DEF 14A

GLACIER WATER SERVICES, INC.
2651 La Mirada Drive, Suite 100
Vista, California 92081

NOTICE OF ANNUAL MEETING
To be held at the offices of
Kayne Anderson Investment Management, Inc.
1800 Avenue of the Stars, Second Floor
Los Angeles, California 90067

May 6, 2004

To Our Stockholders:

        NOTICE is hereby given that the Annual Meeting of Stockholders (the “Annual Meeting”) of Glacier Water Services, Inc. (the “Company”) will be held at 9:00 a.m. Pacific Time on Monday, May 6, 2004, at the offices of Kayne Anderson Investment Management, Inc., 1800 Avenue of the Stars, Second Floor, Los Angeles, California, 90067 for the following purposes:

1. To elect seven directors to serve for terms of one year until the next Annual Meeting of Stockholders and until their respective successors have been duly elected and qualified;

2. To ratify the appointment of KPMG LLP as independent auditors of the Company for the 2004 fiscal year; and

3. To consider and vote upon such other business as may properly come before the Annual Meeting or any adjournment thereof.

        Holders of the Company’s Common Stock, par value $.01 per share, as of the close of business on March 12, 2004, the record date fixed by the Board of Directors, are entitled to notice of and to vote at the Annual Meeting. The Company’s Board of Directors and officers urge that all stockholders of record exercise their right to vote at the Annual Meeting personally or by proxy. Accordingly, we are sending you the enclosed Proxy Statement and proxy card, as well as the fiscal year 2003 Annual Report.

        Whether or not you plan to attend the Annual Meeting, please indicate your vote on the accompanying proxy card and sign, date and return it as promptly as possible in the enclosed self-addressed, postage-paid envelope.

        Your prompt response is appreciated.

By Order of the Board of Directors

W. David Walters
Senior Vice President,
Chief Financial Officer and Secretary

Vista, California
March 23, 2004

GLACIER WATER SERVICES, INC.
2651 La Mirada Drive, Suite 100
Vista, CA 92081

ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 6, 2004

PROXY STATEMENT

        The accompanying proxy is solicited by the Board of Directors of Glacier Water Services, Inc. (the “Company”) to be used at the Annual Meeting of Stockholders on Thursday, May 6, 2004 (the “Annual Meeting”). This Proxy Statement, the enclosed form of proxy and the fiscal year 2003 Annual Report are being sent to stockholders on or about April 12, 2004.

        At the Annual Meeting, stockholders will be asked to consider and vote upon the following items:

1. To elect seven directors to serve for terms of one year until the next Annual Meeting of Stockholders and until their respective successors have been duly elected and qualified;

2. To ratify the appointment of KPMG LLP as independent auditors of the Company for the 2004 fiscal year; and

3. To consider and vote upon such other business as may properly come before the Annual Meeting or any adjournment thereof.

        The fiscal year 2003 Annual Report that accompanies this Proxy Statement is not to be regarded as proxy soliciting material.

        The Board of Directors of the Company believes that election of its director nominees are in the best interests of the Company and its stockholders and recommends to the stockholders of the Company the election of the nominees.

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VOTING

        Shares represented by duly executed and unrevoked proxies in the enclosed form received by the Board of Directors prior to the Annual Meeting will be voted at the Annual Meeting in accordance with the specifications made therein by the stockholders, unless authority to do so is withheld. If no specification is made, shares represented by duly executed and unrevoked proxies will be voted FOR the election as directors of the nominees listed herein, FOR the ratification of KPMG LLP as the Company’s independent auditors, and with respect to any other matter that may properly come before the Annual Meeting, at the discretion of the persons voting the respective proxies.

        No provisions for rights of appraisal or similar rights of dissenters are applicable with respect to the matters to be voted upon at the Annual Meeting.

        Execution of a proxy will not in any way affect a stockholder’s right to attend the Annual Meeting and vote in person, and any stockholder giving a proxy may revoke it at any time prior to its exercise at the Annual Meeting by giving notice of such revocation either personally or in writing to the Secretary of the Company at the Company’s executive offices, located at the address set forth above, by subsequently executing and delivering another proxy or by voting in person at the Annual Meeting.

        The Company has retained Mellon Investor Services LLC to assist in soliciting proxies from brokers and nominees for the Annual Meeting. The estimated cost for these services is estimated to be less than $20,000 and will be borne by the Company. It is contemplated that this solicitation will be primarily by mail. In addition, some of the officers, directors and employees of the Company may solicit proxies by telephone, facsimile, and internet. Such persons will not be compensated for such solicitation.

        Only holders of record of the Company’s Common Stock, $.01 par value (the “Common Stock”), as of the close of business on March 12, 2004 (the “Record Date”), will be entitled to notice of and to vote at the Annual Meeting. On the Record Date, there were outstanding 2,119,591 shares of Common Stock. Each share of Common Stock is entitled to one vote on all matters presented at the Annual Meeting.

Vote Required

        The election of the director nominees requires a plurality of the votes cast in person or by proxy at the Annual Meeting. Under Delaware law, the Company’s Certificate of Incorporation and the Company’s Bylaws, shares as to which a stockholder abstains or withholds from voting on the election of directors and shares as to which a broker indicates that it does not have discretionary authority to vote (“broker non-votes”) on the election of directors will not be counted as voting thereon and therefore will not affect the election of the nominees receiving a plurality of the votes cast.

        The ratification of the appointment of KPMG LLP as independent auditors of the Company for the 2004 fiscal year requires the affirmative vote of the majority of votes cast in person or by proxy at the Annual Meeting.

PROPOSAL 1
ELECTION OF DIRECTORS

        The Bylaws of the Company fix the number of directors at not less than one nor more than nine, with the exact number to be set by resolution of the Board of Directors. The Board of Directors has set the authorized number of directors at seven, and proposes the election of seven directors to hold office until the next Annual Meeting and until their successors are duly elected and qualified. Unless authority to vote for directors has been withheld in the proxy, the persons named in the enclosed proxy intend to vote at the Annual Meeting for the election of the seven nominees presented below. Except as set forth below, persons named as proxies may not vote for the election of any person to the office of director for which a bona fide nominee is not named in the Proxy Statement. All nominees have consented to serve as a director for the ensuing year. Although the Board of Directors does not contemplate that any of the nominees will be unable to serve, if any nominee withdraws or otherwise becomes unavailable to serve, the persons named in the enclosed proxy will vote for any substitute nominee designated by the Board of Directors.

        Each of these individuals is currently a member of the Board. The Company has not paid any third parties to assist in the process of identifying or evaluating candidates for the Board, and it has not rejected any candidates put forward by any stockholder or group of stockholders owing more than 5% of the Company’s stock.

        The names and certain information concerning the persons to be nominated as directors by the Board of Directors at the Annual Meeting are set forth below.

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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES NAMED BELOW.

