SECURITY NATIONAL FINANCIAL CORPORATION
5300 South 360 West, Suite 250
Salt Lake City, Utah 84123
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held on October 4, 2001
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Security National Financial Corporation
(the "Company") for use at the Annual Meeting of Stockholders to be held on
October 4, 2001, at 5300 South 360 West, Suite 250, Salt Lake City, Utah, at
11:30 a.m., Mountain Daylight Time, or at any adjournment or postponements
thereof (the "Annual Meeting"). The shares covered by the enclosed Proxy, if
such is properly executed and received by the Board of Directors prior to the
meeting, will be voted in favor of the proposals to be considered at the Annual
Meeting, and in favor of the election of the nominees to the Board of Directors
(two nominees to be elected by the Class A common stockholders voting separately
as a class and five nominees to be elected by the Class A and Class C common
stockholders voting together) as listed unless such Proxy specifies otherwise,
or the authority to vote in the election of directors is withheld. A Proxy may
be revoked at any time before it is exercised by giving written notice to the
Secretary of the Company at the above address. Stockholders may vote their
shares in person if they attend the Annual Meeting, even if they have executed
and returned a Proxy. This Proxy Statement and accompanying Proxy Card are being
mailed to stockholders on or about September 4, 2001.
Your vote is important. Please complete and return the Proxy Card so your
shares can be represented at the Annual Meeting, even if you plan to attend in
person.
If a shareholder wishes to assign a proxy to someone other than the
Directors' Proxy Committee, all three names appearing on the Proxy Card must be
crossed out and the name(s) of another person or persons (not more than three)
inserted. The signed card must be presented at the meeting by the person(s)
representing the shareholder.
The cost of this solicitation will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers, and regular employees, without additional compensation.
The matters to be brought before the Annual Meeting are (1) to elect
directors to serve for the ensuing year; (2) to ratify the appointment of Tanner
+ Co. as the Company's independent accountants for the fiscal year ending
December 31, 2001; and (3) any other business as may properly come before the
Annual Meeting.
VOTING SECURITIES
Only holders of record of Common Stock at the close of business on August
20, 2001, will be entitled to vote at the Annual Meeting. As of June 30, 2001,
there were issued and outstanding 3,874,566 shares of Class A Common Stock,
$2.00 par value per share, and 5,762,729 shares of Class C Common Stock $.20 par
value per share resulting in a total of 9,637,295 shares of both Class A and
Class C Common Stock outstanding. A majority of the outstanding shares
(4,818,649) of Class A and Class C Common Stock will constitute a quorum for the
transaction of business at the meeting.
The holders of each class of Common Stock of the Company are entitled to
one vote per share. Cumulative voting is not permitted in the election of
directors.
SECURITY NATIONAL FINANCIAL CORPORATION
5300 South 360 West, Suite 250
Salt Lake City, Utah 84123
August 31, 2001
Dear Stockholder:
On behalf of the Board of Directors, it is my pleasure to invite you to
attend the Annual Meeting of Stockholders of Security National Financial
Corporation (the "Company") to be held on October 4, 2001, at 11:30 a.m.,
Mountain Daylight Time, at 5300 South 360 West, Suite 250, Salt Lake City, Utah.
The matters to be addressed at the meeting will include (1) the election of
seven directors; (2) to ratify the appointment of Tanner + Co. as the Company's
independent accountants for the fiscal year ending December 31, 2001 and (3) to
report on the business activities of the Company and answer any stockholder
questions.
Your vote is very important. We hope you will take a few minutes to review
the Proxy Statement and complete, sign, and return your Proxy Card in the
envelope provided, even if you plan to attend the meeting. Please note that
sending us your Proxy will not prevent you from voting in person at the meeting,
should you wish to do so.
Thank you for your support of Security National Financial Corporation. We
look forward to seeing you at the Annual Stockholders Meeting.
Sincerely yours,
SECURITY NATIONAL
FINANCIAL CORPORATION
George R. Quist,
Chairman of the Board, President,
and Chief Executive Officer
SECURITY NATIONAL FINANCIAL CORPORATION
5300 South 360 West, Suite 250
Salt Lake City, Utah 84123
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Security
National Financial Corporation (the "Company"), a Utah corporation, will be held
on October 4, 2001, at 5300 South 360 West, Suite 250, Salt Lake City, Utah, at
11:30 a.m., Mountain Daylight Time, to consider and act upon the following:
1. To elect a Board of Directors consisting of seven directors (two
directors to be elected exclusively by the Class A common stockholders
voting separately as a class and the remaining five directors to be
elected by the Class A and Class C common stockholders voting
together) to serve until the next Annual Meeting of Stockholders or
until their successors are elected and qualified;
2. To ratify the appointment of Tanner + Co. as the Company's independent
accountants for the fiscal year ending December 31, 2001;
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on August 20, 2001,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. A PROXY STATEMENT AND
PROXY CARD ARE ENCLOSED HEREWITH. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE PAID
ENVELOPE SO THAT YOUR SHARES MAY BE VOTED AT THE MEETING. THE GIVING OF A PROXY
WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
By order of the Board of Directors,
William C. Sargent
Senior Vice President and Secretary
Salt Lake City, Utah, August 31, 2001
The Company's Articles of Incorporation provide that the Class A common
stockholders and Class C common stockholders have different voting rights in the
election of directors. The Class A common stockholders voting separately as a
class will be entitled to vote for two of the seven directors to be elected (the
nominees to be voted upon by the Class A stockholders separately consist of
Messrs. H. Craig Moody and Scott M. Quist).
The remaining five directors will be elected by the Class A and Class C
common stockholders voting together (the nominees to be so voted upon consist of
Messrs. Charles L. Crittenden, Robert G. Hunter, M.D, George R. Quist, William
C. Sargent and Norman G. Wilbur). For the other business to be conducted at the
Annual Meeting, the Class A and Class C common stockholders will vote together,
one vote per share. Class A common stockholders will receive a different form of
Proxy than the Class C common stockholders.
