Audit Cmmittee Charter I. Purpse f Audit Cmmittee The purpse f the Audit Cmmittee, which is part f the Bard, shall be (a) t assist the Bard s versight f (i) the integrity f the Cmpany s financial statements, (ii) the Cmpany s independent auditrs qualificatins and independence, (iii) the perfrmance f the Cmpany s independent auditrs and the Cmpany s internal audit functin, (iv) the Cmpany s cmpliance with legal and regulatry requirements, and (v) the Cmpany s systems f disclsure cntrls and prcedures, and internal cntrls ver financial reprting, and (b) t prepare a reprt fr inclusin in the Cmpany's annual prxy statement, in accrdance with applicable law, regulatin and listing standards. II. Cmpsitin f Audit Cmmittee The Audit Cmmittee shall cnsist f nt less than three members. Each member f the Audit Cmmittee shall be appinted by the Bard upn the recmmendatin f the Crprate Gvernance Cmmittee and shall satisfy the independence requirements f the New Yrk Stck Exchange and the Sarbanes Oxley Act f 2002 (the "Act") as apprpriate, including the rules and regulatins prmulgated by the Securities and Exchange Cmmissin. T ensure that each Audit Cmmittee member can devte the apprpriate time t his/her versight rle, each member is limited t serving simultaneusly n the audit cmmittees f n mre than three public cmpanies. The cmmittee as a whle and each individual member must cmply with the financial literacy requirements f the New Yrk Stck Exchange. In accrdance with the Act, the bard will determine whether at least ne member f the cmmittee qualifies as an audit cmmittee financial expert in cmpliance with criteria established by the SEC. The existence f such a member, including his r her name and whether r nt he r she is independent, will be disclsed in peridic filings as required by the SEC. Vacancies n the Audit Cmmittee shall be filled by majrity vte f the Bard at the next meeting f the Bard fllwing the ccurrence f the vacancy. The members f the Audit Cmmittee may be remved by a majrity vte f the Bard. III. Authrity and Respnsibilities f Audit Cmmittee The fllwing are the respnsibilities f the Audit Cmmittee: A. Independent Auditr Appint, cmpensate, and versee the wrk perfrmed by the independent auditr fr the purpse f preparing r issuing an audit reprt r related wrk. The independent auditr shall reprt directly t the Audit Cmmittee and the Audit Cmmittee shall versee the reslutin f disagreements between management and the independent auditr in the event that they arise.
Adpt and ensure cmpliance with a pre-apprval plicy with respect t services prvided by the independent auditr. Review and, in its sle discretin, apprve in advance the services and terms f all audits and, as prvided in the Act, all permitted nn-audit services and relatinships between the Cmpany and the independent auditr. Apprval f audit and permitted nn-audit services may als be made by ne r mre members f the Audit Cmmittee as shall be designated by the Audit Cmmittee/the chairpersn f the Audit Cmmittee, prvided that such designee reprt his/her apprval t the Audit Cmmittee at the next scheduled meeting. At least annually, btain and review a reprt by the independent auditr describing: (a) all relatinships between the independent auditr and the Cmpany cnsistent with Independence Standards Bard Standard N. 1: (b) material issues raised by the mst recent internal quality cntrl review r peer review, r by any inquiry r investigatin cnducted by gvernmental r prfessinal authrities within the five preceding years, respecting ne r mre independent audits carried ut by the independent auditr and any steps taken t deal with such issues; and (c) the independent auditr s internal quality-cntrl prcedures. Discuss the freging reprt by the independent auditr t the extent it disclses any material issues, relatinships r services that may impact the perfrmance, bjectivity r independence f the utside auditr, including the matters required t be discussed by Statement n Auditing Standards N. 61, and take, r recmmend that the full bard take, apprpriate actins t versee the independence f the utside auditr. Evaluate, with the assistance f the Cmpany's management, the qualificatins, perfrmance and independence f the independent auditr, including the lead partner f the independent auditr and, if s determined by the Audit Cmmittee, terminate the Cmpany's engagement