NOMINEES FOR DIRECTORS FOR TERMS EXPIRING IN 2004

Name and Age as of the	Position, Principal Occupation, Business
May 6, 2004 Meeting Date	Experience and Directorships
William A. Armstrong, 62	Mr. Armstrong has been a director of the Company since January 2002. Mr. Armstrong is
	the retired Vice-President, Administration for McKesson Corporation, a health care
	services and technology company, where he served in various positions commencing in 1972
	until his retirement in June 2002. He is director of the YMCA of San Francisco and a
	Business Volunteer for the Arts and the American Conservatory Theater.
William G. Bell, 57	Mr. Bell has been a director of the Company since January 2002. Mr. Bell serves on the
	Board of Directors of Aqua Filter Fresh, Inc., Clear Mountain Spring Water LLC, Tyler
	Mountain Water Company, Wissahickon Spring Water Company, Reid Plastic Holdings and
	Consolidated Container Company, and was past Chairman of the International Bottled Water
	Association. Additionally, he serves as the Executive Vice President of Tyler Mountain
	Water Company, a bottled water company. Previously, Mr. Bell held various management
	positions at Polar Water Company, including General Manager and Northern Region Director
	before his departure in 1980 to found Aqua Filter Fresh, Inc.
Richard A. Kayne, 59	Mr. Kayne has been a director of the Company since March 1995. Mr. Kayne served as
	Chairman of the Board from September 1999 to June 2001. Mr. Kayne and John E. Anderson
	founded Kayne Anderson Investment Management, Inc. in 1984. Mr. Kayne currently serves
	as President, Chief Executive Officer and director of Kayne Anderson Investment
	Management, Inc., the general partner of Kayne Anderson Capital Advisors, L.P., an
	investment management firm, and its broker-dealer affiliate, KA Associates, Inc. He is
	also Co-Chair of the Management Committee of Kayne Anderson Rudnick Investment
	Management, LLC, an investment management firm.
Brian H. McInerney, 36	Mr. McInerney joined the Company in May 2001 as the President and Chief Executive
	Officer. Prior to joining the Company, Mr. McInerney was the Vice President, Worldwide
	Autolite Products for Honeywell International (AlliedSignal), a manufacturing company.
	Mr. McInerney joined AlliedSignal in 1997 and served in various marketing management
	positions. Mr. McInerney began his marketing career at Nabisco, a diversified food
	company. Prior thereto, he served at KPMG, an accounting firm, as a financial auditor.
Peter H. Neuwirth, 65	Mr. Neuwirth has been a director of the Company since January 2000 and has served as
	Vice-Chairman of the Board since October 2000. Mr. Neuwirth currently serves as
	President and Chairman of the Board of Advanced Engine Management, Inc., a manufacturer
	of high-performance automotive systems, and has held that position since 1997. Mr.
	Neuwirth served as President of Imported Parts and Accessories Company, Inc., a major
	importer and distributor of replacement parts for imported cars and light trucks to the
	specialist repair industry, from 1979 to 1995. Mr. Neuwirth currently serves on the
	Board of A Place Called Home, a charitable organization in Los Angeles.
Charles A. Norris, 58	Mr. Norris has served as Chairman of the Board of the Company since June 2001. Mr.
	Norris is the retired President of McKesson Water Products Company, a bottled water
	company, where he served as President from 1990 until he retired in October 2000.
	Glacier acquired Aqua-Vend, a division of McKesson Water Products Company, in 1997. Mr.
	Norris is a past Chairman of the International Bottled Water Association.
Heidi E. Yodowitz, 50	Ms. Yodowitz has been a director since February 2003. Ms. Yodowitz currently serves as
	the Senior Vice President and Chief Financial Officer for McKesson Supply Solutions, the
	largest business unit of McKesson Corporation. Ms. Yodowitz has served in various
	financial positions since joining McKesson Corporation in 1990.

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OTHER CURRENT DIRECTORS

        The following current directors will not be standing for reelection at the Annual Meeting.

Name and Age as of the	Position, Principal Occupation, Business
May 6, 2004 Meeting Date	Experience and Directorships
Scott H. Shlecter, 50	Mr. Shlecter has been a director of the Company since June 1997. Mr. Shlecter
	currently serves as a Portfolio Manager for Kayne Anderson Capital Advisors, L.P.
	Mr. Shlecter served as Chief Executive Officer of Jewelry.com, an internet retailer,
	from September 1999 to August 2000. Mr. Shlecter is a founder of the North American
	division of L.E.K. Consulting, an international business consulting firm and served
	as the President from 1989 until January 1, 1999 when he began serving as its
	President Emeritus.
Robert V. Sinnott, 54	Mr. Sinnott has been a director of the Company since April 1993. Mr. Sinnott
	currently serves as a Senior Vice President of Kayne Anderson Investment Management,
	Inc. and as Chief Investment Officer of Kayne Anderson Capital Advisors, L.P., and
	has served in such capacities since 1992. Mr. Sinnott is also a Director of Plains
	Resources, Inc., an oil and gas exploration and production company, and Plains All
	American Pipeline L.P., an oil and gas transportation and storage company and a
	Director of Ensign Oil and Gas, Inc., a private oil and gas exploration and
	development company.

INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES

        The Board of Directors is responsible for the overall affairs of the Company. The Board of Directors met a total of six times during the 2003 fiscal year, including regularly scheduled and special meetings. The Board of Directors has a standing Audit Committee, Compensation Committee, and Nominating / Governance Committee. The current members of each of the Board’s committees are listed below. No member of the Board of Directors attended fewer than 75% of the meetings of the Board or such Committees on which he served during fiscal 2003, except for Mr. Neuwirth, who attended three of the five Audit Committee meetings.

The Audit Committee

        The Audit Committee acts pursuant to a written charter, a copy of which is attached to this proxy statement as Exhibit A. A copy of the Audit Committee Charter may be obtained by sending a written request to the Secretary of the Company at 2651 La Mirada Blvd., Suite 100, Vista, California 92081. The Audit Committee met five times during the 2003 fiscal year. The Audit Committee is composed solely of directors whom the Board has determined are independent within the meaning of the requirements of the American Stock Exchange. The members of the Audit Committee are Ms. Yodowitz and Messrs. Bell, and Neuwirth. The Board has also determined that Ms. Yodowitz is an “audit committee financial expert” as defined by the rules of the Securities and Exchange Commission. The Audit Committee meets periodically with the Company’s independent auditors and management to discuss accounting principles, financial and accounting controls, the scope and results of the annual audit, internal controls and other matters; advises the Board on matters related to accounting and auditing; and is responsible for selecting and overseeing the independent auditors and determining their compensation. The independent auditors have complete access to the Audit Committee, without management present, to discuss results of their audit and their observations on adequacy of internal controls, quality of financial reporting, and other accounting and auditing matters. A copy of the report of the Audit Committee is contained in this proxy statement.

The Compensation Committee

        The members of the Compensation Committee for the 2003 fiscal year were Messrs. Armstrong, Shlecter and Sinnott. The members of the Compensation Committee for the 2004 fiscal year are expected to be Ms. Yodowitz and Messrs. Armstrong and Neuwirth. None of the members of the Compensation Committee has ever been an officer or employee of the Company. The Compensation Committee met three times during the 2003 fiscal year to review and make recommendations to the Board regarding terms of compensation, employment contracts and pension matters that concern officers and key employees of the Company. The Compensation Committee is also responsible for the administration of stock options under the Company’s stock option plans. A copy of the report of the Compensation Committee is contained in this proxy statement.

