AUDIT COMMITTEE CHARTER
The Audit Committee of Alpha Natural Resources, Inc. (the "Company") is appointed by the Board of Directors (the "Board") to assist the Board in (1) monitoring the quality, reliability and integrity of the accounting policies and financial statements of the Company; (2) overseeing the Company's compliance with legal and regulatory requirements; (3) reviewing the independence, qualifications and performance of the Company's internal and external auditors, (4) overseeing the performance of the Company's internal audit function and independent auditors and (5) preparing an audit committee report as required by the Securities and Exchange Commission (the "SEC") to be included in the Company's annual proxy statement.
II. Committee Composition.
The Committee shall be comprised of three or more members of the Board. The
members of the Committee shall satisfy all applicable requirements then in
effect of the New York Stock Exchange, Inc. (the "NYSE"), or any
stock exchange or national securities association on which the Company's
securities are listed or quoted and any other applicable regulatory
requirements, including without limitation requirements relating to director
independence, financial literacy, nomination and size of the Committee. No
member of the Committee may serve on the audit committee of more than three
public companies, including the Company, unless the Board (i)
determines that such simultaneous service would not impair the ability of such
member to effectively serve on the Committee and (ii) discloses such
determination in the annual proxy statement.
All members of the Committee shall have a working familiarity with basic finance and accounting practices (or acquire such familiarity within a reasonable period after his or her appointment) and at least one member must be an "audit committee financial expert" under the requirements of the Sarbanes-Oxley Act. Committee members may enhance their familiarity with finance and accounting by participating in educational programs conducted by the Company or by a third party.
The members of the Committee shall be appointed by the Board and shall serve until such member's successor is duly elected and qualified or until such member's earlier resignation, retirement, removal from office or death. The members of the Committee may be removed, with or without cause, by a majority vote of the Board.
Unless a Chairman is elected by the full Board, the members of the Committee shall designate a Chairman by majority vote of the full Committee membership. The Chairman will chair all meetings of the Committee and set the agendas for Committee meetings.
III. Delegation of Duties.
In fulfilling its responsibilities, the Committee is entitled to form and delegate any or all of its responsibilities to a subcommittee consisting of one or more members of the Committee, when appropriate and permitted by applicable legal and regulatory requirements. Where so permitted, a subcommittee of the Committee may exercise the powers and authority of the Committee and the Board while acting within the scope of the powers and responsibilities delegated to it.
The Committee shall meet as often as its members deem necessary to fulfill the Committee's responsibilities. A majority of the Committee members shall constitute a quorum for the transaction of the Committee's business. The Committee shall act upon the vote of a majority of its members at a duly called meeting at which a quorum is present. Any action of the Committee may be taken by a written instrument signed by all of the members of the Committee. The Committee shall have the authority to establish other rules and procedures for notice and conduct of its meetings consistent with the Company's bylaws and the Corporate Governance Practices and Policies.
All non-management directors that are not members of the Committee may attend meetings of the Committee but may not vote. Additionally, the Committee may invite to its meetings any director, member of management of the Company and such other persons as it deems appropriate in order to carry out its responsibilities. However, when necessary, the Committee may meet in executive session without such other persons present.
V. Powers and Duties.
The following functions shall be the recurring activities of the Committee in carrying out its responsibilities outlined in Section I of this Charter. These functions should serve as a guide with the understanding that the Committee may carry out additional or substitute functions and adopt additional policies and procedures as may be appropriate in light of changing business, legislative, regulatory, legal or other conditions. The Committee shall also carry out any other responsibilities and duties delegated to it by the Board from time to time related to the purposes of the Committee outlined in Section I of this Charter.
The Committee shall have the following specific powers and duties:
With respect to the independent auditor:
1. To be directly responsible for the appointment, compensation, retention and oversight of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing its audit reports and related work;
2. To review in advance, and grant any appropriate pre-approvals of (i) all auditing services to be performed by the independent auditor and (ii) all non-audit services to be provided by the independent auditor as permitted by Section 10A of the Securities Exchange Act of 1934 (the "Exchange Act"), and, in connection therewith, to approve all fees and other terms of such engagement, provided that pre-approval of de minimus services shall not be required to the extent provided by, and subject to the requirements of, the Exchange Act;
3. On an annual basis, to review and discuss with the independent auditor all relationships the independent auditor has with the Company and its subsidiaries in order to evaluate the independent auditor's continued independence. The Committee shall:
(a) ensure that the independent auditor submits to the Committee on an
annual basis a written statement (consistent with Independence Standards Board
Standards No. 1) delineating all relationships and services that may impair the
objectivity and independence of the independent auditor;
(b) discuss with the independent auditor any disclosed relationship or services that may impact the objectivity and independence of the independent auditor;
(c) satisfy itself as to the independence of the independent auditor; and
(d) ensure the rotation of the audit engagement team as required by law;
4. At least annually, to obtain and review a report from the independent auditor describing (i) such firm's internal quality control procedures, (ii) 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 audits carried out by the firm, (iii) any steps taken to deal with any such issues and (iv) all relationships between the independent auditor and the Company;
5. In consultation with management, to evaluate the qualifications, performance and independence of the lead audit partner (or the lead audit partner responsible for reviewing the audit) for the Company's independent audit firm, and to confirm that the lead audit partner has not performed audit services for the Company for each of the five previous fiscal years;
6. To review, based on the recommendation of the independent auditor and the Company's management, the scope and plan of the work to be done by the independent auditors with respect to each fiscal year;
With respect to financial statements and audit:
7. To meet with the independent auditor prior to the audit to review the planning and staffing of the audit, and to discuss with the independent auditor the scope of its examinations of the books and records of the Company and its subsidiaries and the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit;
