BOWL AMERICA INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENTS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 4, 2001
TO THE HOLDERS OF CLASS A AND CLASS B
COMMON STOCK OF BOWL AMERICA INCORPORATED
The annual meeting of stockholders of Bowl America Incorporated will
be held at the Corporation's office situated at 6446 Edsall Road,
Alexandria, Virginia 22312 (East Exit off Shirley Highway), on Tuesday
December 4, 2001, at 11:00 a.m., for the following purposes:
(1) To elect a Board of Directors to serve until the next annual
meeting
(2) To transact such other business as may properly be brought before
the meeting and any adjournments thereof.
Only stockholders of record at the close of business October 17, 2001,
are entitled to vote at the meeting. The stock transfer books will not
be closed.
You are cordially invited to attend the meeting in person. If you do
not expect to be present, please sign, date, and mail the enclosed proxy,
the postage for which has been provided. Prompt response is helpful, and
your cooperation will be appreciated. If after signing and returning the
enclosed proxy, you find you are able to attend the meeting, you will
have an opportunity to withdraw your proxy and vote in person.
By Order of the Board of Directors
A. Joseph Levy
Secretary
Dated October 26, 2001
PROXY STATEMENT
For Annual Meeting of Stockholders
To be held December 4, 2001
The principal office of the Corporation is situated at 6446 Edsall Road,
Alexandria, Virginia 22312.
The accompanying proxy is solicited by the Board of Directors; and when
such proxy is properly signed and returned, the shares it represents will
be voted at the meeting in accordance with the directions noted thereon;
or if no direction is indicated, it will be voted for the election of
directors.
Solicitation of proxies will be primarily by mail. Proxies may also
be solicited by directors, officers, and employees of the Corporation
personally or by telephone or telegraph. The Corporation will bear the
cost of all such solicitations.
The proxy may be revoked at any time prior to its exercise by giving
notice of the revocation to the Secretary of the Corporation in
writing at any time prior to the meeting and orally at the meeting at
any time prior to the vote.
This statement is being mailed on or about October 26, 2001.
VOTING SECURITIES
Each of the issued and outstanding 3,666,341 shares of the Corporation's
Class A Common Stock, par value of $.10 per share, is entitled to one vote.
Each of the issued and outstanding 1,487,236 shares of the Corporation's
Class B Common Stock, par value of $.10 per share, is entitled to ten votes.
The total number of Class A and Class B shares of Common Stock issued and
outstanding is 5,153,577 shares, with the Class A stockholders having
3,666,341 votes, and the Class B stockholders having 14,872,360 votes. The
price of the Corporation's Class A Common Stock on August 20, 2001,
on the American Stock Exchange was $10.15. The Class B Common Stock is
not traded. Only stockholders of record at the close of business on
October 17, 2001, are entitled to vote at the meeting and adjournment
thereof. The Class A Common Stockholders are entitled to elect two
directors and the Class B Common Stockholders are entitled to elect
six directors.
Votes cast by proxy or in person at the Annual Meeting will be tabulated
by tellers appointed by the Company. The number of shares represented at
the meeting in person or by proxy, including abstentions, will determine
whether or not a quorum is present. Abstentions will not be voted on any
matter submitted to the stockholders for a vote.
Shares on a Broker's Proxy that lack discretionary authority to vote on a
particular matter will not be considered as present and entitled to vote by
the tellers.
ANNUAL REPORTS
A copy of the annual report and Form 10-K of the Corporation for the
fiscal year ending July 1, 2001, which has been filed with the Securities
and Exchange Commission, was mailed to you on September 28, 2001 or is
enclosed with this statement.
ELECTION OF DIRECTORS AND SECURITY OWNERSHIP OF MANAGEMENT
The holders of the Class A Common Stock are entitled to elect two Directors
of the Corporation and the holders of the Class B Common Stock are entitled
to elect six Directors of the Corporation to hold office until the next Annual
Meeting of the stockholders and until their successors shall have been
elected and qualified. The management recommends the election of the
nominees listed below as Directors. All of the nominees are presently
Directors and constituted the Board of Directors for the past year. In the
event any of these nominees becomes unavailable for election, it is intended
that the proxies will be voted for the election of such other persons as
management shall designate. Management has no reason to believe that any
nominee will be unavailable.
