SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT |X|
FILED BY A PARTY OTHER THAN THE REGISTRANT |_|
CHECK THE APPROPRIATE BOX:
|_| PRELIMINARY PROXY STATEMENT. |_| CONFIDENTIAL FOR USE OF THE
COMMISSION ONLY (AS PERMIT-
TED BY RULE 14A-6(E)(2)).
|X| DEFINITIVE PROXY STATEMENT.
|_| DEFINITIVE ADDITIONAL MATERIALS.
|_| SOLICITING MATERIAL PURSUANT TO RULE 14A-12.
RICK'S CABARET INTERNATIONAL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
________________________________________________________________________
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
PAYMENT OF FILING FEE: (CHECK THE APPROPRIATE BOX):
|X| NO FEE REQUIRED.
|_| FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT
RULE 14A-6(I)(1) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:_____________
(2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES: ______________
(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED PURSUANT TO
EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON WHICH THE FILING FEE IS
CALCULATED AND STATE HOW IT WAS DETERMINED): _________________
<PAGE>
(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:_____________________
(5) TOTAL FEE PAID: ______________________
|_| FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS. ______________________
|_| CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT
RULE 0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE WAS
PAID PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT
NUMBER, OR THE FORM OR SCHEDULE AND THE DATE ITS FILING.
(1) AMOUNT PREVIOUSLY PAID:________________
(2) FOR, SCHEDULE OR REGISTRATION STATEMENT NO.:_________________
(3) FILING PARTY:_____________________
(4) DATE FILED:_____________________________
<PAGE>
RICK'S CABARET INTERNATIONAL, INC.
3113 BERING DRIVE
HOUSTON, TEXAS 77057
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 24, 2000
The Annual Meeting of Stockholders (the "Annual Meeting") of Rick's Cabaret
International, Inc. (the "Company") will be held at 3113 Bering Drive, Houston,
Texas 77057, on August 24, 2000 at 10:00 AM (CST) for the following purposes:
(1) To elect seven (7) directors.
(2) To ratify the selection of Jackson & Rhodes, P.C. as the Company's
independent auditor for the fiscal year ending September 30, 2000.
(3) To act upon such other business as may properly come before the
Annual Meeting.
Only holders of common stock of record at the close of business on July 10,
2000 will be entitled to vote at the Annual Meeting or any adjournment thereof.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, please sign, date and return your proxy to us
promptly. Your cooperation in signing and returning the proxy will help avoid
further solicitation expense.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Eric S. Langan
----------------------------------
Chairman of the Board and
President
July 24, 2000
Houston, Texas
<PAGE>
RICK'S CABARET INTERNATIONAL, INC.
3113 BERING DRIVE
HOUSTON, TEXAS 77057
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 24, 2000
This proxy statement (the "Proxy Statement") is being furnished to
stockholders (the "Stockholders") in connection with the solicitation of proxies
by the Board of Directors of Rick's Cabaret International, Inc., a Texas
corporation (the "Company") for their use at the Annual Meeting (the "Annual
Meeting") of Stockholders of the Company to be held at 3113 Bering Drive,
Houston, Texas 77057, on August 24, 2000 at 10:00 AM (CST), and at any
adjournments thereof, for the purpose of considering and voting upon the matters
set forth in the accompanying Notice of Annual Meeting of Stockholders (the
"Notice"). This Proxy Statement and the accompanying form of proxy (the
"Proxy") are first being mailed to Stockholders on or about July 24, 2000. The
cost of solicitation of proxies is being borne by the Company.
The close of business on July 10, 2000 has been fixed as the record date
for the determination of Stockholders entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. As of record date, there were
4,399,178 shares of the Company's common stock, par value $0.01 per share (the
"Common Stock"), issued and outstanding. The presence, in person or by proxy,
of a majority of the outstanding shares of Common Stock on the record date is
necessary to constitute a quorum at the Annual Meeting. Each share is entitled
to one vote on all issues requiring a Stockholder vote at the Annual Meeting.
Each nominee for Director named in Number 1 must receive a majority of the votes
cast in person or by proxy in order to be elected. Stockholders may not
cumulate their votes for the election of Directors. The affirmative vote of a
majority of the shares of Common Stock present or represented by proxy and
entitled to vote at the Annual Meeting is required for the ratification of
Number 2 set forth in the accompanying Notice.
All shares represented by properly executed proxies, unless such proxies
previously have been revoked, will be voted at the Annual Meeting in accordance
with the directions on the proxies. If no direction is indicated, the shares
will be voted (I) FOR THE ELECTION OF THE NOMINEES NAMED HEREIN, AND (II) FOR
THE RATIFICATION OF JACKSON & RHODES, P.C. AS THE COMPANY'S INDEPENDENT AUDITOR
FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2000. The Board of Directors is not
aware of any other matters to be presented for action at the Annual Meeting.
However, if any other matter is properly presented at the Annual Meeting, it is
the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment on such matters.
The enclosed Proxy, even though executed and returned, may be revoked at
any time prior to the voting of the Proxy (a) by execution and submission of a
revised proxy, (b) by written notice to the Secretary of the Company, or (c) by
voting in person at the Annual Meeting.
<PAGE>
__________________________________________________________________
(1) TO ELECT SEVEN (7) DIRECTORS FOR THE ENSUING YEAR
___________________________________________________________________
NOMINEES FOR DIRECTORS
The persons named in the enclosed Proxy have been selected by the Board of
Directors to serve as proxies (the "Proxies") and will vote the shares
represented by valid proxies at the Annual Meeting of Stockholders and
adjournments thereof. They have indicated that, unless otherwise specified in
the Proxy, they intend to elect as Directors the nominees listed below. Each
duly elected Director will hold office until his successor shall have been
elected and qualified.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed Proxy will be voted for the election of the nominees listed below.
Although the Board of Directors of the Company does not contemplate that any of
the nominees will be unable to serve, if such a situation arises prior to the
Annual Meeting, the persons named in the enclosed Proxy will vote for the
election of such other person(s) as may be nominated by the Board of Directors.