ELECTION OF DIRECTORS
Proposal 1
There are three committees of the Board of Directors, which meet
periodically during the year: the Audit Committee, the Compensation Committee,
and the Executive Committee. The Board of Directors does not have a Nominating
Committee.
The Compensation Committee is responsible for recommending to the Board of
Directors for approval the annual compensation of each executive officer of the
Company and the executive officers of the Company's subsidiaries, developing
policy in the areas of compensation and fringe benefits, contributions under the
Employee Stock Ownership Plan, contribution under the 401(k) Retirement Savings
Plan, granting of options under the stock option plans, and creating other
employee compensation plans. The Compensation Committee consists of Messrs.
Charles L. Crittenden, Norman G. Wilbur, and George R. Quist. During 2000, the
Compensation Committee met on two occasions.
The Audit Committee directs the auditing activities of the Company's
internal auditors and outside public accounting firm and approves the services
of the outside public accounting firm. The Audit Committee consists of Messrs.
Charles L. Crittenden, H. Craig Moody, and Norman G. Wilbur. During 2000, the
Audit Committee met on two occasions.
The Executive Committee reviews Company policy, major investment activities
and other pertinent transactions of the Company. The Executive Committee
consists of Messrs. George R. Quist, Scott M. Quist, William C. Sargent, and H.
Craig Moody. During 2000, the Executive Committee met on two occasions.
During 2000, there were five meetings of the Company's Board of Directors.
The Company's Bylaws provide that the Board of Directors shall consist of
not less than three nor more than eleven members. The term of office of each
director is for a period of one year or until the election and qualification of
his successor. A director is not required to be a resident of the State of Utah
but must be a stockholder of the Company.
The size of the Board of Directors of the Company for the coming year is
seven members. Unless authority is withheld by your Proxy, it is intended that
the Common Stock represented by your Proxy will be voted for the respective
nominees listed below. If any nominee should not serve for any reason, the Proxy
will be voted for such person as shall be designated by the Board of Directors
to replace such nominee. The Board of Directors has no reason to expect that any
nominee will be unable to serve. There is no arrangement between any of the
nominees and any other person or persons pursuant to which he was or is to be
selected as a director. There is no family relationship between or among any of
the nominees, except that Scott M. Quist is the son of George R. Quist.
The Nominees
The nominees to be elected by the holders of Class A Common Stock are as
follows:
Name Age Director Since Position(s) with the Company
------------ --- ---------------- ----------------------------
H. Craig Moody 47 September 1995 Director
Scott M. Quist 47 May 1986 First Vice President, General
Counsel, Treasurer and Director
The nominees for election by the holders of Class A and Class C Common
Stock, voting together, are as follows:
Name Age Director Since Position(s) with the Company
------------ --- ---------------- ----------------------------
Charles L. Crittenden 81 October 1979 Director
Robert G. Hunter, M.D 41 October 1998 Director
George R. Quist 80 October 1979 Chairman of the Board,
President and Chief
Executive Officer
William C. Sargent 72 February 1980 Senior Vice President,
Secretary and Director
Norman G. Wilbur 62 October 1998 Director
The following is a description of the business experience of each of the
nominees and directors.
George R. Quist has been Chairman of the Board of Directors, President and
Chief Executive Officer of the Company since October 1979. Mr. Quist is also
Chairman of the Board, President and Chief Executive Officer of Southern
Security Life Insurance Company and has served in these positions since December
1998. From 1946 to 1960, he was an agent, District Manager and Associate General
Agent for various insurance companies. From 1960 to 1964, he was Executive Vice
President and Treasurer of Pacific Guardian Life Insurance Company. Mr. Quist
also served from 1981 to 1982 as the President of The National Association of
Life Companies, a trade association of 642 life insurance companies, and from
1982 to 1983 as its Chairman of the Board. Mr. Quist also served on the Board of
Directors of the National Alliance of Life Companies, an industry trade
association, from 1992 to 1996.
William C. Sargent has been Senior Vice President of the Company since
1980, Secretary since October 1993, and a director since February 1980. Prior to
that time, he was employed by Security National Life as a salesman and agency
superintendent. Mr. Sargent is also Senior Vice President, Secretary and a
director of Southern Security Life Insurance Company and has served in these
positions since December 1998.
Scott M. Quist has been the Company's General Counsel since 1982, First
Vice President since December 1990, Treasurer since October 1993, and a director
since May 1986. From 1980 to 1982, Mr. Quist was a tax specialist with Peat,
Marwick, Mitchell, & Co., in Dallas, Texas. From 1986 to 1991 he was a director
of The National Association of Life Companies, a trade association of 642
insurance companies and its Treasurer until its merger with the American Council
of Life Companies in 1991. Mr. Quist is a past member of the Board of Governors
of the Forum 500 Section (representing small companies) of the American Council
of Life Companies. Mr. Quist is the past President of the Utah Life Convention
and past General Counsel of the Utah Funeral Directors' Association. Mr. Quist
has also been a director since November 1993 of Key Bank of Utah, and is
currently a director and immediate past president of the National Alliance of
Life Companies, an industry trade association of over 200 life companies. Mr.
Quist is also First Vice President, Treasurer, General Counsel and a director of
Southern Security Life Insurance Company and has served in these positions since
December 1998.
Charles L. Crittenden has been a director of the Company since October
1979. Mr. Crittenden is also a director of Southern Security Life Insurance
Company and has served in this position since December 1998. Mr. Crittenden has
been sole stockholder of Crittenden Paint & Glass Company since 1958. He is also
an owner of Crittenden Enterprises, a real estate development company, and
Chairman of the Board of Linco, Inc.
Robert G. Hunter, M.D. has been a director of the Company since October
1998. Dr. Hunter is also a director of Southern Security Life Insurance Company
and has served in this position since December 1998. Dr. Hunter is currently a
practicing physician in private practice. He received a B.S. degree from the
University of Utah in 1982 and an M.D. degree from the University of Utah in
1987, and served his Internship in General Surgery at the University of Texas
Health Science Center at San Antonio. Dr. Hunter created the State Wide E.N.T.