The following table also shows the beneficial ownership of shares of the
Corporation's Class A and Class B Common stock as of September 28, 2001 by
all directors including executive officers, all of whom are directors, and
by all directors and executive officers as a group.
Percentage of Total
Shares of Class A Shares of Class B Votes Eligible to be
Common Stock of Common Stock of Cast of Class A & B
Name of Director and Nominees Corporation Corporation Common Stock
for Election; Principal Occupation; Beneficially Owned Beneficially Owned Beneficially Owned
Positions and Offices with the Periods Served Directly or Indirectly Directly or Indirectly Directly or Indirectly
Corporation Age As a Director on September 28, 2001 on September 28, 2001 on September 28, 2001
NOMINEES FOR ELECTION BY CLASS A COMMON STOCK
Warren T. Braham, Attorney and 69 August 1, 1978 1,978 247 .02
Retired Banker to date
Allan L. Sher, Retired Senior 69 February 5, 1997 52,500 0 .28
Executive of Securities Brokerage to date
Industry
NOMINEES FOR ELECTION BY CLASS B COMMON STOCK
Merle Fabian, Retired Librarian 63 March 20, 1990 226,319(1) 234,533(1) 13.9
to date
Leslie H. Goldberg,(2) President of 71 December 5, 1972 499,233(3) 500,997(3) 29.7
the Corporation to date
Stanley H. Katzman, Senior Computer 61 December 2, 1997 195,502(4) 189,444(4) 11.3
Specialist, National Institutes of to date
Health
A. Joseph Levy, Retired Merchant; 67 June 21, 1988 94,680(5) 53,945(5) 3.4
Senior Vice President and Secretary to date
of the Corporation since December 2,1997
Ruth E. Macklin,(2) Retired Educator; 72 February 14, 1978 184,585(6) 183,407(6) 10.9
Senior Vice President and to date
Treasurer of the Corporation
since December 4, 1990
Irvin Clark, General Manager 68 December 1, 1998 20,758(7) 0 .11
of the Corporation to date
All Directors and Executive Officers
as a group 1,275,555 1,162,573 69.6
(1) Does not include 155,898 shares each of Class A and Class B Common Stock
held as co-trustee with Leslie H. Goldberg, the amount of said shares are
included in the number of shares held by Mr. Goldberg-see footnote 3.
(2) Mr. Leslie H. Goldberg and Ms. Ruth E. Macklin are the trustees of the
Bowl America Incorporated Employee Stock Ownership Plan which owns 249,116
shares of Class A Common Stock. Said shares are not included in the above
table. Voting rights are vested in the employees.
(3) Includes 155,898 shares each of Class A and Class B Common Stock held as
co-trustee with Merle Fabian.
(4) Includes 181,396 shares each of Class A and Class B Common Stock held by
Mr. Katzman as co-trustee.
(5) The shares of stock are owned by the Levy Family LTD Partnership.
(6) Includes 52,337 shares of Class A and 51,198 shares of Class B Common
Stock held by Ms. Macklin as co-trustee.
(7) Includes 38 shares of Class A held by Mr. Clark's wife.
There is sole vesting and voting power of all the shares directly owned by
the directors, and sole vesting and voting power of the shares held by the
directors' respective spouses are vested in them.
Mr. Warren Braham is the only nominee for Director who is on the Board of
Directors of another public Corporation. Mr. Braham is on the Board of Direc-
tors of Amendment I, Inc., a newspaper. Mr. Allan L. Sher is an outside
director and trustee of three of Sun America's Mutual Funds.
Mr. Leslie H. Goldberg and Ms. Merle Fabian are brother and sister.
Together they own directly or indirectly 725,552 shares of Class A Common Stock
and 735,530 shares of Class B Common Stock of the Corporation.
