REXHALL INDUSTRIES, INC.
46147 7th Street West
Lancaster, California 93534
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of Rexhall Industries, Inc.
("Company") will be held at the Lancaster plant, 46147 7th Street West,
Lancaster, California, 93534 on Tuesday, May 22, 2001, at 2:00 p.m., P.D.T.,
for the following purposes:
1. To elect its Board of Directors to serve for the ensuing year;
2. To transact such other business as may properly come before
the meeting or any adjournments thereof.
The stock transfer books of the Company will not be closed, but only
holders of common stock of record at the close of business on April 16, 2001
will be entitled to vote at the meeting.
Your proxy is enclosed. You are cordially invited to attend the
meeting,but if you do not expect to attend, or if you plan to attend, but
desire the proxy holders to vote your shares, please date and sign your proxy
and return it in the enclosed postage paid envelope. The giving of this
proxy will not affect your right to vote in person in the event that you
find it convenient to attend.
By order of the Board of Directors
REXHALL INDUSTRIES, INC.
Cheryl L. Rex
Corporate Secretary
DATED: April 16, 2001
Lancaster, California
REXHALL INDUSTRIES, INC.
46147 7th Street West
Lancaster, California 93534
ANNUAL MEETING OF SHAREHOLDER
TO BE HELD MAY 22, 2001, 2:00 P.M., P.D.T
PROXY STATEMENT
SOLICITATION OF PROXIES
Your proxy is solicited on behalf of the Board of Directors of Rexhall
Industries, Inc. ("Company") for use at the annual meeting of shareholders to
be held on the above date at 46147 7th Street West, Lancaster, California,
93534. If a proxy in the accompanying form is duly executed and returned, the
shares represented by the proxy will be voted as directed. If no direction
is given, the shares will be voted for the election of the five- (5) nominees
for director named herein. A proxy given by a shareholder may be revoked at
any time before it is exercised by notifying the Secretary of the Company in
writing of such revocation, by giving another proxy bearing a later date or
by voting in person at the meeting.
The cost of this solicitation of proxies will be borne by the Company.
Solicitations will be made by mail. In addition the officers and regularly
engaged employees of the Company may, in a limited number of instances,
solicit proxies personally or by telephone. The Company will reimburse
banks, brokerage firms, other custodians, nominees and fiduciaries for
reasonable expenses incurred in sending proxy materials to beneficial owners
of common stock of the Company.
The Company's annual report, including financial statements for its
fiscal year ended December 31, 2000, is being mailed to all shareholders
concurrently herewith. The annual report is not part of the proxy materials.
The Company's annual report on Form 10-K for the year ended December 31,
2000, as filed with the Securities and Exchange Commission, is available
without charge upon written request from the Secretary of the Company at the
address set forth above in the notice.
Holders of common stock of record at the close of business on April 16,
2001 will be entitled to vote at the meeting. There were 3,057,350 shares of
common stock outstanding on that date. Each share is entitled to one vote
and a majority of the shares of common stock outstanding is necessary to
constitute a quorum for the meeting. The shareholders have cumulative voting
rights in the election of directors. Under the cumulative voting method, a
shareholder may multiply the number of shares owned by the number of
directors to be elected and cast this total number of votes for any one
candidate or distribute the total number of votes in any proportion among as
many candidates as the shareholder desires. A shareholder may not cumulate
his votes for a candidate unless such candidate's name has been placed in
nomination prior to the voting and unless a shareholder has given notice at
the meeting prior to the voting of his intention to cumulate his votes. If
any shareholders give such notice, all shareholders may then cumulate their
votes.
ELECTION OF DIRECTORS
The Company's directors are elected annually to serve until the next
annual meeting of shareholders and until their successors are elected and
qualified. The number of directors presently authorized in the By-laws of
the Company is no less than four- (4) but no more than seven- (7).
Unless otherwise directed by shareholders, the proxy holders will vote
all shares represented by proxies held by them for the election of the
maximum number of the following nominees, all of whom are now members of and
constitutes the Company's Board of Directors. The Company is advised that
all of the nominees have indicated their availability and willingness to
serve if elected. In the event that any nominees become unavailable or
unable to serve as a director of the Company prior to voting, the proxy
holders will vote for a substitute nominee in the exercise of their best
judgment.
Information Concerning Nominees. Information concerning the nominees based
on data furnished by them is set forth below:
William J. Rex, 50
Mr. Rex is a founder of the Company, and has served as the Company's
Chief Executive Officer from its inception as a general partnership to date.
