SKYLINE CORPORATION
2520 By-Pass Road
P.O. Box 743
Elkhart, Indiana 46515
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
September 25, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Skyline Corporation ("Skyline") will be held at the Shenandoah Room, in the
Ramada Inn, 3011 Belvedere Road, Elkhart, Indiana, on Monday, September 25,
2000, at 9:00 a.m., Eastern Standard Time, for the following purposes:
1. To elect a Board of Directors for the ensuing year, or until their
successors are elected and qualify.
2. To transact such other business as may properly come before the meeting,
or any adjournment thereof.
The Board of Directors has fixed the close of business on July 20, 2000, as
the record date for the determination of shareholders entitled to notice of,
and to vote at, said meeting.
By Order of the Board of Directors
RONALD F. KLOSKA
Vice-Chairman and
Chief Executive Officer
IF YOU DO NOT EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
SKYLINE CORPORATION
2520 By-Pass Road, P.O. Box 743
Elkhart, Indiana 46515
August 4, 2000
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors of Skyline
Corporation ("Skyline") for use at the Annual Meeting of Shareholders to be
held September 25, 2000. The shares represented by properly executed proxies
received prior to the meeting will be voted. If the shareholder directs in
the proxy how the shares are to be voted, they will be voted accordingly.
When no direction has been given by the shareholder, it is the intention of
the proxies named in the proxy to vote the same in accordance with their best
judgment. Any proxy given may be revoked by the shareholder at any time prior
to the voting of the proxy. The approximate date on which this proxy
statement and the form of proxy are first sent or given to security holders is
August 4, 2000.
VOTING SECURITIES
Only shareholders of record as of the close of business on July 20, 2000, or
their proxies are entitled to vote at the meeting. As of that date, Skyline
had outstanding 8,621,444 shares of Common Stock having one vote per share.
ELECTION OF DIRECTORS
Each share of Common Stock is entitled to one vote, which means that the
holders of more than 50% of the shares voting for the election of Directors
can elect all of the Directors and approve any other matter as may properly
come before the meeting if they choose to do so. It is proposed that nine
Directors be elected at the meeting, each to serve until the next Annual
Meeting of Shareholders and until his successor is elected and qualifies.
It is intended that the votes authorized by the enclosed proxy will be cast
for the election of the nine nominees for Directors whose names are set forth
below. In the event that one or more of the nominees shall unexpectedly
become unavailable for election, the votes will be cast, pursuant to
authority granted by the enclosed proxy, for such person or persons as may be
designated by the present Board of Directors or the Board may be reduced
accordingly. All of the nominees for whom the proxies intend to vote have
agreed to serve as Directors if elected.
Information about the nominees for election as Directors and the beneficial
ownership of Skyline Common Stock by directors as a group is as follows:
Shares of Skyline
Common Stock Bene-
Skyline ficially Owned at Percent
Name, Title, Address Director July 1, 2000 of
and Principal Occupation Age Since Directly or Indirectly Clss(3)
ARTHUR J. DECIO 69 1959 1,477,784(1) 17.1 %
Chairman of the Board
Skyline Corporation, 2520
By-Pass Road, Elkhart, IN
46514. Mr. Decio is also a
Director of NiSource Inc.,
Merrillville, Indiana.
(Mr. Decio was Chief Executive
Officer of Skyline until
December 16, 1998.)
TERRENCE M. DECIO 48 1989 30,080(2)
Senior Executive Vice
President, Skyline Corporation,
2520 By-Pass Road, Elkhart,
Indiana 46514. Mr. Decio is
also a Director of KeyBank of
Northern Indiana, South Bend,
Indiana.
JERRY HAMMES 68 1986 13,000
2015 West Western Avenue,
South Bend, Indiana 46629.
Chairman of Romy Hammes
Bancorp, Inc. and President of
Romy Hammes, Inc., a bank
holding company and real
estate investment company,
South Bend,Indiana, and
Chairman of Peoples Bank of
Kankakee County, a bank,
Bourbonnais, Illinois.
Mr Hammes is also a Director
of St.Joseph Capital
Corporation, Mishawaka, Indiana.
