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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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Check the appropriate box:
[_] Preliminary Proxy Statement
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14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-12
SUTRON CORPORATION
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(Name of Registrant as Specified In Its Charter)
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SUTRON CORPORATION
21300 RIDGETOP CIRCLE
STERLING, VIRGINIA 20166
(703) 406-2800
April 24, 2006
Dear Sutron Shareholder:
You are cordially invited to our Annual Meeting of Shareholders on
Wednesday, May 17, 2006, beginning at 1:30 p.m., local time, at Sutron's
corporate headquarters, 21300 Ridgetop Circle, Sterling, Virginia. The enclosed
notice of annual meeting sets forth the proposals that will be presented at the
meeting, which are described in more detail in the enclosed proxy statement. The
Board of Directors recommends that shareholders vote "FOR" these proposals.
It is important that you use this opportunity to take part in Sutron's
affairs by voting on the business to come before this meeting. Whether or not
you expect to attend the meeting, please complete, date, sign and promptly
return the accompanying proxy card in the enclosed postage-paid envelope so that
your shares may be represented at the meeting. Returning the Proxy card does not
deprive you of your right to attend the meeting and to vote your shares in
person.
We look forward to seeing you there.
Very truly yours,
/s/ Raul S. McQuivey
Raul S. McQuivey
Chairman of the Board, President
and Chief Executive Officer
Page 2
SUTRON CORPORATION
21300 RIDGETOP CIRCLE
STERLING, VIRGINIA 20166
(703) 406-2800
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 17, 2006
TO THE HOLDERS OF COMMON STOCK OF SUTRON CORPORATION,
Notice is hereby given that the Annual Meeting of Shareholders of
Sutron Corporation will be held at 21300 Ridgetop Circle, Sterling, Virginia, on
Wednesday, May 17, 2006, at 1:30 p.m., local time, for the following purposes:
1. To elect five directors to hold office until the next annual
election of directors and until their successors shall have been
duly elected and qualified;
2. To ratify the appointment of Thompson, Greenspon & Co., P.C. as
independent accountants for fiscal year 2006; and
3. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Shareholders of record at the close of business on Tuesday, March 28,
2006, are entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, we urge you to complete,
sign, date and return the enclosed proxy card in the enclosed envelope as
promptly as possible. If you attend the meeting, you may vote in person even if
you have returned a proxy.
By Order of the Board of Directors,
/s/ Thomas N. Keefer
Thomas N. Keefer
Secretary
April 24, 2006
Page 3
SUTRON CORPORATION
21300 RIDGETOP CIRCLE
STERLING, VIRGINIA 20166
(703) 406-2800
PROXY STATEMENT
The enclosed Proxy is solicited on behalf of the Board of Directors of
Sutron Corporation (the "Company") for use at its Annual Meeting of Shareholders
to be held on Wednesday, May 17, 2006 at 1:30 p.m., local time, and at any
adjournments thereof. The purposes of the meeting are set forth herein and in
the accompanying Notice of Annual Meeting of Shareholders. The meeting will be
held at the principal executive offices of the Company, 21300 Ridgetop Circle,
Sterling, Virginia 20166. The approximate date on which this Proxy Statement and
the Proxy Card were first sent to shareholders of the Company is April 24, 2006.
After the enclosed Proxy Card is duly executed and returned, a
shareholder may revoke the proxy at any time by written request that is received
by the Secretary of the Company prior to the meeting or by voting in person at
the meeting or by executing a later dated Proxy Card. The Proxy Card is in
ballot form so that a specification may be made to vote for, or to withhold
authority to vote for, the nominees for election as directors, or any of them,
and to indicate whether the shareholder wishes to vote for or against, or
abstain from voting upon the other proposal.
RECORD DATE AND VOTING RIGHTS
Shareholders of record at the close of business on Tuesday, March 28,
2006 are entitled to notice of and to vote at the meeting. On March 28, 2006,
the Company had outstanding and entitled to vote 4,295,551 shares of Common
Stock. Each share of Common Stock entitles the holder to one vote on each matter
to be voted upon at the meeting.
The By-laws of the Company require that the holders of a majority of
the outstanding shares of the Company's Common Stock entitled to vote at the
Annual Meeting be present in person or represented by proxy in order for a
quorum to exist for the transaction of business at that meeting. Abstentions and
"broker non-votes" (which occur if a broker or other nominee does not have
discretionary authority and has not received voting instructions from the
beneficial owner with respect to the particular item) are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. Assuming that a quorum is present for the Annual Meeting, the five
nominees for director who receive the highest number of votes cast will be
elected. Abstentions and broker non-votes will have no effect on the outcome of
the election of directors.
The ratification of the appointment of the independent public
accountants must be approved by the affirmative vote of a majority of the shares
present in person or by proxy at the Annual Meeting and entitled to vote
thereon. For purposes of this Proposal, abstentions are counted for purposes of
calculating shares entitled to vote but are not counted as shares voting and
therefore have the effect of a vote against such Proposal. For purposes of this
Proposal, broker non-votes are not counted as shares entitled to vote and
therefore have no effect with respect to such Proposal.
Any Proxy Card which is returned by a Shareholder properly completed
and which is not revoked will be voted at the Annual Meeting in the manner
specified therein. Unless contrary instructions are given, the persons
designated as proxy holders in the accompanying Proxy Card (or their
substitutes) will
Page 4
vote "FOR" the election of the Board of Directors' nominees and "FOR" the
ratification of the appointment of Thompson, Greenspon & Co., P.C. as
independent accountants, and in the proxy holders' discretion with regard to all
other matters properly brought before the meeting. Any unmarked proxies,
including those submitted by brokers (other than broker non-votes) or nominees
will be voted in favor of the nominees for the Board of Directors and other
proposals, as indicated in the accompanying Proxy Card. WE URGE YOU TO VOTE YOUR
SHARES WITHOUT DELAY.
The Company will bear the cost of preparing this Proxy Statement and
the other costs of soliciting Proxies for the 2006 Annual Shareholders Meeting.
In addition to solicitation by mail, solicitations may be made by personal
interview or telephone by officers and employees of the Company, acting without
additional compensation. Sutron anticipates that banks, brokerage houses, and
other custodians, nominees, and fiduciaries will forward this material to
beneficial owners of shares of Common Stock entitled to vote at the Annual
Meeting, and such persons will be reimbursed by Sutron for the out-of-pocket
expenses incurred by them.
PRINCIPAL SHAREHOLDERS
The following table sets forth the names and addresses of all persons
who beneficially owned, to the knowledge of the Company, more than 5% of the
issued and outstanding shares of the Company's Common Stock on March 28, 2006.
