In the event of the death of the participant. All Named Executive Officers are currently fully vested in all retirement programs, and would receive no additional benefit upon occurrence of a participant prior to retirement, deathchange-in-control. These benefits are payable for a15-year periodprovided to the deceased participant’s beneficiaries.
Effective December 31, 2003, the Company froze benefit accruals under the plan. It is the intent of the Companysalaried employees generally and are intended to restore a retirement benefitensure that management remains focused on stockholder value when the Company’s financial condition allows.
evaluating strategic alternatives.
Employees Retirement PlanTax Deductibility of Executive Compensation
The Employees Retirement PlanCompany seeks to structure its compensation arrangements to maximize the tax deductibility of all components of executive compensation unless the Companybenefit of such deductibility is a non-contributory, defined benefit retirement plan governedoutweighed by the Employee Retirement Income Security Actneed for flexibility or the attainment of 1974. With limited exceptions,other corporate objectives. The Compensation Committee will continue to monitor issues concerning the deductibility of executive compensation and will take appropriate action if and when it is warranted. Since corporate objectives may not always be consistent with the requirements for full deductibility, the Compensation Committee is prepared, if it deems appropriate, to enter into compensation arrangements under which payments may not be fully deductible. Thus, deductibility will not be the sole factor used by the Compensation Committee in ascertaining appropriate levels or modes of compensation. In fiscal 2008, all employees of the Company and its participating subsidiaries (including executive officers) are eligible to participate provided they meet certain service requirements. Benefits arecompensation paid to or on behalf of each participant upon retirement, normally at age 65, and under certain circumstances upon death. Benefits under the plan are credited to the employee each year based upon years of service and remuneration during such year of service.
Retirement benefits vest partially after three years of service andexecutives was fully after seven years of service, or upon the participant’s 65th birthday. Benefits payable under the plan are adjusted to reflect the form of payment elected by the participant. The following table shows the annual pension benefits for retirement at age 65 which would be payable to retiring employees with representative earnings and years of service:
Pension Plan Table
| | | | | | | | | | | | |
| | Years of Service(2) (3) | |
Assumed Average Compensation(1) | | 10 | | | 20 | | | 30 | |
|
$ 25,000 | | $ | 2,260 | | | $ | 4,520 | | | $ | 6,780 | |
50,000 | | | 4,760 | | | | 9,520 | | | | 14,280 | |
75,000 | | | 7,260 | | | | 14,520 | | | | 21,780 | |
100,000 | | | 9,760 | | | | 19,520 | | | | 29,280 | |
125,000 | | | 12,260 | | | | 24,520 | | | | 36,780 | |
150,000 | | | 14,760 | | | | 29,520 | | | | 44,280 | |
175,000 | | | 15,760 | | | | 31,519 | | | | 47,279 | |
| | |
(1) | | Assumed average compensation is based upon regular base compensation before deduction for taxes or group insurance averaged for each year in the plan. |
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(2) | | Represents annual retirement benefits payable at normal retirement age. To the extent a participant’s service was rendered prior to February 1, 1964, the effective date of the plan, actual benefits will be slightly lower than the benefits shown in the table. |
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(3) | | The benefits shown are for straight-life annuity payments and are not subject to deduction for Social Security or other offset amounts; alternative forms of benefit payments are available under the plan. |
Messrs. Robert Virtue, Douglas Virtue, Dose, Ms. Swafford and Mr. Wonder have 48, 19, 14, 9 and 26 credited years of service and $74,000, $98,000, $123,000, $128,000 and $94,000 of assumed average compensation, respectively, under the plan. From time to time the Company may amend the formula used to determine the benefits applicable to certain management personnel who also participate in the VIP Plan. However, the effect of any such change may not result in a modification to such individual’s overall retirement benefits as determined under the VIP Plan, although a change may alter the plan under which such benefits are paid.
Effective December 31, 2003, the Company froze benefit accruals under the Plan. It is the intent of the Company to restore a retirement benefit when the Company’s financial condition allows.
