LANDAUER, INC.
2 SCIENCE ROAD, GLENWOOD, ILLINOIS 60425-1586
TELEPHONE (708) 755-7000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the annual meeting of stockholders of
Landauer, Inc. will be held at the office of Sidley Austin Brown & Wood
LLP, 55th Floor Conference Center, Bank One Plaza, 10 South Dearborn
Street, Chicago, Illinois, at 4:00 p.m., local time, on Wednesday,
February 4, 2004 for the following purposes:
1. To elect three directors to hold office for a term of three
years each.
2. To vote on the proposal to approve the selection of
PricewaterhouseCoopers LLP as the auditors of the Company for
the fiscal year ending September 30, 2004.
3. To transact such other business as may properly come before
the meeting.
Only stockholders of record at the close of business on December 19,
2003 are entitled to notice of and to vote at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. THEREFORE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE YOUR
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU ATTEND THE MEETING AND VOTE IN PERSON,
YOUR PROXY WILL NOT BE USED.
James M. O'Connell
Vice President, Treasurer, Secretary
and Chief Financial Officer
January 2, 2004
1
PROXY STATEMENT
Approximate Date of Mailing: JANUARY 2, 2004
INFORMATION CONCERNING THE PROXY SOLICITATION
The enclosed proxy is solicited by the Board of Directors of
Landauer, for use at its annual meeting of stockholders to be held on
Wednesday, February 4, 2004 at 4:00 p.m., local time, at the office of
Sidley Austin Brown & Wood LLP, 55th Floor Conference Center, Bank One
Plaza, 10 South Dearborn Street, Chicago, Illinois, or any adjournments or
postponements thereof. You may revoke your proxy at any time prior to it
being voted by giving written notice to the Secretary of Landauer, by
submission of a later dated proxy or by voting in person at the meeting.
The costs of solicitation, including the preparation, assembly and mailing
of proxy statements, notices and proxies, will be paid by Landauer.
Solicitations will be made by mail and, in addition, may be made by the
officers and employees of Landauer personally or by telephone or telegram.
Forms of proxies and proxy material may also be distributed, at the
Company's expense, through brokers, custodians and others to the beneficial
owners of Common Stock. The mailing address of Landauer's principal
executive office is 2 Science Road, Glenwood, Illinois 60425.
On December 19, 2003, Landauer had outstanding 8,845,045 shares of
Common Stock, which is its only class of voting stock, held of record by
approximately 600 holders. Only stockholders of record at the close of
business on December 19, 2003 will be entitled to receive notice of and to
vote at the meeting. With respect to all matters that will come before the
meeting, each stockholder may cast one vote for each share registered in
his name on the record date. A stockholder may, with regard to the
election of directors (i) vote for the election of all named director
nominees, (ii) withhold authority to vote for all named director nominees
or (iii) vote for the election of all named director nominees other than
any nominee with respect to whom the stockholder withholds authority to
vote by so indicating in the appropriate space on the proxy. A stockholder
may, with respect to the proposal to approve the selection of
PricewaterhouseCoopers LLP as auditors (i) vote FOR such proposal, (ii)
vote AGAINST such proposal or (iii) ABSTAIN from voting on such proposal.
The shares represented by every proxy received will be voted, and
where a choice has been specified, the shares will be voted in accordance
with the specification so made. If no choice has been specified on the
proxy, the shares will be voted FOR the election of the nominees as
directors, and FOR approval of PricewaterhouseCoopers LLP as auditors. The
proxy also gives authority to the proxies to vote the shares in their
discretion on any other matter presented at the meeting. If a proxy
indicates that all or a portion of the shares represented by such proxy are
not being voted with respect to a particular proposal, such non-voted
shares will not be considered present and entitled to vote on such
proposal, although such shares may be considered present and entitled to
vote on other proposals and will count for the purpose of determining the
presence of a quorum. An abstention with respect to a proposal has the
effect of a vote against a proposal.
2
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table provides information as of December 19, 2003
concerning beneficial ownership of Common Stock by each person known by
Landauer to own beneficially more than 5% of the outstanding shares of
Common Stock, each director, each director nominee, each executive officer
named under the caption "Executive Compensation" and all directors and
executive officers as a group. Unless otherwise noted, the listed persons
have sole voting and dispositive powers with respect to shares held in
their names, subject to community property laws, if applicable.
Number
Beneficially Percent
Name of Beneficial Owner Owned of Class
- ------------------------ ------------ --------
T. Rowe Price Associates. . . . . . . 867,700(1) 9.6%
Kayne Anderson Investment
Management, LLC . . . . . . . . . . 436,134(2) 4.8%
Robert J. Cronin. . . . . . . . . . . 7,500(3) *
Dr. E. Gail de Planque. . . . . . . . 1,450(4) *
Dr. Gary D. Eppen . . . . . . . . . . 5,900(5) *
M. Christine Jacobs . . . . . . . . . 1,000(4) *
Richard R. Risk . . . . . . . . . . . 6,400(3) *
Michael D. Winfield . . . . . . . . . 5,099(3) *
Robert M. Greaney . . . . . . . . . . 20,812(6) *
Brent A. Latta. . . . . . . . . . . . 81,287(7) *
James M. O'Connell. . . . . . . . . . 39,329(8) *
Dr. R. Craig Yoder. . . . . . . . . . 60,602(9) *
Joseph M. Zlotnicki . . . . . . . . . 23,012(10) *
All directors and executive officers
as a group (11 persons) . . . . . . 252,391(11) 2.8%
- --------------------
* Less than one percent.
(1) As reported in a statement on Schedule 13G filed with the
Securities and Exchange Commission on February 3, 2003.
Includes 556,600 shares owned by the T. Rowe Price Small Cap
Value Fund, Inc. T. Rowe Price Associates expressly disclaims
that it is the beneficial owner of such securities. The
address of this stockholder is 100 East Pratt Street,
Baltimore, MD 21201.
(2) As reported in a statement on Schedule 13G filed with the
Securities and Exchange Commission on February 7, 2003. The
address of the stockholder is 1800 Avenue of the Stars, Los
Angeles, CA 90067.
(3) Includes 4,500 shares subject to options exercisable within
60 days after December 19, 2003.
(4) Includes 1,000 shares subject to options exercisable within
60 days after December 19, 2003.
(5) Includes 1,500 shares subject to options exercisable within
60 days after December 19, 2003.
(6) Includes 5,250 shares subject to options exercisable within
60 days after December 19, 2003.
(7) Includes 62,500 shares subject to options exercisable within
60 days after December 19, 2003.
(8) Includes 21,875 shares subject to options exercisable within
60 days after December 19, 2003.