Upon commencing operations in corporate form, Mr. Rex became the Company's
President and Chairman of the Board, offices that he continues to hold. From
March 1983 until founding the Company, Mr. Rex served in various executive
capacities for Establishment Industries, Inc., a manufacturer of Class A and
Class C motorhomes which was acquired in June 1985 by Thor Industries, Inc., a
large manufacturer of recreational vehicles. His last position with
Establishment Industries, Inc. was President. From 1970 until March 1983,
Dolphin Trailer Company, a manufacturer of a wide range of recreational
vehicles products, employed Mr. Rex in various production capacities. At the
time he left Dolphin Trailer Company (which changed its name to National RV,
Inc. in 1985), Mr. Rex was Plant Manager in charge of all production and
research and development.
Donald C. Hannay, Sr., 73
Mr. Hannay joined the Company in December 1987 and is responsible for
product sales. He became a director in May 1989. From April 1982 until
August 1987, he was employed by Establishment Industries, Inc. as Vice
President, Sales and Marketing, where he built Establishment's dealer
network and was responsible for dealer sales. From August 1987 until
joining the Company, he was employed as General Sales Manager by Komfort
Industries of California, Inc., a recreational vehicle manufacturer located
in Riverside, California.
Robert A. Lopez, 61
Mr. Lopez is President of Nickerson Lumber and Plywood. Mr. Lopez
started his employment with Nickerson as an outside salesman in 1969 and in
1980 he became a partner and purchased Nickerson Lumber stock. He was
elected as President of Nickerson in 1981. His background in marketing
products is primarily to residential builders, manufactured housing and
recreational vehicle assemblers. Mr. Lopez is a great asset to further
developments of marketing Rexhall products in both the domestic and global
markets. In his spare time, Mr. Lopez is captain of the San Fernando Rangers,
a non-profit organization working to use horses as therapeutic conditioning
for mentally and physically disabled children.
Frank A. Visco, 56
Mr. Visco was elected to the Board of Directors on December 17, 1998.
Mr. Frank A. Visco is owner of Frank A. Visco & Associates insurance
company. Mr. Visco began his insurance career in 1970 with New York Life
Insurance Company as a Sales Manager in their Antelope Valley office. From
1975-1984 he was the co-owner of APS Co. Inc., producing aircraft parts for
the aircraft industry. In 1980, in addition to his insurance activities, he
began developing properties in Los Angeles and Kern County.
Dr. Dennis K. Ostrom, 59
Dr. Ostrom was elected to the Board of Directors on July 12, 1999. Dr.
Ostrom received his BS, MS and Ph.D. degrees in Engineering from the
University of California, Los Angeles. He majored in structural mechanics
and dynamics. Dr. Ostrom is a Professional Civil Engineer in the State of
California. Dr. Ostrom was employed by Southern California Edison Company
from 1970 - 1996. His position was that of a Consultant. His job was
formulating technical strategy and policy and relating the same to the
California Energy Commission, California Public Utilities Commission, Nuclear
Regulatory Commission and local regulatory agencies.
Dr. Ostrom has written several papers about risk management and how this
relates to equipment purchasing and risk mitigation strategies, including
insurance purchase decisions. While at Edison, he applied this expertise
as a private consultant (with knowledge and consent of Edison) for other
utilities and organizations, i.e., United States National Academics of
Science and Engineering; Office of Technology Assessment, Congress of the
United States;
Coca Cola; Bonneville Power Authority; British Columbia Hydro; New Zealand
Centre for Advanced Engineering; East Bay Municipal Utility District; Puget
Sound and Power; Snohomish County Public Utility District; Central United
States Earthquake Consortium; Tennessee Valley Authority; Eugene Water &
Electric Board and Humbolt Bay Municipal Water District.
From 1988 to present, Dr. Ostrom has been a member of the Board of
Directors for Keysor Century, Inc., Saugus, California.
Currently Dr. Ostrom is an ongoing consultant for San Diego Gas &
Electric, Pacific Gas & Electric and Southern California Edison. In addition
to his consulting work, Dr. Ostrom is the Planning Commissioner for the City
of Santa Clarita.