Management Employees Life Insurance Plan
In August 1985, the Board of Directors adopted the Management Employees Life Insurance Plan, which provides for the Company to obtain life insurance policies on management employees selected by the Board. Effective Januarydeductible; no executive officer
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CODE OF ETHICS
The Company has adopted a “Code of Ethics,” which is applicable to its chief executive officer and senior financial officers, including the principal accounting officer. The “Code of Ethics” is available on Virco’sthe Company’s website at www.virco.com. The Company intends to post amendments to or waivers under the Code of Ethics at this location on its website. Upon written request, the Company will provide a copy of the Code of Ethics free of charge. Requests should be directed to Virco Mfg. Corporation.,Corporation, 2027 Harpers Way, Torrance, California 90501, Attention: Robert E. Dose, Secretary.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Audit Committee, among its other duties and responsibilities, reviews and monitors all related party transactions and adopted the Company’s “Related Party Transaction Policies and Procedures” (the “Policy”). The Board of Directors has delegated to the Chair of the Audit Committee the authority to pre-approve or ratify (as applicable) any transaction with a related party in which the aggregate amount involved is expected to be less than $250,000. The Chair of the Audit Committee is required to provide to the Board of Directors for review a summary of each new transaction pre-approved by the Chair of the Audit Committee pursuant to this policy at the meeting of the Board of Directors next following such approval or ratification. Under the Policy, the Audit Committee is responsible for reviewing and approving transactions with a related party in which the aggregate amount is expected to exceed $250,000, and both the Audit Committee and the Board of Directors are responsible for reviewing and approving transactions with a related party in which the aggregate amount is expected to equal or exceed $500,000. If advance Audit Committee and/or Board of Directors approval is not feasible, then the transaction with the related party will be considered and, if the Audit Committee and/or Board of Directors determines it to be appropriate, ratified at the next regularly scheduled meeting. In determining whether to approve the entry into a transaction with a related party, the Audit Committee and/or Board of Directors as applicable will assess, among other factors it deems appropriate, whether the transaction is on terms no more favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction. If a transaction with a related party will be ongoing, the Audit Committee and/or Board of Directors may establish guidelines for the Company’s management to follow in its dealings with such related party. Thereafter, the Audit Committee and/or Board of Directors as applicable, on at least an annual basis, will review and asses the relationship with the related party to determine whether the relationship is in compliance with the Policy and remains appropriate. No director shall participate in any discussion or approval of a transaction for which he or she is a related party, except that this director shall provide all material information concerning the transaction to the Audit Committee and/or Board of Directors as applicable.
Robert K. Montgomery served in 2005fiscal 2008 as a member of the Board of Directors of the Company as a Class III Director.Company. Mr. Montgomery is a partnersenior counsel of the law firm Gibson, Dunn & Crutcher LLP, which has provided legal services to the Company. The Company expects that such law firm will continue to render legal services to the Company.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee ofIn fiscal 2008, the Board of Directors is responsible for developing the Company’s executive compensation policiesCompany paid approximately $647,500 to Hedgehog Design, LLC, which provides product design and making recommendationsrelated services to the BoardCompany. Robert Mills, the sole member of DirectorsHedgehog Design, LLC, resides with respect to these
policies. In addition, the Committee makes annual recommendations to the BoardLori L. Swafford, Vice President of Directors concerning the compensation paid to the Chief Executive Officer and to each of the other executive officers ofLegal Affairs for the Company.
Executive Compensation Policy
The goalsIn keeping with the Company’s policy on Related Party Transactions, the Board and the Audit Committee have reviewed and ratified the terms and circumstances of the Company’s executive compensation policy aretransactions with Mr. Mills and found them to attract and retain qualified executives and to ensure that their efforts are directed towardbe properly approved when initiated in 2002; in the long-termbest interests of the Company at the time, at present, and its stockholders. The Company is strivinggoing forward; and no more favorable than terms offered and sums paid to generally position executive salaries at median competitive levelssimilarly situated companies and individuals offering comparable services. As part of the review and ratification process, the product lines designed by Mr. Mills were evaluated for financial and market performance. It was determined that these product lines had and will likely continue to relyhave a favorable impact on variable, performance-based bonuses to play a significant role in determining total compensation. In addition, by establishing the 1993 and 1997 Stock Incentive Plans, the Company further linked executive and stockholder interests.
The Compensation Committee annually reviews salaries, bonuses and other aspects of executive compensation. In general, the purpose of such annual reviews is to ensure that the Company’s overall executiveresults.
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compensation program remains competitive with comparable businesses and that total executive pay reflects both the individual’s performance as well as the overall performance of the Company.
Base Salary
Each year, the performance of executives is reviewed and, based upon an assessment of individual performance, the Company’s performance, and a comparison of the Company’s executive compensation levels and plans with those of other companies in the furniture manufacturing business, a salary increase may be awarded. In 2005, based upon such review, the Compensation Committee concluded that certain executive salaries should be adjusted to perceived competitive levels, as well as the Compensation Committee’s evaluation of the overall performance of the Company and the performance of each executive officer.
