TOM BROWN, INC.

AUDIT COMMITTEE CHARTER

Purpose

      The primary function of the Audit Committee (the “Committee”) is to assist the Board of Directors (the “Board”) of Tom Brown, Inc. (the “Company”) with the oversight of (a) the integrity of the Company’s financial statements, (b) the Company’s compliance with legal and regulatory requirements, (c) the independent auditors’ qualifications and independence and (d) the performance of the Company’s internal audit function and the independent auditors.

Organization

      The Committee shall be comprised of three or more directors all of whom in the judgment of the Board shall be independent in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and New York Stock Exchange (“NYSE”) listing standards. Each member shall in the judgment of the Board have the ability to read and understand the Company’s basic financial statements or shall at the time of appointment undertake training for that purpose. At least one member of the Committee shall in the judgment of the Board be a financial expert in accordance with the rules and regulations of the SEC and at least one member (who may also serve as the financial expert) shall in the judgment of the Board have accounting or related financial management expertise in accordance with the NYSE listing standards.

      The members of the Committee shall be appointed by the Board at the annual organizational meeting of the Board and serve until their successors are duly qualified and appointed. The Committee shall meet at least four times during each fiscal year prior to each of the Company’s quarterly and annual financial reporting deadlines and at such other times as it deems necessary to fulfill its responsibilities. The Committee shall meet regularly in executive session without management present. In addition, the Committee shall periodically meet separately with management, internal auditors and outside auditors to oversee and review their respective performance. Director’s fees are the only compensation that a Committee member may receive from the Company.

Responsibilities

 

 

 

 

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Select, evaluate and, where appropriate, replace the independent auditors who shall be ultimately accountable to the Committee and the Board.

 

 

 

 

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Pre-approve all audit and permitted non-audit services to be performed by the independent auditor; or delegate the authority to pre-approve such services to one or more members of the Committee, who shall report any decision to preapprove any services to the full Committee at its regularly scheduled meetings.

 

 

 

 

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Report the pre-approval of any permitted non-audit services to management for disclosure in the Company’s periodic reports.

 

 

 

 

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Review with the independent auditor and approve the scope of the prospective audit, the estimated fees therefor and such other matters pertaining to such audit as the Committee may deem appropriate.

 

 

 

 

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Receive and review a report by the outside auditor describing (a) the outside auditor’s internal quality-control procedures; (b) 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 independent audits carried out by the firm, and any steps taken to deal with any such issues; and (c) in an effort to assess the auditors’ independence, all relationships between the auditors and the Company as well as all other reports from the outside

 

 

 

 

 

 

auditors, including the annual comments from the outside auditors on accounting procedures and systems of control.

 

 

 

 

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Review with the independent auditors and the Company’s 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 are 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.)

 

 

 

 

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Review the internal audit function of the Company including the independence and authority of its reporting obligations, the proposed audit plans for the coming year, and the coordination of such plans with the independent auditors.

 

 

 

 

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Review with management and the independent auditors all significant issues concerning litigation, contingencies, claims, or assessments and all material transactions and accounting issues that require disclosure in the Company’s financial statements. (The review should include a discussion of recent FASB or other regulatory agency pronouncements or changes in accounting principles that may have a material impact on the Company.)

 

 

 

 

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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, accounting, and auditing personnel, and the cooperation that the independent auditors received during the course of the audit.)

 

 

 

 

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Review with management and the independent auditor the annual and quarterly financial statements of the Company, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and any material changes in accounting principles or practices used in preparing the statements prior to the filing of a report on Form 10-K or 10-Q with the SEC.

 

 

 

 

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Review earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies and discuss Company policies with respect to risk assessment and risk management.

 

 

 

 

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Establish and maintain procedures for the confidential and anonymous receipt, retention and treatment of complaints regarding the Company’s accounting, internal controls or auditing matters and establish clear hiring policies for employees or former employees of the Company’s outside auditor.

 

 

 

 

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Obtain the advice and assistance, as appropriate, of independent counsel and other advisors or necessary to fulfill the responsibilities of the Committee.

 

 

 

 

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Provide the Committee report and any disclosure, to the extent required by the SEC, in the Company’s annual proxy statement to shareholders.

 

 

 

 

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Review this charter annually and update same from time to time as the Committee deems necessary or appropriate.

 

 

 

 

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Provide reports to the Board at regular intervals on Committee activities and significant developments in the course of performing Committee duties and responsibilities.

 

 

 

 

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Conduct an annual performance evaluation of the Audit Committee.