total
| | Name | | ($) | | | ($) | | | | | Thomas W. Rieck | | | 72,306 | | | | 72,306 | | | Dilip S. Vyas | | | 68,776 | | | | 68,776 | | | John P. Chen | | | 70,686 | | | | 70,686 | | | Carl A. Zemenick | | | 70,686 | | | | 70,686 | |
The directors voluntarily reduced their compensation scale by 20 percent beginning February 2009 due | | | | | | | | | | | | | Name | | Fees
Earned or
Paid in
Cash
($) | | | Awards
($)(1)(2) | | | Total
($) | | Barry R. Horek | | | 54,000 | | | | 7,935 | | | | 61,935 | | Bruce J. Mantia | | | 57,000 | | | | 7,935 | | | | 64,935 | | Paul J. Plante | | | 54,000 | | | | 7,935 | | | | 61,935 | | Thomas W. Rieck | | | 60,000 | | | | 7,935 | | | | 67,935 | | Dilip S. Vyas | | | 57,000 | | | | 7,935 | | | | 64,935 | |
It is the Company’s policy to compensate only non-employee Directors. | (1) | On October 1, 2013, the Company granted 1,500 shares to each non-employee Director pursuant to the Director Plan (described below). A total of 7,500 restricted shares were granted which vested six months from the date of grant (April 1, 2014). The Company recognized approximately $39,700 in compensation expense in fiscal year 2014 related to such restricted shares. At April 30, 2014, there was no unrecognized compensation expense related to the 7,500 shares of restricted stock granted. |
| (2) | Represents the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. At April 30, 2014, the aggregate number of shares of common stock of the Company outstanding and issued pursuant to the Director Plan for each non-employee Director was as follows: Mr. Horek, 1,500 shares; Mr. Mantia, 1,500 shares; Mr. Plante, 1,500 shares; Mr. Rieck, 1,500 shares; Mr. Vyas, 1,500 shares. |
Pursuant to the Company’s cost reduction program in response toTender Offer, the downturn inCompany paid Thomas W. Rieck and Dilip S. Vyas $4,900 and $4,900, respectively, for their Eligible Options tendered by each of them under the economy. Due to the improvement in the Company’s financial performance, the directors were paid back 95% of the 2010 fee reduction which was initiated in February 2009. Effective July 2010, the monthly director fees were reinstated at the regular compensation scale set forth on page 14. The number in the Directors Compensation Table include bonuses earned in fiscal 2011 and paid in fiscal 2012, pursuant to the Company’s Bonus Plan set forth on pages 14 and 15. The Company did not issue stock grants or stock option grants to the Board of Directors during fiscal year 2011. No options were exercisedTO in fiscal year 2011.
2014.
18Under the 2000 Directors’ Stock Option Plan, each Director who was, at the time of grant, neither a full-time employee of, nor a consultant to, the Company 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 were exercisable for ten years from the respective date of grant at a price based on the price of common stock on the respective grant dates. As such, all such options have expired in accordance with their grant terms. Further, under the 2004 Directors’ Stock Option Plan, each Director who, at the time of grant, was neither a full-time employee of, nor a consultant to, the Company received a grant of options to acquire 5,000 shares of common stock at each of the September 2004 and September 2005 Annual Stockholders’ Meetings. All options granted under the 2000 Directors’ Stock Option Plan and the 2004 Directors’ Stock Option Plan constituted Eligible Options under the Company’s offer to purchase Eligible Options.