The salary of Mr. Robert A. Virtue, the Company’s Chief Executive Officer, was determined on the foregoing basis in addition to consideration of the salary levels of the chief executive officers of other furniture manufacturers, the Company’s operating results in 2005, the Company’s stock performance, the effect of the general economy on the Company’s performance and the success of the Company in addressing certain goals.
Bonuses
Early each year the Board of Directors considers and approves an annual profit plan for the Company, which establishes a target level of overall Company profits, excluding certain non-recurring items. The bonuses payable to the Chief Executive Officer and the other executive officers are tied to the Company’s actual performance relative to the annual profit plan. In 2005, a consolidated bonus plan was utilized to determine the bonuses of general managers, as well as the Chief Executive Officer and the other executive officers. In 2005, the Chief Executive Officer was eligible to receive a bonus equal to 45% of his salary, with a potential increase to up to 60% of his salary, and each of the executive officers was eligible to receive a bonus equal to 35% of his or her salary, with a potential increase to up to 50% of his or her salary, if the annual profit plan target level had been achieved. In general, the target bonus amount was subject to a 1% increase for each $160,000 that the Company’s actual profits exceeded the plan’s targeted profit level and a 1% decrease for each $160,000 that the plan’s targeted profit level exceeded the Company’s actual profits. No bonuses have been paid to any member of the executive management team in the last three fiscal years.
THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
Donald A. Patrick, Chair
Robert K. Montgomery
James R. Wilburn
The report of the Compensation Committee of the Board of Directors shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
REPORT OF THE AUDIT COMMITTEE
The Board of Directors has adopted a written charter for the Audit Committee, which is available on the Company’s website at www.virco.com. The Audit Committee reviews the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process. The Company’s independent auditors are responsible for expressing an opinion on the conformity of ourthe Company’s audited financial statements with accounting principles generally accepted in the United States.
In this context, the Audit Committee has reviewed and discussed the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2009, with management and the independent auditors, including their judgment of the quality and appropriateness of accounting principles, the reasonableness of significant judgments and the clarity of the
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disclosures in the financial statements. In addition, the Audit Committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication with Audit Committees), SEC rules, and other applicable standards. In addition, the Audit Committee has received from the independent auditors the written disclosures pursuant toand letter required by the Independence Standardsapplicable requirements of the Public Company Accounting Oversight Board Standard No. 1 (Independence Discussionsregarding the independent auditor’s communication with the Audit Committees)Committee concerning independence, and has discussed with them their independence from the Company and its management.independent auditors the independent auditors’ independence. The Audit Committee has also considered whether the independent auditorsauditors’ provision of non-audit services to the Company is compatible with the auditor’sauditors’ independence. The Audit Committee also reviewed and discussed with management its report on internal control over financial reporting and the related audit performed by the independent auditors which confirmed the effectiveness of the Company’s internal control over financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited financial statements be incorporated by reference in the Company’s Annual Report on SECForm 10-K for the fiscal year ended January 31, 2006,2009, for filing with the Securities and Exchange Commission.
THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
Evan M. Gruber,Thomas J. Schulte, Chair
Donald S. Friesz
Albert J. Moyer
Donald A. Patrick
The report of the Audit Committee of the Board of Directors shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act, of 1934, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
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STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The stock performance graph set forth below illustrates the Company’s performance in total stockholder return over the period February 1, 2001 through January 31, 2006, relative to the following external indices: (a) the American Stock Exchange market value index (“AMEX Market Index”) and (b) a peer group. Each line on the stock performance graph assumes that $100.00 was invested in the Common Stock and the respective indices on February 1, 2001. The graph then tracks the value of these investments, assuming reinvestment of dividends, through January 31, 2006.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2001 | | | 2002 | | | 2003 | | | 2004 | | | 2005 | | | 2006 |
VIRCO MFG. CORPORATION | | | | 100.00 | | | | | 102.36 | | | | | 108.96 | | | | | 90.44 | | | | | 96.60 | | | | | 81.71 | |
PEER GROUP | | | | 100.00 | | | | | 125.29 | | | | | 99.92 | | | | | 148.97 | | | | | 160.63 | | | | | 167.31 | |
AMEX MARKET INDEX | | | | 100.00 | | | | | 87.94 | | | | | 86.64 | | | | | 121.62 | | | | | 130.30 | | | | | 158.05 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The cumulative total return shown on the stock performance graph indicates historical results only and is not necessarily indicative of future results.