3
(9) Includes 42,000 shares subject to options exercisable within
60 days after December 19, 2003.
(10) Mr. Zlotnicki resigned as an executive officer effective
December 31, 2003. Shares beneficially owned include 21,500
subject to options exercisable within 60 days after December
19, 2003.
(11) Includes 170,125 shares subject to options exercisable within
60 days after December 19, 2003.
4
ELECTION OF DIRECTORS
Members of Landauer's Board of Directors are divided into three
classes serving staggered three-year terms for a total of nine directors.
Thomas M. Fulton and Paul B. Rosenberg retired from the Board of Directors
during 2003. The terms of three of the seven current directors expire at
the annual meeting. E. Gail de Planque, Gary D. Eppen, and Michael D.
Winfield are Landauer's nominees for re-election to a three-year term. The
vacancies created by the retirement of Messrs. Fulton and Rosenberg may be
filled by the Board of Directors at a later date. Our by-laws provide that
nominations for directorships by stockholders may be made only pursuant to
written notice received at our principal office not less than 50 nor more
than 75 days prior to the meeting. No such nominations were received for
the meeting. Proxies may not be voted for a greater number of persons than
the three named nominees. Directors are elected by a plurality of the
votes present in person or represented by proxy at the meeting and entitled
to vote on the election of directors. Thus, assuming a quorum is present,
the three persons receiving the greatest number of votes will be elected to
serve as directors. Accordingly, withholding authority to vote for a
director and non-votes with respect to the election of directors will not
affect the outcome of the election of directors. If a nominee should
become unavailable for election, the persons voting the accompanying proxy
may in their discretion vote for a substitute.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF THE NAMED
NOMINEES AS DIRECTORS OF LANDAUER.
The following table contains certain information as to the three
nominees for election at the annual meeting and each other person whose
term of office as a director will continue after the meeting. The nominees
for election at the meeting are indicated by an asterisk.
Expira-
tion
Date of
Current Past Business Experience Director
Name Term and Other Directorships Since
- ---- ------- ------------------------ --------
Robert J.
Cronin
(1,2)
Age - 59 2005 Since 2001, partner, The Open 1997
Approach LLC, a provider of
consulting services to the
printing industry. Until
January 2000, Chairman of the
Board and Chief Executive
Officer of Wallace Computer
Services; previously President,
Chief Executive Officer and
director; now retired. Mr. Cronin
joined Wallace Computer Services
in 1967. Wallace Computer
Services is a provider of information
management products, services and
solutions. Mr. Cronin is also a
director of various privately held
corporations.
5
Expira-
tion
Date of
Current Past Business Experience Director
Name Term and Other Directorships Since
- ---- ------- ------------------------ --------
* Dr. E. Gail
de Planque
(3,4)
Age - 58 2004 Since 2000, President, Strategy 2001
Matters, Inc., and, since 1998,
Director, Energy Strategists
Consultancy, Ltd., each providing
consulting services to the energy
and nuclear industries. From 1991
to 1995, Dr. de Planque was a
Commissioner with the U.S. Nuclear
Regulatory Commission. In 1967,
she joined the Health and Safety
Laboratory of the U.S. Atomic Energy
Commission (now the Environmental
Measurements Laboratory) where she
served as Director from 1987 to 1991
and as Deputy Director from 1982 to
1987. Dr. de Planque is a Director
of Northeast Utilities, British
Nuclear Fuels, Inc., and British
Nuclear Fuels, plc. She is a member
of the TXU Operations Review Committee
and a consultant to the United
Nations International Atomic Energy
Agency.
* Dr. Gary D.
Eppen
(3,4)
Age - 67 2004 Ralph and Dorothy Keller Distin- 1992
guished Service Professor Emeritus
of Operations Management, Graduate
School of Business, The University
of Chicago. From July 1998 to June
2001 Dr. Eppen was Deputy Dean of
Part-time Programs and Professor of
Industrial Administration. From
1970 to 1998 he was Professor of
Industrial Administration. Dr. Eppen
is also a director of The Hub Group
Inc., Lombard, Illinois, an intermodal
transportation marketing company.
M. Christine
Jacobs
(1,2)
Age - 53 2006 Since 1998 Chairman of the Board
2001
and since 1993 President and
Chief Executive Officer of
Theragenics Corporation, a
manufacturer of implantable
radiation devices for the
treatment of cancer. Ms. Jacobs
is a director of McKesson, Inc.,
a healthcare services company.
6
Expira-
tion
Date of
Current Past Business Experience Director
Name Term and Other Directorships Since
- ---- ------- ------------------------ --------
Brent A.
Latta
Age - 60 2005 President and Chief Executive 1998
Officer of Landauer since
December 1998. Mr. Latta
joined Landauer in 1987 as
Vice President - Marketing
and served in such capacity
until 1997 when he was elected
Executive Vice President.
Richard R.
Risk
(1,2)
Age - 57 2005 President and Chief Executive 1997
Officer of Advocate Health Care
until April 2002 now retired.
Previously Mr. Risk served as
President and CEO of EHS Health
Care (merged with Advocate
Health Care). Advocate Health
Care specializes in health care
management.
* Michael D.
Winfield
(3,4)
Age - 64 2004 Director of UOP LLC until January 1994
2003, a general partnership of
Honeywell International, Inc. and
Dow Chemical Company, engaged in
the licensing of technologies to
the oil refining and petrochemical
industries. Mr. Winfield was
President and Chief Executive
Officer of UOP from February 1992
to January 2001, and a Vice President
from 1983 to 1992. He is also a
director of Metallurg, Inc., a
leading supplier of additives to
the metals industry.
Member of the (1) Audit Committee, (2) Compensation Committee, (3)
Governance and Nominating Committee, (4) Technology Committee.
7
BOARD OF DIRECTORS AND COMMITTEES
During fiscal 2003, the Board of Directors held a total of six
meetings. No director attended fewer than 75 percent of the aggregate of
the total number of meetings of the Board of Directors and the total number
of meetings held by all Committees of the Board on which such director
served.
The Board of Directors has an Audit Committee, Compensation
Committee, Governance and Nominating Committee and Technology Committee.
Each Committee has adopted a formal written charter, approved by the full
Board of Directors that specifies the scope of the Committee's
responsibilities and procedures for carrying out such responsibilities. A
copy of the Audit Committee's charter is attached to this Proxy Statement
as Exhibit A. A copy of each charter is available on the Company's website
at http://www.landauerinc.com. The Audit Committee assists the Board of
Directors in fulfilling its oversight responsibilities with respect to
financial reports and other financial information and recommends the
appointment of independent public accountants to the Board of Directors.
