AUDIT AND FINANCE COMMITTEE CHARTER
2003 Committee Charter : PNR
The Audit and Finance Committee is responsible for
(ii) the Company's compliance with legal and regulatory requirements,
(iii) the independence and qualifications of the Company's external auditor and
(iv) the performance of the Company's internal audit function and of the external auditor, and
1. Committee Composition.
Each Committee member will submit an annual statement to the Board of Directors confirming compliance with these independence requirements.
(b) an ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;
(c) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can resonably be expected to be raised by the Company's financial statements, or experience actively supervising one or more persons engaged in such activities;
(d) an understanding of internal controls and procedures for financial reporting; and
(e) an understanding of audit committee functions.
For a director to qualify as "Independent":
(a) The Board of Directors must affirmatively determine that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a material relationship with the Company) that would prevent the director from acting independently of management of the Company.
b) The director (including such director's immediate family members and anyone who shares the same home as such director) shall not, presently or within the immediately preceding five (5) years:
(ii) be or have been affiliated with or employed by a present or former (during the immediately preceding five (5) year period) internal or external auditor of the Company or a material affiliate of the Company;
(iii) be or have been employed as an executive officer of another company where an executive officer of the Company serves on the compensation committee of such other company;
(iv) be or have been an executive officer or an employee of another company(A) that accounts for at least $1 million or two percent (2%), whichever is greater, of the Company's revenues or (B) for which the Company accounts for at least $1 million or two percent (2%), whichever is greater, of such other company's consolidated gross revenues; or
(v) receive or have received more than $100,000 per year in direct compensation from the Company (other than director and committee fees and pension or other forms of deferred compensation, so long as such compensation is not contingent in any way on continued services).
(d) Other than in his or her capacity as a member of the Board of Directors or any committee thereof, the director may not be an affiliated person of the Company or any of its subsidiaries (as defined and interpreted pursuant to SEC rules).
(e) The following commercial or charitable relationships will not be considered to be material relationships that would impair a Director's independence:
(ii) if a Director serves as an officer, director or trustee of a charitable organization, and the Company's discretionary charitable contributions to the organization are less than five percent (5%) of that organization's total annual charitable receipts.
(a) The external auditor appointed by the Committee shall, in the opinion of the Committee, be independent of the Company. An external auditor does not meet the independence requirement of this Charter if a chief executive officer, controller, chief financial officer, chief accounting officer, any person serving in an equivalent position for the Company or any person in a position to, or that does, exercise influence over the contents of the Company's financial statements or anyone who prepares them, was employed by the external auditor and participated in any capacity in the audit of the Company during the one year period preceding the date of the initiation of the audit.
(b) The Committee shall require the external auditor to submit on a periodic basis to the Committee a formal written statement delineating all relationships between the external auditor and the Company; shall actively engage in a dialogue with the external auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the external auditor.
(c) On an annual basis, the Committee shall be responsible for obtaining and reviewing a report by the external auditor describing: (i) the external auditor's internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the external auditor, 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 external auditor, and (iii) any steps taken to deal with any such issues.
(d) In appointing an external auditor, the Committee shall require audit partner rotation at least every 5 years, after the effective date of any transition time periods under applicable SEC and other rules and regulations.
(e) The Committee shall report periodically to the Board regarding its determinations and findings with respect to the independence and qualifications of the external auditor.
(f) The Committee shall set clear policies for the hiring by the Company of employees or former employees of the external auditors who participated in any capacity in the audit of the Company.
3. Audit Services and Permitted Non-Audit Services; Conduct of Audit.
(a) The Committee shall review and approve the external auditor's audit plan including scope, staffing and timing of work.
(b) "Permitted Non-Audit Services" shall mean such non-audit services, including tax services, that are permitted by law and applicable rules and regulations, but shall not include the following services, after the effective date of any transition time periods under applicable SEC and other rules and regulations:
(ii) financial information systems design and implementation;
(iii) appraisal or valuation services, fairness opinions, or contribution-in-kind reports;
(iv) actuarial services related to financial statement amounts or disclosures;
(v) internal audit outsourcing services;
(vi) management functions or human resources;
(vii) broker or dealer, investment adviser, or investment banking services;
(viii) legal services; or
(ix) expert services unrelated to the audit.
(d) The Committee shall receive reports from the external auditor regarding:
(ii) all alternative treatments of financial information within GAAP that have been discussed with management of the Company, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditor;
(iii) other material written communications between the external auditor and management of the Company, such as any management letter or schedule of unadjusted differences.
(ii) any communications between the audit team and the external auditor's national office respecting auditing or accounting issues presented by the engagement; or
(iii) any management or internal control letter issued or proposed to be issued by the audit firm to the Company.
4. Financial Statements; Accounting Practices and Policies.
(a) Meet with management to review the annual audited financial statements and discuss major issues regarding accounting and auditing principles and practices as well as the adequacy of internal controls that could significantly affect the Company's financial statements.
(b) Review significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements.
(c) Review and discuss with management and the external auditor the Company's annual audited financial statements and quarterly financial statements, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations".
(d) Review major changes to the Company's auditing and accounting principles and practices as suggested by the external auditor, internal auditor or management.
(e) Discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies.
(f) Be responsible for resolution of disagreements between management of the Company and the external auditor regarding financial reporting.
5. Risk Management.
6. Internal Audit Function.
(a) Perform a general oversight function assuring adequate competent staff and sufficient internal control policies to ensure the integrity of the Company's financial reporting process.
(b) Review the performance of the internal audit department.
(c) As appropriate, review significant reports to management prepared by the internal audit department and management's responses.
(d) Discuss with the external auditor, the appropriate responsibilities, budget and staffing of the Company's internal audit function, as well as any limitation on the internal audit that the external auditor is aware of.
7. Procedure for Reporting Accounting and Auditing Concerns.
8. Disclosures Regarding Controls.
9. Outside Advisors.
10. Other Duties and Responsibilities.
(a) Review and reassess at least annually the adequacy of this Charter and recommend any proposed changes to the Board for its review and approval.
(b) Prepare the report required by the rules of SEC to be included in the Company's annual proxy statement regarding the activities of the Audit Committee and shall submit all required certifications to the appropriate exchanges.
(c) Perform an annual performance evaluation of the Audit Committee.
(d) Reports its activities to the Board of Directors at each Board meeting
(e) Perform such other duties as delegated to it from time to time by the Board of Directors.
11. Finance Oversight.
(a) Shall conduct reviews jointly with management prior to making recommendations regarding:
(ii) Sales or repurchases of equity and long-term debt.
(iii) The financing of major capital expenditure programs.
(iv) The financing of acquisitions, divestitures, joint ventures, partnerships or other combinations of business interests.
(v) Annual financial performance objectives as developed by management.
(vi) Dividend policy and declarations.
(vii) The use of any derivative related instruments, including its use to manage currency and interest exposure.
(viii) Foreign currency positions.
(ii) Receive and review written semi-annual investment performance reports.
(iii) Review annually management's reports regarding the effectiveness of trustees and performance of investment managers relative to established benchmarks.
(iv) Report investment results to the Board of Directors annually and, as conditions may require, report on the result of any specific inquiries and analysis.
(v) As to the 401(k) plans, review (a) the criteria for selecting funds to be offered to participants and (b) the performance and related risks of each fund.