(1) The peer group comprises all companies identified by CoreData Industry Group 313 — Business Equipment — which are as follows: American Locker Group, Cash Systems, Inc., Champion Industries Inc., Diebold Inc., Dorel Industries Inc. B, Falcon Products Inc., Fiberstars Inc., Franklin Electronic Publishers Incorporated, General Binding Corporation, Genlyte Group Inc., Global Payment Tech Inc., Gradco Systems Inc., Herman Miller Inc., Hon Industries Inc., Hypercom Corporation, International Lottery & Totalizer Systems, Inc., Kimball International, Knape & Vogt Manufacturing Company; Kronos Inc., Lipman Electronic Engine, LSI Industries Inc., Mity Enterprises Inc., Moneyflow Systems International, Nam Tai Electronics Inc., Par Technology Corporation, Pitney Bowes Inc., Steelcase Inc., Techlite Inc., Thomas Industries Inc., Ultradata Systems, Vitacube Systems Holdings, Xerox Corporation, and the Company.
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RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP wasaudited the Company’s financial statements for fiscal 2008 and has been selected by the Audit Committee ofto audit the Board of Directors to examine the accounts of the CompanyCompany’s financial statements for fiscal year 2005.2009. The Audit Committee is directly responsible for the engagement of the outside auditor. In making its determination, the Audit Committee reviewed both the audit scope and estimated audit fees for the coming year. Each professional service performed by Ernst & Young LLP during the fiscal year ended January 31, 2006,2008 was reviewed, and the possible effect of such service on the independence of the firm was considered, by the Audit Committee. Representatives of Ernst & Young LLP will be present at the Annual Meeting and will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.
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The Audit Committee has adopted policies and procedures for pre-approving all audit services, audit-related services, tax services and non-audit services performed by Ernst & Young LLP. Specifically, the Audit Committee has pre-approved the use of Ernst & Young LLP for detailed, specific types of services within the following categories: annual audits, quarterly reviews and statutory audits, preparation of certain corporate tax returns, regulatory implementation and compliance and risk assessment guidance. In each case, the Audit Committee has also set specific annual ranges or limits on the amount of each category of services which the Company would obtain from Ernst & Young LLP, which limits and amounts are established periodically by the Audit Committee. Any proposed services exceeding these levels or amounts require specific pre-approval by the Audit Committee. The Audit Committee monitors the performance of all services provided by the independent auditor, to determine whether such services are in compliance with the Company’s pre-approval policies and procedures.
Fees Paid to Ernst & Young LLP
The following table shows the fees that the Company paid or accrued for the audit and other services provided by Ernst & Young LLP for fiscal years 20052008 and 2004.2007. All of the services described in the following fee table were approved in conformity with the Audit Committee’s pre-approval process.
| | | | | | | | |
| | 2008 | | | 2007 | |
Audit Fees | | $ | 476,125 | | | $ | 555,000 | |
Audit -Related Fees | | | 47,000 | | | | 47,000 | |
Tax Fees | | | — | | | | 43,745 | |
All Other Fees | | | — | | | | — | |
| | | | | | |
| | | | | | | | |
Total | | $ | 523,125 | | | $ | 645,745 | |
| | | | | | |
| | | | | | | | |
| | 2005 | | | 2004 | |
|
Audit Fees | | $ | 570,400 | | | $ | 609,000 | |
Audit-Related Fees | | | 39,000 | | | | 34,500 | |
Tax Fees | | | 48,620 | | | | 45,250 | |
All Other Fees | | | — | | | | — | |
| | | | | | | | |
Total | | $ | 658,020 | | | $ | 688,750 | |
| | | | | | | | |
Audit Fees.Audit fees are the aggregate fees for services of the outside auditor for audits of ourthe Company’s annual financial statements, the audit of management’s assessment of internal control over financial reporting and the independent registered accounting firm’s own audit of our internal control over financial reporting, including testing and compliance with Section 404 of the Sarbanes-Oxley Act of 2002, and review of ourthe Company’s quarterly financial statements included in ourthe Company’s Forms 10-Q, and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements for those fiscal years.
Audit-Related Fees.Audit-related fees are those fees for services provided by the outside auditor that are reasonably related to the performance of the audit or review of ourthe Company’s financial statements and not included as audit fees. The services for the fees disclosed under this category include the audit of Virco’sthe Company’s 401(k) and Qualified Pension Plans.