PERCENTAGE
NAME AND ADDRESS OF NUMBER OF SHARES OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING(1)
---------------------- ------------------ --------------
Raul S. McQuivey, Ph.D. 914,436 (2) 21.3%
Kenneth W. Whitt 587,000 (3) 13.7%
Thomas N. Keefer, Ph.D. 395,000 (4) 9.2%
Daniel W. Farrell 269,660 (5) 6.3%
Yorktown Avenue Capital, LLC,
Boulder Capital, LLC and
Boston Avenue Capital, LLC 248,000 (6) 5.8%
(1) As of March 28, 2006, the Company had 4,295,551 shares of Common Stock
outstanding. In computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares of Common Stock, which that
person could purchase by exercising outstanding options and options that will
become exercisable within 60 days of March 28, 2006, are deemed outstanding.
Such shares, however, are not deemed outstanding for the purpose of computing
the percentage ownership of any other person. Each natural person named in the
table above has an address in care of Sutron Corporation, 21300 Ridgetop Circle,
Sterling, Virginia 20166.
(2) Dr. McQuivey's holdings consist of 710,836 shares held by Dr. Raul S.
McQuivey and Karen T. McQuivey, Dr. McQuivey's wife, as Trustees for the Raul S.
McQuivey Trust and the Karen T. McQuivey Trust and 203,600 shares subject to
options exercisable within 60 days after March 28, 2006.
(3) Mr. Whitt's holdings consist of 587,000 shares owned by Kenneth W.
Whitt and Eva D. Whitt, Mr. Whitt's wife, as Joint Tenants with a Right of
Survivorship.
(4) Dr. Keefer's holdings consist of 380,000 shares that are held by Dr.
Thomas N. Keefer and Sally E. Keefer, Dr. Keefer's wife, as Joint Tenants with a
Right of Survivorship and 15,000 shares subject to options exercisable within 60
days after March 28, 2006.
(5) Mr. Farrell's holdings consist of 139,460 shares that are held by
Daniel W. Farrell and Jill E.
Page 5
Farrell, Mr. Farrell's wife, as Joint Tenants with a Right of Survivorship and
130,200 shares subject to options exercisable within 60 days after March 28,
2006.
(6) Information regarding the number of shares of Common Stock beneficially
owned by Yorktown Avenue Capital, LLC, Boulder Capital, LLC and Boston Avenue
Capital, LLC is based on the most recent Schedule 13G filed by Yorktown Avenue
Capital, LLC, Boulder Capital, LLC, Boston Avenue Capital, LLC and Charles M.
Gillman who is the manager of all three limited liability companies, which
reports as of September 1, 2005 that Yorktown Avenue Capital, LLC, Boulder
Capital, LLC and Boston Avenue Capital, LLC beneficially own 248,000 shares of
common stock, for which it has sole voting power as to 248,000 shares and sole
dispositive power as to 248,000 shares. The address of Yorktown Avenue Capital,
LLC, Boulder Capital, LLC and Boston Avenue Capital, LLC is 415 South Boston,
Tulsa, Oklahoma 74103.
ELECTION OF DIRECTORS
The nominees for directors are Dr. Raul S. McQuivey, Daniel W. Farrell,
Robert F. Roberts, Jr., Andrew D. Lipman and Thomas R. Porter. All nominees are
presently directors of the Company. Mr. Roberts, Mr. Lipman and Mr. Porter are
non-employees of the Company and are independent as defined by Nasdaq listing
standards and therefore result in a majority of the Company's Board of Directors
being independent in accordance with Nasdaq listing standards.
The Board of Directors of the Company recommends the election of the
nominees to serve as directors of Sutron until the fiscal year 2007 Annual
Meeting of Shareholders and until their successors have been duly elected and
qualified or until the director's earlier death, resignation or removal. In the
event that any nominees for directors should be unavailable to serve, which is
not anticipated, the Board of Directors, in its discretion, may designate
substitute nominees, in which event Proxies received by the Board of Directors
will be voted for such substitute nominees.
The five nominees for director who receive the highest number of votes
cast by the holders of shares entitled to vote in the election of directors at
the Annual Meeting will be elected. All duly submitted and unrevoked Proxy Cards
will be voted "FOR" the nominees selected by the Board of Directors except where
authorization to vote is withheld.
NOMINEES FOR DIRECTORS
Set forth below, for each nominee, are his name and age, his positions
with the Company, his principal occupation and business experience during at
least the past five years and the year of the commencement of his term as a
director of the Company:
Raul S. McQuivey, Ph.D., age 67, has served as a director since 1976
and as President, Chief Executive Officer, and Chairman of the Board of
Directors since January 1989. Dr. McQuivey served as Executive Vice President
from September 1980 to January 1989, Treasurer of the Company from March 1983 to
March 1984 and as Secretary from March 1983 until September 1989. Dr. McQuivey
earned a B.S. in Civil Engineering from Utah State University in 1961, an M.S.
in Civil Engineering (Hydraulics) from Colorado State University in 1963, and a
Ph.D. in Civil Engineering (Hydraulics, Hydrology and Fluid Mechanics) from
Colorado State University in 1967. He is a Registered Professional Engineer.
Daniel W. Farrell, age 53, has served as a director since May 1988 and
as Vice President of the Company since March 1984. Mr. Farrell has been over the
Company's Research and Development Division since August 1989. Prior to managing
the Research and Development Dision, Mr. Farrell was a Project Manager in the
Water Resources Division. Mr. Farrell joined the Company in September 1976 as
Page 6
a staff scientist. Mr. Farrell received a B.S. in Chemistry from Brigham Young
University in 1976.
Robert F. Roberts, Jr., age 55, has served as a director since May 2003
and as the Chairman of the Compensation Committee of the Board of Directors
since July 2005 and is also a member of the Corporate Governance and Nominating
and Audit Committees of the Board. Mr Roberts was the founder, CEO and Chairman
of Concepts Automation from 1975 to 1995. Concepts Automation, a computer
systems integrator, grew from a one-man operation to employing over 220 people
in six offices. Federal and state government agencies and Fortune 1000 companies
were the primary clients. Sales in 1995 were in excess of $100 million when the
company was sold. Mr. Roberts has served as a Director for Colgan Airways, a
regional commuter airline from 1990 to present, as a Principal for Foresight
Funding that manages private investments in tax free bonds, real estate and
corporate obligations from 1995 to present and as Chairman, Trustee of Wakefield
School, a private school that offers a classical curriculum for grades Pre-K to
12 from 1990 to present. Mr. Roberts received an Associates degree in Business
Management from Northern Virginia Community College.
