def14a
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of
1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12 |
SUNTRON CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of its filing. |
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Date Filed: |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 15, 2006
To Our Stockholders:
The 2006 Annual Meeting of Stockholders of Suntron Corporation will be held at 10:00 a.m.,
local time, on Friday, December 15, 2006 at Suntrons corporate headquarters located at 2401 West
Grandview Road, Phoenix, Arizona 85023. At the meeting, stockholders will vote on the following
matters:
1. To elect three Class II directors, each for a term expiring in 2009; and
2. To transact such other business as may properly come before the meeting and any
postponement or adjournment thereof.
Stockholders of record as of the close of business on November 20, 2006 are entitled to notice
of, and to vote at, the meeting and any postponement or adjournment thereof.
Whether or not you expect to be present please sign, date, and return the enclosed proxy card
in the enclosed pre-addressed envelope as promptly as possible. No postage is required if mailed
in the United States.
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By Order of the Board of Directors, |
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Phoenix, Arizona
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/s/ James A. Doran |
November 21, 2006
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Secretary |
THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON.
THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY URGED TO EXECUTE AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY
NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY, AND VOTE THEIR SHARES IN PERSON.
TABLE OF CONTENTS
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i
SUNTRON CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
This proxy statement contains information related to our annual meeting of stockholders to be
held on Friday, December 15, 2006, beginning at 10:00 a.m. local time, at Suntrons corporate
headquarters located at 2401 West Grandview Road, Phoenix, Arizona 85023 and at any adjournments or
postponements thereof. The purpose of this proxy statement is to solicit proxies from the holders
of our common stock for use at the meeting. This proxy statement, the accompanying notice of
annual meeting, and the enclosed form of proxy are being sent to stockholders on or about November
21, 2006. You should review this information in conjunction with our 2005 Annual Report to
Stockholders, which accompanies this proxy statement.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At the annual meeting, stockholders will vote on the election of directors. In addition, our
management will report on our performance during 2005 and respond to questions from our
stockholders.
Who is entitled to vote at the meeting?
Only stockholders of record at the close of business on the record date, November 20, 2006,
are entitled to receive notice of the annual meeting and to vote the shares of our common stock
that they held on that date at the meeting, or any postponements or adjournments of the meeting.
Each outstanding share of common stock entitles its holder to cast one vote on each matter to be
voted upon.
Who may attend the meeting?
All stockholders as of the record date, or their duly appointed proxies, may attend the
meeting. Please note that if you hold shares in street name (that is, through a broker or other
nominee), you will need to bring a copy of a brokerage statement reflecting your share ownership as
of the record date.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a majority of all of the
shares of common stock outstanding on the record date will constitute a quorum, permitting the
stockholders to conduct their business. As of the record date, 27,562,647 shares of our common
stock were outstanding. Proxies received but marked as abstentions and broker non-votes will be
included in the calculation of the number of shares considered to be present at the meeting but
will not be counted as votes cast for or against any given matter.
If less than a majority of the outstanding shares of common stock entitled to vote are
represented at the meeting, a majority of the shares present at the meeting may adjourn the meeting
to another date, time, or place, and notice need not be given of the new date, time, or place if
the new date, time, or place is announced at the meeting before an adjournment is taken.
How do I vote?
If you complete and properly sign the accompanying proxy card and return it to us, it will be
voted as you direct. If you are a registered stockholder and attend the meeting, you may deliver
your completed proxy card in person. Street name stockholders who wish to vote at the meeting
will need to obtain a proxy form from the institution that holds their shares.
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Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote at any time before
the proxy is exercised by filing with us either a notice of revocation or a duly executed proxy
bearing a later date. The powers of the proxy holders will be suspended if you attend the meeting
in person and so request, although attendance at the meeting will not by itself revoke a previously
granted proxy.
What are the boards recommendations?
Unless you give other instructions on your proxy card, the persons named as proxy holders on
the proxy card will vote in accordance with the recommendations of our board of directors. Each of
the boards recommendations is set forth together with the description of each item in this proxy
statement. In summary, the board recommends a vote for election of its nominees for directors.
Our board of directors does not know of any other matters that may be brought before the
meeting nor does it foresee or have reason to believe that the proxy holders will have to vote at
the meeting for substitute or alternate board nominees for directors. In the event that any other
matter should properly come before the meeting or any nominee for director is not available for
election, the proxy holders will vote as recommended by the board of directors or, if no
recommendation is given, in accordance with their best judgment.
What vote is required to approve each item?
Election of Directors. The affirmative vote of a plurality of the votes cast at the meeting
by each holder of common stock (either in person or by proxy) is required for the election of
directors. A properly executed proxy marked WITHHOLD AUTHORITY with respect to the election of
one or more directors will not be voted with respect to the director or directors indicated,
although it will be counted for purposes of determining whether there is a quorum. Stockholders do
not have the right to cumulate their votes for directors.
Other Items. For each other item, the affirmative vote of a majority of the votes cast at the
meeting by each holder of common stock (either in person or by proxy) will be required for
approval. A properly executed proxy marked ABSTAIN with respect to any such matter will not be
voted with respect to such matters, although it will be counted for purposes of determining whether
there is a quorum. Accordingly, an abstention will have the effect of a negative vote.
What are the effects of broker non-votes?
If you hold your shares in street name through a broker or other nominee, your broker or
nominee may not be permitted to exercise voting discretion with respect to some of the matters to
be acted upon. Thus, if you do not give your broker or nominee specific instructions, your shares
may not be voted on those matters. Shares represented by these broker non-votes will, however,
be counted in determining whether there is a quorum. As a result, broker non-votes will have the
effect of a negative vote on some matters.
Who will pay for the preparation of the proxy?
We will pay the cost of preparing, assembling, and mailing the proxy statement, notice of
meeting, and enclosed proxy card. In addition to the use of mail, our employees may solicit
proxies personally and by telephone. Our employees will receive no compensation for soliciting
proxies other than their regular salaries. We may request banks, brokers, and other custodians,
nominees, and fiduciaries to forward copies of the proxy materials to the beneficial owners of our
common stock and to request authority for the execution of proxies, and we may reimburse such
persons for their expenses incurred in connection with these activities.
Our principal executive offices are located at 2401 West Grandview Road, Phoenix, Arizona
85023 and our telephone number is (602) 789-6600. A list of stockholders entitled to vote at the
annual meeting will be available at our offices for a period of 10 days prior to the meeting and at
the meeting itself for examination by any stockholder.
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ELECTION OF DIRECTORS
Directors and Nominees
Our board of directors is divided into three classes and each class of directors serves for a
three-year term or until successors of that class have been elected and qualified. At the annual
meeting, our stockholders will elect three Class II directors, each of whom will serve for a term
expiring at the 2009 annual meeting of stockholders, or until his successor has been duly elected
and qualified.
Our board of directors has no reason to believe that any nominee will refuse to act as a
director or be unable to accept election as a director. However, if any of them are unable to
accept election or if any other unforeseen contingencies should arise, our board of directors may
designate a substitute nominee. If our board of directors designates a substitute nominee, the
persons named as proxies will vote for the substitute nominee designated by our board of directors.
Our board of directors has nominated Ivor J. Evans, Douglas P. McCormick and Marc Schölvinck,
each of whom are currently serving as directors, to stand for re-election. The terms of Thomas B.
Sabol, Scott D. Rued, Kurt D. Grindstaff, and William S. Urkiel will expire at the annual meeting
of stockholders in 2007. The terms of Allen S. Braswell, Jr., James J. Forese and Hargopal (Paul)
Singh will expire at the annual meeting of stockholders in 2008.
The following table, together with the accompanying text, sets forth certain information, with
respect to each of our directors.
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Position(s) Held |
Allen S. Braswell, Jr.