The Compensation Committee approves all executive compensation and has
responsibility for granting stock options to eligible members of management
and administering our stock option and incentive plans. The Governance and
Nominating Committee establishes corporate governance policy and selects
nominees for the Board of Directors. (See "Process for Nominating
Directors.") The Technology Committee provides oversight and counsel with
respect to the Company's development and use of appropriate technologies in
its products and services. The membership of each Committee consists
solely of non-employee directors. Where required, each Committee member
meets the independence standards established by the New York Stock
Exchange. During fiscal 2003, the Audit Committee met eleven times
including the meetings required to conduct its quarterly financial reviews,
the Compensation Committee met four times, the Governance and Nominating
Committee met four times, and the Technology Committee met three times.
8
PROCESS FOR NOMINATING DIRECTORS
Landauer's Governance and Nominating Committee establishes and
oversees adherence to the Board's corporate governance policies and
guidelines and establishes policies and procedures for the recruitment and
retention of Board members. The Governance and Nominating Committee is
comprised of three members, each of whom meets the independence
requirements established by the New York Stock Exchange in respect of
Governance and Nominating Committees.
The Governance and Nominating Committee has adopted a formal written
Charter that has been approved by the Board of Directors of the Company.
The Charter specifies the scope of the Committee's responsibilities and
procedures for carrying out such responsibilities. A copy of such Charter
is available on the Company's website. The website address is
http://www.landauerinc.com.
The Governance and Nominating Committee will consider nominees for
the Board of Directors that have been properly and timely recommended by
stockholders. Section 1.4 of the Company's by-laws contains provisions
setting forth the requirements applicable to a stockholder nomination for
director. These requirements are summarized in this Proxy Statement under
the caption "Stockholder Proposals." The Governance and Nominating
Committee has not established any specific, minimum qualification standards
for nominees to the Board. From time to time, the Governance and
Nominating Committee may identify certain skills or attributes (e.g.
healthcare industry experience, technology experience, financial
experience) as being particularly desirable for specific director nominees.
To date, the Governance and Nominating Committee has identified and
evaluated nominees for directors based on several factors, including
referrals from management, existing directors, advisors and representatives
of the Company or other third parties, business and board of director
experience, professional reputation and personal interviews. Each of the
current nominees for director listed under the caption "Election of
Directors" is an existing director standing for re-election. Landauer has
not paid any fee to a third party to identify or evaluate, or assist in
identifying or evaluating, potential nominees. In connection with the 2004
Annual Meeting, the Governance and Nominating Committee did not receive any
recommendation for a nominee from any stockholder or group of stockholders
owning more than 5% of the Company's Common Stock.
9
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
The Company's Annual Meeting of Stockholders provides an opportunity
each year for stockholders to ask questions of or otherwise communicate
directly with members of the Company's Board of Directors on matters
relevant to the Company. Each of the Company's directors is requested to
attend in person the Annual Meeting. All of the Company's directors
attended the Company's 2003 Annual Meeting of Shareholders. In addition,
stockholders may, at any time, communicate in writing with the Chairman of
the Governance and Nominating Committee, or non-management directors as a
group, by sending such written communication to the following address:
Chairman, Governance and Nominating Committee, or Non-Management Directors
of Landauer, Inc., c/o Landauer, Inc., 2 Science Road, Glenwood, Illinois
60425; Attention: Corporate Secretary (fax 708-755-7011). Copies of
written communications received at such address will be provided to the
Chairman of the Governance and Nominating Committee or the non-management
directors as a group unless such communications are considered, in the
reasonable judgment of the Corporate Secretary, to be improper for
submission to the intended recipient(s). Examples of stockholder
communications that would be considered improper for submission include,
without limitation, customer complaints, solicitations, communications that
do not relate directly or indirectly to the Company or the Company's
business or communications that relate to improper or irrelevant topics.
COMPENSATION OF DIRECTORS
During fiscal 2003 directors (except Mr. Latta) were paid an annual
retainer in the amount of $24,000 each. Additionally, the Board and
Committee chairs were each paid an annual retainer in the amount of $4,000,
and Committee members were paid a fee in the amount of $1,000 per meeting
attended. Landauer maintains a stock option plan for its non-employee
directors, pursuant to which each eligible director elected or appointed
prior to 2002 was granted an option to purchase 5,000 shares of Common
Stock at the fair market value on the date of grant, which option vests
ratably over 10 years. The plan, as amended and approved by stockholders
at the 2002 annual meeting, provides for the automatic grant of options to
each non-employee director on the date of each annual meeting, commencing
with the 2002 annual meeting, to purchase 1,500 shares of Common Stock at
the fair market value on the date of grant, which options vest ratably over
three years. Landauer formerly maintained a directors' retirement plan
that provides certain retirement benefits for non-employee directors. This
plan was terminated in January 1997. Benefits accrued under the retirement
plan are frozen and will be payable to directors upon their retirement at
age 70. As of September 30, 2003, the aggregate liability for these
benefits amounted to $315,000, which has been accrued in the financial
statements.
10
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the compensation
for services to Landauer for the last three fiscal years of the President
and Chief Executive Officer and the four other most highly compensated
executive officers (the "Named Executive Officers".)
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation
Compensation Awards
------------------- ------------ All
Securities Other
Underlying Compen-
Name and Fiscal Options sation
Principal Position Year Salary($) Bonus($) (#) (1) ($)(2)
- ------------------- ------ --------- -------- ---------- -------
Brent A. Latta
President & 2003 $306,250 $ -- 50,000 $1,150
Chief Executive 2002 291,250 191,700 -- 1,150
Officer 2001 276,250 192,500 -- 1,150
James M. O'Connell
Vice President,
Treasurer, Secre- 2003 $191,750 $ -- 7,000 $1,150
tary & Chief 2002 180,250 94,600 -- 1,150
Financial Officer 2001 173,250 96,300 -- 1,150
R. Craig Yoder
Senior Vice
President - 2003 $207,500 $ -- 8,000 $1,150
Marketing & 2002 197,500 104,000 -- 1,150
Technology 2001 185,500 110,000 -- 1,150
Joseph M. Zlotnicki
(3) 2003 $138,250 $ -- 6,000 $1,150
Vice President - 2002 131,000 66,200 10,000 1,150
International 2001 122,500 68,800 -- 1,150
Robert M. Greaney
(4) 2003 $152,500 $ -- 6,000 $1,150
Vice President - 2002 146,500 77,000 -- 1,150
Operations 2001 139,000 78,100 -- 1,150
- --------------------
(1) There were no restricted stock awards or long-term incentive payouts
for any of the executive officers for the last three fiscal years.