2013 Non-Employee Director Restricted Stock Plan On September 20, 2013, the Company implemented the 2013 Non-Employee Director Restricted Stock Plan (“Director Plan”), approved by the stockholders at the 2013 Annual Meeting of the Stockholders. The purpose of the Director Plan is to promote the success and interest of the Company and to enhance the stock ownership of the Directors by providing a method whereby non-employee Directors may receive a portion of their annual compensation in restricted shares of the common stock of the Company. Pursuant to the Director Plan, non-employee Directors may be paid a portion of the annual compensation in an award of shares of restricted Common Stock of the Company (“Award”). 19
The Director Plan is administered by the Compensation Committee which has the power to determine the terms and provision of each Award. An aggregate of 50,000 shares of Common Stock of the Company were reserved for Awards under the Director Plan. Generally, stock awarded under the Director Plan do not vest until the six-month anniversary of the date of the Award and all shares of awarded restricted stock may not be sold, transferred or otherwise disposed of until they become vested, although the right to receive dividends with respect to the shares and to vote the shares occur upon grant. The Compensation Committee may amend, alter or terminate the Director Plan, subject to stockholder approval, if required. 20
REPORT OF THE AUDIT COMMITTEE The Audit Committee has reviewed, and discussed the audited financial statements with management, and discussed with the independent public accounting firm (the “Auditors”) the matters to be discussed with the Audit Committee under the rules adopted by the Public Company Accounting Oversight Board (the “PCAOB”). The Audit Committee has received disclosures and the letter from the Auditors required by the PCAOB regarding the Auditor’s communication with the Audit Committee concerning independence, and the Audit Committee has discussed the Auditor’s independence with the Auditors. 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 onForm 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. Thomas W. Rieck (Chairman)
Dilip S. Vyas
Carl A. Zemenick
19Barry R. Horek
Paul J. Plante 21
CERTAIN TRANSACTIONS There are no reportable related party transactions.
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MISCELLANEOUS The Company’s 20112014 Annual Report to Stockholders is being mailed to stockholders contemporaneously with this Proxy Statement. 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 20122015 Annual Meeting of Stockholders must be received by the Secretary of the Company before April 17, 20122015, in order for the proposal to be considered for inclusion in the Company’s notice of meeting, proxy statement and proxy relating to the 20122015 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 directorsDirectors 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 20122015 Annual Meeting of Stockholders will be held September 21, 2012. 18, 2015.The by-laws also provide that nominations for directorDirector 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 noof the Company not less than 60 ordays and not more than 90 days prior to the meeting. However,regularly scheduled Annual Meeting of Stockholders, or within 10 days after receipt of notice of an Annual Meeting of Stockholders if the Company has not publicly disclosed the date of thesuch meeting at leasthas not been publicly disclosed within 70 days prior to the meeting date, notice may be timely made by a stockholder if received by the Secretary no later than the close of business on the 10th day following the day on which the Company publicly disclosed the meeting date. Some brokers and other nominee record holders may be participating in the practice of “householding” corporate communications to stockholders, such as proxy statements and annual reports. This means that only one copy of this proxy statement may have been sent to multiple stockholders in your household. The Company will promptly deliver a separate copy of this proxy statement to you if you call or write us at the following address or phone number: SigmaTron International, Inc., 2201 Landmeier Road, Elk Grove Village, Illinois 60007, Telephone:(800) 700-9095. If you want to receive separate copies of our corporate communications to stockholders such as proxy statements and annual reports in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your broker or other nominee record holders, or you may contact the Company at the above address and phone number. By order of the Board of Directors
Linda K. Frauendorfer
Secretary
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ANNUAL MEETING OF STOCKHOLDERS OF Appendix A
CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
SIGMATRON INTERNATIONAL, INC.
September 19, 2014 GO GREEN The purpose of the Audit Committee (the “Committee”) of SigmaTron International, Inc. (the “Company”) is to oversee the accounting and financial processes of the Company and the audits of the financial statements of the Company.
The functions of the Committee shall include: (1) review of audits of the financial statements of the Company and the scope of the audit; (2) review with the independent accountants the corporate accounting and financial reporting 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.