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The Nominating / Governance Committee

        The Nominating / Corporate Governance Committee provides assistance to the Board of Directors in fulfilling its responsibility to the shareholders, potential shareholders and investment community by (i) reviewing and making recommendations to the Board regarding the Board’s composition and structure, establishing criteria for Board membership and evaluating corporate policies relating to the recruitment, selection, tenure and qualifications of Board members; and (ii) establishing, implementing and monitoring policies and processes regarding principles of corporate governance in order to ensure the Board’s compliance with its fiduciary duties to the Company and its shareholders. The Nominating / Governance Committee acts pursuant to a written charter, a copy of which is attached to this proxy statement as Exhibit B. The members of the Nominating / Governance Committee for fiscal year 2003 were Messrs. Shlecter and Kayne. The members of the Nominating and Governance Committee for fiscal year 2004 are expected to be Messrs. Armstrong and Bell, each of whom is independent within the meaning of the requirement of the American Stock Exchange. In identifying candidates for membership on the Board of Directors, the Nominating Committee takes into account all factors it considers appropriate, which may include ensuring that the Board of Directors, as a whole, consists of individuals with various and relevant career experience, relevant technical skills, industry knowledge and experience, financial expertise, local and community ties and minimum individual qualifications, including strength of character, mature judgment, familiarity with the Company’s business and industry, independence of thought and an ability to work collegially. The Nominating Committee also may consider the extent to which the candidate would fill a particular need of the Board. The Nominating Committee reviews the qualifications of, among others, those persons recommended for nomination to the Board of Directors by stockholders. A stockholder suggesting a nominee to the Board should send the nominee’s name, biographical material, beneficial ownership of the Company’s stock and other relevant information in writing to the Secretary of the Company in a timely manner as set forth in the Company’s Bylaws, accompanied by a consent of such nominee to serve as a director if elected. See “Proposals of Stockholders”. Nominees must be willing to devote the time required to serve effectively as a director and as a member of one or more Board committees. In order to submit a nomination, a stockholder must be a holder of record on the date of such submission and on the record date for determining stockholders entitled to vote at the meeting at which the election will take place. The Nominating Committee met in February 2004 for the purpose of recommending to the Board the nomination of the nominees named in this Proxy Statement.

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EXECUTIVE OFFICERS OF THE REGISTRANT

Name	Position	Age
Brian H. McInerney	President and Chief Executive Officer		36
Steven L. Murphy	Senior Vice President and Chief Operating Officer		55
W. David Walters	Senior Vice President, Chief Financial Officer and Secretary		55
Luz E. Gonzales	Vice President, Human Resources		51
Brian T. Nakagawa	Vice President, Technology and Information Systems		50
Kenneth W. Sumner, Sr	Vice President, Sales		63

        The executive officers are elected by and serve at the discretion of the Board of Directors until their successors are duly chosen and qualified.

    Brian H. McInerney

    Mr. McInerney joined the Company in May 2001 as the President and Chief Executive Officer. Prior to joining the Company, Mr. McInerney was the Vice President, Worldwide Autolite Products for Honeywell International (AlliedSignal), a manufacturing company. Mr. McInerney joined AlliedSignal in 1997 and served in various marketing management positions. Mr. McInerney began his marketing career at Nabisco, a diversified food company. Prior thereto, he served at KPMG, an accounting firm, as a financial auditor.

    Steven L. Murphy

    Mr. Murphy joined the Company in October 2000 as Senior Vice President and Chief Operating Officer. From 1998 to 2000, Mr. Murphy served as Vice President, Finance and Chief Financial Officer of World Wide Parts and Accessories Company (WORLDPAC), a major importer and distributor of replacement parts for imported cars and light trucks to the specialist repair industry. From 1977 to 1998, Mr. Murphy served in various roles for WORLDPAC, including Vice President of Operations and Vice President, General Manager.

    W. David Walters

    Mr. Walters has served as Senior Vice President, Chief Financial Officer and Secretary since January 2000. Mr. Walters joined the Company in January 1999 as Chief Financial Officer, Vice President-Finance and Secretary. From 1997 to 1999, Mr. Walters was the Vice President Finance and Controller for the Penn Traffic Company, a grocery supermarket retailer. From 1996 to 1997, Mr. Walters was the Vice President, Controller for Bruno’s, Inc., a grocery supermarket retailer. From 1992 to 1996, Mr. Walters was the Chief Financial Officer for ABCO Markets, Inc., a grocery supermarket retailer.

    Luz E. Gonzales

    Ms. Gonzales joined the Company in February 1995 as Vice President of Human Resources. From 1981 to February 1995, Ms. Gonzales was Corporate Director of Human Resources for Southwest Water Company, a water utility and wastewater management company. Prior thereto, Ms. Gonzales served at American Isuzu Motors, an automotive manufacturer, as a Human Resources Manager.

    Brian T. Nakagawa

    Mr. Nakagawa has served as Vice President, Technology and Information Systems since February 1996, after joining the Company as Director of Technology and Information Systems in June 1995. Prior to joining the Company, Mr. Nakagawa was the owner of New Frontier Technologies, an information systems consulting company.

    Kenneth W. Sumner, Sr.

    Mr. Sumner joined the Company in February 2002 as Vice President, Sales upon the Company’s acquisition of substantially all of the assets of Pure Fill Corporation. Mr. Sumner was the President of Pure Fill Corporation from February 1999 through February 2002. From December 1997 to February 1999, Mr. Sumner was General Manager of National Water Services, a subsidiary of Pure Fill Corporation. From 1985 through 1996, Mr. Sumner held various positions with Coca-Cola Bottling Plants in Kentucky and Virginia.

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        The Company has adopted a Standards of Business Conduct and ethics policy for its executive officers and directors, a copy of which has been filed as an exhibit to the Company’s annual report filed with the Securities and Exchange Commission.

EXECUTIVE COMPENSATION

Summary of Compensation

        The table below presents information concerning the compensation of (i) the Chief Executive Officer of the Company during fiscal 2003 and (ii) the four most highly compensated executive officers who served as executive officers of the Company at December 28, 2003 (the persons listed in the table below are the “Named Executive Officers”).

Summary Compensation Table
	Annual Compensation								Long-Term Compensation Awards
Name And Principal Position	Year		Salary		Bonus (1)		Other Annual Compensation (2)		Securities Underlying Options (#)		All Other Compensation
Brian H. McInerney		2003	$	249,784	$	125,000		—		6,500		—
President and Chief		2002	$	241,723	$	175,000		—		1,500		—
Executive Officer (3)		2001	$	146,794	$	190,000		—		125,000		71,072
Steven L. Murphy		2003	$	211,838	$	85,393		—		1,500		—
Senior Vice President,		2002	$	205,862	$	125,000		—		1,500		—
Chief Operating Officer (4)		2001	$	200,000	$	50,098		—		25,000		120,000
W. David Walters		2003	$	206,000	$	77,604		—		1,500		—
Senior Vice President,		2002	$	205,862	$	115,000		—		1,500		—
Chief Financial Officer and		2001	$	195,938	$	50,098		—		75,000		—
Secretary
Luz E. Gonzales,		2003	$	121,865	$	36,856		—		1,500		—
Vice President,		2002	$	116,860	$	47,000		—		5,000		—
Human Resources		2001	$	107,846	$	20,000		—		1,500		—
Kenneth W. Sumner, Sr		2003	$	119,461	$	42,010		—		5,000		—
Vice President, Sales (5)		2002	$	90,769	$	44,700		—		3,000		10,619
		2001	$	—	$	—		—		—		—

(1) Except as indicated in note (3), all 2003 bonus amounts were paid in 2004, all 2002 bonus amounts were paid in 2003 and all 2001 bonus amounts were paid in 2002.

(2) Other Annual Compensation did not exceed the lesser of $50,000 or 10% of the Named Executive Officer’s salary and bonus.

(3) Mr. McInerney has served as President and Chief Executive Officer since May 2001. The initial $75,000 of Mr. McInerney’s 2001 bonus was paid in 2001. The remaining $115,000 was paid in 2002. All other compensation in 2001 for Mr. McInerney represents amounts paid by the Company to third parties in connection with relocation expenses and associated income taxes.

(4) Mr. Murphy has served as Senior Vice President and Chief Operating Officer since October 2000. All other compensation in 2001 for Mr. Murphy represents amounts paid by the Company to third parties in connection with relocation expenses and associated income taxes.

(5) Mr. Sumner has served as Vice President, Sales since February 2002. All other compensation in 2002 for Mr. Sumner represents amounts paid by the Company to third parties in connection with relocation expenses and associated income taxes.