As of the last filing of Form 13-G with the Securities and Exchange
Commission, Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 239,667 shares
of Bowl America Incorporated Class A Common Stock as of December 31, 2000
which amounts to 6.70% of the outstanding Class A Common Stock,
all of which shares are held in portfolios of DFA Investment Dimensions Group
Inc., a registered open-end investment company, or a series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group Trust
and DFA Participation Group Trust, investment vehicles for qualified employee
benefit plans, for all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
Ida Goldberg, the widow of C. Edward Goldberg, owns directly 8,881 shares
and 127,615 shares as trustee, of Class B Common Stock which amounts to
approximately 9.2% of the outstanding Class B Common Stock. She also owns
directly 26,296 shares and 127,615 shares as trustee, of Class A Common
Stock. Mrs. Goldberg is a trustee with Mr. Leslie H. Goldberg and Ms. Merle
Fabian of 155,898 shares each of Class A and Class B Common Stock, which shares
are shown in the preceding table.
Under federal securities law, the Corporation's directors, certain officers,
and persons holding more than ten percent of any class of the Corporation's
common stock are required to report, within specified monthly and annual due
dates their initial ownership in any class of the Corporation's common stocks
and all subsequent acquisitions, dispositions, or other transfers of interest
in such securities, if and to the extent reportable events occur which require
reporting by such due dates. The Corporation is required to describe in this
proxy statement whether it has knowledge that any person required to file such
a report may have failed to do so in a timely manner. In this regard, all of
the Corporation's directors and officers satisfied such filing requirements.
The foregoing is based upon written representations and information provided
to the Corporation by the persons required to make such filings.
TRANSACTIONS WITH DIRECTORS AND OFFICERS
The Directors of the Corporation who are not officers receive a fee for
attendance at each Board of Directors meeting. During the past fiscal year the
fee was $1,150.00 for each meeting. The Board of Directors meets quarterly, and
there were four Board meetings this past fiscal year. All the Directors except
Stanley Katzman, who missed one meeting, attended all of such meetings. The
Corporation has a standing audit and compensation committee consisting of
directors Warren Braham, Allan L. Sher, and Stanley Katzman all of whom are
independent directors. The committee met four times in the past fiscal year
with full attendance at each meeting except Stanley Katzman, who missed one
meeting. There is no nominating committee or committee performing a similar
function.
The Corporation's Employment Agreement with Mr. Leslie H. Goldberg (71 years
old) dated July 3, 2000 expired July 1, 2001 and was extended to the end of
the next fiscal year. This agreement provides for an annual salary of $102,000
with an annual bonus of 2% of the Corporation's and its subsidiaries'
consolidated annual net income prior to income taxes, in excess of $2,500,000.
In the event that he leaves the employ of the Corporation at the termination of
the contract or becomes disabled during the term thereof so that he cannot carry
on his duties as President, he shall act as a consultant and shall receive
one-half the average of his previous three years compensation for a term equal
to the number of years that he had been President of the Corporation.
The Corporation's Employment Agreement with Mr. Irvin Clark (68 years old)
as General Manager is for a term of two years commencing January 1, 2001 and
expiring on December 31, 2002. This agreement provides for an annual salary
of $140,000.00.
The other executive officers of the Corporation are A. Joseph Levy (Senior
Vice President and Secretary), 67 years old, and Ms. Macklin (Senior Vice
President and Treasurer), 72 years old. Both are major stockholders.
Mr. C. Edward Goldberg died on February 28, 1990 and pursuant to the Corpor-
ation's agreement with Mr. Goldberg it is required to pay Ida Goldberg, his
widow, the sum of $20,000 per year, payable in monthly installments for her
life. These payments are substantially funded by insurance on the life of Mr.
Goldberg. The Corporation was the owner and beneficiary under the policy.