Information Concerning Directors and Committees. During 2000, there was
the Annual meeting of the Board of Directors as well as numerous telephonic
meetings of the Board of Directors. All Directors attended the Annual
Meeting of the Board of Directors. Outside directors receive $500 per
meeting for serving the Company as members of the Board. Directors may also
be reimbursed for reasonable expenses relating to attendance at Meetings of
the Board or a Committee of the Board. All committee members attended all
meetings of their respective committees.
These are the following Committees of the Board of Directors:
Audit Committee. The Audit Committee consists of Robert A. Lopez, Frank A.
Visco and Dr. Dennis K. Ostrom. Dr. Dennis K. Ostrom was appointed to the
Audit Committee on January 1, 2000 to replace Mr. Al J. Theis. The Audit
Committee is to meet with representatives of the Company's independent
auditors and with representatives of senior management. The committee
recommends the engagement or discharge of the Company's independent auditors,
consults with the auditors as to the adequacy of internal accounting
procedures and reviews and approves financial statements and reports. The
Audit Committee met three times in 2000. The Audit Committee has no unusual
transactions or accounting practice changes to report, except as set forth
in the financial statements and the notes thereto.
Compensation Committee. The Compensation Committee consists of William J.
Rex, Robert A. Lopez and Frank A. Visco. Mr. Frank A. Visco was appointed
to the Compensation Committee on November 22, 1999 to replace Mr. Al J.
Theis. The Compensation Committee is responsible for reviewing and reporting
to the Board on the recommended annual compensation for officers including
salary, bonuses, and other forms of compensation and re-numeration and also
administers the Company's Stock Option Plan. The Compensation Committee met
two times in 2000.
The Company has no standing nominating or similar committee whose
function it is to consider or recommend nominees to the Board of Directors.
Security Ownership of Certain Beneficial Owners and Management. The
following table sets forth information regarding the ownership of the
Company's Common Stock by (I) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock,
(ii) each of the Company's directors beneficially owning Common Stock and
(iii) all of the Company's officers and directors as a group as:
Number of Percent of
Name of Beneficial Owner Shares Outstanding
or Identity of Group Beneficially Shares at
Owned (1) March 29, 2001
William J. Rex (1)..... 1,623,000 53.1%
c/o Rexhall Industries
46147 7th Street West
Lancaster, California 93534
All Directors and
Officers as a Group (6 persons) 1,649,000 53.9%
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock Shown as Beneficially owned by him,
subject to applicable community property law.
EXECUTIVE COMPENSATION
The following table sets forth certain information as to each of the
five highest paid (1) Company's executive officers whose cash compensation
exceeds $100,000 for the year ended December 31, 2000.
SUMMARY COMPENSATION TABLE
Annual Compensation
Bonus
Name and Accrued Other Annual
Principal Position Year Salary ($) Bonus($) Non-Paid Compensation (2)
William J. Rex 00 250,000 See Note (3) 5,000 ---
President & CEO 99 250,000 445,000 411,000 ---
98 250,000 295,000 310,000 ---
Donald C. Hannay, Sr. 00 62,800 161,800 12,400 ---
V.P. of Sales
& Marketing 99 61,400 201,600 20,700 ---
98 52,000 178,000 --- ---
James C. Rex (4) 00 52,000 54,000 --- ---
National Director of
Service and Warranty
(1) Note: Only three executive officers received cash compensation in
excess of $100,000.
(2) The unreimbursed incremental cost to the Company of providing
perquisites and other personal benefits during 2000 did not exceed,
as to any named officer, the lesser of $50,000 or 10% of the total
2000 salary and bonus paid to such named officer and, accordingly, is
omitted from the table. These benefits included (i) reimbursement for
medical expenses and (ii) amounts allocated for personal use of a
company-owned automobile provided to Mr. Rex.
(3) For 2000, William J. Rex earned a bonus of $491,000 of which he was
paid $486,000 leaving $5,000 in the accrued bonus account. Mr. Rex
used $384,000 of accrued bonus from 1999 to repay a loan, with
interest, the Company made to him in 1998 under the Company's Stock
Option Program. The remaining $27,000 of the $411,000 accrued bonus
from 1999 was paid to Mr. Rex in 2000. All combined, Mr. Rex was
paid $513,000 in cash for 1999 and 2000 bonuses in 2000, while he
used another $384,000 to repay the loan with interest.
(4) Mr. James C. Rex is the brother of Mr. William J. Rex. Mr. James Rex
has been employed by the Company for eight years. This is the first
year that his salary exceeded $100,000.
