UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
ACME UNITED CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(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
Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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5) Total fee paid:
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[ ] 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 of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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Dear Fellow Shareholder:
On behalf of your Board of Directors and Management, I cordially invite you to
attend the Annual Meeting of Shareholders of Acme United Corporation scheduled
to be held on Monday, April 28, 2003 at 11:00 a.m., at the American Stock
Exchange, 86 Trinity Street, New York, New York. I look forward to greeting
personally those shareholders able to attend.
At the Meeting, shareholders will be asked to elect eight directors to serve for
a one-year term; and approve an amendment to the Company's Certificate of
Incorporation to broaden the indemnification of directors and officers to the
fullest extent permitted by applicable law and limit the liability of directors.
Information regarding these matters are set forth in the accompanying Notice of
Annual Meeting and Proxy Statement to which you are urged to give your prompt
attention.
It is important that your shares be represented and voted upon at the Meeting.
Whether or not you plan to attend, please take a moment to sign, date and
promptly mail your proxy in the enclosed prepaid envelope. This will not limit
your right to vote in person should you attend the meeting.
On behalf of your Board of Directors, thank you for your continued support and
interest in Acme United Corporation.
Sincerely,
Walter C. Johnsen
President and Chief Executive Officer
(1)
Acme United Corporation
1931 Black Rock Turnpike
Fairfield, Connecticut 06825
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 2003
Notice is hereby given that the Annual Meeting of Shareholders of Acme United
Corporation will be held at the American Stock Exchange, 86 Trinity Street, New
York, New York, on Monday, April 28, 2003, at 11:00 A.M. for the following
purposes:
1. To elect eight Directors of the Company to serve until the next Annual
Meeting and until their successors are elected.
2. To consider and vote upon an Amendment to the Company's Certificate of
Incorporation to broaden the indemnification of directors and officers
to the fullest extent permitted by applicable law and limit the
liability of directors.
3. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on March 10, 2003 will be
entitled to vote at the meeting and at any adjournment thereof.
March 28, 2003
Fairfield, Connecticut --------------------------------------
Paul G. Driscoll, Vice President and
Chief Financial Officer, Secretary and
Treasurer
YOUR VOTE IS IMPORTANT
You are urged to date, sign and promptly return your proxy so that your shares
may be voted in accordance with your wishes and in order that the presence of a
quorum may be assured. The prompt return of your signed proxy, regardless of the
number of shares you hold, will aid the Company in reducing the expense of
additional proxy solicitation. The giving of such proxy does not affect the
right to vote in person in the event you attend the meeting.
Enclosure: The Annual Report of the Company for the year 2002.
(2)
Acme United Corporation
1931 Black Rock Turnpike
Fairfield, Connecticut 06825
ANNUAL MEETING OF SHAREHOLDERS
April 28, 2003
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies
by the directors of Acme United Corporation (hereinafter called the "Company")
to be used at the Annual Meeting of Shareholders of the Company, to be held
April 28, 2003, or at any adjournment thereof. The purposes are set forth in the
accompanying Notice of Annual Meeting of Shareholders and in this Proxy
Statement. Any proxy given may be revoked by a shareholder orally or in writing
at any time prior to the voting of the proxy.
The approximate date on which this Proxy Statement and the enclosed Proxy is
first sent or given to shareholders is March 28, 2003.
Only holders of Common Stock of record at the close of business on March 10,
2003 will be entitled to vote at the meeting. Each holder of the 3,373,251
issued and outstanding shares of $2.50 par value Common Stock is entitled to one
vote per share.
Each share of Common Stock is entitled to one vote on each question to be
presented at the Annual Meeting. A plurality of the vote cast by the shares of
stock entitled to vote, in person or by proxy, at the Annual Meeting will elect
directors as long as a quorum is present. A quorum consists of a majority of the
votes entitled to be cast on a question. Once a share is represented for any
purpose at the meeting, it is deemed present for quorum purposes for the
remainder of the meeting. If a quorum exists, action on each other question to
be voted upon will be approved if votes, in person or by proxy, cast by
shareholders favoring the action exceed the vote cast by shareholders opposing
the action. In certain circumstances, a shareholder will be considered to be
present at the Annual Meeting for quorum purposes, but will not be deemed to
have voted in the election of directors or in connection with other matters
presented for approval at the Annual Meeting. Such circumstances will exist
where a shareholder is present but specifically abstains from voting, or where
shares are represented at a meeting by a proxy conferring authority to vote on
certain matters but not for the election of directors or on other matters. Under
Connecticut law, such abstentions and non-votes have a neutral effect on the
election of management's nominees for directors and on the approval or
disapproval of the other matters presented for shareholder action.
(3)
PRINCIPAL SHAREHOLDERS
The following information is given with respect to any person who, to the
knowledge of the Company's Board of Directors, owns beneficially more than 5% of
the Common Stock of the Company (exclusive of treasury shares) as of February 1,
2003:
Type of Shares Owned on Percent of
Shareholder Ownership February 1, 2003 Class
- ------------------------------- ----------- ------------------ ------------
Walter C. Johnsen Direct 277,272 (1) 6.90
1931 Black Rock Turnpike
Fairfield, CT 06825
- ------------------------------- ----------- ------------------ ------------
R. Scott Asen Direct 602,690 14.99
Asen and Co.
224 East 49th Street
New York, NY 10017
- ------------------------------- ----------- ------------------ ------------
(1) In addition, Mr. Johnsen has the right to acquire 255,000 shares issuable
upon exercise of outstanding options within 60 days of February 1, 2003.
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates, as to each named executive officer, director and
nominee, and as to all directors and executive officers as a group, the number
of shares and percentage of the Company's Common Stock beneficially owned as of
February 1, 2003. The persons shown have sole voting power in these shares
except as shown in the footnotes below.