(2) Represents the Company's contribution to its 401(K) plan on behalf
of each of these employees.
(3) Mr. Zlotnicki resigned as an executive officer of the Company
effective December 31, 2003.
(4) Mr. Greaney was elected as Vice President on February 3, 2001.
11
OPTIONS GRANTS IN LAST FISCAL YEAR
Information regarding stock options granted during the last fiscal
year to Landauer's named Executive Officers is shown below:
Potential Realizable
No. of % of Value at Assumed
Shares Total Annual Rates of
Under- Options Stock Price
lying Granted to Exercise Appreciation for
Options Employees Price Expir- Option Term (3)
Granted in Fiscal ($/share) ation ---------------------
Name (#)(1) Year (2) Date 5% 10%
- ---- ------- ---------- --------- ------ ---------- ----------
Brent A.
Latta 50,000 38.0% $34.50 (4) $1,085,000 $2,749,000
James M.
O'Connell 7,000 5.3% 34.50 (4) 151,900 384,860
R. Craig
Yoder 8,000 6.1% 34.50 (4) 173,600 439,840
Joseph M.
Zlotnicki 6,000 4.6% 34.50 (4) 130,200 329,880
Robert M.
Greaney 6,000 4.6% 34.50 (4) 130,200 329,880
- --------------------
(1) Each option becomes exercisable over a four-year period, with 25%
of the options becoming exercisable on the first, second, third,
and fourth anniversaries of the date of grant. Options become
fully exercisable by reason of death, disability or normal
retirement or pursuant to a change in control as defined in the
Plan.
(2) The exercise price is the fair market value on the date of grant.
(3) Potential realizable value is calculated based on an assumption
that the price of Landauer's Common Stock appreciates at the annual
rate shown, compounded annually, from the date of grant of the option
until the expiration date of the option. The value is net of the
exercise price but is not adjusted for the taxes that are due upon
exercise. The 5% and 10% assumed rates of appreciation are required
by the rules of the Securities and Exchange Commission and do not
represent Landauer's estimate of future price. Actual gains, if any,
upon the exercise of these options will depend on the actual
performance of the Common Stock.
(4) November 5, 2012.
12
AGGREGATED OPTION EXERCISES IN LAST YEAR
AND FISCAL YEAR-END OPTION VALUES
Information regarding the exercise of stock options during the last
fiscal year and the holdings of unexercised stock options at September 30,
2003 by Landauer's Named Executive Officers is shown below.
Number of Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options Held at Options at
Shares September 30, September 30,
Acquired 2003 (#) 2003 ($) (1)
on Value ----------------- -----------------
Exercise Realized Exer- Unexer- Exer- Unexer-
Name (#) ($) cisable cisable cisable cisable
- ---- -------- -------- ------- ------- ------- -------
Brent A.
Latta 7,835 $301,648 50,000 50,000 $449,600 $46,500
James M.
O'Connell 7,687 292,029 20,000 7,000 179,840 6,510
R. Craig
Yoder 2,050 84,194 40,000 8,000 459,060 7,440
Joseph M.
Zlotnicki 8,041 311,617 17,500 6,000 134,880 39,680
Robert M.
Greaney -- -- 3,750 6,000 33,720 5,580
- --------------------
(1) Aggregate market value on September 30, 2003 less aggregate
exercise price.
13
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of September 30, 2003
regarding the number of shares of Common Stock that may be issued under the
Company's equity compensation plans. All equity compensation plans have
been approved by the Company's stockholders.
(a) (b) (c)
----------------- ----------------- -----------------
Number of
securities
Number of remaining
securities available for
to be Weighted- future issuance
issued upon average exercise under equity
exercise of price of compensation
outstanding outstanding plans (excluding
options, options, securities
warrants warrants and reflected in
Plan category and rights rights column (a))
- ------------- ----------------- ----------------- -----------------
Equity compen-
sation plans
approved by
security holders 444,950 $28.05 308,999
Equity compen-
sation plans
not approved
by security
holders -- -- --
------- ------ -------
Total 444,950 $28.05 308,999
======= ====== =======
14
EXECUTIVE EMPLOYMENT AGREEMENTS AND RETIREMENT PLANS
EMPLOYMENT AND COMPENSATION AGREEMENTS. Landauer has entered into
employment agreements with each of the executive officers for their
employment in their respective capacities indefinitely. The agreements
provide that, in the event of termination of employment under certain
circumstances by Landauer other than for cause, death, disability or
voluntary termination, or by the executive for good reason (which includes
a good faith determination by the executive that he believes that he will
not be able to effectively discharge his duties or where Landauer fails to
obtain an assumption in writing of its obligations under the agreement by a
successor, as defined) the executive will become entitled to continuation
of base salary and average bonuses determined in accordance with the
agreement for a period ranging from twelve to eighteen months and certain
other benefits. The amounts otherwise payable to the executive will be
offset by any compensation earned by the executive from employment with a
new employer during such severance period but will not be reduced below an
amount equal to six month's base salary and average bonuses. The benefits
payable to Messrs. Latta and O'Connell, Dr. Yoder, and Mr. Greaney under
these agreements, if their employment had been terminated as of
September 30, 2003, would have had an estimated value of $650,000,
$390,000, $425,000 and $200,000, respectively. Mr. Zlotnicki resigned his
position as an executive officer effective December 31, 2003.
EXECUTIVE SPECIAL SEVERANCE PLAN. On May 22, 2002, Landauer adopted
the Landauer, Inc. Executive Special Severance Plan (the "Severance Plan")
in which certain of Landauer's executives, including Messrs. Latta and
O'Connell, Dr. Yoder and Mr. Greaney, participate. Under the Severance
Plan, if (i) the executive's employment is terminated involuntarily without
cause or is terminated by the executive for good reason (as defined in the
plan) within two years following a change in control, or (ii) the executive
elects to terminate employment for any reason during the 30-day period
immediately following the one-year anniversary of a change in control, the
executive will receive a lump sum payment equal to three times (in the case
of Mr. Latta) or two times (in the case of the other Named Executive
Officers) the sum of: (i) the highest annual rate of the executive's base
salary during the 12-month period immediately prior to his termination and
(ii) the greater of the executive's target annual bonus and the average
annual bonus received during the three fiscal years prior to termination.
