CHARTER OF THE AUDIT COMMITTEE
The purpose of the Audit Committee of the Board is to assist the Board and
as required by law, regulation and Board directive, act on behalf of the Board,
in its oversight of (i) the integrity of the
Company's financial statements, (ii) the Company's compliance with legal and
regulatory requirements, (iii) the engagement of the Company's independent
auditors and their qualifications and independence, and (iv) the performance of
the Company's internal audit function and independent auditors, in addition to
preparing the report the SEC rules require be included in the Company's annual
proxy statement. This Charter sets out the structure and responsibilities of
the Audit Committee.
I. Structure and Qualifications
The Audit Committee shall consist of at least three directors all of whom
shall be independent and all of whom shall be able to read and understand
fundamental financial statements, including the Company's balance sheet, income
statement, and cash flow statement. The Chair of the Audit Committee shall have
such accounting, financial or other experience as shall be required by the
rules of the Securities and Exchange Commission and by the New York Stock
To be considered independent the director must meet the requirements of the
Corporate Governance Rules of the New York Stock Exchange and Rule 10A-3(b)(1)
of the rules and regulations under the Securities Exchange Act of 1934.
If an Audit Committee member simultaneously serves on the audit committee of
more than two other public companies, then the Board must determine that such
simultaneous service would not impair the ability of such member to effectively
serve on the Company's audit committee and disclose such determination in the
annual proxy statement.
Additionally, the Audit Committee shall have at least one audit committee
financial expert within the meaning of item 401(h)(2)
of Regulation S-K of the Securities and Exchange Commission.
The Audit Committee shall meet at least four times a year. One of such
meetings shall immediately proceed the completion and release of the annual
financial results of the Company and one of such meetings shall be subsequent
to such release and shall receive any applicable report by the Company's
independent auditors with respect to the prior year's audit and shall review
and approve the audit plan for the current fiscal year. Both of such meetings
shall include representatives of the independent auditors and shall include an
opportunity for the Committee to meet with the independent auditors separately
The Audit Committee shall:
- Review the accounting policies, procedures, and
practices of the Company, including critical accounting policies and
practices, internal accounting systems and financial reporting processes
and procedures with management and with the Company's independent auditors
and review any issues identified by management or the independent auditors
regarding accounting and financial policies and procedures and any
alternative treatment of financial information discussed by management and
the independent auditors, including the treatment preferred by the
- Review and approve in advance in accordance with
Section 10A(i) of the
Securities Exchange Act of 1934 all auditing and non-audit services
provided by the Company's independent auditors. The Committee may delegate
advance approval of such engagements to a member thereof provided such
approvals are reviewed with the Committee at its next meeting.
- Review and discuss the annual financial
statements and quarterly financial statements of the Company with
management and the independent auditors, including the Company's
disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations", including in such review an
inquiry as to the independent auditors' characterization of the accounting
principles selected by management and judgments made by management
material to the presentation of such financial statement.
- Obtain and review, at least annually, a formal
written report from the Company's independent auditors delineating: (a)
the independent auditors' internal quality-control procedures; (b) 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 carried out by the firm, and any
steps taken to deal with any such issues; and (c) all relationships between
the independent auditor and the Company. Based on such report and the work
of the independent auditor, the Audit Committee shall evaluate the
qualifications, performance and independence of the independent auditor
and report thereon to the Board.
- Possess the sole authority to select, retain,
evaluate, oversee, set compensation for and, when appropriate, terminate
the independent auditors. In connection with such selections, the Audit
Committee shall advise the independent auditors that they are to report to
- Review any accounting changes which have a
material impact on the obligations or financial statements of the Company;
review filings made with the Securities and Exchange Commission as
required; and hold such other conferences or undertake such other reviews
with management and with the independent auditors as the Committee may
deem appropriate or as the independent auditors may request.
- Inquire of management and the independent
auditors to assure that the independent auditors have not engaged in any
prohibited activities within the provisions of Section 10A(g)
of the Securities Exchange Act of 1934.
- Discuss with management of the Company the
Company's philosophy and approach to earnings press releases, as well as
to financial information and earnings guidance provided to analysts and
rating agencies, including the type of information to be disclosed and the
type of presentations to be made.
- Obtain advice and assistance from outside legal,
accounting, or other advisors, as necessary to carry out its duties.
Pursuant to approval of this Charter, no further requirement of Board
approval for such engagements is required and the Company shall provide
all funding necessary to engage the independent auditors, to engage such
outside legal, accounting or other advisors and for the administrative
needs of the Audit Committee.
- Discuss the Company's major financial risk
exposures and the guidelines, policies and practices regarding risk assessment
and risk management, including derivative policies, insurance programs and
steps management has taken to monitor and control major financial risks.
- Meet separately with management, with internal
auditors or other personnel responsible for the internal audit function,
and with independent auditors.
- Review with the independent auditor any audit
problems or difficulties encountered in the course of the audit, including
any restrictions in the scope of the independent auditor's activities or
on access to requested information and any disagreements with management
and management's response. Also, the Audit Committee shall obtain from the
independent auditors copies of all written communications to management of
the Company in any way related to the Company's financial statements or
reports or the integrity of the Company's financial books, records,
practices or procedures.
- Set clear hiring policies for employees or
former employees of the independent auditors.
- Report regularly to the Board and review with
the Board any issues relating 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 auditors, or the performance of the internal audit function.
- Conduct an annual review of the work of the
Audit Committee, including review of: (a) major issues regarding
accounting principles and financial statement presentations, including any
significant changes in the Company's selection or application of
accounting principles, and major issues as to the adequacy of the
Company's internal controls and any special audit steps adopted in light
of material control deficiencies; (b) 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; (c) the effect of regulatory and
accounting initiatives, as well as off-balance sheet structures on the
financial statements of the Company; and (d) the type and presentation of
information to be included in earnings press releases, paying particular
attention to any use of "pro forma," or "adjusted"
non-GAAP, information, as well as financial information and earnings
guidance provided to analysts and rating agencies.
- Establish procedures for the receipt, retention,
and treatment of complaints regarding accounting, internal accounting
controls and auditing matters and for the confidential, anonymous
submission by employees of the Company of concern regarding questionable
accounting or auditing matters.
- Approve all transactions between the Company and
its executive officers and directors, including transactions with
affiliates of executive officers or directors, other than compensation
arrangements approved by the Compensation Committee of the Board, employee
benefit arrangements made available generally to the employees, and
compensation of directors.
- Review and annually approve a code of ethics for
the senior financial officer of the Company as required by section 406 of
the Sarbanes-Oxley Act of 2002.
- Conduct at least annually a performance
evaluation of the Audit Committee.
Director's and Board Committee fees are the only compensation an Audit
Committee member may receive from the Company. If a director satisfies the
definition of an independent director, then his or her receipt of a pension or
other form of deferred compensation from the Company for prior service,
provided such compensation is not contingent in any way on continued service,
will not preclude him or her from satisfying the requirement that director's
fees are the only form of compensation he or she receives from the Company.