Common Stock Beneficially Owned
as of February 1,2003
- --------------------------------------------------- ------- -------------------
Number of Shares (1) Percent
- --------------------------------------------------- ------- -------------------
James A. Benkovic....................51,060 (2) 1.27
- --------------------------------------------------- ------- -------------------
Larry H. Buchtmann...................44,500 (3) 1.11
- --------------------------------------------------- ------- -------------------
Paul G. Driscoll ....................11,900 (4) *
- --------------------------------------------------- ------- -------------------
George R. Dunbar ....................50,309 (5) 1.25
- --------------------------------------------------- ------- -------------------
Richmond Y. Holden, Jr. .............30,472 (6) *
- --------------------------------------------------- ------- -------------------
Walter C. Johnsen...................532,272 (7) 13.24
- --------------------------------------------------- ------- -------------------
Wayne R. Moore ......................47,643 (5) 1.19
- --------------------------------------------------- ------- -------------------
Brian S. Olschan....................125,375 (8) 3.12
- --------------------------------------------------- ------- -------------------
Gary D. Penisten ...................128,787 (5) 3.20
- --------------------------------------------------- ------- -------------------
Stevenson E. Ward III ................8,500 (9) *
- --------------------------------------------------- ------- -------------------
Executive Officers and Directors
as a Group (10 persons)........1,030,818
- --------------------------------------------------- ------- -------------------
*Less than 1.0%
(4)
(1) Based on a total of 3,383,251 outstanding shares as of February 1, 2003 and
636,725 shares issuable upon exercise of outstanding options exercisable
within 60 days of February 1, 2003.
(2) Includes 39,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2003.
(3) Includes 43,500 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2003.
(4) Includes 10,500 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2003.
(5) Includes 27,500 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2003.
(6) Includes 25,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2003.
(7) Includes 255,000 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2003.
(8) Includes 119,375 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2003.
(9) Includes 7,500 shares issuable upon exercise of outstanding options
exercisable within 60 days of February 1, 2003.
(5)
ELECTION OF DIRECTORS
Each of the following persons has been nominated as a director until the next
Annual Meeting of Shareholders and until his/her successor is chosen and
qualified. The proxies in the enclosed form which are executed and returned will
be voted (unless otherwise directed) for the election as directors of the
following nominees, all of whom except Susan H. Murphy are now members of the
Board of Directors:
- ------------------------- -------------------------------------------- ---------
Director
Nominees Principal Occupation Since
- ------------------------- -------------------------------------------- ---------
Walter C. Johnsen President and Chief Executive Officer 1995
(age 52) of the Company since November 30,1995;
Executive Vice President from
January 24, 1995 to November 29, 1995.
Formerly served as Vice Chairman and
a principal of Marshall Products, Inc.,
a medical supply distributor.
- ------------------------- -------------------------------------------- ---------
Gary D. Penisten Chairman of the Board of the Company 1994
(age 71) since February 27, 1996. He is a Director
of D.E. Foster & Partners L.P., an
executive search firm. From 1977 to 1988,
he was Senior Vice President of Finance,
Chief Financial Officer and a Director
of Sterling Drug Inc. From 1974 to 1977
he served as Assistant Secretary of the
Navy for Financial Management. Prior to
that, he was employed by General Electric
Company.
- ------------------------- -------------------------------------------- ---------
Wayne R. Moore President and Chief Executive Officer 1976
(age 71) of the Moore Special Tool Company
(1974-1993) and its Chairman of the
Board (1986-1993). He was Chairman of
the Board of the Producto Machine
Company (1994-1997). Mr. Moore was
Chairman of the Association for
Manufacturing Technology/U.S. Machine
Tool Builders (1985-1986) and Committee
Member of the U.S. Eximbank (1984). He
is a Trustee of the American Precision
Museum and on the Board of Advisors of
the Fairfield University School of
Engineering.
- ------------------------- -------------------------------------------- ---------
(6)
- ------------------------- -------------------------------------------- ---------
George R. Dunbar President of The U.S. Baird Corporation 1977
(age 79) since January 2001 and President of
Dunbar Associates, a municipal management
consulting firm. Former Chief
Administrative Officer for the City of
Bridgeport. President (1972-1987),
Bryant Electric Division of Westinghouse
Electric Corporation, manufacturer of
electrical distribution and utilization
products, Bridgeport, CT.
- ------------------------- -------------------------------------------- ---------
Richmond Y. Holden, Jr. President and Chief Executive Officer 1998
(age 49) of J.L. Hammett Co. since 1992; Executive
Vice President from 1989 to 1992. J.L.
Hammett Co. is a distributor and retailer
of educational products throughout the
United States. He is currently Chairman
of the Board of PC-Build, a computer
upgrade, network services and computer
services company.
- ------------------------- -------------------------------------------- ---------
Brian S. Olschan Executive Vice President and Chief 2000
(age 46) Operating Officer of the Company as
of January 25, 1999; Senior Vice
President - Sales and Marketing from
September 12, 1996 to January 24, 1999;
formerly served as Vice President and
General Manager of the Cordset and
Assembly Business of General Cable
Corporation, an electrical wire and
cable manufacturer.
- ------------------------- -------------------------------------------- ---------
Stevenson E. Ward III Vice President and Chief Financial 2001
(age 58) Officer of Triton Thalassic Technologies,
Inc. since September 2000. From 1999 thru
2000, Mr. Ward served as Senior Vice
President-Administration of
Sanofi-Synthelabo, Inc. He also served
as Executive Vice President (1996-1999)
and Chief Financial Officer (1994-1995)
of Sanofi, Inc. and Vice President,
Pharmaceutical Group, Sterling Winthrop,
Inc. (1992-1994). Prior to joining
Sterling he was employed by General
Electric Company.
- ------------------------- -------------------------------------------- ---------
(7)
- ------------------------- -------------------------------------------- ---------
Susan H. Murphy Vice President for Student and Academic 2003
(age 51) Services, Cornell University since 1994;
Dean of Admissions and Financial Aid
from 1985 to 1994. Employed at Cornell
since 1978. Chair of Policy Committee,
Council of Ivy Presidents since 1997.
- ------------------------- -------------------------------------------- ---------
Management does not expect that any of the nominees will become unavailable
for election as a director, but, if for any reason that should occur prior
to the Annual Meeting, the persons named in the proxy will vote for such
substitute nominee, if any, as may be recommended by Management.