FINANCIAL STATEMENTS
Report of the Audit Committee on Financial Statements
The Audit Committee oversees the financial reporting process, the systems of
internal accounting and financial controls, the performance and independence of
the independent auditors, the annual audit of Bowl America Incorporated's
financial statements and related matters. A copy of the written charter for the
Audit Committee, which was adopted by the Board of Directors, is attached to the
Proxy Statement as Appendix A. The Audit Committee is composed entirely of
independent Directors in accordance with the applicable independence standards
of the American Stock Exchange.
The Audit Committee: (1) reviewed and discussed with management Bowl
America's audited financial statements for the year ended July 1, 2001;
(2) discussed with the independent auditors the matters required by Statement
on Auditing Standards No. 61, "Communication with Audit Committees", as amended
by Statement on Auditing Standards No. 90, "Audit Committee Communications";
(3) received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1, "Independence
Discussions with Audit Committees"; (4) considered whether the provision of
non-audit services is compatible with maintaining the auditors' independence;
and (5) discussed with the auditors the auditors' independence.
Based on the review and discussion, the Audit Committee recommended to the
Board of Directors that the audited financial statements for the year ended
July 1, 2001, be included in Bowl America Incorporated's Annual Report on
Form 10-K for filing with the Securities and Exchange Commission.
The Audit Committee
Warren T. Braham, Chairman Allan L. Sher Stanley H. Katzman
AUDIT AND CONSULTING FEES PAID TO PRINCIPAL AUDITOR
Deloitte & Touche LLP acts as the principal auditor for Bowl America
Incorporated and provides certain consulting services. For the fiscal year
2001, Deloitte & Touche charged the following audit and consulting fees.
AUDIT FEES - Fees incurred in the audit of Bowl America's annual financial
statements and the quarterly reviews of Bowl America's interim reports were
$76,900.
ALL OTHER FEES - Fees of $42,355 related to matters not described above,
including income tax services and advice of $35,455, and reviews required by
non-regulatory bodies of $6,900.
EXECUTIVE COMPENSATION
The following table shows the compensation received by the President, who is
the Chief Executive Officer, for the three fiscal years ending July 1, 2001.
The other executive officers, namely A. Joseph Levy, Senior Vice President and
Secretary and Ruth E. Macklin, Senior Vice President and Treasurer receive com-
pensation of less than $100,000 per year. In fiscal 2001, A. Joseph Levy and
Ms. Macklin each received compensation of $8,500 for the fiscal year. There
are no restricted stock awards, no stock option grants and no stock appreciation
rights. There is no pension plan.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
(1) (2) (3) (4) (5) (6) (7) (8) (9)
Name and Other Restricted
Principal Fiscal Annual Stock Options/ LTIP All Other
Position Year Salary Bonus Compensation Awards SAR's(#) Payouts Compensation
Leslie Goldberg, 2001 $102,000 $ 78,192 $8,136 $0 0 $0 $0
President and 2000 $102,000 $ 54,628 $9,053 $0 0 $0 $0
Chief Executive 1999 $102,000 $ 45,430 $8,861 $0 0 $0 $0
Officer
The Compensation Committee has the responsibility for negotiating the
compensation of the President, Leslie H. Goldberg, who is the Chief
Executive Officer of the Corporation. The President is responsible for
determining the compensation of the other executive officers and all other
management employees. The Committee, in negotiating the President's
compensation, takes into account his performance and his contribution to the
Corporation's functions. The Committee thought it important that there be
an incentive which is accomplished by a bonus based on the income of the
Corporation. The terms of the President's current contract are the same as
the terms of his prior contract. The President does participate with the
employees in the Profit Sharing Plan and the Employee Stock Ownership Plan.
