AUDIT COMMITTEE CHARTER

THE FINOVA GROUP INC.

 

Purpose:

 

The Audit Committee is appointed by the Board to assist the Board in overseeing (1) the quality and integrity of FINOVA’s financial statements, (2) FINOVA’s systems of internal accounting and financial controls, (3) compliance with legal and regulatory requirements, (4) the independence and performance of the internal and external auditors, and (5) the activities of the Ethics Committee and compliance with its requirements.

 

The Committee should promote open communication among the Committee, the Board, financial and senior management, and the internal and external auditors. The Committee members and their designees have the authority to investigate any matter brought to their attention or deemed appropriate by them. They will have full access to all of FINOVA’s books, records, facilities, personnel and agents. The Committee may retain any legal, accounting and other consultants to advise the Committee.

 

While the Committee has oversight responsibilities, it has no obligation to plan or conduct audits or to determine that the financial statements are complete, accurate and in accordance with generally accepted accounting principles. Management is responsible for preparing the financial statements. The external auditors are responsible for auditing and expressing their opinion on those statements. The Committee also has no obligation to conduct investigations, resolve disagreements, if any, between management, the external auditors or others, or assure compliance with any laws, regulations or the Code of Conduct.

 

Composition:

 

The Committee shall be comprised of three or more members, as determined by the Board. All members of the Committee shall meet the independence, experience and any other requirements of the New York Stock Exchange and any other relevant regulatory body, as interpreted by the Board in its reasonable business judgment.

 

Unless a Chairman is elected by the Board, the members of the Committee may designate a Chairman by majority vote of the full Committee. The Chairman may appoint a temporary Chairman in his or her absence.

 

Meetings:

 

The Committee will meet at least four times annually, or more frequently in its discretion. The Committee should meet at least semi-annually with the Chief Executive Officer, Senior Vice President – Controller and Chief Financial Officer, Senior Vice President – Internal Audit (the “Internal Auditor”), the General Counsel and external auditors in separate private sessions to discuss any matters that the Committee or those individuals believe should be discussed privately.

 

The Committee may establish procedural and policy rules, subject to the supervision of the Board and the requirements of the Company’s certificate of incorporation and bylaws. The Committee may appoint subcommittees or may authorize one or more of its members to act on its behalf in carrying out its duties if permitted by applicable law, stock exchange rules, accounting standards and other governing authority.

 

Responsibilities:

 

To fulfill its responsibilities, the Audit Committee will conduct the meetings noted above and will:

 

A.

Financial Reporting and the Reporting Process:

 

 

1.

Review the annual audited financial statements with management and the external auditors, including significant issues regarding accounting principles and policies, as well as the adequacy of internal controls that could significantly affect FINOVA’s financial statements.

 

 

2.

Review with management and the external auditors the quarterly financial statements, if required by applicable law, exchange rule, accounting principles or other requirements. If requested by the

 

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Committee or advised by management or the external auditors that the review is necessary or advisable prior to the release of quarterly earnings, the review will be conducted before that release.

 

 

3.

Review one or more analyses prepared by management and the external auditors of significant financial reporting issues and judgments made in connection with the preparation of the financial statements. The analyses should review the quality, not just the acceptability, of accounting principles and financial disclosure practices used by FINOVA.

 

 

4.

Meet periodically with management to review FINOVA’s financial risk exposures and the steps management has taken to monitor and control those exposures.

 

 

5.

Review significant changes to FINOVA’s accounting principles and policies and internal audit standards, as suggested by management, the Internal Auditor or the external auditors.

 

B.

External Auditors:

 

 

1.

Recommend to the Board the appointment of the independent external auditors. Assure the external auditors are advised that they are ultimately accountable to the Committee and the Board.

 

 

2.

Evaluate the performance of the external auditors as warranted and annually recommend their retention or replacement to the Board.

 

 

3.

Receive periodic reports from the external auditors regarding their independence. Evaluate the reports and satisfy itself and the Board as to the continued independence of the external auditors.

 

 

4.

Approve the fees to be paid to the external auditors.

 

 

5.

Meet with the external auditors in connection with the audits to review the planning, staffing and scope of the significant audits to be conducted.

 

 

6.

Obtain from the external auditors assurance at least annually that Section 10A of the Private Securities Litigation Reform Act of 1995 has not been implicated.

 

 

7.

Discuss with the external auditors the matters required to be discussed by Statement of Auditing Standards No. 90, relating to the conduct of the audits.

 

 

8.

Review with the external auditors any problems or difficulties they may have encountered in performing their duties, including any restrictions on the scope of activities or access to the required information or any changes to the planned scope of the external audit. Review any management letters provided by the external auditors and management’s response to those letters.

 

C.

Internal Auditors:

 

 

1.

Review the appointment, performance and replacement of the Internal Auditor.

 

 

2.

Review with the Internal Auditor the internal audit department’s responsibilities, planned audit activities and department organization.

 

 

3.

Review the significant reports to management prepared by the internal auditing department and management’s responses, as well as any other significant issues that department has encountered in performing its auditing duties.

 

 

D.

Legal and Ethical Compliance:

 

 

1.

Review with management, the Internal Auditor, and the General Counsel whether FINOVA (including its domestic and foreign subsidiaries) is in material compliance with applicable legal requirements. Review the procedures designed to help assure compliance with applicable laws and monitor the results of those compliance efforts.

 

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2.

Review reports from the Internal Auditor on the activities of the Ethics Committee and on compliance by FINOVA personnel and agents with the Code of Conduct.

 

 

3.

Review with the General Counsel significant legal matters, investigations by governmental agencies, stock exchanges or other regulatory authorities, changes in FINOVA’s legal compliance policies and procedures, and any other matters requested by the Committee or the General Counsel.

 

E.

Continuing/General Duties:

 

 

1.

Review and update this Charter at least annually and recommend any proposed changes to the Board for approval and publish the Charter in the proxy statement at least once every three years.

 

 

2.

Prepare the annual report from the Committee required to be included in FINOVA’s proxy statement.

 

 

3.

Review and, if appropriate, approve or recommend Board or shareowner approval of significant related party transactions that require Committee, Board or shareowner approval, pursuant to law or Section 3.07 of the New York Stock Exchange Manual.

 

 

4.

Report periodically to the Board on significant results of the foregoing activities.

 

 

5.

Report to the New York Stock Exchange and, if necessary, other regulatory agencies regarding the adoption of this Charter and annually on other Committee matters.

 

 

6.

Perform any other duties deemed necessary or appropriate by the Committee or the Board or as are imposed by law, rules of the New York Stock Exchange, accounting standards or similar requirements.