RONALD F. KLOSKA 66 1965 28,600
Vice-Chairman and Chief
Executive Officer, Skyline
Corporation, 2520 By-Pass Road,
Elkhart, Indiana 46514. (Mr.
Kloska was Deputy Chief
Executive Officer of Skyline
until December 16, 1998 and
Secretary prior to September
18, 1995.)
WILLIAM H. LAWSON 63 1975 3,000
400 East Spring Street,
Bluffton, Indiana 46714.
Chairman of the Board, Chief
Executive Officer, and a
Director of Franklin Electric
Company, Inc., a manufacturer
of electric motors, Bluffton,
Indiana. Mr. Lawson is also a
Director of JSJ Corporation and
Sentry Insurance, a Mutual
Company.
DAVID T. LINK 63 1994 600
Dean Emeritus, Notre Dame Law
School, University of Notre
Dame, Notre Dame, Indiana 46556.
President Emeritus, University
of Notre Dame Australia,
Fremantle, W.A., Australia.
Associate Vice President,
University of St. Thomas, St.
Paul, Minnesota.
ANDREW J. McKENNA 70 1971 12,300
8338 North Austin Avenue,
Morton Grove, Illinois 60053.
Chairman and CEO of Schwarz,
a national printer, converter
and distributor of packaging and
promotional materials, Morton
Grove, Illinois. Mr. McKenna
is also a director of Tribune
Company, Aon Corporation and
McDonalds Corporation.
WILLIAM H. MURSCHEL 55 1992 4,000
President and Chief Operations
Officer, Skyline Corporation,
2520 By-Pass Road, Elkhart,
Indiana 46514.
DALE SWIKERT 70 1963 8,791
511 Queen Victoria Ct., Nampa,
Idaho 83687. Private Investor.
ALL NOMINEES AND
OFFICERS AS A GROUP 1,580,305 18.3%
(l) Includes 83,500 shares in The Arthur J. Decio Foundation, a charitable
foundation, of which Mr. Decio is a trustee. Mr. Decio disclaims any
beneficial interest with respect to these shares.
(2) Terrence M. Decio is the son of Arthur J. Decio.
(3) Less than one percent unless otherwise indicated.
Information about Board and Committee meetings is as follows:
The Audit Committee consisted of Messrs. Hammes, McKenna, Lawson, Link and
Swikert. It met two times during the fiscal year ended May 31, 2000. The
Committee meets with the accounting firm which conducts the annual audit of
Skyline's books, reviews auditors' recommendations, reviews the independence
of Skyline's auditors and considers the range of audit and non-audit fees. It
also meets with the internal audit staff and Chief Financial Officer, reviews
the scope and adequacy of Skyline's internal auditing program and reports its
findings to the Board with any recommendations it considers appropriate.
Skyline's Board of Directors has adopted a written charter for the audit
committee, a copy of which is included as an appendix to this proxy
statement. The members of Skyline's Audit Committee are all "independent" as
defined in the New York Stock Exchange Listing Standards.
The Governance and Compensation Committee consisted of Messrs. McKenna,
Hammes, Lawson and Link. It met one time during the last fiscal year. The
Committee establishes compensation for the Chairman of the Board and consults
with the Chairman of the Board concerning compensation for other elected
officers of the Company. The Committee also recommends to the Board the
selection of nominees for election as directors, and considers the
performance of incumbent directors in determining whether to nominate them
for re-election. Nominees recommended by shareholders will be considered upon
their submission in writing by the shareholders to Skyline prior to the end of
the fiscal year immediately preceding the next regular annual shareholders'
meeting.
The Executive Committee of the Board of Directors consisted of Messrs.
Arthur J. Decio, McKenna, Hammes, Lawson and Link, and met three times during
the last fiscal year. This Committee exercises the powers of the Board of
Directors in the management of the business affairs of Skyline, subject to
the approval of the full Board of Directors at the next regular or special
meeting.
The Board of Directors met or took action six times during the last fiscal
year. Every Board member was present at all Board meetings and meetings of
all committees of which he was a member, except that one Board member missed
two Board meetings and one Board member missed one Board meeting and one
committee meeting.
