2003 Committee Charter : MCDTA

McDATA CORPORATION
CHARTER OF THE AUDIT COMMITTEE OF
THE BOARD OF DIRECTORS
As adopted by the Board of Directors
on May 23, 2000, as amended on December 2, 2003.
1. AUTHORITY
1. The Audit Committee (the "Committee") of the Board of Directors
(the "Board") of McDATA Corporation (the "Corporation") is established
pursuant to Article IV, Section 25 of the Corporation's By-laws
and Section 141(c) of the Delaware General Corporation Law. The
Committee shall be comprised of three (3) or more directors as determined
from time to time by resolutions of the Board. Members of the
Committee shall be elected by the Board at the annual meeting of the
Board or at such other time as may be determined by the Board.
2. The Chairman of the Committee (the "Chairman") shall be
designated by the Board, provided that if the Board does not so
designate a Chairman, the members of the Committee, by majority
vote, may designate a Chairman.
3. The presence in person or by telephone or other similar means of a
majority of the Committee's members shall constitute a quorum for
any meeting of the Committee. All actions of the Committee will
require the vote of a majority of its members present at a meeting of
the Committee at which a quorum is present.
2. PURPOSE OF THE COMMITTEE
1. The Committee's purpose is to provide assistance to the Board in
fulfilling its legal and fiduciary obligations with respect to matters
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involving the accounting, auditing, financial reporting, internal control
and legal compliance functions of the Corporation and its subsidiaries.
2. The Committee shall be directly responsible for the appointment,
compensation, and oversight of the work of any registered public
accounting firm employed by the Corporation (including resolution of
disagreements between management and the auditor regarding
financial reporting), for the purpose of preparing or issuing an audit
report or related work. In addition, the Committee will oversee the
audit efforts of the Corporation's internal auditors and, in that regard,
shall take such actions as it may deem necessary to satisfy itself that
the Corporation's auditors are independent of management. It is the
objective of the Committee to maintain free and open means of communications
among the Board, the independent accountants, the
internal auditors and the financial and senior management of the
Corporation.
3. COMPOSITION OF THE COMMITTEE
1. Each member of the Committee shall be an "independent" director
within the meaning of The Nasdaq Stock Market Marketplace Rules
and, as such, shall be free from any relationship that may interfere
with the exercise of his or her independent judgment as a member of
the Committee. However, as permitted by the rules of The Nasdaq
Stock Market (the "Nasdaq"), under exceptional and limited circumstances,
one director who does not meet certain of the criteria for
"independence" may be appointed to the Committee if the Board
determines in its business judgment that membership on the Committee
by such person is required by the best interests of the Corporation
and its stockholders and the Corporation discloses in the annual proxy
statement the nature of such person's relationship and the reasons for
the Board's determination. Notwithstanding the foregoing, current
employees or officers, or their immediate family members, are not
allowed to serve on the Committee.
2. All members of the Committee shall be financially literate at the time
of their election to the Committee or shall become financially literate
within a reasonable period of time after their appointment to the
Committee. "Financial literacy" shall be determined by the Board in
the exercise of its business judgment, and shall include a working
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familiarity with basic finance and accounting practices and an ability
to read and understand fundamental financial statements. At least one
member of the Committee shall have past employment experience in
finance or accounting, requisite professional certification in accounting
or any other comparable experience or background which results
in the individual's financial sophistication, including being or having
been a chief executive officer, chief financial officer or senior officer
with financial oversight responsibilities. Committee members, if they
or the Board deem it appropriate, may enhance their understanding of
finance and accounting by participating in educational programs
conducted by the Corporation or an outside consultant or firm.
3. The Committee shall determine that at least one member meets the
criteria, as defined by the Securities and Exchange Commission, to
qualify as the "Financial Expert." The Committee, in ascertaining this
classification, will vote on the designation of the expert.
4. MEETINGS OF THE COMMITTEE
1. The Committee shall meet with such frequency and at such intervals
as it shall determine is necessary to carry out its duties and responsibilities.
As part of its purpose to foster open communications, the
Committee shall meet at least annually with management, the head of
the internal auditing department and the Corporation's independent
accountants in separate executive sessions to discuss any matters that
the Committee or each of these groups or persons believe should be
discussed privately.