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Director |
Ivor J. Evans
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Chairman of the Board of Directors |
James J. Forese
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Director |
Kurt D. Grindstaff
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54 |
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Director |
Douglas P. McCormick
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Director |
Scott D. Rued
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49 |
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Director |
Thomas B. Sabol
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47 |
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Chief Financial Officer and Director |
Marc Schölvinck
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49 |
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Director |
Hargopal (Paul) Singh
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Chief Executive Officer, President and Director |
William S. Urkiel
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60 |
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Director |
Hargopal (Paul) Singh has served as our Chief Executive Officer and President since May 2005
and as a director since June 2005. From July 2004 to May 2005, Mr. Singh was Vice President in
charge of our largest manufacturing facility in Sugar Land, Texas. From 1995 until 2003, Mr. Singh
was with Pemstar, Inc., an electronic manufacturing services (EMS) company, where he served on
the board for five years and held various senior executive positions, including Chief Operating
Officer and Executive Vice President International Operations. From 1979 to 1995, Mr. Singh held
senior management positions in major corporations such as Microsoft and IBM. Mr. Singh has been
actively involved in community and professional societies. Mr. Singh holds a BE Mechanical
Engineering from Osmania University, in India, and a MS in Industrial Engineering and Management
from Oklahoma State University.
Thomas B. Sabol has served as a director since July 2004 and as our Chief Financial Officer
since February 2006. From March 2005 to November 2005, Mr. Sabol served as Chief Financial Officer
for Wolverine Tube, Inc., a manufacturer and distributor of copper and copper alloy tube products.
From December 2004 to March 2005, Mr. Sabol served as Senior Vice President, Finance & Accounting
for Wolverine Tube, Inc. Mr. Sabol served as an independent business consultant from January 2004
to November 2004. Previously, Mr. Sabol served as the Executive Vice President and Chief Operating
Officer of Plexus Corp., an EMS company, from July 2002 to November 2003 and as the Chief Financial
Officer of Plexus from January 1996 to September 2002. Mr. Sabol is a Certified Public Accountant.
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Allen S. Braswell, Jr. has served as a director since October 2001. Mr. Braswell has engaged
in private investment activities as his principal occupation since December 2000. From October 1996
until December 2000, Mr. Braswell served as President of Jabil Global Services and its
predecessors. Jabil Global Services is a subsidiary of Jabil Circuit, Inc., which was purchased
from EFTC Corporation in September 1999. Mr. Braswell is also a director for Medication
Technologies Inc.
Ivor J. (Ike) Evans has served as our Chairman of the Board since November 2005 and
a director since June 2005. He has been an Operating Partner of Thayer Capital Partners, a private
equity investment firm, since May 2005. He served as a director of both Union Pacific Corporation
and Union Pacific Railroad from 1999 until February 2005, and he served as vice chairman from
January 2004 until his retirement in February 2005. From 1998 until his election as vice chairman,
Mr. Evans served as the President and Chief Operating Officer of Union Pacific Railroad. From 1990
until 1998, Mr. Evans served in various executive positions at Emerson Electric Company. Mr. Evans
is also a director of Cooper Industries, Ltd., Textron, Inc., ArvinMeritor, Inc. and Spirit
Aerosystems, Inc.
James J. Forese has served as a director since July 2004. He has been Operating Partner and
Chief Operating Officer of Thayer Capital Partners, since July 2003. He was Chairman of the Board
of IKON Office Solutions, Inc. (IKON) from 2000 until his retirement in February 2003. He was
President and Chief Executive Officer of IKON from 1998 to 2002, Executive Vice President and
President of International Operations of IKON from 1997 to 1998, and Executive Vice President and
Chief Operating Officer of IKON from 1996 to 1997. Prior to joining IKON, he spent 36 years with
IBM Corporation (IBM) in numerous executive positions, including two years as Chairman and Chief
Executive Officer of IBM Credit Corporation, three years as Vice PresidentFinance of IBM, and six
years as Vice President and Controller of IBM. He is also a director of Anheuser-Busch, BFI Canada
Inc., and Spherion Corporation.
Kurt D. Grindstaff has served as a director since November 2005. Mr. Grindstaff has performed
financial consulting services since 1999, primarily for clients engaged in the financial services
industries. Until September 1998, he served in various executive capacities during his 17-year
tenure with The Seven Up Bottling Company of St. Louis, including as President, Executive Vice
President, Chief Operating Officer, and Senior Vice President of Finance. Mr. Grindstaff is a
Certified Public Accountant.
Douglas P. McCormick has served as a director since October 2001. Mr. McCormick is a Managing
Partner of Thayer Capital Partners, where he has also served as a Managing Director since January
2001 and a Vice President since January 1999. From June 1997 to January 1999, Mr. McCormick served
as an associate at Morgan Stanley & Co. Incorporated, an investment banking firm. From September
1995 to June 1997, Mr. McCormick attended Harvard Business School.
Scott D. Rued has served as a director since November 2005. Mr. Rued has served as a Managing
Partner of Thayer Capital Partners since September 2003. Prior to joining Thayer, Mr. Rued served
as President and Chief Executive Officer of Hidden Creek Industries (HCI) from May 2001 to
October 26003. From January 1994 through April 2001, Mr. Rued served as Executive Vice President
and Chief Financial Officer of HCI and from June 1989 through 1993 he served as Vice
President-Finance and Corporate Development of HCI. Mr. Rued also serves as the Chairman of the
Board of Directors for Commercial Vehicle Group, Inc.
Marc Schölvinck has served as a director since May 2006. Mr. Schölvinck is a Partner and the
Chief Financial Officer of Blum Capital Partners, L.P. (Blum LP), a San Francisco based private
equity and strategic block investment firm. Mr. Schölvinck joined Blum LP in 1991. From 1991 to
1993 he was Vice President and Controller of Blum LP (except for a ten-month period in 1993 when he
held the position of Personal Assistant to the Chairman of Intabex, where he was responsible for
worldwide investments). Prior to initially joining Blum LP, he was a Senior Manager in the Capital
Markets Services Group of Deloitte & Touche, responsible for merger and acquisition services for
international and North American clients and for audit services for financial institutions. He was
previously a Senior Manager at Touche Ross & Co. in Cape Town, South Africa. Mr. Schölvinck has a
Bachelor of Commerce (Honors) from the University of Cape Town and is a Chartered Accountant (South
Africa).
William S. Urkiel has served as a director since August 1, 2006. Mr. Urkiel has been a member
of the Board of Directors of Crown Holdings, Inc. since December 9, 2004. From 1999 until 2005, Mr.
Urkiel served as
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Senior Vice President and Chief Financial Officer of IKON Office Solutions. From 1995 until
1999, Mr. Urkiel served as the corporate controller and Chief Financial Officer at AMP
Incorporated. Prior to 1999, Mr. Urkiel held various financial management positions at IBM
Corporation.
There are no family relationships between any of the directors, nominees, or any of our
executive officers.
Information Relating to Corporate Governance and the Board of Directors
Our board of directors has determined, after considering all the relevant facts and
circumstances, that Messrs. Braswell, Grindstaff, and Urkiel are independent directors, as
independence is defined by the listing standards of the National Association of Securities
Dealers (NASD).
Thayer-Blum Funding III, L.L.C. owns 24,582,191 shares of our common stock, or 89.2% of our
outstanding shares. See Security Ownership of Principal Stockholders, Directors and Officers
below beginning on page 8. Accordingly, our company is deemed to be a controlled company, which
is defined by the NASD listing standards as a company of which more than 50% of the voting power is
held by an individual, group, or another company. As a controlled company, we are not required
to have a compensation committee or a nominating committee comprised solely of independent
directors nor is our board of directors required to be comprised of a majority of independent
directors.
Our board of directors has established three standing committees: an audit committee; a
compensation committee; and a nominating and corporate governance committee. Our board of
directors has adopted charters for the audit and the nominating and corporate governance committees
describing the authority and responsibilities delegated to each committee by the board of
directors. Our board of directors has also adopted a Whistle Blower Policy and a Code of Ethics
for our Chief Executive Officer and Senior Financial Officers. We post on our website at
www.suntroncorp.com, the charters of the audit and the nominating and corporate governance
committees; our Whistle Blower Policy and Code of Ethics for our Chief Executive Officer and Senior
Financial Officers, and any amendments or waivers thereto; and any other corporate governance
materials contemplated by the Securities and Exchange Commission (the SEC) or NASD regulations.
These documents are also available in print to any stockholder requesting a copy in writing from
our Secretary at our executive offices set forth in this proxy statement. In addition, the charter
of the audit committee as currently in effect is attached as Appendix A to this proxy
statement.