Report of the Audit Committee
The audit committee of Skyline's Board of Directors has reviewed and
discussed Skyline's audited financial statements with management; has
discussed with Skyline's independent auditors PricewaterhouseCoopers LLP the
matters required to be discussed by Codification of Statements on Auditing
Standards, AV 380, Statement on Auditing Standards No. 61; has received from
the auditors disclosures regarding the auditors' independence as required by
Independence Standards Board Standard No. 1 and has discussed with the
auditors the auditors' independence; and has, based on the review and
discussions noted above, recommended to Skyline's Board of Directors that
the audited financial statements be included in Skyline's Annual Report on
Form 10-K for the fiscal year ended May 31, 2000 for filing with the
Securities and Exchange Commission.
Jerry Hammes
William H. Lawson
Andrew J. McKenna
David T. Link
Dale Swikert
CERTAIN OTHER BENEFICIAL OWNERS
The following person, entities or "group" as indicated are known to
Skyline to own beneficially at least five percent (5%) of Skyline's common
stock or are members of management identified in the summary compensation
table but who are not on Skyline's Board. The beneficial ownership of Skyline
common stock by the members of its Board and its nominees for directors is
shown in the table under "Election of Directors" above.
Shares of Skyline Common
Name and Address Stock Beneficially Owned Percent of
of Beneficial Owner at July 1, 2000 Class (l)
Christopher R. Leader 650
Vice President, Operations
2520 By-Pass Road
Elkhart, Indiana 46514
Dimensional Fund Advisors 475,300 5.5%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Private Capital Management, Inc. 1,420,032 16.5%
3003 Tamiami Trail North, 3rd Floor
Naples, Florida 34103
T. Rowe Price Associates, Inc. (2) 620,000 7.2%
100 East Pratt Street
Baltimore, Maryland 21202
(l) Less than one percent (1%) if not specified.
(2) T. Rowe Price Associates, Inc. (Price Associates) has informed Skyline
that these securities are owned by various individual and institutional
investors which Price Associates serves as investment advisor with power to
direct investment and/or sole power to vote the securities and that for
purposes of the reporting requirements of the Securities Exchange Act of
1934, Price Associates is deemed to be a beneficial owner of such securities;
however, Price Associates expressly disclaims that it is, in fact, the
beneficial owner of such securities.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of forms provided to Skyline and on certain
written representations, Skyline is unaware of any failure to file on a
timely basis reports required by Section 16(a) of the Exchange Act by any
director, officer or beneficial owner of more than ten percent of Skyline's
common stock.
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid during the
fiscal year ended May 31, 2000 for each of the five highest paid executive
officers of Skyline, including the Chief Executive Officer. The table also
shows for each such officer, the amounts set aside during the last fiscal
year under Skyline's Profit Sharing Plan.
All
Other
Annual Compensation Compensation
(Vested
Name and Principal Profit
Position Year Salary ($) Bonus ($) Sharing)
Arthur J. Decio 2000 365,000 233,600 9,000
Chairman of the Board (Chief Executive 1999 365,000 481,800 9,000
Officer of Skyline until December 16, 1998) 1998 395,000 379,000 9,000
Ronald F. Kloska 2000 365,000 233,600 9,000
Vice-Chairman and Chief Executive Officer 1999 365,000 481,800 9,000
(Deputy Chief Executive Officer of Skyline 1998 355,000 340,000 9,000
until December 16, 1998 and Secretary
prior to September 18, 1995)
William H. Murschel 2000 330,000 211,200 9,000
President and Chief Operations Officer 1999 330,000 435,600 9,000
1998 330,000 316,000 9,000
Terrence M. Decio 2000 275,000 176,000 9,000
Senior Executive Vice-President 1999 275,000 363,000 9,000
1998 245,000 240,000 9,000
Christopher R. Leader 2000 190,000 91,200 9,000
Vice-President, Operations (Hired 1999 190,000 99,750 9,000
January 13, 1997. Vice President- 1998 175,000 78,750 9,000
Operations of Trek Bicycle from
October 1994 to 1996)
Compensation of Directors
Directors who are not full-time employees of Skyline receive an annual fee
of $16,000 payable in quarterly installments and receive $500 for each Board
or Committee meeting attended. Chairmen of the Board Committees who are not
full-time employees of Skyline receive an additional $2,000 annually and
Committee members who are not full-time employees of Skyline receive an
additional $1,500 annually payable in quarterly installments.