The Board of Directors unanimously recommends a vote FOR the election of
each of the nominees listed below. All of the nominees are presently our
directors.
Eric S. Langan, age 32, has been a Director of the Company since 1998 and
the President of the Company since March, 1999. Mr. Langan is also the acting
Chief Financial Officer of the Company. He has been involved in the adult
entertainment business since 1989. Mr Langan has also served as the President
and Director of Taurus Entertainment Companies, Inc. since November, 1997.
Taurus is a public subsidiary of the Company. From January 1997 through the
present, he has held the position of President with X.T.C. Cabaret, Inc., which
was subsequently acquired by Taurus. From November 1992 until January 1997, Mr.
Langan was the President of Bathing Beauties, Inc. Since 1989, Mr Langan has
exercised managerial control over the grand openings and operations of more than
twelve adult entertainment businesses. Through these activities, Mr. Langan has
acquired the knowledge and skills necessary to successfully operate adult
entertainment businesses.
Robert L. Watters, age 49, has been a director of the Company since 1986.
Mr. Watters was president and chief executive officer of the Company from 1991
until March, 1999. He was also a founder in 1989 and operator until 1993 of the
Colorado Bar & Grill, an adult cabaret located in Houston, Texas and in 1988
performed site selection, negotiated the property purchase and oversaw the
design and permitting for the cabaret that became the Cabaret Royale, in Dallas,
Texas. Mr. Watters practiced law as a solicitor in London, England and is
qualified to practice law in New York state. Mr. Watters worked in the
international tax group of the accounting firm of Touche, Ross & Co. (now
succeeded by Deloitte & Touche) from 1979 to 1983 and was engaged in the private
practice of law in Houston, Texas from 1983 to 1986, when he became involved in
the full-time management of the Company. Mr. Watters graduated from the London
School of Economics and Political Science, University of London, in 1973 with a
Bachelor of Laws (Honours) degree and in 1975 with a Master of Laws degree from
Osgoode Hall Law School, York University.
<PAGE>
Michael S. Thurman, age 40, has been a director of the Company since 1999
and he is the Company's director of operations. He has been employed in the bar
and restaurant industry since 1982 for several operators of bars and
restaurants. He has served in various management positions. From 1986 through
1989 Mr. Thurman worked as the controller of a multi-location bar and restaurant
chain with annual sales in 1989 of approximately $6,000,000. Beginning in 1989,
Mr. Thurman worked in managerial capacities for adult entertainment businesses
located in Houston, Texas including the Colorado Bar & Grill, the Gold Club,
Rick's, and Caligula XXI. From 1994 until 1997, Mr. Thurman was employed as the
chief financial officer of X.T.C. Group and the X.T.C. Cabaret, businesses now
owned and operated by Taurus Entertainment Companies, Inc., which became a
subsidiary of the Company in 1998. During 1997 until mid-1998, Mr. Thurman was
a director of Taurus Entertainment Companies, Inc.,
Alan Bergstrom, age 54, has been a director of the Company since 1999.
Since 1997, Mr. Bergstrom has been the Chief Operating Officer of Eagle
Securities which is an investment consulting firm. Mr. Bergstrom is also a
registered stock broker with Rhodes Securities, Inc. From 1991 until 1997, Mr.
Bergstrom was a vice president--investments with Principal Financial Securities,
Inc. Mr. Bergstrom holds a B.B.A. Degree in Finance, 1967, from the University
of Texas.
Travis Reese, age 30, has been a director of the Company since 1999 and is
the Company's Director of Technology. From 1997 through 1999, Mr. Reese was a
senior network administrator at St. Vincent's Hospital in Sante Fe, New Mexico.
During 1997, Mr. Reese was a computer systems engineer with Deloitte & Touche.
From 1995 until 1997, Mr. Reese was a vice-president with Digital Publishing
Resources, Inc., an internet service provider. From 1994 until 1995, Mr. Reese
was a pilot with Continental Airlines. From 1992 until 1994, Mr. Reese was a
pilot with Hang On, Inc., an airline company. Mr. Reese has an Associates
Degree in Aeronautical Science from Texas State Technical College.
Ron Levi, age 49, has been a director and officer of National Telemedia
Corporation since 1991. Since 1992, Mr. Levi has been a director and officer of
Voice Media, Inc. Mr. Levi was appointed to our board in connection with our
acquisition of certain assets of Voice Media, Inc. Voice Media, Inc. and the
National Telemedia Corporation are global Internet media companies, focusing on
Internet development and Electronic commerce applications for Web based
entertainment products, including the development of proprietary technologies,
industry-defining systems and marketing processes.
Paul Lesser, age 40, has been a director and officer of National Telemedia
Corporation since 1991. Since 1992, Mr. Lesser has been a director and officer
of Voice Media, Inc. Mr. Levi was appointed to our board in connection with our
acquisition of certain assets of Voice Media, Inc. Voice Media, Inc. and the
National Telemedia Corporation are global Internet media companies, focusing on
Internet development and Electronic commerce applications for Web based
entertainment products, including the development of proprietary technologies,
industry-defining systems and marketing processes.
<PAGE>
OUR OFFICERS
Eric S. Langan is also our CEO, President and Chief Financial Officer.
Michael S. Thurman is also our COO, and V.P.-Director of Operations. Travis
Reese is also our V.P.-Director of Technology.
RELATED TRANSACTIONS
The Board of Directors of the Company has adopted a policy that Company
affairs will be conducted in all respects by standards applicable to
publicly-held corporations and that the Company will not enter into any future
transactions and/or loans between the Company and its officers, directors and 5%
shareholders unless the terms are no less favorable than could be obtained from
independent, third parties and will be approved by a majority of the
independent, disinterested directors of the Company. In the Company's view, all
of the transactions described below meet this standard.
In August, 1998, the Company acquired approximately 93% of the outstanding
common stock of Taurus Entertainment Companies, Inc. ("Taurus") in a private
stock exchange transaction with the certain principal stockholders of Taurus,
among whom were Eric S. Langan and Ralph McElroy. The Stock Exchange Agreement
provided that the Company exchange one share of its common stock for each three
and one-half shares of Taurus common stock owned by certain principal
shareholders of Taurus. As a result of the Exchange, Mr. Langan received
402,146 shares of common stock of the Company, and Mr. McElroy received 393,389
shares of common stock the Company. The terms and conditions of the Exchange
were determined by the parties through arms length negotiations.