We intend to schedule each year at least two executive sessions at which our independent
directors meet without the presence or participation of management. During 2005, our independent
directors met in four executive sessions.
Interested parties may communicate with our board of directors or specific members of our
board of directors, including the members of our various board committees, by submitting a letter
addressed to the Board of Directors of Suntron Corporation c/o any specified individual director or
directors at the address listed herein. Any such letters will be forwarded to the indicated
directors.
Meetings of the Board of Directors
Our board of directors held seven meetings, including two telephonic meetings, during the
fiscal year ended December 31, 2005. Except for former board members Messrs. Medeiros and
Zambrano, all of our directors attended more than 75% of the meetings of the board of directors and
the committees of the board of directors (for such period that they served as a member of our board
of directors and the related committees) held during fiscal year 2005.
Committees of the Board of Directors
Audit Committee. The purpose of the audit committee is to oversee the accounting and
financial reporting processes of our company and the audits of the financial statements of our
company and to provide assistance to our board of directors with respect to the oversight of the
integrity of the financial statements of our company, our companys compliance with legal and
regulatory matters, the independent auditors qualifications and independence,
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and the performance of our companys internal audit function and our independent auditors.
The primary responsibilities of the audit committee are set forth in its charter and include
various matters with respect to the oversight of our companys accounting and financial reporting
process and audits of the financial statements of our company on behalf of our board of directors.
The audit committee also: selects the independent certified public accountants to conduct the
annual audit of the financial statements of our company; reviews the proposed scope of such audit;
reviews accounting and financial controls of our company with the independent public accountants
and our financial accounting staff; and reviews and approves transactions between us and our
directors, officers, and their affiliates. The current members of the audit committee are Messrs.
Braswell, Grindstaff (Chairman), and Urkiel, each of whom qualifies as an independent director
under NASD listing standards as well as under rules adopted by the SEC pursuant to the
Sarbanes-Oxley Act of 2002. Our board of directors has determined that Messrs. Grindstaff and
Urkiel each qualify as an audit committee financial expert in accordance with applicable SEC
rules and regulations. The audit committee met nine times during fiscal year 2005, including five
telephonic meetings.
Compensation Committee. The compensation committee reviews and monitors our compensation and
benefit plans to ensure that they meet corporate objectives, including the administration of our
Amended and Restated 2002 Stock Option Plan. In fulfilling this function, the compensation
committee reviews the recommendations of our chief executive officer regarding changes to the major
compensation policies and practices and the compensation provided to our officers. Its current
members consist of Messrs. Forese (chairman) and Schölvinck. Due to participation by the entire
board of directors in decisions about changes in executive officers, the compensation committee
only met one time and also took action by unanimous written consent on one occasion in 2005.
Nominating and Corporate Governance Committee. The purpose and responsibilities of the
nominating and corporate governance committee include the oversight of the selection and
composition of committees of the board of directors, the oversight of the evaluations of the board
of directors and management, the identification of individuals qualified to become board members,
the selection or recommendation to the board of directors of nominees to stand for election as
directors at each election of directors, the development and recommendation to the board of
directors of a set of corporate governance principles applicable to our company, and the
establishment of board of director compensation levels.
The nominating and corporate governance committee will consider persons recommended by
stockholders for inclusion as nominees for election to our board of directors if the names,
biographical data, and qualifications of such persons are submitted in writing in a timely manner
addressed and delivered to our companys Secretary at the address listed herein. The nominating
and corporate governance committee identifies and evaluates nominees for our board of directors,
including nominees recommended by stockholders, based on numerous factors it considers appropriate,
some of which may include strength of character, mature judgment, career specialization, relevant
technical skills, diversity, and the extent to which the nominee would fill a present need on our
board of directors. The current members of the nominating and corporate governance committee are
Messrs. Braswell, and Forese (chairman). Due to participation by the entire board of directors in
decisions about changes in the composition of our board of directors, the nominating and corporate
governance committee did not meet during 2005.
Director Compensation and Other Information
We pay each of our independent directors an annual fee of $15,000, which is paid in quarterly
installments. We also pay each independent director $500 per board meeting. Each independent
director is entitled to receive, in lieu of the cash retainer fee, quarterly stock options having a
Black-Scholes value as of the grant date equal to $3,750. During 2005, none of the independent
directors elected to receive stock options in lieu of cash compensation.
Additionally, we pay members of our audit committee and independent members of our
compensation committee a fee for each committee meeting they attend. Each audit committee member
receives $1,000 per meeting ($500 in the case of telephonic meetings), and the Chairman of the
audit committee receives an additional $500 per meeting ($250 in the case of telephonic meetings).
Each independent member of the nominating and corporate governance committee and the compensation
committee receives $500 per meeting ($250 in the case of telephonic meetings), and the Chairman of
these committees receives no additional payment. We will also pay $10,000 to each member of any
special committee created to represent the interests of the minority stockholders.
6
Finally, we reimburse our independent directors for all out-of-pocket expenses incurred in the
performance of their duties as directors.
All of our independent directors are eligible to receive grants of stock options under our
stock option plan. Upon election to our board of directors, each independent director receives an
option to purchase a total of 15,000 shares of our common stock at an exercise price per share
equal to the closing price on the grant date. The initial options granted to independent directors
vest for 20% of the shares at the end of each calendar year. At the end of each calendar quarter,
each independent director also receives an option to purchase 1,000 shares of our common stock at
an exercise price per share equal to the closing price on the grant date, provided the director has
served as an independent director for at least two months. The options granted to independent
directors at the end of each calendar quarter vest for 20% of the shares upon each anniversary of
the grant date.
7
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS, AND OFFICERS
The following table sets forth information with respect to our common stock beneficially owned
as of September 29, 2006 by (a) each person known by us to own beneficially more than 5% of our
outstanding common stock, (b) each of our directors, (c) each of our executive officers, and (d)
all of our directors and executive officers as a group.