AUDIT COMMITTEE REPORT
To the Board of Directors of Rexhall Industries, Inc.:
The Audit Committee of the board is responsible for the providing
independent, objective oversight of the company's accounting functions and
internal controls. The Audit Committee is composed of 3 directors, each of
whom is independent as defined by the National Association of Securities
Dealer's listing standards. The Audit Committee operates under a written
charter approved by the Board of Directors. A copy of the charter is attached
to this Proxy Statement as Appendix "A".
The management is responsible for the Company's internal controls and
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statement in accordance with generally accepted auditing standards and to
issue a report thereon. The audit Committee's responsibility is to monitor
and oversee these processes.
In connection with these responsibilities, the Audit Committee met with
management and the independent accountants to review and discuss the December
31, 2000 financial statements. The Audit Committee also discussed with the
independent accountants the matters required by the Statement on Auditing
Standards No. 61 (Communication with Audit Committees). The Audit Committee
also received written disclosures from the independent accountants required
by Independence Standards Board Standard No. 1 (Independence Discussion with
Audit Committees), and the Audit Committee discussed with the independent
accountants that firm's independence.
Based upon the Audit Committee's discussions with management and the
independent accountants, the Audit Committee's review of the representations
of management and the independent accountants, the Audit Committee
recommended that the Board of Directors include the audited consolidated
financial statements in the Company's Annual Report on form 10-K for the year
ended December 31, 2000, to be filed with the Securities and Exchange
Commission.
/s/ Robert A. Lopez /s/ Dennis Ostrom /s/ Frank Visco
Chairman Secretary Board Member
COMPENSATION COMMITTEE REPORT
On August 1, 1996, the Company renewed for 5 years (expires July 31,
2001) an employment agreement with William Rex. The employment agreement
provides for an annual salary of $250,000 plus a bonus determined monthly in
the amount of 10% before bonus and taxes. Other Executive Officers are
compensated based on the following factors as determined by the Board of
Directors: (1) the financial result of the Company during the prior year or
sales commission, (2) compensation paid to executive officers in prior years,
(3) extraordinary performance during the year and (4) compensation of
executive officers employed by competitors.
Directors who are not Executive Officers are paid $500 per Board Meeting
and there are three to four Board Meetings per year.
The Company also has an incentive program under which it pays
supervisory employees involved in sales and production a cash bonus based on
specific performance criteria. The Committee members are William J. Rex,
Robert A. Lopez and Frank A. Visco.
Mr. William J. Rex does not participate in the determination of his own
compensation.
The Committee believes that the executive compensation programs and
practices described above are conservative and fair to shareholders. The
Committee further believes that these programs and practices serve the best
interests of Rexhall and its shareholders.
Respectfully submitted,
William J. Rex
Robert A. Lopez
Frank A. Visco
COMPARATIVE SHARE PERFORMANCE
The graph below compares the cumulative total shareholder return on
the Common Shares of Rexhall for the last five fiscal years with the
cumulative total return on the Standard & Poor's (S&P) 500 Index over the
same period (assuming the investment of $100 in Rexhall's Common Shares, the
S & P 500 Index and the below mentioned Peer Group Index on December 31,
1996).
REXHALL INDUSTRIES, INC.
Share Price Performance
INDEXED TOTAL RETURN - BASE 100
SOURCES: IDD Information Services via Lexis BASE YEAR = 100: 12/31/96
Company Name: 12/96 12/97 12/98 12/99 12/00
REXHALL INDUSTRIES, INC. 100.00 70.49 118.03 127.87 77.88
S & P 500 COMP-LTD 100.00 131.01 165.95 198.35 178.24
PEER GROUP INDEX
Coachmen Industries,Inc. 100.00 75.97 92.59 53.29 37.00
Monaco 100.00 134.56 100.00 119.36 69.36
Thor Industries,Inc. 100.00 156.92 163.02 157.30 121.54
{Graph not available}
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires
Rexhall's directors, executive officers, and persons who own more than ten
percent (10%) of a registered class of Rexhall's equity securities to file
with the United States Securities and Exchange Commission ("SEC") initial
reports of ownership and reports of changes in ownership of Common Shares and
other equity securities of Rexhall. Officers, directors and greater than ten
percent (10%) shareholders, are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms filed by them.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no
other reports were required, all Section 16(a) filing requirements applicable
to its officer, directors and greater than ten percent (10%) beneficial
owners were complied with on a timely basis during the fiscal year ended
December 31, 2000.