Termination of Employment Arrangements
The Skyline Corporation and Affiliates Employees' Profit Sharing Plan
provides benefits on death, disability or retirement for officers and
executives, sales, administrative and supervisory employees. Employees hired
on or after June 1, 1987 become eligible as of the June 1 or December 1
immediately following completion of six months of employment. Under the Plan,
as amended effective June 1, 1989, the amount of contribution under the Plan
is at the discretion of Skyline each year. However, the maximum contribution
for any participant shall not exceed 12% of a participant's basic
compensation. Upon retirement, death or permanent total disability, a
participant is entitled to all of the funds credited to his account. In case
of termination of employment by resignation or discharge, the participant is
entitled to a percentage of the amount credited to his account, ranging from
0% (10% for employees hired on or before May 31, 1987) after one year of
employment to 100% after seven years. For plan years beginning on or after
June 1, 1987, forfeitures resulting from any employee's termination of
employment prior to full vesting will be used to reduce employer
contributions. Net investment earnings or net losses for each fiscal year are
allocated to the account of each participant in the same ratio as the
participant's account balance bears to the total account balances of all
participants. Skyline reserves the right to modify, amend or terminate the
Plan. In the event of termination of the Plan, the entire amount theretofore
contributed under the Plan must be paid to participants or their
beneficiaries and under no circumstances reverts to Skyline.
Under an insurance plan, payments would be made to the below named
executive officers, and executive officers as a group, for a period of 10
years upon retirement from Skyline at age 60, 62, or later, in the following
annual amounts: Arthur J. Decio, $100,000; Ronald F. Kloska, $100,000;
William H. Murschel, $75,000; Terrence M. Decio, $75,000 and Christopher R.
Leader, $60,000; and all executive officers as a group, consisting of 8
individuals, $550,000. Under the same insurance plan, in the event of the
death of any of such executive officers while employed by Skyline, payments
would be made for a period of 10 years in the annual amounts hereinafter
specified to the beneficiaries of the following individuals and group: Ronald
F. Kloska, $100,000; William H. Murschel, $75,000; Terrence M. Decio,
$75,000, and Christopher R. Leader, $40,000; and 3 other executive officers,
totaling 7 individuals, $390,000. Skyline is the owner and beneficiary of
policies insuring the lives of all such executive officers in the total amount
of $3,111,659.
In addition, in the event of the death of Arthur J. Decio, whether before or
after his retirement from Skyline, Skyline has agreed to pay his survivor(s) the
sum of $1,920,000, which at the present income tax rates, would result in
after tax cost to Skyline of approximately $1,150,000. Skyline is the owner
and beneficiary of policies insuring Arthur J. Decio's life in the amount of
$1,060,000.
The appreciation in cash surrender value of all of the above-described
insurance policies is such that there is no current cost to Skyline for their
maintenance.
Compensation Committee Interlocks and Insider Participation
The following persons served as members of the Governance and
Compensation Committee (the "Compensation Committee") of Skyline's Board of
Directors during the fiscal year ended May 31, 2000: Andrew J. McKenna, Jerry
Hammes, William H. Lawson and David T. Link. Arthur J. Decio is the Chairman
of the Board of Skyline, and is a member of the Board of Directors of Schwarz.
Andrew J. McKenna is an executive officer of Schwarz.
Report of the Governance and Compensation
Committee (the "Compensation Committee")
on Executive Compensation
The compensation of Skyline's executive officers is determined by the
Compensation Committee of the Board of Directors. Each member of the
Compensation Committee is a director who is not an employee of Skyline or any
of its affiliates. The following report with respect to compensation paid to
Skyline's executive officers for the fiscal year ended May 31, 2000 is
furnished by the Compensation Committee.