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Option Grants in Fiscal 2003

        The following table presents certain information regarding stock option grants to each of the Named Executive Officers during the fiscal year ended December 28, 2003.

	Individual Grants								Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term
Name	Number of Securities Underlying Option Granted (#)		Percent of Total Options Granted to Employees in Fiscal Year		Exercise Or Base Price ($/Share)		Expiration Date		5% ($)		10% ($)
Brian H. McInerney		1,500		1.71%	$	14.50		2013	$	13,434	$	34,275
Brian H. McInerney		5,000		5.69%	$	15.60		2013	$	49,054	$	124,312
Steven L. Murphy		1,500		1.71%	$	14.50		2013	$	13,434	$	34,275
W. David Walters		1,500		1.71%	$	14.50		2013	$	13,434	$	34,275
Luz E. Gonzales		1,500		1.71%	$	14.50		2013	$	13,434	$	34,275
Kenneth W. Sumner, Sr		1,500		1.71%	$	14.50		2013	$	13,434	$	34,275
Kenneth W. Sumner, Sr		3,500		3.98%	$	15.60		2013	$	34,338	$	87,018

Aggregated Option Exercises in Fiscal 2003 and Fiscal Year-End Option Values

        The following table presents certain information regarding stock option exercises during fiscal 2003 and fiscal year-end option values of unexercised options for each of the Named Executive Officers.

Name	Shares Acquired On Exercise (#)	Value Realized ($)	Number of Unexercised Options at FY-End # Exercisable/Unexercisable	Value of Unexercised In-the-Money Options at Fiscal Year End $ Exercisable/Unexercisable
Brian H. McInerney	—	—	92,042 / 40,958	$1,040,318 / $420,032
Steven L. Murphy	—	—	50,375 / 27,625	$471,356 / $277,244
W. David Walters	—	—	57,375 / 63,847	$471,694 / $477,356
Luz E. Gonzales	—	—	17,250 / 7,250	$ 41,169 / $ 66,731
Kenneth W. Sumner, Sr	—	—	750 / 7,250	$ 5,813 / $ 40,838

Compensation of Directors

        Effective January 1, 2002, the members of the Board were entitled to receive, in lieu of cash fees, supplemental grants of options to purchase Common Stock of the Company at the fair market value on the date the options are granted. The cash equivalent values for these options are $26,750 per quarter for Mr. Norris as Chairman of the Board and $6,250 per quarter for the other outside directors. With the expiration of the 1994 Stock Compensation Program on March 17, 2004, the members of the Board will no longer receive grants for their services as members of the Board, but instead will, effective May 6, 2004, receive $26,750 per quarter in the case of Mr. Norris as Chairman of the Board, $7,500 per quarter in the case of Ms. Yodowitz as Chairman of the Audit Committee and $6,250 per quarter in the case of all other outside directors. All members of the Board are reimbursed for expenses incurred in connection with their services on the Board.

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1994 Stock Compensation Program

        The Company adopted its 1994 Stock Compensation Program (the “Program”) to provide a means of encouraging certain officers, employees, directors, advisors and consultants of the Company and its subsidiaries to obtain a proprietary interest in the enterprise and thereby create an additional incentive for such persons to further the Company’s growth and development. The Program provided for the granting of options to certain officers, employees, directors, advisors and consultants of the Company and its subsidiaries to purchase shares of the Company’s Common Stock. The Program terminated on March 17, 2004. The following description of the Program is qualified in its entirety by the full text of the Program, copies of which have been filed with the Securities and Exchange Commission.

        The Program is divided into two parts. Part I is the 1994 Employee Stock Option Plan and Part II is the 1994 Non-Employee Director Stock Option Plan. Part I provides for discretionary grants of stock options to officers, employees, advisors and consultants of the Company. Such stock options may be either incentive stock options (each, an “ISO”) under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or nonqualified stock options that are not intended to be, or do not qualify as, ISOs (each, an “NSO”), provided, however, that ISOs may be granted only to employees of the Company. Part II provides for the non-discretionary annual grant of options to purchase 1,500 shares of the Company’s Common Stock to each non-employee director of the Company. Stock options granted under Part II may only be NSOs. The Program is administered by the Compensation Committee.

        Additionally, under the Program, non-employee directors of the Company received supplemental grants of Options in lieu of cash fees. The supplemental options (“Supplemental Options”) were granted each year on the date of the Company’s Annual Meeting. The number of Supplemental Options granted to a director was the lesser of (i) the number whose value, as determined by an independent valuation expert retained by the Compensation Committee, is equivalent on the date of grant to the cash compensation which the director would otherwise have been entitled to receive for such year, or (ii) the number set by the Board of Directors in its discretion. In general, Supplemental Options vest and become exercisable one year from the date of grant (or such longer period as the Compensation Committee may set) and will be exercisable at a price per share equal to the closing price of the Company’s Common Stock on the exchange on which it is traded at the close of business on the first trading day preceding the date of grant. Supplemental Options become immediately exercisable upon a director’s death or disability or upon a Change of Control. If a director’s membership on the Board of Directors ends for any reason other than death, disability or a Change in Control, then the number of Supplemental Options granted for the year in which the membership ends shall be reduced to reflect the amount of cash equivalent compensation actually earned by the director in that year and shall be immediately exercisable. Once any Supplemental Options become exercisable, they shall remain exercisable for the lesser of (i) five years after the date of grant or (ii) one year after the director’s membership on the Board of Directors ends for any reason. Supplemental Options to non-employee directors may only be NSOs.

Employment Agreement

    Mr. McInerney and the Company are parties to an employment agreement which provides for Mr. McInerney to receive an annual salary of $275,000 for 2004 (with such annual increases thereafter as are given in the Board’s discretion) and for a severance benefit equal to one-year’s compensation if his employment is terminated without cause or generally in connection with a change of control. The agreement also provided for Mr. McInerney’s eligibility for a target annual bonus of 50% of his salary and a target long-term incentive payout of 75% of his average salary for the three-year term of the Company’s 2004 Long-Term Incentive Plan.

Certain Relationships and Related-Party Transactions

        Kayne Anderson Capital Advisors, L.P. currently manages the Company’s investment portfolio. Kayne Anderson Investment Management, Inc. is the general partner of Kayne Anderson Capital Advisors, L.P. Several board members are employed as senior executives of Kayne Anderson Investment Management, Inc. Such board members and Kayne Anderson Investment Management, Inc. are shareholders of the Company. The Company incurred costs of $3,000, $7,000, and $13,000 in 2003, 2002 and 2001, respectively, to Kayne Anderson Capital Advisors, L.P. in connection with investment management fees.

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Litigation

        No director, officer, affiliate or beneficial owner of the Company, or any associate thereof, is a party adverse to the Company or any of its subsidiaries in any lawsuit nor has a material adverse interest thereto.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s executive officers, directors and persons who own more than 10% of the Company’s Common Stock to file reports of ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission. Executive officers, directors and 10% stockholders are required by the Commission to furnish the Company with copies of all Forms 3, 4 and 5 they file.

        Based solely on the Company’s review of the copies of such forms it has received, the Company believes that all of its executive officers, directors and greater than 10% beneficial owners have complied with all the filing requirements applicable to them with respect to transactions during fiscal 2003.

REPORT OF THE COMPENSATION COMMITTEE⁽¹⁾
ON EXECUTIVE COMPENSATION

Compensation Philosophy

        The Compensation Committee’s executive compensation philosophy is to provide competitive levels of compensation while establishing a strong, explicit link between executive compensation and the achievement of the Company’s annual and long-term performance goals, rewarding above-average corporate performance, recognizing individual initiative and achievement, and assisting the Company in attracting and retaining highly-skilled management. This philosophy has been adhered to by developing incentive pay programs, which provide competitive compensation and mirror Company performance. Both short-term and long-term incentive compensation are based on direct, explicit links to Company performance and the value received by stockholders.