Beneficial Ownership Table
|
|
|
|
|
|
|
|
|
|
|
Shares Beneficially Owned |
Name of Beneficial Owner(1) |
|
Number |
|
Percent (2) |
Thayer-Blum Funding III, L.L.C. (3) |
|
|
24,582,191 |
|
|
|
89.2 |
% |
Hargopal Singh (4) |
|
|
200,000 |
|
|
|
* |
|
Allen S. Braswell, Jr. (5) |
|
|
215,234 |
|
|
|
* |
|
Ivor J. Evans (6)(7) |
|
|
24,607,191 |
|
|
|
89.2 |
% |
James J. Forese (6) |
|
|
24,582,191 |
|
|
|
89.2 |
% |
Kurt D. Grindstaff (8) |
|
|
3,000 |
|
|
|
* |
|
Douglas P. McCormick (6) |
|
|
24,582,191 |
|
|
|
89.2 |
% |
Scott D. Rued (6) |
|
|
24,582,191 |
|
|
|
89.2 |
% |
Thomas B. Sabol (9) |
|
|
16,800 |
|
|
|
* |
|
Marc Schölvinck (6) |
|
|
24,582,191 |
|
|
|
89.2 |
% |
William S. Urkiel |
|
|
|
|
|
|
* |
|
James A. Doran (10) |
|
|
42,342 |
|
|
|
* |
|
Oscar A. Hager (11) |
|
|
52,188 |
|
|
|
* |
|
All directors and executive officers as a
group
(12 persons) (6)(12) |
|
|
25,086,755 |
|
|
|
89.8 |
% |
|
|
|
* |
|
Represents less than 1% of our outstanding common stock. |
|
(1) |
|
Except as otherwise indicated, the address of each person listed in the table is 2401 West
Grandview Road, Phoenix, Arizona 85023. |
|
(2) |
|
We have determined beneficial ownership in accordance with the rules of the SEC. In
computing the number of shares beneficially owned by a person and the percentage ownership of
that person, we have included the shares of common stock subject to options and convertible
securities held by that person that are currently exercisable or convertible or will become
exercisable or convertible within 60 days after September 29, 2006, but we have not included
those shares for purposes of computing percentage ownership of any other person. We have
assumed unless otherwise indicated that the persons and entities named in the table have sole
voting and investment power with respect to all shares beneficially owned, subject to
community property laws where applicable. Beneficial ownership is based on 27,562,647 shares
of our common stock outstanding as of September 29, 2006. |
|
(3) |
|
Thayer-Blum Funding III, L.L.C. is owned as follows: 59.94% by Thayer Equity Investors IV,
L.P., 0.04% by TC Manufacturing Holdings, L.L.C., 0.02% by TC KCo, L.L.C., 33.9% by Blum
Strategic Partners, L.P., and 6.1% by Blum (K*TEC) Co-Investment Partners, L.P. |
|
|
|
TC Manufacturing Holdings, L.L.C. is controlled by limited liability companies, the managing
members of which are Frederick Malek, Carl Rickersten, and Paul Stern. |
|
|
|
Thayer Equity Investors IV, L.P. is controlled by a limited liability company, the managing
members of which are Frederick Malek and Carl Rickersten. |
|
|
|
TC KCo, L.L.C. is controlled by a limited liability company, the managing members of which are
Frederik Malek and Carl Rickersten. |
|
|
|
Blum Strategic Partners, L.P. is controlled by a limited liability company, of which the
general partner is Blum Strategic GP, L.L.C. |
|
|
|
Blum (K*TEC) Co-Investment Partners, L.P. is controlled by a limited liability company, of
which the general partner is Blum Strategic GP, L.L.C. |
8
|
|
|
|
|
Messrs. McCormick and Rued, both directors of ours, are Managing Partners of the limited
liability company that controls Thayer Equity Investors IV, L.P. Mr. Forese, one of our
directors, is an Operating Partner and Chief Operating Officer of the company that controls
Thayer Equity Investors IV, L.P. Mr. Evans, one of our directors, is an Operating Partner of
the company that controls Thayer Equity Investors IV, L.P. Mr. Schölvinck is a member of
the general partner of Blum Strategic Partners, L.P. |
|
|
|
The address of Thayer-Blum Funding III, L.L.C. is 1455 Pennsylvania Avenue, N.W., Suite 350,
Washington, D.C. 20004. |
|
(4) |
|
Consists of 200,000 shares issuable pursuant to options that are currently exercisable or
exercisable within 60 days of September 29, 2006. |
|
(5) |
|
Includes 37,561 shares beneficially owned by the Allen S. Braswell, Jr. Family Limited
Partnership; 24,455 shares beneficially owned by the Allen S. Braswell, Jr. Gifting Trust; 6
shares beneficially owned by Uniform Gift to Minors Accounts of the minor children of Allen S.
Braswell, Jr.,; 133,522 shares beneficially owned by Circuit Test International GRIT Limited
Partnership, of which Braswell Investment Corporation (BIC) is a general partner; and
19,690 shares issuable pursuant to options that are exercisable within 60 days of September
29, 2006. Allen S. Braswell, Jr. is president of BIC. |
|
(6) |
|
Reflects 24,582,191 shares held by Thayer-Blum Funding III, L.L.C. See footnote 3. Messrs.
Evans, Forese, McCormick, Medeiros, Rued, and Schölvinck disclaim beneficial ownership of
these shares, except to the extent of any pecuniary interest therein. |
|
(7) |
|
Includes 25,000 shares issuable pursuant to options that are currently exercisable or
exercisable within 60 days of September 29, 2006. |
|
(8) |
|
Consists of 3,000 shares issuable pursuant to options that are currently exercisable or
exercisable within 60 days of September 29, 2006. |
|
(9) |
|
Consists of 16,800 shares issuable pursuant to options that are currently exercisable or
exercisable within 60 days of September 29, 2006. |
|
(10) |
|
Includes 42,250 shares issuable pursuant to options that are currently exercisable or
exercisable within 60 days of September 29, 2006. |
|
(11) |
|
Includes 52,063 shares issuable pursuant to options that are currently exercisable or
exercisable within 60 days of September 29, 2006. |
|
(12) |
|
Includes 358,803 shares issuable pursuant to options that are currently exercisable or
exercisable within 60 days of September 29, 2006. |
9
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act) requires
our directors, officers, and persons who own more than 10% of a registered class of our securities
to file reports of ownership and changes in ownership with the SEC. Directors, officers, and
certain stockholders are required by SEC regulations to furnish us with copies of all Section 16(a)
forms they file. During 2005, we believe that our directors, executive officers and stockholders
owning more than 10% of our outstanding shares complied with all Section 16(a) filing requirements,
except the following officers and directors were granted stock options that were not reported
within the two business day deadline:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Grant Date |
|
Number of Shares |
|
Exercise Price |
|
Date Filed |
Hargopal (Paul) Singh |
|
|
8-29-05 |
|
|
|
56,950 |
|
|
$ |
0.01 |
|
|
|
10-13-05 |
|
Oscar A. Hager |
|
|
8-29-05 |
|
|
|
10,050 |
|
|
$ |
0.01 |
|
|
|
10-13-05 |
|
John H. Kulp |
|
|
8-29-05 |
|
|
|
10,050 |
|
|
$ |
0.01 |
|
|
|
10-13-05 |
|
Peter W. Harper |
|
|
8-29-05 |
|
|
|
14,740 |
|
|
$ |
0.01 |
|
|
|
10-13-05 |
|
James A. Doran |
|
|
8-29-05 |
|
|
|
6,700 |
|
|
$ |
0.01 |
|
|
|
10-13-05 |
|
Kurt D. Grindstaff |
|
|
11-8-05 |
|
|
|
15,000 |
|
|
$ |
1.08 |
|
|
|
11-17-05 |
|
10
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation we paid for the fiscal
years ended December 31, 2003, 2004, and 2005 to our Chief Executive Officer and each of the four
other most highly compensated individuals who served as our executive officers at the end of 2005,
as well as their titles.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation |
|
|
|
|
Annual Compensation |
|
Awards |
|
Payouts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Annual |
|
Securities |
|
LTIP |
|
|
Name and Principal |
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation |
|
Underlying |
|
Payouts |
|
All Other |
Position |
|
Year |
|
Salary($) |
|
Bonus($) |
|
($)(1) |
|
Options(#) |
|
($) |
|
Compensation($) |
Hargopal Singh |
|
|
2003 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Chief Executive |
|
|
2004 |
|
|
|
75,417 |
|
|
|
30,000 |
|
|
|
|
|
|
|
25,000 |
|
|
|
|
|
|
|
27,420 |
(6) |
Officer and President |
|
|
2005 |
|
|
|
263,333 |
|
|
|
316,000 |
|
|
|
|
|
|
|
756,950 |
|
|
|
|
|
|
|
18,427 |
(2) |
|
James K. Bass |
|
|
2003 |
|
|
|
300,000 |
|
|
|
31,000 |
|
|
|
|
|
|
|
60,000 |
|
|
|
|
|
|
|
|
|
Former Chief Executive |
|
|
2004 |
|
|
|
300,000 |
|
|
|
280,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer and President (7) |
|
|
2005 |
|
|
|
114,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
443,762 |
(8) |
|
James A. Doran |
|
|
2003 |
|
|
|
155,210 |
|
|
|
|
|
|
|
|
|
|
|
9,000 |
|
|
|
|
|
|
|
|
|
Chief Financial Officer
(3) |
|
|
2004 |
|
|
|
158,401 |
|
|
|
80,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Secretary |
|
|
2005 |
|
|
|
165,680 |
|
|
|
|
|
|
|
|
|
|
|
10,050 |
|
|
|
|
|
|
|
20,000 |
(5) |
|
Oscar A. Hager |
|
|
2003 |
|
|
|
150,000 |
|
|
|
15,000 |
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
Vice President of |
|
|
2004 |
|
|
|
165,000 |
|
|
|
77,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information Technology
& Administration |
|
|
2005 |
|
|
|
175,000 |
|
|
|
|
|
|
|
|
|
|
|
10,050 |
|
|
|
|
|
|
|
50,000 |
(5) |
|
John H. Kulp |
|
|
2003 |
|
|
|
170,000 |
|
|
|
15,000 |
|
|
|
|
|
|
|
12,000 |
|
|
|
|
|
|
|
|
|
Vice President of |
|
|
2004 |
|
|
|
195,000 |
|
|
|
91,450 |
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
Sales and Marketing (4) |
|
|
2005 |
|
|
|
200,000 |
|
|
|
|
|
|
|
|
|
|
|
10,050 |
|
|
|
|
|
|
|
50,000 |
(5) |
|
|
|
(1) |
|
Except as otherwise provided in this table, no amounts for perquisites and other personal
benefits received by any of the named executive officers are shown because the aggregate
dollar amounts were lower than the reporting requirements established by the rules of the SEC. |
|
(2) |
|
Represents payment to defray moving expenses for relocation in connection with employment by
the Company. |
|
(3) |
|
Mr. Doran served as our interim Chief Financial Officer from October 2005 through February
13, 2006. Effective February 14, 2006, Mr. Doran resumed his duties as our Chief Accounting
Officer. |
|
(4) |
|
Effective February 21, 2006, Mr. Kulp terminated his employment with Suntron.
