Audit Committee Charter
The purposes of the Audit Committee (“Committee”) are to assist the Board of Directors in its oversight of the integrity of the Company's financial statements, the Company's compliance with legal and regulatory requirements, the independent auditor's qualifications and independence, and the performance of the Company's internal audit function and independent auditor; and to produce an audit committee report for inclusion in the Company's proxy statement, in accordance with applicable rules and regulations.
The management of the Company is responsible for the preparation, presentation and integrity of the Company's financial statements. Management is responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for planning and carrying out a proper audit of the Company's annual financial statements, review of the Company's quarterly financial statements prior to the filing of each quarterly report on Form 10-Q, and other procedures. In fulfilling their responsibilities hereunder, it is recognized that members of the Committee are not full-time employees of the Company and are not, and do not represent themselves to be, accountants or auditors by profession or experts in the fields of accounting or auditing. As such, it is not the duty or responsibility of the Committee or its members to conduct "field work" or other types of auditing or accounting reviews or procedures or to set auditor independence standards, and each member of the Committee shall be entitled to rely on (i) the integrity of those persons and organizations within and outside the Company from which it receives information, and (ii) the accuracy of the financial and other information provided to the Committee by such persons or organizations absent actual knowledge to the contrary.
The Committee will consist of three or more members of the Board appointed from time to time by the Board, each of whom the Board has determined have no material relationship with the Company. The Committee will consist solely of non-employee directors who meet the independence and experience requirements of the Securities and Exchange Commission and the New York Stock Exchange. The Board shall determine that each member is financially literate and that at least one member shall have accounting or related financial management expertise as such qualifications are interpreted by the Board in its business judgment. Members of the Committee are subject to removal at any time by a majority of the Board without cause. Any resulting vacancy may be filled by the Board.
No director may serve as a member of the Committee if such director serves on the audit committees of more than two other public companies unless the Board determines that such simultaneous service would not impair the ability of such director to effectively serve on the Committee and disclosed this determination in the Company's annual proxy statement.
No member of the Committee may receive any compensation from the Company other than (i) director’s fees (including cash, stock, restricted stock and/or stock options); (ii) a pension or other deferred compensation for prior service that is not contingent on future service; and (iii) any other regular benefits that other directors receive.
DUTIES AND RESPONSIBILITIES
The Committee is not responsible for preparing financial statements or performing audits, and its members are not auditors or certifiers of the Company's financial statements.
The Committee will:
1. select the Company's independent auditor (subject to stockholder ratification of the selection, if such ratification is required or sought), approve the fees to be paid to such firm, and terminate such firm when circumstances warrant;
2. review and discuss with the independent auditor the scope and plans for its audit examination, its audit procedures and the results of the annual audit examination;
3. evaluate the independent auditor’s qualifications, performance and independence on an ongoing basis, but no less frequently than once per year;
4. establish policies and procedures for, and, as appropriate, approve the engagement of, the independent auditor for any non-audit service (to the extent such service is not prohibited by Section 10A(g) of the Securities Exchange Act of 1934, as amended) and the fee for such service, and consider whether the independent auditor’s performance of any non-audit services is compatible with its independence. The Committee may delegate one (1) or more members the authority to grant pre-approval of non-audit services;
5. 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 independent auditor's firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with such issues;
• all relationships between the independent auditor and the Company; and
• that neither the lead (or coordinating) audit partner having primary responsibility for the Company’s audit nor the audit partner responsible for reviewing the Company’s audit has performed audit services for the Company in each of the Company’s five (5) previous fiscal years;
6. review and discuss with management and the independent auditor the Company's annual audited financial statements and quarterly financial statements, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," prior to the filing or release of such financial statements;
7. review with management and the independent auditor (a) major issues regarding accounting policies and practices used by the Company, including any significant changes in selection or application of accounting policies and major internal controls; (b) all significant reporting issues and judgments, including the effects of alternative GAAP methods; and (c) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures;
8. recommend to the Board whether, based on the review and discussions described in paragraphs (6) and (7) above, the annual audited financial statements should be included in the Company's annual report on Form 10-K;
9. regularly review with the independent auditor any audit problems or difficulties and management's response (including any restrictions on the scope of the independent auditor's activities or on access to requested information and any significant disagreements with management), and resolve disagreements between management and the independent auditor regarding financial reporting;
10. review the performance of the internal auditor;
11. establish clear hiring policies for employees or former employees of the independent auditor;
12. establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters;
13. meet periodically with management, the internal auditor and the independent auditor and obtain, review, and/or discuss (a) the reports required to be prepared by the independent auditor under Section 10A(k) of the Securities Exchange Act of 1934 regarding (i) all critical accounting policies and practices used in the Company’s audit, and (ii) all alternative treatments of the Company’s financial information within GAAP that have been discussed with management, the ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the independent auditor, and (b) all other material written communications between the independent auditor, management and the internal auditor, such as any management letter or schedule of unadjusted differences;
14. discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies;
15. discuss policies with respect to risk assessment and risk management and generally review processes established by management to manage and assess risk;
16. produce an audit committee report for inclusion in the Company's proxy statement, in accordance with applicable rules and regulations;
17. review and reassess the adequacy of this Charter at least annually and recommend any proposed changes to the Board for approval;
18. conduct an annual performance evaluation of the Committee, in connection with which the Committee will review on a retrospective basis:
a. major issues regarding accounting principles and financial statement presentations, including any significant change in the Company's selection or application of accounting principles;
b. major issues as to the adequacy of the Company's internal controls and any special audit steps adopted in light of material control deficiencies;
c. analyses prepared by management and/or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements;
d. the effect on the financial statements of regulatory and accounting initiatives and off-balance sheet structures;
e. earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies; and
19. as appropriate, obtain advice and assistance from outside legal, accounting or other advisors.
The Committee will provide regular reports of its activities to the Board, specifically addressing any issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent auditor, or the performance of the internal audit function.
The Committee shall meet once every fiscal quarter, or more frequently if circumstances dictate, to discuss with management the annual audited financial statements and quarterly financial statements, as applicable. A majority of the members of the Committee will constitute a quorum for the transaction of business. Periodically, the Committee should meet separately with management, the internal auditor and the independent auditor to discuss any matters that the Committee believes should be discussed. Members of the Committee may participate in a meeting of the Committee by telephonic communication.
RESOURCES AND AUTHORITY
The Committee will have the resources and authority appropriate to discharge its responsibilities, including sole authority to:
• retain and terminate the independent auditor, which will be accountable to and report to the Committee;
• approve any significant non-audit relationship with the independent auditor, other than any relationship to provide services prohibited by Section 10A(g) of the Exchange Act; and
• approve all audit engagement fees and terms
In addition, the Committee will have authority to:
• conduct or authorize investigations into any matters within its scope of responsibilities;
• engage outside auditors for special audits, reviews and other procedures;
• retain special counsel and other experts and consultants to advise the Committee; and
• approve the fees and other retention terms for such parties.
The Committee may request any officer or employee of the Company or the Company's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee. The Committee has the authority to use other resources either within or outside the Company to address special circumstances when appropriate.
The Committee may delegate its authority to subcommittees established by the Committee from time to time, which subcommittees will consist of one or more members of the Committee and will report to the Committee.
ADOPTION OF CHARTER
This Charter was
originally adopted by the Board of Directors on