SHENANDOAH TELECOMMUNICATIONS COMPANY
124 South Main Street
Edinburg, Virginia
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 17, 2001
March 30, 2001
TO THE SHAREHOLDERS OF SHENANDOAH TELECOMMUNICATIONS COMPANY:
The annual meeting of shareholders of Shenandoah Telecommunications
Company will be held in the Social Hall of the Edinburg Fire Department, Stoney
Creek Boulevard, Edinburg, Virginia, on Tuesday, April 17, 2001, at 11:00 a.m.
for the following purposes:
1. To elect three Class III Directors to serve until the 2004 Annual
Shareholders' Meeting;
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business March 20, 2001,
will be entitled to vote at the meeting.
Lunch will be provided.
By Order of the Board of Directors
Harold Morrison, Jr.
Secretary
IMPORTANT
YOU ARE URGED TO COMPLETE, SIGN, AND RETURN THE ENCLOSED PROXY CARD IN THE
SELF-ADDRESSED STAMPED (FOR U. S. MAILING) ENVELOPE PROVIDED AS PROMPTLY AS
POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO
ATTEND THE MEETING IN PERSON, YOU MAY THEN WITHDRAW YOUR PROXY AND VOTE YOUR OWN
SHARES.
PROXY STATEMENT
P. O. Box 459
Edinburg, VA 22824
March 30, 2001
TO THE SHAREHOLDERS OF SHENANDOAH TELECOMMUNICATIONS COMPANY:
Your proxy in the enclosed form is solicited by the management of the
Company for use at the Annual Meeting of Shareholders to be held in the Social
Hall of the Edinburg Fire Department, Stoney Creek Boulevard, Edinburg,
Virginia, on Tuesday, April 17, 2001, at 11:00 a.m., and any adjournment
thereof.
The mailing address of the Company's executive offices is P.O. Box 459,
Edinburg, Virginia 22824.
The Company has 8,000,000 authorized shares of common stock, of which
3,759,670 shares were outstanding on March 20, 2001. This proxy statement and
the Company's Annual Report, including financial statements for 2000, are being
mailed on or about March 30, 2001, to approximately 3,731 shareholders of record
on March 20, 2001. Only shareholders of record on that date are entitled to
vote. Each outstanding share will entitle the holder to one vote at the Annual
Meeting. The Company intends to solicit proxies by the use of the mail, in
person, and by telephone. The cost of soliciting proxies will be paid by the
Company.
Executed proxies may be revoked at any time prior to exercise. Proxies
will be voted as indicated by the shareholders. Executed but unmarked proxies
will be voted "FOR" the election of the three nominees for Class III Directors.
THE ELECTION OF DIRECTORS
Directors Standing for Election
There are currently nine directors (constituting the entire Board of
Directors of the Company), divided into three classes. The current term of Class
III Directors expires at the 2001 Annual Meeting. The Board of Directors
proposes that the nominees described below, all of whom are currently serving as
Class III Directors, be re-elected to Class III for a new term of three years
and until their successors are duly elected and qualified.
The proxy holders will vote the proxies received by them (unless
contrary instructions are noted on the proxies) for the election of the three
nominees as directors, all of whom are now members of and constitute the Class
III Directors. If any such nominees should be unavailable, the proxy holders
will vote for substitute nominees in their discretion. Shareholders may withhold
the authority to vote for the election of directors or one or more of the
nominees. Directors will be elected by a plurality of the votes cast.
Abstentions and shares held in street name that are not voted in the election of
directors will not be included in determining the number of votes cast. The
names and principal occupation of the three nominees, six current directors and
executive officers are indicated in the following table. The Board of Directors
unanimously recommends a vote "FOR" election of directors.
BOARD OF DIRECTORS
Year
Elected Principal Occupation and Other Directorships
Name of Director Director Age for Past Five Years
- ----------------------------- --------- ------ -----------------------------------------------
(1) (2) (3)
Nominees for Election of Directors
Class III (Term expires 2004) - The directors standing for election are:
Dick D. Bowman 1980 72 President, Bowman Bros., Inc. (a farm
Treasurer of the Co. equipment dealer); Director, Shenandoah Valley
Electric Cooperative; Director, The Rockingham
Group; Director, Old Dominion Electric
Cooperative.
Christopher E. French 1996 43 President, Shenandoah Telecommunications Co.
President and its subsidiaries; Director, First National
Corporation.