The Compensation Committee
Warren T. Braham, Chairman Allan L. Sher Stanley H. Katzman
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The following graph shows changes over the past five fiscal year period in
the value of $100 invested in (1) Bowl America Incorporated Class A Common
Stock, (2) the American Stock Exchange Market Index, and (3) the Peer Group
consisting of 16 companies in the business Industry Group No.715, Sporting
Activities. It is assumed that all dividends were reinvested.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG BOWL AMERICA INC., AMEX MARKET INDEX AND PEER GROUP INDEX
FISCAL YEAR ENDING
COMPANY 1996 1997 1998 1999 2000 2001
BOWL AMERICA INC. 100 105.74 131.54 116.16 153.06 213.17
AMEX MARKET INDEX 100 106.35 122.96 120.96 139.08 136.22
PEER GROUP INDEX 100 117.37 189.96 164.94 82.77 96.46
PROFIT SHARING PLAN
The Board of Directors adopted a profit sharing plan for its employees which
became effective on June 29, 1975, and which has been approved by the Internal
Revenue Service. The following shows the name of each person named in the pre-
ceding table and shows for each named person and for all of the Directors and
Officers of the Corporation as a group, the amount allocated to their accounts
in trust from the contributions of the Corporation for the fiscal year ending
July 1, 2001 under its employee's profit sharing plan in Column (B), from con-
tributions since the inception of the plan in Column (C), and from other
accruals under the plan in Column (D), which accruals consist of a share of
forfeitures resulting from employees covered by the plan who leave the Corpor-
ation's employment and interest on plan investments.
A B C D
Leslie H. Goldberg $3,452 $79,150 $400,341
All Directors and Officers
including the one named above
and Director Irvin Clark $6,089 $125,790 $600,112
Directors as such do not participate in the Corporation's employee profit
sharing plan. All employees, including officers of the Corporation, are
eligible to commence participation under the Plan after completing a minimum of
1,000 hours continuous employment during the Corporation's fiscal year. Actual
payment of accounts to participants or their beneficiary is deferred until
retirement, disability, or death. In the event of termination of employment,
the vested portion, if any, is paid. Accounts become vested after three (3)
years of service according to a graduated scale until 100% is vested after
seven (7) years of service. No estimate can be made of the annual benefits on
the retirement of a particular person because the amount set aside each year
depends on the earnings of the Corporation for such year. The amount of the
contribution is within the discretion of the Corporation's Board of Directors
and can only be paid from profits. The Board of Directors made a contribution
of $160,000 including any expenses incurred by the Trust paid by the Corpora-
tion for the fiscal year 2001. The contribution is made to a trust (Bowl
America Incorporated Profit Sharing Trust). Contributions of the Corporation
to the trust and forfeitures of terminated members are allocated in proportion
to compensation with the Corporation. Earnings of the trust are allocated in
proportion to balances in account.
1987 EMPLOYEE STOCK OWNERSHIP PLAN
The Board of Directors adopted the Bowl America Incorporated 1987 Employee
Stock Ownership Plan (the "ESOP") on March 31, 1987, and secured a satisfactory
ruling from the Internal Revenue Service. All employees of the Corporation and
certain subsidiaries become participants on the last day of the fiscal year or
December 29 following the date on which they have been employed for one year
with at least 1,000 hours of service. The Board of Directors of the Corpora-
tion has the discretion to declare each year a cash amount or a specified
number of shares of Class A Common Stock ("Common Stock") that will be contri-
buted to the ESOP. On June 26, 2001, the Board of Directors has made a
contribution valued at $165,100 including 13,000 shares and any expenses
incurred by the Plan which were paid by the Corporation for fiscal year 2001.
Corporation contributions are allocated to employees who are participants on the
last day of the fiscal year through a formula based upon the participant's
compensation. Employee contributions to the ESOP are not permitted. The
trustees of the ESOP, Leslie Goldberg and Ruth Macklin, have the exclusive
authority to manage the trust in which ESOP contributions are deposited and
are obligated to invest the cash portion of ESOP contributions primarily in
the Corporation's Common Stock. The trustees are permitted to borrow money
to purchase Common Stock for the trust.