Organization (Rocky Mountain E.N.T., Inc.) where he is currently a member of the
Executive Committee. He is Chairman of Surgery at Cottonwood Hospital, a
delegate to the Utah Medical Association, a delegate representing Utah to the
American Medical Association, and a member of several medical advisory boards.
H. Craig Moody has been a director of the Company since September 1995. Mr.
Moody is also a director of Southern Security Life Insurance Company and has
served in this position since December 1998. Mr. Moody is owner of Moody &
Associates, a political consulting and real estate company. He is a former
Speaker and Majority Leader of the House of Representatives of the State of
Utah.
Norman G. Wilbur has been a director of the Company since October 1998. Mr.
Wilbur is also a director of Southern Security Life Insurance Company and has
served in this position since December 1998. Mr. Wilbur worked for the regional
offices of J.C. Penney Co., Inc. in budgeting and analysis. His positions with
J.C. Penney Co. Inc. included Manager of Planning and Reporting. After 36 years
with J.C. Penney's, Mr. Wilbur took an option of an early retirement in 1997. He
is a past board member of a homeless organization in Plano, Texas.
Executive Officers
The following table sets forth certain information with respect to the
executive officers of the Company (the business biographies for the first three
individuals are set forth above):
Name Age Title
________________ ______ _______________________________________
George R. Quist1 80 Chairman of the Board, President and Chief
Executive Officer
Scott M. Quist1 47 First Vice President, General Counsel and
Treasurer
William C. Sargent 72 Senior Vice President and Secretary
1George R. Quist is the father of Scott M. Quist.
The Board of Directors of the Company has a written procedure which
requires disclosure to the Board of any material interest or any affiliation on
the part of any of its officers, directors or employees which is in conflict or
may be in conflict with the interests of the Company.
No director, officer or 5% stockholder of the Company or its subsidiaries,
or any affiliate thereof has had any transactions with the Company or its
subsidiaries during 2000 or 1999.
Each of the directors of the Company are directors of Southern Security
Life Insurance Company, which has a class of equity securities registered under
the Securities Exchange Act of 1934, as amended. In addition, Scott M. Quist is
a director of Key Bank of Utah.
All directors of the Company hold office until the next annual meeting of
stockholders, or until their successors have been elected and qualified.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth security ownership information of the Company's
Class A and Class C Common Stock as of June 30, 2001, (i) for persons who own
beneficially more than 5% of the Company's outstanding Class A or Class C Common
Stock, (ii) each director of the Company, and (iii) for all executive officers
and directors of the Company as a group.
Class A Class C Class A and Class C
Common Stock Common Stock Common Stock
------------ ------------ ------------
Amount Amount Amount
Name and Address of Beneficially Percent Beneficially Percent Beneficially Percent
Beneficial Owner Owned of Class Owned of Class Owned of Class
- ----------------- ------- -------- ----- -------- ----- --------
George R. Quist (1)(2)
4491 Wander Lane
Salt Lake City, Utah 84124 146,899 3.8% 229,562 4.0% 376,461 3.9%
George R. and Shirley C
Quist Family
Partnership, Ltd.(6)
4491 Wander Lane
Salt Lake City, Utah 84124 343,740 8.9% 2,760,704 47.9% 3,104,444 32.2%
Employee Stock
Ownership Plan (4)
5300 S. 360 W., Suite 250
Salt Lake City, Utah 84123 553,322 14.3% 1,277,690 22.2% 1,831,012 19.0%
William C. Sargent (1)(2)(3)
4974 Holladay Blvd
Salt Lake City, Utah 84117 117,109 3.0% 168,934 2.9% 286,043 3.0%
Scott M. Quist (3)
7 Wanderwood Way
Sandy, Utah 84092 107,429 2.8% 73,156 1.3% 180,585 1.9%
Charles L. Crittenden
2334 Filmore Avenue
Ogden, Utah 84401 1,725 * 197,140 3.4% 198,865 2.1%
Robert G. Hunter, M.D
2 Ravenwood Lane
Sandy, Utah 84092 2,088 * -0- * 2,088 *
H. Craig Moody
1782 East Faunsdale Dr.
Sandy, Utah 84092 680 * -0- * 680 *
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (Continued)
Class A Class C Class A and Class C
Common Stock Common Stock Common Stock
------------ ------------ ------------
Amount Amount Amount
Name and Address of Beneficially Percent Beneficially Percent Beneficially Percent
Beneficial Owner Owned of Class Owned of Class Owned of Class
- ----------------- ------- -------- ----- -------- ----- --------
Norman G. Wilbur
2520 Horseman Drive
Plano, Texas 75025 994 * -0- * 994 *
Associated Investors (5)
5300 S. 360 W. Suite 250
Salt Lake City, Utah 84123 76,345 2.0% 539,372 9.4% 615,717 6.4%
All directors and
executive officers
(7 persons) 720,664 18.6% 3,429,496 59.5% 4,150,160 43.1%
* Less than one percent
(1) Does not include 553,322 shares of Class A Common Stock and
1,277,690 shares of Class C Common Stock owned by the Company's
Employee Stock Ownership Plan (ESOP), of which George R. Quist
and William C. Sargent are the trustees and accordingly, exercise
shared voting and investment powers with respect to such shares.
(2) Does not include 76,345 shares of Class A Common Stock and
539,372 shares of Class C Common Stock owned by Associated
Investors, a Utah general partnership, of which these individuals
are the managing partners and, accordingly, exercise shared
voting and investment powers with respect to such shares.
(3) Does not include 109,137 shares of Class A Common Stock owned by
the Company's 401(k) Retirement Savings Plan, of which William C.
Sargent, Scott M. Quist and George R. Quist are members of the
Investment Committee and accordingly, exercise shared voting and
investment powers with respect to such shares.
(4) The trustees of the Employee Stock Ownership Plan (ESOP) are
George R. Quist and William C. Sargent, who exercise shared
voting and investment powers.
(5) The managing partners of Associated Investors are George R. Quist
and William C. Sargent, who exercise shared voting and investment
powers.
