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.
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 the Company.
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.
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.
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 Company’s internal auditors and independent auditors, with and without management present, to discuss the results of their respective 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 chair of the committee shall prepare an Audit Committee Report for inclusion in each Proxy Statement related to an Annual Meeting of Stockholders.
· 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 committee shall review and approve all financial press releases, including earnings guidance prior to issuance by the Company.
· 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 Audit 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 responsibilities:
· 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 Principles.
· 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, 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.
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.
K:\Legal\Corporate\Alpharma Inc\AUDIT & CORP GOV COMMITTEE\050725-Revised Audit and Corp Gov Comm Charter-DKH.doc