AUDIT COMMITTEE CHARTER

Organization

The Committee shall be composed of at least three directors, each of whom shall be free of any relationship that, in the business judgment of the Board, would interfere with the exercise of their independence from management and the Company. Each Committee member shall also be able to read and understand fundamental financial statements, including the Company's balance sheet, income statement, and cash flow statement. At least one Committee member shall satisfy the financial sophistication requirements of the Nasdaq Marketplace Rules and shall be an "audit committee financial expert" as defined by the Securities and Exchange Commission. In determining financial expertise, the Board may consider past employment experience or background, including being or having been a chief financial officer or other senior officer with financial oversight responsibilities. In addition to these requirements for Committee members, the Board shall consider other applicable stock exchange or regulatory requirements in determining a director's eligibility to serve on the Committee.

Statement of Policy

The Committee shall: (i) oversee the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company, (ii) select the independent auditors, and (iii) evaluate the independence of the independent auditors. In so doing, it is the responsibility of the Committee to maintain free and open means of communication among the Board, the independent auditors and the financial management of Company.

Responsibilities

In carrying out its responsibilities, the Committee believes its policies and procedures should remain flexible, in order to best react to changing conditions and to provide oversight to the Board and shareholders to help see to it that the corporate accounting and reporting practices of the Company are in accordance with all applicable requirements. The function of the Committee is oversight. 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 polices and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The external auditors are responsible for planning and carrying out a proper audit and reviews, including reviews 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 the members of the Committee are not 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, except as required by other provisions of this charter. Therefore, it is not the duty or responsibility of the Committee to conduct “field work” or other types of auditing or accounting reviews or procedures, and each member of the Committee shall be entitled to rely on (i) the integrity and skill of those persons and organizations within and outside the Company that it receives information from and (ii) the accuracy of the financial and other information provided by such persons or organizations absent actual knowledge to the contrary (which shall be promptly reported to the Board).

In carrying out these responsibilities, the Committee will:

• Review and select the independent auditors to audit the financial statements of the Company and its subsidiaries. Such independent auditors shall be ultimately accountable to the Board and the Committee as representatives of the shareholders, and the Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditors (including resolution of disagreements between management and the auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company, and such independent auditors shall report directly to the Committee. Prior to engaging any firm for the first time, the Committee shall (a) require that the firm describe in writing to the Committee all relationships between the accounting firm or any of its affiliates and the Company or persons in a financial reporting oversight role at the Company, that may reasonably be thought to bear on the firm's independence; (b) discuss with the Committee the potential effects of any such relationships on the firm's independence; and (c) document the substance of such discussion(s) with the Committee. Collectively, requirements (a), (b), and (c) shall be referred to as the "Rule 3526 requirements."
• Require that the independent auditors annually provide a formal written statement affirming that they are independent, and require that the independent auditors otherwise comply with applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Committee concerning independence, including the Rule 3526 requirements. The Committee shall be responsible for actively engaging in a dialogue with the independent auditors with respect to any disclosed relationships or services that may affect the objectivity and independence of the independent auditors and taking or recommending that the Board take action as appropriate to oversee the independence of the independent auditors.
• Meet with the independent auditors and financial management of the Company to review the scope of the proposed audit for the current year and the audit procedures to be utilized, and at the conclusion of such audit, including any comments or recommendations of the independent auditors.
• Review with the independent auditors and the financial and accounting personnel the adequacy and effectiveness of the accounting and financial controls of the Company and elicit any recommendations for the improvement of such internal control procedures or particular areas where new or more detailed controls or procedures may be desirable. Particular emphasis should be given to the adequacy of such internal controls to expose any payments, transactions or procedures that might be deemed illegal or otherwise improper.
• Discuss, or the Committee Chairperson will discuss, matters identified during the auditors' review of interim financial information with the auditors and management prior to the filing of the Company's Form 10-Q.
• Review the financial statements contained in the Annual Report to Shareholders with management and the independent auditors to determine that the independent auditors are satisfied with the disclosure and content of the financial statements to be presented to the shareholders. Any changes in accounting principles should be reviewed.
• Discuss with the independent auditors and the Company's financial management the auditors' judgments about the quality of the Company's accounting principles as applied in its financial reporting and significant judgments affecting the financial statements. The discussion should include such matters as the consistency of application of accounting polices and the clarity and completeness of the Company's accounting information contained in the financial statements and related disclosures.
• Receive and review a report from the independent auditors discussing: (a) all critical accounting policies and practices in use by the Company; (b) alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, the ramifications of the use of such alternative treatments (including relevant disclosure requirements) and the treatment preferred by the independent auditor; and (c) other material written communications with management, such as any management letter, engagement letters and independence letters.
• Periodically discuss with the independent auditors whether all material correcting adjustments identified by the independent auditors in accordance with generally accepted accounting principles and rules of the Securities and Exchange Commission are reflected in the Company's financial statements.
• Review and reassess the adequacy of this charter on an annual basis.
• As required by the applicable regulations, provide a report in the annual proxy statement disclosing that the Committee has: (i) reviewed and discussed the audited financial statements with management, (ii) discussed with the independent auditors that the matters required to be discussed by Statement on Auditing Standards No. 61, as adopted by the Public Company Accounting Oversight Board in Rule 3200T, as may be modified or supplemented, (iii) received the written disclosures and the letter from the independent auditors required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Committee concerning independence, as may be modified and supplemented, and has discussed with the auditors the auditors' independence and (iv) disclosed that based on the review and discussions described in (i) through (iii) above, the Committee recommended to the Board that the audited financial statements be included in the Company's Annual Report on Form 10-K.
• Provide sufficient opportunity for the independent auditors to meet with the members of the Committee without members of management present. Among the items to be discussed in these meetings are the independent auditors' evaluation of the Company's financial and accounting personnel, and the cooperation that the independent auditors received during the course of the audit.
• Establish procedures for (a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
• Submit the minutes of all meetings of the Committee to, or discuss the matters discussed at each committee meeting with, the Board.
• Investigate any matter brought to the attention within the scope of its duties, with the power to retain outside counsel or independent accountants for this purpose if, in its judgment, that is appropriate.

Resources and Authority

The Committee shall have the resources and authority appropriate to discharge its responsibilities, including the authority to engage outside auditors for special audits, reviews, and other procedures and to retain special counsel and other experts or consultants, as it determines necessary to carry out its duties.

The Company shall provide for appropriate funding, as determined by the Committee, for payment of: (a) compensation to any independent auditors engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the listed issuer; (b) compensation to any advisers employed by the Committee; and (c) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
Skip to Quick Links section.