In a transaction simultaneous to the acquisition of Taurus, the Company
acquired certain real estate in San Antonio, Texas from Mr. McElroy. The
Company acquired the property from Mr. McElroy for the same price that Mr.
McElroy paid for the property. The Company financed the purchase of the
property by the issuance of a six year $366,000 Convertible Debenture, secured
by the real estate acquired. The Convertible Debenture bears interest at the
rate of 12% per annum, with interest payable monthly. Interest payments began
in September, 1998. The principal balance of the Convertible Debenture is due
in one lump sum payment in July, 2004. The Convertible Debenture is subject to
redemption at the option of the Company, in whole or in part, at 100% of the
principal face amount of the Convertible Debenture redeemed plus any accrued and
unpaid interest on the redemption date, at any time and from time to time, upon
not less than 30 nor more than 60 days notice, if the Closing Price of the
common stock of the Company shall have equaled or exceeded $8.50 per share of
common stock for ten (10) consecutive trading days. The Convertible Debenture
is convertible into shares of Common Stock at any time prior to maturity (unless
earlier redeemed) at the Conversion Price of $2.75 per share. In the event that
the Company files a Registration Statement to register shares of its Common
Stock with the Securities and Exchange Commission on Form S-3 or other similar
form (except for Form S-8 or Form S-4) than the Company will undertake to use
its best efforts to register for resale all of Mr. McElroy's shares into which
the Convertible Debenture may be converted under the same Registration
Statement.
<PAGE>
In a transaction simultaneous to the acquisition of Taurus, Taurus
refinanced a mortgage on one of its real estate holdings in Houston, Texas by
extinguishing this mortgage and replacing it with a Convertible Debenture
secured by this real estate. The mortgagee was Mr. McElroy and Mr. McElroy
received the Convertible Debenture. Taurus had purchased the property from Mr.
McElroy for the same price that Mr. McElroy paid for the property. The Company
refinanced the purchase of the property on terms more favorable to Taurus by the
issuance of a six year $286,744 Convertible Debenture, secured by the real
estate acquired. The Company is a guarantor of this Convertible Debenture. The
Convertible Debenture bears interest at the rate of 12% per annum, with interest
payable monthly. Interest payments began in September, 1998. The principal
balance of the Convertible Debenture is due in one lump sum payment in July,
2004. The Convertible Debenture is convertible into shares of Common Stock of
the Company at any time prior to maturity at the Conversion Price of $2.75 per
share. In the event that the Company files a Registration Statement to register
shares of its Common Stock with the Securities and Exchange Commission on Form
S-3 or other similar form (except for Form S-8 or Form S-4) than the Company
will undertake to use its best efforts to register for resale all of Mr.
McElroy's shares into which the Convertible Debenture may be converted under the
same Registration Statement.
On March 29, 1999, Robert L. Watters, a Director of the Company, purchased
RCI Entertainment Louisiana, Inc. ("RCI Louisiana"), a subsidiary of the
Company, for the purchase price of $2,200,000 consisting of $1,057,327 in cash,
the endorsement over to the Company of a $652,744 secured promissory note (the
"McElroy Note"), a guaranteed promissory note in the amount of $326,773 made by
Mr. Watters (the "Watters Note"), and the cancellation by Mr. Watters of the
Company's $163,156 indebtedness to him. The McElroy Note, which is due July 31,
2004, bears interest at the rate of twelve percent (12%) per annum with interest
being paid monthly. The principal of the McElroy Note is due in one lump sum
payment. The McElroy Note is secured by (i) a convertible debenture of the
Company in the original principal amount of $366,000, which was issued August,
11, 1998, in favor of Mr. McElroy (the "Convertible Debenture") and (ii) a
promissory note of Taurus Entertainment Companies, Inc. (a subsidiary of the
Company) and guaranteed by the Company (which has a conversion feature) in the
original principal amount of $286,744.61, dated August 11, 1998, in favor of Mr.
McElroy, (the "Convertible Promissory Note"). Both the Convertible Debenture
and the Convertible Promissory Note are secured by certain real estate of the
Company or its subsidiaries. The Watters Note is guaranteed by RCI Louisiana,
which operates a Rick's Cabaret in New Orleans, Louisiana. In connection with
the acquisition of the stock of RCI Louisiana, Mr. Watters also assumed RCI
Louisiana's liabilities of approximately $1,400,000. As a condition of this
transaction, Mr. Watters arranged for the release by a lender of the Company's
liability of $763,199 owed to the lender by RCI Louisiana, which the Company had
guaranteed. The Company obtained an opinion from Chaffe & Associates, Inc., a
New Orleans investment banking firm, stating that the purchase price paid by Mr.
Watters for RCI Louisiana was fair from a financial point of view to the
shareholders of the Company. The terms of this transaction were the result of
arms-length negotiations between the Company and Mr. Watters. In connection
with the sale of RCI Louisiana, Mr. Watters entered into an agreement with the
Company to terminate his Employment Agreement and to cancel all stock options of
the Company which he held. Mr. Watters continues to serve as a Director of the
Company. Further, in connection with the sale of RCI Louisiana, the Company
entered into an Exclusive Licensing Agreement with Mr. Watters which granted Mr.
Watters the right to the use of the name "Rick's Cabaret" and all logos,
trademarks and service marks attendant thereto for use in the states of
Louisiana, Florida, Mississippi and Alabama.
<PAGE>
On July 6, 2000, we acquired the adult Internet web site
www.XXXPassword.com from Voice Media, Inc. This web site had gross revenues in
excess of $3,000,000 for the 11 months ended May 31, 2000. Under the terms of
the acquisition, we issued 700,000 restricted shares of our common stock to
Voice Media, of which 250,000 shares will remain in escrow until certain
earnings benchmarks are achieved which are related to the "EBITDA" (earnings
before interest, depreciation, taxes and amortization) of XXXPassword.com. If,
during the first full 12 months following July 6, 2000, the EBITDA of
XXXPassword.com equals or exceeds $400,000, the full 250,000 will be released
from escrow to Voice Media, Inc. In the event that the EBITDA during this 12
month period is less than $400,000, then a pro-rata portion of the shares will
be released to Voice Media, Inc. If at any time during the 12 month period, the
EBITDA exceeds $400,000, all 250,000 shares will be released to Voice Media,
Inc.