2. In addition, the Committee, or the Chairman, should meet or confer
with the independent accountants and management quarterly to review
the Corporation's periodic financial statements prior to their filing
with the Securities and Exchange Commission ("SEC"). The
Chairman should work with the Chief Financial Officer and
management of the Corporation to establish the agendas for
Committee meetings. The Committee, in its discretion, may ask
members of management or others to attend its meetings, or portions
thereof, and to provide pertinent information as necessary. The
Committee shall maintain minutes of its meetings and records relating
to those meetings and the Committee's activities and provide copies of
such minutes to the Board.
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5. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
1. In carrying out its duties and responsibilities, the Committee's policies
and procedures should remain flexible, so that it may be in a position
to best react or respond to changing circumstances or conditions. The
Committee should review and reassess annually the adequacy of the
Committee's charter. The charter must specify: (1) the scope of the
Committee's responsibilities and how it carries out those responsibilities;
(2) the ultimate accountability of the Corporation's independent
auditors to the Board and the Committee; (3) the responsibility of the
Committee and the Board for the selection, evaluation and replacement
of the Corporation's independent auditors; and (4) that the
Committee is responsible for ensuring that the Corporation's independent
auditors submit on a periodic basis to the Committee a formal
written statement delineating all relationships between the independent
auditors and the Corporation and that the Committee is responsible
for actively engaging in a dialogue with the independent auditors with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditors and for
recommending that the Board take appropriate action to ensure the
independence of the independent auditors.
2. While there is no "blueprint" to be followed by the Committee in
carrying out its duties and responsibilities, the following should be
considered within the authority of the Committee:
1. Selection and Evaluation of Auditors
1. Make recommendations to the Board as to the selection of
the firm of independent public accountants to audit the
books and accounts of the Corporation and its subsidiaries
for each fiscal year; with a rotation of audit firms in
compliance with applicable SEC rules.
2. Review and approve the Corporation's independent auditors'
annual engagement letter, including the proposed fees contained
therein;
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3. Review the performance of the Corporation's independent
auditors and make recommendations to the Board regarding
the replacement or termination of the independent auditors
when circumstances warrant;
4. Oversee the independence of the Corporation's independent
auditors by, among other things: (1) requesting that the
independent auditors deliver to the Committee on a periodic
basis a formal written statement delineating all relationships
between the independent auditors and the Corporation; and
(2) actively engaging in a dialogue with the independent
auditors with respect to any disclosed relationships or services
that may impact the objectivity and independence of
the independent auditors and recommending that the Board
take appropriate action to satisfy itself of the auditors' independence;
and (3) prohibit the Corporation from hiring a
member of the audit engagement team if they were
members of the audit engagement team within one year
prior to the commencement of procedures for the current
audit engagement;
5. Instruct the Corporation's independent auditors that they are
ultimately accountable to the Committee and the Board, and
that the Committee and the Board are responsible for the
selection, evaluation and termination of the Corporation's
independent auditors.
6. Establish a delegation of authority to the Chairman for the
purposes of pre-approving all non-auditing services.
7. Pre-approve all non-auditing services, including tax
services, as defined by Section 201 of the Sarbanes-Oxley
Act of 2002.
8. Report all non-auditing services to investors in periodic
reports.
2. Oversight of Annual Audit and Quarterly Reviews
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1. Review and accept, if appropriate, the annual audit plan of
the Corporation's independent auditors, including the scope
of audit activities, and monitor such plan's progress and
results during the year;
2. Confirm through private discussions with the Corporation's
independent auditors and the Corporation's management
that no management restrictions are being placed on the
scope of the independent auditors' work;
3. Review the results of the year-end audit of the Corporation,
including, among other things: (1) the audit report, the
published financial statements, the management representation
letter, the "Memorandum Regarding Accounting Procedures
and Internal Control" or similar memorandum prepared
by the Corporation's independent auditors, and any
other pertinent reports and management's responses concerning
such memorandum; (2) any material accounting
issues among management, the Corporation's internal auditing
department and the independent auditors; and (3) other
matters required to be communicated to the Committee
under generally accepted auditing standards, as amended,
by the independent auditors;
4. Review with management and the Corporation's independent
auditors such accounting policies, and changes therein,
of the Corporation, including any financial reporting issues
which could have a material impact on the Corporation's
financial statements, as are deemed appropriate for review
by the Committee prior to any interim or year-end filings
with the SEC or other regulatory body; and
5. Confirm that the Corporation's interim financial statements
included in Quarterly Reports on Form 10-Q have been
reviewed by the Corporation's independent auditors.