|
|
(5) |
|
Represents bonus earned for remaining employed with Suntron through December 2005. |
|
(6) |
|
Represents a $20,000 sign-on bonus and $7,420 to defray moving expenses for relocation in
connection with employment by the Company. |
|
(7) |
|
Effective May 6, 2005, Mr. Bass resigned as chief executive officer, president and a director
of Suntron. |
|
(8) |
|
In connection with the termination of Mr. Bass employment, we entered into a severance and
consulting agreement that provided for aggregate cash payments of $443,762 over a fourteen
month period that ended in July 2006. |
11
Stock Option Grants
We did not grant any stock appreciation rights in 2005. The following table sets forth
information concerning the grant of stock options in 2005 to our Chief Executive Officer and the
other executive officers named in the Summary Compensation Table above.
Option Grants In Last Fiscal Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants |
|
|
|
|
Number of |
|
% of Total |
|
|
|
|
|
Grant |
|
|
|
|
|
|
|
|
Securities |
|
Options |
|
|
|
|
|
Date |
|
|
|
|
|
Potential Realizable Value at Assumed |
|
|
Underlying |
|
Granted to |
|
Exercise or |
|
Market |
|
|
|
|
|
Annual Rates of Stock Price Appreciation |
|
|
Options |
|
Employees in |
|
Base Price |
|
Value |
|
Expiration |
|
for Option Terms (4) |
Name |
|
Granted (#) |
|
Fiscal Year (3) |
|
($/Share) |
|
($/Share) |
|
Date |
|
0%($) |
|
5%($) |
|
10%($) |
Hargopal Singh |
|
|
700,000 |
(1) |
|
|
65.8 |
% |
|
$ |
1.79 |
|
|
$ |
1.79 |
|
|
|
5-15-15 |
|
|
$ |
¾ |
|
|
$ |
788,005 |
|
|
$ |
1,996,959 |
|
Hargopal Singh |
|
|
56,950 |
(2) |
|
|
5.4 |
% |
|
$ |
0.01 |
|
|
$ |
1.25 |
|
|
|
3-10-08 |
|
|
|
70,618 |
|
|
|
79,877 |
|
|
|
89,874 |
|
James A. Doran |
|
|
6,700 |
(2) |
|
|
0.6 |
% |
|
$ |
0.01 |
|
|
$ |
1.25 |
|
|
|
3-10-08 |
|
|
|
8,308 |
|
|
|
9,397 |
|
|
|
10,573 |
|
James A. Doran |
|
|
3,350 |
(2) |
|
|
0.3 |
% |
|
$ |
0.01 |
|
|
$ |
1.34 |
|
|
|
3-10-08 |
|
|
|
4,456 |
|
|
|
4,977 |
|
|
|
5,534 |
|
John H. Kulp |
|
|
10,050 |
(2) |
|
|
0.9 |
% |
|
$ |
0.01 |
|
|
$ |
1.25 |
|
|
|
3-10-08 |
|
|
|
12,462 |
|
|
|
14,096 |
|
|
|
15,860 |
|
Oscar A. Hager |
|
|
10,050 |
(2) |
|
|
0.9 |
% |
|
$ |
0.01 |
|
|
$ |
1.25 |
|
|
|
3-10-08 |
|
|
|
12,462 |
|
|
|
14,096 |
|
|
|
15,860 |
|
|
|
|
(1) |
|
Represents options to purchase shares of our common stock that become exercisable for 25% of
the underlying shares on each anniversary of the grant date so long as the executive remains
employed with Suntron. |
|
(2) |
|
Represents options to purchase shares of our common stock that become exercisable for 33.33%
of the underlying shares on March 1, 2006 and 8.33% every three months thereafter, so long as
the executive remains employed with Suntron. |
|
(3) |
|
The percentages shown above are based on an aggregate of 1,064,240 options for shares of our
common stock that were granted to employees for the year ended December 31, 2005. |
|
(4) |
|
Potential realizable value assumes that the stock price increases from the date of the grant
until the end of the option term at the annual rate specified (0%, 5%, and 10%). The 0%, 5%,
and 10% assumed annual rates of appreciation are mandated by SEC rules and do not represent
our estimate or projection of the future price of our common stock. We do not believe this
method accurately illustrates the potential value of a stock option. |
Stock Option Exercises and Values for Fiscal 2005
The following table sets forth information with respect to our Chief Executive Officer
and the executive officers named in the Summary Compensation Table above concerning options
exercised in 2005 and unexercised options held by them as of the end of such fiscal year:
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
|
Value of Unexercised |
|
|
Acquired |
|
|
|
Number of Options at |
|
In-the-Money Options at |
|
|
on |
|
Value |
|
December 31, 2005 |
|
December 31, 2005($)(1) |
Name |
|
Exercise |
|
Realized |
|
Exercisable |
|
Unexercisable |
|
Exercisable |
|
Unexercisable |
Hargopal Singh
|
|
|
|
$
|
|
|
25,000 |
|
|
|
756,950 |
|
|
$
|
|
$ |
68,910 |
|
James K. Bass
|
|
|
|
|
|
|
422,376 |
|
|
|
|
|
|
|
|
|
|
|
James A. Doran
|
|
|
|
|
|
|
42,250 |
|
|
|
19,050 |
|
|
|
|
|
23,051 |
|
Oscar A. Hager
|
|
|
|
|
|
|
49,875 |
|
|
|
29,425 |
|
|
|
|
|
30,311 |
|
John H. Kulp
|
|
|
|
|
|
|
71,063 |
|
|
|
26,738 |
|
|
|
|
|
26,681 |
|
12
|
|
|
(1) |
|
The closing sales price per share for our common stock as reported by the Nasdaq SmallCap
Market on December 31, 2005 was $1.22. The option value is calculated by multiplying (a) the
positive difference, if any, between $1.22 and the option exercise price by (b) the number of
shares of common stock underlying the option. |
Equity Compensation Plan Information
The following table sets forth certain information, as of December 31, 2005, regarding
shares of our common stock that may be issued upon the exercise of options under our only stock
option plan (the Amended and Restated 2002 Stock Option Plan).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) |
|
|
(a) |
|
(b) |
|
Number of Securities |
|
|
Number of |
|
Weighted |
|
Remaining Available for |
|
|
Securities to be |
|
Average |
|
Future Issuance Under |
|
|
Issued Upon |
|
Exercise |
|
Equity |
|
|
Exercise of |
|
Price of |
|
Compensation Plans |
|
|
Outstanding |
|
Outstanding |
|
(Excluding Securities |
Plan Category |
|
Options |
|
Options |
|
Reflected in Column (a)) |
Equity Compensation
Plans Approved by
Stockholders |
|
|
2,263,703 |
|
|
$ |
5.94 |
|
|
|
2,730,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation
Plans Not Approved
by Stockholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,263,703 |
|
|
$ |
5.94 |
|
|
|
2,730,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment Agreements and Change of Control Arrangements
On May 16, 2006, we entered into an Amended and Restated Employment Agreement (the
Employment Agreement) with Hargopal Singh, our President and Chief Executive Officer, pursuant to
which his existing employment agreement was amended to: (i) increase his base annual salary to
$400,000; (ii) provide for a potential 2006 performance bonus of up to $480,000, based on achieving
certain revenue, EBITDA, and operational objectives established by our compensation committee; and
(iii) provide for a severance payment equal to three times the sum of his base annual salary and
the maximum bonus payable to him by us for the fiscal year in which his employment is terminated,
in the event that his employment is terminated within 12 months following a Change of Control (as
defined in the Employment Agreement) by either (1) us without Cause (as defined in the Employment
Agreement) or (2) Mr. Singh for Good Reason (as defined in the Employment Agreement).