General Policies. Skyline's compensation programs are intended to enable
Skyline to attract, motivate, reward and retain the executive management
talent required to achieve corporate objectives. It is Skyline's policy to
reward exceptional performance and contributions to the development of
Skyline's business. To attain these objectives, Skyline's executive
compensation program includes a competitive base salary coupled with the
opportunity to participate in a bonus pool which is created based on the
performance of Skyline's business. The Compensation Committee establishes the
base salaries and discretionary bonuses which will be paid to Skyline's
executive officers for each fiscal year. In setting salaries and bonuses, the
Compensation Committee takes into account several factors, including
compensation paid by competitors and other industries' compensation data as
well as qualitative factors bearing on an individual's experience,
responsibilities, management and job performance. The Compensation Committee
evaluates the contributions to Skyline's overall performance during the last
fiscal year, leadership, effectiveness and commitment of all executive
officers, including the Chief Executive Officer. For the fiscal year ended
May 31, 2000, each of the executive officers received a bonus, in the amounts
set forth above in the executive compensation table.
Salaries. Salary levels for executive officer positions are set so as to
reflect the duties and level of responsibilities inherent in the position and
current economic conditions relating to Skyline's business. Comparative
salaries paid by other companies in the industries in which Skyline does
business are considered in establishing the salary level for a given
position. The Compensation Committee does not, however, target a specific
percentile range within the comparative group in setting salaries of
Skyline's executive officers. The particular qualifications and level of
experience of the individual holding the position are also considered in
establishing a salary level when the individual is first appointed to a given
position.
Bonus. Skyline provides executive officers the opportunity to earn an
annual incentive bonus based on an evaluation of the executive's individual
performance and Skyline's performance. No executive officer is automatically
entitled to a bonus or a bonus in any particular amount. In considering
bonuses for executives other than Arthur J. Decio, the Compensation Committee
consults with the Chairman of the Board.
Other. In addition, the executive officers participate in a profit
sharing program and insurance and other plans described above providing
payments on death or retirement.
Compensation of Chief Executive Officer ("CEO"). In setting the base
salary and bonus for Skyline's CEO, for the fiscal year ended May 31, 2000,
the Compensation Committee considered the same factors as with other
executive officers of Skyline. The Compensation Committee believes the
CEO's compensation was fully supported by those standards.
Andrew J. McKenna, Chairman
Jerry Hammes
William H. Lawson
David T. Link
Being all the members of Skyline's
Governance and Compensation Committee
(the "Compensation Committee")
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG SKYLINE CORPORATION, S & P 500 INDEX AND PEER GROUP
1995 1996 1997 1998 1999 2000
SKYLINE 100.00 145.38 141.76 171.30 187.46 127.62
S&P 500 100.00 128.44 166.22 217.22 262.89 290.44
PEER GROUP 100.00 165.85 154.01 226.39 177.81 92.48
*Notes:
Assumes initial investment of $100 on May 31, 1995 and compares the return on
that investment through May 31, 2000.
For comparison purposes, Total Return assumes reinvestment of dividends,
although Skyline has no dividend reinvestment plan.
Total Return is based on market capitalization.
This self constructed peer group consists of the following companies:
Champion Enterprises, Inc.
Coachmen Industries, Inc.
Fleetwood Enterprises, Inc.
Liberty Homes, Inc.
Thor Industries, Inc.
The returns for each member of this peer group have been weighted according
to that company's respective stock market capitalization.
INDEPENDENT PUBLIC ACCOUNTANTS
Skyline's independent public accounting firm is PricewaterhouseCoopers
LLP. It is expected that representatives of PricewaterhouseCoopers LLP will
be present at the meeting of shareholders, will have the opportunity to make
a statement if they so desire and will be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS
Any proposal submitted for inclusion in Skyline's Proxy Statement and form
of proxy for the 2001 Annual Meeting of Shareholders must be received at the
address shown above on or before April 3, 2001.
MISCELLANEOUS
As of the date of this Proxy Statement, the Board of Directors knows of
no other business which will be presented for consideration at the annual
meeting. However, if other proper matters are presented at the meeting, it is
the intention of the proxies named in the enclosed proxy to take such action
as shall be in accordance with their best judgment.
