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Tenneco Inc. recognizes that sound principles of corporate governance and the
integrity of the company's financial statements and financial reporting
processes are essential to obtaining and retaining the trust and respect of
investors and other persons and groups interested in the company and its
activities, including employees, customers, suppliers, communities in which it
does business, government officials and the public generally.
The Board of Directors has approved the following Charter of the Audit
Committee that, together with the company's Corporate Governance Principles, is
intended to provide a framework for the governance of the company with respect
to the company's financial statements, financial reporting processes, systems
of internal controls and compliance with legal and regulatory requirements.
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| I. |
Audit Committee Designation
There is a committee of the Board of Directors of Tenneco Inc. called the Audit
Committee.
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| II. |
Audit Committee Purpose
The Audit Committee is directly responsible for the appointment, compensation,
retention and oversight of the work of the company's independent auditors. The
purpose of the Audit Committee is to:
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assist the Board of Directors in
fulfilling its oversight of (a) the integrity of the company's financial
statements and financial reporting processes and systems of internal controls
regarding finance, accounting, information systems security, environmental
compliance and legal compliance, (b) the company's compliance with legal and
regulatory requirements, and (c) the independence, qualifications and
performance of the company's independent auditors and internal auditing
function;
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provide an avenue of
communication among the independent auditors, management, the internal auditors
and the Board of Directors; and |
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prepare the audit-related report
required by the Securities and Exchange Commission (SEC) to be included in the
company's annual proxy statement. |
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The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its responsibilities, and it has direct access to the independent
auditors as well as any officer or other employee of the company or its
subsidiaries. The Audit Committee has the ability to retain, at the company's
expense, special legal, accounting or other consultants or experts it deems
necessary in the performance of its duties.
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| III. |
Audit Committee Composition and Meetings
The Audit Committee is comprised of three or more directors, as determined by
the Board of Directors. The Board of Directors appoints the members of the
Audit Committee annually, considering the recommendation of the
Compensation/Nominating/Governance Committee, and further considering the views
of the Chairman of the Board of Directors and the Chief Executive Officer, as
appropriate. The members of the Audit Committee serve until their successors
are appointed and qualify. The Board of Directors has the power at any time to
change the membership of the Audit Committee and to fill vacancies in it,
subject to the new member(s) satisfying the independence, experience and
financial expertise requirements described in this Charter.
Each member of the Audit Committee must be "independent" for purposes of
Section 10A of the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder. Each member of Audit Committee must be an independent
director as determined under the applicable rules of the New York Stock
Exchange, and must also satisfy the additional New York Stock Exchange
independence requirement for members of audit committees, in each case no later
than the end of any applicable grace or "phase-in" period adopted by the New
York Stock Exchange with respect to those rules.
All members of the Audit Committee are required to have a basic understanding
of finance and accounting and be able to read and understand fundamental
financial statements. Unless otherwise determined by the Board of Directors to
be appropriate under the circumstances, at least one member of the Audit
Committee is required to be a "financial expert," and at least one member of
the Audit Committee is required to have "financial expertise," as determined
for purposes of the rules of the SEC and New York Stock Exchange, respectively.
If an Audit Committee Chair is not designated by the Board of Directors or
present, the members of the Audit Committee may designate a Chair by majority
vote of the Audit Committee membership.
The Audit Committee holds regular meetings, at least quarterly and additionally
as often as the committee deems appropriate. The Audit Committee Chair approves
an agenda in advance of each meeting. The Audit Committee should meet privately
in executive session as often as it deems necessary, but at least annually,
with management, the Internal Audit Director, the independent auditors and as a
committee to discuss any matters that the Audit Committee or any of these
groups believe should be discussed.
Except as expressly provided in this Charter, the by-laws of the company or any
Corporate Governance Principles of the company, or as otherwise provided by law
or the rules of the New York Stock Exchange, the Audit Committee may fix its
own rules of procedure.
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| IV. |
Audit Committee Responsibilities and Authority
The Audit Committee has the sole authority to appoint or replace the
independent auditors, and must approve in advance all audit engagement fees and terms. The
Audit Committee also must approve in advance all non-audit engagements by the Company with
the independent auditors, except as otherwise permitted by applicable law. The
Audit Committee may consult with management but may not delegate these
responsibilities, except that pre-approvals of non-audit services may be
delegated to the extent permitted by applicable law. In its capacity as a
committee of the Board, the Audit Committee is directly responsible for the
oversight of the work of the independent auditors (including resolution of
disagreements between management and the independent auditors regarding
financial reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company, and the
independent auditors report directly to the Audit Committee.