James E. Zerkel II 1985 56 Vice Pres., James E. Zerkel, Inc. (a hardware
firm); Director, Shenandoah Valley Electric
Cooperative.
Directors Continuing in Office
Class I (Term expires 2002)
Douglas C. Arthur 1997 58 Attorney-at-Law, Arthur and Allamong;
Director, First National Corporation; Member,
Shenandoah County School Board.
Harold Morrison, Jr. 1979 71 Chairman of the Board, Woodstock Garage, Inc.
Secretary of the Co. (an auto sales & repair firm); Director, First
Virginia Bank-BR
Zane Neff 1976 72 Retired Manager, Hugh Saum Company, Inc.(a
Asst. Secretary of the Co. hardware and furniture store.)
Class II (Term expires 2003)
Noel M. Borden 1972 64 Retired President, H. L. Borden Lumber Company
Vice President (a retail building materials firm); Chairman
of the Board, First National Corporation.
Ken L. Burch 1995 56 Farmer
Grover M. Holler, Jr. 1952 80 President, Valley View, Inc. (a real estate
developer.)
(1) The directors who are not full-time employees of the Company were
compensated in 2000 for their services on the Board and one or more of
the Boards of the Company's subsidiaries at the rate of $500 per month
plus $500 for each Board meeting attended. Additional compensation was
paid during the year to certain non-employee directors who also serve as
Vice President, Secretary, Assistant Secretary, and Treasurer, for their
services in these capacities, in the amounts of $1,700, $3,440, $1,700,
and $3,440, respectively.
(2) Years shown are when first elected to the Board of the Company or the
Company's predecessor, Shenandoah Telephone Company. Each nominee has
served continuously since the year he joined the Board.
(3) Each director also serves as a director of the Company's subsidiaries.
Attendance of Board Members at Board and Committee Meetings
During 2000, the Board of Directors held 13 meetings. All of the
directors attended at least 75 percent of the aggregate of: (1) the total number
of meetings of the Board of Directors; and (2) the total number of meetings held
by all committees of the Board on which they served.
Standing Audit, Nominating, and Compensation Committees
of the Board of Directors
1. Audit Committee - Prior to October 13, 2000, the Finance Committee of the
Board of Directors performed a function similar to that of an Audit
Committee. The Finance Committee consisted of the following directors: Dick
D. Bowman (Chairman), Grover M. Holler, Jr., and Noel M. Borden. On October
13, 2000 an Audit Committee was created separate from the Finance
Committee. The Audit Committee consists of Grover M. Holler, Jr.
(Chairman), Douglas C. Arthur, and James E. Zerkel II. The Audit Committee
was established so that the committee members would be independent under
the listing standards of the NASDAQ Stock Market. During 2000 there were
three meetings of the Finance Committee. Additional business of the
committees was conducted in connection with the regular Board meetings.
Before October 13, 2000, the Finance Committee was responsible for the
employment of outside auditors and for receiving and reviewing the
auditor's report. As of October 13, 2000, this function is being performed
by the Audit Committee.
2. Nominating Committee - The Board of Directors does not have a standing
Nominating Committee.
3. Compensation Committee - The Personnel Committee of the Board of Directors
performs the function of a compensation committee. The Personnel Committee
consists of the following directors: Noel M. Borden (Chairman), Harold
Morrison, Jr., and James E. Zerkel. The committee is responsible for the
wages, salaries, and benefit programs for all employees. During 2000 there
were three meetings of this committee.
STOCK OWNERSHIP
The following table presents information relating to the beneficial
ownership of the Company's outstanding shares of common stock by all directors,
executive officers, and all directors and officers as a group. The Company is
not aware of any other ownership interest of 5% or more of the Company's
outstanding stock.
No. of Shares Percent
Name and Address Owned as of 2-1-01(1) of Class (2)
- -------------------------------------------------------------------------------
Douglas C. Arthur 1,440 *
Noel M. Borden 18,842 *
Dick D. Bowman 46,564 1.24
Ken L. Burch 45,172 1.20
Christopher E. French 293,979(3) 7.82
Grover M. Holler, Jr. 70,736 1.88
Harold Morrison, Jr. 19,828 *
Zane Neff 7,716 *
James E. Zerkel II 4,498 *
David E. Ferguson 2,459(3) *
David K. MacDonald 640(3) *
Laurence F. Paxton 2,184(3) *
William L. Pirtle 1,525(3) *
Total shares beneficially owned by
13 directors and officers as a group 515,583 13.69
(1) Includes shares held by relatives and in certain trust relationships, which
may be deemed to be beneficially owned by the nominees under the rules and
regulations of the Securities and Exchange Commission; however, the
inclusion of such shares does not constitute an admission of beneficial
ownership.