(6) This stock is owned by the George R. and Shirley C. Quist Family
Partnership, Ltd., of which Mr. Quist is the general partner.
The Company's officers and directors, as a group, own beneficially
approximately 43.1% of the outstanding shares of the Company's Class A and Class
C Common Stock.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Executive Officer Compensation
The following table sets forth, for each of the last three fiscal years,
the compensation received by George R. Quist, the Company's President and Chief
Executive Officer, and all other executive officers (collectively, the "Named
Executive Officers') at December 31, 2000, whose salary and bonus for all
services in all capacities exceed $100,000 for the fiscal year ended December
31, 2000.
Summary Compensation Table
Annual Compensation Long-Term Compensation
-------------------------------------- ----------------------------------------------------
Awards Payouts
----------------------------------------------------
Other
Annual Restricted Securities Long-Term All Other
Compen- Stock Underlying Incentive Compensa-
Name and Principal PositionYear Salary($) Bonus($) sation($) (2) Awards($) Options/SARs(#) Payout($) tion($) (3)
- ------------------------------- --------- -------- ------------- --------- --------------- --------- -----------
George R. Quist (1) 2000 147,204 20,200 2,400 0 50,000 0 5,281
Chairman of the Board, 1999 147,204 20,200 2,400 0 50,000 0 20,247
President and Chief 1998 137,454 20,200 2,400 0 50,000 0 12,084
Executive Officer
William C. Sargent 2000 147,798 17,325 4,500 0 45,000 0 637
Senior Vice President, 1999 148,058 17,325 4,500 0 45,000 0 16,879
Secretary and 1998 130,329 17,325 4,500 0 45,000 0 5,286
Director
Scott M. Quist (1) 2000 140,400 18,770 7,200 0 35,000 0 637
First Vice President, 1999 129,400 18,770 7,200 0 35,000 0 15,201
General Counsel 1998 119,025 18,770 7,200 0 35,000 0 7,257
Treasurer and Director
(1) George R. Quist is the father of Scott M. Quist.
(2) The amounts indicated under "Other Annual Compensation" for 2000
consist of payments related to the operation of automobiles by
the Named Executive Officers. However, such payments do not
include the furnishing of an automobile by the Company to George
R. Quist, William C. Sargent and Scott M. Quist nor the payment
of insurance and property taxes with respect to the automobiles
operated by the Named Executive Officers.
(3) The amounts indicated under "All Other Compensation" consist of
(a) amounts contributed by the Company into a trust for the
benefit of the Named Executive Officers under the Employee Stock
Ownership Plan (for fiscal 2000, such amounts were George R.
Quist, $0; William C. Sargent, $0; and Scott M. Quist, $0); (b)
matching contributions made by the Company pursuant to the 401(k)
Retirement Savings Plan in which all matching contributions are
invested in the Company's Class A Common Stock (for fiscal 2000,
such amounts were George R. Quist, $0; William C. Sargent, $0;
and Scott M. Quist, $0; (c) profit sharing contributions made by
the Company pursuant to the 401(k) Retirement Savings Plan (for
fiscal 2000, such amounts were George R. Quist, $0; William C.
Sargent, $0; and Scott M. Quist, $0); (d) insurance premiums paid
by the Company with respect to a group life insurance plan for
the benefit of the Named Executive Officers (for fiscal 2000,
$1,911 was paid for all Named Executive Officers as a group, or
$637 each for George R. Quist, William C. Sargent and Scott M.
Quist); and (e) life insurance premiums paid by the Company for
the benefit of the family of George R. Quist ($4,644). The
amounts under "All Other Compensation" do not include the no
interest loan in the amount of $172,000 that the Company made to
George R. Quist on April 29, 1998, to exercise stock options.
The following table sets forth information concerning the exercise of
options to acquire shares of the Company's Common Stock by the Named Executive
Officers during the fiscal year ended December 31, 2000, as well as the
aggregate number and value of unexercised options held by the Named Executive
Officers on December 31, 2000.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs In-the-Money Options/SARs at
at December 31, 2000(#) December 31, 2000($)
----------------------- --------------------
Shares Acquired Value
Name on Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------------- ------------ ----------- ------------- ----------- -------------
George R. Quist 0 0 173,781 $0 $ 0 $0
William C. Sargent 0 0 248,850 $0 $ 11,494 $0
Scott M. Quist 0 0 132,673 $0 $ 0 $0
Retirement Plans
George R. Quist, who has been Chairman, President and Chief Executive
Officer of the Company since 1979, has a Deferred Compensation Agreement, dated
December 8, 1988, with the Company (the "Compensation Agreement"). This
Compensation Agreement was amended effective January 2, 2001, to reflect the
following benefits. The employment agreements between the Company and George R.
Quist be amended to adjust for inflation in accordance with the United States
Consumer Index commencing January 2, 2002, and for each year thereafter of the
term of the agreement and that for the year 2001 the adjustment for his
retirement is $60,000 per year instead of $50,000 per year. The agreements shall
also be amended to provide his spouse, in the event of his pre-mature death,
with health insurance coverage equivalent to that carried on executive personnel
with the coverage for the entire period of the agreement. In the event of death
of George R. Quist and his spouse prior to the expiration of the terms of the
agreement, payments shall be paid to his estate or as otherwise directed by him
in writing.
The Compensation Agreement further provides that the Board of Directors may
elect to pay the entire amount of deferred compensation in the form of a single
lump-sum payment or other installment payments, so long as the term of such
payments do not exceed 10 years. However, in the event Mr. Quist's employment
with the Company is terminated for any reason other than retirement, death or
disability, the entire deferred compensation shall be forfeited by him.
William C. Sargent, who has been Senior Vice President of the Company since
1980, has a Deferred Compensation Agreement dated April 15, 1994, with the
Company (the "Compensation Agreement"). This Compensation Agreement was amended
effective January 2, 2001, to reflect the following benefits. The employment
agreement between the Company and William C. Sargent be amended to adjust for
inflation in accordance with the United States Consumer Index commencing January
2, 2002, and for each year thereafter of the term of the agreement and that for
the year 2001 the adjustment for his retirement is $60,000 per year instead of
$50,000 per year. The agreements shall also be amended to provide his spouse, in
the event of his pre-mature death, with health insurance coverage equivalent to
that carried on executive personnel with the coverage for the entire period of
the agreement. In the event of death of William C. Sargent and his spouse prior
to the expiration of the terms of the agreement, payments shall be paid to his
estate or as otherwise directed by him in writing.
