I. Committee Members
The Audit Committee shall consist of at least three members. Members of the committee are appointed by the Board of Directors from time to time and may be removed by the Board of Directors at any time. Each member of the Committee shall be independent directors, as determined by the Board of Directors in accordance with the applicable rules of the New York Stock Exchange ("NYSE"), the Securities and Exchange Commission ("SEC") and the Sarbanes-Oxley Act (the "Act"). Committee members shall be chosen based on their competence and ability to add substance to the deliberations of the Committee. All members of the Committee will have a general understanding of basic finance and accounting practices. The Board of Directors will determine if any member is a "financial expert" as defined by the SEC.
Each Committee member is prohibited from accepting, directly or indirectly, any fees from the Company other than for service as a member of the Board of Directors or committee thereof, and each member will be free from any financial, family, or other material relationship that, in the opinion of the Board of Directors, would interfere with the exercise of his or her independent judgment.
The role of the Committee is to assist the Board in fulfilling its financial, legal and regulatory oversight responsibilities. The Committee's primary responsibilities are to assist Board oversight of:
III. Responsibilities and Duties
The Committee believes its policies and procedures should remain flexible in order to best react to changing conditions and provide reasonable assurance to the Board that the accounting and reporting practices of the corporation meet applicable requirements and that an effective business ethics program exists.
A. Reviews and Procedures
· Determine and advise management of the appropriate funding which the Company is required to provide under the Act for the compensation of the Company's outside auditors and any advisors retained by the Committee.
· Review the adequacy of the quarterly and annual SEC certification process and disclosures.
· Discuss the unaudited quarterly financial statements and annual audited financial statements, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations", prior to filing with the SEC. The review should include discussions with management, including the Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, the Internal Audit Department, and the independent accountants, of significant issues regarding accounting principles, practices, and judgments. Discuss earnings press releases as well as financial information and earnings guidance provided to analysts and ratings agencies.
· Discuss policies with respect to risk assessment and risk management.
· Prepare a report to shareholders as required by the SEC to be included in the Company's annual proxy statement.
· Maintain minutes or other records of meetings and activities.
· Keep the Board of Directors informed on a regular basis of the Committee's activities.
· Conduct or authorize investigations into any matters within the Committee's scope of responsibilities. The Committee has direct access to anyone in the Company.
· Establish and review on a periodic basis the adequacy of the Company's procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and the confidential, anonymous submission by the Company employees of concerns regarding questionable accounting or auditing matters.
· Review any reports required by the SEC and/or NYSE to be presented to the Committee.
· Review with the staffs of the Accounting, Internal Audit and Legal Departments their procedures and reports for assuring that the Company's internal controls and policies for assuring compliance with legal requirements are adequate and functioning.
B. Internal Audit Department
· The appointment and replacement of the senior internal auditing executive shall be made in consultation with the Committee. The senior internal auditing executive shall report to the Company's CFO and to the Committee.
· Review the scope of the Internal Audit Department's plans and a summary of significant reports to management prepared by the Internal Audit Department and management's responses.
· Review the Internal Audit Department's activities, annual and quarterly reports, and any recommendations to the Committee. Review the mission and objectives, resources, reporting relationships, and independence of the Internal Audit Department.
C. Independent Accountants
· Appoint and/or terminate the Company's independent accountants.
· Be responsible for resolving disagreements between the Company's management and its independent accountants.
· Instruct the independent accountants that they report directly to the Committee.
· Oversee the work of the independent accountants.
· Preapprove all audit and non-audit services fees to be paid to and terms of the engagement with the independent accountants.
· Periodically review the non-audit professional services fees to be paid to the independent accountants with the full Board of Directors.
· Ensure that a formal statement delineating all relationships between the independent accountants and the Company is received from the independent accountants annually. The Committee shall discuss with the independent accountants all significant relationships the accountants have with the Company to determine the accountants' independence.
· Meet with the independent accountants and financial management of the Company to review the scope of the proposed external audit for the current year. The external audit scope shall include a requirement that the independent accountants inform the Committee of any significant changes in the independent accountant's original audit plan and that the independent accountants will conduct an interim financial review prior to the Company's earnings release and quarterly filing with the SEC.
