Audit Committee

MEMBERS

Peter Gyenes

Steven F. Kaplan

James P. O’Halloran

AUDIT COMMITTEE CHARTER

I. PURPOSE

The primary purpose of the Audit Committee (the “Committee”) is to oversee the accounting and financial reporting processes and the audits of the financial statements of the corporation.

The Committee will primarily fulfill this oversight responsibility by carrying out the activities enumerated in Section IV of this Charter.  The Committee will report periodically to the Board of Directors (the “Board”) regarding the execution of its duties and responsibilities.

II. COMPOSITION

The Committee shall be comprised of three or more directors as determined by the Board, each of whom shall meet the independence and experience requirements of the Nasdaq Stock Market, as applicable, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations of the Securities and Exchange Commission.  At least one member of the Committee shall qualify as an “audit committee financial expert”, as defined in Item 407(d)(5) of Regulation S-K under the Exchange Act.

The members of the Committee shall be elected by the Board at the annual organizational meeting of the Board.  The Board may, at any time and in its sole discretion, replace a Committee member.  A Chairman shall be elected by the full Board.

III. MEETINGS

The Committee shall meet at least four times annually, or more frequently as circumstances dictate.  As part of its job to foster open communication, the Committee should meet at least annually with management and the independent accountants in separate executive sessions to discuss any matters that the Committee or each of these groups believe should be discussed privately.  In addition, the Committee should meet with the independent accountants and management quarterly to review the corporation’s financial statements and the Company’s disclosure under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s SEC reports consistent with Section IV below.

IV. RESPONSIBILITIES AND DUTIES

To fulfill its responsibilities and duties the Committee shall:

Documents/Reports Review

  1. Review and update this Charter periodically, at least annually, as conditions dictate.
  2. Review and discuss with management the corporation’s annual financial statements, quarterly financial statements and all internal controls reports (or summaries thereof).  Review other material reports on financial information (excluding tax returns and reports) submitted by the corporation to any government body, including management certifications as required by the Sarbanes-Oxley Act (Sections 302 and 906) and relevant reports rendered by the independent accountants (or summaries thereof) prepared by the corporation’s internal and external auditors.
  3. Recommend to the Board whether the financial statements should be included in the Annual Report on Form 10-K.  Review with financial management and the independent accountants the 10-Q prior to its filing.
  4. Review and discuss with management, including the CFO and the independent accounting firm, major changes in and other questions regarding accounting and auditing principles and procedures.

Independent Accountants

  1. Be directly responsible for the appointment, compensation, retention and oversight of the independent accounting firm employed by the corporation (including the resolution of disagreements between management and the independent accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related work.  Any such independent accounting firm shall report directly and have ultimate accountability to the Committee.
  2. On an annual basis, receive from the independent accounting firm a formal written statement identifying all relationships between the independent accounting firm and the corporation consistent with applicable requirements of the Public Company Accounting Oversight Board regarding the independent accounting firm’s communications with the audit committee concerning independence.  The Committee shall actively engage in a dialogue with the independent accounting firm as to any disclosed relationships or services that may impact the independent accounting firm’s independence.  The Committee shall take, or recommend that the Board take, appropriate action to oversee the independence of the independent accounting firm.
  3. On an annual basis, discuss with representatives of the independent accounting firm the matters required to be discussed by Statement of Audited Standards (“SAS”) 71, as it may be modified or supplemented.
  4. Review and discuss with the independent accounting firm (outside of the presence of management) the matters described in SAS No. 61, including any difficulties the independent accounting firm encountered in the course of the audit work, any restrictions on the scope of the independent accounting firm’s activities or access to requested information, and any significant disagreements with management.
  5. To the extent required by Section 10A of the Exchange Act, pre-approve all non-audit services to be provided to the corporation by the independent accounting firm.
  6. Review and discuss with the independent accounting firm on a timely basis (i) all critical accounting policies and practices to be used, (ii) all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of such alternative disclosures and treatments, and the treatment preferred by the independent accounting firm; and (iii) other material written communications between the independent accounting firm and management, such as any management letter or schedule of unadjusted differences.

Financial Reporting Processes

  1. In consultation with the independent accountants, review the integrity of the corporation’s financial reporting processes (both internal and external controls) and the internal control structure (including disclosure controls).
  2. Review and discuss with management and the Chief Compliance Officer the corporation’s internal system of audit and business and financial controls, and the results of internal audits.
  3. Consider the independent accountants’ judgments about the quality and appropriateness of the corporation’s accounting principles as applied in its financial reporting.
  4. Consider and approve, if appropriate, major changes to the corporation’s auditing and accounting principles and practices as suggested by the independent accounting firm or management.
  5.  Establish procedures for (i) the receipt, retention and treatment of complaints received by the corporation regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission by employees of the corporation of concerns regarding questionable accounting or auditing matters.

Process Improvement

  1. Establish regular and separate systems of reporting to the Committee by each of management and the independent accountants regarding any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments.
  2. Review with the independent accountants and management the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented.  (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Committee.)
  3. Establish hiring policies for employees or former employees of the corporation’s independent accounting firm employed by the corporation to ensure compliance with Section 10A(l) of the Exchange Act.
  4. Assure the regular rotation of the lead audit partner and the audit partner responsible for reviewing the audit as required by Section 10A(j) of the Exchange Act.
  5. Ascertain annually from the independent accounting firm whether the corporation has issues under Section 10A(b) of the Exchange Act.

Legal Compliance

  1. Review, with the corporation’s counsel, legal compliance matters (including corporate securities trading policies) reasonably likely to have a material affect on the corporation’s financial statements.
  2. Oversee the corporation’s Code of Conduct and have sole authority to grant requests presented to it for waivers of compliance with such code by directors and executive officers of the corporation.
  3. Review, with the corporation’s counsel, any legal matter that could have a significant impact on the corporation’s financial statements.
  4. Perform any other activities consistent with this Charter, the corporation’s By-laws and governing law, as the Committee or the Board deems necessary or appropriate.

V. ADVISORS; FUNDING

The Committee shall have the authority to retain independent legal counsel and independent accountants and other advisors as it deems necessary and appropriate to carry out its duties and responsibilities hereunder.  The corporation shall provide appropriate funding, as determined by the Committee, for payment of (i) compensation to the independent accounting firm employed by the corporation to render or issue an audit report,(ii) compensation to the advisors referred to in the immediately preceding sentence employed by the Committee and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.