SELECTION OF INDEPENDENT ACCOUNTANTS
The firm of KPMG LLP will continue to serve Rexhall as
independent auditors for the fiscal year ending December 31, 2001. The firm
of KPMG LLP has served as independent auditors for Rexhall since
1998. Representatives of KPMG LLP are expected to be present at
the Annual Meeting and will have the opportunity to make statements and
respond to appropriate questions.
Audit Fees. The aggregate fees billed for professional services rendered for
the audit of the Company's annual financial statements for the fiscal year
ended December 31, 2000 and the reviews of the financial statements included
in the Company's Forms 10-Q for that fiscal year were $77,000.
Financial Information Systems Design and Implementation and All Other Fees:
For the fiscal year ended December 31, 2000, the Company paid no fees to its
principal accountants for professional services rendered in connection with
the operation, supervision or management of the Company's information systems
or local area network, or for the design or implementation of a hardware or
software system for aggregating source data underlying the Company's
financial statements or generating information that is significant to such
statements, taken as a whole. Since the company paid no fees to its
principal accountants for information technology services or other fees,
other than described above, the audit committee did not consider whether the
provision of such services to the Company is compatible with maintaining the
auditor's independence.
ANNUAL REPORT
Rexhall's Annual Report, containing audited financial statements for the
fiscal year ended December 31, 2000, December 31, 1999 and December 31, 1998,
accompanies or has proceeded the mailing of this Proxy Statement. Upon your
written request, Rexhall will send you, without charge, a copy of the Annual
Report on Form 10-K for the fiscal year ended December 31, 2000, including
the financial statements and schedules thereto, which Rexhall is filing with
the Securities and Exchange Commission. Rexhall's Annual Report on Form 10-K
is incorporated herein by reference. The written request must be directed to
the attention of Investor Relations at Rexhall Industries, Inc., 46147
7th Street West, Lancaster, CA 93534.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 2002 Annual
Meeting must be received at the Company's principal office no later than
December 28, 2001 in order to be considered for inclusion in the proxy
statement and form of proxy related to that meeting.
OTHER BUSINESS
The Board of Directors knows of no other matter to be acted upon at the
meeting. However, if any other matter shall properly come before the
meeting, the proxy holders named in the proxy accompanying this statement
will have discretionary authority to vote all proxies in accordance with
their best judgment.
By order of the Board of Directors
REXHALL INDUSTRIES, INC.
Cheryl L. Rex,
Corporate Secretary
DATED: April 16, 2001
Lancaster, California
<page
"APPENDIX A"
REXHALL INDUSTRIES, INC.
46147 7th St. West
Lancaster, California 93534
AUDIT COMMITTEE CHARTER
OF THE BOARD OF DIRECTORS
I. PURPOSE
The primary function of the Audit Committee (the "Committee") is to
assist the Board of Directors in fulfilling its oversight responsibilities by
reviewing: the financial reports and other financial information provided by
Rexhall Industries, Inc. (the "Corporation") to any governmental body or the
public; the Corporation's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established; and the Corporation's auditing, accounting and financial
reporting processes generally. Consistent with this function, the Audit
Committee should encourage continuous improvement of, and should foster
adherence to, the corporation's policies, procedures and practices at all
levels.
Primary Duties:
The Audit Committee's primary duties and responsibilities are to:
1. Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
2. Review and appraise the audit efforts of the Corporation's
independent accountants and the Controller, who serves as the internal
auditor.
3. Provide an open avenue of communication among the independent accountants,
financial and senior management, the Controller and the Board of Directors.
The Audit Committee will primarily fulfil these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, (as
defined by Rule 4200 (a)(15) of the National Association of Securities
Dealers listing standards, as applicable and as may be modified or
supplemented) and free from any relationship that, in the opinion of the
Board, would interfere with the exercise of his or her independent judgment
as a member of the Committee. All members of the Committee shall have past
or present employment experience in finance or accounting, professional
certification in accounting, or any other comparable experience of background
which results in an individual's financial sophistication. Committee members
may enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Corporation or an outside consultant.
The members of the committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a Chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the full
Committee membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. As part of its job to foster open
communication, the Committee should meet separately (at least annually) with
management, the Controller, and the independent accountants to discuss any
matters that the Committee or each of these groups believe should be
discussed privately. In addition, the Committee or at least its Chair should
meet with the independent accountants and management quarterly to review the
Corporation's financials consistent with the sixth item under
"Documents/Reports Review" in Article IV (below).