In addition, the terminated executive will become fully vested in his
accrued benefit under the supplemental key executive retirement plan
(described below) and will receive a lump sum payment equal to the
actuarial equivalent of his accrued benefit under that plan. The
terminated executive also will receive continued medical, dental and life
insurance coverage and outplacement services for up to three years (in the
case of Mr. Latta) or up to two years (in the case of the other Named
Executive Officers). The Severance Plan conditions receipt of the
foregoing severance payments and benefits upon the executive entering into
a noncompetition/nonsolicitation agreement and executing a general release
of claims against Landauer and its affiliates.
Additionally, the Severance Plan provides that, immediately upon a
change in control, all of the executive's outstanding stock options and
other equity awards become exercisable, or vested, in full, and any
outstanding stock options will remain exercisable until the earlier of the
first anniversary of the executive's termination of employment and the
original expiration date of the option.
The Severance Plan also provides that if any payment made under the
Severance Plan or otherwise to a covered executive would be subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code,
Landauer will make an additional payment to the executive such that the
executive receives a net amount equal to the amount he would have received
if Section 4999 did not apply; provided, however, if the net-after tax
benefit to the executive would not exceed by at least 10% the net after-tax
proceeds without such additional payment and with a reduction of the
benefits to an amount such that no excise tax is payable, Landauer will not
make the additional payment and the executive's benefits will be reduced to
such amount.
15
For purposes of the Severance Plan, a "change in control" generally
means (i) certain acquisitions of 30% or more of the then outstanding
shares of Common Stock, (ii) a change in the Board of Directors resulting
in the incumbent directors ceasing to constitute at least a majority of the
Board of Directors, (iii) the consummation of a reorganization, merger or
consolidation or sale or disposition of all or substantially all of the
assets of Landauer (unless, among other conditions, Landauer's stockholders
receive more than 60% of the stock of the resulting company) or (iv) the
consummation of a liquidation or dissolution of Landauer.
RETIREMENT PLAN AND SUPPLEMENTAL RETIREMENT PLAN. Messrs. Latta and
O'Connell, Dr. Yoder, and Messrs. Zlotnicki and Greaney participate in
Landauer's retirement plan, a defined benefit plan under which benefits are
based upon the average of the annual rates of compensation in effect as of
October 1 of each year for the period of five consecutive years which
produces the highest such average and also based on years of service as set
forth below. U.S. tax law places limitations on the annual compensation
eligible for benefit consideration and on the aggregate annual amount
payable to an individual under qualified retirement plans.
Messrs. Latta and O'Connell, Dr. Yoder, and Messrs. Zlotnicki and
Greaney also participate in Landauer's supplemental key executive
retirement plan, under which a participant is entitled to such payments
during his life after retirement at age 65 as may be necessary, when added
to his benefits under other company-funded retirement or profit sharing
plans, to provide a minimum annual benefit equal to 50% of his highest
five-year average compensation (including incentive compensation) or final
year compensation (including five-year average incentive compensation),
whichever is greater. Such payments continue to a participant's spouse
after the participant's death, but at a decreased percentage of 25%.
Benefits are reduced by 2% (1% for surviving spouses) for each year of
service less than 25 years.
The following table sets forth information concerning the combined
annual benefits payable pursuant to the retirement plan on a straight-life
annuity basis and the supplemental retirement plan on a 50% joint-and-
survivor basis upon retirement at age 65 for specified compensation levels
(assuming continuation of 2003 fiscal year compensation, as defined) and
years of service classifications. Benefits under the retirement plan are
computed solely on the base salary of participants. Benefits under the
supplemental key executive retirement plan are inclusive of incentive
compensation. Benefits under the retirement plan that are reduced on
account of Social Security entitlement on the basis of the Internal Revenue
Service permitted disparity rules may be reinstated under the supplemental
retirement plan.
PENSION PLAN TABLE
Earnings
on Which
Combined Estimated Combined Annual Pension Based on
Retirement Years of Service Indicated
Benefits --------------------------------------------------
are Based 20 years 25 years 30 years 35 years 40 years
- ---------- -------- -------- -------- -------- --------
$200,000 $ 80,000 $100,000 $100,000 $100,000 $133,600
250,000 100,000 125,000 125,000 125,000 133,600
300,000 120,000 150,000 150,000 150,000 150,000
350,000 140,000 175,000 175,000 175,000 175,000
400,000 160,000 200,000 200,000 200,000 200,000
450,000 180,000 225,000 225,000 225,000 225,000
500,000 200,000 250,000 250,000 250,000 250,000
Credited years of service at September 30, 2003 were 16 for Mr.
Latta, 13 for Mr. O'Connell, 20 for Dr. Yoder, 13 for Mr. Zlotnicki and 27
for Mr. Greaney. Credited years of service at age 65 would be 21 for Mr.
Latta, 22 for Mr. O'Connell, 35 for Dr. Yoder and 42 for Mr. Greaney.
16
COMPENSATION COMMITTEE REPORT
Landauer's compensation program is designed to motivate and retain
employees by encouraging and rewarding performance. The program is
administered by the Compensation Committee of the Board of Directors (the
"Committee"), consisting of three independent outside directors who are not
employees of Landauer. The Committee regularly reviews and approves
generally all of Landauer's compensation and fringe benefit programs and
also reviews and determines the base salary and incentive compensation of
the Named Executive Officers, as well as stock option grants to all
employees. All compensation actions taken by the Committee are reported to
the full Board of Directors. The Committee also reviews and makes
recommendations to the Board on policies and programs for the development
of management personnel, as well as management structure and organization.
The Committee administers Landauer's Amended and Restated 1996 Equity Plan
(the "Equity Plan") and 2000 Incentive Compensation Plan for Executive
Officers (the "Executive Officer Plan"); each of which was approved by the
Committee, the Board of Directors and stockholders.
Landauer believes that stock options are an important incentive to
motivate executive officers and other key employees for improved long-term
performance of Landauer. Landauer considers stock ownership, options
currently held and options previously granted when granting options.
Landauer believes that the combination of salary, incentive
compensation and the award of stock options is the best tool for
compensating its executive officers and senior managers to promote uniform
excellence, long-term commitment and team performance. Management salaries
are determined as a result of individual performance, level of
responsibility and experience. Landauer reviews these salaries annually
and periodically measures them against compensation data obtained from
published compensation surveys and surveys that the Committee makes of peer
companies. The peer companies are generally of about the same size as
Landauer in terms of market capitalization and profitability and are in
technical or service, rather than consumer or distribution, fields.
Landauer believes that its competitors for executive talent are not
necessarily companies which engage in the same business as Landauer and,
therefore, the companies used for comparative compensation purposes
generally differ from the companies included in the testing laboratory peer
group shown under the heading "Performance Graph.".