On February 14, 2006, we entered into a Change of Control Severance Agreement with Thomas B.
Sabol in connection with his appointment as our Chief Financial Officer. On May 16, 2006, the
Company also entered into Change of Control Severance Agreements with James A. Doran and Oscar
Hager, the Companys Chief Accounting Officer and Vice President of Information Technology and
Administration, respectively (each a Change of Control Agreement). Each Change of Control
Agreement provides that, in the event the executive is terminated within 12 months following a
Change of Control (as defined in the Change of Control Agreement) by either (1) us without
Cause (as defined in the Change of Control Agreement) or (2) the executive for Good Reason (as
defined in the Change of Control Agreement), the executive will be entitled to receive as severance
a payment equal to two times the sum of his base annual salary and the maximum bonus payable to him
by us for the fiscal year in which the executives employment was terminated.
13
REPORT OF THE COMPENSATION COMMITTEE
The following Report of the Compensation Committee, the Report of the Audit Committee, and
Performance Graph included elsewhere in this proxy statement do not constitute soliciting material
and should not be deemed filed or incorporated by reference in any other filing of ours under the
Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically
incorporate either Report or the Performance Graph by reference therein.
Under rules established by the SEC, we are required to provide a report explaining the
rationale and considerations that led to fundamental compensation decisions affecting our executive
officers (including the executive officers named in the Summary Compensation Table above) during
the past fiscal year. The report of our compensation committee is set forth below.
Hargopal Singh has served as our President and Chief Executive Officer since May 6, 2005, when
we entered into an employment agreement with him. In May 2006, we entered into an Amended and
Restated Employment Agreement with Mr. Singh. This employment agreement terminates in December
2006. The employment agreement provides for a minimum base salary of $400,000, which the committee
believes is consistent with industry parameters, and incentive-based bonus compensation based on
our company achieving certain financial performance targets determined by the compensation
committee. For 2005, Mr. Singh received $316,000 in bonus compensation based on our company
achieving certain financial performance targets established by the compensation committee. For
2006, Mr. Singh has the opportunity to earn up to $480,000 if the performance targets determined by
the compensation committee are achieved. The compensation committee believes that the attributes of
Mr. Singhs compensation package will provide appropriate performance-based incentives.
The compensation committees general philosophy with respect to the compensation of our other
executive officers has been to recommend competitive compensation programs designed to attract and
retain key executives critical to our long-term success and to recognize an individuals
contribution and personal performance. In addition, our stock option plan is designed to attract
and retain executive officers and other employees and to reward them for delivering long-term value
to us. In fiscal year 2005 the compensation committee awarded cash bonuses to the executive
officers in recognition of our companys improved financial performance and granted stock options
to certain executive officers.
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a federal
income tax deduction to public companies for certain compensation in excess of $1 million paid to a
corporations chief executive officer or any of its four other most highly compensated executive
officers. Qualifying performance-based compensation will not be subject to the deduction limit if
certain requirements are met. Our equity-based compensation plan does not satisfy these
requirements as the members of our compensation committee do not satisfy the definition of an
outside director under Section 162(m). Accordingly, the compensation income deemed to be
received upon the exercise of stock options granted under the plan does not qualify as
performance-based compensation and may be subject to the deduction limit. The compensation
committee intends to review the potential effects of Section 162(m) periodically and in the future
may decide to structure additional portions of our compensation programs in a manner designed to
permit unlimited deductibility for federal income tax purposes. We are not currently subject to
the limitations of Section 162(m) because none of our executive officers received compensation
during 2005 in excess of $1 million.
Dated as of: November 3, 2006
James J. Forese, Chairman
Marc Schölvinck
14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of the fiscal year ended December 31, 2005, our compensation committee consisted of Messrs.
Forese and Walker (chairman). The compensation committee currently consists of Messrs. Forese
(chairman) and Schölvinck. None of these individuals had any contractual or other relationships
with us during such fiscal year except as directors and those transactions discussed elsewhere in
this proxy statement. See Certain Relationships and Related Transactions on page 18. No
interlocking relationship exists between any member of our compensation committee and any member of
any other companys board of directors or compensation committee.
15
REPORT OF THE AUDIT COMMITTEE
Our board of directors has appointed an audit committee consisting of three directors. All
members of our audit committee are able to read and understand fundamental financial statements,
including our balance sheet, income statement, and cash flow statement. At least one member of our
audit committee has past employment experience in finance or accounting, requisite professional
certification in accounting, or other comparable experience or background that results in the
individuals financial sophistication, including being or having been a chief executive officer,
chief financial officer, or other senior officer with financial oversight responsibility. Our
board of directors has determined that Messrs. Braswell, Grindstaff, and Urkiel are independent,
as defined by Rule 4200(a)(14) of the NASDs listing standards.
The primary responsibility of the audit committee is to assist our board of directors in
fulfilling its responsibility to oversee managements conduct of our financial reporting process,
including overseeing: the financial reports and other financial information that we submit to
governmental or regulatory bodies (such as the SEC), the public, and other users thereof; our
systems of internal accounting and financial controls; and the annual independent audit of our
financial statements.
Management has the primary responsibility for the financial statements and the reporting
process, including the system of internal controls. The independent auditors are responsible for
auditing the financial statements and expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles in the United States.
In fulfilling its oversight responsibilities, the audit committee reviewed the audited
financial statements with management and the independent auditors. The audit committee discussed
with the independent auditors the matters required to be discussed by Statement of Auditing
Standards No. 61, as amended. This included a discussion of the auditors judgments as to the
quality and the acceptability of our accounting principles and such other matters as are required
to be discussed with the audit committee under generally accepted auditing standards. In addition,
the audit committee received from the independent auditors written disclosures and the letter
required by Independence Standards Board Standard No. 1. The audit committee also discussed with
the independent auditors the auditors independence from us and our management, including the
matters covered by the written disclosures and letter provided by the independent auditors.
The audit committee discussed with our independent auditors the overall scope and plans for
their audits. The audit committee met with the independent auditors, with and without management
present, to discuss the results of their quarterly reviews and annual audits, their evaluations of
our internal controls, and the overall quality of our financial reporting. The audit committee met
nine times, including five telephonic meetings, during the fiscal year ended December 31, 2005.
Based on the reviews and discussions referred to above, the audit committee recommended to the
board of directors, and the board or directors approved, that the audited financial statements be
included in the Annual Report on Form 10-K for the year ended December 31, 2005 for filing with the
SEC.
The Board of Directors has amended and restated our audit committee charter from time-to-time
to reflect, among other things, the requirements of recently adopted federal legislation, including
the Sarbanes-Oxley Act of 2002, new rules adopted by the SEC, and amended NASD listing standards.
A copy of the Audit Committee Charter, as amended and restated, is included as Appendix A
in this proxy statement. We certify that it is in compliance with Rule 4350(d)(1) of the NASDs
listing standards.
Dated as of: November 3, 2006
Kurt D. Grindstaff, Chairman
Allen S. Braswell, Jr.
William S. Urkiel
16
PERFORMANCE GRAPH
Our common stock has been listed on the Nasdaq National Market since March 1, 2002.
Accordingly, the following graph compares, for the period from March 1, 2002 to December 31, 2005,
the cumulative total stockholder return on our common stock against the cumulative total return of:
|
|
|
the Nasdaq Composite Index; and |
|
|
|
|
a peer group consisting of us and six other publicly traded electronic manufacturing
services companies that we have selected. |
The graph assumes $100 was invested in our common stock on March 1, 2002, the date on which
our common stock became listed on the Nasdaq National Market and an investment in each of the peer
group and the Nasdaq Composite Index, and the reinvestment of all dividends. The companies
included in the peer group are Benchmark Electronics, Inc. (NYSE: BHE), IEC Electronics Corp.