Tax Fees.Tax fees are those fees for services provided by the outside auditor, primarily in connection with the Company’s tax compliance activities, including technical tax advice related to the preparation of tax returns.
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PROPOSAL 2
The Company’s Audit Committee has selected Ernst & Young LLP, independent auditors, to audit its financial statements for the fiscal year ending January 31, 2007,2010, and recommends that the stockholders vote for ratification of that appointment. The Company’s Audit Committee has reviewed the professional services provided by Ernst & Young LLP, as described above, has considered the possible effect of such services on the independence of the firm, and has determined that such services have not affected Ernst & Young LLP’s independence. Notwithstanding this selection, the Audit Committee, inat its discretion, may direct the appointment of new auditors at any time during the fiscal year if the Audit Committee feelsdetermines that such a change would be in the best interests of the Company and its stockholders. If there is a negative vote on ratification, the Audit Committee will reconsider its selection.
The affirmative vote of a majority of the votes cast is required to ratify the Audit Committee’s selection. In addition, the affirmative votes must represent at least a majority of the required quorum. If the stockholders reject the selection, the Board of Directors will reconsider its selection.The Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP.
Other Matters
Section 16(a)16 (a) Beneficial Ownership Reporting Compliance.Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s officers, directors and persons who beneficially own more than 10% of any equity security of the Company to file reports of beneficial ownership and changes in beneficial ownership with the Securities and Exchange Commission and to furnish copies of these reports to the Company. Based solely on a review of the copies of the forms that the Company received, and other information available to it, to the best of the Company’s knowledge the following officers each filed one late report, reporting one transaction each: Robert Dose, Bassey Yau, Patricia Quinones, D. Randal Smith, Lori Swafford and Larry Wonder.all such reports were timely filed.
20062010 Stockholder Proposal.Proposals.If a stockholder wishes to submit a proposal for consideration at the 20072010 Annual Meeting of the Stockholders and wants that proposal to appear in the Company’s proxy statement and form of proxy for that meeting, the proposal must be submitted in writing to Virco’sthe Company’s Corporate Secretary at 2027 Harpers Way, Torrance, California 90501, Attention: Robert E. Dose, no later than January 23, 2007.18, 2010 and must comply with all applicable SEC requirements. The submission of a stockholder proposal does not guarantee that it will be included in the Company’s Proxy Statement and form of proxy.
The Company’s bylaws also establish an advance notice procedure with regard to nominations of persons for election to the Board of Directors and proposals for other business that are not submitted for inclusion in the Proxy Statement and form of proxy but that a stockholder instead wishes to present directly at an Annual Meeting of Stockholders. If a stockholder wishes to submit a proposalnominee or other business for consideration at the 20072010 Annual Meeting of the Stockholders without including that nominee or proposal in the Company’s proxy statementProxy Statement and form of proxy, the Company’s bylaws require, among other things, that the stockholder tosubmission contain certain information concerning the nominee or other business, as the case may be, and other information specified in the Company’s bylaws, and that the stockholder provide the Company with written notice of such nominee or business no later than February 16, 2010 provided that, if the 2010 Annual Meeting of Stockholders is advanced or delayed more than 40 days from the anniversary date, such nominee or proposal of other business must be submitted no lesslater than 120 days in advancethe close of such meetingbusiness on the later of the 120th day prior to the 2010 Annual Meeting of Stockholders or if later, the tenth10th day following the first public announcement of the date of such meeting. Suchmeeting If the number of directors to be elected to the Board of Directors is increased and there is no public announcement specifying the size of increase before February 16, 2010, then a stockholder notice will be considered timely only with respect to nominees for new positions created by such increase if submitted not later than the close of business on the 10th day following the first public announcement of such increase. A stockholder notice should be sent to Virco’sthe Company’s Corporate Secretary at 2027 Harpers Way, Torrance, California 90501.90501, Attention: Robert E. Dose. Proposals or nominations not meeting the advance notice requirements in the Company’s bylaws will not be entertained at the 2010 Annual Meeting of Stockholders. A copy of the full text of the relevant bylaw provisions may be obtained from the Company’s filing with the SEC or by writing our Corporate Secretary at the address identified above.
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Additional Matters Considered at the Annual Meeting.The Board of Directors does not know of any matters to be presented at the 2006 Annual Meeting other than as stated herein. If other matters do properly come before the Annual Meeting, the persons named on the accompanying proxy card will vote the proxies in accordance with their judgment in such matters.