3. Oversight of Financial Reporting Process and Internal Controls
1. Review the adequacy and effectiveness of the Corporation's
accounting and internal control policies and procedures
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through inquiry and discussions with the Corporation's
independent auditors and management of the Corporation;
2. Review with management the Corporation's administrative,
operational and accounting internal controls, including
controls and security of the computerized information systems,
and evaluate whether the Corporation is operating in
accordance with its prescribed policies, procedures and
codes of conduct;
3. Obtain from management signed statements in accordance
with the Sarbanes-Oxley Act, Sections 302 and 404,
regarding the establishment and maintenance of internal
controls, including an assessment of the effectiveness of the
internal controls and the procedures for financial reporting.
4. Receive an annual attestation report from the Corporation's
independent auditors in compliance with Section 404 of the
Sarbanes-Oxley Act.
5. Review with management and the independent auditors any
reportable conditions and material weaknesses, as defined
by the American Institute of Certified Public Accountants,
affecting internal control;
6. Receive periodic reports from the Corporation's
independent auditors and management of the Corporation to
assess the impact on the Corporation of significant
accounting or financial reporting developments proposed by
the Financial Accounting Standards Board or the SEC or
other regulatory body, or any other significant accounting
or financial reporting related matters that may have a
bearing on the Corporation; and
7. Establish and maintain free and open means of communication
between and among the Board, the Committee, the
Corporation's independent auditors, the Corporation's internal
auditing department and management.
4. Other Matters
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1. Meet with the general counsel and/or outside counsel, when
appropriate, to review legal and regulatory matters, including
any matters that may have a material impact on the
financial statements of the Corporation;
2. Prepare a report to be included in each annual proxy statement
of the Corporation containing that information required
by the rules of the Nasdaq, the Securities Exchange
Act of 1934 (the "1934 Act") or any other rule or
regulation applicable to the Corporation or deemed
appropriate by the Committee:
3. Review the Corporation's policies relating to the avoidance
of conflicts of interest and review past or proposed transactions
between the Corporation and members of management
as well as policies and procedures with respect to officers'
expense accounts and perquisites, including the use of
corporate assets. The Committee shall consider the results
of any review of these policies and procedures by the Corporation's
independent auditors;
4. Obtain from the independent auditors any information
pursuant to Section 10A of the 1934 Act;
5. Establish procedures for the receipt, retention and treatment
of complaints regarding accounting, internal accounting
controls, or auditing;
6. Conduct or authorize investigations into any matters within
the Committee's scope of responsibilities, including retaining
outside counsel or other consultants or experts for this
purpose; and
7. Perform such additional activities, and consider such other
matters, within the scope of its responsibilities, as the Committee
or the Board deems necessary or appropriate.
3. With respect to the duties and responsibilities listed above, the Committee
should:
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1. Report regularly to the Board on its activities, as appropriate;
2. Exercise reasonable diligence in gathering and considering all
material information;
3. Understand and weigh alternative courses of conduct that may
be available;
4. Focus on weighing the benefit versus harm to the Corporation
and its shareholders when considering alternative recommendations
or courses of action;
5. If the Committee deems it appropriate, secure independent
expert advice and understand the expert's findings and the basis
for such findings, including retaining independent counsel,
accountants or others to assist the Committee in fulfilling its
duties and responsibilities; and
6. Provide management, the Corporation's independent auditors
and internal auditors with appropriate opportunities to meet
privately with the Committee.
4. While the Committee has the duties and responsibilities set forth in
this charter, the Committee is not responsible for planning or conducting
the audit or for determining whether the Corporation's financial
statements are complete and accurate and are in accordance with
generally accepted accounting principles. Similarly, it is not the
responsibility of the Committee to resolve disagreements, if any,
between management and the independent auditors or to ensure that
the Corporation complies with all laws and regulations.