(2) Asterisk indicates less than 1%.
(3) Includes 1,775, 1,287, 420, 981 and 1,209 shares subject to options
exercisable within 60 days, by Christopher French, David Ferguson, David
MacDonald, Laurence Paxton, and William Pirtle, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 2000, the Company purchased vehicles and received services from Mr.
Morrison's company in the amount of $70,040; and, purchased supplies and
received services from Mr. Zerkel's company in the amount of $5,869. Management
believes that each of the companies provides these services to the Company on
terms comparable to those available to the Company from other similar companies.
No other director is an officer, director, employee, or owner of a significant
supplier or customer of the Company.
SUMMARY COMPENSATION TABLE
The following Summary Table is furnished as to the salary and incentive
payment paid by the Company and its subsidiaries on an accrual basis during the
fiscal years 1998, 1999, and 2000 to, or on behalf of, the Chief Executive
Officer and each of the other executive officers who earn more than $100,000 per
year.
Long-Term
Annual Compensation Compensation
------------------- ------------
Other
Name and Principal Incentive Compensation
Position Year Salary($) Payment($) Options(#) ($)(1)
-------- ---- --------- --------------------- ------
Christopher E. French 2000 $168,375 $43,342 573 $ 8,938
President 1999 159,424 35,700 529 8,225
1998 148,318 38,041 489 7,849
David E. Ferguson 2000 111,681 18,123 406 7,703
Vice President- 1999 105,277 15,705 371 7,161
Customer Service 1998 101,204 16,232 361 7,096
David K. MacDonald 2000 87,004 17,725 317 6,379
Vice President- 1999 84,365 13,039 262 5,720
Engineering & 1998 70,345 11,925 - 4,488
Construction
Laurence F. Paxton 2000 88,839 14,855 287 6,401
Vice President- 1999 84,872 12,290 283 5,906
Finance 1998 81,059 13,439 279 5,972
William L. Pirtle 2000 106,387 17,733 391 6,660
Vice President- 1999 101,633 15,384 378 6,192
Personal Comm. Service 1998 96,990 15,991 329 6,196
(1) Includes amounts contributed by the Company under its 401(k) and Flexible
Benefits Plans, each of which is available to all regular Company employees.
OPTION GRANTS TABLE
Option Grants in Last Fiscal Year
Potential
Individual Grants Realizable Value at
----------------- Assumed Annual Rates
Percent of of Stock Price
Total Options Exercise Apprciation For
Options Granted Or Base Expiration Option Term
Name (Shares) Fiscal Year Per Share Date 5%(1) 10%(1)
- ---- -------------------- --------- ---- ----- ------
Christopher E. French 573 3.0% $34.37 2/14/2005 $5,444 12,022
David E. Ferguson 406 2.1% 34.37 2/14/2005 3,857 8,518
David K. MacDonald 317 1.7% 34.37 2/14/2005 3,012 6,651
Laurence F. Paxton 287 1.5% 34.37 2/14/2005 2,727 6,021
William L. Pirtle 391 2.0% 34.37 2/14/2005 3,715 8,203
(1) In order to realize the potential value set forth, the price per share of
the Company's common stock would be approximately $43.87 and $55.35,
respectively, at the end of the five-year option term.
OPTION EXERCISES AND YEAR END VALUE TABLE
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Value
No. of Value of
Unexercised Unexercised
Options/ in the Money
FY-End (Shares) Options/FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
- --------------- ----------- -------- ------------- -------------
Christopher E. French 0 0 1,224/838 12,412/2,964
David E. Ferguson 0 0 898/592 9,091/2,080
David K. MacDonald 0 0 131/448 1,465/1,465
Laurence F. Paxton 0 0 696/429 7,040/1,588
William L. Pirtle 0 0 825/580 9,387/2,114
Closing price on December 31, 2000 was $32.125 and was used in calculating the
value of unexercised options.
