2003 Audit Charter: MLHR



The primary function of the Audit Committee (the "committee") is to assist the Board of Directors by overseeing (1) the quality and integrity of the company's accounting, auditing and reporting practices, (2) the performance of the company's business risk group, including the internal audit function, and independent auditor, and (3) the company's disclosure controls and system of internal controls regarding finance, accounting, legal compliance, and ethics that management and the Board of Directors have established.

The committee shall provide an open avenue of communication among the independent auditors, financial and senior management, the business risk group and the Board of Directors.


The committee shall be comprised of three or more members of the Board of Directors, each of whom (1) must qualify as an independent director under the listing standards of the NASDAQ and Section 301 of the Sarbanes-Oxley Act, and (2) shall be free from any relationship to the company that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the committee. All members of the committee shall have a working familiarity with basic financial and accounting practices and the Board of Directors shall attempt to appoint at least one member of the committee who is a "financial expert" in compliance with the criteria established by the Securities and Exchange Commission. The members shall be nominated by the Nominating and Governance Committee and appointed annually to one-year terms by the Board. The Nominating and Governance Committee shall recommend, and the Board shall designate, one member of the committee as Chair. A member of the committee shall not simultaneously serve on the audit committee of more than two other public companies.


Meetings of the committee shall be subject to the committee procedure rules set forth in the company's Bylaws, rules established by the Board, and its own rules of procedure (including the Administrative Guidelines schedule), which shall be consistent with those Bylaws and the following:

1. The committee shall meet at least four (4) times annually and more frequently as circumstances require. At least four (4) scheduled meetings of the committee shall include an executive session of the committee, absent members of management and on such terms and conditions as the committee may elect. In addition, the committee may meet periodically with management, the head of the company's business risk group and the independent auditors in separate executive sessions to discuss any matters that the committee or the business risk department or independent auditors believe should be discussed privately.

2. Following each of its meetings, the committee shall deliver a report (verbal or written) on the meeting to the Board, including a description of actions taken by the committee.

3. Minutes will be prepared for each meeting by a legal non-employee resource and will be maintained as a permanent part of corporate records.

4. At least annually, the committee will review this charter and update it as necessary.


The company's management is responsible for preparing the company's financial statements, and the independent auditors are responsible for auditing the company's financial statements. Consequently, the Audit Committee's role is one of oversight and does not provide any expert assurance or certification as to the company's financial statements or the work of the independent auditors or that of the business risk group. However, the independent auditors and director of business risk are directly accountable to the Audit Committee. The committee shall have the following responsibilities and duties:




1. Review the company's annual financial statements and any financial reports submitted to the SEC or to the public, including any report issued by the independent auditors.
2. Review the management letter and other reports from the independent auditors, reports from the business risk group, management's responses, and subsequent updates on actions taken.
3. Recommend to the Board whether the financial statements should be included in the Annual Report on Form 10-K.
4. Cause to be prepared and approve the committee's report to be included in the company's proxy statement.
5. Review with financial management and the independent auditors the quarterly report on Form 10-Q prior to its filing.
6. Approve quarterly earnings press releases with management prior to dissemination.
7. Discuss with management financial information and earnings guidance provided to external parties (e.g. analysts and agencies), if not previously discussed with the Executive Committee or Board of Directors.
8. Review management's assertion and the independent auditors' report on internal controls over financial reporting.


1. Appoint, approve the compensation of, and provide oversight (including regarding the audit scope and audit plan) of the company's independent auditor, including the removal of the company's independent auditors. The independent auditors shall report directly to the committee, and the committee shall oversee the resolution of any disagreements between management and the independent auditors.

2. On an annual basis, (a) review and evaluate the qualifications and performance of the independent auditors, and (b) review and discuss with the independent auditors all significant relationships the auditors have with the company to determine the auditors' objectivity and independence, undertaking or recommending appropriate action to ensure and continue that independence.

3. Administer the company's Policy Regarding the Approval of Audit and Non-audit Services Provided by the Independent Auditor.

4. Hold timely discussions with the independent auditors regarding:

(a) All critical accounting policies and practices;
(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 disclosures and treatments, and the treatment preferred by the independent auditor;

(c) Other material written communications between the independent auditor and management including, but not limited to, schedule of unadjusted differences; and

(d) An analysis of the auditor's judgment as to the quality of the company's accounting principles, setting forth significant reporting issues and judgments made in connection with the preparation of the financial statements.

5. At least annually, obtain and review a report by the independent auditor describing:

(a) The firm's internal quality control procedures; and
(b) Any material issues raised by the most recent internal quality-control review, peer review 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, and any steps taken to deal with any such issues.


1. Review the integrity of the company's financial reporting process, both internal and external, giving consideration to the disclosure controls, and consultation with management, the independent auditors and the director of business risk.
2. Consider and approve, as appropriate, material changes to the company's auditing and accounting principles and practices as suggested by the independent auditors, management or the director of business risk.
3. Review and approve all related party transactions.
4. Establish and maintain procedures for the receipt, retention and treatment of complaints regarding accounting, or auditing matters, including procedures necessary to receive and respond to confidential and anonymous submissions by company employees regarding questionable accounting or auditing matters.
5. Approve the annual EVA calculation including the actual improvement and bonus factor.



2. Periodically review any significant difficulties, disagreements with management or scope restrictions encountered in the course of that group's work.


1. Review the audit plan, activities, organizational structure and qualifications of the company's business risk group including a periodic review of the director's performance, and approve the appointment of the director.


1. Review compliance with the company's policies related to legal and ethical practices, including its Code of Business Ethics, approved by the Board of Directors, to ensure that management has maintained a system to comply with expected ethical and legal requirements.
2. Review, with the company's counsel, legal compliance matters including corporate securities trading policies.
3. Review, with the company's counsel, any legal matter that could have a significant impact on the company's financial statements
4. Discuss the company's significant business and financial risk exposures and steps taken by management to control or mitigate those exposures.


1. Perform an annual self-assessment relative to the Audit Committee's purpose, duties and responsibilities set forth in this Charter.
2. To the extent it deems appropriate, and with or without full Board approval, obtain advice and assistance from outside legal, accounting or other advisors as deemed appropriate to perform its duties and responsibilities.
3. Monitor the development of the company's insurance programs and their adequacy to safeguard against extraordinary liabilities and losses.
4. Perform any other activities consistent with this Charter, the company's bylaws and governing law, as the Audit Committee or the Board of Directors deems necessary or appropriate.