        Fiscal 2003 Executive Compensation

        Cash compensation includes base salary and annual bonuses. Base salaries are set at competitive levels, with reference to the responsibilities undertaken by personnel and their experience. Annual salary adjustments are determined by reference to the Company’s and the individual’s performance, as well as the competitive marketplace generally. Annual bonuses are awarded based primarily on management’s ability to achieve specified earnings levels.

        Stock-Based Incentives

        The Compensation Committee believes that it is essential to align the interests of the executives and other management personnel responsible for the growth of the Company with the interests of the Company’s stockholders. The Compensation Committee believed that this alignment was best accomplished through the provision of stock-based incentives. Therefore, the Company has periodically granted stock options to officers, salaried employees, advisors, consultants and non-employee directors under the Company’s stock option plans. The Company’s Stock Compensation Program terminated on March 17, 2004 and will be replaced with a Long-Term Incentive Program which will be aligned with long-term performance goals set by the Board.

        Fiscal 2003 President and Chief Executive Officer Compensation

        Mr. McInerney’s compensation as President and Chief Executive Officer of the Company for Fiscal 2003 was recommended to the Board by the Compensation Committee. For Fiscal 2003, the Compensation Committee determined that Mr. McInerney would be entitled to receive an annual base salary of $250,000 and a bonus objective of $125,000, subject to the Company’s achievement of specified earnings levels. In March 2004, Mr. McInerney was awarded a bonus of $125,000 for achieving targeted earnings levels.

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        Summary

        After its review of the Company’s existing programs, the Compensation Committee believes that the total compensation program for executives of the Company over the last fiscal year was competitive with the compensation programs provided by other companies with which the Company competes for management talent. The Compensation Committee also believes that the annual bonuses and stock-based incentives provided opportunities to participants that are consistent with the returns that are generated on behalf of the Company’s stockholders.

        Limitation of Tax Deduction for Executive Compensation

        The Omnibus Budget Reconciliation Act of 1993 (the “Act”) prevents publicly traded companies from receiving a tax deduction on compensation paid to proxy-named executive officers in excess of $1 million annually, effective for compensation paid after 1993. Although the Compensation Committee has not adopted a policy relating to the Act, the Compensation Committee believes that there will be little, if any, impact from this limitation to the Company.

COMPENSATION COMMITTEE:

      William A. Armstrong
      Scott H. Shlecter
      Robert V. Sinnott

(1) Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, the Report of the Compensation Committee on Executive Compensation shall not be incorporated by reference in any such filings.

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PERFORMANCE GRAPH ⁽²⁾

        The following graph compares the Company’s cumulative total stockholder return on Common Stock for the period from December 31, 1998, to December 29, 2003, with returns on, respectively, the American Stock Exchange Index and an industry index consisting of the Dow Jones Industry Group – Beverages, Soft Drinks. The return lines assume a $100 investment in the Company’s Common Stock (or in the basket of stocks represented by the given index) at the beginning of the period presented.

GLACIER WATER SERVICES, INC. STOCK PERFORMANCE GRAPH
FROM DECEMBER 31, 1998 THROUGH DECEMBER 28, 2003

(2) Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, this performance graph shall not be incorporated by reference in any such filings.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth as of March 1, 2004 certain information regarding the shares of Common Stock beneficially owned by each stockholder who is known by the Company to beneficially own in excess of 5% of the outstanding shares of Common Stock, by each director and each executive officer, and by all executive officers and directors as a group.

Name of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class
William A. Armstrong (1)	31,694	1.49	%
William G. Bell (2)	6,375	*
Richard A. Kayne (3)	860,903	38.42	%
Peter H. Neuwirth (4) (5)	132,514	6.03	%
Charles A. Norris (4) (6)	432,189	19.39	%
Scott H. Shlecter (4) (7)	31,578	1.47	%
Robert V. Sinnott (4) (8)	38,090	1.77	%
Heidi E. Yodowitz (9)	—	*
Luz E. Gonzales (10) (4)	31,611	1.47	%
Brian H. McInerney (10) (4)	94,042	4.25	%
Steven L. Murphy (10) (4)	51,375	2.37	%
Brian T. Nakagawa (10) (4)	35,611	1.65	%
Kenneth W. Sumner, Sr. (10) (4)	2,750	*
W. David Walters (10) (4)	78,375	3.57	%
Executive officers and directors
as a group (14 persons) (4)	1,827,107	65.18	%

* Less than 1%.

(1) The address for Mr. Armstrong is 4035 Natasha Drive, Lafayette, California 94549.

(2) The address for Mr. Bell is c/o Tyler Mountain Water Company, One Commerce Drive, Pittsburgh, Pennsylvania 15239.

(3) The 860,903 shares include (i) 750,903 held directly by Mr. Kayne (including 122,053 shares which may be acquired within 60 days upon exercise of options) and (ii) 110,000 shares held by managed accounts of Kayne Anderson Capital Advisors, L.P., a registered investment adviser. Mr. Kayne disclaims beneficial ownership of such shares held in the managed accounts. The address for Richard A. Kayne is c/o Kayne Anderson Investment Management, Inc., 1800 Avenue of the Stars, Second Floor, Los Angeles, California 90067.

(4) Shares beneficially owned include shares issuable upon the exercise stock options exercisable within 60 days of March 1, 2004 in the amounts of 77,707 held by Mr. Neuwirth, 110,230 held by Mr. Norris, 31,578 held by Mr. Shlecter, 38,090 held by Mr. Sinnott, 31,611 held by Ms. Gonzales, 94,042 held by Mr. McInerney, 51,375 held by Mr. Murphy, 35,611 held by Mr. Nakagawa, 2,750 held by Mr. Sumner and 78,375 held by Mr. Walters.

(5) The address for Mr. Neuwirth is c/o Advanced Engine Management, Inc., 474 Cuesta Way, Los Angeles, California 90077.

(6) The address for Mr. Norris is 481 Denslow Avenue, Los Angeles, California 90049.

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(7) Mr. Shlecter is a Portfolio Manager for Kayne Anderson Capital Advisors, L.P.; however, he disclaims beneficial ownership with respect to any shares held by Kayne Anderson Capital Advisors, L.P. or any of its affiliates. The address for Mr. Shlecter is c/o Kayne Anderson Capital Advisors, L.P., 1800 Avenue of the Stars, Second Floor, Los Angeles, California 90067.

(8) Mr. Sinnott is the Senior Vice President of Kayne Anderson Investment Management, Inc.; however, he disclaims beneficial ownership with respect to any shares held by Kayne Anderson Capital Advisors, L.P. or any of its affiliates. The address for Mr. Sinnott is c/o Kayne Anderson Investment Management, Inc., 1800 Avenue of the Stars, Second Floor, Los Angeles, California 90067.

(9) The address for Ms. Yodowitz is c/o McKesson Corporation, One Post Street, San Francisco, CA 94104.

(10) The address of each of the stockholders named is: c/o Glacier Water Services, Inc., 2651 La Mirada Drive #100, Vista, CA 92081-8435.

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AUDIT COMMITTEE REPORT

        The Audit Committee assists the board of directors in discharging its responsibilities relating to the accounting, reporting, and financial practices of the Company, and has general responsibility for oversight and review of the accounting and financial reporting practices, internal controls and accounting and audit activities of the Company. The Audit Committee acts pursuant to a written charter. The Audit Committee Charter was originally adopted by the Board of Directors on June 6, 2000 and was amended and restated on January 2, 2004. A copy of the amended charter is attached as Exhibit A to this Proxy Statement.