Voice Media will also be entitled to receive a cash earn-out amount from us
of $380,000 during the next six years. In addition, Voice Media could receive
up to an additional cash earn out amount of $925,000 if certain earnings
benchmarks are achieved. Voice Media would receive the entire amount if the
EBITDA of XXXPassword during the next 12 months exceeds $1,200,000. The cash
earn-out portion of the purchase price is payable only from up to 50% of the
free cash flow from the web site, payable over six years. As part of the
acquisition, Voice Media will continue to manage and market XXXPassword for us
at a flat monthly fee. Ron Levi and Paul Lesser each own 50% of Voice Media,
Inc. This transaction was the result of arms length negotiations between the
parties. However, no appraisal was done.
In late April 2000, we entered into a Letter of Intent with Voice
Media, Inc. to acquire an additional adult entertainment website,
www.CLUBPIX.com. This website had gross revenues of $10.29 million for the eight
months ended February 2000. Under the terms of the Letter of Intent, we
will issue 1,700,000 restricted shares of our common stock and $3,128,000 to
Voice Media. Of these 1,700,000 shares, 700,000 shares will remain in escrow
until certain earnings benchmarks are achieved. The entire 700,000 shares
will be released if the EBITDA of www.clubpix.com equals or exceeds
$4,000,000 during the twelve months period following the closing of this
transaction. Voice Media could also receive an additional 300,000 restricted
shares of our common stock and up to $9,000,000 (inclusive of the $3,128,000) if
certain other earnings benchmarks are achieved. Voice Media would receive the
entire amount if the EBIDTA of www.clubpix.com during the twelve months
period following the closing of this transaction exceeds $6,000,000. The cash
portion of the purchase price is payable only from up to 75% of the free cash
flow from the web site payable over six years. The Letter of Intent is subject
to the gross revenues of clubpix.com for the preceding twelve months exceeding
$14,000,000 and earnings before EBIDTA derived from clubpix.com for the twelve
months period being in excess of $3,500,000. In addition, the Letter of Intent
is subject to shareholder approval of Rick's, the receipt by Rick's of a
fairness opinion from an independent third party and the execution of definitive
agreements by the parties.
<PAGE>
In connection with the July 6, 2000 transaction with Voice Media, Inc., we
entered into an agreement with National Telemedia Corporation whereby National
Telemedia will manage XXXPassword.com for us for a flat fee of $$22,500 per
month. Paul Lessor is a Director and the President of National Telemedia, Inc.,
and Ron Levi is a Director and the Vice-president of National Telemedia, Inc.
Messrs. Levi and Lesser each own 50 % of National Telemedia. This transaction
was the result of arms length negotiations between the parties.
Other than as set forth above, we know of no other transactions that could
result in a change of control of us.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Company has no compensation committee and no nominating committee.
Decisions concerning executive officer compensation for 1999 were made by the
full Board of Directors. Eric S. Langan, Michael S. Thurman and Travis Reese
are the only directors of the Company who are also officers of the Company.
The Company has an Audit Committee whose members are currently Robert L.
Watters and Alan Bergstrom. The primary purpose of the Audit Committee is to
oversee the Company's financial reporting process on behalf of the Board of
Directors. The Audit Committee will meets privately with the Company's Chief
Accounting Officer and with the Company's independent public accountants and
evaluates the responses by the Chief Accounting Officer both to the facts
presented and to the judgments made by the outside independent accountants. The
Audit Committee reports its activities to the full Board after each such meeting
so that the Board is kept informed of its activities on a current basis. In
addition, the activities and responsibilities of the Audit Committee include the
nomination or selection of the independent auditors, review of the results of
the audit and a detailed review of the overall Company and the adequacy of the
Company's internal controls.
In May 2000, the Board adopted a Charter for the Audit Committee. The
Charter establishes the independence of our Audit Committee and sets forth the
scope of the Audit Committee's duties. The Purpose of the Audit Committee is to
conduct continuing oversight of our financial affairs. The Audit Committee
conducts an ongoing review of our financial reports and other financial
information prior to their being filed with the Securities and Exchange
Commission, or otherwise provided to the public. The Audit Committee also
reviews our systems, methods and procedures of internal controls in the areas
of: financial reporting, audits, treasury operations, corporate finance,
managerial, financial and SEC accounting, compliance with law, and ethical
conduct. A majority of the members of the Audit Committee will be independent.
The Audit Committee is objective, and reviews and assesses the work of our
independent accountants and our internal audit department.
<PAGE>
A majority of our Audit Committee members must be independent Directors and
we will meet this requirement by June 2001. The Board of Directors shall elect
the Members annually. Members shall serve until their successors are duly
elected and qualified. Unless an Audit Committee Chairperson is elected by the
full Board, the Members of the Committee may designate a Chairperson by majority
vote of the all Members. A majority of the members will be free from any
relationship that could conflict with a Member's independent judgment. All
Members must be able to read and understand fundamental financial statements,
including a balance sheet, income statement, and cash flow statement. At least
one Member must have past employment experience in finance or accounting,
requisite professional certification in accounting, or other comparable
experience or background, including a current or past position as a chief
executive or financial officer or other senior officer with financial oversight
responsibilities. A copy of the Audit Committee Charter is attached hereto as
Attachment "A".
In as much as the Charter for the Audit Committee was only recently
adopted, the Audit Committee has not yet reviewed and discussed the audited
financial statements with management or discussed with the independent auditors
the matters required by SAS 61. The Audit Committee has not yet received the
written disclosures and the letter from the independent accountants required by
Independence Standards Board No. 1, and the Audit Committee has not yet
discussed with the independent accountant the independent accountant's
independence. Each of these items will be properly addressed in forthcoming
months. The Audit Committee did not make any recommendation to the Board of
Directors that should be included in the Company's audited financial statements
included in our Annual Report on Form 10-KSB for the last fiscal year.
The Board of Directors held six meetings during the fiscal year ended
September 30, 1999. The Audit Committee held two meetings during the fiscal
year ended September 30, 1999.
There is no family relationship between or among any of the directors and
executive officers of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company believes all persons so required to, have complied with Section
16(a) of the Securities Exchange Act of 1934.
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to us
for the fiscal years ended September 30, 1999, 1998 and 1997 of certain
executive officers. No other executive officer of ours received compensation
that exceeded $100,000 during 1999.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Other Securities
Name and Annual Restricted Underlying Other All Other
Principal Compen- Stock Options/ LTIP Compens-
Position Year Salary Bonus sation (1) Awards SARs Payouts sation
----------------------------------- ------- ------------ ---------- ---------- --------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eric S. 1999 $155,000 (2) -0- -0- -0- 85,000 -0- -0-
Langan 1998 -0- -0- -0- -0- 50,000 -0- -0-
Director, 1997 -0- -0- -0- -0- -0- -0- -0-
President, and
Acting CFO
Robert L.(3) 1999 $ 137,500 -0- -0- -0- 10,000 -0- -0-
Watters 1998 $ 325,000 -0- -0- -0- 20,000 -0- -0-
Director 1997 $ 325,000 -0- -0- -0- -0- -0- -0-
__________________________________
<FN>
(1) We provide certain executive officers certain personal benefits. Since the value of such benefits does not
exceed the lesser of $50,000 or 10% of annual compensation, the amounts are omitted.
(2) We paid Mr. Langan $155,000 as compensation in fiscal 1999, of which $52,000 was allocated to our subsidiary,
Taurus Entertainment Companies, Inc.
(3) Mr. Watters is a director of the Company. However, Mr. Watters ceased being an executive officer of the
Company in March 1999.
</TABLE>
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Number of Percent of Total
Securities Options/SARs
Underlying Granted To
Options/SARs Employees In Exercise of Expiration
Name Granted Fiscal Year Base Price Date
----------- ------------ ----------------- ------------ --------------
<S> <C> <C> <C> <C>
Eric Langan 85,000 70 % $ 2.70 August 4, 2004
Robert L. 10,000 8% $ 2.70 August 4, 2004
Watters
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number Of
Unexercised Value of
Securities Unexercised
Underlying In-The-Money
Options/SARs Options/SARs
Shares At FY-End At FY-End
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized Unexercisable Unexercisable
----------- ------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
Eric Langan -0- (1) -0- 130,000 / 5,000 -0- / -0-
Robert L. -0- (1) -0- 5,000 / 5,000 -0- / -0-
Watters
<FN>
________________________
(1) Mr. Langan and Mr. Watters did not exercise any options during the last
fiscal year.
</TABLE>
DIRECTOR COMPENSATION
We do not currently pay any cash directors' fees, but we pay the expenses
of our directors in attending board meetings. In August, 1999, we issued 10,000
options to each present Director. These options have a strike price of $2.70 per
share and expire in August, 2009. Half of these options were immediately
exercisable and half will become exercisable in August, 2000.
EMPLOYEE STOCK OPTION PLANS
SUMMARY OF 1995 STOCK OPTION PLAN
While the Company has been successful in attracting and retaining qualified
personnel, the Company believes that its future success will depend in part on
its continued ability to attract and retain highly qualified personnel. The
Company pays wages and salaries which it believes are competitive. The Company
also believes that equity ownership is an important factor in its ability to
attract and retain skilled personnel, and in 1995 and 1999 adopted a Stock
Option Plan (the "Plan") for employees and directors. The purpose of the Plan
is to further the interest of the Company, its subsidiaries and its stockholders
by providing incentives in the form of stock options to key employees and
directors who contribute materially to the success and profitability of the
Company. The grants will recognize and reward outstanding individual
performances and contributions and will give such persons a proprietary interest
in the Company, thus enhancing their personal interest in the Company's
continued success and progress. This Plan will also assist the Company and its
subsidiaries in attracting and retaining key employees and directors. The Plan
is administered by the Board of Directors. The Board of Directors has the
exclusive power to select the participants in the Plan, to establish the terms
of the options granted to each participant, provided that all options granted
shall be granted at an exercise price equal to at least 85%of the fair market
value of the Common Stock covered by the option on the grant date and to make
all determinations necessary or advisable under the Plan. A total of 300,000
shares may be granted and sold under the Plan. As of July 10, 2000, a total of
167,500 stock options had been granted and are outstanding under the 1995 Plan,
none of which have been exercised. The Company does not plan to issue any
additional options under the 1995 Plan, and the 1995 Plan is effectively
terminated.
<PAGE>
The 1999 Stock Option Plan (the "Plan") was adopted by the Board of
Directors and approved by our shareholders in 1999. The 1999 Plan allows
Incentive Stock Option grants as determined by the Compensation Committee, or
the Board of Directors if there is no compensation committee (the "Committee").
The Board of Directors has reserved 500,000 shares of Common Stock for issuance
pursuant to the Plan. The purpose of the Plan is to foster and promote the
financial success of the Company and increase Stockholder value by enabling
eligible key employees, directors and consultants to participate in the
long-term growth and financial success of the Company. As of July 10, 2000, a
total of 275,000 stock options had been granted and are outstanding under the
Plan, 6,000 of which have been exercised.
SUMMARY OF 1999 STOCK OPTION PLAN
ELIGIBILITY. The Plan is open to key employees (including officers and
directors) and consultants of the Company and its affiliates ("Eligible
Persons").
TRANSFERABILITY. The grants are not transferrable.
CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The Plan will not affect the
right of the Company to authorize adjustments, recapitalization, reorganizations
or other changes in the Company's capital structure. In the event of an
adjustment, recapitalization or reorganization the award shall be adjusted
accordingly. In the event of a merger, consolidation, or liquidation, the
Eligible Person will be eligible to receive a like number of shares of stock in
the new entity he would have been entitled to if immediately prior to the merger
he had exercised his option. The Board may waive any limitations imposed under
the Plan so that all options are immediately exercisable.