RETIREMENT PLAN
The Company maintains a noncontributory defined benefit Retirement Plan
for its employees. The following table illustrates normal retirement benefits
based upon Final Average Compensation and years of credited service. The normal
retirement benefit is equal to the sum of:
(1) 1.14% times Final Average Compensation plus 0.65% times Final
Average Compensation in excess of Covered Compensation (average
annual compensation with respect to which Social Security
benefits would be provided at Social Security retirement age)
times years of service (not greater than 30); and
(2) 0.29% times Final Average Compensation times years of service in
excess of 30 years (such excess service not to exceed 15 years).
Estimated Annual Pension
Years of Credited Service
Final Average
Compensation 15 20 25 30 35
-----------------------------------------------------------------------
$ 20,000 $ 3,420 $ 4,560 $ 5,700 $ 6,840 $ 7,130
35,000 5,985 7,980 9,975 11,970 12,478
50,000 9,797 13,062 16,328 19,594 20,319
75,000 16,509 22,012 27,516 33,019 34,106
100,000 23,222 30,962 38,703 46,444 47,894
125,000 29,934 39,912 49,891 59,869 61,681
150,000 36,647 48,862 61,078 73,294 75,469
170,000 42,017 56,022 70,028 84,034 86,499
Covered Compensation for those retiring in 2001 is $37,212. Final
Average Compensation equals an employee's average annual compensation for the
five consecutive years of credited service for which compensation was the
highest. The amounts shown as estimated annual pensions were calculated on a
straight-life basis assuming the employee retires in 2001. The Company did not
make a contribution to the Retirement Plan in 2000, as the Plan was adequately
funded. Christopher French, David Ferguson, David MacDonald, Laurence Paxton,
and William Pirtle had 19 years, 33 years, 5 years, 10 years, and 8 years,
respectively, of credited service under the plan as of January 1, 2001.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors of the Company serves as a
representative of the Board for general oversight of the Company's financial
accounting and reporting systems, managing the audit process, and monitoring
compliance with applicable laws and regulations. The Board of Directors has
adopted a written charter for the Audit Committee, and a copy of the charter is
included as Appendix A to this proxy statement. The Company's management has
primary responsibility for preparing the Company's financial statements and the
Company's financial reporting process. The Company's auditors are responsible
for expressing an opinion on the conformity of the Company's audited financial
statements to generally accepted accounting principles. In this context the
Audit Committee hereby reports as follows:
1. The Committee has reviewed and discussed the audited 2000 financial
statements with management.
2. The Committee has discussed with the independent auditors the matters
required to be discussed by SAS 61.
3. The Committee has received the auditor's disclosures regarding the auditor's
independence from the Company.
4. No item has come to the attention of the Committee which would lead its
members to believe that the audited 2000 financial statements in the
Company's Annual Report contained an untrue statement of a material fact or
omitted a material fact that would make the statements misleading.
5. The Committee recommended to the Board of Directors, and the Board has
approved, that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the calendar year ended December 31, 2000 for
filing with the Securities and Exchange Commission.
Each of the members of the Audit Committee is independent as defined under
the listing standards of the NASDAQ Stock Market.
Submitted by the Company's Audit Committee
Grover M. Holler, Jr., Chairman
Douglas C. Arthur
James E. Zerkel II
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The members of the Personnel Committee of the Board of Directors of the
Company perform the function of a Compensation Committee. The Committee's
approach to compensation of the Company's executive officers, including the
Chief Executive Officer, is to award a total compensation package consisting of
salary, annual and long-term incentives, and fringe benefit components, which
recognizes that the compensation of executive officers should be established at
levels which are consistent with the Company's objectives and achievements. The
compensation package, and the Committee's approach to setting compensation, is
to provide base salaries at levels that are competitive with amounts paid to
senior executives with comparable qualifications, experience, and
responsibilities. The annual incentive compensation is approved upon achievement
of corporate objectives. The longer-term incentive compensation, consisting of
the Company's Incentive Stock Option Plan, is closely tied to the Company's
success in achieving increases in the Company's stock price, thereby benefiting
all shareholders. The Committee reviews industry compensation surveys, and
compares compensation data from public filings by other publicly held companies
in our industry and market region. In setting the compensation of the executive
officers other than the Chief Executive Officer, the Committee receives and
accords significant weight to the input of the Chief Executive Officer.