        Management is responsible for the preparation, presentation and integrity of the Company’s financial statements, the financial reporting process, accounting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The Company’s auditors are responsible for performing an independent audit of the financial statements in accordance with auditing standards generally accepted in the United States of America and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes.

        During the fiscal year the Audit Committee met and held discussions with management and the independent auditors. The meetings were conducted so as to encourage communication among the members of the Audit Committee, management and the independent auditors. The Audit Committee discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, “Communications with Audit Committees.”

        The Audit Committee reviewed and discussed the audited financial statements of the Company’s as of and for the year ended December 28, 2003 with management and the independent auditors, and the board of directors including the Audit Committee received an opinion of KPMG LLP as to the conformity of such audited financial statements with generally accepted accounting principles.

        The Audit Committee discussed with the independent auditors the overall scope and plans for the audit. The Audit Committee met regularly with the independent auditors, with and without management present, to discuss the results of their examination, the evaluation of the Company’s internal controls and the overall quality of the Company’s accounting procedures.

        In addition, the Audit Committee obtained from KPMG LLP written documentation describing all relationships between KPMG LLP and the Company that might bear on KPMG LLP’s independence consistent with Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees.” The Audit Committee discussed with KPMG LLP any relationships that may have an impact on its objectivity and independence and satisfied itself as to KPMG LLP’s independence.

        Based on the above-mentioned review and discussions with management and KPMG LLP, and subject to the limitations on our role and responsibility described above and in the Audit Committee Charter, 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 28, 2003, for filing with the Securities and Exchange Commission.

AUDIT COMMITTEE:
Heidi E. Yodowitz
Peter H. Neuwirth
William G. Bell

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FEES PAID TO AUDITORS

        Fees for all services provided by KPMG LLP for fiscal year 2003 were as follows:

        The aggregate fees billed by KPMG LLP for professional services rendered for the audit of the Company’s annual financial statements for the fiscal year ended December 28, 2003, and for the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q for that fiscal year were $75,000. All other fees were non-audit services, primarily tax compliance services, of $60,000. No amounts were billed by KPMG LLP in 2003 for financial information systems design and implementation services. The Audit Committee has considered whether the provision of non-audit services is compatible with maintaining the principal accountant’s independence.

PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

        The Audit Committee has appointed KPMG LLP, as independent auditors of the Company for the fiscal year ending January 2, 2005, subject to ratification by the stockholders of the Company. It is intended that, in the absence of contrary specifications, the shares represented by proxies will be voted FOR the ratification of the appointment of KPMG LLP.

        The affirmative vote of the holders of at least a majority of the shares of Common Stock voted in person or by proxy at the meeting is required to ratify the appointment of KPMG LLP. A representative of KPMG LLP is expected to be present at the Annual Meeting, will be given an opportunity to make a statement on behalf of his firm if such representative so desires, and will be available to respond to any appropriate questions of any stockholder. KPMG LLP was the Company’s independent auditor for the fiscal years ended December 28, 2003 and December 29, 2002.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING JANUARY 2, 2005.

STOCKHOLDER-DIRECTOR COMMUNICATIONS

        Stockholders who desire to communicate with the Board or with specific members of the Board should send any such communications in writing in care of the Secretary of the Company at 2651 La Mirada, Suite 100, Vista, CA 92081 or by email to Dave.Walters@Glacierwater.com. The Secretary will review all such communications and will pass on to the appropriate directors all communications other than those which are merely solicitations for products or services, items of a personal nature not relevant to the stockholders and other matters that are of a type which render them improper or irrelevant to the functioning of the Board and the Company.

        The Company strongly encourages each director to attend, and expects that each director will attend, the Annual Meeting of the Stockholders. All directors attended the Company’s 2003 Annual Meeting of Stockholders.

ANNUAL REPORT

        The Annual Report of the Company, including financial statements for the fiscal year ended December 28, 2003, is being forwarded to each stockholder with this Proxy Statement. Stockholders may obtain a copy of the Annual Report without charge by writing to the Secretary of the Company.

OTHER MATTERS

        The Board of Directors has no knowledge of any other matters which may come before the Annual Meeting. If any other matters shall properly come before the meeting, the persons named in the proxies will have discretionary authority to vote the shares thereby represented in accordance with their best judgment.

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PROPOSALS OF STOCKHOLDERS

        Stockholder proposals, if any, which may be considered for inclusion in the Company’s proxy materials for the 2004 Annual Meeting must be received by the Company at its offices at 2651 La Mirada Drive, Suite 100, Vista, CA 92081, not later than January 6, 2005. Any material received after January 6, 2005 shall be considered as untimely presented.

OTHER MATTERS TO COME BEFORE THE MEETING

        The federal proxy rules specify what constitutes timely submission for a stockholder proposal to be included in the Proxy Statement, as discussed above under “Proposals of Stockholders”. If a stockholder desires to bring business before an annual meeting which is not the subject of a proposal timely submitted for inclusion in the Proxy Statement, the stockholder must provide notice to the Company, attention to the Company Secretary, in writing of the business the stockholder proposes to bring before the annual meeting.

        If a stockholder wants to nominate a person for election to the Board other than a director nominated by the Nominating Committee, notice of the proposed nomination must be provided to the Secretary of the Company in the time period set forth in the previous section in the case of the 2005 annual meeting and, in the case of a special meeting called for the purpose of electing directors, by the close of business on the tenth day following the day on which public disclosure of the date of the special meeting is made.

FORWARD LOOKING STATEMENTS

        This Proxy Statements contains “forward-looking” information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements in this report or incorporated by reference are intended to be subject to the safe harbor protection provided by the federal securities laws.

        Forward-looking statements often, although not always, may be found by looking for words or phrases such as “may”, “will”, “intend(s)", “expect(s/ed)", “anticipate(s/d)", “will likely”, “will continue”, “estimate(s/d)", “outlook” and similar words used in this report.

        Forward-looking statements are subject to numerous estimates, assumptions, risk and uncertainties (including trade relations and competition) that may cause our actual results to be materially different from any future results expressed or implied in these statements. We caution readers not to place undue reliance on these statements because they are subject to risks and uncertainties.

        The cautionary statements set forth above should be considered in connection with any subsequent written or oral forward–looking statements that we, or persons acting on our behalf, may issue. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

By Order of the Board of Directors
Name: Murray M. Rubin

W. David Walters
Senior Vice President,
Chief Financial Officer and Secretary

Dated: March 23, 2004

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EX-99

Exhibit A

GLACIER WATER SERVICES, INC.
AUDIT COMMITTEE CHARTER
January 2, 2004

1. PURPOSE

        The primary function of the Glacier Water Services, Inc. (the “Company”) Audit Committee is to assist the Board of Directors (the “Board”) in fulfilling its oversight responsibilities by reviewing: the financial reports and other financial information provided by the Corporation to any governmental body or the public; the Corporation’s systems of internal controls regarding finance, accounting, legal and regulatory compliance and ethics that the Corporation’s management and the Board have established; the independent auditor’s qualifications and independence; and the Corporation’s auditing, accounting and financial reporting processes generally.

        The Audit Committee shall prepare the report required by the rules of the Securities Exchange Commission (the “SEC”) to be included in the Company’s annual proxy statement.

        Consistent with this function, the Audit Committee should encourage continuous improvement of, and should foster adherence to, the Company’s policies, procedures and practices at all levels. In performing its duties, the Audit Committee will maintain effective working relationships with the Board, the Company’s management and the independent auditors. To effectively perform his or her role, each Audit Committee member will obtain an understanding of the detailed responsibilities of Committee Membership as well as the Company’s business, operation and risks.