The Executive Officer Plan covers executive officers who are elected
by the Board of Directors to such offices and establishes an incentive pool
which is related to aggregate executive officer base salary and performance
of Landauer relative to (i) budgeted operating income and (ii) achievement
of budgeted revenues. The target incentive compensation award, as a
percentage of individual executive officer base salary, is 50% for the
Chief Executive Officer and 40% for Vice Presidents. The actual size of
the incentive compensation pool available for award varies based upon
actual financial performance for operating income and revenue achievement.
OPERATING INCOME COMPONENT. At 100% actual-to-budget operating
income, the aggregate executive officer incentive compensation pool is
equal to 100% of the sum of the target awards for each executive officer.
From 100% to 120% actual-to-budget operating income, the aggregate
executive officer incentive compensation pool is prorated from 100% to 200%
of the sum of the target awards for each executive officer. At or above
120% actual-to-budget operating income, the aggregate executive officer
incentive compensation pool is equal to 200% of the sum of the target
awards for each executive officer. At or below 90% actual-to-budget
operating income, the pool available for incentive compensation is zero.
17
REVENUE ACHIEVEMENT COMPONENT. Revenue achievement, as measured by
percent actual-to-budget revenues, serves to modify the award based upon
operating income. At revenue achievement levels above 98% and below 102%
no adjustment is required. At 96% revenue achievement the aggregate amount
of the executive officer incentive compensation pool determined on the
basis of operating income is reduced by 20%. At 94% revenue achievement
the reduction is 40%. The sole increase in the aggregate amount of the
pool occurs where revenue achievement is above 102% at which level the
percent of target bonus to be paid is increased by 20 percentage points.
The amount of tentative incentive award for any executive officer is
determined by multiplying the executive's base salary by the actual
incentive award percentage. The actual incentive award percentage is the
target award percentage (50% or 40%) multiplied by the percentage of target
award determined by the operating income and revenue achievement
components. Two-thirds of the tentative incentive award is payable to the
executive officer based solely on these financial performance measures.
With respect to the balance remaining in the pool for the fiscal year, the
Compensation Committee will have the discretion to award any executive
officer an amount ranging from zero to one-third of the award such
executive officer would otherwise receive.
The aggregate amount of incentive compensation awards for any fiscal
year under the Executive Officer Plan and other incentive compensation
plans is limited to 6% of Landauer's operating income for such fiscal year.
Recognizing that extraordinary positive or negative non-operating events
can and do occur, the Committee may elect to make adjustments to the
incentive compensation calculations to reflect the impact of those events.
During fiscal 2003 the ratio of actual-to-budget operating income was below
90% and no such incentive compensation calculation adjustments were
considered. Accordingly, no incentive compensation was awarded to
executive officers.
The recommended base salary and incentive compensation award for the
Chief Executive Officer is determined each year by the Committee based upon
overall financial performance of Landauer and the performance of the Chief
Executive Officer relative to corporate objectives and other factors under
the terms of the Executive Officer Plan. Mr. Latta's base salary for
fiscal 2003 was $306,250. The increase in Mr. Latta's base salary related
to the level of responsibility and accountability of the Chief Executive
Officer, as well as external factors such as inflation and base salary
levels in comparable companies. In accordance with the terms of the
Executive Officer Plan no incentive compensation was awarded to Mr. Latta
because the ratio of actual-to-budget operating income was below 90%.
Although the Company did not achieve its financial targets either in terms
of operating income or revenues, Mr. Latta achieved substantially all of
the personal objectives established by the Board of Directors during fiscal
2003.
MEMBERS OF THE COMPENSATION COMMITTEE:
Richard R. Risk, Chairman
Robert J. Cronin
M. Christine Jacobs
18
PERFORMANCE GRAPH
The following graph reflects a comparison of the cumulative total
return (change in stock price plus reinvested dividends) assuming $100
invested in Landauer's Common Stock, in the New York Stock Exchange
("NYSE") Market Index and in an industry index represented by a group of
testing laboratories during the period from September 30, 1998 through
September 30, 2003. (On January 15, 2002, the listing of Landauer's Common
Stock was changed from the American Stock Exchange to the New York Stock
Exchange.) The comparisons in the following table are historical and are
not intended to forecast or be indicative of possible future performance of
Landauer's Common Stock.
Value of Investment at September 30,
------------------------------------
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Landauer, Inc. $100 $104 $ 82 $159 $162 $180
NYSE Market Index 100 119 137 114 94 116
Testing Laboratories 100 119 229 139 174 213
AUDIT COMMITTEE REPORT
Landauer's Audit Committee has reviewed and discussed with management
the Company's audited financial statements as of and for the fiscal year
ended September 30, 2003. Additionally, the Committee has reviewed and
discussed with management and the independent auditors the Company's
unaudited interim financial statements as of and for the end of each of the
first three fiscal quarters for the year ended September 30, 2003. These
discussions occur prior to the issuance of news releases reporting such
quarterly results.
The Committee discussed with PricewaterhouseCoopers LLP, our
independent auditors, the matters required to be discussed by the Statement
on Auditing Standards No. 61, Communication with Audit Committees, as
amended, of the Auditing Standards Board of the American Institute of
Certified Public Accountants.
The Committee received and reviewed the written disclosures and the
letter from the independent auditors required by Independence Standard No.
1, Independence Discussions with Audit Committees, as amended, of the
Independence Standards Board, and discussed with the auditors the auditors'
independence. In addition, the Committee considered whether the provision
by the independent auditors of non-audit services is compatible with
maintaining the independent auditors' independence from management and the
Company.
Based on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors that the audited fiscal year-end
financial statements referred to above be included in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 2003.
MEMBERS OF THE AUDIT COMMITTEE:
Robert J. Cronin, Chairman
Richard R. Risk
M. Christine Jacobs
19
CHANGE IN AUDITORS
On May 22, 2002, the Board of Directors of the Company dismissed its
independent auditor, Arthur Andersen LLP. The decision to dismiss Arthur
Andersen was recommended by the Company's Audit Committee and unanimously
approved by the Company's Board of Directors.
Arthur Andersen's report on the financial statements of the Company
for the year ended September 30, 2001 did not contain an adverse opinion or
a disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles.
During the year ended September 30, 2001 and the interim period
between September 30, 2001 and May 22, 2002, there were no disagreements
between the Company and Arthur Andersen on any matter of accounting
principles or practices, financial statement disclosure or auditing scope
or procedure, which disagreements, if not resolved to the satisfaction of
Arthur Andersen, would have caused it to make reference to the subject
matter of the disagreements in connection with its report. During the year
ended September 30, 2001 and the interim period between September 30, 2001
and March 31, 2002, there were no reportable events (as defined in Item
304(a)(1)(v) of Regulation S-K). A letter from Arthur Andersen was filed
as Exhibit 16.1 to the Company's Current Report on Form 8-K/A dated
June 26, 2002.