f the independent auditr. Ensure that partner rtatin practices are in cmpliance with all applicable SEC rules and ther related laws and regulatins. Establish clear hiring plicies, cmpliant with gverning laws r regulatins fr emplyees r frmer emplyees f the independent auditr. The Audit Cmmittee shuld present its cnclusins with respect t the abve matters, as well as its review f the lead partner f the independent auditr t the Bard. B. Financial Reprting, Accunting Plicies and Internal Cntrl Meet t review and discuss the annual audited and quarterly financial statements with the Cmpany's management, its Disclsure Cmmittee and the independent auditr, including the Cmpany s specific disclsures under Management s Discussin and Analysis f Financial Cnditin and Results f Operatins. Review ther relevant reprts r financial infrmatin submitted by the Cmpany t any gvernmental bdy, r the public, including management certificatins as required by the Act. Receive and review: (1) any disclsure frm the Cmpany s CEO r CFO made in cnnectin with the certificatin f the Cmpany s quarterly and annual reprts filed with the SEC and (2) management s reprt and the 2
auditr s attestatin related t the effectiveness f internal cntrl ver financial reprting. Discuss with management and the auditr: a) all significant deficiencies and material weaknesses in the design r peratin f internal cntrl ver financial reprting which are reasnably likely t adversely affect the Cmpany s ability t recrd, prcess, summarize and reprt financial data; and b) any fraud, whether r nt material, that invlves management r ther emplyees wh have a significant rle in the Cmpany s internal cntrls. Discuss the Cmpany's earnings press releases, including review f prfrma r adjusted nn-gaap infrmatin, as well as financial infrmatin and earnings guidance prvided by the Cmpany t analysts and rating agencies. This review may be dne generally thrugh a discussin f the types f infrmatin t be disclsed and type f presentatins t be made, and the Audit Cmmittee need nt discuss in advance each earnings release r each instance in which the Cmpany may prvide earnings guidance. Review analyses setting frth-significant financial reprting issues and judgments made in cnnectin with the preparatin f the Cmpany's financial statements, including analyses f the effects f alternative GAAP methds n the financial statements. Review majr issues regarding the Cmpany's significant accunting principles and financial statement presentatins and any changes in the selectin r applicatin f accunting principles; majr issues regarding the adequacy f the Cmpany s internal cntrls; and any special audit steps adpted in light f material cntrl deficiencies. Cnsider the impact f acceptable alternative accunting principles that are cmmunicated by the independent auditr, internal auditrs r the Cmpany's management. Review the effect f regulatry and accunting initiatives, as well as ffbalance sheet structures, n the financial statements f the Cmpany. Discuss the Cmpany s plicies with respect t risk assessment and risk management; including the Cmpany s majr financial accunting and risk expsures and the steps management has undertaken t cntrl them. Make a recmmendatin t the Bard as t the inclusin f the Cmpany's audited financial statements in the Cmpany's Annual Reprt n Frm 10- K. Submit the Audit Cmmittee reprt required by the rules f the Securities and Exchange Cmmissin t be included in the Cmpany s annual prxy statement. C. Audit Prcess f the Independent Auditr Meet with the independent auditr prir t its cmmencing the audit t review the scpe (i.e. nature f wrk perfrmed by entity), planning and staffing f the audit. Discuss with the independent auditr the matters required t be discussed under SAS 61, as amended by SAS 84 and SAS 90. Review with the independent auditr any prblems r difficulties and management s 3