The Compensation Agreement further provides that the Board of Directors may
elect to pay the entire amount of deferred compensation in the form of a single
lump-sum payment or other installment payments, so long as the term of such
payments do not exceed 10 years. However, in the event Mr. Sargent's employment
with the Company is terminated for any reason other than retirement, death or
disability, the entire deferred compensation shall be forfeited by him.
Employment Agreement
The Company maintains an employment agreement with Scott M. Quist. The
agreement, which has a five-year term, was entered into in 1996, and renewed in
1997. Under the terms of the agreement, Mr. Quist is to devote his full time to
the Company serving as the First Vice President, General Counsel, and Treasurer
at not less than his current salary and benefits, and to include $500,000 of
life insurance protection. In the event of disability, Mr. Quist's salary would
be continued for up to five years at 50% of its current level. In the event of a
sale or merger of the Company, and Mr. Quist were not retained in his current
position, the Company would be obligated to continue Mr. Quist's current
compensation and benefits for seven years following the merger or sale.
Director Compensation
Directors of the Company (but not including directors who are employees)
are paid a director's fee of $8,400 per year by the Company for their services
and are reimbursed for their expenses in attending board and committee meetings.
No additional fees are paid by the Company for committee participation or
special assignments.
Employee 401(k) Retirement Savings Plan
In 1995, the Company's Board of Directors adopted a 401(k) Retirement
Savings Plan. Under the terms of the 401(k) Plan, effective as of January 1,
1995, the Company may make discretionary employer matching contributions to its
employees who choose to participate in the Plan. The Plan allows the board to
determine the amount of the contribution at the end of each year. The Board
adopted a contribution formula specifying that such discretionary employer
matching contributions would equal 50% of the participating employee's
contribution to the Plan to purchase Company stock up to a maximum discretionary
employee contribution of 1/2% of a participating employee's compensation, as
defined by the Plan.
All persons who have completed at least one year's service with the Company
and satisfy other plan requirements are eligible to participate in the 401(k)
plan. All Company matching contributions are invested in the Company's Class A
Common Stock. The Company's matching contributions for 2000, 1999, and 1998 were
approximately $0, $3,858, and $7,000, respectively. Also, the Company may
contribute at the discretion of the Company's Board of Directors an Employer
Profit Sharing Contribution to the 401(k) plan. The Employer Profit Sharing
Contribution shall be divided among three different classes of participants in
the plan based upon the participant's title in the Company. All amounts
contributed to the plan are deposited into a trust fund administered by an
independent trustee. The Company's contributions to the plan for 2000, 1999 and
1998, were $0, $130,958 and $0, respectively.
Employee Stock Ownership Plan
Effective January 1, 1980, the Company adopted an employee stock ownership
plan (the "Ownership Plan") for the benefit of career employees of the Company
and its subsidiaries. The following is a description of the Ownership Plan, and
is qualified in its entirety by the Ownership Plan, a copy of which is available
for inspection at the Company's offices.
Under the Ownership Plan, the Company has discretionary power to make
contributions on behalf of all eligible employees into a trust created under the
Ownership Plan. Employees become eligible to participate in the Ownership Plan
when they have attained the age of 19 and have completed one year of service (a
twelve-month period in which the employee completes at least 1,040 hours of
service). The Company's contributions under the Ownership Plan are allocated to
eligible employees on the same ratio that each eligible employee's compensation
bears to total compensation for all eligible employees during each year. To
date, the Ownership Plan has approximately 107 participants and had no
contributions payable to the Plan in 2000. Benefits under the Ownership Plan
vest as follows: 20% after the third year of eligible service by an employee, an
additional 20% in the fourth, fifth, sixth and seventh years of eligible service
by an employee.
Benefits under the Ownership Plan will be paid out in one lump sum or in
installments in the event the employee becomes disabled, reaches the age of 65,
or is terminated by the Company and demonstrates financial hardship. The
Ownership Plan Committee, however, retains discretion to determine the final
method of payment. Finally, the Company reserves the right to amend or terminate
the Ownership Plan at any time. The trustees of the trust fund under the
Ownership Plan are Messrs. George R. Quist and William C. Sargent.
1993 Stock Option Plan
On June 21, 1993, the Company adopted the Security National Financial
Corporation 1993 Stock Incentive Plan (the "1993 Plan"), which reserves shares
of Class A Common Stock for issuance thereunder. The 1993 Plan was approved at
the annual meeting of the stockholders held on June 21, 1993. The 1993 Plan
allows the Company to grant options and issue shares as a means of providing
equity incentives to key personnel, giving them a proprietary interest in the
Company and its success and progress.
The 1993 Plan provides for the grant of options and the award or sale of
stock to officers, directors, and employees of the Company. Both "incentive
stock options," as defined under Section 422A of the Internal Revenue Code of
1986 (the "Code"), and "non-qualified options" may be granted pursuant to the
1993 Plan. The exercise prices for the options granted are equal to or greater
than the fair market value of the stock subject to such options as of the date
of grant, as determined by the Company's Board of Directors. The options granted
under the 1993 Plan were to reward certain officers and key employees who have
been employed by the Company for a number of years and to help the Company
retain these officers by providing them with an additional incentive to
contribute to the success of the Company.
The 1993 Plan is to be administered by the Board of Directors or by a
committee designated by the Board. The terms of options granted or stock awards
or sales effected under the 1993 Plan are to be determined by the Board of
Directors or its committee. The Plan provides that if the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price per share to reflect
such subdivision, combination or stock dividend. No options may be exercised for
a term of more than ten years from the date of grant.