The Company engaged PricewaterhouseCoopers LLP as its new independent
auditor, effective May 22, 2002. During the year ended September 30, 2001
and the interim period between September 30, 2001 and May 22, 2002, the
Company did not consult with PricewaterhouseCoopers LLP regarding (i) the
application of accounting principles to a specified transaction, either
completed or proposed, (ii) the type of audit opinion that might be
rendered on the Company's financial statements or (iii) any matter that was
either the subject of a disagreement (as described above) or a reportable
event.
FEES BILLED BY INDEPENDENT AUDITORS
AUDIT FEES. PricewaterhouseCoopers LLP billed fees to the Company of
approximately $112,000 in fiscal 2003 and approximately $79,900 in fiscal
2002 for professional services rendered for the audit of the Company's
annual financial statements and reviews of the interim financial statements
included in the Company's Quarterly Reports on Form 10-Q filed during those
fiscal years.
AUDIT-RELATED FEES. PricewaterhouseCoopers LLP billed approximately
$5,000 to the Company in fiscal 2003 and approximately $43,600 in fiscal
2002 that were reasonably related to the performance of the audit or review
of the Company's financial statements and are not included in "Audit Fees"
above. These services included advice on generally accepted accounting
principles, the Company's employee benefit plans and addressing financial
statement issues at the subsidiary companies.
TAX FEES. PricewaterhouseCoopers LLP billed fees to the Company of
approximately $77,300 in fiscal 2003 and approximately $85,890 in fiscal
2002 for professional services rendered by PricewaterhouseCoopers LLP for
tax compliance, tax advice and tax planning, primarily related to the
parent company.
ALL OTHER FEES. PricewaterhouseCoopers LLP billed fees to the
Company of approximately $30,000 in fiscal 2003 professional services other
than those services covered above. These services included providing
officer and director compensation survey information.
20
As provided in the Sarbanes-Oxley Act of 2002, all audit and non-
audit services provided after May 6, 2003 by the Company's principal
accountants must be pre-approved by the Audit Committee. Accordingly,
policies and procedures were established whereby the Committee approves
performance of all audit and non-audit services in advance. Based in part
on consideration of the non-audit services provided by
PricewaterhouseCoopers LLP during fiscal 2003, the Committee determined
that such non-audit services were compatible with maintaining the
independence of PricewaterhouseCoopers LLP. Since May 6, 2003, the
Committee approved 100% of the services described above. The Company
believes that none of the time expended on PricewaterhouseCoopers LLP's
engagement to audit the Company's financial statements for fiscal 2003 was
attributable to work performed by persons other than PricewaterhouseCoopers
LLP's full-time, permanent employees.
SELECTION OF AUDITORS
The stockholders will be asked at the annual meeting to approve the
selection of auditors for the fiscal year ending September 30, 2004.
PricewaterhouseCoopers LLP, One North Wacker, Chicago, Illinois, has served
as auditors for Landauer for the years ended September 30, 2003 and 2002,
and it will be recommended to the stockholders that such firm be selected
again. The Audit Committee, comprised of Robert J. Cronin, Richard R. Risk
and M. Christine Jacobs, has approved this recommendation. Representatives
of PricewaterhouseCoopers LLP will be present at the meeting, will have the
opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions.
If a quorum is present, in order to approve the selection of
PricewaterhouseCoopers LLP as Landauer's auditors for the fiscal year
ending September 30, 2004, a majority of the shares present in person or by
proxy at the annual meeting and entitled to vote on such proposal must vote
in favor of it. Accordingly, abstentions will have the same effect as
votes against and non-votes will reduce the number of shares considered
present and entitled to vote on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE SELECTION OF
PRICEWATERHOUSECOOPERS LLP AS AUDITORS OF LANDAUER FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 2004.
STOCKHOLDER PROPOSALS
Proposals intended to be presented by security holders at the annual
meeting of stockholders scheduled for February 2, 2005, must be received by
Landauer in order to be considered for inclusion in Landauer's proxy
statement and form of proxy relating to that meeting not later than
September 10, 2004. Such proposals may be included in next year's proxy
statement if they comply with certain rules and regulations of the
Securities and Exchange Commission. In addition, under Landauer's by-laws,
nominations for directorships and stockholder proposals to be acted on at
the 2005 annual meeting may be made only pursuant to written notice
received at Landauer's principal office on or after November 19, 2004 and
on or before December 14, 2004.
21
Landauer's by-laws provide that notice of a stockholder nomination
for director must set forth, as to each person whom the stockholder
proposes to nominate for election or re-election as director, (i) the name,
age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and
number of shares of capital stock of the corporation that are beneficially
owned by the person and (iv) any other information relating to the person
that is required to be disclosed in solicitations for proxies for election
of directors pursuant to Schedule 14A under the Securities Exchange Act of
1934. Such notice must also set forth, as to the stockholder making the
nomination, (i) the name and record address of such stockholder and (ii)
the class and number of shares of capital stock of the corporation that are
beneficially owned by such stockholder. If the chairman of the stockholder
meeting determines that a stockholder nomination was not made in accordance
with the procedure set forth in the bylaws, he shall so declare to the
meeting and the defective nomination shall be disregarded.
Nominations for director and stockholder proposals should be directed
to James M. O'Connell, Secretary, Landauer, Inc., 2 Science Road, Glenwood,
Illinois 60425-1586.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
Landauer's officers and directors and persons who beneficially own more
than ten percent of Landauer's Common Stock ("Reporting Persons") to file
reports of beneficial ownership and changes in such ownership with the
Securities and Exchange Commission ("SEC"). Reporting Persons are required
by SEC regulation to furnish Landauer with copies of all Section 16(a)
reports they file and Landauer is required to post such reports on its
website, http://www.landuaerinc.com.
Based solely on a review of the Form 3, 4 and 5 filings received
from, or filed by Landauer on behalf of, Reporting Persons since the
beginning of fiscal year 2003, Landauer is not aware of any failure to file
on a timely basis any Form 3, 4 or 5 during fiscal year 2003 except one
report on Form 4 for each of the executive officers for the grant of stock
options on November 5, 2002 and one report on Form 4 for each of the
directors for the grant of stock options on February 5, 2003. In each case
the required forms were not filed on a timely basis but have since been
filed.
MISCELLANEOUS
Landauer's 2003 Annual Report to Stockholders (which includes a copy
of Landauer's Annual Report on Form 10-K for the fiscal year ended
September 30, 2003) accompanies this proxy statement.