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review:
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review with the independent accountants and the Controller the
coordination of auditing efforts to ensure completion of coverage,
reduction of redundancy and the effective use of resources.
3. Review with the independent accountants and the Controller any
difficulties encountered during the course of the audit, including any
access restrictions to required information.
4. Review the Corporation's annual financial statements and any reports
or other financial information submitted to any governmental body, or
the public, including any certification, report, opinion, or review
rendered by the independent accountants.
5. Review the regular internal reports to management prepared by the
Controller and management's response.
6. Review with financial management and the independent accountants
the 10-Q prior to its filing or prior to the release of earnings. The
Chair of the Committee may represent the entire Committee for purposes of
this review.
Independent Accountants:
1. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness and approve the
fees and other compensation to be paid to the independent accountants. On
an annual basis, the Committee should review and discuss with the
accountants all significant relationships the accountants have with the
Corporation to determine the accountants' independence.
2. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
3. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and
accuracy of the Corporation's financial statements.
Financial Reporting Processes:
1. Review the internal audit function of the Corporation, including the
independence and authority of its reporting obligations, the proposed
audit plans for the coming year and the coordination of such plans with
the independent accountants.
2. In consultation with the independent accountants and the internal
auditors, review the integrity of the Corporation's financial reporting
processes, both internal and external, including computerized information
system controls and security.
3. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principals as applied in
its financial reporting.
4. Discuss with the independent accountants, the Chief Financial Officer,
and the Controller their qualitative judgments about the appropriateness,
not just the acceptability of financial disclosure practices used by the
Corporation, such as the degree of aggressiveness or conservatism of the
Corporation's accounting principles and underlying estimates.
5. Consider and approve, if appropriate, major changes to the Corporation's
auditing and accounting principles and practices as suggested by the
independent accountants, management, or the Controller.
6. Report in the Corporation's proxy statement whether:
(a) the Committee has reviewed and discussed the audited financial
statements with management;
(b) the Committee has discussed with the independent accountants matters
required to be discussed by Statements on Auditing Standards 61, as
may be modified or supplemented;
(c) the Committee has received the written disclosures and the letter from
the independent accountants required by Independence Standards Board
Standard No. 1, as may be modified or supplemented, and has discussed with
the independent accountants their independence; and
(d) based on the review and discussions referred to in paragraphs
(a) - (c), the Committee recommended to the Board of Directors that the
audited financial statements be included in the Corporation's Annual
Report on Form 10-K for the latest fiscal year.
Process Improvement:
1. Establish regular and separate systems of reporting to the Committee by
each of management, the independent accountants and the Controller
regarding any significant judgments made in management's preparation of
the financial statements and the view of each as to appropriateness of
such judgments.
2. Following completion of the annual audit, review separately with each
of management, the independent accountants, and the Controller any
significant difficulties encountered during the course of the audit,
including any restrictions on the scope of work or access to required
information.
3. Review any significant disagreement among management and the
independent accountants or the Controller in connection with the
preparation of the financial statements.
4. Review with the independent accountants, the Controller and management
the extent to which changes or improvements in financial or accounting
practices, as approved by the Committee, have been implemented (This
review should be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided by the Committee.)
5. Inquire of management, the independent accountants, and the Controller
about significant risks of exposure and assess the steps taken by
management and/or legal counsel to minimize such risk. Advise management
to consult further with legal counsel, if necessary.
Ethical and Legal Compliance:
1. Ensure that management has the proper review system in place to ensure
that Corporation's financial statements, reports and other financial
information disseminated to governmental organizations and the public
satisfy legal requirements.
2. Review activities, organizational structure, and qualifications of the
controller and his or her staff, including whether he or she is the
appropriate person to be in charge of the Corporation's internal auditing
functions, and whether he or she has adequate staffing and other support
necessary to adequately perform the internal auditing functions.
3. Review, with the Corporation's counsel, legal compliance matters
including corporate securities trading policies.
4. Review, with the Corporation's counsel, any legal matter that could
have significant impact on the Corporations financial statements.
5. Perform any other activities consistent with this Charter, the
Corporation's By-Laws and governing law, as the Committee or the Board
deems necessary or appropriate.
6. Conduct or authorize investigations into any matters within the
Committee's scope of responsibilities. The Committee shall be authorized
to retain independent counsel and other professionals to assist in the
conduct of any investigation.