The expense of this solicitation, including the cost of preparing and
mailing this Proxy Statement and accompanying material, will be paid by
Skyline. Skyline expects to pay approximately $6,500 to Georgeson Shareholder
Communications, Inc. as compensation for the solicitation of proxies, and may
reimburse brokers and others for their expense for sending proxy material to
principals for the purpose of obtaining signed proxies. In addition,
solicitation may be by mail, telephone, telefax and personal interview by
regularly engaged officers of Skyline who will not be additionally
compensated therefor.
Shareholders are respectfully requested to date, sign and return promptly the
enclosed proxy in the enclosed envelope. No postage is required if mailed in
the United States.
By Order of the
Board of Directors
RONALD F. KLOSKA
Vice-Chairman and
Chief Executive Officer
APPENDIX
CHARTER OF THE AUDIT COMMITTEE
OF
THE BOARD OF DIRECTORS
OF
SKYLINE CORPORATION
The Audit Committee shall consist of at least three (3) directors, all of
whom are independent of management of the Corporation and any of its
subsidiaries and free from any relationship that, in the judgment of the
Board of Directors, would interfere with the exercise of independent judgment
respecting the matters over which the Committee is given authority.
The members of the Audit Committee shall be elected annually by the Board of
Directors in connection with the annual meeting of the board. Members shall
be elected by the Board of Directors with due regard to such member's
training in, or experience with, accounting and financial reporting issues.
Members of the Committee may be removed, and vacancies on the Committee may
be filled by the Board of Directors in accordance with the Code of By-laws of
the Corporation. The Chairman of the Audit Committee may be designated by the
Board of Directors and, in the absence of such designation, may be elected by
the Audit Committee from among their members.
The Audit Committee shall assist the Board of Directors to oversee the
Corporation's financial reporting processes, its internal financial control
structures and its internal and external financial audit processes. The Audit
Committee shall facilitate communication on Financial Matters (defined below)
among the Board of Directors, management, the Corporation's internal audit
department and the Corporation's independent auditors. The Audit Committee
possesses and is hereby granted the power and authority of the Board of
Directors over the foregoing and over the Corporation's Financial Matters to
the extent necessary to allow the Committee to carry out its purposes. The
matters over which the Audit Committee has oversight authority include the
following (collectively, referred to herein as "Financial Matters"):
* The quality, scope and procedures of the independent auditors' audits of the
Corporation's financial statements.
* The quality, appropriateness and implementation of the Corporation's
significant accounting policies.
* Audit conclusions respecting significant estimates and adjustments.
* The disclosure, treatment or resolution of any material weakness in
financial reporting or controls or reportable conditions identified by
management, the internal audit department or the independent auditors.
* The quality, adequacy and appropriateness of the Corporation's internal
financial control structures, including any circumstances in which such
controls may be overridden or compromised.
* The quality, adequacy and appropriateness of the Corporation's internal
auditing processes.
* Disagreements among management, the internal audit department or the
independent auditors.
* The assessment of material risks or contingencies that may affect the
Corporation's financial reporting including the risk of liability associated
with litigation or noncompliance with law.
* Such other matters affecting the quality, integrity or accuracy of the
Corporation's financial reporting as the Committee deems relevant to any of the
foregoing matters.
Authority Respecting Independent Auditors
The Audit Committee has the following specific authority respecting the
independent auditors:
(a) In consultation with management, to direct the engagement or dismissal of
the independent auditors or to refer the engagement or dismissal of the
independent auditors for action by the Board of Directors, with or without an
affirmative or negative recommendation. The Corporation shall not engage or
dismiss its independent auditors without the action of the Audit Committee or
the Board of Directors.
(b) To direct the independent auditors to meet with the Audit Committee or the
Board of Directors from time to time, separately or in the presence of
management or others, to discuss Financial Matters or to prepare and submit
reports to the Committee respecting Financial Matters.
(c) To require the independent auditors to report to the Audit Committee on
matters that may be deemed to affect the independence of the independent
auditors, including any management consulting services provided, or proposed to
be provided, by the independent auditors for the Corporation or its
affiliates and the fees paid or proposed to be paid for such services; to
assess the effect of the foregoing on the independence of the independent
auditors and the appearance of propriety of the foregoing and to direct
management to take action in respect of such matters.