The Board of Directors does not know of any business that will come
before the meeting except the matters described in the notice. If other
business is properly presented for consideration at the meeting, it is
intended that the proxies will be voted by the persons named therein in
accordance with their judgment on such matters.
In the event that a quorum is not present when the meeting is
convened, it is intended to vote the proxies in favor of adjourning the
meeting from time to time until a quorum is obtained.
James M. O'Connell
Vice President, Treasurer, Secretary
and Chief Financial Officer
January 2, 2004
22
EXHIBIT A
CHARTER OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS OF LANDAUER, INC.
PURPOSE
The primary purpose of the Audit Committee is to assist the Board of
Directors (the "Board") of Landauer, Inc. (the "Company") in fulfilling its
oversight responsibilities with respect to the integrity of the Company's
financial statements, related disclosures and other financial information.
In this regard, the Audit Committee is to:
1. Serve as an independent and objective body to monitor the
Company's financial reporting process and internal control
systems.
2. Serve, together with the Board, as the ultimate authority
to which the independent auditor (the "Independent Auditor")
and the internal auditing function ("Internal Audit") are
accountable.
3. Have the ultimate authority and responsibility to evaluate the
qualifications and independence of the Independent Auditor.
4. Monitor the Company's compliance with legal and regulatory
requirements.
5. Review the audit efforts and performance of the Independent
Auditor and Internal Audit.
6. Provide an open avenue of communication among the Independent
Auditor, financial and senior management, Internal Audit, and
the Board.
COMPOSITION, EXPERTISE AND SCHEDULE
1. Members of the Audit Committee and its Chair shall meet the
independence and experience requirements as may be determined
from time to time by the New York Stock Exchange and other
market(s), if any, on which the securities of the Company or
any of its subsidiaries are traded. Determinations as to
whether a particular director satisfies the requirements for
membership on the Audit Committee will be made by the Board.
2. The members of the Audit Committee shall be elected by the
Board at the annual organizational meeting of the Board, and
shall serve until the earlier of their resignation, death or
removal, or until their successors shall have been duly elected
and qualified.
3. The Audit Committee shall be composed of at least three, but
not more than five, members and shall meet as required by the
duties enumerated in this Charter, but no fewer than four times
per year.
DUTIES AND RESPONSIBILITIES
The Audit Committee shall:
1. Review the adequacy of this Charter at least annually and at
such other intervals as the Audit Committee or the Board
determines.
23
2. Review and discuss with management and the Independent Auditor
the annual audited and quarterly financial statements including
the Company's disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
During such annual and quarterly reviews, or at such other
times as the Audit Committee deems appropriate, discuss
earnings press releases and other written and verbal financial
communications with the investment community or rating agencies
including earnings guidance information.
3. Review reports to management prepared by the Independent
Auditor or Internal Audit and any responses to the same by
management.
4. Have the sole authority to (i) retain and terminate the
Independent Auditor to audit the books, records and accounts of
the Company; (ii) approve the engagement terms, fees and other
compensation of the Independent Auditor; (iii) approve any
significant non-audit engagements with the Independent Auditor;
and (iv) nominate the Independent Auditor to be proposed for
shareholder approval in any proxy statement.
5. Review and discuss with the Independent Auditor all significant
relationships which the firm and its affiliates have with the
Company and its affiliates in order to determine the auditor's
independence, including (i) requesting, receiving and
reviewing, on a periodic basis, a formal written statement
delineating all relationships between them which may reasonably
be thought to bear on the independence of the Independent
Auditor with respect to the Company and (ii) discussing with
the Independent Auditor any disclosed relationships or services
that may impact the objectivity and independence of the
Independent Auditor.
6. Obtain and review a report by the Independent Auditor, at least
annually, that (i) describes the firm's internal quality
control procedures; (ii) discusses any material issues raised
in the firm's most recent internal quality-control or peer
review; and (iii) describes any inquiry or investigation by
governmental or professional authorities that during the
preceding five years involved one or more independent audits
carried out by the firm, and the steps taken by the firm, if
any, to deal with the relevant issues.
7. Meet separately, at least quarterly, with management, with the
Independent Auditors and with those responsible for Internal
Audit. Such discussions should focus on (i) financial
reporting processes and audit controls, both internal and
external, based on consultation with the Independent Auditor
and Internal Audit; (ii) the Independent Auditor's judgment
about the quality and appropriateness of accounting principles
as applied in financial reporting; (iii) significant changes to
auditing and accounting principles and practices (including
alternative applications thereof) as may be suggested by the
Independent Auditor, management or Internal Audit; (iv) reports
to the Audit Committee by each of management, the Independent
Auditor and Internal Audit regarding any significant judgments
made in management's preparation of financial statements and
the view of each as to the appropriateness of such judgments;
(v) a review with each of management, the Independent Auditor
and Internal Audit any significant difficulties encountered
during the course of each audit; (vi) a review of any
significant disagreement between management and the Independent
Auditor or Internal Audit in connection with the preparation of
the financial statements; and (vii) a review with the
Independent Auditor, Internal Audit and management the extent
to which changes or improvements in financial or accounting
practices and internal controls, as approved by the Audit
Committee, have been implemented.
24
8. Discuss with management the Company's significant risk
exposures and policies regarding the assessment and management
of risk. Determine that management has implemented adequate
measures to respond to such exposures and guidelines to monitor
and control these risks.
9. Establish hiring policies for employees or former employees of
the Independent Auditors to ensure independence.
10. Prepare and review the report to shareholders to be included in
the Company's annual proxy statement in the form prescribed
Securities and Exchange Commission rules and regulations.
11. Keep a written record of the acts and proceedings of the Audit
Committee and report thereon to the Board periodically or
whenever requested to do so.
12. Review with the Company's independent legal counsel, accounting
or other advisors any legal, tax compliance or other matters
that could have a significant impact on the organization's
financial statements. In this regard the Audit Committee shall
have the sole authority to retain such advisors to fulfill its
duties.
13. Review and assess the Company's processes for administering its
code of ethical conduct.
14. Conduct an evaluation of its performance annually and provide a
report of the conclusions of the evaluation to the Board.
15. Perform such other activities consistent with this Charter, the
Company's Certificate of Incorporation, By-laws and governing
law, as the Audit Committee or the Board deems necessary or
appropriate.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. This is the responsibility of management and the Independent
Auditor. The duty of the Audit Committee includes the conduct of
investigations, the resolution of disagreements, if any, among management,
the Independent Auditor or Internal Audit, and the assurance of compliance
with laws and regulations.
25