The Committee has recognized the success of the Company's executives in
accomplishing the Company's various strategic objectives, and has taken into
account management's commitment to the long-term success of the Company. The
Company has continued to expand its product and service offerings and has also
continued its expansion beyond its traditional geographic base. The Company has
also continued to focus its efforts on increasing earnings and on providing
superior customer service while controlling operating costs. These actions will
in turn assist the Company in meeting the challenge of achieving growth in an
increasingly competitive telecommunications industry. Based upon its evaluation
of these and other relevant factors, the Committee is satisfied that the
executives have contributed positively to the Company's long-term financial
performance.
The annual base salary of the Chief Executive Officer is determined by
the Committee in recognition of his leadership role in formulating and executing
strategies for responding to the challenges of our industry, and the Committee's
assessment of his past performance and its expectation for his future
contributions in leading the Company. The 2000 base salary was not set in
response to attainment of any specific goals by the Company, although the
Committee took into consideration his individual contributions to the Company's
performance, reflected by approximately 41% growth in revenues, 53% growth in
earnings, and his efforts to successfully negotiate the sale of two major wire-
less assets.
The annual incentive plan stresses improvement in both financial
performance, as measured by increases in net income, and service provided to the
Company's customers, as measured by trouble reports from customers. Specific
target goals are set each year. In 2000, targets were set for increases in
revenues from the Company's PCS services; increases in earnings from our
non-wireless businesses; reductions in troubles reported by customers; and, a
subjective valuation of overall productivity, timely and cost effective
completion of projects, and improvement in working relationships between
different functional areas of the organization. Performance of these four
factors could range from 0 to 200%, and were weighted by 20%, 25%, 30%, and 25%
respectively. As a result of its increase in earnings and revenues and a
significant improvement in service, the Company reached over 164 percent of its
combined goals. Overall performance greatly exceeded the Company's goals and
exceeded the goals by a larger margin than the previous year's plan; therefore,
incentive payments made to the Company's president and other executive officers
were larger than payments made in the previous year.
The long-term incentive plan involves most employees of the Company, and
incentive stock options are currently being granted on a formula related to base
salary. Rewards under this plan for the executive officers, as well as all
participating employees, are dependent upon increases in the market price of the
Company's stock.
Submitted by the Company's Personnel Committee:
Noel M. Borden, Chairman
Harold Morrison, Jr.
James E. Zerkel II
FIVE-YEAR STOCKHOLDER RETURN COMPARISON
The following graph compares the performance of the Company's stock to
the NASDAQ Market Index and the S&P Telephone Index. The S&P Telephone Index
consists of Alltel Corporation; BellSouth Corporation; CenturyTel, Inc; Qwest
Communications International Inc.; SBC Communications Inc.; and, Verizon
Communications. The graph assumes that the value of the investment in the
Company's stock and each of the indices was $100 at December 31, 1995 and that
all dividends were reinvested. As of October 23, 2000, the Company's stock
became listed on the NASDAQ National Market, and continued to trade under the
symbol "SHET."
1995 1996 1997 1998 1999 2000
Shenandoah Telecommunications Company 100 112 99 102 184 178
NASDAQ Stock Market 100 123 151 213 395 238
S&P Telephone Index 100 101 141 207 219 196
Comparison of Five-Year Cumulative Total Return among Shenandoah
Telecommunications Company, NASDAQ Market Index, and S&P Telephone Index
[OBJECT OMITTED]
SECTION 16(a) - BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and transactions in Company stock by executive officers and
directors are required to be reported to the Securities and Exchange Commission
pursuant to Section 16(a) of the Securities and Exchange Act. On February 12,
2001 David K. MacDonald, an executive officer, filed a Form 5 for the year ended
December 31, 2000 to correct an inadvertent failure to report the indirect
ownership of an additional 20 shares on his Form 3 of September 1, 1998. Based
solely upon a review of copies of reports of beneficial ownership provided to
the Company by officers and directors, the Company believes that all reports
required pursuant to Section 16(a) with respect to the year 2000 were timely
filed.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, on the recommendation of the Audit Committee,
has decided to terminate McGladrey and Pullen, LLP's appointment as its auditor
and has appointed the firm of KPMG LLP as auditors to make an examination of the
accounts of the Company for the 2001 fiscal year. McGladrey and Pullen, LLP has
made the annual audits of the Company from 1994 until the year ended December
31, 2000. In connection with its reports on the financial statements of the
Company for each of the years in which it performed an audit, there were no
disagreements with McGladrey and Pullen, LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to their satisfaction would have
caused them to make reference in connection with their opinion to the subject
matter of the disagreement. In addition, these audit reports did not contain an
adverse opinion or a disclaimer of opinion, nor were they qualified or modified
as to uncertainty, audit scope or accounting principles. It is not expected that
representatives of either firm will be present at the annual meeting.