In performing its functions, the Audit Committee undertakes those tasks and
responsibilities that, in its judgment, would most effectively contribute to
and implement the purposes of the Audit Committee. The following functions are
some of the common recurring activities of the Audit Committee in carrying out
its duties:
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Review Procedures |
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The Audit Committee reviews and
discusses with management and the independent auditors the company's annual
audited financial statements and quarterly financial statements prior to filing
or distribution, including the company's disclosures under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other matters required to be reviewed under applicable legal, regulatory or New
York Stock Exchange requirements and, as appropriate, recommends to the Board
of Directors whether the audited financial statements should be included in the
company's Form 10-K. The Audit Committee's review should include discussion
with management and the independent auditors of significant issues regarding
accounting principles, practices and judgments, including any items required to
be communicated by the independent auditors in accordance with Statement on
Auditing Standards No. 61. |
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The Audit Committee discusses
with management and, as appropriate, the independent auditors earnings press
releases (paying particular attention to any use of "pro forma" or "adjusted"
non-GAAP information) and financial information and earnings guidance provided
to analysts and ratings agencies. |
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In consultation with the
management, the independent auditors and the internal auditors, the Audit
Committee considers the integrity of the company's financial reporting
processes and controls. |
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4. |
The Audit Committee reviews
disclosures made by the company's principal executive officer or officers and
principal financial officer or officers regarding compliance with their
certification obligations as required under the Sarbanes-Oxley Act of 2002 and
the rules promulgated thereunder, including the company's disclosure controls
and procedures and internal controls for financial reporting and evaluations
thereof. |
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The Audit Committee reviews any
reports of the independent auditors mandated pursuant to Section 10A of the
Securities Exchange Act of 1934, as amended, and the rules thereunder, and
obtains from the independent auditors any information with respect to illegal
acts in accordance with Section 10A and the rules thereunder. |
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6. |
The Audit Committee reviews and
discusses with management and the independent auditors, as applicable:
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major issues regarding accounting principles
and financial statement presentations, including any significant changes in the
company's selection or application of accounting principles, and major issues
as to the adequacy of the company's internal controls and any special audit
steps adopted in light of material control deficiencies; |
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analyses prepared by management or the
independent auditors that set forth significant financial reporting issues and
judgments made in connection with the preparation of the financial statements,
including analyses of the effects of alternative GAAP methods on the financial
statements; |
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any management letter provided by the
independent auditors and the company's response to that letter; |
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any problems, difficulties or differences
encountered in the course of the audit work, including any disagreements with
management or restrictions on the scope of the independent auditors' activities
or on access to requested information and management's response thereto;
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liquidity, off-balance sheet structures and
debt covenants; and
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the effect of significant regulatory and
accounting initiatives on the financial statements of the company. |
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The Audit Committee discusses
with management the company's major financial risk exposures and the steps
management has taken to monitor and control those exposures, including the
company's risk assessment and risk management policies. |
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Independent Auditors |
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The independent auditors are
ultimately accountable to the Audit Committee. The Audit Committee reviews the
independence, qualifications and performance of the auditors at least annually,
including a review and evaluation of the lead partner of the independent
auditors and taking into account the opinions of management and the company's
internal auditors. At least annually, the Audit Committee appoints the
company's independent auditors for the ensuing fiscal year, and will report to
the Board of Directors regarding its determinations about the appointment or
removal of any independent auditors. |
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The Audit Committee obtains and
reviews a report from the independent auditors at least annually regarding: |
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the independent auditors' internal
quality-control procedures; |
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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;
and |
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any steps taken to deal with any such issues |
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On an annual basis, the Audit
Committee requires the independent auditors to submit a formal written
statement delineating all relationships between the auditors and the company or
its subsidiaries or affiliates, and reviews and discusses all significant
relationships that could impair the auditors' independence. It is the
responsibility of the Audit Committee to take appropriate action in response to
the independent auditors' report to satisfy itself of the auditors'
independence. |
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At least annually, the Audit
Committee reviews the independent auditors' audit plan with respect to the
ensuing fiscal year, and discusses with them, as determined appropriate, the
plan's scope, staffing, locations, reliance upon management and internal audit
and general audit approach. |