Andrew D. Lipman, age 54, has served as a director since June 2005 and
as the Chairman of the Corporate Governance and Nominating Committee of the
Board of Directors since July 2005 and is also a member of the Compensation and
Audit Committees of the Board. Mr. Lipman is a partner and head of the
Telecommunications, Media and Technology Group of Bingham McCutchen LLP,
formerly Swidler Berlin, LLP, an international law firm since 1988. He is
currently Vice Chairman of the firm. From 1987 to 1997, Mr. Lipman also served
as Senior Vice President for Legal and Regulatory Affairs for MFS
Communications, Co., a competitive telecommunications provider. He also
currently serves as a member of the boards of directors of MPower
Communications, a competitive telecom carrier; TMNG Inc., a
telecommunications-related consulting firm and Nu Skin Enterprises, a personal
care and nutritional supplements provider. He received a B.A. degree, summa cum
laude, from the University of Rochester and a J.D. degree from Stanford
University.
Thomas R. Porter, age 54, has served as a director since June 2005 and
as the Chairman of the Audit Committee of the Board of Directors since July 2005
and is also a member of the Compensation and Corporate Governance and Nominating
Committees of the Board. Mr. Porter is the Managing Member and Co-Founder of
Value Consultants, LLC, a firm specializing in the provision of expert witness
and litigation consulting services in 1996. Mr. Porter worked in the Defense
Consulting Group of Peat, Marwick Mitchell & Co. from 1978-1983. From 1983 to
1989, he worked for the firm Laventhol & Horwath, CPAs and rose to the level of
principal. From 1989 to 1993, Mr. Porter was the president of a management
company and the chief financial officer of a privately-held distributor of
building products. He was Director of Litigation Services for the Washington
D.C. office of Grant Thornton, LLP from 1993 until 1996. Mr. Porter is a
Certified Public Accountant' an attorney, a Certified Forensic Financial Analyst
and a Certified Valuation Analyst. He received a B.S. and a M.S. in Industrial
Engineering from the Georgia Institute of Technology and a J.D. degree from the
George Washington University.
BOARD AND COMMITTEE MEETINGS
During fiscal 2005, the Board held six meetings, including telephone
conference meetings, and took six actions by written consent. The three standing
committees of the Board are the Audit Committee, the Compensation Committee and
the Corporate Governance and Nominating Committee. No director attended fewer
than 75% of the aggregate of the total number of meetings of the Board and the
total number of meetings held by all committees of the Board on which he served
(during the periods that he served) with the exception of Mr. Roberts, who due
to health reasons, attended 50% of the meetings.
AUDIT COMMITTEE Mr. Porter, Mr. Lipman and Mr. Roberts are the current members
of the Audit Committee. Mr. Porter, the Chairman of the Audit Committee, was
elected as Chairman of the Audit
Page 7
Committee in July 2005. The Board has determined that Mr. Porter is the "audit
committee financial expert" as defined by the rules of the Securities and
Exchange Commission. The Audit Committee met three times during fiscal 2005. The
Audit Committee's primary responsibilities are to provide oversight of the
Company's accounting and financial controls, review the scope of and procedures
to be used in the annual audit, review the financial statements and results of
the annual audit, and retain and evaluate the performance of the independent
accountants and the Company's financial and accounting personnel. Each current
member of the Audit Committee meets the independence and other requirements to
serve on our Audit Committee under the rules of the SEC and listing standards of
The Nasdaq Stock Market. The Audit Committee has a formal charter that is
attached as Appendix "1" to this Proxy Statement.
COMPENSATION COMMITTEE Mr. Roberts, Mr. Lipman and Mr. Porter are the
current members of the Compensation Committee. Mr. Roberts serves as the
Chairman of the Compensation Committee and was appointed to that position in
July 2005. The Compensation Committee met two times during fiscal 2005. The
principal responsibilities of the Compensation Committee are to establish the
general compensation policy for Sutron. The Compensation Committee reviews and
establishes base salary levels and target bonuses for the Company's Chief
Executive Officer and other executive officers each year. The Compensation
Committee also administers the Company's 1996, 1997 and 2002 Amended and
Restated Stock Option Plans. The Compensation Committee does not currently have
a formal charter.
NOMINATING COMMITTEE Mr. Lipman, Mr. Porter and Mr. Roberts are the
current members of the Corporate Governance and Nominating Committee. Mr. Lipman
is the Chairman of the Nominating Committee and was appointed to that position
in July 2005. The Nominating Committee met one time in fiscal 2005. The
principal responsibilities of the Nominating Committee are to identify and
recommend to the Board of Directors individuals qualified to become Board of
Directors' members, to recommend to the Board of Directors corporate governance
principles, and to lead the Board of Directors in complying with its corporate
governance principles. Each current member of the Corporate Governance and
Nominating Committee meets the independence and other requirements to serve on
our Corporate Governance and Nominating Committee under the rules of the SEC and
listing standards of The Nasdaq Stock Market. The Nominating Committee does have
a formal charter that is available on the Company's web site at www.sutron.com
under "Investor Information."
DIRECTOR NOMINATION PROCESS
The Company did not engage a third party to assist in identifying and
evaluating the individuals nominated for election as directors at this meeting.
Historically, the Board has relied on recommendations from its members to
identify nominees. In considering whether to nominate any particular candidate
for election to the Board, the Board uses various criteria to evaluate each
candidate, including an evaluation of each candidate's integrity, business
acumen, knowledge of the Company's business and industry, experience, diligence,
conflicts of interest and the ability to act in the interests of the Company's
shareholders. The Board evaluates biographical information and interviews
selected candidates. The Board also considers whether a potential nominee would
satisfy the Nasdaq listing standards for "independence" and the SEC's definition
of "audit committee financial expert." The Board does not assign specific
weights to particular criteria and no particular criterion is a prerequisite for
each prospective nominee. The Company believes that the backgrounds and
qualifications of its directors, considered as a group, should provide a
composite mix of experience, knowledge and abilities that will allow the Board
to fulfill its responsibilities.
The Company does not have a formal policy with regard to the
consideration of director candidates recommended by its shareholders; however
shareholder recommendations relating to director nominees may be submitted in
accordance with the procedures set forth below under the heading "Communicating
with the Board of Directors."
Page 8
COMMUNICATING WITH THE BOARD OF DIRECTORS
Shareholders who wish to send communications to the Board may do so by
writing to the Secretary of the Company, Sutron Corporation, 21300 Ridgetop
Circle, Sterling, Virginia 20166. The mailing envelope must contain a clear
notation indicating that the enclosed letter is a "Shareholder-Board
Communication." All such letters must identify the author as a shareholder and
must include the shareholder's full name, address and a valid telephone number.