The Committee shall be comprised of three or more directors as determined by the Board, each of whom shall: (i) be independent as defined under Nasdaq Stock Market, Inc. (“Nasdaq”) Rule 5605(a)(2); (ii) meet the criteria for independence set forth inRule 10A-3(b)(1) under the Securities Exchange Act of 1934 (the “Act”), subject to the exemptions provided inRule 10A-3(c) under the Act; (iii) not have participated in the preparation of the financial statements of the Company at any time during the past three (3) years; (iv) be able to read and understand fundamental financial statements, including a Company’s balance sheet, income statement, and cash flow statement; (v) not be an affiliated person of the Company; and (vi) satisfy any other independence requirements under applicable law, rules, and regulations, including Nasdaq rules. In addition, the Committee shall have at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience 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. A director who qualifies as an audit committee financial expert under Item 401(h) ofRegulation S-K or Item 401(e) ofRegulation S-B is presumed to qualify as a financially sophisticated audit committee member.
Notwithstanding the foregoing, one director who: (a) is not independent as defined in Rule 5605(a)(2), as may be modified or supplemented; (b) meets the criteria set forth in Section 10A(m)(3) under the Act and the rules thereunder; and (c) is not a current officer or employee or a Family Member, as defined by Nasdaq, of such officer or employee, may be appointed to the Committee, if the Board, under exception and limited circumstances, determines that membership on the Committee by the individual is required by the best interest of the Company and its Shareholders, and the Board discloses, in the next annual proxy statement subsequent to such determination (or, if the Company does not file a proxy, in itsForm 10-K or 20-F), 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.
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.
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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 V.3 below.
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 reportse-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other financial information submittedeligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com 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.enjoy online access. | | | | 3. | Review with the chief financial officer orhis/her delegate and, if the Committee believes it to be advisable, the independent accountants, quarterly reports onForm 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 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 onForm 10-K or10-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 AccountantsIMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON SEPTEMBER 19, 2014 The Notice of Meeting, proxy statement and proxy card are available at www.sigmatronintl.com Please sign, date and mail your proxy card in the envelope provided as soon as possible. | | | | | | | | | | 5. | Select, evaluate, oversee the work (including resolution of disagreements between management and the auditor regarding financial reporting), 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 must report directly to and 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 shall ensure its receipt from the outside auditors of a formal written statement delineating all relationships between the auditor and the Company, consistent with |
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| | | | | Independence Standards Board Standard 1, and shall actively engage in a dialogue with the auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor. |
| | | | 8. | Review the performance of the independent accountants and discharge the independent accountants when circumstances warrant. | | | 9. | Receive copies of the annual comments from the independent accountants on accounting practices and policies and systems of control of the Company, and review with them any questions, comments or suggestions they may have relating thereto. | | | 10. | Oversee regular rotation of the lead audit partner, as required by applicable law, rules and regulations, and consider whether rotation of the independent accountants or their lead audit partner is necessary to ensure independence. | | | 11. | Ensure receipt of a formal written statement from independent accountants delineating all relationships between the independent accountants and the Company. | | | 12. | Actively engage in dialogue with the independent accountants with respect to any disclosed relationships or services that may impact the objectivity and independence of the accountants. | | | 13. | Take, or recommend the full board to take other appropriate action to oversee the independence of the independent accountants and outside auditor. |
Financial Reporting Processes
| | | | 14. | 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. | | | 15. | Review with management and the independent accountants significant exposure risks and the plans to appropriately control such risks. | | | 16. | 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. | | | 17. | 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. | | | 18. | 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. | | | 19. | 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. | | | 20. | 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. |
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| | | | 21. | 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. The management letter should be separately communicated to the Chair of the Committee at the same time it is provided to management. |
Internal Controls and Process Improvement
| | | | 22. | Evaluate whether senior management is setting the appropriate tone at the top by reviewing their communication with other personnel of the Company regarding the importance of internal controls and evaluate whether the members of senior management possess an understanding of their roles and responsibilities. | | | 23. | Establish a regular system of reporting to the Committee and internally within the Company by management, the independent accountants and the internal accounting department. | | | 24. | 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. | | | 25. | Review and attempt to resolve disagreements between management and the independent accountants regarding financial reporting. | | | 26. | 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. | | | 27. | 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. | | | 28. | 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
| | | | 29. | Review and make approval decisions regarding all related-party transactions, as required by applicable law, rules and regulations. | | | 30. | If appropriate, and if it determines necessary to carry out its duties, obtain advice and assistance from independent legal, accounting or other advisors and determine the compensation to be paid for such advice and assistance which shall be paid by the Company. | | | 31. | If necessary, institute special investigations and, if appropriate, hire special counsel or experts to assist. | | | 32. | 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. | | | 33. | Determine the appropriate funding, to be provided by the Company, for the payment of ordinary administrative expenses of the Committee necessary or appropriate in carrying out its duties. However, a member of the Committee shall not accept any consulting, advisory, or other compensatory fee from the Company other than for board service. |
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.
