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Textron Inc. Audit Committee Charter

(As amended, effective February 28, 2007)

The Audit Committee (the “Committee”) of the Board of Directors of Textron Inc. (the “Company”) shall consist of no fewer than three members.  All members of the Committee shall be independent directors and shall satisfy the independence standards established by the New York Stock Exchange and the Securities Exchange Commission (the “SEC”), and shall be financially literate.  At least one member of the Committee shall be an “audit committee financial expert” as defined by the SEC.  No Committee member shall simultaneously serve on the audit committees of more than two other public companies, unless the Board of Directors determines that such service would not impair the member’s ability to effectively serve on the Committee.  The Board of Directors, upon recommendation of the Nominating and Corporate Governance Committee, shall appoint the members of the Committee and its Chair and may remove members of the Committee in its sole discretion.  Because effective service on the Committee requires a significant time commitment from its members, in making appointments to the Committee the Board of Directors will take into consideration the other obligations of prospective members, including service on other boards of directors and audit committees. 

The purpose of the Committee shall be to (a) assist the Board of Directors with its oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance of the Company’s internal audit function and independent auditor, and (b) prepare the audit committee report that SEC rules require be included in the Company’s annual proxy statement.

In furtherance of this purpose, the Committee shall have the following duties and responsibilities:

1. To be directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report and performing other audit, review or attest services for the Company, including the retention or termination of the independent auditor.  The independent auditor shall report directly to the Committee.  The Committee shall pre-approve all auditing services (which may entail providing comfort letters in connection with securities underwritings), and all non-audit services provided by the Company’s independent auditor, subject to a de minimis exception as set forth by the SEC.
2. To, at least annually, obtain and review a report by the independent auditor describing: the independent auditor’s internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits performed by the firm, and any steps taken to deal with any such issues, and (to assess the auditor’s independence) all relationships between the independent auditor and the Company.
3. To oversee the rotation of the members of the audit engagement team as required by law or as otherwise desirable and the independent auditor’s process for the orderly transition of audit engagement team members.
4. To (i) meet to review and discuss the Company’s annual audited financial statements and Form 10-K and the Company’s quarterly financial statements and Forms 10-Q with management and the independent auditor, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and recommend to the Board of Directors whether the audited financial statements should be included in the Company’s Form 10-K; and (ii) discuss with management and the independent auditor the annual audited financial statements and Form 10-K of the Company’s wholly-owned subsidiary, Textron Financial Corporation.
5. To discuss with the independent auditor (i) all critical accounting policies and practices identified by management or the independent auditor, (ii) all alternative treatments of financial information within GAAP for policies and practices related to material items that the independent auditor has discussed with management, the ramifications of such alternative disclosures and treatments, and the accounting treatment “preferred” by the independent auditor, and (iii) any other material written communications with management, such as a management letter or schedule of unadjusted differences.
6. To discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and ratings agencies with management and the independent auditor, as appropriate.
7. To engage outside advisors, including counsel, as it determines necessary to carry out its duties and approve appropriate funding and retention terms, as determined by the Committee.
8. To discuss policies with management and the independent auditor, as appropriate, with respect to risk assessment and risk management, including the Company’s major risk exposures and the steps management has taken to monitor and control such exposures.
9. To discuss with the General Counsel legal matters that may have a material impact on the financial statements or the Company’s compliance policies.
10. To meet separately and periodically, but at least quarterly, with each of the internal auditors, the independent auditors and the General Counsel.
11. To review with the independent auditor the matters required to be discussed by Public Company Accounting Oversight Board Interim Auditing Standard AU Section 380, “Communications with Audit Committees” relating to the conduct of the audit, including any problems or difficulties encountered in the course of the audit work, any restrictions on the scope of the independent auditor’s activities or on access to requested information, any significant disagreements with management and, in each case, management’s response to such matter.
12. To set hiring policies for employees or former employees of the independent auditors.
13. To review, as appropriate, the results of internal audits and discuss such matters with the internal audit department and with management, including significant reports to management prepared by the internal audit department and management’s responses.
14. To discuss, as appropriate, the adequacy of the Company’s disclosure controls and internal controls with the internal audit department, the independent auditor and management, including reports regarding (i) significant limitations on the effectiveness of disclosure controls and procedures, (ii) significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting and (iii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting; and to review and discuss, as appropriate, the steps implemented by management to address significant control deficiencies.
15. To establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters and violations of law or Company policy.
16. To report regularly to the Board of Directors, including oversight and review of the Company’s legal, ethical and regulatory compliance program and of any issues that arise with respect to the quality or integrity of the Company’s compliance with legal, ethical or regulatory requirements, the performance and independence of the Company’s independent auditors, or the performance of the internal audit function.

The Chair of the Committee, or any two members of the Committee (in consultation with the Chair where possible) may call meetings of the Committee.  Meetings of the Committee may be held telephonically.

The Chair shall preside at all sessions of the Committee at which he or she is present and shall set the agendas for Committee meetings.  All members of the Board of Directors may suggest to the Chair items for inclusion in the agenda for the Committee’s meetings.  The agenda and information concerning the business to be conducted at each Committee meeting shall, to the extent practical, be communicated to the members of the Committee sufficiently in advance of each meeting to permit meaningful review.

The Committee shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the independent auditor for the purpose or preparing or issuing an audit report or performing other audit, review or attest services for the Company and to any advisors employed by the Committee, and for ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties and responsibilities.

The Committee may, in its sole discretion, delegate any of its duties and responsibilities to subcommittees.  The Committee may, in its sole discretion, delegate to one or more of its members the authority to pre-approve any audit or non-audit services to be performed by the independent auditor, provided that any such approvals are reported to the Committee at its next scheduled meeting.

The Committee shall conduct an annual performance evaluation of the Committee, including compliance with this charter, and shall report the results of the evaluation to the Nominating and Corporate Governance Committee.  The Committee shall review at least annually the adequacy of this charter and recommend any proposed changes to the Nominating and Corporate Governance Committee.

The Committee may request that any Directors, officers or other employees of the Company, or any other persons whose advice and counsel are sought by the Committee, attend any meeting of the Committee to provide such pertinent information as the Committee requests.  The Committee shall periodically meet in executive session.

The Committee shall have the authority to investigate any matter brought to its attention that it determines to be within the scope of its authority with full access to all books, records, facilities and personnel of the Company.

In addition to performing the Committee’s duties and responsibilities set forth in this charter, the Committee may carry out additional functions and adopt additional policies and procedures in furtherance of the purpose of the Committee outlined in this charter as may be appropriate in light of changing business, legislative, regulatory or other conditions, or as may be delegated to the Committee by the Board of Directors from time to time.  The Committee may also, at its discretion, review particular businesses of the Company in order to evaluate accounting policies, disclosure practices or controls, internal controls, compliance matters or other matters within the scope of the Committee’s duties and responsibilities.

The Committee shall maintain minutes or other records of its meetings.