The name of any specific intended Board recipient should be noted in the
communication. The Secretary will forward any such correspondence to the
intended recipients; however, prior to forwarding any such correspondence, the
Secretary or his designee will review such correspondence, and in his or her
discretion, may not forward communications that relate to ordinary business
affairs, communications that are primarily commercial in nature, personal
grievances or communications that relate to an improper or irrelevant topic or
are otherwise inappropriate for the Board's consideration.
DIRECTOR ATTENDANCE AT ANNUAL MEETING OF SHAREHOLDERS
Although the Company does not have a policy with regard to Board
members' attendance at the Company's annual meeting of shareholders, all
directors are encouraged to attend the annual meeting. All five members of the
Board of Directors attended the 2005 Annual Meeting of Shareholders.
COMPENSATION OF DIRECTORS
The Company has no arrangement by which any of its officers are
compensated for their services as directors and, therefore, Mr. Farrell and Dr.
McQuivey did not and will not receive any additional remuneration for their
services as directors. On December 22, 2005, the Board of Directors of Sutron
Corporation approved a compensation plan for its independent directors. The plan
provides that each independent director will be paid an annual retainer through
a grant of stock options in the amount of 5,000 shares of Common Stock of Sutron
Corporation that will vest over a one-year period from the date of grant, which
will be the date of the Annual Meeting of Shareholders. The grant date for 2005
stock options was not retroactive to the June 1, 2005, the date of the 2005
Annual Meeting of Shareholders, but became effective as of December 22, 2005 and
the options vested immediately.
Each independent director is paid an attendance fee of $1,500 for each
meeting of the Board of Directors where the director is physically present and
$500 for each meeting attended telephonically. Also, each independent director
is paid an attendance fee of $1,000 for each committee meeting of the Board of
Directors where the director is physically present and $500 for each meeting
attended telephonically. There is no additional compensation when the committee
meeting is held in conjunction with a Board meeting. Travel expenses are
reimbursed at actual cost.
CODE OF ETHICS
The Company has adopted a Code of Ethics that applies to all directors
and employees, including the Company's principal executive officer, principal
financial officer, principal accounting officer and controller. The Code of
Ethics is posted on the Company's website at www.sutron.com under Investor
Information."
MANAGEMENT OWNERSHIP OF COMMON STOCK
Set forth below is information concerning stock ownership of each named
executive officer, director and director nominee, and all directors and
executive officers of the Company as a group, as of March 28, 2006. The
information as to securities beneficially owned are, in each instance, based
upon
Page 9
information furnished by each individual. As to the shares shown to be
beneficially owned, the owner has sole investment and voting power, unless
otherwise indicated.
NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS (1)
---------------- ------------------ ---------
Raul S. McQuivey, Ph.D. (2) 914,436 21.3%
Thomas N. Keefer, Ph.D. (3) 395,000 9.2%
Daniel W. Farrell (4) 269,660 6.3%
Sidney C. Hooper (5) 196,200 4.6%
Robert F. Roberts (6) 25,000 .6%
Andrew D. Lipman(7) 5,000 .1%
Thomas R. Porter(8) 5,000 .1%
All executive officers and
directors as a group (7 in number) 1,810,296 42.2%
(1) See Note 1 under "PRINCIPAL SHAREHOLDERS".
(2) See Note 2 under "PRINCIPAL SHAREHOLDERS".
(3) See Note 4 under "PRINCIPAL SHAREHOLDERS".
(4) See Note 5 under "PRINCIPAL SHAREHOLDERS".
(5) Includes 36,000 shares owned by Sidney C. Hooper and Malissa C. Hooper, Mr.
Hooper's wife, as Joint Tenants with a Right of Survivorship and 160,200 shares
subject to options exercisable within 60 days after March 28, 2006.
(6) Includes 25,000 shares subject to options exercisable within 60 days after
March 28, 2006.
(7) Includes 5,000 shares subject to options exercisable within 60 days after
March 28, 2006.
(8) Includes 5,000 shares subject to options exercisable within 60 days after
March 28, 2006.
EXECUTIVE OFFICERS
The following table furnishes information concerning Sutron's executive
officers as of March 28, 2006.
Name Age Title
---- --- -----
Raul S. McQuivey 67 Chief Executive Officer and President
Daniel W. Farrell 53 Vice President
Sidney C. Hooper 47 Chief Financial Officer and Treasurer
Thomas N. Keefer 61 Vice President and Secretary
The biographies for Messrs. McQuivey and Farrell are provided under the
heading "Nominees for Directors."
Sidney C. Hooper, age 47, has served as the Chief Financial Officer of
the Company since 2003 and as Treasurer since May 1993. Mr. Hooper joined the
Company in August 1989 and was promoted to the position of Controller in January
1990. Prior to joining the Company, Mr. Hooper served as a Senior Accountant
with Arthur Andersen & Company. Mr. Hooper received a B.S. in Accounting from
Brigham Young University in 1983 and a Master of Accountancy from Brigham Young
University in 1984.
Page 10
Thomas N. Keefer, Ph.D., age 61, has served as Vice President of
Software Support Services since 1997. He joined the Company in January 1977, as
a Project Engineer and served as the Vice President of the Water Resources
Division and the Integrated Systems Division from 1981 to 1997. Dr. Keefer has
earned three degrees from Colorado State University, a B.S. in Civil Engineering
in 1967, an M.S. in Civil Engineering (Hydraulics) in 1969 and a Ph.D. in Civil
Engineering (Hydraulics, Hydrology and Fluid Mechanics) in 1971. He is a
Registered Professional Engineer.
EXECUTIVE OFFICER COMPENSATION
The following summary compensation table sets forth information
concerning the annual and long-term compensation paid by us during the last
three completed years to our chief executive officer, and other executive
officers, whom we refer to as our "Named Executive Officers."