Availability of Annual Report.The Annual Report to the Stockholders of the Company for the fiscal year ended January 31, 20062009, is being mailed to stockholders concurrently herewith and is also available online at http://www.virco.com. The Company will deliver only one Proxy Statement and accompanying Annual Report to multiple stockholders sharing an address unless the Company has received contrary instructions from one or more of the stockholders. The Company will undertake to deliver promptly, upon written or oral request, a separate copy of the Proxy Statement and accompanying Annual Report to a stockholder at a shared address to which a single copy of such documents are delivered. A stockholder can notify the Company that the stockholder wishes to receive a separate copy of the Proxy Statement and/or Annual Report by contacting the Company’s Corporate Secretary at 2027 Harpers Way, Torrance, California 90501 or at (310) 553-0474. Similarly, stockholders sharing an address who are receiving multiple copies of the Proxy Statement and accompanying Annual Report may request delivery of a single copy of the Proxy Statement and/or Annual Report by contacting the Company at the address set forth above or at (310) 533-0474.
The Company will also provide without charge a copy of its Annual Report onForm 10-K, including financial statements and related schedules, filed with the Securities and Exchange Commission, upon written or oral request from any person who was holder of record, or who represents in good faith that he/she was a beneficial owner, of Common Stock of the Company on April 21, 2006.24, 2009. Any such request shall be addressed to the Company at 2027 Harpers Way, Torrance, California 90501, Attention: CorporateRobert E. Dose, Secretary or by calling(310) 533-0474.
By Order of the Board of Directors
Robert E. Dose
Secretary
Torrance, California
May 23, 2006
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APPENDIX A
VIRCO MFG. CORPORATION
AUDIT COMMITTEE CHARTER
This charter sets forth the authority and responsibility of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Virco Mfg. Corporation. (the “Company”).
1. Purpose and Authority.
The primary purposes of the Committee are to prepare the report that Securities and Exchange Commission (“SEC”) rules require to be included in Company’s annual proxy statement and to assist the Board in fulfilling its oversight responsibilities to the stockholders of the Company relating to:
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| • | the integrity of the Company’s financial statements, including disclosure controls and procedures; |
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| • | the Company’s compliance with legal and regulatory requirements; |
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| • | the independent auditor’s qualifications and independence; and |
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| • | the performance of the Company’s internal audit function and internal controls and the Company’s independent auditors. |
The Committee will primarily fulfill these responsibilities by carrying out the activities listed below in Section V of this charter. Subject to any restrictions or limitations on the delegation of power and authority imposed by the rules or regulations promulgated by the SEC, the American Stock Exchange (“AMEX”) or other regulatory authority, or by applicable law, the Committee shall have and may exercise all the powers and authority of the Board of Directors reasonably necessary or advisable for the Committee to effectuate its purposes and perform its responsibilities as set forth in this Section I and in Section V of this charter.
2. Composition.
The Committee will be appointed annually to serve at the pleasure of the Board and will be comprised of not less than three Directors. The Board shall designate one member of the Committee to be Chair. Vacancies in the Committee may be filled at any meeting of the Board.
Each member of the Committee shall be independent and free from any relationship that in the opinion of the Board would interfere with the exercise of independent judgment as a member of the Committee. For purposes of determining Director independence, the term “independent” shall also mean a Director who meets the definition of “independence” for members of an audit committee set forth in the Company Manual of the AMEX and Section 10(A)(m)(3) of the Securities Exchange Act of 1934, as amended. All members of the Committee shall have a working familiarity with basic finance and accounting practices, and at least one member of the Committee shall be a “financial expert,” as defined in rules promulgated by the SEC. Committee members are encouraged to enhance their familiarity with finance and accounting by participating in educational programs conducted by the Company and by outside services.
No member of the Committee shall serve simultaneously on the audit committee of more than three public companies (including the Company).
3. Meetings.
The Committee shall meet at least four times annually, or more frequently as circumstances dictate. Regular meetings of the Committee may be held without call or notice at such times and places as the Committee from time to time may fix. Special meetings of the Committee may be called by the Chairman of the Committee or by the Secretary of the Company when requested to do so by any two members of the Committee or by the Company’s independent or internal auditors. Notice shall be given in the same manner as notice of special meetings of the Board.
Any action required or permitted to be taken at any meeting of the Committee may be taken without a meeting if consent in writing is given thereto by all members of the Committee and such consent is filed with the minutes.
