AUDIT AND CORPORATE GOVERNANCE COMMITTEE CHARTER
This charter governs the operations of the Audit and Corporate Governance
Committee. The committee shall be nominated by the Chairman of the Board and
appointed by the Board of Directors and shall comprise at least three directors,
each of whom are independent directors as that term is defined in the Alpharma
Corporate Governance Principles. All committee members shall be financially
literate, or shall become financially literate within a reasonable period of
time after appointment to the committee, and at least one member shall have
accounting or related financial management expertise necessary to be considered
a "financial expert" under the rules of the Securities and Exchange Commission.
STATEMENT OF POLICY
The committee shall provide assistance to the Board of Directors in
fulfilling the Board's oversight responsibility to the stockholders, potential
stockholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the annual independent audit of the
Company's financial statements, and Corporate Governance Principles. In so
doing, it is the responsibility of the committee to maintain free and open
communications between the committee, independent auditors, and management of
In discharging its oversight role, the committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities, and personnel of the Company and the power to retain
outside counsel, or other experts for this purpose. The Company shall provide
funding necessary for the committee to retain outside counsel and experts.
The committee should take the appropriate actions to set the overall
corporate "tone" for quality financial reporting, sound business risk and
corporate governance practices, and ethical behavior.
RESPONSIBILITIES AND PROCESSES
The following is a general expression of the responsibilities and processes
to be employed by the committee. However, the committee believes its policies
and procedures should remain flexible in carrying out these responsibilities, in
order to react to changing conditions and circumstances.
THE FINANCIAL REPORTING PROCESS
It is the responsibility of the committee to oversee the Company's
financial reporting process on behalf of the Board and report the results of its
activities to the Board. Management is responsible for preparing the Company's
financial statements, and the independent auditors are responsible for auditing
those financial statements.
The following shall be the principal recurring processes of the committee
in carrying out its oversight responsibilities:
- The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are directly
accountable to the committee, as representatives of the Company's
stockholders. The committee shall be responsible for the oversight of
work of the independent auditors, including the resolution of any
disagreement between management and the auditors and shall have the
direct authority and to appoint, approve the compensation for and, where
appropriate, replace the independent auditors. The Company shall provide
funding to the committee for the purpose of engaging and compensating the
independent auditors. The committee shall discuss with the auditors their
independence from management and the Company and the matters included in
the written disclosures required by the Independence Standards Board.
Annually, the committee shall review and recommend to the Board the
selection of the Company's independent auditors.
- The committee shall discuss with the independent auditors the overall
scope and plans for their respective audits, including the level of fees
paid. Also, the committee shall discuss with management and the
independent auditors the adequacy and effectiveness of the accounting and
financial controls, including the Company's system to monitor and manage
business conduct guidelines. Further the committee shall meet separately
with the independent auditors, with and without management present, to
discuss the results of their examinations.
- The committee shall review the year-end financial statements and Form
10-K with management and the independent auditors and recommend the
signing of the Form 10-K by the entire Board of Directors. Also, the
committee shall discuss the results of the review and any other matters
required to be communicated to the committee by the independent auditors
under generally accepted auditing standards.
- The committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the committee by the independent auditors
under generally accepted auditing standards. The chair of the committee
may represent the entire committee for the purposes of this review.
- The Company's Board of Directors has adopted a resolution requiring the
committee to review transactions between the Company and A. L. Industrier
(or their respective subsidiaries) involving more than $50,000 and to
report to the Company's Board of Directors regarding whether such
transactions are fair to the Company. Such resolution also requires prior
approval of the committee for any transaction with A. L. Industrier which
involves $500,000 or more, except that prior approval of the committee is
required for any sale or transfer of assets other than inventory sold or
transferred in the ordinary course of business.
- The Committee shall adopt procedures by which it will pre-approve all
audit and non-audit services provided by the independent auditors.
It is the responsibility of the committee to oversee corporate governance
issues relating to the Company. The following shall be the principal
responsibilities of the committee in carrying out these oversight
- To develop and recommend to the Board of Directors for its approval a set
of Corporate Governance Principles. The committee shall review the
principles on an annual basis, or more frequently if appropriate, and
recommend changes as necessary.
- The development of corporate policies and procedures necessary or
appropriate to carry out the intent of the Corporate Governance
- To develop and institute a procedure for the general oversight of the
Company's Business Conduct Guidelines and the receipt, retention and
treatment of complaints received by the Company concerning its Business
Conduct Guidelines, accounting, internal accounting controls or auditing
matters, including a procedure allowing employees to make such complaints
on an anonymous basis.
- To review and react to any complaints or other matters relating to
corporate governance that come to its attention and to make appropriate
reports to the Board of Directors.
COMMITTEE OPERATING PROCESSES
Meetings may be called by the Chairman of the Audit and Corporate
Governance Committee by oral or written notice, and communicated to each member
not less than twenty-four hours before such meeting.
Action may be taken without a meeting if all members of the committee
consent to such action and confirm such unanimous consent in writing either
prior or subsequent to the taking of such action.
The Audit and Corporate Governance Committee shall report to the Board at
its next regularly scheduled meeting on any material actions taken by the
committee. Minutes of all meetings of the committee shall be kept in the
ordinary course of business and shall be open for inspection at all times upon
the request of any member of the Board of Directors.
A majority of the committee shall constitute a quorum for the transaction
of business and an affirmative vote of the majority of the members who attend
the meeting shall be required for approval of any action.
USE OF THIRD PARTY PROVIDERS
The committee shall have the authority to use third party service providers
in executing its duties. The committee shall have the sole authority to approve,
retain, terminate and approve the fees and other retention terms of any such
third party service providers.