As of the last day of the fiscal year, eligible participants are credited
with their proportionate share of the trust's assets. A participant's
interest vests and is nonforfeitable if while employed by the Corporation or
participating subsidiaries he attains at least 65 years of age, becomes totally
or permanently disabled or dies. Also, a participant's interest vests and is
nonforfeitable to the extent and in the percentage set forth in a schedule in
the ESOP. Under this schedule, a participant's interest is 100 percent
vested after seven years of service. Vested amounts are distributed upon
retirement, disability, or death. If termination of service occurs prior to
the occurrence of those events, payment may be made or deferred until the
participant attains age 65. As determined by the participant, distributions
are made in cash or Common Stock.
The Corporation may terminate or amend the ESOP but not in such a way as
would adversely affect any participant's vested benefits. The trustees
have the right to vote the Common Stock in the trust subject to the direction
of each participant with respect to the shares allocated to his account.
As of the end of fiscal 2001, there were 671 participants in the ESOP. This
year, no shares of Class A Common Stock will be allocated to the account of
Leslie H. Goldberg, President. No other Executive Officer or Director except
Irvin Clark participates in the Plan. All employees as a group will receive
an aggregate of 16,000 shares of Class A Common Stock.
PROPOSALS OF SECURITY HOLDERS
Proposals of stockholders intended to be presented at the 2002 Annual
Meeting, which presently is expected to be held in December 2002, must be
received by the Secretary of the Corporation, 6446 Edsall Road, Alexandria,
Virginia 22312 no later that June 28, 2002, in order for them to be considered
for inclusion in the 2002 Proxy Statement. A stockholder desiring to submit
a proposal to be voted on at the next year's Annual Meeting, but not desiring
to have such proposal included in next year's Proxy Statement relating to
that meeting, should submit such proposal to the Company by September 12,2002.
Failure to comply with that advance notice requirement will permit management
to use its discretionary voting authority if and when the proposal is
raised at the Annual Meeting without having had a discussion of the proposal
in the Proxy Statement.
RELATIONSHIP OF CORPORATION WITH ITS AUDITORS DELOITTE & TOUCHE
The Board of Directors has considered all of the professional services
rendered by its auditors, Deloitte & Touche, and was of the opinion that
these services had no effect on the independence of said accounting firm.
The Board of Directors, prior to authorizing Deloitte & Touche to provide
any non-audit services, considered that such services would have no effect
on the independence of said accounting firm. A representative of Deloitte &
Touche is expected to attend the Annual Meeting and will be given the
opportunity to make a statement and to respond to the appropriate questions.
This firm of independent accountants is not and has never been financially
interested in the Corporation or connected with it except as auditors, tax
consultants or advisors.
OTHER MATTERS
Management does not intend to bring any other matters before the meeting
and does not know of any other matters to be brought before the meeting by
any others. If any other matter should come before the meeting, it is the
intention of the persons named in the accompanying proxy to vote the proxy
in accordance with their best judgment.
By Order of the Board of Directors
A. Joseph Levy
Secretary
APPENDIX A
BOWL AMERICA INCORPORATED
AUDIT COMMITTEE CHARTER
The primary function of the audit committee is to assist the board in fulfilling
its oversight responsibilities by reviewing the financial information that
will be provided to the shareholders and others, the systems of internal
controls management and the board of directors have established and all
audit processes.
The Board of Directors of Bowl America Inc. hereby constitutes and establishes
an audit committee with authority, responsibility and specific duties as
described below.
COMMITTEE COMPOSITION
The committee shall be comprised of three directors, two of whom must be
independent directors. At least one of the independent directors must be
financially literate. One non-independent director is permitted with board
approval and proxy disclosure, under exceptional and limited circumstances;
provided, however, that such person may not be a current employee or an
immediate family member of such employee.
A committee member must be free of any relationship that could influence his
or her judgement as a committee member. A committee member may not be
associated with a major vendor to, or customer of the company. When there is
some doubt about independence, the director should recluse himself from any
decision that might be influenced by the lack of independence.
GENERAL RESPONSIBILITIES
The audit committee provides open avenue of communication between the indepen-
dent accountants and the board of directors.
The audit committee must report committee actions to the full board of directors
and may make appropriate recommendations.