        The Audit Committee’s primary authority and responsibilities are to:

Serve as an independent and objective party to monitor the Company’s financial reporting process and internal control system;

Review and appraise the audit efforts of the Company’s independent auditors; and

Provide an open avenue of communication among the independent auditors, the Company’s senior management, and the Board.

Have sole authority to appoint or replace the independent auditors (subject to stockholder ratification).

Be directly responsible for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditors shall report directly to the Audit Committee.

Preapprove all auditing services and permitted non-audit services (including the fees and terms hereof) to be performed for the Company by its independent auditors, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1) of the Exchange Act which are approved by the Audit Committee prior to the completion of the Audit. The Audit Committee may form and delegate to subcommittees, consisting of one or more members when appropriate, including the authority to grant preapprovals of audit and permitted non-audit services, provided that decisions of such subcommittees to grant preapprovals shall be presented to the full Audit Committee at its next scheduled meeting.

The Audit Committee shall review all transactions between the Company and any person who may be deemed to control the Company.

The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain independent legal, accounting or other advisers. The Company shall provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to the independent auditors for the purpose of rendering or issuing an audit report and to any advisers employed by the Audit Committee.

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The Audit Committee will primarily fulfill these responsibilities by carrying out the activities enumerated in Section IV of this Charter.

II. COMPOSITION

The Audit Committee shall be comprised of no fewer than three directors as determined by the Board, each of whom shall be an independent director and shall be free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee. The members of the Audit Committee shall meet the independence and experience requirements of the American Stock Exchange, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations of the Commission. At least one member of the Audit Committee shall be an “audit committee financial expert,” as defined by the Commission. Audit Committee members shall not simultaneously serve on the audit committees of more than two other public companies. The members of the Audit Committee shall be appointed by the Board. Audit Committee members may be replaced by the Board.

        For purposes of this Charter, the definition of independence includes the absence of any relationship with the Company that may interfere with the exercise of the member’s independence from management and the Company. In addition, the following restrictions apply to every Audit Committee member:

        A member’s independence would be deemed impaired if:

The member is currently employed by a) the company, b) an affiliate, or c) a current parent or predecessor, or so employed in the past three (3) years.

The member is currently, or within the past three (3) years, a member of the immediate family of a current executive officer of the company or an affiliate.

The member is an executive of another business organization where any of the company’s executives serve on the organization’s compensation committee.

The member is a partner, controlling shareholder, or executive officer of a business organization that has a business relationship with the company.

The members of the Committee shall be elected by the Board at the annual organizational meeting of the Board or until their successors shall be duly elected and qualified. Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.

III. MEETINGS

        The Audit Committee shall meet as often as it determines, but no less frequently than quarterly. As part of its job to foster open communication, the Committee should meet at least annually with management and with the independent auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately. In addition, the Committee or at least its Chair should meet with the independent auditors and management quarterly to review the Company’s financial statements consistent with Sections IV.7 thru IV.9 below.

IV. RESPONSIBILITIES AND DUTIES

        To fulfill its responsibilities and duties, the Audit Committee shall:

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Independent Auditors

1. The Audit Committee shall have sole authority to appoint and replace the independent auditors, considering independence and effectiveness, and approve the fees and other compensation to be paid to the independent auditors. On an annual basis, the Committee will obtain from the auditors a formal written statement delineating all relationships between the auditors and the Company consistent with Independence Standards Board No. I and review and discuss with the auditors all significant relationships the auditors have with the Company to oversee the auditors’ independence.

2. Review the performance of the independent auditors and discharge the independent auditors when circumstances warrant.

3. Review and evaluate the lead partner of the independent auditor team.

4. Obtain and review a report from the independent auditor at least annually regarding (a) the independent auditor’s internal quality control procedures, (b) any material issues raised by the most recent internal quality control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues and (d) all relationships between the independent auditor and the Company. Evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence, and taking into account the opinions of management and internal auditors. The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.

5. Periodically consult with the independent auditors out of the presence of the Company’s management about internal controls and the fullness and accuracy of the organization’s financial statements.

6. Discuss with the independent auditors the matters required to be discussed by Statement of Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information and any significant disagreements with management.

Documents/Reports Review

7. Review with the independent auditors the plan and scope of their audit, its status during the year and the results when completed.

8. Review with management and the independent auditors the Quarterly Reports on Form 1O-Q prior to filing

9. Review the organization’s annual financial statements and any reports or other financial information submitted to any governmental body or to the public, including any certification, report, opinion, or review rendered by the independent auditors, and following the satisfactory completion of each year-end audit, review and recommend to the Board the inclusion of the Company’s audited financial statements in its Annual Report on Form 10-K. On an annual basis, the Audit Committee shall provide a report to the Company, which will be included in its Proxy Statement, in compliance with Rule 306 of Regulation S-K.

10. Review and discuss quarterly reports from the independent auditors on:

a. All critical accounting policies and practices to be used.

b. All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative treatments, and the treatment most preferred by the auditors.

c. Other material written communications between the independent auditors and management, such as any management letter or schedule of unadjusted differences.

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Financial Reporting Processes

11. In consultation with the independent auditors, review the integrity of the organization’s financial reporting processes and controls, both internal and external, to ensure the reliability of financial reporting and compliance with applicable codes of conduct, laws and regulations.

12. Consider the independent auditors’ judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting, the clarity of the Company’s financial disclosures, the degree of aggressiveness or conservatism of the Company’s accounting principles and the underlying estimates, and the significant decisions made by management in preparing the financial disclosure.

13. Consider and approve, if appropriate, major changes to the Company’s auditing and accounting principles and practice as suggested by the independent auditors or the Company’s management.

14. Review disclosures made to the Audit Committee by the Company’s Chief Executive Officer and the Chief Financial Officer during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company’s internal controls.

15. Discuss with management the Company’s earnings press releases, including the use of “pro forma” or “adjusted” non-GAAP information, as well as financial information and earnings guidance provided to analysis and rating agencies. Such discussion may be done generally (consisting of discussing the types of information to be disclosed and the types of presentations to be made).

16. Ensure the rotation of the lead (or coordinating ) auditor partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law. Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditing firm on a regular basis.

Process Improvement

17. Establish regular and separate systems of reporting to the Audit Committee by each of the Company’s management and the independent auditors regarding any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments.

18. Following completion of the annual audit, review separately with each of the Company’s management and the independent auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.

19. Review any significant disagreement among the Company’s management and the independent auditors in connection with the preparation of the financial statements.

20. Review with the independent auditors and the Company’s management the extent to which changes or improvements in financial or accounting practices, as approved by the Audit Committee, have been implemented. (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Committee.)

21. Review periodically the adequacy of the Company’s accounting, financial and auditing personnel resources.

22. Monitor compliance with the Company’s ethical practices, and ensure that management has the proper review system in place to ensure that Company’s financial statements, reports and other financial information disseminated to governmental organizations and the public satisfy legal requirements.

23. Review with the Company’s counsel legal compliance matters, including pending or threatened litigation and corporate securities trading policies.

24. Review with the Company’s counsel any legal matter that could have a significant impact on the Company’s financial statements.

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Miscellaneous

25. Review and reassess the adequacy of this Charter annually. If any revisions therein are deemed necessary or appropriate, submit the same to the Board for its consideration and approval.

26. Perform any other activities consistent with this Charter, the Company’s By-Laws and governing law, as the Committee or the Board deems necessary or appropriate.

V. REPORTS

        The Audit Committee will report to the Board from time to time with respect to its activities and its recommendations. When presenting any recommendation or advice to the Board, the Committee will provide such background and supporting information as may be necessary for the Board to make an informed decision. The Committee will keep minutes of its meetings and will make such minutes available to the full Board for its review.