respnse; and hld timely discussins with the independent auditrs regarding the fllwing: All critical accunting plicies and practices; All alternative treatments f financial infrmatin within generally accepted accunting principles that have been discussed with management, ramificatins f the use f such alternative disclsures and treatments, and the treatment preferred by the independent auditr; and Other material written cmmunicatins between the independent auditr and management including, but nt limited t, the management letter and schedule f unadjusted differences. D. Internal Audit Functin Review and advise n the appintment and replacement f the Cmpany s Chief Audit Executive, the adequacy and qualificatins f the Internal Audit staff, and the respnsibilities, rganizatin structure and budget f the Internal Audit functin. Review, peridically with the independent auditr, the budget, staffing, and respnsibilities f the Internal Audit functin. Annually, review and recmmend changes (if any) t the Internal Audit charter. Review any significant reprts r summaries theref t the Cmpany's management prepared by the Internal Audit staff and related respnses f the Cmpany's management. Peridically review with the Cmpany s Chief Audit Executive any significant difficulties, disagreements with management, r scpe restrictins encuntered in the curse f the Internal Audit functin s wrk. E. Legal and Ethical Cnduct Matters Review with the Cmpany's General Cunsel and management, legal matters that may have a material impact n the Cmpany's financial statements, the Cmpany's cmpliance plicies, and any material reprts r inquiries received frm regulatrs r gvernmental agencies. Recmmend, review and update peridically a Cde f Business Cnduct and Ethics and determine that management has established a system t enfrce this Cde. Determine whether the Cde is in cmpliance with all applicable rules and regulatins. Review management s mnitring f the Cmpany s cmpliance with the rganizatin s Cde f Business Cnduct and Ethics, and determine that management has the prper review system in place t ensure that the Cmpany s financial statements, reprts, and ther financial infrmatin disseminated t gvernmental rganizatins and the public, satisfy legal requirements. Establish and maintain prcedures fr the receipt, retentin, and treatment f cmplaints received by the Cmpany regarding accunting, internal accunting cntrls, r auditing matters. 4
Establish and maintain prcedures fr the cnfidential, annymus submissin by emplyees f the Cmpany f cncerns regarding questinable accunting r auditing matters. F. Evaluatin On an annual basis, the Audit Cmmittee shall evaluate and discuss its perfrmance relative t the Audit Cmmittee s purpse, duties and respnsibilities, as described by this Charter. The Audit Cmmittee shall review and assess the adequacy f this Charter at least annually and recmmend any prpsed changes t the Bard fr apprval. IV. Meetings f the Audit Cmmittee The Audit Cmmittee shall meet at least six times per year, r mre frequently as circumstances require. The Audit Cmmittee shall reprt regularly t the Bard regarding the executin f its duties and respnsibilities and shall keep written minutes f its meetings, which minutes shall be maintained with the bks and recrds f the Bard f Directrs f the Cmpany. The members f the Audit Cmmittee shall select a chair wh will preside at each meeting f the Audit Cmmittee and, in cnsultatin with the ther members f the Audit Cmmittee, shall set the frequency and length f each meeting and the agenda f items t be addressed at each upcming meeting. A majrity f the members f the Audit Cmmittee present in persn r by means f a cnference telephne r ther cmmunicatins equipment, by means f which all persns participating in the meeting can hear each ther, shall cnstitute a qurum. Peridically, the Audit Cmmittee shall meet with the Cmpany's management, members f the Cmpany's Internal Audit staff and with the independent auditr in separate sessins. V. Resurces f the Audit Cmmittee The Audit Cmmittee shall have the authrity t retain and cmpensate legal, accunting, r ther advisrs, independent f management, t advise the Audit Cmmittee and assist it in fulfilling its duties and respnsibilities. The Audit Cmmittee may request any fficer r emplyee f the Cmpany, r the Cmpany's utside cunsel r independent auditr, r its advisrs, t attend a meeting f the Audit Cmmittee r t meet with any members f, r advisrs t, the Audit Cmmittee. VI. Other While the Audit Cmmittee has the respnsibilities and pwers set frth in this Charter, it is nt the duty f the Audit Cmmittee t plan r cnduct audits, r t determine that the Cmpany's financial statements are materially accurate and in accrdance with generally accepted accunting principles. This is the respnsibility f the Cmpany's management and the independent auditr. 5