Options intended as incentive stock options may be issued only to
employees, and must meet certain conditions imposed by the code, including a
requirement that the option exercise price be no less than the fair market value
of the option shares on the date of grant. The 1993 Plan provides that the
exercise price for non-qualified options will be not less than at least 50% of
the fair market value of the stock subject to such option as of the date of
grant of such options, as determined by the Company's Board of Directors.
The 1993 Plan has a term of ten years. The Board of Directors may amend or
terminate the 1993 Plan at any time, subject to approval of certain
modifications to the 1993 Plan by the shareholders of the Company as may be
required by law or the 1993 Plan. On November 7, 1996, the Company amended the
Articles of Incorporation as follows: (i) to increase the number of shares of
Class A Common Stock reserved for issuance under the Plan from 300,000 Class A
shares to 600,000 Class A shares; and (ii) to provide that the stock subject to
options, awards and purchases may include Class C Common Stock.
On October 14, 1999, the Company amended the 1993 Plan to increase the
number of shares of Class A Common Stock reserved for issuance under the plan
from 746,126 Class A shares to 1,046,126 Class A shares.
2000 Director Stock Option Plan
On October 16, 2000, the Company adopted the 2000 Directors Stock Option
Plan (the "Director Plan") effective November 1, 2000. The Director Plan
provides for the grant by the Company of options to purchase up to an aggregate
of 50,000 shares of Class A Common Stock for issuance thereunder. The Director
Plan provides that each member of the Company's Board of Directors who is not an
employee or paid consultant of the Company automatically is eligible to receive
options to purchase the Company's Class A Common Stock under the Director Plan.
Effective as of November 1, 2000, and on each anniversary date thereof
during the term of the Director Plan, each outside director shall automatically
receive an option to purchase 1,000 shares of Class A Common Stock. In addition,
each new outside director who shall first join the Board after the effective
date shall be granted an option to purchase 1,000 shares upon the date which
such person first becomes an outside director and an annual grant of an option
to purchase 1,000 shares on each anniversary date thereof during the term of the
Director Plan. The options granted to outside directors shall vest in their
entirety on the first anniversary date of the grant. The primary purposes of the
Director Plan are to enhance the Company's ability to attract and retain
well-qualified persons for service as directors and to provide incentives to
such directors to continue their association with the Company.
In the event of a merger of the Company with or into another company, or a
consolidation, acquisition of stock or assets or other change in control
transaction involving the Company, each option becomes exercisable in full,
unless such option is assumed by the successor corporation. In the event the
transaction is not approved by a majority of the "Continuing Directors" (as
defined in the Director Plan), each option becomes fully vested and exercisable
in full immediately prior to the consummation of such transaction, whether or
not assumed by the successor corporation.
Report of the Audit Committee
The Company has an Audit Committee consisting of three non-management
directors, Charles L. Crittenden, H. Craig Moody, and Norman G. Wilbur. Each
member of the Audit Committee is considered independent and qualified in
accordance with applicable independent director and audit committee listing
standards.
The Company's Board of Directors has adopted a written charter for the
Audit Committee and included such charter as an appendix to this Proxy
Statement.
During the year 2000, the Audit Committee met two times. The Audit
Committee has met with management and discussed the Company's internal controls,
the quality of the Company's financial reporting, the results of internal and
external audit examinations, and the audited financial statements. In addition,
the Audit Committee has met with the Company's independent auditors, Tanner +
Co., and discussed all matters required to be discussed by the auditors with the
Audit Committee under Statement on Auditing Standards No. 61 (communication with
audit committees). The Audit Committee received and discussed with the auditors
their annual written report on their independence from the Company and its
management, which is made under Independence Standards Board Standard No. 1
(independence discussions with audit committees), and considered with the
auditors whether the provision of financial information systems design and
implementation and other non-audit services provided by them to the Company
during 2000 was compatible with the auditors' independence.
In performing these functions, the Audit Committee acts only in an
oversight capacity. In its oversight role, the Audit Committee relies on the
work and assurances of the Company's management, which is responsible for the
integrity of the Company's internal controls and its financial statements and
reports, and the Company's independent auditors, who are responsible for
performing an independent audit of the Company's financial statements in
accordance with general accepted auditing standards and for issuing a report on
these financial statements.
Pursuant to the reviews and discussions described above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, for filing with the Securities and Exchange
Commission.
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
executive officers, directors and persons who own more than 10% of any class of
the Company's Common Stock to file reports of ownership and reports of changes
of the Company's Common Stock. For fiscal 2000, Dr. Robert G. Hunter, a director
of the Company, through an oversight, filed one late stock purchase transaction
report covering four transactions; and Norman G. Wilbur, a director of the
Company, through an oversight, filed one late stock purchase transaction report
covering two transactions.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Proposal 2
The independent public accounting firm of Tanner + Co. has been the
Company's independent accountants since December 31, 1999. The Audit Committee
has recommended and the Board of Directors has appointed Tanner + Co. for
purposes of auditing the consolidated financial statements of the Company for
the fiscal year ending December 31, 2001. It is anticipated that representatives
of Tanner + Co. will be present at the Annual Meeting and will be provided an
opportunity to make a statement if they desire, and to be available to respond
to appropriate questions.
The Board of Directors recommends that stockholders vote "FOR" ratification
of the appointment of Tanner + Co. as the Company's independent accountants for
fiscal year ending December 31, 2001.
AUDIT FEES, FINANCIAL INFORMATION SYSTEMS DESIGN
AND IMPLEMENTATION FEES AND ALL OTHER FEES
Fees for the year 2000 annual audit and related quarterly reviews were
approximately $93,000, and all other fees were approximately $-0-.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting, but if other matters properly come before the meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote the shares
they represent in accordance with their judgment.
ANNUAL REPORT AND FINANCIAL STATEMENTS
You are referred to the Company's annual report, including financial
statements, for the fiscal year ended December 31, 2000. The annual report is
incorporated in this Proxy Statement and is not to be considered part of the
soliciting material. The Company will provide, without charge to each
stockholder upon written request, a copy of the Company's Annual Report Form
10-K as filed with the Securities and Exchange Commission for the fiscal year
ended December 31, 2000. Such requests should be directed to Mr. William C.