OPTIONS. The Plan provides for both Incentive and Nonqualified Stock
Options. Option price. Incentive options shall be not less than the greater of
(i)100% of fair market value on the date of grant, or (ii) the aggregate par
value of the shares of stock on the date of grant. The Compensation Committee,
at its option, may provide for a price greater than 100% of fair market value.
The price for Incentive Stock Options for Stockholders owning 10% or more of the
Company's shares ("10% Stockholders") shall be not less than 110% of fair market
value.
AMOUNT EXERCISABLE-INCENTIVE OPTIONS. In the event an Eligible Person
exercises Incentive Options during the calendar year whose aggregate fair market
value exceeds $100,000, the exercise of options over $100,000 will be considered
non qualified stock options.
<PAGE>
DURATION. No option may be exercisable after the expiration date as set
forth in the option agreement.
EXERCISE OF OPTIONS. Options may be exercised by written notice to the
President of the Company with (i) cash, certified check, bank draft, or postal
or express money order payable to the order of the Company for an amount equal
to the option price of the shares; or (ii) stock at its fair market value on the
date of exercise;
TERMINATION OF EMPLOYMENT. Any Option which has not vested at the time the
Optionee ceases continuous employment for any reason other than death,
disability or retirement shall terminate upon the last day that the Optionee is
employed by the Company. Incentive Stock Options must be exercised within three
months of cessation of Continuous Service for reasons other than death,
disability or retirement in order to qualify for Incentive Stock Option tax
treatment. Nonqualified Options may be exercised any time during the Option
Period regardless of employment status.
DEATH. Unless the Option expires sooner, the Option will expire one year
after the death of the Eligible Person.
DISABILITY. Unless the Option expires sooner, the Option will expire one
year after the disability of the Eligible Person.
RETIREMENT. Any Option which has not vested at the time the Optionee
ceases continuous employment due to retirement shall terminate upon the last day
that the Optionee is employed by the Company. Upon retirement Incentive Stock
Options must be exercised within three months of cessation of Continuous Service
in order to qualify for Incentive Stock Option tax treatment. Nonqualified
Options may be exercised any time during the Option Period regardless of
employment status.
AMENDMENT OR TERMINATION OF THE PLAN. The Committee may amend, terminate
or suspend the Plan at any time, in its sole and absolute discretion; provided,
however, that to the extent required to qualify the Plan under Rule 16b-3
promulgated under Section 16 of the Exchange Act, no amendment that would (a)
materially increase the number of shares of stock that may be issued under the
Plan, (b) materially modify the requirements as to eligibility for participation
in the Plan, or (c) otherwise materially increase the benefits accruing to
participants under the Plan, shall be made without the approval of the Company's
Stockholders; provided further, however, that to the extent required to maintain
the status of any incentive option under the Code, no amendment that would (a)
change the aggregate number of shares of stock which may be issued under
incentive options, (b) change the class of employees eligible to receive
incentive options, or (c) decrease the option price for incentive options below
the fair market value of the stock at the time it is granted, shall be made
without the approval of the Stockholders. Subject to the preceding sentence,
the Board shall have the power to make any changes in the Plan and in the
regulations and administrative provisions under it or in any outstanding
incentive option as in the opinion of counsel for the Company may be necessary
or appropriate from time to time to enable any incentive option granted under
this Plan to continue to qualify as an incentive stock option or such other
stock option as may be defined under the Code so as to receive preferential
federal income tax treatment. No amendment, suspension or termination of the
Plan shall act to impair or extinguish rights in Options already granted at the
date of such amendment, suspension or termination.
<PAGE>
EMPLOYMENT AGREEMENT
The Company has a three year employment agreement with Eric S. Langan
(the"Langan Agreement"). The Langan Agreement extends through August 11, 2001
and provides for an annual base salary of $171,600. The Langan Agreement also
provides for participation in all benefit plans maintained by the Company for
salaried employees. Mr. Langan's Agreement contains a confidentiality provision
and an agreement by Mr. Langan not to compete with the Company upon the
expiration of the Langan Agreement. The Company has not established long-term
incentive plans or defined benefit or actuarial plans. Pursuant to the Langan
Agreement, Mr. Langan has received options to purchase up to 125,000 of the
Company's shares at an exercise price of $1.87 per share, vesting in August,
1999.
STOCK OWNERSHIP OF MAJOR STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information at July 10, 2000, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known to us who owns beneficially more than 5% of the outstanding shares of
Common Stock, (ii) each of our directors, (iii) each of our executive officers
and (iv) all of our executive officers and directors as a group. Unless
otherwise indicated, each stockholder has sole voting and investment power with
respect to the shares shown.
<TABLE>
<CAPTION>
Name and Address Number of Shares Title of Class Percent of Class
--------------------------------- ----------------- -------------- -----------------
<S> <C> <C> <C>
Eric S. Langan
505 North Belt, Suite 630
Houston, Texas 77060 1,271,038 (1) Common Stock 27.5 %
Robert L. Watters
315 Bourbon Street
New Orleans, Louisiana 70130 12,471 (2) Common Stock 0.3 %
Michael S. Thurman
505 North Belt, Suite 630
Houston, Texas 77060 32,471 (3) Common Stock 0.8 %
Travis Reese
505 North Belt, Suite 630
Houston, Texas 77060 40,100 (4) Common Stock 1.0 %
<PAGE>
Alan Bergstrom
707 Rio Grande, Suite 200
Austin, Texas 78701 10,000 (2) Common Stock 0.3 %
Ron Levi
Suite 205
5000 North Parkway
Calabasas, California 91302 754,000 (5) Common Stock 17.2 %
Paul Lesser
Suite 205
5000 North Parkway Calabasas
Calabasas, California 91302 700,000 (5) Common Stock 16.0 %
Voice Media, Inc.