SUMMARY COMPENSATION TABLE
Long Term Compensation
-----------------------
Annual Compensation Awards Payouts
--------------------------- ----------------------- -------
Other Securities All Other
Name and Annual Restricted Underlying LTIP Compen-
Principal Compen- Stock Options/ Payouts sation
Position Year Salary Bonus sation Awards SARs(#) ($) ($)
----------------- ---- -------- ------- ------ ---------- ---------- ------- ------------
Raul S. McQuivey 2005 $177,000 $20,000 -- -- -- -- $ 17,098 (1)
CEO 2004 $167,556 $32,270 -- -- -- -- $ 14,890 (1)
2003 $164,317 -- -- -- -- -- $ 3,148 (1)
Daniel W. Farrell 2005 $146,854 $14,420 -- -- -- -- $ 14,011 (2)
Vice President 2004 $141,781 $27,306 -- -- -- -- $ 13,606 (2)
2003 $136,377 -- -- -- -- -- $ 3,133 (2)
Sidney C. Hooper 2005 $143,910 $15,000 -- -- -- -- $ 15,254 (3)
CFO and Treasurer 2004 $125,807 $25,000 -- -- -- -- $ 12,464 (3)
2003 $114,250 -- -- -- -- -- $ 4,519 (3)
Thomas N. Keefer 2005 $104,234 $ 7,500 -- -- -- -- $ 6,827 (4)
Vice President 2004 $100,000 $10,000 -- -- -- -- $ 6,827 (4)
2003 $ 98,500 -- -- -- -- -- $ 3,133 (4)
(1) The amounts shown in this column for Dr. McQuivey are comprised of the
following: (i) in 2005, 2004 and 2003 a payment of $3,148 for life
insurance premiums on term life insurance and (ii) in 2005 a profit
sharing contribution of $13,950 to the Company's 401(k) Profit Sharing
Plan and in 2004 a profit sharing contribution of $11,742 to the
Company's 401(k) Profit Sharing Plan on behalf of Dr. McQuivey.
(2) The amounts shown in this column for Mr. Farrell are comprised of the
following: (i) in 2005 a payment of $630 for life insurance premiums on
term life insurance, in 2004 a payment of $1,418 for life insurance
premiums on term life insurance and in 2003 a payment of $1,175 for
life insurance premiums on term life insurance, (ii) in 2005 a profit
sharing contribution of $11,310 to the Company's 401(k) Profit Sharing
Plan and in 2004 a profit sharing contribution of $8,304 to the
Company's 401(k) Profit Sharing Plan on behalf of Mr. Farrell and (iii)
in 2005 value of auto allowance relating to personal use of $2,071, in
2004 value of auto allowance relating to personal use of $3,884 and in
2003 value of auto allowance relating to personal use of $1,958.
Page 11
(3) The amounts shown in this column for Mr. Hooper are comprised of the
following: in 2005, 2004 and 2003 a payment of $355 for life insurance
premiums on term life insurance, (ii) in 2005 a profit sharing
contribution of $10,739 to the Company's 401(k) Profit Sharing Plan and
in 2004 a profit sharing contribution of $7,984 to the Company's 401(k)
Profit Sharing Plan on behalf of Mr. Hooper and (iii) in 2005 value of
auto allowance relating to personal use of $4,160, in 2004 value of
auto allowance relating to personal use of $4,125 and in 2003 value of
auto allowance relating to personal use of $4,164.
(4) The amounts shown in this column for Dr. Keefer are comprised of the
following: (i) in 2005 and 2004 a payment of $743 for life insurance
premiums on term life insurance and in 2003 a payment of $3,133 for
life insurance premiums on term life insurance and (ii) in 2005 a
profit sharing contribution of $6,460 to the Company's 401(k) Profit
Sharing Plan and in 2004 a profit sharing contribution of $6,084 to the
Company's 401(k) Profit Sharing Plan on behalf of Dr. Keefer.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no options/SAR grants for the year ended December 31, 2005
to the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE
The following table summarizes information relating to stock exercises
during the fiscal year ended December 31, 2005 by the Named Executive Officers.
Value of
Unexercised
Shares Number of Securities In-the-Money
Acquired Underlying Unexercised Options/SARs at
on Options/SARs at FY-End FY-End ($)(1)
Exercise Value (#)Exercisable/ Exercisable/
Name (#) Realized ($) Unexercisable Unexercisable
----------------- ------- ------------ ---------------------- ---------------
Raul S. McQuivey 0 0 203,600/0 $1,496,460/$0
Daniel W. Farrell 0 0 130,200/0 $956,970/$0
Sidney C. Hooper 0 0 160,200/0 $1,177,470/$0
Thomas N. Keefer 0 0 15,000/0 $110,250/$0
(1) On December 31, 2005, the closing price of the Company's Common Stock
on the Nasdaq Capital Market was $7.35.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
The Company did not award long-term incentive plan awards to the Named
Executive Officers during the fiscal year 2005.
Page 12
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the securities
authorized for issuance under the Company's equity compensation plans as of
December 31, 2005:
Weighted Number of Securities
Number of Average Remaining Available for
Securities to be Issued Exercise Price of Future Issuance
Upon Exercise of Outstanding Under Equity Compensation
Outstanding Options, Options, Warrants Plans
Warrants and Rights (1) and Rights (2)
----------------------- ------------------ -------------------------
Equity compensation plans
approved by shareholders -- -- --
Equity compensation plans
not approved by shareholders 739,333 $ .98 225,667
----------------------- ------------------ -------------------------
Total 739,333 $ .98 225,667
======================= ================== =========================
(1) Includes the Company's 1996 Amended and Restated Stock Option Plan, 1997
Amended and Restated Stock Option Plan and 2002 Amended and Restated Stock
Option Plan.
(2) Includes shares issuable under the 1996 Amended and Restated Stock
Option Plan and 2002 Amended and Restated Stock Option Plan.
EMPLOYMENT AGREEMENTS
The Company does not have any Employment Agreements and has no other
plan or arrangement which would result in any executive officer receiving
compensation as a result of their resignation, retirement or any other
termination of employment with the Company. Option agreements do provide for the
immediate vesting of all unvested stock options in the event of a change in
control of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 2003, the Company changed its banking relationship from M&T Bank to
BB&T Bank. One aspect of the change was a reduction in the borrowing base amount
due to the exclusion of inventory as collateral for borrowings. The Company
obtained additional funds in the amount of $330,000 that were used for working
capital by issuing promissory notes to Robert F. Roberts, Jr., Raul S. McQuivey
and Thomas N. Keefer. These notes were payable on April 12, 2004. Mr. Robert's
note was repaid in April 2004 including interest in the amount of $8,422. Mr.
McQuivey and Mr. Keefer's notes were repaid in September 2004 including interest
of $6,213 and $3,575, respectively.
