Baker Hughes 2004 Annual Report Download - page 45

ANNEX฀B
BAKER฀HUGHES฀INCORPORATED฀
CHARTER฀OF฀THE฀AUDIT/ETHICS฀COMMITTEE฀OF฀฀
THE฀BOARD฀OF฀DIRECTORS
(as฀amended฀and฀restated฀October฀27,฀2004)
The฀Board฀of฀Directors฀of฀Baker฀Hughes฀Incorporated฀(the฀
“Company”)฀has฀heretofore฀constituted฀and฀established฀an฀
Audit/Ethics฀Committee฀(the฀“Committee”)฀with฀authority,฀
responsibility฀and฀specific฀duties฀as฀described฀in฀this฀Charter.฀It฀
is฀intended฀that฀this฀Charter฀and฀the฀composition฀of฀the฀Com-
mittee฀comply฀with฀the฀rules฀of฀the฀New฀York฀Stock฀Exchange฀
(the฀“NYSE”).฀This฀document฀replaces฀and฀supersedes฀in฀its฀
entirety฀the฀previous฀Charter฀of฀the฀Committee฀adopted฀by฀
the฀Board฀of฀Directors฀of฀the฀Company.฀
Purpose
The฀Committee’s฀purpose฀is฀to฀assist฀the฀Board฀of฀Directors฀
with฀oversight฀of:฀(i)฀the฀integrity฀of฀the฀Company’s฀financial฀
statements฀and฀reporting฀system,฀(ii)฀the฀Company’s฀compli-
ance฀with฀legal฀and฀regulatory฀requirements,฀(iii)฀the฀indepen-
dent฀auditor’s฀qualifications฀and฀independence฀and฀(iv)฀the฀
performance฀of฀the฀Company’s฀internal฀audit฀function฀and฀
independent฀auditors.฀The฀Committee’s฀purpose฀is฀also฀to฀
pre฀pare฀the฀report฀of฀the฀Committee฀to฀be฀included฀in฀the฀
Company’s฀annual฀proxy฀statement,฀carry฀out฀the฀duties฀and฀
responsibilities฀set฀forth฀in฀this฀Charter฀and฀conduct฀an฀฀
annual฀self-evaluation.
Composition
The฀Committee฀and฀Chairman฀of฀the฀Committee฀shall฀
be฀elected฀annually฀by฀the฀Board฀of฀Directors฀and฀subject฀to฀
removal฀pursuant฀to฀the฀terms฀of฀the฀Company’s฀Bylaws.฀The฀
Committee฀shall฀be฀comprised฀of฀not฀less฀than฀three฀non-
employee฀Directors฀who฀are฀(i)฀independent฀(as฀defined฀by฀
Section฀10A(m)(3)฀of฀the฀Securities฀Exchange฀Act฀of฀1934฀and฀
the฀regulations฀thereunder฀and฀the฀NYSE)฀and฀(ii)฀financially฀lit-
erate฀(as฀interpreted฀by฀the฀Board฀of฀Directors฀in฀its฀business฀
judgment).฀Such฀Committee฀members฀may฀not฀simultaneously฀
serve฀on฀the฀audit฀committee฀of฀more฀than฀three฀public฀com-
panies.฀At฀least฀one฀member฀of฀the฀Committee฀shall฀have฀
accounting฀or฀related฀financial฀management฀expertise฀and฀at฀
least฀one฀member฀of฀the฀Committee฀shall฀be฀an฀“audit฀com-
mittee฀financial฀expert,”฀as฀defined฀by฀the฀Securities฀and฀
Exchange฀Commission฀(“SEC”).฀The฀audit฀committee฀financial฀
expert฀must฀have:฀an฀understanding฀of฀GAAP฀and฀financial฀
statements;฀experience฀in฀the฀(a)฀preparation,฀auditing,฀analyz-
ing฀or฀evaluating฀of฀financial฀statements฀of฀generally฀compara-
ble฀issuers฀and฀(b)฀application฀of฀such฀principles฀in฀connection฀
with฀the฀accounting฀for฀estimates,฀accruals฀and฀reserves;฀an฀
understanding฀of฀internal฀accounting฀controls฀and฀procedures฀
for฀financial฀reporting;฀and฀an฀understanding฀of฀audit฀commit-
tee฀functions.฀The฀Committee฀may,฀if฀appropriate,฀delegate฀its฀
authority฀to฀subcommittees.