The audit committee has the power to conduct or authorize investigations into
matters within the committee's scope of responsibilities. The committee is
authorized to retain independent counsel, accountants or others it needs to
assist in an investigation.
The committee will meet at least four times each year and more frequently if
circumstances dictate. Meetings may be conducted by telephone, fax or e-mail
if needed. The audit committee chairman has the power to call a committee
meeting whenever he or she thinks there is a need. An audit committee member
should not vote on any matter in which he or she is not independent. The
committee may ask members of management or others to attend the meeting and is
authorized to receive all pertinent information from management.
The committee will do whatever else the law, the company's charter or bylaws or
the board of directors require.
RESPONSIBILITY FOR ENGAGING INDEPENDENT ACCOUNTANTS
The audit committee shall approve the independent accountants selected by
management for company audits. The committee's selection is subject to
approval by the full board of directors. The audit committee also will
review fees paid to the independent accountants for annual audit and review
and approve dismissal of independent accountants.
The audit committee will confirm and assure the independence of the independent
accountants including a review of management consulting services provided by
the independent accountants and the fees paid to them.
The audit committee will consider, in consultation with the independent
accountants and the controller, the audit scope and procedural plans made by
the independent accountants.
The audit committee will listen to management and the primary independent
auditor if either thinks there might be a need to engage additional auditors.
The audit committee will decide whether to engage an additional firm and, if so,
which one.
RESPONSIBILITY FOR REVIEWING ANNUAL EXTERNAL AUDIT AND REVIEW OF
QUARTERLY AND ANNUAL FINANCIAL STATEMENTS
The audit committee will ascertain that the independent accountants view the
board of directors as its client, that they will be available to the full
board of directors at least annually and that they will provide the committee
with a timely analysis of significant financial reporting issues.
The audit committee will ask management and the independent accountants about
significant risks and exposures and will assess management's steps to minimize
them.
The audit committee will review the following with the independent accountants:
a. The adequacy of the company's internal controls, including computerized
information system controls and security.
b. Any significant findings and recommendations made by the independent
accountants, together with management's responses to them.
Shortly after the annual audit examination is completed, the audit committee
will review the following with management and the independent accountants:
a. The company's annual financial statements and related financial
statements.
b. The independent accountant's audit of and report on the financial
statements.
c. The auditor's qualitative judgments about the appropriateness, not just
the acceptability, of accounting principles and policies, clarity of
financial statements and related disclosures, unusual transactions,
timing and recording of significant transactions and how aggressive or
conservative the accounting principles and underlying estimates are.
d. Any serious difficulties or disputes with management encountered during
the audit.
e. Anything else about the audit procedures or findings that the S.E.C.,
AICPA or GAAS require the auditors to discuss with the committee.
The audit committee will review annual filings with the S.E.C. and other
published documents containing the company's financial statements and will
consider whether the information in the filing is consistent with the informa-
tion in the financial statements.
The audit committee will review interim financial reports with management and
the independent accountants before those interim reports are released to the
public or filed with the S. E. C. or other regulators.
PERIODIC RESPONSIBILITIES
Review and update the committee's charter annually.
Review legal and regulatory matters that may have a material effect on the
company's financial statements, compliance policies and programs and reports
from regulators.
Prepare proxy statement disclosure of the existence of an audit committee,
the independence of the members, and a report setting forth:
a. The audit committee's review and discussion of the financial statements
with management.
b. The audit committee's discussion with the independent auditors of those
matters required by SAS 61, "Communication with Audit Committees".
c. The audit committee's receipt from independent auditors of the written
independence disclosures required by ISB 1 and the discussion with them
of the auditor's independence.
d. The audit committee's recommendation to the board of directors that the
audited financial statements be included in the company's annual report
on Form 10-K.
Prepare proxy statement disclosure of the existence of the audit committee
charter with a copy included as an appendix every three years.
Meet with the independent accountants and management in separate executive
sessions to discuss any matters the committee or these groups believe should
be discussed privately with the audit committee.