Suite 205
5000 North Parkway Calabasas
Calabasas, California 91302 700,000 (6) Common Stock 16.0 %
E. S. Langan. L.P.
505 North Belt, Suite 630
Houston, Texas 77060 578,632 (7) Common Stock 13.2 %
Ralph McElroy
1211 Choquette
Austin, Texas, 78757 817,147 (8) Common Stock 18.1 %
All of our Directors and Officers
as a group of seven persons 1,870,080 (9) Common Stock 39.7%
<FN>
______________________________________
(1) This amount includes shares owned indirectly through E. S. Langan, L.P. Mr.
Langan is the general partner of E. S. Langan, L.P. Mr. Langan has sole
voting and investment power for 207,406 shares that he owns directly. Mr.
Langan has shared voting and investment power for 578,632 shares that he
owns indirectly through E. S. Langan, L.P. This amount also includes
options to purchase up to 235,000 shares of common stock that are presently
exercisable. Includes 250,000 shares over which Mr. Langan has voting
power.
(2) Includes options to purchase up to 10,000 shares of common stock which are
presently exercisable.
(3) Includes options to purchase up to 30,000 shares of common stock which are
presently exercisable.
<PAGE>
(4) Includes options to purchase up to 35,000 shares of common stock that are
presently exercisable
(5) Of these, 700,000 shares are owned directly by Voice Media, Inc. Messrs.
Levi and Lesser are control person of Voice Media, Inc. Of these shares,
250,000 shares are subject to a voting agreement whereby Eric S. Langan has
voting power over these shares. This voting agreement is related to the
acquisition of the XXXPassword.com assets of Voice Media, Inc. by us.
(6) Of these shares, 250,000 shares are subject to a voting agreement whereby
Eric S. Langan has voting power over these shares. This voting agreement is
related to the acquisition of the XXXpassword.com assets of Voice Media,
Inc. by us.
(7) Mr. Langan has shared voting and investment power for 578,632 shares that
he owns indirectly through E. S. Langan, L.P. This amount also includes
options to purchase up to 235,000 shares of common stock that are presently
exercisable.
(8) Includes 66,545 shares of common stock which would be issuable upon
conversion of a convertible debenture held by Mr. McElroy. Also includes
52,135 shares of common stock which would be issuable upon conversion of a
convertible promissory note held by Mr. McElroy.
(9) Includes options to purchase up to 320,000 shares of common stock which are
presently exercisable.
</TABLE>
---------------------------------------------------------------------
(2) TO RATIFY THE SELECTION OF JACKSON & RHODES, P.C.
AS THE COMPANY'S INDEPENDENT AUDITOR
FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2000
---------------------------------------------------------------------
The Board of Directors has selected Jackson & Rhodes, P.C. as the Company's
independent auditor for the current fiscal year. Although not required by law
or otherwise, the selection is being submitted to the Stockholders of the
Company as a matter of corporate policy for their approval.
The Board of Directors wishes to obtain from the Stockholders a
ratification of their action in appointing their existing certified public
accountant, Jackson & Rhodes, P.C., independent auditor of the Company for the
fiscal year ending September 30, 2000. Such ratification requires the
affirmative vote of a majority of the shares of Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting.
<PAGE>
In the event the appointment of Jackson & Rhodes, P.C. as independent
auditor is not ratified by the Stockholders, the adverse vote will be considered
as a direction to the Board of Directors to select other independent auditors
for the fiscal year ending September 30, 2000.
A representative of Jackson & Rhodes, P.C. is expected to be present at the
Annual Meeting with the opportunity to make a statement if he so desires and to
respond to appropriate questions.
The Board of Directors unanimously recommends a vote FOR the ratification
of Jackson & Rhodes, P.C. as independent auditor for fiscal year ending
September 30, 2000.
---------------------------------------------------------------------
(3) OTHER MATTERS
---------------------------------------------------------------------
The Board of Directors is not aware of any other matters to be presented
for action at the Annual Meeting. However, if any other matter is properly
presented at the Annual Meeting, it is the intention of the persons named in the
enclosed proxy to vote in accordance with their best judgement on such matters.
FUTURE PROPOSALS OF STOCKHOLDERS
The deadline for stockholders to submit proposals to be considered for
inclusion in the Proxy Statement for the 2000 Annual Meeting of Stockholders is
November 30, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Eric S. Langan
----------------------------------
Chairman of the Board and
President
Houston, Texas
<PAGE>
PROXY
RICK'S CABARET INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 24, 2000
The undersigned hereby appoints Eric S. Langan and Michael S. Thurman, and
each of them as the true and lawful attorneys, agents and proxies of the
undersigned, with full power of substitution, to represent and to vote all
shares of Common Stock of Rick's Cabaret International, Inc. held of record by
the undersigned on July 10, 2000, at the Annual Meeting of Stockholders to be
held on August 24, 2000, at 10:00 AM (CST) at 3113 Bering Drive, Houston, Texas
77057, and at any adjournments thereof. Any and all proxies heretofore given
are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR THE
NOMINEES LISTED IN NUMBER 1 AND FOR THE RATIFICATION IN NUMBER 2.
1. ELECTION OF DIRECTORS OF THE COMPANY. (INSTRUCTION: TO WITHHOLD AUTHORITY
TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH, OR OTHERWISE
STRIKE, THAT NOMINEE'S NAME IN THE LIST BELOW.)
[ ] FOR all nominees listed [ ] WITHHOLD authority to
below except as marked vote for all nominees
to the contrary. below.
Eric S. Langan Robert L. Watters Michael S. Thurman
Alan Bergstrom Travis Reese Ron Levi Paul Lesser
2. PROPOSAL TO RATIFY THE SELECTION OF JACKSON & RHODES, P.C. AS THE COMPANY'S
INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
----------------------------- ------------------------------
NUMBER OF SIGNATURE
SHARES OWNED
------------------------------
(TYPED OR PRINTED NAME)
------------------------------
SIGNATURE IF HELD JOINTLY
------------------------------
(TYPED OR PRINTED NAME)
DATED:
-----------------------
THIS PROXY MAY BE REVOKED AT ANY TIME
BEFORE IT IS VOTED AT THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
<PAGE>
ATTACHMENT "A"
AUDIT COMMITTEE CHARTER
RICK'S CABARET INTERNATIONAL, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
1. Purpose. The Audit Committee of the Board of Directors shall conduct
-------
continuing oversight of the financial affairs of Rick's Cabaret
International, Inc.