8. To review and discuss with management and the independent auditor the Company's annual audited and quarterly unaudited financial statements and the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's filings with the SEC;
9. To review the integrity of the Company's financing reporting processes,
both internal and external, and discuss with management and the independent
auditor (a) major issues regarding accounting principles and financial
statement presentation, including any significant changes in the Company's
selection or application of accounting principles, (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, the ramifications of the use of such
alternative methods, (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 review
any financial information and earnings guidance provided to analysts and rating
10. To periodically review separately with each of management, the independent auditor and the internal auditors:
(a) any significant disagreement between management and the independent auditor in connection with the preparation of the financial statements;
(b) any problems or difficulties encountered in the course of the audit, including any restrictions on the scope of activities or access to required information, and management's response thereto;
(c) any changes required in the planned scope of the internal audit; and
(d) the responsibilities, budget and staffing of the Company's internal audit function;
11. To review with management and the independent auditor any correspondence with regulators or governmental agencies and any employee complaints or published reports which raise material issues regarding the Company's financial statements or accounting policies;
12. To periodically discuss with the independent auditor, without management being present, the audit firm's judgment about the quality, appropriateness and acceptability of the Company's accounting principles and financial statements and the completeness and accuracy of the Company's financial statements;
13. To discuss the Company's press releases, as well as financial information and earnings guidance provided to analysts and rating agencies;
With respect to internal audit functions, internal controls and related matters:
14. To approve and adopt a Code of Conduct and Business Ethics (the "Code") for all directors, officers and employees of the Company and make such changes to the Code as may be appropriate;
15. To review and discuss with management (i) the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures (including management's risk assessment and risk management policies) and (ii) the procedures that management has established to monitor compliance with the Code;
16. To review and discuss with management all material off-balance sheet transactions, arrangements, obligations (including contingent obligations) and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the financial condition, changes in financial condition, results of operations, liquidity, capital resources or significant components of revenues or expenses;
17. To periodically review, in consultation with the independent auditor and management, (i) the adequacy of the Company's internal controls and any special audit steps adopted in light of material control deficiencies, (ii) procedures and policies of the Company designed to ensure compliance with applicable laws and regulations and (iii) the responsibilities, budget and staffing needs for the internal audit function;
18. To review with management and the independent auditor the sufficiency and quality of the internal auditor staff and other financial and accounting personnel of the Company and its subsidiaries;
19. To establish procedures for (i) the receipt, retention and treatment of complaints received by the Company and its subsidiaries regarding accounting, internal accounting or auditing matters and (ii) confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters;
20. To review, periodically, with the Company's counsel, any legal matter that could have a significant impact on the Company's financial statements;
21. To establish the policy for the Company's hiring of employees or former employees of the independent auditor who were engaged on the Company's account;
22. To report regularly to the Board with respect to any issues that arise with respect 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;
23. To maintain minutes or other records of meetings and activities of the Committee and to report to the Board following meetings of or actions taken by the Committee;
24. To produce all Committee reports required to be included in the Company's annual proxy statement, in accordance with applicable rules and regulations promulgated by the SEC, the NYSE and other regulatory bodies;
25. To conduct or authorize investigations into any matters within the Committee's purpose and powers;
26. To review and reassess the powers of the Committee and the adequacy of this Charter periodically and recommend any proposed changes to the Board for approval;
27. To conduct an annual performance review and evaluation of the Committee; and
28. To consider such other matters in relation to the financial affairs of the Company, its books and records, and its internal and external audits as the Committee or the Board may, in its discretion, determine to be advisable.
VI. Committee Resources.
The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern that the Committee deems appropriate. The Committee shall have the authority to retain special legal, accounting or other advisers to advise the Committee, including without limitation the sole authority to determine the fees payable and other terms of retention of the independent auditor for the purpose of rendering or issuing the annual audit reports and any independent legal, accounting or other advisers retained to advise the Committee. The Company shall provide for appropriate funding for (i) compensation to the Company's independent auditors for the purpose of preparing or issuing audit reports or performing other work, (ii) compensation to any independent legal, accounting or other advisers employed by the Committee and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
VII. Understanding as to the Committee's Role.
Management of the Company is responsible for the day-to-day operation of the Company's business. In addition, the independent auditors and management have the fundamental responsibility for the Company's financial statements and disclosures. As a result, the Company's officers and employees and other persons who may be engaged by the Committee may have more time, knowledge and detailed information about the Company than do the Committee members. The Committee will review information, opinions, reports or statements presented to the Committee by the Company's officers or employees or other persons as to matters the Committee members reasonably believe are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. While the Committee has the responsibilities and powers set forth in this charter, each member of the Committee, in the performance of his or her duties, will be entitled to rely in good faith upon reports presented to the Committee by these experts. The Committee is not responsible for certifying the Company's financial statements or the auditor's report. Accordingly, the Committee's role does not provide any special assurances with regard to matters that are outside the Committee's area of expertise or that are the traditional responsibility of management and the auditors.