(d) To take action to resolve any disagreement respecting accounting
principles, the implementation or application of such principles or Financial
Matters between management and the independent auditors, or to refer such
matters to the Board of Directors.
Authority Respecting The Internal Audit Department
The Audit Committee has the following specific authority respecting the
internal audit department:
(a) To elect or remove the director of internal audit or to refer the
election or removal of the director of internal audit for action by the Board of
Directors, with or without an affirmative or negative recommendation.
(b) To assess the quality, adequacy and appropriateness of the plan for the
Corporation's internal auditing processes, and, in the Committee's
discretion, from time to time or upon request, to approve or disapprove such
plan or to approve or disapprove any changes therein.
(c) To direct the director of internal audit to meet with the Audit Committee
or the Board of Directors from time to time, separately or in the presence of
the independent auditors, management or others, to discuss Financial Matters
or to prepare and submit reports to the Committee respecting Financial Matters.
(d) To direct management, the director of internal audit, the Corporation or
the independent auditors to take such action as the Committee may deem
necessary or appropriate to address any issues identified by any of such
parties regarding significant internal audit findings, difficulties
encountered in carrying out internal audit procedures, or any management
override of internal control mechanisms.
Authority Over Management Activities Relating To Financial Matters
The Audit Committee has the following specific authority over the activities
of management in Financial Matters:
(a) To direct the chief financial officer or other members of management to
meet with the Audit Committee or the Board of Directors from time to time,
separately or in the presence of the independent auditors, the director of
internal audit or others, to discuss Financial Matters or to prepare and
submit reports to the Committee respecting Financial Matters.
(b) To assess the quality, adequacy and appropriateness of the accounting
principles and policies implemented and applied by the Corporation and the
quality, integrity and accuracy of the Corporation's financial reporting,
and, in the Committee's discretion, from time to time or upon request, to
approve or disapprove such principles or policies or to approve, disapprove
or mandate any changes therein.
Investigations And Obtaining Advice
The Audit Committee has authority to require investigations and to obtain
advice respecting the Corporation's Financial Matters and the Committee's
exercise of its authority, as the Committee deems necessary or appropriate.
Without limiting the foregoing, the Committee has authority to direct
management, including the Corporation's counsel, the independent auditors and
the director of internal audit to investigate any Financial Matters and
related issues and to provide reports to the Committee respecting such
investigation. The Committee has authority to meet with the Corporation's
counsel, to obtain advice respecting the exercise of the Committee's
authority and to direct such counsel to investigate such legal issues
relating to Financial Matters and to report to the Committee regarding same,
as the Committee deems necessary or appropriate. The Committee has authority
to direct management, on behalf of the Corporation, to engage independent
advisors whom the Committee may designate to provide advice and guidance to
the Committee respecting the exercise of its authority and issues relating to
Financial Matters as the Committee deems necessary or appropriate, including,
without limitation, independent legal counsel, and independent financial
advisors which may include investment banking firms or accounting firms,
other than the independent auditors. The Committee has authority to meet
separately with, and to receive private and, where appropriate, privileged,
written or oral communications from any of such advisors.
Procedural Matters
The Audit Committee shall meet from time to time at the call of its Chairman or
at the direction of the Board of Directors. The Committee shall meet at least
two (2) times per year. The Chairman of the Audit Committee shall call a
meeting of the Committee upon the request of any member of the Committee or
the Chairman of the Board of Directors. The provisions of the Code of By-laws of
the Corporation respecting notice of meetings and for action to be taken by the
Board of Directors shall apply to meetings and actions of the Audit Committee.
The Chairman of the Audit Committee shall report on the activities of the
Committee to the Board of Directors from time to time upon request of the
Chairman of the Board of Directors or of the Board of Directors.
Limitation
Nothing in this Charter is intended to alter in any way the standard of
conduct that applies to any of the directors of the Corporation under the
Indiana Corporation Law, as amended, and this Charter does not impose, nor
shall it be interpreted to impose any duty on any director greater than, or
in addition to, the duties or standard established by the State of Indiana.
ADOPTED BY THE BOARD OF DIRECTORS this 16th day of March, 2000.