Sargent, Senior Vice President and Secretary, at P.O. Box 57250, Salt Lake City,
Utah 84157-0250.
DEADLINE FOR RECEIPT OF STOCKHOLDER'S PROPOSALS
FOR ANNUAL MEETING TO BE HELD IN JUNE, 2002
Any proposal by a stockholder to be presented at the Company's next Annual
Meeting of Stockholders expected to be held in June, 2002, must be received at
the offices of the Company, P.O. Box 57250, Salt Lake City, Utah 84157-0250, no
later than March 31, 2002.
By order of the Board of Directors,
William C. Sargent
Senior Vice President and Secretary
Salt Lake City, Utah, August 31, 2001
PROXY - SECURITY NATIONAL FINANCIAL CORPORATION - PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
CLASS C COMMON STOCK
The undersigned Class C common stockholder of Security National Financial
Corporation (the "Company") acknowledges receipt of the Notice of Annual Meeting
of the Stockholders to be held on October 4, 2001, at 5300 South 360 West, Suite
250, Salt Lake City, Utah, at 11:30 a.m. Mountain Daylight Time, and hereby
appoints Messrs. George R. Quist, Scott M. Quist and William C. Sargent, or any
of them, each with full power of substitution, as attorneys and proxies to vote
all the shares of the undersigned at said Annual Meeting of Stockholders and at
all adjournments or postponements thereof, hereby ratify and confirm all that
said attorneys and proxies may do or cause to be done by virtue hereof. The
above-named attorneys and proxies are instructed to vote all of the
undersigned's shares as follows:
1. To elect five of the seven directors to be voted upon by Class A and
Class C common stockholders together:
[ ] FOR all nominees listed below (except as marked to the
contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
(INSTRUCTION: to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below.)
Charles L. Crittenden, Robert G. Hunter, M.D., George R. Quist
William C. Sargent and Norman G. Wilbur
2. To ratify the appointment of Tanner + Co. as the Company's independent
accountants for the fiscal year ending December 31, 2001;
[ ] FOR [ ] AGAINST
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2.
Dated , 2001
- ------------------------------------------------------------------------
Signature of Stockholder
- ------------------------------------------------------------------------
Signature of Stockholder
Please sign your name exactly as it appears on your share certificate. If shares
are held jointly, each holder should sign. Executors, trustees, and other
fiduciaries should so indicate when signing. Please sign, date, and return this
Proxy Card immediately.
NOTE: Securities dealers or other representatives please state the number of
shares voted by this Proxy.
PROXY - SECURITY NATIONAL FINANCIAL CORPORATION - PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
CLASS A COMMON STOCK
The undersigned Class A common stockholder of Security National Financial
Corporation (the "Company") acknowledges receipt of the Notice of Annual Meeting
of the Stockholders to be held on October 4, 2001, at 5300 South 360 West, Suite
250, Salt Lake City, Utah, at 11:30 a.m., Mountain Daylight Time, and hereby
appoints Messrs. George R. Quist, Scott M. Quist and William C. Sargent, or any
of them, each with full power of substitution, as attorneys and proxies to vote
all the shares of the undersigned at said Annual Meeting of Stockholders and at
all adjournments or postponements thereof, hereby ratify and confirming all that
said attorneys and proxies may do or cause to be done by virtue hereof. The
above-named attorneys and proxies are instructed to vote all of the
undersigned's shares as follows:
1. To elect two directors to be voted upon by Class A common stockholders
voting separately as a class:
[ ] FOR all nominees listed below (except as marked to the
contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below.)
H. Craig Moody and Scott M. Quist
2. To elect the remaining five directors to be voted upon by Class A and
Class C common stockholders together:
[ ] FOR all nominees listed below (except as marked to the
contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below.)
Charles L. Crittenden, Robert G. Hunter, M.D., George R. Quist
William C. Sargent and Norman G. Wilbur
3. To ratify the appointment of Tanner + Co. as the Company's independent
accountants for the fiscal year ending December 31, 2001;
[ ] FOR [ ] AGAINST
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE NOMINEES LISTED IN PROPOSALS 1 and 2 ABOVE AND FOR PROPOSAL 3.
Dated , 2001
- ------------------------------------------------------------------------
Signature of Stockholder
- ------------------------------------------------------------------------
Signature of Stockholder
Please sign your name exactly as it appears on your share certificate. If shares
are held jointly, each holder should sign. Executors, trustees, and other
fiduciaries should so indicate when signing. Please sign, date, and return this
Proxy Card immediately.
NOTE: Securities dealers or other representatives please state the number of
shares voted by this Proxy.
ANNEX A
CHARTER
OF THE
AUDIT COMMITTEE
OF THE
BOARD OF DIRECTORS
SECURITY NATIONAL FINANCIAL CORPORATION
Adopted June 13, 2000
I. Purpose
The Purpose of the Audit Committee (the "Committee") of the Board of
Directors (the "Board") of Security National Financial Corporation (the
"Company") is to assist the Board in fulfilling its statutory and fiduciary
oversight responsibilities relating to the Company's financial accounting,
reporting and controls. The Committee's principal functions are to:
(a) Monitor the periodic reviews of the adequacy of the accounting and
financial reporting processes and systems of internal control that are
conducted by the Company's independent auditors, and the Company's
financial and senior management.
(b) Review and evaluate the independence and performance of the Company's
independent auditors.
(c) Facilitate communication among the Company's independent auditors, the
Company's financial and senior management, and the Board.
(d) Exercise an active oversight role with respect to the internal audit
function.
The Committee will fulfill these functions primarily by carrying out the
activities enumerated in Part IV of this charter. In order to serve these
functions, the Committee shall have unrestricted access to Company personnel and
documents, and shall have authority to direct and supervise an investigation
into any matters within the scope of its duties, including the power to retain
outside counsel in connection with any such investigation.
