Board of Directors Audit Committee

Charter of the Audit Committee

I. Purpose

The purpose of the Audit Committee (the "Committee") is to assist the Perot Systems Corporation (Perot Systems) Board of Directors (Board) oversight of:

A. The integrity of  Perot Systems' financial statements;
B. Perot Systems' compliance with applicable legal and regulatory requirements;
C. The performance of Perot Systems' independent auditor and internal audit department; and 
D. The independent auditor's qualifications and independence.

The Committee will prepare a report required by the SEC for inclusion in the Perot Systems' annual proxy statement.

II. Structure and Operations

A. Size. The Committee shall comprise three or more members of the Board, as determined by the Board after considering the recommendation, if any, of the Nominating and Corporate Governance Committee. 

B. Appointment and Removal of Members.The Board shall appoint the members of the Committee from qualified members of the Board.  Each member of the Committee shall serve until such member's successor is duly elected and qualified or until such member's earlier resignation or removal.  Any or all members of the Committee may be removed, with or without cause, by a majority vote of the Board.

C. Qualifications. The membership of the Committee must have the following qualifications, as determined by the Board:

1. Each member must be “independent” in accordance with Perot Systems' Corporate Governance Principles, the rules of the New York Stock Exchange, Inc. (the “NYSE”), Section 10A(m)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations of the Securities and Exchange Commission (the “Commission”), including being free from any material relationship that would interfere with the exercise of his or her independent judgment.  Persons are not “independent” if, within the past three years:

a) The person was an employee, or an immediate family member was an executive officer, of Perot Systems;
b) The person, or an immediate family member, received more than $100,000 in direct compensation from Perot Systems (other than for director's fees) in a year;
c) The person was affiliated with or employed by, or an immediate family member was affiliated with or employed in a professional capacity by, a present or former internal or external auditor of Perot Systems;
d) The person was employed by, or an immediate family member was an executive officer of, a company of which any of Perot Systems' present executives serve on the other company's compensation committee; or
e) The person was employed by, or an immediate family member was an executive officer of, another company that makes payments to, or receives payments from, Perot Systems for property or services in an amount which in any fiscal year, exceeds the greater of $1,000,000 or five percent of such other company's consolidated gross revenues.

2. Each member will be “financially literate,” or become financially literate within a reasonable period of time after his or her appointment to the Committee.

3. At least one member will be an “audit committee financial expert,” as defined by the Commission.

4. No member will simultaneously serve on the audit committee of more than two other public companies without the approval of the full Board.

5. Any additional qualifications required by Perot Systems' Corporate Governance Principles, the NYSE, the Exchange Act and the rules and regulations of the Commission.

D. Chair. Unless a Chair is elected by the full Board, the members of the Committee shall designate a Chair by majority vote of the full Committee membership. The Chair will chair all regular sessions of the Committee and set the agendas for Committee meetings, based upon consultations with management, the independent auditor, and the director of internal audit and upon any input received from the members of the Committee. If a Chair is not designated or is not present at any meeting, the members of the Committee may designate a chairman for such meeting by majority vote of the Committee.

E. Delegation. The Committee shall be entitled to delegate certain of its responsibilities, where appropriate, to the Chair or to one or more other members of the Committee, subject to policies and/or procedures adopted by the Committee, which shall be consistent with applicable legal and regulatory requirements.

F. Funding. Perot Systems shall provide for appropriate funding, as determined by the Committee, for payment of (a) compensation to the independent auditor for the purpose of rendering or issuing an audit report or related work or performing other audit, review, attest and related services for Perot Systems, (b) compensation to the independent auditor for engagements pre-approved in accordance with Perot Systems' policy “Restrictions on the Engagement of Audit Firm,” (c) other consultants or experts employed by the Committee and (d) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

III. Meetings

A. Frequency; Notice; Quorum. The Committee shall meet at least quarterly, or more frequently as circumstances dictate. The Chair or any member of the Committee may call meetings of the Committee upon at least 48 hours' notice, which may be delivered by mail, courier service, fax, email, or telephone, as long as the means of delivery utilized would normally result in all members having at least 48 hours' notice of the meeting. Meetings of the Committee may be held telephonically. A majority of the members of the Committee will constitute a quorum.

B. Attendance of Non-Members.The Committee may invite to its meetings any director, any manager of Perot Systems and any other persons it deems appropriate in order to carry out its responsibilities. The Committee may also exclude from its meetings any persons it deems appropriate in order to carry out its responsibilities.

C. Executive Sessions. The Committee shall meet with management, the director of the internal auditing department and the independent auditor, in separate executive sessions, as required by applicable law, regulation, exchange listing rules and in such other instances that the Committee deems appropriate.