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ANNUAL MEETING OF STOCKHOLDERS OF SIGMATRON INTERNATIONAL, INC. September 16, 2011 NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:The Notice of Meeting, proxy statement and proxy card are available atwww.sigmatronintl.com Please sign, date and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. 20230303000000000000 8 091611 | | | | |
| | | | | | | | | | | | | | | | |  | | 20233000000000000000 7 | | | | | | | | 091914 | | | | | | | | | | | | | | | | | | | | | | | | | | THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSALS 2 THROUGH 4. AND 3. | | | PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HEREx | | | | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | 1. Election of Two Class III Directors: | | | | | | | | 2. PROPOSAL TO RATIFY THE SELECTION OF BDO USA, LLP AS INDEPENDENT AUDITORSREGISTERED PUBLIC ACCOUNTANTS FOR FISCAL YEAR 2015. | | ¨ | | ¨ | | ¨ | | | | | NOMINEES: | | | | | | | | | | | | ¨ | | FOR ALL NOMINEES | |  Gary R. Fairhead
Dilip S. VyasWITHHOLD AUTHORITY | | | | 3. PROPOSAL TO APPROVE ADOPTION OF SIGMATRONFOR ALL NOMINEES INTERNATIONAL, INC. 2011 EMPLOYEE STOCK OPTION PLANFOR ALL EXCEPT(See instructions below) 4. IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING (which the Board of Directors does not know of prior to August 15, 2011)2014). | | ¨ | | ¨ | | ¨ | ¨ | | WITHHOLD AUTHORITY FOR ALL NOMINEES | | | | | | | | | | | | | | ¨ | | FOR ALL EXCEPT (See instructions below) | | | | | | | | THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, FOR THE RATIFICATION OF THE SELECTION OF BDO USA, INSTRUCTIONS:To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT” LLP AS INDEPENDENT AUDITORS, AND FOR ADOPTION OF SIGMATRONand fill in the circle next to each nominee you wish to withhold, as shown here:INTERNATIONAL, INC. EMPLOYEE STOCK OPTION PLAN,REGISTERED PUBLIC ACCOUNTANTS AND WILL CONFER THE AUTHORITY IN PARAGRAPH 4. 3. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Receipt is hereby acknowledged of the Notice of the Meeting and Proxy Statement dated August 15, 20112014 as well as a copy of the 20112014 Annual Report to Stockholders. | | | | INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark“FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here:  | | | | PLEASE SIGN, DATE 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 personperson. | |
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| | | | | | | | | | | | | ¨ | | | | | | | | | | 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. Frauendorfer and Henry J. Underwood, and each of them, with full power of substitution, as attorneys and proxies to represent the undersigned at the 20112014 Annual Meeting of Stockholders of SIGMATRON INTERNATIONAL, INC. (the “Company”) to be held at the Company’s offices at 2201 Landmeier Road, Elk Grove Village, Illinois at 10:00 a.m. local time, on Friday, September 16, 201119, 2014 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) | | | | | | | | | | | | | | | | | | | | | | | 14475 | | |
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