2003 Audit Charter: AGLANGELICA CORPORATION
Audit Committee of the Board of Directors
AMENDED AND RESTATED CHARTER
The Audit Committee shall be composed of not less than three Directors, each of whom is an "independent" Director. An independent Director is a member of the Board of Directors of Angelica who:
the Board of Directors of Angelica has affirmatively determined has no material commercial, industrial, banking, consulting, legal, accounting, charitable or familial relationship with Angelica, either individually or as a partner, shareholder or officer of an organization or entity having such a relationship with Angelica;
is not, and has not been for the five years prior to the date of determination, an employee of Angelica;
is not, and has not been, affiliated with or employed by the present or former auditor of Angelica, or one of the auditors' affiliates, unless it has been more than five years since the affiliation, employment or the auditing relationship ended;
is not, and has not been for the five years prior to the date of determination, part of an interlocking directorship in which an executive officer of Angelica serves on the compensation committee of the company that concurrently employed the Director;
has, and for the five years prior to the date of determination had, no immediate family members (i.e., spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law and anyone who shares the Director's home) in any of the above categories; provided, however, that in the case of employment of one of the above-described immediate family members, the family member must have served as an officer or partner of the subject entity to impact the Director's independence; and
is compensated by Angelica solely with the directors' fees that are paid by Angelica to each Audit Committee member.
Each Director who serves on the Audit Committee shall, in the judgment of the Board of Directors, be financially literate, and at least one member shall be an "Audit Committee financial expert." A Director shall be considered an Audit Committee financial expert if the Director:
has an understanding of financial statements and generally accepted accounting principles;
has the ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;
has experience preparing, or actively supervising others in, auditing, analyzing or evaluating financial statements with a breadth and level of complexity generally comparable to the breadth and complexity of issues that can reasonably be expected to arise in Angelica's financial statements;
has an understanding of internal controls and procedures for financial reporting; and
has an understanding of the functions of the Audit Committee.
The Board of Directors can determine that a person has acquired the above attributes through the person's education and experience as, or experience actively supervising, a principal financial officer, principal accounting officer, controller, public accountant or auditor or another position with responsibility for the preparation, auditing or evaluation of financial statements.
II. Purposes and Authority
The Audit Committee shall have the sole authority to hire and fire the independent auditors of Angelica and to approve any non-audit relationship with the independent auditors. The purpose of the Audit Committee shall be to assist the Board of Directors of Angelica in the Board's oversight of:
the integrity of Angelica's financial statements;
Angelica's compliance with applicable legal and regulatory requirements with respect to financial reporting;
the independent auditor's qualifications and independence; and
the performance of Angelica's internal audit function and Angelica's independent auditors.
The Audit Committee will also prepare its report that is required by the rules and regulations of the Securities and Exchange Commission to be included in Angelica's proxy statement for the annual meeting of shareholders. The Audit Committee will maintain free and open means of communication between the Board of Directors, the independent auditors, the internal auditors and those responsible for financial management for Angelica.
In carrying out its responsibilities, the Audit Committee believes its policies and procedures should remain flexible in order to best react to the changing conditions and to ensure to the Board of Directors and shareholders of Angelica that the corporate accounting and reporting practices of Angelica are in accordance with all applicable requirements and are of the highest quality.
Specifically, the Audit Committee will:
Have regular meetings at least four times a year and special meetings as the Audit Committee may deem necessary;
Retain and terminate, as the Audit Committee deems necessary, the independent auditors to audit the consolidated financial statements of Angelica and its subsidiaries on an annual basis and any legal, accounting and other outside advisors to advise the Audit Committee on any matter within the scope of the Audit Committee's duties and responsibilities;
Meet with the independent auditors and financial management of Angelica to review the scope of the proposed audit for the then-current year, the proposed audit fees and the audit procedures to be utilized, and at the conclusion thereof, review such audit, including any comments or recommendations of the independent auditors, and elicit the judgment of the independent auditors regarding the quality of the accounting principles applied to Angelica's financial reporting;
At least annually, assess the independence of the independent auditor by reviewing all relationships between the independent auditor and Angelica and obtain and review a report by the independent auditor describing the independent auditor's internal quality-control procedures, any material issues raised in the most recent quality-control review or peer review of the independent auditor or by any inquiry or investigation of the independent auditor by a governmental or professional authority within the past five years with respect to one or more audits carried out by the independent auditor and any steps taken by the independent auditor to deal with the issues;
Review the annual audited and quarterly financial statements with management and the independent auditors, including the disclosures in the management's discussion and analysis section of the Form 10-K or Form 10-Q. In conjunction with such annual or quarterly review, the Audit Committee shall review:
major issues regarding accounting principles and financial statement presentation, including any significant changes in Angelica's selection or application of accounting principles and major issues as to the adequacy and effectiveness of internal controls and any special audit actions taken in light of major internal control deficiencies;
analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including an analysis of the effects of alternative methods of generally accepted accounting principles on the financial statements; and
the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on financial statements;
Discuss the type of information to be disclosed in earnings press releases, earnings guidance and other financial presentations that are to be provided to analysts, rating agencies and the general public, paying particular attention to the use of "pro forma" or "as adjusted" financial disclosures that are not determined in accordance with generally accepted accounting principles;
Discuss Angelica's guidelines and policies regarding risk assessment and risk management; and
Provide the opportunity for management, the internal auditors and the independent auditors to meet separately with the Audit Committee. Among the items to be discussed at the meeting with the independent auditors should include any restrictions placed on the scope of the independent auditors' activities and access to information and an evaluation by the internal auditors of Angelica's financial, accounting and internal auditing personnel and the cooperation that the independent auditors received from such personnel during the course of the audit. The Audit Committee shall be informed of and may review:
Any accounting adjustments that were noted by the independent auditors but "passed" (as immaterial or otherwise);
Any communications between the independent audit team and the independent auditors' national offices about auditing or accounting issues raised in the course of the audit of Angelica's financial statements; or
Any management letter issued by the audit firm to Angelica.
The meeting with the internal auditors should include a review of the responsibilities, budget and staffing of Angelica's internal audit function as well as the internal auditors' independence and authority, reporting obligations, proposed internal audit plan for the coming year and coordination of the plan with the independent auditors. The internal auditors should also present a summary of findings for completed internal audits and progress reports on current internal audit plans, with explanations for any deviations from the plan;
Review and approve all relationships between the independent auditors and Angelica, other than the audit of the financial statements, with a view toward ensuring the objectivity and independence of the independent auditors. In this regard, the Audit Committee will set clear hiring policies with respect to employees or former employees of the independent auditors by Angelica to ensure that there are no direct or indirect adverse effects on independence of the independent auditors due to the potentiality of future employment by Angelica of such personnel;
Establish procedures for the receipt, retention and treatment of complaints and concerns received by Angelica regarding accounting, internal controls and auditing matters and for the confidential, anonymous submission of such complaints and concerns by employees of Angelica; and
Submit reports of all meetings of the Audit Committee to, and discuss the matters covered at each Committee meeting with, the Board of Directors. The reports to the Board should include a review of any issues relating to the quality and integrity of Angelica's financial statements, its compliance with legal and regulatory requirements, the performance and independence of the independent auditors and the performance of the internal audit function.
IV. Annual Review
The Audit Committee annually will review and assess the adequacy of the Charter and the Audit Committee's own performance under the Charter. The Audit Committee will determine whether any changes to the Charter are advisable or any corrective actions should be undertaken to correct any deficiencies or weaknesses noted in the self-evaluation. The findings of the Audit Committee, as well as any amendments to the Charter, will be presented to the Board of Directors for its approval.