IV. Responsibilities and Duties

The following functions shall be within the power of the Committee in carrying out its purposes outlined in Section I of this Charter. These functions should serve as a guide with the understanding that the Committee may carry out additional functions and adopt additional or different policies and procedures as may be appropriate in light of changing business, legislative, regulatory, legal or other conditions. The Committee shall also have such further powers as may be 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, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern, including but not limited to issues arising from section IV (D)(3), that the Committee deems appropriate. The Committee shall have independent authority to retain outside counsel or other experts for this purpose and unrestricted access to Perot Systems' employees, documents and other information. Perot Systems will pay the fees and out-of-pocket expenses associated any study or investigation conducted by the Committee, including fees and expenses of the Committee's outside counsel and other experts. The Committee is authorized to perform, oversee the performance of, and engage the independent auditor or third parties to perform such supplemental or additional work as the Committee may from time to time determine to be appropriate.

A. Financial Statements and Disclosure Matters.

1. Review and discuss with management, the internal audit department and the independent auditor the annual and quarterly financial statements, including disclosures made in Management's Discussion and Analysis of Financial Condition and Results of Operations, prior to the annual and quarterly financial statements being filed in Perot Systems' Forms 10-K and Forms 10-Q, as applicable. In connection with these reviews, the Committee will:

a) Review and discuss with the independent auditor (i) all critical accounting policies and practices to be used, (ii) all alternative treatments of financial information within generally accepted accounting principles (“GAAP”) that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor, (iii) the internal controls adhered to by Perot Systems, management and the financial, accounting and internal auditing personnel of Perot Systems, and the impact of the system of internal controls on the quality and reliability of Perot Systems' financial reporting and (iv) other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.

b) Review and discuss with management, the independent auditor and, to the extent applicable, the internal auditing department (i) significant accounting principles and financial statement presentations, including any significant changes in Perot Systems' selection or application of accounting principles, (ii) significant financial reporting issues and judgments made in connection with the preparation of Perot Systems' financial statements, including the effect of alternative GAAP methods on the financial statements, (iii) the development, selection and disclosure of critical accounting estimates and the analyses of alternative assumptions or estimates, and the effect of such estimates on Perot Systems' financial statements, (iv) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of Perot Systems, (v) any “pro forma” or “adjusted non-GAAP” information contained in Perot Systems' periodic reports, (vi) the effect of significant litigation, contingencies and claims against Perot Systems on Perot Systems' financial statements and (vii) audit problems or difficulties and management's response to such problems and difficulties.

2. Discuss with management and the independent auditor Perot Systems' earnings press releases, including the use, if any, of “pro forma” or “adjusted non-GAAP” information. In addition, the Committee will discuss with management financial information and earnings guidance provided to analysts and rating agencies. Such discussions may be done generally (consisting of discussing the types of information to be disclosed and the types of presentations to be made).

3. Discuss with management Perot Systems' major financial risk exposures and the steps management has taken to monitor and control such exposures, including Perot Systems' risk assessment and risk management policies.

4. Obtain from the independent auditor the information required to be disclosed to Perot Systems by generally accepted auditing standards (“GAAS”) in connection with the conduct of an audit and discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61, including (i) the independent auditor's responsibility under GAAS, (ii) Perot Systems' significant accounting policies, (iii) accounting estimates, assumptions and judgments used in preparing Perot Systems' financial statements, (iv) significant audit adjustments discovered and (v) disagreements with management encountered in the course of the audit.

5. Receive and review the Section 302 certifications of Perot Systems' Chief Executive Officer and Chief Financial Officer, or other persons performing similar functions, included in Perot Systems' Forms 10-K and Forms 10-Q.

B. Independent auditor.

1. The Committee is appointed by the Board to be directly responsible for the appointment, termination, compensation and oversight of the independent auditor of Perot Systems in connection with their preparation or issuance of audit reports and the performance of other audit, review, attest and related services for Perot Systems. The Committee is also responsible for approving, evaluating and overseeing the work of the independent auditor (including the audit plan and any subsequent changes in the audit plan) and resolving any disagreements between management and the independent auditor regarding Perot Systems' financial reporting process, internal controls and financial statements. The independent auditor reports directly to the Committee.

2. Pre-approve engagements for, and set policies and procedures for engagements relating to, audit, review or attest services and permitted non-audit services and the terms and fees thereof, which may include pre-approval of categories of non-audit services with aggregate authorized expenditures, to be performed for Perot Systems or its subsidiaries by the independent auditor, subject to the de minimis exceptions for permitted non-audit services described in Section 10A(i)(1)(B) of the Exchange Act.

3. Review the experience and qualifications of the senior members of the independent auditor's team to determine that the team has the competence necessary to conduct the audit engagement in accordance with GAAS.

4. Obtain and review a report from the independent auditor at least annually regarding (a) the independent 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) all relationships between the independent auditor and Perot Systems or any of its affiliates, including the written disclosures and the letter required by Independence Standards Board Standard 1, as it may be amended from time to time, and any successor to such standard. The Committee will evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditors' quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditors' independence. In making this evaluation, the Committee should take into account the opinions of management and the internal audit department. The Committee presents its conclusions to the Board.

5. Oversee the rotation of the lead audit partner, the concurring review partner and each other audit partner who has responsibility for decision-making on significant auditing, accounting and reporting matters that affect the financial statements or who maintain regular contact with management and the Committee as required by applicable law, regulation or exchange listing rules.