(Nasdaq NM: IECE), Jabil Circuit, Inc. (NYSE: JBL), Plexus Corp. (Nasdaq NM: PLXS), Sanmina-SCI
Corporation (Nasdaq NM: SANM), and Solectron Corporation (NYSE: SLR).
COMPARISON OF 46 MONTH CUMULATIVE TOTAL RETURN*
AMONG SUNTRON CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
|
|
|
* |
|
$100 invested on 3/1/02 in stock or on 2/28/02 in index-including reinvestment of dividends.
Fiscal year ending December 31. |
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Thayer-Blum Management Fees
During 2005, we incurred $750,000 for management fees to affiliates of our majority
stockholder, Thayer-Blum Funding III, L.L.C. The services provided under this arrangement consist
of management fees related to corporate development activities and consulting services for
strategic and operational issues.
Purchase and Sale of Material
For the six months ended July 3, 2005, we purchased raw materials to support our production
requirements for $229,000 from TTM Technologies, Inc. TTM is a publicly-held EMS provider that was
controlled by affiliates of our majority stockholder and a member of our Board of Directors also
served as a member of TTMs Board of Directors. We continued to do business with TTM during the
third and fourth quarters of 2005; however there is no longer an affiliation between TTM and our
majority stockholder or any member of our Board of Directors.
During 2005, we purchased raw materials to support our production requirements for $443,000
from Cosmotronic Corporation. In addition, we sold products for $207,000 to Cosmotronic
Corporation during 2005. Two members of our Board of Directors also served as Board members for
Cosmotronic Corporation; however there is no longer an affiliation between Cosmotronic and our
majority stockholder or any member of our Board of Directors.
Participation Agreement
On August 19, 2005, our lenders agreed to amend the credit agreement to permit an affiliate of
our majority stockholder to enter into a participation agreement with our lenders. Under the
participation agreement, the affiliate made a $5.0 million cash payment to our lenders and our
lenders agreed to pay interest to the affiliate at the same rate that our lenders charged us under
our credit agreement. Effective January 31, 2006, the participation agreement was amended to
provide another $5.0 million cash payment to our lenders on the same terms.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP served as our independent registered public accounting firm for each of the years in
the three-year period ended December 31, 2005.
Fees Charged By Independent Registered Public Accounting Firm
The following is a summary of fees, all of which were approved by our audit committee, billed
by KPMG LLP for audit and other professional services during the years ended December 31, 2004 and
2005:
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
2005 |
|
Audit fees and expenses |
|
$ |
230,000 |
|
|
$ |
255,000 |
|
Audit-related fees |
|
|
9,630 |
|
|
|
|
|
Income tax fees |
|
|
29,164 |
|
|
|
7,000 |
|
All other fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fees |
|
$ |
268,794 |
|
|
$ |
262,000 |
|
|
|
|
|
|
|
|
Audit-related fees include fees related to Section 404 of the Sarbanes-Oxley Act of 2002.
Income tax fees include tax return preparation and consultation on various tax-related issues.
18
Pre-Approval Policy for Independent Registered Public Accounting Firms Fees
In 2003, our audit committee adopted a formal policy concerning pre-approval of audit and
non-audit services to be provided by our independent auditors. The policy requires that all
proposed services to be provided by KPMG LLP must be pre-approved by the audit committee before any
services are performed. This policy includes all audit, tax, and consulting services that KPMG LLP
may provide to us. In evaluating whether to engage KPMG LLP for non-audit services, our audit
committee considers whether the performance of services other than audit services is compatible
with maintaining the independence of KPMG LLP.
ANNUAL REPORT AND OTHER MATTERS
We have mailed with this proxy statement a copy of our 2005 annual report to each stockholder
of record as of November 20, 2006. If a stockholder requires an additional copy of our annual
report, we will provide one, without charge, on the written request of any such stockholder
addressed to our Secretary at Suntron Corporation, 2401 West Grandview Road, Phoenix, Arizona
85023. Any exhibits listed in the annual report also will be furnished upon written request at the
actual expense we incur in furnishing such exhibit.
Our 2005 annual report to stockholders is not incorporated into this proxy statement and is
not to be considered a part of these proxy materials or subject to Regulations 14A or 14C or to the
liabilities of Section 18 of the Exchange Act. The information contained in the Report of the
Compensation Committee, Report of the Audit Committee, and Performance Graph above shall not
be deemed filed with the SEC, or subject to Regulations 14A or 14C or to the liabilities of
Section 18 of the Exchange Act.
STOCKHOLDER PROPOSALS FOR THE 2007 ANNUAL MEETING
We must receive stockholder proposals that are intended to be presented at our annual meeting
of stockholders to be held during calendar year 2007 no later than March 30, 2007, in order to be
included in the proxy statement and form of proxy relating to such meeting. Pursuant to Rule 14a-4
under the Exchange Act, we intend to retain discretionary authority to vote proxies with respect to
stockholder proposals for which the proponent does not seek to have us include the proposed matter
in the proxy statement for the annual meeting to be held during calendar 2007, except in
circumstances where (a) we receive notice of the proposed matter no later than March 30, 2007, and
(b) the proponent complies with the requirements set forth in Rule 14a-4.
OTHER MATTERS
As of the date of this proxy statement, we know of no matter that will be presented for
consideration at the annual meeting other than the election of directors. If, however, any other
matter should properly come before the annual meeting for action by stockholders, proxies in the
enclosed form returned to us will be voted in accordance with the recommendation of the board of
directors or, in the absence of such a recommendation, in accordance with the judgment of the proxy
holder.
By Order of the Board of Directors,
/s/ James A. Doran
Secretary
Phoenix, Arizona
November 21, 2006
19
APPENDIX A
Suntron Corporation
Charter of the Audit Committee of the Board of Directors
(Amended and Restated as of December 13, 2004)
Purpose
The purpose of the Audit Committee is to:
|
(A) |
|
oversee the Companys accounting and financial reporting processes and the
audits of the Companys financial statements; |
|
|
(B) |
|
assist the Board in monitoring (1) the integrity of the Companys financial
statements, (2) the independent auditors qualifications and independence, (3) the
performance of the Companys internal audit function and independent auditors, and (4)
the Companys compliance with legal and regulatory requirements; and |
|
|
(C) |
|
prepare the Audit Committee report required by the rules of the Securities and
Exchange Commission (the Commission) to be included in the Companys annual
proxy statement. |
Committee Membership
The Audit Committee shall consist of no fewer than three members. The members of the Audit
Committee shall meet the independence and experience requirements of the Nasdaq Stock Market,
Section 10A(m)(3) of the Securities Exchange Act of 1934 (the Exchange Act) and the rules
and regulations of the Commission. At least one member of the Audit Committee shall be a financial
expert as defined by the Commission.
The members of the Audit Committee shall be appointed by the Board on the recommendation of the
Boards Corporate Governance/Nominating Committee. Audit Committee members may be replaced by the
Board.
Chairman
Unless a Chairman is appointed by the full Board, the members of the Audit Committee shall
designate a Chairman by the majority vote of the Audit Committee members. The Chairman shall chair
all meetings of the Audit Committee and establish the agendas for such meetings.
Meetings
The Audit Committee shall meet as often as it determines, but not less frequently than quarterly.
The Audit Committee shall meet periodically with management, the internal auditors and the
independent auditor in separate executive sessions. The Audit Committee may request any officer or
employee of the Company or the Companys outside counsel or independent auditor to attend a meeting
of the Committee or to meet with any members of, or consultants to, the Committee. Meetings of the
Committee may be held telephonically.
All non-employee directors who are not members of the Audit Committee may attend meetings of the
Audit Committee, but may not vote.
Committee Authority and Responsibilities
The Audit Committee shall be directly responsible for the appointment, compensation, retention and
oversight of the work of the independent auditor (including resolution of disagreements between
management and the independent
A-1
auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services or related work. The independent auditor shall
report directly to the Audit Committee. The Audit Committee shall also have the authority to
direct the Companys internal audit department as it deems necessary or appropriate.
The Audit Committee shall pre-approve all auditing services and permitted non-audit services
(including the fees and terms thereof) to be performed for the Company by its independent auditor
as set forth in Section 10A(i) of the Exchange Act.