There were no material transactions between the Company and any officer of
the Company, any director or nominee for election as director, any security
holder holding more than 5% of the Common Stock of the Company or any
relative or spouse of any of the foregoing persons.
The Board of Directors had seven meetings. All directors attended at least
75% of the aggregate of the total number of the Board meetings and meetings
of Committees of which they were a member.
DIRECTORS' FEES
All directors who are not salaried employees received a fee of $3,000 per
quarter plus $600 for each Board of Directors meeting attended. The Chairman of
the Board earned an additional $600 per meeting to compensate for the broader
responsibility and related effort. The fees earned for service on the Committees
of the Board were $500 per Committee meeting and $500 for each one-half day, or
major portion thereof, devoted to Committee work. The Chairman of each Committee
earned an additional $500 per meeting to compensate for the broader
responsibility and related effort.
(8)
DIRECTORS STOCK OPTIONS
Under the Non-Salaried Directors Stock Option Plan, options were granted on
April 28, 1997 for 10,000 shares each to Messrs. Dunbar, Moore and Penisten, of
which 2,500 shares vested on April 28, 1997, 2,500 shares vested on April 28,
1998, 2,500 shares vested on April 28, 1999, and 2,500 shares vested on April
28, 2000. On April 27, 1998, options were granted for 2,500 shares each to
Messrs. Dunbar, Moore and Penisten, of which all shares vested immediately. On
April 27, 1998, options were granted for 10,000 shares to Richmond Y. Holden,
Jr., of which 2,500 vested April 27, 1998, 2,500 vested on April 27, 1999, 2,500
vested on April 27, 2000 and 2,500 vested on April 27, 2001. On April 26, 1999,
options were granted for 2,500 shares to Messrs. Dunbar, Holden, Moore and
Penisten, of which all shares vested immediately. On April 24, 2000, options
were granted for 2,500 shares to Messrs. Dunbar, Holden, Moore and Penisten, of
which all shares vested immediately. On April 24, 2001, options were granted for
7,500 shares to Messrs. Dunbar, Holden, Moore and Penisten, of which all shares
vested immediately. Additionally on April 24, 2001, options were granted for
10,000 shares to Stevenson E. Ward III of which 2,500 shares vested on April 25,
2001, 2,500 shares vested on April 25, 2002, 2,500 shares will vest on April 25,
2003 and 2,500 shares will vest on April 25, 2004. On April 22, 2002, options
were granted for 2,500 shares to Messrs. Dunbar, Holden, Moore, Penisten and
Ward of which all shares vested immediately.
Newman M. Marsilius, a former Director, had been previously been granted options
for 10,000 shares, which fully vested on April 27, 1998 upon his retirement from
the Board; the Board extended the exercise date for his options to expiration of
the Plan.
COMMITTEE STRUCTURE
There is an Executive Committee of the Board of Directors, which is composed of
Mr. Penisten as Chairman, and Mr. Dunbar. The function of the Executive
Committee is to act for the Board of Directors during the intervals between
meetings of the Board.
There is an Audit Committee of the Board of Directors, which is composed of Mr.
Holden as Chairman, and Messrs. Ward and Moore.
The members of the Audit Committee are "independent" as such term is defined in
Section 121A of the American Stock Exchange's listing standards. The Board of
Directors has adopted a written charter for the Audit Committee, a copy of which
is included as Appendix A to this proxy statement.
Report of the Audit Committee
The Audit Committee oversees the Company's financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process including the systems of internal
controls. In fulfilling its oversight responsibilities, the Audit Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with accounting principles generally accepted in the United States,
their judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee under auditing standards generally accepted in the
United States. In addition, the Audit Committee has discussed with the
independent auditors the auditors' independence from management and the Company,
including the matters in the written disclosures received by the Audit Committee
as required by the Independence Standards Board, and has considered the
compatibility of nonaudit service with the auditors' independence.
(9)
The Audit Committee discussed with the Company's independent auditors the
overall scope and plan for their respective audits. The Audit Committee meets
with the independent auditors, with and without management present, to discuss
the results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
Audit Committee held two meetings during 2002.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2002 for filing with the Securities and
Exchange Commission. The Audit Committee and the Board have also selected the
Company's independent auditors.
Richmond Y. Holden, Jr., Audit Committee Chair
Stevenson E. Ward III, Audit Committee Member
Wayne R. Moore, Audit Committee Member
NOMINATING COMMITTEE
The functions of the Nominating Committee are performed by the whole Board. The
Board will consider nominees for directors recommended by shareholders, and such
recommendations may be made by submitting in writing to the Board at least sixty
(60) days prior to the annual meeting at which the election of directors is to
be held (subject to certain requirements set forth in the by-laws), care of the
Secretary at the Company's principal executive office, the name, address,
telephone number and resume of his or her business and educational background
along with a written statement by the shareholder as to why such person should
be considered for election to the Board of Directors.
(10)
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE AND INSIDER PARTICIPATION
The Company's executive compensation program is administered by the Compensation
Committee of the Board of Directors. During 2002, the Committee was composed of
certain non-employee members of the Board of Directors, which include Mr. Dunbar
as Chairman, and Messrs. Holden, and Penisten. The Committee had two meetings
during 2002.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is committed to a strong, positive link between
business, performance and strategic goals, and compensation and benefit
programs.
OVERALL EXECUTIVE COMPENSATION POLICY
Our compensation policy is designed to support the overall objective of
enhancing value for our shareholders by:
- Attracting, developing, rewarding and retaining highly qualified and
productive individuals.
- Directly relating compensation to both Company and individual
performance.
- Ensuring compensation levels that are externally competitive and
internally equitable.
Following is a description of the elements of the Company's executive
compensation program and how each relates to the objectives and policy outlined
above.
BASE SALARY
The Committee reviews each executive officer's salary annually. In determining
appropriate salary levels, we consider level and scope of responsibility,
experience, company and individual performance, internal equity, as well as pay
practices of other companies relating to executives of similar responsibility.
By design, we strive to set executives' salaries at competitive market levels.
ANNUAL INCENTIVES
Annual incentive award opportunities are made available to executives to
recognize and reward corporate and individual performance. The plan in effect
for 2002 provided for an incentive bonus based on the achievement of corporate
profitability goals set for each individual, based upon his area of
responsibility. The bonuses would range from 5% to 50% of base salary, provided
minimum goals were reached. The amount individual executives may earn under the
bonus plan is directly dependent upon the individual's position, responsibility
and ability to impact our financial success and corporate goals. The bonuses
awarded in 2002 to top management are listed in the Summary Compensation Table
below.
(11)
In 2003, the incentive plan criteria will be similar to the plan in 2002.
STOCK OPTION INCENTIVES
The Company's stock option compensation program is administered by the Board of
Directors, which acts upon recommendations of the Compensation Committee. The
purpose of the Company's Employee Stock Option Plan is to promote the interests
of the Company by enabling its key employees to acquire an increased proprietary
interest in the Company and thus to share in the future success of the Company's
business. Accordingly, the plan is intended as a means not only of attracting
and retaining outstanding management personnel but also of promoting a closer
identity of interests between employees and shareholders. Since the employees
eligible to receive options under the plan will be those who are in a position
to make important and direct contributions to the success of the Company, the
Board believes that the grant of options under the plan has been and will
continue to be in the best interests of the Company.
The Company's Amended and Restated Stock Option Plan terminated on February 24,
2002, at which time options previously granted under the Plan continue to vest
and to be exercisable in accordance with their terms; however, no new options
may be granted under the Plan after February 24, 2002. The Company adopted a new
stock option plan, effective February 26, 2002.
The following options were granted in 2002:
Options for 10,000 shares were granted to Paul G. Driscoll on September 23,
2002 of which 2,500 shares vested on September 24, 2002, 2,500 will vest on
September 24, 2003, 2,500 shares will vest on September 24, 2004, and 2,500
shares on September 24, 2005.
The Board also granted options for 8,000 shares in the aggregate to two
other employees with staggered vesting dates through September 24, 2005.
RATIONALE FOR CEO COMPENSATION
Walter C. Johnsen was designated President and Chief Executive Officer of the
Company effective on November 30, 1995. His compensation package was designed to
encourage performance in line with the interests of our shareholders. We believe
Mr. Johnsen's total compensation was competitive in the external marketplace and
reflective of Company and individual performance.
COMPENSATION COMMITTEE
George R. Dunbar, Chairman
Richmond Y. Holden, Jr.
Gary D. Penisten
(12)
The Compensation Committee Report on Executive Compensation shall not be deemed
incorporated by reference by any general statement incorporating by reference in
this proxy statement into any filing under the Securities Act of 1933 or the
Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
SUMMARY COMPENSATION TABLE
The following sets forth information concerning the compensation of the
Company's Chief Executive Officer and each of the four other most highly
compensated officers of the Company at the end of the last completed fiscal
year. No information is given as to any person for any fiscal year during which
such person was not an officer of the Company.
ANNUAL COMPENSATION
- ---------------------------- ---- --------- ------- --------------- ------------
Other Annual All Other
Name and Principal Position Year Salary(1) Bonus Compensation(2) Compensation
- ---------------------------- ---- --------- ------- --------------- ------------
Walter C. Johnsen 2002 $287,231 $60,000 $ 0 $ 0
President & Chief 2001 $257,346 $43,125 $ 0 $ 0
Executive Officer 2000 $228,224 $30,000 $ 0 $ 0
- ---------------------------- ---- --------- ------- --------------- ------------
Brian S. Olschan 2002 $247,008 $40,000 $ 0 $ 0
Executive Vice President & 2001 $220,067 $36,563 $ 0 $ 0
Chief Operating Officer (3) 2000 $193,385 $25,000 $ 0 $ 0
- ---------------------------- ---- --------- ------- --------------- ------------
Paul G. Driscoll 2002 $128,686 $10,000 $ 0 $ 0
Vice President-Chief 2001 $96,615 $ 0 $ 0 $ 0
Financial Officer (4) 2000 $ 0 $ 0 $ 0 $ 0
- ---------------------------- ---- --------- ------- --------------- ------------
James A. Benkovic 2002 $143,616 $17,000 $ 0 $ 0
Vice President- 2001 $128,673 $11,250 $ 0 $ 0
Consumer Sales (5) 2000 $114,193 $10,000 $ 0 $ 0
- ---------------------------- ---- --------- ------- --------------- ------------
Larry H. Buchtmann 2002 $151,346 $17,000 $ 0 $ 0
Vice President- 2001 $138,894 $11,250 $ 0 $ 0
Manufacturing (6) 2000 $126,692 $10,000 $ 0 $ 0
- ---------------------------- ---- --------- ------- --------------- ------------
(1) Effective 1997, the Company changed its payroll payment cycle from monthly
to bi-weekly. The salary reported is gross wages paid, which varies
slightly from annual compensation.
(13)
(2) Does not include the value of perquisites and other personal benefits
because the aggregate amount of such compensation, if any, does not exceed
the lesser of $50,000 or ten (10%) percent of the total amount of annual
salary and bonus for any named individual.
(3) Brian S. Olschan joined Acme as Senior Vice President-Sales and Marketing
on September 12, 1996. He was promoted to Executive Vice President and
Chief Operating Officer on January 25, 1999.
(4) Paul G. Driscoll joined Acme as Director, International Finance and
Planning on March 19, 2001. He was named Vice President and Chief Financial
Officer, Secretary and Treasurer on September 23, 2002.
(5) James A. Benkovic joined Acme as Western Regional Sales Manager on June 18,
1990. He was promoted to Vice President of Sales - Consumer Products on
October 1, 1991.
(6) Larry H. Buchtmann joined Acme as Vice President-Manufacturing on March 17,
1998.
OPTION GRANTS IN LAST FISCAL YEAR
AND POTENTIAL REALIZABLE VALUES
The following table provides information concerning each option granted during
the last fiscal year to each of the named executive officers and the potential
realizable value of such options at certain assumed rates of stock appreciation.
Individual Grants
- -------------------- ----------- ------------ ----------- ----------------- ----------------
Potential
Realizable
Value at
Assumed Annual
% of Total Rates of Stock
Number of Options Price
Shares Granted to Appreciation
Underlying Employees in for Option
Options Fiscal Exercise or Term
Name Granted (1) Year Base Price Expiration Date 5% 10%
- -------------------- ----------- ------------ ----------- ----------------- ----------------
Paul G. Driscoll 10,000 55.6% $3.75 per September 23, $24,000 $60,000
share 2012
- -------------------- ----------- ------------ ----------- ----------------- ----------------
(1) The dates on which the shares vest are summarized under the heading Stock
Option Incentives in the preceding pages.
(14)
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table provides information concerning each option exercised during
the last fiscal year by each of the named executive officers and the value of
unexercised options held by such executive officers at the end of the fiscal
year.
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
Value of
Number of Securities Unexercised In-the-Money
Underlying Unexercised Options/SARs at Fiscal Year
Options/SARs at Fiscal Year End
Shares Acquired End (#) (1) Exercisable/ ($)(1)(2) Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
Walter C. Johnsen -0- $0 252,500/37,500 $146,000/$38,000
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
Brian S. Olschan -0- $0 117,500/27,500 $116,000/$28,000
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
Paul G. Driscoll -0- $0 8,000/13,000 $1,000/$1,000
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
Larry H. Buchtmann -0- $0 42,250/12,750 $46,000/$91,000
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
James A. Benkovic -0- $0 37,750/12,250 $35,000/$12,000
- ---------------------------- ------------------ ------------------- ------------------------------ ------------------------------
(1) The Company has no unexercised SARs.
(2) Values stated are based on the closing price per share of the Company's
Common Stock on the American Stock Exchange on December 31, 2002, the last
trading day of the fiscal year.
ACME UNITED CORPORATION RETIREMENT PLANS
In December 1995, the Board of Directors adopted a resolution to freeze the
defined benefit pension plan resulting in no further benefit accruals after
February 1, 1996. The life annuity annual benefit at age 65 was zero for Walter
C. Johnsen, Brian S. Olschan, Paul G. Driscoll and Larry H. Buchtmann and $3,985
for James A. Benkovic. Amounts earned by others under this plan are not subject
to a deduction for estimated Social Security benefits, and do not include
benefits which would result from the transfer by a retiring employee of his
accrued profit-sharing account balance to the pension plan.
(15)
CHANGE-IN-CONTROL ARRANGEMENTS AND SEVERANCE PAY PLAN
The Company has a Salary Continuation Plan in effect covering officers of the
Company employed in the United States at the level of Vice President or above,
under the age of 65 and having at least one (1) year of Company service. This
plan covers Walter C. Johnsen, Brian S. Olschan, Paul G. Driscoll, James A.
Benkovic and Larry H. Buchtmann and is designed to retain key employees and
provide for continuity of management in the event of an actual or threatened
change in control of the Company. First, the plan provides that in the event of
such a change in control each such key employee would have specific rights and
receive certain benefits if, within one year after such change in control (two
years for officers who like Mr. Johnsen and Mr. Olschan are also directors),
either the employee's employment is terminated by the Company involuntarily,
his/her responsibility, status or compensation is reduced, or if he/she is
transferred to a location unreasonably distant from his/her current location. In
such circumstances the compensation which the employee would be entitled to
receive would be a lump sum payment equal to a specific number of months'
compensation based upon the level of his/her non-deferred compensation in effect
immediately preceding such disposition. Secondly, any such key employee
resigning within six (6) months after the disposition of the Company (one year
for certain officers who like Mr. Johnsen and Mr. Olschan are also directors)
would be entitled to a similar payment. Under the first scenario Messrs. Johnsen
and Olschan would be entitled to thirty (30) months' compensation, respectively
and Messrs. Driscoll, Benkovic and Buchtmann eighteen (18) months compensation.
Under the second scenario, Messrs. Johnsen and Olschan would be entitled to
twenty-four (24) months', and Messrs. Driscoll, Buchtmann and Benkovic would be
entitled to six (6) months' compensation.
The Company has a Severance Pay Plan in effect covering officers of the Company
employed in the United States at the level of Vice President or above, under the
age of 65 and having at least one (1) year of Company service. This Plan covers
Messrs. Johnsen, Olschan, Driscoll, Benkovic and Buchtmann and is designed to
enable the Company to attract and retain key employees. The Plan provides that
in the event the key employee's employment is terminated by the Company
involuntarily, his/her responsibility, status or compensation is reduced, or if
he/she is transferred to a location unreasonably distant from his/her current
location, he/she shall be entitled to benefits under the Plan. In such
circumstances the compensation which the employee would be entitled to receive
would be a lump sum payment equal to a specific number of months compensation
based upon the level of his/her non-deferred compensation in effect immediately
preceding such termination. Under the Plan Messrs. Johnsen and Olschan would be
entitled to nine (9) months' compensation, and Messrs. Driscoll, Benkovic and
Buchtmann six (6) months' compensation, upon such severance. This plan applies
only if the Salary Continuation Plan does not apply.
PERFORMANCE GRAPH
The following Performance Graph shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that the Company specifically incorporates this information
by reference, and shall not otherwise be deemed filed under such Acts.
(16)
The graph compares the yearly cumulative total shareholder return on the
Company's Common Stock with the yearly cumulative total return of (a) the AMEX
Market Index and (b) a peer group of companies that, like the Company, (i) are
currently listed on the American Stock Exchange, and (ii) have a market
capitalization of $10 million to $20 million. The peer group includes the
following companies: Ablest Incorporated, Advanced Photonix CL A, Amcon
Distributing Co, American Insured MTG 84, American Shared Hosp SVC, ATC
Healthcare Inc. CL A, Atlantic Premium Brands, Avitar Inc., AXS-One Inc., Bell
Industries Inc. A,Bexil Corp. Big City Radio Inc., Bionova Holding Corp.,
Blackrock CA Inv QMT, Blackrock FL IQMT, Blackrock NJ INVST QLTY, Blackrock NY
INVST QLTY, Blonder Tongue Labs, Bolt Technology Corp., Cardiotech International
Inc, Carmel Container System, Cheniere Energy Inc., Cognitronics Corp.,
Competitive Technologies, Core Molding Tech Inc., Cornerstone Bancorp, Cortex
Pharmaceuticals, CPI Aerostructures Inc., Cross Media Marketing, Cybex
International, Danielson Holding Corp., Decorator Industries, Decorize Inc.,
Eagle Broadband Inc., Earl Sheib Inc., Elite Pharmaceuticals, Empire Resources
Inc., Environmental Elements, Equidyne Corporation, Eurotech Limited, Excel
Maritime Carriers, First City Bank CT, Five Star Quality Care Inc., Flanigan's
Enterprise Inc., Franklin Electronic Publication, Friedman Industries Inc.,
Genetronics Biomedical, Goldfield Corp, Golf Trust of America,Graham Corp,
Gristedes Foods Inc., Grupo Simec S A ADR, Halifax Corporation, Heartland
Partners L.P., Hersha Hospitality Trust, Hi-Shear Technology Corp, Imageware
Systems Inc.,Investors Capital Holdings, Jinpan International Ltd., Kentucky
First Bancorp, Kinark Corp., Lifepoint Inc., Lynch Corp., McRae Industries CL A,
Merrimac Industries Inc., Michael Anthony Jewelers, Movie Star Inc., New Dragon
Asia Corp., Northern Technology, The Ohio Art Company, ON2 Technoligies Inc.,
Phoenix Footwear Group, Piccadilly Cafeterias, Pittsburgh and WV Railroad, PLC
Systems Inc., Proterion Corp., REFAC, Rica Foods Inc, Riviera Holdings Corp.,
Rotonics Manufacturing, Sherwood Brands Inc., Sifco Industries Inc., Southern
Banc Co., Southfirst Bancshares, Stephen Company, Sterling Cap CP, Streettracks
DJ Global, Streettracks DJ US LC VL, Streettracks DJ US SM CP, Sunair
Electronics Inc., Sunlink Health Systems, Sussex Bancorp, Tech Flavors and
Fragrance, Tech-Ops Sevcon Inc., Tengasco Incorporated, Tofutti Brands Inc.,
United Guardian Inc., Urecoats Industries Inc., Valpey Fisher Corp., Versar
Inc., Vicon Industries, Viragen Inc., Vita Food Products Inc., Wellco
Enterprises Inc, Westminster Capital, Inc.
(17)
The Company does not believe it can reasonably identify a peer group of
companies on an industry or line-of-business basis for the purpose of developing
a comparative performance index. While the Company is aware that some other
publicly-traded companies market products in the Company's line-of-business,
none of these other companies provide most or all of the products offered by the
Company, and many offer other products or services as well. Moreover, some of
these other companies that engage in the Company's line-of-business do so
through divisions or subsidiaries that are not publicly-traded. Furthermore,
many of the other companies are substantially more highly capitalized than the
Company. For these reasons, any such comparison would not, in the opinion of the
Company, provide a meaningful index of comparative performance.
The comparisons in the graph below are based on historical data and are not
indicative of, or intended to forecast, the possible future performance of the
Company's Common Stock.
(Printer: Insert Graph)
COMPARISON OF CUMULATIVE TOTAL RETURN OF COMPANY, PEER GROUP AND
AMEX MARKET INDEX
- --------------------------------FISCAL YEAR ENDED-------------------------------
1997 1998 1999 2000 2001 2002
ACME UNITED CORP 100.00 37.50 18.75 46.88 65.00 62.67
PEER GROUP 100.00 74.43 71.17 38.61 35.07 24.06
AMEX MARKET INDEX 100.00 98.64 122.98 121.47 115.87 111.25
PROPOSAL FOR AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has approved, and recommends that the Shareholders of the
Company approve, an Amendment to the Certificate of Incorporation for the
purpose of 1) broadening the indemnification of directors and officers to the
fullest extent permitted by applicable law and 2) limiting the liability of
directors. Until Connecticut's corporation laws were extensively changed
effective January 1, 1997, directors and officers were provided with
indemnification at a level mandated by law for all Connecticut corporations.
This protection was the maximum indemnification then permitted in Connecticut
corporations. Once the new Connecticut corporation laws came into effect in
1997, corporations were free to change the extent of protection of directors and
officers, but directors and officers of corporations which were formed under
older law (like the Company) maintained the indemnification rights they had
under the older law unless the corporation affirmatively changed them. The
Company now proposes to amend the certificate of incorporation to provide
directors and officers the maximum indemnification rights permitted under the
new Connecticut corporation law. By providing the maximum protection allowed by
applicable law, the Board believes that such an Amendment would be in the best
interests of the Company in attracting and retaining skilled and effective
directors and officers because it modernizes the Company's indemnification and
limitation of liability policy to a level competitive in today's environment.
(18)
The text of the resolution for the proposed Amendment is as follows:
RESOLVED, that the Certificate of Incorporation be and hereby is amended by
adding thereto the following new Articles VI and VII as follows:
ARTICLE VI. Subject to the provisions of Connecticut General Statutes
section 33-775, the corporation shall indemnify an individual who is a
party to a proceeding because he is a director or officer of the
corporation against liability (as defined in subdivision 5 of Connecticut
General Statutes section 33-770) in the proceeding if:
(1)(A) he conducted himself in good faith; (B) he reasonably believed
(i) in the case of conduct in his official capacity, that his conduct
was in the best interests of the corporation; and (ii) in all other
cases, that his conduct was at least not opposed to the best interests
of the corporation; and (C) in the case of any criminal proceeding, he
had no reasonable cause to believe his conduct was unlawful; or
(2) such liability arises from any action taken, or any failure to
take any action, as a director or officer, except liability that (A)
involved a knowing and culpable violation of law by the director or
officer; (B) enabled the director, officer or an associate, as defined
in Connecticut General Statutes section 33-840, to receive an improper
personal gain; (C) showed a lack of good faith and a conscious
disregard for the duty of the director or officer to the corporation
under circumstances in which the director or officer was aware that
his conduct or omission created an unjustifiable risk of serious
injury to the corporation; (D) constituted a sustained and unexcused
pattern of inattention that amounted to an abdication of the
director's or officer's duty to the corporation; or (E) created
liability under Connecticut General Statutes section 33-757. This
provision shall not affect the indemnification of or advance of
expenses to a director or officer for any liability stemming from acts
or omissions occurring prior to the effective date of this provision.
(19)
ARTICLE VII. The personal liability of a director to this corporation or
its shareholders for monetary damages for breach of duty as a director is
hereby limited to an amount equal to the compensation received by such
director for serving the corporation during the year of the violation,
provided such breach did not (A) involve a knowing and culpable violation
of law by the director; (B) enable the director or an associate, as defined
in Connecticut General Statutes section 33-840, to receive an improper
personal economic gain; (C) show a lack of good faith and a conscious
disregard for the duty of the director to the corporation under
circumstances in which the director was aware that his conduct or omission
created an unjustifiable risk of serious injury to the corporation; (D)
constitute a sustained and unexcused pattern of inattention that amounted
to an abdication of the director's duty to the corporation; or (E) create
liability under Connecticut General Statutes section 33-757. This provision
shall not limit or preclude the liability of a director for any act or
omission occurring prior to the effective date of this provision.
The first of the proposed changes would require the Company to indemnify
directors and officers against a claim made by any person that the director or
officer took some action or failed to take some action which the claimant
believes was improper. This requirement is subject to an independent
determination by disinterested corporate officials (described in Connecticut
General Statutes section 33-775) that the person claiming indemnification has
met the standards of conduct entitling him or her to indemnification, as
described further below. Indemnification means that the Company would be
responsible for paying the claimant for a successful claim against the director
or officer (whether by court judgment or settlement of the claim) as well as for
paying for the director's or officer's costs to defend the claim (such as
attorneys fees). However, there are certain kinds of acts or omissions of a
director or officer for which indemnification is not permitted to be made under
Connecticut law, as described in subparagraphs (2) (A) through (E) of the
proposed new Article VI. The proposal would allow for the maximum amount of
indemnification for officers and directors presently permitted under Connecticut
law. The proposal and Connecticut law would also allow the Company to advance
sums, during the pendency of the claim, to a director or officer against whom a
claim had been made, for the costs of defending the claim, such as attorneys
fees, but subject to any limitations on such advances imposed by federal
securities laws.
(20)
As discussed above, because no action has been taken to date to vary the
indemnification rights of directors and officers of the Company since the change
in Connecticut law which became effective in 1997, they presently are entitled
(subject to the independent determination described below) to the same
indemnification from the Company as described in part 1 of the proposed Article
VI above. The Board of Directors believes that providing the additional measure
of protection now permitted by Connecticut law (part 2 of the proposed Article
VI above) would be in the best interests of the Company in attracting and
retaining skilled and effective directors and officers.
Under Connecticut law, any indemnification of a director or officer must be
authorized for a specific proceeding after a determination has been made that
the indemnification of the director or officer is permissible because he has met
the relevant standard of conduct set forth in the Connecticut Business
Corporation Act (and restated in part 1 of the proposed Article VI above). Such
a determination is to be made by the board of directors on a majority vote of
all the disinterested directors, if there are two or more disinterested
directors; by a committee appointed by disinterested directors; by special legal
counsel selected by disinterested directors (or by the entire board of directors
if there are fewer than two disinterested directors); or by the shareholders.
The second proposed amendment to the Certificate of Incorporation (new Article
VII) has some similarities to the first, but is distinct. This proposal is
intended to put a cap on claims which could be made either by the Company or its
Shareholders against a director for breaches of the duty of a director other
than those types of breaches enumerated. The five enumerated exceptions are
those required by Connecticut law (Connecticut General Statutes section
33-636(b)), and are essentially the same as the exceptions applicable to
director and officer indemnification under the proposed new Article VI above.
The Board of Directors believes that violations which do not fall within the
five enumerated exceptions should not give rise to personal liability for a
director beyond his compensation for the year in which the violation or breach
occurs and that the proposed amendment is necessary to attract and retain
skilled and effective persons to serve on the Board of Directors. The proposed
amendment would provide the maximum limitation on director liability presently
allowed under Connecticut law.
VOTES REQUIRED
The approval of the proposed amendment to the Certificate of Incorporation
requires the affirmative vote of a majority of the shares of Common Stock of the
Company voting in person or by proxy on the amendment. If the amendment is not
approved by shareholders, it will not become effective.
(21)
The Board of Directors recommends a vote FOR approval of the amendment to the
Certificate of Incorporation.
SELECTION OF AUDITORS
The Board of Directors has reappointed Ernst & Young LLP as independent auditors
to audit the financial statements of the Company for the current fiscal year.
Representatives of Ernst & Young LLP are expected to be present at the 2003
Annual Meeting with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions. The
Company knows of no direct or material indirect financial interest in the
Company or of any connection with the Company by this accounting firm except the
professional relationship between auditor and client.
FEES TO AUDITORS
A. Audit Fees
Fees for the 2002 audit were $134,000.
B. All other Fees
All other fees were $73,000, including audit related services of
$9,000. Audit related services generally include fees for pension audits
and accounting consultations.
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 executive officers, and persons who own more than 10% of a
registered class of the Company Common Stock(collectively referred to herein as
"Insiders"), to file with the SEC and the American Stock Exchange reports of
ownership and changes in ownership of Common Stock and other equity securities
of the Company. Insiders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file. During the last year, the
Company undertook an extensive review of the Section 16(a) reports filed on
behalf of each individual who was an Insider during the fiscal year ended
December 31,2002 to determine whether all their reportable transactions in the
Company's Common Stock were timely reported and, as these transactions were
identified, the Company undertook to assist the affected persons in filing the
appropriate forms. In most of these cases there was no purchase or sale
involved, but rather non-market transactions which have already been disclosed
in the Company's annual Proxies, such as stock option grants and payment of
director's fees in Common Stock rather than cash. Since conducting the review,
the Company has developed new procedures to ensure improved compliance on an
on-going basis, including compliance with the requirements of the Sarbanes-Oxley
Act of 2002.
(22)
The following are the late reports filed during February 2003 by such
Insiders under Section 16(a) and the number of transactions reflected therein as
not reported on a timely basis during such fiscal year or prior fiscal years:
Mr. Benkovic's February 2003 filing covered eleven late reports including five
market transactions during 2001 and 2002 and ten grants of options during the
years 1995 through 2001 which increased his beneficial ownership by 2,300 shares
and by 50,000 options; Mr. Buchtmann's February 2003 filing covered four late
reports including eight grants of options during the years 1998 through 2001
which increased his beneficial ownership by 55,000 options; Mr. Davanzo's
February 2003 filing covered five late reports including ten grants of options
during the years 1997 through 2001; Mr. Dunbar's February 2003 filing covered
eight late reports including two market transactions during 1999, one issue of
stock in lieu of cash fees (22,622 shares) during 1999 and five grants of
options during the years 1997 through 2001 which increased his beneficial
ownership by 17,809 shares and by 25,000 options; Mr. Holden's February 2003
filing covered five late reports including one issue of stock in lieu of cash
fees (5,472 shares) during 1999 and four grants of options during the years 1998
through 2001 which increased his beneficial ownership by 5,472 and 22,500
options ; Mr. Johnsen's February 2003 filing covered three late reports
including seven grants of options during the years 1999 through 2001 which
increased his beneficial ownership by 140,000 options; Mr. Moore's February 2003
filing covered six late reports including one issue of stock in lieu of cash
fees (13,255 shares) during 1999 and five grants of options during the years
1997 through 2001 which increased his beneficial ownership by 13,255 shares and
by 25,000 options; Mr. Olschan's February 2003 filing covered six late reports
including ten grants of options during the years 1996 through 2001 which
increased his beneficial ownership by 145,000 options; Mr. Penisten's February
2003 filing covered three late reports including one market transaction during
2002, one issue of stock in lieu of cash fees (47,287 shares) during 1999 and
one grant of options in 2001 which increased his beneficial ownership by 46,787
shares and by 7,500 options; and Mr. Ward's February 2003 filing covered one
late report of a grant of options in 2001 which increased his beneficial
ownership by 10,000 options.
(23)
SHAREHOLDER PROPOSALS
To allow sufficient time for preparation of the proxy and proxy statement,
shareholder proposals for presentation at the Annual Meeting scheduled for April
26, 2004 must be received by the Secretary of the Company no later than November
23, 2003.
In addition, the Company's by-laws provide that any shareholder wishing to make
a nomination for the office of director at the 2004 Annual Meeting must give the
Company at least sixty (60) days' advance notice, and that notice must meet
certain requirements set forth in the by-laws. Shareholders may request a copy
of the by-laws from the Secretary of the Company.
Notices and requests should be addressed to Secretary, Acme United Corporation,
1931 Black Rock Turnpike, Fairfield, Connecticut 06825.
OTHER BUSINESS
Management does not know of any matters to be presented, other than those
described herein, at the Annual Meeting. If any other business should come
before the meeting, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies in accordance with their best
judgment.
Solicitation of proxies is being made by management through the mail, in person
and by telephone. The Company will be responsible for costs associated with this
solicitation.
By Order of the Board of Directors
Paul G. Driscoll, Vice President and
Chief Financial Officer, Secretary
and Treasurer
Acme United Corporation
1931 Black Rock Turnpike
Fairfield, Connecticut 06825
March 27, 2003
(24)
APPENDIX A
Acme United Corporation
Audit Committee Charter
Organization
This charter governs the operations of the Audit Committee. The Committee shall
review and reassess the charter at least annually and obtain the approval of the
charter by the Board of Directors. The Committee shall be appointed by the Board
of Directors and shall comprise at least three directors, each of whom are
independent of management and the Company. Members of the Committee shall be
considered independent if they have no relationship that may interfere with the
exercise of their independence from management and the Company. All Committee
members shall be financially literate, (or shall become financially literate
within a reasonable period of time after appointment to the committee), and at
least one member shall have accounting or related financial management
expertise.
Statement of Policy
The Audit Committee shall provide assistance to the Board of Directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the legal
compliance and ethics programs as established by management and the Board. In so
doing, it is the responsibility of the Committee to maintain free and open
communication between the Committee, independent auditors, and management of the
Company. In discharging its oversight role, the committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities, and personnel of the Company and the power to retain
outside counsel, or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the Audit Committee is to oversee the Company's
financial reporting process on behalf of the Board and report the results of
their activities to the Board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. The Committee in carrying out its
responsibilities believes its policies and procedures should remain flexible, in
order to best react to changing conditions and circumstances. The Committee
should take the appropriate actions to set the overall corporate "tone" for
quality financial reporting, sound business practices, and ethical behavior.
The following shall be the principal recurring processes of the Audit Committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Committee may supplement them as
appropriate.
(25)
o The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Audit Committee, as representatives of the
Company's shareholders. The Committee shall have the ultimate authority and
responsibility to evaluate and, where appropriate, recommend to the Board
and to management the replacement of the independent auditors. The
Committee shall discuss with the auditors their independence from
management and the Company and the matters included in the written
disclosures required by the Independence Standards Board. Annually, the
Committee shall review and recommend to the Board the selection of the
Company's independent auditors, and notify the shareholders of the Board's
decision.
o The Committee shall discuss with the independent auditors the overall scope
and plans for their respective audits including the adequacy of staffing
and compensation. Also, the Committee shall discuss with management, and
the independent auditors the adequacy and effectiveness of the accounting
and financial controls, including the Company's system to monitor and
manage business risk, and legal and ethical compliance programs. Further,
the Committee shall meet separately with the independent auditors, with and
without management present, to discuss the results of their examinations.
o The Committee shall review the interim financial statements and the
Company's Quarterly Report on Form 10-Q with management and the independent
auditors. Also, the Committee shall discuss the results of the quarterly
review and any other matters required to be communicated to the Committee
by the independent auditors under generally accepted auditing standards.
The chair of the Committee may represent the entire Committee for the
purposes of this review.
o The Committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form
10-K (or the annual report to shareholders if distributed prior to the
filing of Form 10-K), including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements.
Also, the Committee shall discuss the results of the annual audit and any
other matters required to be communicated to the Committee by the
independent auditors under generally accepted auditing standards.
(26)