While the Audit Committee has the responsibilities and powers set forth in
this charter, it is not the duty of the Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the Company's independent auditors. Nor is it
the duty of the Committee to conduct investigations, to resolve disagreements,
if any, between management and its independent auditors or to assure compliance
with laws and regulations and the Company's policies and procedures.
II. Membership
All members of the Committee will be appointed by, and shall serve at the
discretion of, the Board. Unless a Chair is elected by the full Board, the
members of the Committee may designate a Chair by majority vote of the Committee
membership.
As of the date this charter is adopted and until June 13, 2001, the
Committee shall consist of at least two members of the Board. At least a
majority of the members shall be persons who are not officers or employees of
the Company or any subsidiary and who do not have any other relationship which,
in the opinion of the Board of Directors, would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. As of
June 14, 2001, the Committee shall consist of three or more members of the
Board, with the exact number being determined by the Board. Each member of the
Committee shall be 'independent' as defined by the rules of The Nasdaq Stock
Market, as they may be amended from time to time (the "Rules"), except as
otherwise permitted by such Rules. Each member of the Committee shall have the
ability to read and understand fundamental financial statements (or become able
to do so within a reasonable time after joining the Committee) and at least one
member shall have prior experience in accounting, financial management or
financial oversight, as required by the Rules.
III. Meetings
Meetings of the Committee shall be held from time to time as determined by
the Board. The Committee should periodically meet with the independent auditors
out of the presence of management about internal controls, the fullness and
accuracy of the Company's financial statements and any other matters that the
Committee or these groups believe should be discussed privately with the
Committee. The Committee members, or the Chair of the Committee on behalf of all
of the Committee members, should communicate with management and the independent
auditors on a quarterly basis in connection with their review of the Company's
financial statements.
IV. Responsibilities and Duties - Independent Auditors
The following shall be the principal recurring processes of the Committee
in carrying out its oversight responsibilities. These processes are set forth as
a guide with the understanding that the Committee may supplement them as
appropriate and may establish policies and procedures from time to time that it
deems necessary or advisable in fulfilling its responsibilities.
1. Review the Company's quarterly and annual financial statements,
including any report or opinion by the independent auditors.
2. In connection with the Committee's review of the annual financial
statement:
(a) Discuss with the independent auditors and management the
financial statements and the results of the independent auditors'
audit of the financial statements.
(b) Discuss any items required to be communicated by the independent
auditors in accordance with SAS 61, as amended. These discussions
should include the independent auditors' judgments about the
quality and appropriateness of the Company's accounting
principles, the reasonableness of significant judgments, the
clarity of the disclosures in the Company's financial statements
and any significant difficulties encountered during the course of
the audit, including any restrictions on the scope of work or
access to required information.
3. In connection with the Committee's review of the quarterly financial
statements:
(a) Discuss with the independent auditors and management the results
of the independent auditors' SAS 71 review of the quarterly
financial statements.
(b) Discuss significant issues, events and transactions and any
significant changes regarding accounting principles, practices,
judgments or estimates with management and the independent
auditors, including any significant disagreements among
management and the independent auditors.
4. Discuss any comments or recommendations of the independent auditors
outlined in their annual management letter. Approve a schedule for
implementing any recommended changes and monitor compliance with the
schedule.
5. Discuss with the independent auditors and management the periodic
reviews of the adequacy of the Company's accounting and financial
reporting processes and systems of internal control, including the
adequacy of the systems of reporting to the audit committee by each
group.
6. Periodically consult with the independent auditors out of the presence
of management about internal controls, the fullness and accuracy of
the Company's financial statements and any other matters that the
Company or these groups believe should be discussed privately with the
Committee.
7. Review the independence and performance of the independent auditors.
Recommend to the Board of Directors the appointment or discharge of
the independent auditors.
8. Communicate with the Company's independent auditors about the
Company's expectations regarding its relationship with the auditors,
including the following: (i) the independent auditors' ultimate
accountability to the Board and the Committee, as representatives of
the Company's shareholders; and (ii) the ultimate authority and
responsibility of the Board and the Committee to select, evaluate and,
where appropriate, replace the independent auditors.
9. Review and approve processes and procedures to ensure the continuing
independence of the Company's independent auditors. These processes
shall include obtaining and reviewing, on an annual basis, a letter
from the independent auditors describing all relationships between the
independent auditors and the Company required to be disclosed by
Independence Standards Board Standard No. 1, reviewing the nature and
scope of such relationships and discontinuing any relationships that
the Committee believes could compromise the independence of the
auditors.
10. Review the independent auditor's audit plan.
11. Approve the fees and other significant compensation to be paid to the
independent auditors.
V. Responsibilities and Duties - Internal Audit
1. The audit committee meets with the Controller and senior management
to review the audit plan and help ensure the effectiveness of overall
controls.
2 The audit committee receives briefing on internal audit activities,
including significant conditions and weaknesses.
3. Periodically consult with the Controller out of the presence of
management about internal controls.
VI. Other Matters
1. Periodically review the status of any legal matters that could have a
significant impact on the Company's financial statements.
2 Annually prepare a report to the Company's stockholders for inclusion
in the Company's annual proxy statement as required by the rules and
regulations of the Securities and Exchange Commission, as they may be
amended from time to time.
3. Maintain minutes of meetings and periodically report to the Board of
Directors on significant matters related to the Committee's
responsibilities.
4. Review and reassess the adequacy of the Committee's charter at least
annually, Submit the charter to the Company's Board of Directors for
review and include a copy of the charter as an appendix to the
Company's proxy statement as required by the rules and regulations of
the Securities and Exchange Commission, as they may be amended from
time to time (currently, once every three years).
5 Perform any other activities by applicable law, rules or regulations,
including the rules of the Securities and Exchange Commission and any
stock exchange or market on which the Company's Common Stock is
listed, and perform other activities that are consistent with this
charter, the Company's Bylaws and governing laws, as the Committee or
the Board deems necessary or appropriate.
VII. Minutes
The Committee will maintain written minutes of its meetings, which will be
filed within the Company's minute books along with the minutes of the meetings
of the Board. The Committee also will issue reports as required to comply with
the SEC proxy rules and other applicable laws and regulations.