The Audit Committee shall at least annually (i) request and receive from the independent auditor a
formal written statement delineating all relationships between the independent auditor and the
Company, consistent with Independence Standards Board Standard 1, (ii) actively engage in a
dialogue with the independent auditor with respect to any disclosed relationships or services that
may impact the objectivity and independence of the independent auditor, and (iii) take, or
recommend that the Companys Board take, appropriate action to oversee the independence of the
independent auditor.
The Audit Committee shall establish procedures for (i) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting controls or auditing
matters, and (ii) the confidential, anonymous submission by employees of concerns regarding
questionable accounting or auditing matters.
The Audit Committee shall have the authority, to the extent it deems necessary to carry out its
duties, to retain independent legal, accounting or other advisors. The Company shall provide for
appropriate funding, as determined by the Audit Committee, for payment of (i) compensation to the
independent auditor for the purpose of preparing or issuing an audit report or performing other
audit, review or attest services, (ii) compensation to any advisors employed by the Audit Committee
pursuant to the preceding sentence, and (iii) ordinary administrative expenses of the Audit
Committee that are necessary or appropriate to carry out its duties.
The Audit Committee shall make regular reports to the Board. The Audit Committee shall review and
reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for
approval.
The Audit Committee may form and delegate authority to subcommittees consisting of one or more
members when appropriate, including the authority to grant pre-approvals of audit and permitted
non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be
presented to the full Audit Committee at its next scheduled meeting.
The Audit Committee, to the extent it deems necessary or appropriate, shall:
Financial Statement and Disclosure Matters
1. |
|
Review and discuss with management and the independent auditor the Companys annual audited
financial statements, including disclosures made in managements discussion and analysis, and
recommend to the Board whether the audited financial statements should be included in the
Companys Form 10-K. |
|
2. |
|
Review and discuss with management and the independent auditor the Companys quarterly
financial statements prior to the filing of its Form 10-Q, including the results of the
independent auditors review of the quarterly financial statements. |
|
3. |
|
Discuss with management and the independent auditor significant financial reporting issues
and judgments made in connection with the preparation of the Companys financial statements,
including any significant changes in the Companys selection or application of accounting
principles, any major issues as to the adequacy of the Companys internal controls, and any
special steps adopted in light of material control deficiencies. |
|
4. |
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Review and discuss quarterly reports from the independent auditors on: |
|
(a) |
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All critical accounting policies and practices to be used. |
A-2
|
(b) |
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All alternative treatments of financial information within generally accepted
accounting principles that have been discussed with management, ramifications of the
use of such alternative disclosures and treatments, and the treatment preferred by the
independent auditor. |
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(c) |
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Other material written communications between the independent auditor and
management, such as any management letter or schedule of unadjusted differences. |
5. |
|
Review and discuss the Companys earnings press releases, including the use of non-GAAP
financial measures, as well as financial information and earnings guidance provided to
analysts and rating agencies, at regularly scheduled Audit Committee meetings. The Audit
Committee Chairman shall approve the Companys earnings press releases. Such discussion may
be done generally (consisting of discussing the types of information to be disclosed and the
types of presentations to be made). |
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6. |
|
Discuss with management and the independent auditor the effect of regulatory and accounting
initiatives, as well as off-balance sheet structures, on the Companys financial statements. |
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7. |
|
Discuss with the independent auditor the matters required to be discussed by Statement on
Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties
encountered in the course of the audit work, any restrictions on the scope of activities or
access to requested information, and any significant disagreements with management. |
|
8. |
|
Review disclosures made to the Audit Committee by the Companys CEO and CFO during their
certification process for the Form 10-K and Form 10-Q about any significant deficiencies in
the design or operation of internal controls, material weaknesses therein, and any fraud
involving management or other employees who have a significant role in the Companys internal
controls. |
Oversight of the Companys Relationship with the Independent Auditor
9. |
|
Obtain and review a report from the independent auditor at least annually regarding (a) the
independent auditors 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
material 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
(c) any steps taken to deal with any such issues. |
|
10. |
|
Evaluate the qualifications, performance and independence of the independent auditor,
including considering whether the auditors quality controls are adequate and the provision of
permitted non-audit services is compatible with maintaining the auditors independence, and
taking into account the opinions of management and internal auditors. The Audit Committee
shall present its conclusions with respect to the independent auditor to the Board in
connection with each annual audit engagement. |
|
11. |
|
Meet with the independent auditor prior to the audit to discuss the planning and staffing of
the audit. |
|
12. |
|
Ensure the rotation of the lead (or coordinating) audit partner having primary responsibility
for the audit and the audit partner responsible for reviewing the audit as required by law. |
|
13. |
|
Recommend to the Board policies for the Companys hiring of employees or former employees of
the independent auditor who participated in any capacity in the audit of the Company. |
|
14. |
|
Consider whether, in order to assure continuing auditor independence, it is appropriate to
adopt a policy of rotating the independent auditing firm on a regular basis. |
Oversight of the Companys Internal Audit Function
15. |
|
Review the appointment and replacement of the Companys senior internal auditing executive. |
A-3
16. |
|
Review the significant reports to management prepared by the internal auditing department and
managements responses. |
|
17. |
|
Discuss with the independent auditor and management the internal audit department
responsibilities, budget and staffing and any recommended changes in the planned scope of
internal audits. |
Compliance Oversight Responsibilities
18. |
|
Discuss with management and the independent auditor any correspondence with regulators or
governmental agencies and any published reports which raise material issues regarding the
Companys financial statements or accounting policies. |
|
19. |
|
Discuss with the Companys general counsel legal matters that could reasonably be expected to
have a material impact on the financial statements or the Companys compliance policies. |
|
20. |
|
Review and approve all related party transactions. |
Other
21. |
|
Carry out additional functions and adopt additional policies and procedures as may be
appropriate in light of changing business, legal or other conditions. |
|
22. |
|
Maintain minutes or other records of meetings and activities of the Committee. |
Limitation of Audit Committees Role
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not
the duty of the Audit Committee to plan or conduct audits or to determine that the Companys
financial statements and disclosures are complete and accurate and are in accordance with generally
accepted accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
A-4
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Mark this box with an X if you have made
changes to your name or address details above. |
Annual Meeting Proxy Card
A Election of Directors
1. The Board of Directors recommends a vote FOR the listed nominees.
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01 Ivor J. Evans
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For
o
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Withhold
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02 Douglas P. McCormick
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For
o
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Withhold
o |
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03 Marc Schölvinck
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For
o
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Withhold
o |
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2. Upon such other matters as may properly come before such
Annual Meeting or any adjournments or
postponements thereof.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting and any
adjournment or postponement
thereof.
B Authorized Signatures Sign Here This section must be completed for your instructions to be executed.
The undersigned hereby acknowledges receipt of (1) the Notice of Annual Meeting and proxy
statement relating to the 2006 Annual Meeting, and (2) the Companys 2005 Annual Report to
Stockholders.
A majority of such proxies or substitutes as shall be present and shall act at said
meeting or any adjournment or adjournments thereof (or if only one shall be present and act, then
that one) shall have and may exercise all of the powers of said proxies hereunder.
(Please date and sign exactly as the name appears hereon. When shares are held by joint tenants, all should sign.
When signing as a fiduciary (e.g., attorney, executor, administrator, conservator, trustee, or
guardian), please give title. If a corporation or partnership, please sign in corporate or
partnership name by an authorized person.)
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Signature 1 Please keep signature within the box
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Signature 2 Please keep signature within the box
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Date (mm/dd/yyyy) |
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Proxy SUNTRON CORPORATION
2006 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
OF THE COMPANY
The undersigned, a holder of Common Stock, $0.01 par value (Common Stock) of SUNTRON
CORPORATION, a Delaware corporation (the Company), hereby appoints Hargopal Singh and Thomas B.
Sabol, and each of them, as proxies for the undersigned, each with full power of substitution, and
hereby authorizes them to represent and vote, as designated below and on the reverse, all the
shares of Common Stock held of record by the undersigned at the close of business on November 20,
2006 at the 2006 Annual Meeting of Stockholders of the Company to be held at the Companys
corporate headquarters located at 2401 West Grandview Road, Phoenix, Arizona 85023 on December 15,
2006, and at any adjournment or postponement thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS; AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope