<PAGE>
HI-SHEAR
TECHNOLOGY
CORP.
HI-SHEAR TECHNOLOGY CORPORATION
24225 Garnier Street
Torrance, California 90505-5355
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 16, 2000
--------------------
The Annual Meeting of Stockholders of HI-SHEAR TECHNOLOGY CORPORATION
will be held on October 16, 2000 at 9:30 a.m., at the Company's facility, 24225
Garnier Street, Torrance, California, to consider and act upon the following
matters:
1. The election of directors;
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only stockholders of record at the close of business on August 25,
2000, are entitled to notice of and to vote at the Annual Meeting of
Stockholders and any adjournment thereof.
By Order of the Board of Directors,
/s/ Linda A. Nespole
Linda A. Nespole
Corporate Secretary
Torrance, California
September 4, 2000
================================================================================
IMPORTANT
---------
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
IF YOU ATTEND THE MEETING AND SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN
PERSON. THANK YOU FOR ACTING PROMPTLY.
================================================================================
<PAGE>
HI-SHEAR TECHNOLOGY CORPORATION
24225 GARNIER STREET
TORRANCE, CALIFORNIA 90505-5355
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 16, 2000
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished by the Board of Directors of Hi-Shear
Technology Corporation ("Hi-Shear" or the "Company"), a Delaware corporation, to
be used in voting at the Annual Meeting of Stockholders and at any adjournment
of such meeting (the "Annual Meeting"). The Annual Meeting will be held at 9:30
a.m., local time, October 16, 2000 at the Company's facility, 24225 Garnier
Street, Torrance, California. The Annual Meeting is being held for the purpose
set forth in the accompanying Notice of Annual Meeting of Stockholders. The
Proxy Statement, the accompanying proxy card and the Notice of Annual Meeting of
Stockholders are provided to stockholders beginning on or about September 4,
2000.
RECORD DATE AND OUTSTANDING SHARES
The record date for determining stockholders entitled to vote at the
Annual Meeting is the close of business on August 25, 2000 (the "Record Date"),
at which time the Company had issued and outstanding approximately 6,670,000
shares of $.001 par value common stock (the "Common Stock"). Each share of
Common Stock outstanding on the Record Date is entitled to one vote on each
matter presented.
QUORUM AND VOTING REQUIREMENTS
The presence at the Annual Meeting of Stockholders, in person or by
proxy, of the holders of a majority of the outstanding shares of Common Stock is
necessary to constitute a quorum. Each share of Common Stock held of record on
the Record Date is entitled to one vote on each matter to be considered at the
Annual Meeting. The election of directors requires the affirmative vote of
holders representing a majority of the outstanding shares of Common Stock
present in person or by proxy at a meeting at which a quorum is present.
Shares of Common Stock represented by all properly executed proxies
received in time for the Annual Meeting will be voted, unless revoked, in
accordance with the choices specified in the proxy. Unless contrary instructions
are indicated on the proxy, the shares will be voted FOR the election of the
nominees named in this Proxy Statement as directors. Representatives of the
Company's transfer agent will assist the Company in the tabulation of the votes.
Abstentions and broker non-votes are counted as shares represented at the
meeting and entitled to vote for purposes of determining a quorum. Abstentions
will have the same legal effect as a vote "against" election of the directors.
With respect to any proposal that a broker has discretion to act upon in the
absence of voting instructions from the beneficial owner, the broker may vote
such shares absent specific voting instructions. Therefore, with respect to the
election of directors, with respect to which brokers have the discretionary
power to vote, brokers may vote such shares absent specific voting directions
from the beneficial owners of such shares.
The giving of the enclosed proxy does not preclude the right to vote in
person should the stockholder giving the proxy so desire. A proxy may be revoked
at any time prior to its exercise by delivering a written statement to the
Secretary of the Company that the proxy is revoked. A proxy may also be revoked
by presenting to the Company a later-dated proxy executed by the person
executing the prior proxy, or by attending the Annual Meeting and voting in
person.
1
<PAGE>
DISSENTERS' RIGHTS
Under Delaware law, stockholders are not entitled to any dissenters'
rights with respect to the election of directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Common Stock as of August 25, 2000, by (i) each person known to
the Company to own beneficially more than 5% of the outstanding shares of the
Common Stock, (ii) each director, including the nominees for director and each
executive officer, and (iii) all executive officers and directors as a group:
<TABLE>
<CAPTION>
Percentage of
Shares of Common Stock Outstanding
Beneficially Owned Common Stock (2)
------------------ ----------------
<S> <C> <C>
George W. Trahan (1)..................... 2,690,000 40.3
Thomas R. Mooney (1)..................... 2,269,580 34.0
David W. Einsel.......................... 19,000 *
Jack Bunis............................... 16,000 *
All executive officers and directors
as a group (4 persons).............. 4,994,580 74.3
-----------------------
</TABLE>
*Less than 1% of the outstanding shares of Common Stock
(1) The address for each of the named persons is c/o Hi-Shear Technology
Corporation, 24225 Garnier Street, Torrance, CA 90505-5355. The named
persons possess sole voting and investment power with respect to the
shares listed (except to the extent authority is shared with spouses
under applicable law).
(2) Based on approximately 6,670,000 shares of Common Stock outstanding as
of the date of this Proxy Statement.
ELECTION OF DIRECTORS
DIRECTORS
The Bylaws of the Company authorize the Board of Directors to fix the
number of directors up to a maximum of seven (7) directors. The Board of
Directors has currently fixed the number of directors at four (4), all of whom
will be elected at the Annual Meeting of Stockholders. Shares of Common Stock
cannot be voted for more than four (4) directors and each will be elected at the
Annual Meeting to hold office until the next Annual Meeting until their
respective successors have been duly elected and qualified.
All of the four (4) nominees for election to the Board of Directors are
members of the current Board of Directors. Each of the nominees has consented to
be named in this Proxy Statement and to continue to serve as a director if
elected. However, should any nominee named herein for the office of directors
become unable or unwilling to accept nomination or election, the Board of
Directors may recommend and nominate another person in the place and stead of
2
<PAGE>
such person. The Board of Directors has no reason to believe that any substitute
nominee will be required. Unless otherwise directed, the persons named in the
accompanying proxy will vote the shares represented only for the election as
directors of the four (4) nominees named below.
NAME AND AGE PRESENT OCCUPATION AND OTHER INFORMATION
------------ ----------------------------------------
George W. Trahan......................President and Chief Executive Officer of
Age 51 the Company. In April 2000 the Board of
Directors appointed Mr. Trahan Chief
Executive Officer and Co-chairman. Mr.
Trahan joined the Company as Vice
President in July 1990 and was elected
as a Director and Executive Vice
President from 1993 until his election
as President in June 1998. Before
joining the Company, he served as Vice
President of Cherry Textron, a leading
supplier of fasteners to the commercial
aerospace and automobile market from
1985 to 1990. From 1978 to 1985, Mr.
Trahan served as Group Controller at the
corporate headquarters of Textron Inc.
advising management regarding strategic
planning, capital investment and
acquisitions. Prior to that, he served
as Manager of Corporate Audit for
Textron's international operations and
also served as an engineer at Texas
Instruments Incorporated. Mr. Trahan
received his Bachelor of Science in
Industrial Engineering from Clarkson
University and has attended the Harvard
Advanced Management Program.
Thomas R.Mooney......................Co-chairman of the Board of the Company.
Age 63 Mr. Mooney retired from active
employment and as Chief Executive
Officer in February 2000. Mr. Mooney
served as Chief Executive Officer and
Chairman of the Board from June 1994
until February 2000. Mr. Mooney served
as President of the Company from March
1988 until June 1998. Mr. Mooney served
as Vice President of Programs at Quantic
Industries, a component supplier and
subsystems manufacturer in the ordnance
and electronics business, from 1982 to
1988. After retiring from the U.S. Army
as a Lieutenant Colonel in 1979, Mr.
Mooney served as a Program Manager for
Thiokol Corporation. He is a graduate of
the U.S. Military Academy and holds a
Masters of Science in Physics from Penn
State University and a Masters of
Business Administration from Old
Dominion University.
David W. Einsel.......................Director. Mr. Einsel became a Director
Age 71 in March 1994. He served in the U.S.
Army from 1950 to 1989, retiring with
the rank of Major General. As a general
officer, Mr. Einsel served as the Deputy
Commander, Army Research and Development
Command, Deputy and Assistant Secretary
Defense for Atomic Energy and served on
the President's Task Force for
Reorganization of Nuclear Weapons
Employment. After retiring from the Army
in 1989, he served as a National
Intelligence Expert at large to the
Director of the Central Intelligence
Agency. Mr. Einsel was elected to the
U.S. Army Chemical Corps Hall of Fame.
Jack Bunis............................Director. Mr. Bunis became a Director in
Age 65 September 1996. He is currently the
Founder and Principal of a management
consulting firm, Bunis & Associates. Mr.
Bunis was the Chairman, President, and
Chief Executive Officer of Cair Systems,
Inc., an Orange County, California based
provider of information and automation
services to the insurance and health
care industries from 1988 to 1995.
Previously, Mr. Bunis held the position
of Senior Vice President and Chief
Operating Officer at Mitchellmatix, a
division of Cordura Corporation.
3
<PAGE>
The Board of Directors meets during the Company's fiscal year to review
significant developments affecting the Company and to act on matters requiring
board approval. The Board of Directors met two (2) times and acted by unanimous
written consent one (1) time during the 2000 fiscal year. During such period,
all members of the Board participated in at least 75% of all Board and
applicable committee meetings.
The Company is not aware of any arrangements that may result in a
change of control.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE
"FOR" THE ELECTION OF THE ABOVE NOMINEES FOR DIRECTOR.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established audit, executive, compensation,
stock options and nominating committees to devote attention to specific subjects
and to assist it in the discharge of its responsibilities. The Audit,
Compensation Committee and the Nominating Committee consist solely of the
"independent" directors of the Company. The Executive and Stock Option Committee
consists of Messrs. Trahan and Mooney. The functions of those committees, their
members and the number of meetings held during the 2000 fiscal year are
described below:
AUDIT COMMITTEE. The Audit Committee was established to recommend to
the Board of Directors the appointment of the firm selected to be the
independent public accountants for the Company. On June 12, 2000 the Board of
Directors adopted a written Audit Committee Charter (Appendix I). The Audit
Committee monitors the performance of such firm's reviews and approves the scope
of the annual audit and quarterly reviews and evaluates with the independent
public accountants the Company's annual audit and quarterly and annual financial
statements. The Audit Committee reviews with management the status of the
internal accounting controls to evaluate any problem areas having a potential
financial impact on the Company. Any potential problem areas may be brought to
its attention by management, the independent public accountants or the Board of
Directors and the Audit Committee evaluates all public financial reporting
documents of the Company. The Audit Committee is comprised of two (2)
independent directors having no financial, family, or other material personal
ties to management. Messrs. Einsel and Bunis are members of the Audit Committee
and are compensated at the rate of $1,000 per year for serving on the committee.
The Audit Committee met five (5) times during the fiscal year.
COMPENSATION COMMITTEE AND NOMINATING COMMITTEE. The Compensation
Committee is responsible for making recommendations to the Board of Directors
concerning the annual compensation of all executive officers and key employees.
The Nominating Committee was established to recommend and nominate qualified
persons to serve as independent directors of the Company. Messrs. Einsel and
Bunis are members of the Compensation Committee, which met two (2) times during
the year. Messrs. Einsel and Bunis are also members of the Nominating Committee.
The Nominating Committee has not adopted procedures for the consideration of
nominees recommended by security holders. The Nominating Committee did not meet
during the fiscal year.
4
<PAGE>
EXECUTIVE COMMITTEE. The Executive Committee is empowered to act in
lieu of the Board of Directors on any matter except that for which the Board of
Directors has specifically reserved authority to itself and except for those
matters specifically reserved to the full Board of Directors by law. Messrs.
Trahan and Mooney are members of the Executive Committee. The Executive
Committee met four (4) times during the fiscal year.
STOCK OPTIONS COMMITTEE. The Stock Options Committee develops and
administers incentive plans, including the Company's 1994 Stock Option Plan.
Messrs. Trahan and Mooney are members of the Stock Options Committee, which met
one (1) time during the fiscal year.
The Company paid director fees of $1,000 for each meeting of the Board
of Directors or separate committee meetings attended by each independent
director, and reimbursement of costs and expenses of all directors for attending
such meetings. During fiscal year 2000, the Company granted stock options to
purchase 3,500 shares to each of David Einsel and Jack Bunis in consideration of
their services as Board members.
AUDIT COMMITTEE REPORT
This disclosure statement is being provided to inform shareholders of
the Audit Committee oversight with respect to the Company's financial reporting.
The Board of Directors adopted a written charter for the Audit Committee on June
12, 2000, which is attached to this Proxy Statement as Appendix I.
The Audit Committee has reviewed and discussed the audited financial
statements and the footnotes thereto with management and the independent
auditors. Based on these discussions with management and the independent
auditors, the Audit Committee believes the Company's financial statements are
fairly presented in conformity with Generally Accepted Accounting Principles
(GAAP) in all material respects. The Audit Committee has not been apprised of
any misstatements or omissions in the financial statements. In addition, the
Audit Committee discussed with the independent auditors the matters required to
be discussed by Statement of Auditing Standard No. 61.
The Audit Committee discussed with the Company's auditors the
independence of such auditors from management and the Company, and received the
written disclosures concerning the auditors' independence required by the
Independence Standards Board to be made by the auditors to the Company. The
Audit Committee members do not have vested interests in the Company either
through financial, family or other material ties to management which would
hamper or influence their ability to evaluate objectively the propriety of
management's accounting, internal control and reporting practices.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-KSB for the year ended
May 31, 2000 to be filed with the Commission.
Jack Bunis David Einsel
Audit Committee Audit Committee
Member Board of Directors Member Board of Directors
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term cash and
non-cash compensation paid by the Company for services rendered in all
capacities during the fiscal years ended May 31, 1998, 1999 and 2000 to those
persons who were, as of May 31, 2000, President, Chief Executive Officer and
Co-chairman of the Board of Directors of the Company and to those officers of
the Company whose total annual salary and bonus exceeded $100,000 during the
fiscal year ended May 31, 2000 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payout
------------------- ------ ------
Name and Principal Fiscal Salary($) Bonus($) Other($) Restricted Options/ LTIP All Other
Position Year (1) Stock SARs(#) Payout($) Compensation
Award(s)($) ($)(2)
------------------------- ------- ------------ ---------- ----------- -------------- ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George W. Trahan, 2000 275,000 69,100 -0- -0- -0- -0- -0-
President, Chief 1999 270,000 56,400 -0- -0- -0- -0- -0-
Executive Officer 1998 225,000 36,203 -0- -0- -0- -0- -0-
Thomas R. Mooney, 2000 198,300 69,100 -0- -0- -0- -0- -0-
Co-Chairman 1999 275,000 68,900 -0- -0- -0- -0- -0-
1998 275,000 44,247 -0- -0- -0- -0- -0-
</TABLE>
(1) Bonus payments are made in fiscal years subsequent to fiscal years
during which they are earned. No bonus payments were earned during
fiscal year 2000.
(2) The remuneration described in the table does not include the cost to
the Company of benefits furnished to the Named Officers, including
premiums for health insurance and other personal benefits provided to
such individuals in connection with their employment. The value of
such benefits cannot be precisely determined; however, the Named
Executive Officers did not receive other compensation in excess of the
lesser of $50,000 or 10% of such officers' cash compensation.
Effective April 4, 2000, the Company renewed a five-year employment
agreement with Mr. Trahan, which provides an annual base salary of $275,000. Mr.
Trahan is eligible to participate in an incentive bonus program, which includes
stock options.
Effective February 25, 2000, Mr. Mooney retired from his position as
CEO at the Company, and pursuant to an arrangement with the Company, will
perform consulting services and remain as Co-chairman of the Board.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The Executive Officers serve at the discretion of the Company's Board
of Directors. For biographical information regarding Messrs. Trahan and Mooney,
who are nominees for Director of the Company, see "Election of Directors".
KEY EMPLOYEES
JOSEPH L. POLLO, 55, joined the Company in August of 1999 as Vice
President of Manufacturing. Mr. Pollo has over twenty years of diverse
engineering and manufacturing experience with companies such as TRW, Phillip
Service Industry, Thomson Industries Inc., and Fairchild Fasteners. Mr. Pollo is
responsible for reducing manufacturing time, increasing customer satisfaction,
improving supplier performance, increasing efficiencies in manufacturing
techniques, and automating production planning. He holds a Bachelor of Science
in Mechanical Engineering and a Masters of Science in Engineering Management
from Pacific Western University.
7
<PAGE>
GREGORY J. SMITH, 53, joined the Company in July 1999 and served as
Director, Finance and Information Systems until his promotion to Vice President,
Finance and Information Systems in July 2000. Mr. Smith is responsible for
corporate finance and information systems for the Company. Prior to this, Mr.
Smith worked at Burke Industries where he was the Division Controller since July
1995. He has fifteen years of financial management and computer software
experience.
LINDA A. NESPOLE, 38, joined the Company in 1989 and has served as
Manager, Human Resources before being named Director of Human Resources and
Corporate Secretary of the Company in January 1994. Ms. Nespole is responsible
for corporate administration and investor relations for the Company. She holds a
Bachelor of Arts degree in Communications from the University of California,
Santa Barbara, and a certificate in Human Resources Management from Loyola
Marymount University.
ANNUAL REPORT
The Company undertakes, on written request, and without charge, to
provide each person from whom the accompanying Proxy is solicited with a copy of
the Company's Annual Report on Form 10-KSB for the year ended May 31, 2000, as
filed with the Securities and Exchange Commission (the Commission), including
the financial statements and notes thereto. Copies of the exhibits not included
in the form 10-KSB are also available, on written request, at the Company's
cost. In addition, these documents can be downloaded from the Company's website
at: www.hstc.com. Requests should be addressed to Hi-Shear Technology
Corporation, 24225 Garnier Street, Torrance, CA 90505-5355, Attention: Corporate
Secretary.
CHANGES IN COMPANY'S CERTIFYING ACCOUNTANT
On August 28, 2000, the Company received a letter of resignation from
its independent public accountants, McGladrey & Pullen, LLP, dated August 25,
2000. The Board of Directors is currently interviewing several audit firms that
have expressed interest in providing their independent public accounting
services to the Company. The Company expects to identify the selection of its
new auditing firm promptly.
McGladrey & Pullen, LLP previously issued a report dated August 1,
2000. The report did not contain any adverse opinion or disclaimer of opinion,
or any qualification as to uncertainty, audit scope or accounting principles.
Such report subsequent to issuance has not been modified. There were no
disagreements with McGladrey & Pullen, LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure during the two year period covered by their report and subsequently
through August 25, 2000.
No representatives from McGladrey & Pullen, LLP are expected to be
available for the Annual Meeting of Stockholders.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and certain of its officers, and persons who own more than
10 percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Commission. Officers,
directors and greater than 10 percent stockholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, two Forms 5 covering
gift transactions have been filed. The Company believes that during the year
ended May 31, 2000, it complied with all filing requirements applicable to its
officers, directors and greater than 10 percent beneficial owners.
8
<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of
no other business that will be presented by management for consideration at the
meeting. If any other business properly comes before the meeting, the proxy
holders intend to vote the proxies as recommended by the Board.
SAFE HARBOR STATEMENT
This Proxy Statement, as it relates to Company matters, contains
forward-looking statements, which are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that all forward-looking statements involve risks and
uncertainties including, without limitation, risks related to market acceptance
of and demand for the Company's new commercial products, dependence on the
uncertainty of government budgetary issues, primary government contracts, and
intellectual property rights.
PROPOSALS OF STOCKHOLDER FOR 2001 ANNUAL MEETING
Proposals by stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders must be received by the Company at 24225 Garnier Street,
Torrance, California, 90505-5355, not later than June 2, 2001. Such proposals
must set forth (i) a brief description of the business desired to be brought
before the meeting; (ii) the stockholder's name and address as they appear on
the Company's records; (iii) the number of shares of Common Stock beneficially
owned by the stockholder; and (iv) any material interest of the stockholder in
such business. Such proposals should be addressed to the Secretary of the
Company. It is suggested that such proposals be submitted by Certified Mail,
Return Receipt Requested.
SOLICITATION OF PROXIES
The costs of this solicitation will be borne by the Company. Proxy
solicitations will be made by mail and also may be made by personal interview,
telephone, facsimile transmission and telegram on behalf of the Company by
officers and regular employees of the Company. Banks, brokerage houses, nominees
and other fiduciaries may be requested to forward the proxy soliciting material
to the beneficial owners and to obtain authorization for the execution of
proxies. The Company will, upon request, reimburse such parties for their
reasonable expenses in forwarding proxy materials to the beneficial owners.
By Order of the Board of Directors,
/s/ Linda a. Nespole
Linda A. Nespole
Corporate Secretary
9
<PAGE>
APPENDIX I
HI-SHEAR TECHNOLOGY CORPORATION
AUDIT COMMITTEE CHARTER
ORGANIZATION
There shall be a committee of the Hi-Shear Board of Directors to be known as the
Audit Committee. The Audit Committee shall be composed of at least two 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 and economic 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 of value and
in accordance with all requirements and are of the highest quality. The Board
shall review the Charter on an annual basis.
In carrying out these responsibilities, the Audit Committee will:
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 and, where
appropriate, recommend the replacement of the Auditors.
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 Assure that the services provided by the independent auditors
are being provided at reasonable cost and are being reasonably
and professionally rendered. Annually, receive from the
Auditors a report confirming their independence from the
corporation consistent with Independence Standards Board
Standard 1.
o Review with the independent auditors, the Company's 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 economically
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.
10
<PAGE>
o Review the financial statements contained in the quarterly and
annual reports 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. 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 accounting, financial, and human resources succession
planning within the company.
o Submit the minutes of all meetings of the Audit Committee to,
or discuss the matters discussed at each committee meeting
with, the Board of Directors and Corporate Secretary.
SAFE HARBOR STATEMENT
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the corporation's financial statements are complete, accurate
and in accordance with generally accepted accounting principles. That is the
responsibility of management and the Auditors. Nor is it the duty of the Audit
Committee to conduct investigations, to resolve disagreements, if any, between
Management and the Auditors or to assure compliance with applicable laws and
regulations.
11