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Minutes of the meetings of the Committee will be prepared and kept in the minute books of the Company, together with minutes of meetings of other committees of the Board. These minutes shall be made available to the members of the Board from time to time for their information.
4. Quorum.
A majority of the members of the Committee, but no fewer than two persons, shall constitute a quorum for the transaction of business at any meeting of the Committee. Any action of the Committee to be effective must be authorized by the affirmative vote of a majority of the members thereof present and in any event shall require not less than two affirmative votes.
5. Responsibilities and Duties.
To fulfill its responsibilities and duties the Committee shall:
Meet and Review Documents/Reports
1. Review and, as appropriate, update this Charter at least annually.
2. Review and discuss with management and the independent auditors the Company’s annual and quarterly financial statements and annual and quarterly reports onForms 10-K and10-Q, respectively, prior to filing each such report, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and any certification, report, opinion or review rendered by the independent auditors with respect thereto.
3. Discuss the general types of information to be disclosed, and the type of presentation to be made, in the Company’s earnings press releases and in the financial information and earnings guidance, if any, provided to analysts and rating agencies.
4. Meet separately, periodically, with management, the internal auditors (or other personnel responsible for the internal audit function) and with independent auditors.
5. Report to the Board of Directors following meetings of the Committee.
Independent Auditors
6. Appoint the firm of independent certified public accountants to serve as the Company’s independent auditors, which firm shall report directly to the Committee, and retain or terminate, when appropriate, such firm. The Committee shall be directly responsible for the appointment, compensation and oversight of the independent auditors.
7. Obtain and review at least annually a report by the independent auditors describing: (a) the firm’s internal quality control procedures; (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (c) all relationships between the independent auditors and the Company, including services performed for the Company and fees charged to the Company, and all other relationships that may adversely affect the independence of the auditors.
8. Consider, at least annually, the independence of the independent auditors, including all relationships between the Company and the independent auditors and whether such auditors’ performance of permissible non-audit services is compatible with the auditors’ independence.
9. Pre-approve all audit engagement fees and terms and all non-audit engagements with the independent auditors. The Committee shall have sole authority to carry out the responsibilities set forth in this Paragraph 9.
10. Review with the independent auditors the degree to which leased employees were used (if at all) in the performance of the independent accounts services.
11. Approve the hiring by the Company of any current employee of the independent auditors or any former employee of the independent auditors employed by the independent auditors within the prior one-year period;
A-2
provided that, in no event shall the Committee approve the hiring by the Company of a chief executive officer, controller, chief financial officer, chief accounting officer or any person that would serve in an equivalent position for the Company if such person was employed by the independent auditors and participated in the audit of the Company during the one-year period preceding the date of the initiation of the most recent audit.
Financial Reporting Processes
12. In consultation with the independent auditors, management and the internal auditors, review the integrity of the Company’s financial reporting processes, both internal and external, and the fullness and accuracy of the Company’s financial statements.
13. Review the adequacy of the Company’s internal controls.
14. Consider the independent auditors’ judgments about the quality and appropriateness of the Company’s accounting principles as applied to financial reporting.
15. Consider and approve, if appropriate, major changes to the Company’s internal auditing and accounting principles and practices as suggested by the independent auditors or management.
16. Establish regular and separate systems of reporting to the Committee by management and the independent auditors regarding any significant judgments made in management’s preparation of the financial statements and the view of each as to the appropriateness of such judgments.
17. Review with the independent auditors any problems or difficulties encountered during the course of the audit work, including any restrictions on the scope of work or access to requested information, any significant disagreements between the independent auditors and management, and management’s response to such problems or difficulties.
18. Review with the independent auditors and management the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented.
19. Establish procedures, pursuant to rules or regulations that may be issued from time to time by theSEC and/or the AMEX, for handling complaints regarding accounting, internal accounting controls and auditing matters, including procedures for confidential, anonymous submission of legitimate concerns by employees regarding accounting and auditing matters.
20. Prepare the report that SEC rules require to be included in the Company’s annual proxy statement.
Risk Assessment
21. Evaluate the Company’s guidelines and policies with respect to risk assessment and risk management.
Ethical and Legal Compliance
22. Establish, review and update periodically a Code of Ethical Conduct and ensure that management has established a system to enforce this Code.
23. Review with the Company’s counsel, legal compliance matters including securities laws compliance and any legal matter that could have a significant impact on the Company’s financial statements.