· Obtain from the independent accountants the auditor reports required under Section 10A of the Securities Exchange Act of 1934, that include (1) all critical accounting policies and practices to be used; (2) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management officials of Company, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent accountants; and (3) other material written communications between the independent accountants and management of Company, such as any management letter or schedule of unadjusted differences. ? Obtain and review a report from the independent accountants at least annually regarding (a) the accountant's internal quality-control procedures, (b) any material issues raised by the most recent 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 accountants and the Company. Evaluate the qualifications, performance and independence of the independent accountants, including considering whether the accountant's quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the accountant's independence, and taking into account the opinions of management and the senior internal auditing executive. The Committee shall present its conclusions to the Board and, if so determined by the Committee, recommend that the Board take additional action to satisfy itself of the qualifications, performance and independence of the accountants.
· Discuss with the independent accountants the internal audit responsibilities, budget and staffing and any recommended changes in the planned scope to the internal audit.
· Establish clear hiring policies for employees or former employees of the independent accountants.
· Assure compliance with provisions of the Act and SEC regulations relating to audit partner rotation.
· Recommend to the Board policies for the Company's hiring of employees or former employees of any independent auditor who participated in any capacity in the audit of the Company or its affiliates.
· Obtain from the independent accountants assurance that Section 10A(b) of the Securities Exchange Act of 1934 has not been implicated.
D. Company Management
· Receive an annual report from the Chief Financial Officer and the Controller relating to accounting policies used in the preparation of the Company's financial statements (specifically those policies for which management is required to exercise discretion or judgment regarding the implementation thereof).
· Receive quarterly reports from the Chief Financial Officer and the Controller relating to significant accounting developments and issues, particularly with respect to reserves, accounting changes and other financial information.
· Review the possible impact of any impending significant changes in accounting standards or rules as promulgated by the FASB, SEC or others.
· Review with the Company's general counsel legal matters that may have a material impact on the financial statements, the Company's compliance policies and any material reports or inquiries received from regulators or governmental agencies.
· Review the annual management representation letter provided by management to the independent accountants.
· Advise financial management and the independent accountants to discuss with the Committee their qualitative judgments about the quality, not just the acceptability, of accounting principles and financial disclosure practices used or proposed to be adopted by the Company.
E. Internal Controls and Risk Management
· Make inquiries of management and the independent accountants concerning the adequacy of the Company's system of internal controls.
· Meet periodically with management to review the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures.
· Review the management letter provided by the independent accountants and management's action plan.
F. Business Ethics and Conduct
· Provide oversight to the Business Ethics and Conduct program.
· Require management to report on procedures that provide assurance that the Company's mission, values, and Code of Conduct are properly communicated to all employees on at least an annual basis.
· Review the Company's Code of Conduct program annually and direct management to establish a system reasonably designed to assure compliance with the Code.
· Review annual results of compliance with the Code of Conduct.
· Obtain reports from management, the Company's senior internal auditing executive and the independent accountants that the Company's subsidiary/foreign affiliated entities are in conformity with applicable legal requirements and the Company's Code of Conduct, including disclosures of insider and affiliated party transactions.
· Review the report of the senior internal auditing executive regarding the expenses of, the perquisites paid to, and the conflicts of interest, if any, of members of the Company's senior management.
· The Company's management is required to bring to the attention of the Audit Committee any internal or external communications regarding criticisms of the Company's financial reporting.
· Consider any Code of Conduct violations involving the CEO or senior management and report findings to the Board.
The Committee may delegate its duties and responsibilities to a subcommittee consisting of one or more members of the Committee, or to senior officers of the Company. Any delegation may be made only to the extent permitted by the NYSE rules, SEC rules and applicable law.
The Committee has the authority to retain and obtain advice from internal and external legal, accounting and other advisors as it determines necessary and appropriate to carry out its duties.
VI. Annual Performance Evaluation
The Committee shall conduct an annual review of the Committee's performance, periodically assess the adequacy of its charter (at least annually) and recommend changes to the Board as needed. The charter should be published at least every 3 years in accordance with SEC regulations.
Meetings of the Audit Committee shall be held upon call by the Chairman of the Board or the Chairman of the Committee. The Committee will meet at least four times annually. Additional meetings may occur more frequently as circumstances dictate. The Committee chairman shall approve an agenda in advance of each meeting.
The Committee shall meet privately in executive session at least quarterly with the senior internal auditing executive, the independent accountants, such other members of management as deemed appropriate and as a committee to discuss any matters that the Committee believes are relevant to fulfilling its responsibilities.
April 1, 2003