2. Scope of Review. The Audit Committee shall conduct an ongoing review the
---------------
Corporation's:
* Financial reports and other financial information prior to their being
filed with the U.S. Securities and Exchange Commission or otherwise
provided to the public.
* Systems, methods and procedures of internal controls in the areas of:
financial reporting, audits, treasury operations, corporate finance,
managerial, financial and SEC accounting, compliance with law, and
ethical conduct.
3. General Tasks. The Audit Committee shall:
--------------
* Be objective. A majority of the Audit Committee shall be independent.
* Recommend and encourage improvements in the Corporation's financial
affairs.
* Review and assess the work of the Corporation's independent accountant
and internal audit department.
* Solicit and encourage comments from the Corporation's independent
accountant, financial and senior management, internal audit department
and the Board of Directors.
4. Audit Committee Members. The Audit Committee shall be consist of one or
-------------------------
more Members (the "Members"), a majority of whom are independent Directors.
The Board of Directors shall elect the Members annually. Members shall
serve until their successors are duly elected and qualified. Unless an
Audit Committee Chairperson is elected by the full Board, the Members of
the Committee may designate a Chairperson by majority vote of the all
Members.
<PAGE>
5. The independent members shall be free from any relationship that could
conflict with an independent member's independent judgment. Any
non-independent member shall exercise judgment as if that member was
independent. All Members must be able to read and understand fundamental
financial statements, including a balance sheet, income statement, and cash
flow statement. At least one member must have past employment experience in
finance or accounting, requisite professional certification in accounting,
or other comparable experience or background, including a current or past
position as a chief executive or financial officer or other senior officer
with financial oversight responsibilities.
6. Independence. Independent Director is defined as a director who has:
------------
* Not been employed by the Corporation or its affiliates in the current
or past three years.
* Not accepted any compensation from the Corporation or its affiliates
in excess of $60,000 during the previous fiscal year (except for board
service, retirement plan benefits, or non-discretionary compensation).
* No immediate family member who is, or has been in the past three
years, employed by the Corporation or its affiliates as an executive
officer.
* Not been a partner, controlling shareholder or an executive officer of
any other for-profit entity to which the Corporation made, or from
which it received, payments (other than those which arise solely from
investments in the Corporation's securities) that exceed five percent
of the other entity's consolidated gross revenues for that year, or
$200,000, whichever is more, in any of the past three years.
* Not been employed as an executive of another entity where the
Corporation's executives serve on the other entity's compensation
committee.
7. Meetings. The Audit Committee shall meet at least four times per year, and
--------
may meet as frequently as deemed necessary. The Audit Committee shall meet
separately in closed meetings at least once each year with management, the
director of internal audit and the independent accountant to discuss any
matter. The Audit Committee shall select one of its Members each quarter to
meet with management, the director of internal audit and the independent
accountant for the purposes set forth below.
8. Specific Tasks. The Audit Committee shall:
---------------
(a) Assess and, if necessary, update this Charter at least annually.
(b) Review the Corporation's annual, quarterly and other financial
statements and any other reports, financial information or other
material filed with any governmental body (except for litigation
matters in the ordinary course of business) or announced to the
public, including the independents accountant's certifications,
reports, opinions, or reviews.
<PAGE>
(c) Review the regular internal reports to management prepared by the
internal audit department and management's response thereto.
(d) Review with management and the independent accountant all Form 10-Q 's
prior to the filing or prior to the release of earnings information to
the public. The Chairperson of the Audit Committee may represent the
entire Audit Committee for the review of the Form 10-Q.
(e) Recommend to the Board of Directors the selection of the independent
accountant for each fiscal year, considering independence and
effectiveness, and approve the fees and other compensation to be paid
to the independent accountant. On an annual basis, the Audit Committee
shall review and discuss with the independent accountant all
significant relationships the independent accountant has with the
Corporation to determine the accountant's independence.
(f) Review the performance of the independent accountant and approve any
proposed discharge of the independent accountant when circumstances
warrant.
(g) Periodically consult with the independent accountant, out of the
presence of management, about internal controls and the completeness
and accuracy of the Corporation's financial statements.
(h) Continually review the integrity of the Corporation's internal and
external financial reporting processes. The Audit Committee shall
consult with the independent accountant and the internal auditors for
this review.
(i) Consider the independent accountant's judgments about the quality and
appropriateness of the Corporation's accounting principles in relation
to the Corporation's internal and external financial reporting.
(j) Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices.
(k) Establish regular and separate systems of reporting to the Audit
Committee by each of management, the independent accountant and the
internal auditors in connection with the appropriateness and
application of accounting principles made in management's preparation
of the financial statements.
(l) Following completion of the annual audit, review separately with each
of management, the independent accountant and the internal audit
department whether any difficulties were encountered during the course
of the audit, including any restrictions on the scope of work or
access to required information.
<PAGE>
(m) Review any disagreement among management and the independent
accountants or the internal auditing department in connection with the
preparation of the financial statements or the appropriateness and
application of accounting principles made in management's preparation
of the financial statements.
(n) Review with the independent accountant, the internal audit department
and management whether and how changes or improvements in the
Corporation's financial or accounting practices, as approved by the
Audit Committee, have been implemented. The Audit Committee shall
conduct this review promptly after the implementation of the changes
or improvements.
(o) Establish a code of corporate compliance with law and a code of
ethical conduct, and review the Corporation's implementation and
enforcement of these codes.
(p) Review activities, organizational structure, and qualifications of the
internal audit department.
(q) Review, with the Corporation's counsel, legal compliance matters
including policies regarding trading in the Corporation's securities.
(r) Review, with the Corporation's counsel, any legal matter that could
have a material impact on the Corporation's financial statements.
(s) Perform any other activities consistent with this Charter, the
Corporation's Articles of Incorporation, By-laws and governing law, as
the Audit Committee or the Board of Directors deems necessary or
appropriate.
<PAGE>