24. Obtain such advice and assistance from outside legal, accounting or other advisors as deemed appropriate by the Committee in its sole discretion. The Committee is specifically empowered to retain these advisors without seeking approval from the Board.
General
25. Review and discuss the adequacy of the Company’s disclosure controls and procedures.
26. Conduct an annual performance evaluation of the Committee in accordance with, and as required by, rules that may be issued by the AMEX from time to time.
27. Perform any other activities consistent with this charter, the Company’s Certificate of Incorporation and Bylaws, and governing law as the Committee or the Board deems necessary or appropriate.
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
VIRCO MFG. CORPORATION
Annual Meeting of Stockholders — June 20, 2006
The undersigned hereby appoints ROBERT A. VIRTUE, DOUGLAS A. VIRTUE and ROBERT E. DOSE, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Virco Mfg. Corporation Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the Company to be held June 20, 2006 or any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Meeting.
(Continued, and to be marked, dated and signed, on the other side)
Address Change/Comments(Mark the corresponding box on the reverse side)
5Fold and detach here.5
You can now access your VIRCO MFG. CORPORATION account online.
Access your Virco Mfg. Corporation stockholder account online via Investor ServiceDirect® (ISD).
Mellon Investor Services LLC, agent for Virco Mfg. Corporation, now makes it easy and convenient to get current information on your stockholder account. After a simple and secure process of establishing a Personal Identification Number (PIN), you are ready to log in and access your account to:
| | | | |
| |
l/s/Robert E. DoseRobert E. Dose | | View account status | | l | | View payment history for dividends |
l | | View certificate history | | l | | Make address changes |
l | | View book-entry information | | l | | Obtain a duplicate 1099 tax form |
| | Secretary | | l | | Establish/change your PIN |
Visit us on the web athttp://www.melloninvestor.com/isdTorrance, California
and follow the instructions shown on this page.May 18, 2009
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect® is a registered trademark of Mellon Investor Services LLC
21
| | | | |
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE PROPOSALS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND ON ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING IN THE DISCRETION OF THE HOLDERS OF THIS PROXY Please mark your votes as indicated in this example | | Mark Here
for Address
Change or
Comments | | o |
| | SEE REVERSE SIDE X |
| | | | | | |
The Board of Directors recommends a vote FOR item 1. | | FOR | | WITHHELD
FOR ALL |
1. | | Election of Directors Nominees: | | o | | o |
01 | | Robert A. Virtue | | | | |
02 | | Robert K. Montgomery | | | | |
03 | | Donald A. Patrick | | | | |
| | | | | | |
Withheld for the nominees you list below: (Write that nominee’s name in the space provided below.) |
| | | | | | | | |
The Board of Directors recommends a vote FOR item 2. | | | | | | |
| | | | | FOR | | WITHHOLD | | *EXCEPTIONS |
| | | | | ALL | | FOR ALL | | |
1. | ELECTION OF DIRECTORS: | | | | | | |
| Nominees: | | c | | c | | c |
| 01 Robert A. Virtue | | | |
| 02 Robert K. Montgomery | | | | | | |
| 03 Donald A. Patrick | | | | | | |
(INSTRUCTIONS: To specify different instructions with regard to cumulative voting or to withhold authority to vote for any individual nominee, mark the “Exceptions” box above and write your instructions in the space provided below.)
*Exceptions
| | | | | | |
| | FOR | | AGAINST | | ABSTAIN |
|
2. | | Ratification of Appointmentappointment of Independent Auditors | | oc | | oc | | oc |
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE ELECTION OF ALL OF THE NOMINEES TO THE BOARD OF DIRECTORS, “FOR” PROPOSAL 2, AND “FOR” ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING IN THE DISCRETION OF THE HOLDERS OF THE PROXY.
| | |
Mark Here for Address Change or Comments SEE REVERSE | | c |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
5Detach here from proxy voting card5Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a WeekWE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING.
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet and Telephone and Internet voting isare available through 11:59 PM EST Eastern Time
the day
prior to annual meetingthe Annual Meeting day.
Important notice regarding the Internet availability of proxy materials for the Annual Meeting of stockholders
The Proxy Statement and the 2008 Annual Report to Stockholders are available at:
http://www.virco.com
INTERNET
http://www.proxyvoting.com/virc
Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site.
OR
TELEPHONE 1-866-540-5760
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.
OR
MAIL
Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
Your telephoneInternet or Internettelephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
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