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It is the responsibility of the
Audit Committee to ensure that the representatives of the independent auditors
who perform work for the company are rotated as required by the Sarbanes-Oxley
Act of 2002 and other applicable law, and to further consider rotation of the
independent auditor firm itself. |
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The Audit Committee discusses
with the independent auditors any communications between the audit team and the
audit firm's national office regarding any material auditing or material
accounting issues presented by the independent auditors' engagement by the
company. |
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The Audit Committee discusses
with management and the independent auditors any accounting adjustments that
were noted or proposed by the independent auditors but were not recorded by
management (because they were deemed to be immaterial or otherwise were
"passed"). |
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Internal Audit |
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It is the responsibility of the
Audit Committee to ensure that the company maintains an internal audit
function. |
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At least annually, the Audit
Committee reviews the company's internal audit plan, activities, organizational
structure and staffing. The Audit Committee reviews any significant changes to
the company's internal audit plan. |
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The Audit Committee reviews
significant reports prepared by the internal audit department, together with
management's response and follow-up to these reports. |
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At least annually, the Audit
Committee discusses with the independent auditors the company's internal
auditors and their audit plan, responsibilities, budget and staffing. |
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Environmental and Legal Compliance |
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At least annually, the Audit
Committee reviews with the company's General Counsel: |
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any environmental or legal matters that could
have a significant impact on the company's financial statements; |
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compliance by the company and its
subsidiaries with applicable laws and regulations; and
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any inquiries received from regulators or
governmental agencies by the company or its subsidiaries. |
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Other Audit Committee
Responsibilities |
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It is the responsibility of the
Audit Committee to annually prepare a report to stockholders as required by the
rules of the SEC. The report is included in the company's annual proxy
statement. |
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It is the responsibility of the
Audit Committee to review and reassess the adequacy of this Charter at least
annually and to recommend any proposed changes to the Board of Directors for
approval. It is the responsibility of the Audit Committee to cause the Charter
to be published in accordance with applicable SEC and New York Stock Exchange
regulations. |
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22. |
The Audit Committee monitors
compliance with the company's Statement of Business Principles. |
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23. |
As may be set forth from time to
time in the company's Statement of Business Principles (or other code of
business conduct and ethics adopted by the company), the Audit Committee may be
responsible for reviewing waivers of the Statement of Business Principles (or
other code of business conduct and ethics) for directors and executive
officers subject to approval of any such waivers by the full Board. |
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Pursuant to applicable SEC rules,
it is the responsibility of the Audit Committee to establish procedures for: |
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the receipt, retention and treatment of
complaints received by the company and its subsidiaries regarding accounting,
internal accounting controls or auditing matters; and |
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the confidential, anonymous submission by
employees of the company and its subsidiaries of concerns regarding
questionable accounting or auditing matters. |
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25. |
The Audit Committee shall from
time to time establish policies for the company's hiring of employees or former
employees of the independent auditors who were engaged on the company's account
(recognizing that the hiring by the Company of certain representatives of the
independent auditors could jeopardize the auditors' independence or otherwise
be prohibited). |
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It is the responsibility of the
Audit Committee to maintain minutes of its meetings and report, through its
Chair, to the Board of Directors on significant results of each meeting. |
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It is the responsibility of the
Audit Committee to engage in a self-assessment of its performance at least
annually. |
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| V. |
Funding
The Audit Committee shall be given the resources and assistance necessary,
including adequate funding, as determined by the Audit Committee, for payment
of the compensation of any registered public accounting firm engaged for the
purpose of preparing or issuing an audit report or performing other audit,
review or attest services for the company or any advisors employed by the Audit
Committee, as well as for payment of ordinary administrative expenses of the
Audit Committee that are necessary or appropriate in carrying out its duties.
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| VI. |
Limitations on Audit Committee Responsibilities
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to prepare financial
statements, 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.
These are the responsibilities of management and the independent auditors. In
carrying out its oversight responsibilities, the Audit Committee is not
providing any expert, professional or special assurance as to the company's
financial statements or any professional certification. Audit Committee members
are not deemed to have accepted a duty of care greater than the duty of other
directors. Nothing contained in this Charter is intended to alter the operation
of the "business judgment rule" as interpreted under Delaware law.
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