Audit Fees
The aggregate fees billed for Audit of the Company's annual financial
statements for 2000 and the reviews of the financial statements included in the
Company's forms 10-Q for 2000 was $79,536.
Financial Information Systems Design and Implementation Fees
The Company did not engage the principal accountant for any services of
this nature.
All Other Fees
The aggregate of all other fees billed by the principal accountant was
$42,226, the majority of which was for audit of the Company's benefit plans and
assistance in preparing tax returns. The Audit Committee considers the nature of
this work to be compatible with maintaining the principal accountant's
independence.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders to be included in management's proxy statement
and form of proxy relating to next year's annual meeting must be received at the
Company's principal executive offices no later than November 30, 2001. In
addition, in order for any matter to be properly brought before the 2002 annual
meeting, the stockholder must notify the Company in writing no later than
December 17, 2001.
OTHER MATTERS
Management does not intend to bring before the meeting any matters other
than those specifically described above and knows of no matters other than the
foregoing to come before the meeting. If any other matters properly come before
the meeting, it is the intention of the persons named in the accompanying form
of proxy to vote such proxy in accordance with their judgment on such matters,
including any matters dealing with the conduct of the meeting.
FORM 10-K
The Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission is available to shareholders, without charge, upon request
to Mr. Laurence F. Paxton, Vice President-Finance, Shenandoah Telecommunications
Company, P. O. Box 459, Edinburg, VA 22824; or, can be retrieved from the
Securities and Exchange Commission website at www.sec.gov.
APPENDIX A
SHENANDOAH TELECOMMUNICATIONS COMPANY AUDIT COMMITTEE CHARTER
Organization - There shall be a committee of the board of directors to be known
as the audit committee. The audit committee shall be composed of three or more
directors who are independent of the management of the corporation and are free
of any relationship that, in the opinion of the board of directors, would
interfere with their exercise of independent judgment as a committee member.
Statement of Policy - The audit committee shall provide assistance to the
corporate directors in fulfilling their responsibility to the shareholders,
potential shareholders, and investment community relating to corporate
accounting, reporting practices of the corporation, and the quality and
integrity of the financial reports of the corporation. In so doing, it is the
responsibility of the audit committee to maintain free and open means of
communication between the directors, the independent auditors, and the financial
management of the corporation.
Responsibilities - In carrying out its responsibilities, the audit committee
believes its policies and procedures should remain flexible, in order to best
react to changing conditions and to ensure to the directors and shareholders
that the corporate accounting and reporting practices of the corporation are in
accordance with all requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
o Reassess the adequacy of this written charter on an annual basis.
o Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the corporation and its
divisions and subsidiaries. The independent auditors will be ultimately
accountable to the directors.
o Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current
year and the audit procedures to be utilized, and at the conclusion
thereof review such audit, including any comments or recommendations of
the independent auditors.
o Review with independent auditors and financial and accounting personnel,
the adequacy and effectiveness of the accounting and financial controls
of the corporation, and elicit any recommendations for the improvement
of such internal control procedures or particular areas where new or
more detailed controls or procedures are desirable. Particular emphasis
should be given to the adequacy of such internal controls to expose any
payments, transactions, or procedures that might be deemed illegal or
otherwise improper.
o Ensure that at least one member of the Audit Committee possesses the
necessary financial sophistication for financial oversight
responsibilities, as evidenced by past employment experience in finance
or accounting, or other comparable experience or background.
o Receive from the independent auditors a formal written statement
delineating all relationships between the auditors and the company.
o Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the shareholders.
Any changes in accounting principles should be reviewed.
o Provide sufficient opportunity for the independent auditors to meet with
the members of the audit committee without members of management
present. Among the items to be discussed in these meetings are the
independent auditors' evaluation of the corporation's financial,
accounting, and auditing personnel, and the cooperation that the
independent auditors received during the course of the audit.
o Review human resources and succession planning within the accounting and
financial departments of the company.
o Submit the minutes of all meetings of the audit committee to, or discuss
the matters discussed at each meeting with, the board of directors.
o Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
o Review related party transactions for potential conflict of interest
situations.