Principal฀Responsibilities
The฀principal฀responsibilities฀of฀the฀Committee฀are:฀(i)฀to฀
provide฀assistance฀to฀the฀Board฀of฀Directors฀in฀fulfilling฀its฀
responsibility฀in฀matters฀relating฀to฀the฀accounting฀and฀report-
ing฀practices฀of฀the฀Company,฀the฀adequacy฀of฀the฀Company’s฀
internal฀controls฀and฀the฀quality฀and฀integrity฀of฀the฀financial฀
statements฀of฀the฀Company;฀and฀(ii)฀to฀oversee฀the฀Company’s฀
compliance฀programs.฀The฀independent฀auditor฀is฀ultimately฀
accountable฀to฀the฀Board฀of฀Directors฀and฀the฀Committee,฀
as฀representatives฀of฀the฀Company’s฀stockholders,฀and฀shall฀
report฀directly฀to฀the฀Committee;฀and฀the฀Committee฀has฀the฀
ultimate฀authority฀and฀direct฀responsibility฀to฀select,฀appoint,฀
evaluate,฀compensate฀and฀oversee฀the฀work,฀and,฀if฀necessary,฀
terminate฀and฀replace฀the฀independent฀auditor฀(subject,฀if฀
applicable,฀to฀stockholder฀ratification).฀The฀Committee฀shall฀
have฀authority฀to฀conduct฀or฀authorize฀investigations฀into฀any฀
matters฀within฀its฀scope฀of฀responsibilities.
The฀Committee฀shall฀have฀the฀authority฀to฀engage฀inde-
pendent฀counsel฀and฀other฀advisors,฀as฀the฀Committee฀deems฀
necessary฀to฀carry฀out฀its฀duties.฀The฀Committee฀shall฀have฀the฀
sole฀authority฀to฀approve฀the฀fees฀paid฀to฀any฀independent฀
advisor฀retained฀by฀the฀Committee,฀and฀the฀Company฀shall฀
provide฀funding฀for฀such฀payments.฀In฀addition,฀the฀Company฀
must฀provide฀funding฀for฀ordinary฀administrative฀expenses฀of฀
the฀Committee฀that฀are฀necessary฀or฀appropriate฀in฀carrying฀
out฀its฀duties.
The฀Committee฀shall฀review฀the฀composition,฀expertise฀
and฀availability฀of฀the฀Committee฀members฀on฀an฀annual฀
basis.฀The฀Committee฀shall฀also฀perform฀a฀self-evaluation฀
of฀the฀Committee฀and฀its฀activities฀on฀an฀annual฀basis.
The฀Committee฀shall฀meet฀in฀executive฀session฀at฀each฀
regularly฀scheduled฀meeting,฀including฀separate,฀private฀meet-
ings฀with฀the฀independent฀auditors,฀internal฀auditors,฀general฀
counsel฀and฀compliance฀officer.
This฀Charter฀is฀intended฀to฀be฀flexible฀so฀that฀the฀Commit-
tee฀is฀able฀to฀meet฀changing฀conditions.฀The฀Committee฀is฀
authorized฀to฀take฀such฀further฀actions฀as฀are฀consistent฀with฀
the฀following฀described฀responsibilities฀and฀to฀perform฀such฀
other฀actions฀as฀applicable฀law,฀the฀NYSE,฀the฀Company’s฀
charter฀documents฀and/or฀the฀Board฀of฀Directors฀may฀require.฀
To฀that฀end,฀the฀Committee฀shall฀review฀and฀reassess฀the฀ade-
quacy฀of฀this฀Charter฀annually.฀Any฀proposed฀changes฀shall฀be฀
put฀before฀the฀Board฀of฀Directors฀for฀its฀approval.
With฀regard฀to฀its฀audit฀responsibilities,฀the฀Committee฀shall:
•฀ Receive฀and฀review฀reports฀from฀the฀independent฀auditors฀
pursuant฀to฀the฀Sarbanes-Oxley฀Act฀of฀2002฀(“SOX”)฀and,฀
on฀an฀annual฀basis,฀formal฀written฀reports฀from฀the฀inde-
pendent฀auditors฀regarding฀the฀auditors’฀independence฀
required฀by฀Independence฀Standards฀Board฀Standard฀No.฀1฀
(Independence฀Discussions฀with฀Audit฀Committees),฀giving฀
consideration฀to฀the฀range฀of฀audit฀and฀non-audit฀services฀
performed฀by฀them฀and฀all฀their฀relationships฀with฀the฀Com-
pany,฀as฀well฀as฀a฀report฀describing฀the฀(i)฀independent฀audi-
tors’฀internal฀quality-control฀procedures;฀and฀(ii)฀material฀
issues฀raised฀by฀the฀most฀recent฀internal฀quality-control฀
review฀or฀Public฀Company฀Accounting฀Oversight฀Board฀
review,฀of฀the฀independent฀auditors,฀or฀by฀any฀inquiry฀or฀
Proxy฀Statement฀฀฀฀฀B-1