2004 Committee Charter : KBH

(Amended and Restated February 3, 2004)


I. Purpose

The primary functions of the Audit and Compliance Committee (the "Committee") are to represent and assist the Board of Directors in fulfilling its oversight responsibilities to the shareholders relating to: (a) the corporate accounting and reporting practices of the Company and the quality and integrity of financial reports of the Company; (b) the Company's system of internal controls; (c) the audit process, including the qualifications and independence of the registered, independent public accounting firm employed for the purpose of preparing an audit report or related work for the Company (the "Independent Accountants") and the internal Controls Evaluation and Audit Department ("Audit Department"); and (d) the Company's compliance with legal and regulatory requirements and oversight of matters in which the Company has or may have material liability exposure. The Committee also oversees the preparation of a report required by the Securities and Exchange Commission's (the "SEC") rules to be included in the Company's annual proxy statement.

II. Composition

A. The Committee shall be comprised of three or more directors as determined by the Board, each of whom shall meet the "independence" requirements of the New York Stock Exchange and shall be "financially literate," both as determined by the Board. At least one member of the Committee shall be an "audit committee financial expert" in accordance with SEC rules.

B. The Chairman of the Committee and its members shall be appointed by the Board annually, upon recommendation of the Nominating and Corporate Governance Committee.

C. No Committee member shall serve on the audit committee of more than three public companies; provided, further, if such situation arises, the Committee shall determine whether such service impairs that Committee member's ability to serve on this Committee and, to the extent required, make a disclosure regarding such determination in the Company's Proxy Statement.

III. Meetings

A. The Committee shall meet at least four (4) times annually, or more frequently as circumstances dictate. The Chairman of the Committee shall have the authority to call such additional meetings as he or she deems necessary or desirable.

B. The Committee shall meet periodically with the chief officer of the Audit Department and the Independent Accountants, and with the chief financial officer, the corporate controller and the chief legal officer, in separate executive sessions.

C. The Chairman of the Committee shall formally report upon the matters discussed at each Committee meeting to the Board of Directors.

D. In general, in addition to the Committee members, the audit partner of the Independent Accountants and the following members of the Company's management team should typically be expected to attend Committee meetings: chief executive officer, chief financial officer, chief accounting officer, chief officer of the Audit Department and chief legal officer.

IV. Responsibilities and Duties

A. Review and Evaluation

1. The Committee shall review and reassess the adequacy of this Charter on an annual basis.

2. The Committee shall evaluate its performance annually.

B. Independent Accountants

1. The Committee shall be directly responsible, in its capacity as a Committee of the Board, for the appointment, compensation, retention and oversight of the work of the Independent Accountants. In this regard, it shall consider their independence and effectiveness, and shall review the fees and other compensation to be paid to the Independent Accountants. Further, on an annual basis, the Committee shall review and discuss with the Independent Accountants all significant relationships the accountants have with the Company to determine the Independent Accountant's independence. The Committee will procure from the outside auditor an annual written statement delineating all relationships between the Independent Accountants and the Company, and the Committee shall be responsible for engaging in active dialogue with the Independent Accountants regarding any relationship that might compromise their objectivity.

2. The Committee shall receive and review, at least annually, a report by the Independent Accountants describing: (a) the Independent Accountant's internal quality control procedures; and (b) any material issues raised by the most recent internal quality-control review, or peer review, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the Independent Accountants, and any steps taken to deal with any such issues.

3. The Independent Accountants shall make timely reports to the Committee describing: (a) critical accounting policies and practices used in the audit by the Independent Accountants; (b) all alternative treatments of financial information within generally accepted accounting principles ("GAAP") discussed with management, including the ramifications of such treatment and the treatment preferred by the Independent Accountants; and (c) all other material written communications between the Independent Accountants and management of the Company.

4. The Committee shall approve in advance all audit and permissible non-audit services to be provided by the Independent Accountants and shall establish policies and procedures for the pre-approval of audit and permissible non-audit services to be provided by the Independent Accountants.

5. The Committee shall establish policies for the hiring of employees and former employees of the Independent Accountants.

C. Financial Reporting Processes

The Committee shall:

1. Consider the Independent Accountant's judgments about the internal control environment and the appropriateness of the Company's accounting principles as applied in its financial reporting.

2. Consider and approve, if appropriate, major changes to the Company's auditing and accounting principles and practices as suggested by the Independent Accountants, management, or the Audit Department.
3. Review any significant disagreement among management and the Independent Accountants or the Audit Department in connection with the internal control environment or preparation of the financial statements.

4. Review with financial management and the Independent Accountants the results of their timely analysis of significant financial reporting issues and practices, including changes in, or adoptions of, accounting principles and disclosure practices. Such review shall also include confirming that: (a) Company management disclose its critical accounting policies that have a material impact on the Company's financial presentations in its public disclosures; and (b) in the event that the Company's public disclosures contain any pro forma financial information, the presentation of such information complies with the SEC rules regarding the accuracy of pro forma financial information.

5. Review, at least annually, the adequacy of internal controls and procedures related to: (a) executive expense accounts, including the use of Company assets; and (b) compensation of Board members and senior executives of the Company.

6. Discuss with management and the Independent Accountants the Company's quarterly reports on Form 10-Q, including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," and discuss with the Independent Accountants the matters required to be discussed by SAS No. 100.

7. Report, through the Chairman of the Committee, to the Board the Committee's recommendation with respect to whether, based on information available to the Committee, the Company's financial statements should be filed with the Company's Annual Report on Form 10-K.

8. Discuss the Company's policies with respect to earnings press releases, as well as other press releases related to financial information and earnings guidance as appropriate.

9. Review with the Independent Accountants, the chief officer of the Audit Department and management, the adequacy and effectiveness of: (a) the Company's internal controls, including any significant deficiencies in internal controls and significant changes in internal controls reported to the Committee by the Independent Accountants or management; and (b) the Company's disclosure controls and procedures, and management reports thereon.

10. Review the Company's policies with respect to risk assessment and risk management.

D. Ethical and Legal Compliance

To fulfill its responsibilities and duties the Committee shall:

1. At least annually, review and approve the Company's Business Ethics Policy, as may be materially revised from time to time by Company management subject to Committee approval and discuss with management the Company's system to enforce the Business Ethics Policy.

2. Establish procedures for the treatment or complaints received by the Committee regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

3. Review the staffing, organizational structure and qualifications of, and internal audit reports prepared by, the Audit Department at least annually.

4. Meet with the Company's chief legal officer at each meeting of the Committee (and, at least annually, meet with the chief legal officer in an executive session), and review any matters of legal liability exposure that could reasonably be anticipated to have a material impact on the Company's financial statements.

5. Perform any other activities consistent with this Charter, the Company's Bylaws, Delaware governing law and New York Stock Exchange listing standards, as the Committee or the Board of Directors deems necessary or appropriate.

E. Authority to Engage Independent Counsel and Advisers; Funding of Independent Accountants

The Committee shall have the authority to engage independent counsel and/or other advisers necessary to carry out its duties. Further, the Company shall, as determined by the Committee, provide appropriate funding for payment of compensation to the Independent Accountants and to any advisers retained by the Committee to assist in carrying out the Committee's duties.