Name Relationship Issue Date Note Amount Rate
---------------------- ---------------- ------------------ ----------- -----
Robert F. Roberts, Jr. Director September 15, 2003 $200,000.00 7.25%
Raul S. McQuivey Officer/Director August 28, 2003 $ 80,000.00 7.25%
Thomas N. Keefer Officer/Director September 8, 2003 $ 50,000.00 7.25%
-----------
$330,000.00
===========
Page 13
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Under the securities laws of the United States, the Company's directors
and its executive officers are required to report ownership of the company's
Common Stock and any changes in that ownership to the Securities and Exchange
Commission. Specific due dates for these reports have been established and the
Company is required to disclose in this proxy statement any failure to file by
these dates during 2005. Mr. Lipman, Mr. Porter and Mr.Roberts were subject to
the reporting requirement of Section 16(a) and were delinquent in filing
required reports on Form 4. Mr. McQuivey was delinquent in filing one required
report on Form 4.
REPORT OF THE AUDIT COMMITTEE
This Report of the Audit Committee of the Company's Board of Directors
(the "Audit Committee") is required by the Securities and Exchange Commission
and shall not be deemed to be incorporated by reference into any filing under
the Securities Act or under the Exchange Act by any general statement
incorporating by reference this Proxy Statement, and shall only be incorporated
into other filings to the extent that the Company specifically incorporates this
information by reference, and shall not be deemed soliciting material or filed
under the Securities Act or Exchange Act.
The Audit Committee is composed of three independent directors and
operates under a written charter approved by the Audit Committee and adopted by
the Board. Thomas R. Porter, Andrew D. Lipman and Robert F. Roberts, Jr. are the
current members of the Audit Committee. The Audit Committee's primary
responsibilities are to provide oversight of the Company's accounting and
financial controls, review the scope of and procedures to be used in the annual
audit, review the financial statements and results of the annual audit, and
retain and evaluate the performance of the independent accountants and the
Company's financial and accounting personnel.
The Company's management has the primary responsibility for the
financial statements and reporting process, which includes the Company's systems
for internal control. Thompson, Greenspon & Co., the Company's independent
auditor, is responsible for performing an independent audit of the Company's
financial statements in accordance with standards established by the Public
Company Accounting Oversight Board, expressing an opinion, based on its audit,
as to the conformity of such financial statements with accounting principles
generally accepted in the United States. The Audit Committee's responsibility is
to monitor and oversee these processes, including by engaging in discussions
with management and the Company's independent registered public accounting firm.
The Audit Committee members are not professional accountants or
auditors, and their role is not intended to duplicate or certify the activities
of management and the independent registered public accounting firm, nor can the
Committee certify that the independent registered public accounting firm is
"independent" under applicable rules. The Committee serves a board-level
oversight role, in which it provides advice, counsel and direction to management
and the independent registered public accounting firm on the basis of the
information it receives, discussions with management and the independent
registered public accounting firm, and the experience of the Committee's members
in business, financial and accounting matters.
In carrying out its oversight responsibilities, the Board met with
management and reviewed with management the audited consolidated financial
statements included in the Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2005. The review included a discussion of the quality and
acceptability of the Company's financial reporting and controls, including the
reasonableness of significant judgments and the clarity of disclosures in the
consolidated financial statements.
Page 14
The Board also reviewed with Thompson, Greenspon & Co., who are
responsible for expressing an opinion on the conformity of the Company's audited
financial statements with generally accepted accounting principles, their
judgments as to the quality and the acceptability of the Company's financial
reporting and such other matters as are required to be discussed with the Board
under generally accepted auditing standards and SAS (Statement on Auditing
Standards) 61 as amended by Statement on Auditing Standards No. 90 (Audit
Committee Communications). In addition, the Board discussed with Thompson,
Greenspon & Co. their independence from management and the Company, including
the matters in their written disclosures required by the Independence Standards
Board, including Standard No. 1, and received written disclosures required by
that standard. The Board has considered whether the independent auditors'
provision of non-audit services to the Company is compatible with the auditors'
independence. The Board held a private session with the Company's independent
auditors, Thompson, Greenspon & Co., at which candid discussions of financial
management, accounting and internal controls took place.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended that the audited consolidated financial statements be
included in the Annual Report on Form 10-KSB for the fiscal year ended December
31, 2005 for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Thomas R. Porter, Chairman
Andrew D. Lipman
Robert F. Roberts, Jr.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors considers it desirable that its appointment of
the firm of Thompson, Greenspon & Co. as independent registered public
accounting firm of the Company for fiscal year 2006 be ratified by the
shareholders. Thompson, Greenspon & Co. has certified the Company's financial
statements for all years beginning in 1976. Representatives of Thompson,
Greenspon & Co. will be present at the Annual Meeting, will be given an
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions from the shareholders.
The Board of Directors recommends a vote "FOR" ratification of the
appointment of Thompson, Greenspon & Co. and the enclosed proxy will be so voted
unless a vote against the proposal or an abstention is specifically indicated.
If this proposal is not approved at the Annual Meeting, the Audit Committee may
reconsider its selection of Thompson, Greenspon & Co.
Aggregate fees for professional services rendered to the Company by
Thompson, Greenspon & Co. as of or for the years ended December 31, 2005 and
2004 are summarized in the table below.
2005 2004
---------- ----------
Audit $ 55,000 $ 50,803
Audit-related 0 0
Tax 7,500 5,000
All other 1,500 1,627
---------- ----------
Total $ 64,000 $ 57,430
========== ==========
Audit fees for the years ended December 31, 2005 and 2004,
respectively, were for professional services rendered for the audits of the
financial statements of the Company, income tax provision procedures and
assistance with review of documents filed with the SEC.
Page 15
Tax fees as of the years ended December 31, 2005 and 2004,
respectively, were for services related to tax compliance, including the
preparation of tax returns, tax planning and tax advice.
All other services include a transfer pricing review done in regards to
income tax filings for Sutron's Branch Office in India and research on stock
option expense requirements under SFAS No. 123(R). The Company did not incur any
fees for audit-related work.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
During Fiscal 2005, the Board pre-approved all services (audit and
permitted non-audit services) provided to Sutron by the Company's independent
auditor. The Board however has not adopted written policies and procedures in
regards to pre-approval of audit and permitted non-audit services.
OTHER MATTERS
The Board of Directors knows of no other business that will be
presented for consideration at the 2006 Annual Meeting of Shareholders. The
enclosed Proxy confers upon the person or persons entitled to vote the shares
represented thereby discretionary authority to vote such shares in accordance
with their best judgment with respect to other business that may come before the
2006 Annual Meeting of Shareholders in addition to the scheduled items of
business.
A copy of the Company's Annual Report for 2005, which includes
financial statements and other information concerning the Company, is included
with this Proxy material. Upon the written request by any shareholder entitled
to vote at the 2006 Annual Meeting of Shareholders, the Company will furnish
that person without charge a copy of the Company's Form 10-KSB Annual Report for
2005 which is filed with the Securities and Exchange Commission, including the
financial statements and schedules thereto, but excluding the exhibits thereto.