        The Audit Committee shall report to shareholders in the Company’s proxy statement for its annual meeting whether the Committee has satisfied its responsibilities under this Charter.

V1. OTHER AUTHORITY

        The Audit Committee is authorized to confer with the Company’s management and other employees to the extent it may deem necessary or appropriate to fulfill its duties. The Committee is authorized to conduct or authorize investigations into any matters within the Committee’s scope of responsibilities. The Committee also is authorized to seek outside legal or other advice to the extent it deems necessary or appropriate, provided it shall keep the Board advised as to the nature and extent of such outside advice. The Audit Committee will also perform such other functions as are authorized for this Committee by the Company’s Board of Directors from time to time.

V11. DISCLAIMER

        With respect to the preparation and auditing of the Company’s financial statements, the Audit Committee’s role is one of oversight. While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. The Company’s management is responsible for preparing the Company’s financial statements. The Company’s independent auditors are responsible for auditing those financial statements. Nothing in this Charter should be construed to imply that the Audit Committee is required to provide any assurance or certification as to the Company’s financial statements or the services of the independent auditors.

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EX-99

Exhibit B

NOMINATING/CORPORATE GOVERNANCE
COMMITTEE OF THE BOARD OF DIRECTORS

CHARTER

I. PURPOSE

        The Nominating/Corporate Governance Committee shall provide assistance to the Board of Directors in fulfilling its responsibility to the shareholders, potential shareholders and investment community by (i) reviewing and making recommendations to the Board regarding the Board’s composition and structure, establishing criteria for Board membership and evaluating corporate policies relating to the recruitment of Board members; and (ii) establishing, implementing and monitoring policies and processes regarding principles of corporate governance in order to ensure the Board’s compliance with its fiduciary duties to the Company and its shareholders.

II. STRUCTURE AND OPERATIONS

Composition and Qualifications

        The Committee shall be composed of two members of the Board of Directors, each of whom is determined by the Board of Directors to be “independent” in accordance with the rules of the American Stock Exchange.

Appointment and Removal

        The members of the Committee shall be appointed by the Board of Directors and shall serve until such member’s successor is duly elected and qualified or until such member’s earlier resignation or removal. The members of the Committee may be removed, with or without cause, by a majority vote of the Board of Directors.

Chairman

        Unless a Chairman is elected by the full Board of Directors, the members of the Committee shall designate a Chairman by majority vote of the full Committee membership. The Chairman shall be entitled to cast a vote to resolve any ties. The Chairman will chair all regular sessions of the Committee and set the agendas for Committee meetings.

III. MEETINGS

        The Committee shall meet at least annually, or more frequently as circumstances dictate. The Chairman of the Board of Directors or any member of the Committee may call meetings of the Committee. Any meeting of the Committee may be held telephonically.

        The Committee may invite to its meetings any director, management of the corporation and such other persons as it deems appropriate in order to carry out its responsibilities. The Committee may also exclude from its meetings any persons it deems appropriate in order to carry out its responsibilities.

IV. RESPONSIBILITIES AND DUTIES

        The following functions shall be the principal responsibilities and duties of the Committee. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board of Directors from time to time related to the purposes of the Committee outlined in Section I of this Charter or as may be appropriate in light of changing business, legislative, regulatory, legal or other conditions.

        The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern that the Committee deems appropriate and shall have the authority to retain and terminate outside counsel or other experts for this purpose, including the authority to approve the fees payable to such counsel or experts and any other terms of retention.

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Board Selection, Composition and Evaluation

1. Establish criteria for the selection of new directors to serve on the Board of Directors.

2. Identify individuals believed to be qualified as candidates to serve on the Board of Directors and select, or recommend that the Board of Directors select, the candidates for all directorships to be filled by the Board of Directors or by the shareholders at an annual or special meeting. In identifying candidates for membership on the Board of Directors, the Committee shall take into account all factors it considers appropriate, which may include ensuring that the Board of Directors, as a whole, consists of individuals with various and relevant career experience, relevant technical skills, industry knowledge and experience, financial expertise (including expertise that could qualify a director as a “financial expert,” as that term is defined by the rules of the SEC), local or community ties and minimum individual qualifications, including strength of character, mature judgment, familiarity with the company’s business and industry, independence of thought and an ability to work collegially. The Committee also may consider the extent to which the candidate would fill a present need on the Board of Directors.

Review and make recommendations to the full Board of Directors, or determine, whether members of the Board of Directors should stand for re-election. Consider matters relating to the retirement of members of the Board of Directors, including term limits or age limits.

3. Evaluate candidates for nomination to the Board of Directors, including those recommended by shareholders. In that connection, the Committee shall adopt procedures for the submission of recommendations by shareholders as it deems appropriate.

4. Conduct all necessary and appropriate inquiries into the backgrounds and qualifications of possible candidates.

5. Consider questions of independence and possible conflicts of interest of members of the Board of Directors and executive officers, and whether a candidate has special interests or a specific agenda that would impair his or her ability to effectively represent the interests of all shareholders.

6. Review and make recommendations, as the Committee deems appropriate, regarding the composition and size of the Board of Directors.

7. Oversee evaluation of the Board of Directors and management.

Committee Selection Composition

8. Recommend members of the Board of Directors to serve on the committees of the Board of Directors, giving consideration to the criteria for service on each committee as set forth in the charter for such committee, as well as to any other factors the Committee deems relevant, and where appropriate, make recommendations regarding the removal of any member of any committee.

9. Recommend members of the Board of Directors to serve as the chairs of the committees of the Board of Directors.

10. Establish, monitor and recommend the purpose, structure and operations of the various committees of the Board of Directors, the qualifications and criteria for membership on each committee of the Board of Directors and, as circumstances dictate, make any recommendations regarding periodic rotation of directors among the committees and impose any term limitations of service on any committee of the Board of Directors.

11. Periodically review the charter and composition of each committee of the Board of Directors and make recommendations to the Board of Directors for the creation of additional committees or the elimination of committees of the Board of Directors.

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Corporate Governance

12. Review the adequacy of the certificate of incorporation and by-laws of the corporation and recommend to the Board of Directors, as conditions warrant, that it propose amendments to the certificate of incorporation and by-laws for consideration by the shareholders.

13. Develop and recommend to the Board of Directors a set of corporate governance principles and keep abreast of developments with regard to corporate governance to enable the Committee to make recommendations to the Board of Directors in light of such developments as may be appropriate.

14. Review policies relating to meetings of the Board of Directors. This may include meeting schedules and locations, meeting agendas and procedures for delivery of materials in advance of meetings.

Continuity / Succession Planning Process

15. Oversee and approve the management continuity planning process. Review and evaluate the succession plans relating to the CEO and other executive officer positions and make recommendations to the Board of Directors with respect to the selection of individuals to occupy these positions.

Reports

16. Report regularly to the Board of Directors (i) following meetings of the Committee, (ii) with respect to such other matters as are relevant to the Committee’s discharge of its responsibilities and (iii) with respect to such recommendations as the Committee may deem appropriate. The report to the Board of Directors may take the form of an oral report by the Chairman or any other member of the Committee designated by the Committee to make such report.

17. Maintain minutes or other records of meetings and activities of the Committee.

V. ANNUAL PERFORMANCE EVALUATION

        The Committee shall review and evaluate, at least annually, the performance of the Committee and its members, including by reviewing the compliance of the Committee with this Charter. In addition, the Committee shall review and reassess, at least annually, the adequacy of this Charter and recommend to the Board of Directors any improvements to this Charter that the Committee considers necessary or valuable. The Committee shall conduct such evaluations and reviews in such manner as it deems appropriate.

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