SHAREHOLDERS PROPOSALS
Any shareholder proposals intended to be presented at Sutron's 2007
Annual Meeting of Shareholders must be received by Sutron at its offices at
21300 Ridgetop Circle, Sterling, Virginia 20166, on or before December 6, 2006,
for consideration for inclusion in the proxy material for such Meeting.
If a shareholder of the Company wishes to present a proposal before the
2007 Annual Meeting, but does not wish to have the proposal considered for
inclusion in the Company's proxy statement and proxy card, such shareholder must
also give written notice to the Secretary of the Company at the address noted
above. The Secretary must receive such notice by March 12, 2007, and if a
shareholder fails to provide such timely notice of a proposal to be presented at
the 2007 Annual Meeting, the proxies designated by the Company's Board of
Directors will have discretionary authority to vote on any such proposal.
By Order of the Board of Directors,
/s/ Thomas N. Keefer
Thomas N. Keefer
Secretary
April 24, 2006
Page 16
APPENDIX 1
----------
SUTRON CORPORATION AUDIT COMMITTEE CHARTER
------------------------------------------
ROLE
----
The Audit Committee ("the Committee") of the Board of Directors ("the
Board") of Sutron Corporation ("the Company") assists the Board in fulfilling
its responsibility for oversight of the quality and integrity of the accounting,
auditing and reporting practices of the Company, and such other duties as
directed by the Board. The Committee's purpose is to oversee the accounting and
financial reporting processes of the Company, the audits of the Company's
financial statements, and the qualifications of the public accounting firm
engaged as the Company's independent auditor to prepare or issue an audit report
on the financial statements of the Company. The Committee's role includes a
particular focus on the qualitative aspects of financial reporting to
shareholders, the Company's processes to manage business and financial risk, and
compliance with significant applicable legal, ethical and regulatory
requirements. The Committee is directly responsible for the appointment,
compensation, retention and oversight of the independent auditor.
MEMBERSHIP
----------
The membership of the Committee consists of at least three directors,
all of whom shall meet the independence requirements in accordance with the
applicable rules of the National Association of Securities Dealers ("NASD") and
Rule 10A-3(b) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (subject to the exemptions provided in Rule 10A-3(c)). Each
member shall in the judgment of the Board have the ability to read and
understand fundamental financial statements. At least one member of the
Committee shall in the judgment of the Board be an "audit committee financial
expert" as defined by the rules and regulations of the Securities and Exchange
Commission, and at least one member (who may also serve as the audit committee
financial expert) shall in the judgment of the Board meet the financial
sophistication standard as defined by the requirements of the Nasdaq Stock
Market, Inc. The Board appoints the members of the Committee and the
chairperson. The Board may remove any member from the Committee at any time with
or without cause. No member of the Audit Committee may receive, directly or
indirectly, any consulting, advisory or other compensatory fee from the Company
or any of its subsidiaries other than fees paid in his or her capacity as a
member of the Board of Directors or a committee of the Board.
OPERATIONS
----------
The Committee meets at least four times a year. Additional meetings may
occur as the Committee or its chair deems advisable. The Committee will cause to
be kept adequate minutes of all its proceedings, and will report on its actions
and activities at the next meeting of the Board. Committee members will be
furnished with copies of the minutes of each meeting. The Committee is governed
by the same rules regarding meetings, action without meetings, notice, waiver of
notice, and quorum and voting requirements as are applicable to the Board. The
Committee is authorized and empowered to adopt its own rules of procedure not
inconsistent with (a) any provision of this Charter, (b) any provision of the
Bylaws of the Company, or (c) the laws of Virginia.
COMMUNICATIONS
--------------
The independent auditor reports directly to the Committee. The
Committee is expected to maintain free and open communications with the
independent auditor and management. This communication may include periodic
private executive sessions with either party.
Page 17
EDUCATION
---------
The Company is responsible for providing new members with appropriate
orientation briefings and educational opportunities, and the full Committee with
educational resources related to accounting principles and procedures, current
accounting topics pertinent to the Company and other material as may be
requested by the Committee. The Company will assist the Committee in maintaining
appropriate financial literacy.
AUTHORITY
---------
The Committee will have the resources and authority necessary to
discharge its duties and responsibilities. The Committee has sole authority to
retain and terminate outside counsel or other experts or consultants, as it
deems appropriate, including sole authority to approve the firms' fees and other
retention terms. The Committee will be provided with appropriate funding by the
Company, as the Committee determines, for the payment of compensation to the
Company's independent auditor; outside counsel and other advisors as it deems
appropriate, and ordinary administrative expenses of the Committee that are
necessary or appropriate in carrying out its duties. In discharging its
oversight role, the Committee is empowered to investigate any matter brought to
its attention. Any communications between the Committee and legal counsel in the
course of obtaining legal advice will be considered privileged communications of
the Company, and the Committee will take all necessary steps to preserve the
privileged nature of those communications. The Committee may form and delegate
authority to subcommittees and may delegate authority to one or more designated
members of the Committee.
RESPONSIBILITIES
----------------
The Committee's specific responsibilities in carrying out its oversight
role are delineated in the Audit Committee Responsibilities Calendar. The
Responsibilities Calendar will be updated annually to reflect changes in
regulatory requirements, authoritative guidance, and evolving oversight
practices. As the compendium of Committee responsibilities, the most recently
updated Responsibilities Calendar will be considered to be an addendum to this
Charter. The Committee relies on the expertise and knowledge of management and
the independent auditor in carrying out its oversight responsibilities.
Management of the Company is responsible for determining that the Company's
financial statements are complete, accurate and in accordance with generally
accepted accounting principles. The independent auditor is responsible for
auditing the Company's financial statements. It is not the duty of the Committee
to plan or conduct audits, to determine that the financial statements are
complete and accurate and in accordance with generally accepted accounting
principles, to conduct investigations, or to assure compliance with laws and
regulations or the Company's standards of business conduct, codes of ethics,
internal policies, procedures and controls.
AUDIT COMMITTEE RESPONSIBILITIES CALENDAR
-----------------------------------------
======== ============================================================ ====== ====== ====== ====== =============
Task Responsibility Q1 Q2 Q3 Q4 As Req'd
======== ============================================================ ====== ====== ====== ====== =============
1 Review the Committee's charter; reassess its adequacy; Annually
recommend changes to Sutron Board; make changes that result
from new laws or regulations.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
2 Test for independence of each Committee member. Annually
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
3 Ascertain that at least one Committee member meets the Annually
requirements of a financial expert.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
4 Meet at least four times per year. x x x x
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
Page 18
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
5 Review and discuss the Company's quarterly financial x x x x x
statements and earnings release with management.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
6 Conduct executive sessions with the outside auditors, Sutron x
officers, Sutron representatives and anyone else as desired
by the Committee.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
7 Hire outside counsel or other consultants as necessary. x
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
8 Appoint the independent auditors; establish the audit fees; x
pre-approve any non-audit services provided by the
independent auditors, including tax services, before the
services are rendered.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
9 Review and evaluate the performance of the independent x
auditors and review with the full Board any proposed
discharge of the independent auditors.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
10 Ascertain that the lead (or concurring) audit partner from x
any public accounting firms performing audit services,
serves in that capacity for no more than five fiscal years
of the Company.
======== ============================================================ ====== ====== ====== ====== =============
Task Responsibility Q1 Q2 Q3 Q4 As Req'd
======== ============================================================ ====== ====== ====== ====== =============
11 Ascertain that any partner other than the lead or concurring x
partner serves no more than seven years at the partner level
on the Company's audit.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
12 Review with management the policies and procedures with Annually
respect to officers' expense accounts and perquisites,
including their use of corporate assets, and consider the
results of any review of these areas by the independent
auditors.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
13 Consider, with management, the rationale for employing x
audit firms other than the principal independent auditors.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
14 Inquire of management and the independent auditors about x x x x x
significant risks or exposures facing the Company; assess
the steps management has taken or proposes to take to
minimize such risks to the Company; and periodically review
compliance with such steps.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
15 Review with the independent auditor and appropriate Company x
personnel, the audit scope and plan of the independent
auditors. Address the coordination of audit efforts to
assure the completeness of coverage, reduction of redundant
efforts, and the effective use of audit resources.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
16 Inquire of the CEO and CFO regarding the "quality of x x x x x
earnings" of the Company from a subjective as well as an
objective standpoint.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
17 Review with the independent accountants: (1) the adequacy x
of internal controls including computerized information and
system controls and security; (2) any related significant
findings and recommendations of the independent auditors
together with management's responses thereto.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
18 Review with management and the independent auditor the x x x x x
effect of any regulatory and accounting initiatives, as
well as off-balance sheet structures, if any.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
Page 19
======== ============================================================ ====== ====== ====== ====== =============
Task Responsibility Q1 Q2 Q3 Q4 As Req'd
======== ============================================================ ====== ====== ====== ====== =============
19 Review with management and the independent auditors the x x x x x
interim annual financial report before it is filed with the
SEC or other regulators.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
20 Review with each public accounting firm that performs an x
audit: (1) all critical accounting policies and practices
used by the company; (2) all alternative treatments of
financial information within generally accepted accounting
principles that have been discussed with management of the
Company, the ramifications of each alternative, and the
treatment preferred by the Company.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
21 Review all material written communications between the x
independent auditors and management, such as any management
letter or schedule of unadjusted differences.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
22 Review with management and the independent auditors: (1) x
the Company's annual financial statements and related
footnotes; (2) the independent auditors' audit of the
financial statements and their report thereon; (3) the
independent auditors' judgments about the quality, not just
the acceptability, of the Company's accounting principles
as applied in its financial reporting; (4) any significant
changes required in the independent auditors' audit plan;
(5) any serious difficulties or disputes with management
encountered during the audit; (6) matters required to be
discussed by Statement on Auditing Standards No. 61,
COMMUNICATION WITH AUDIT COMMITTEES, as amended, related to
the conduct of the audit.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
23 Review with the general counsel any legal and regulatory x x x x x
matters that, in the opinion of management, may have a
material impact on the financial statements, related
Company compliance policies, and programs and reports
received from regulators.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
24 Periodically review the Company's code of conduct to ensure Annually
that it is adequate and up-to-date.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
Page 20
======== ============================================================ ====== ====== ====== ====== =============
Task Responsibility Q1 Q2 Q3 Q4 As Req'd
======== ============================================================ ====== ====== ====== ====== =============
25 Review with the general counsel the results of its review Annually
of the monitoring of compliance with the Company's code of
conduct.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
26 Review the procedures for the receipt, retention, and x
treatment of complaints received by the Company regarding
accounting, internal accounting controls, or auditing
matters that may be submitted by any party internal or
external to the organization.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
27 Review any complaints that might have been received, x
current status, and resolution if one has been reached.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
28 Review procedures for the confidential, anonymous submission x x x x x
by employees of the organization of concerns regarding
questionable accounting or auditing matters.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
29 Review any submissions that have been received, the current x x x x x
status, and the resolution if one has been reached.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
30 Perform such other functions as assigned by law, the x
Company's charter or bylaws, or the Board.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
31 Evaluate the independent auditors and internal auditors. x
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
32 Conduct a self-assessment and 360-degree evaluation of Annually
all members.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
33 Create an agenda for the ensuing year or review and approve x
the agenda submitted by appropriate Company personnel
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
34 Oversee the preparation of an annual report of the Audit x
Committee as required by the rules of the SEC and the
annual affirmation required by the appropriate listing
exchange, if necessary.
-------- ------------------------------------------------------------ ------ ------ ------ ------ -------------
35 When required by SEC rules, include in the annual Proxy x
Statement for the Company a report of the Committee in
accordance with the Proxy Rules promulgated by the SEC.
======== ============================================================ ====== ====== ====== ====== =============
Page 21
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SUTRON CORPORATION
The undersigned hereby appoints Thomas Keefer and Sidney C. Hooper
proxies, each with power to act without the other and with power of
substitution, and hereby authorizes them to represent and vote, as designated on
the other side, all the shares of stock of Sutron Corporation standing in the
name of the undersigned with all powers which the undersigned would possess if
present at the Annual Meeting of Stockholders of the Company to be held at 21300
Ridgetop Circle, Sterling, Virginia at 1:30 p.m. on May 17, 2006 or any
adjournment thereof.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS
NOMINEES: Raul S. McQuivey, Daniel W. Farrell, Robert F. Roberts, Jr.,
Andrew D. Lipman, Thomas R. Porter
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
For all nominees listed to the right (except as marked to the contrary) [_]
WITHHOLD AUTHORITY to vote for all nominees listed to the right [_]
2. Ratification of Thompson, Greenspon & Co., P.C. as the independent certified
public accountants of the corporation.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated: ______________________________________________ 2006
______________________________________________________
(Signature)
______________________________________________________
(Signature if held jointly)
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Page 22