6. Recommend and oversee Perot Systems' written policies for hiring employees or former employees of the independent auditor who have participated in any capacity in an audit of Perot Systems.

7. If necessary or appropriate, review any communications between the independent audit team and its national office regarding auditing or accounting issues presented by the engagement.

8. Discuss with management, the internal audit department and the independent auditor any accounting adjustments that were noted or proposed by the independent auditor, but were passed (as immaterial or otherwise).

9. Discuss with the independent auditor any difficulties the independent auditor encountered in the course of the audit work, including any restrictions on the scope of the independent auditor's activities or on access to requested information, and any significant disagreements with management.

10. Discuss with the independent auditor the responsibilities, budget and staffing of the internal audit function.

11. Require the independent auditor to review the financial information included in Perot Systems' Forms 10-Q in accordance with Rule 10-01(d) of Regulation S-X prior to Perot Systems filing such reports with the Commission. If Perot Systems states in a Form 10-Q that the interim financial statements have been reviewed by the independent auditor, the Committee will obtain the independent auditor's report as required by Rule 10-01(d).

C. Internal Audit Department and Legal Compliance.

1. Review the budget, plan, changes in plan, material activities, organizational structure, and qualifications of the internal audit department, as needed.

2. Review the performance of, and make recommendations to the management of the Perot Systems regarding, the appointment, performance, and retention, of the director of internal audit.

3. Review significant reports prepared by the internal audit department together with management's response and follow-up to these reports.

4. On at least an annual basis, review with Perot Systems' counsel (a) any legal matters that could have a significant impact on the organization's financial statements, (b) Perot Systems' compliance with internal corporate governance policies and applicable laws and regulations and (c) inquiries received from and correspondence with regulators, governmental agencies and employees raising material issues with respect to Perot Systems' financial reporting process, internal controls and financial statements. On at least an annual basis, review with Perot Systems' Tax Director any tax matters that could have a significant impact on the organization's financial statements.

5. Obtain presentations from management and Perot Systems' internal audit director concerning Perot Systems' compliance with applicable legal requirements and Perot Systems' Standards & Ethical Principles. Obtain and review presentations regarding, and disclosures of, insider and affiliated party transactions.

6. Obtain from the independent auditor the reports required to be furnished to the Committee under Section 10A of the Exchange Act and obtain from the independent auditor any information with respect to illegal acts in accordance with Section 10A.

D. Other Committee Responsibilities, and Clarification of Role.

1. Oversee the integrity of the audit process, financial reporting process, internal controls and financial statements of Perot Systems, and the work of management, the internal audit department and the independent auditor in these areas, as applicable.

2. Review and approve procedures, including but not limited to a confidential, anonymous hotline, for (a) the receipt, retention and treatment of complaints received by Perot Systems regarding accounting, internal accounting controls or auditing matters, and (b) the confidential, anonymous submission by employees of Perot Systems of concerns regarding questionable accounting or auditing matters.

3. Review management's report regarding the internal controls and procedures for financial reporting of Perot Systems as required by the rules and regulations of the Commission.

E. Reports.

1. Report regularly to the Board (i) following meetings of the Committee, (ii) with respect to such other matters as are relevant to the Committee's discharge of its responsibilities, and (iii) with respect to such recommendations as the Committee may deem appropriate. The report to the Board may take the form of an oral report by the Chair or any other member of the Committee designated by the Committee to make such report.

2. Ensure that (i) the Perot Systems website includes a copy of this Charter and (ii) Perot Systems' annual report states that a copy of this Charter is available on the Perot Systems website and available in print upon request.

3. Maintain minutes or other records of meetings and activities of the Committee.

V. Annual Performance Evaluation

The Committee shall perform a review and evaluation, at least annually, of the performance of the Committee, including by reviewing the compliance of the Committee with this Charter.  In conducting its evaluation, the Committee may address all matters that it considers relevant to its performance .  In addition, the Committee shall review and reassess, at least annually, the adequacy of this Charter and recommend to the Board any improvements to this Charter that the Committee considers necessary or desirable.

VI. General

A. Reliance.Nothing in this Charter will, or will be deemed to, decrease or modify in any manner adverse to any member of the Committee, such member's right to rely on statements and certifications made by Perot Systems' officers, employees, agents, counsel, experts and auditors.

B. Indemnification.Nothing in this Charter will, or will be deemed to, adversely affect in any manner the rights of members of the Committee to indemnification and advancement of expenses under the Certificate of Incorporation or Bylaws of Perot Systems or under any contract, agreement, arrangement or understanding benefiting such member.

C. No Creation of Duties, Liabilities, or Obligations. Notwithstanding any other provision of this Charter, no provision of this Charter will, except to the extent required by applicable law, rule or regulation, be construed to create any duty, liability or obligation on the part of the Committee or any of its members.

D. Committee Is Not an Auditor.While the Committee has the responsibilities, duties and powers set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that Perot Systems' financial statements are complete and accurate and are in accordance with generally accepted accounting principles.  Perot Systems' financial statements are the responsibility of its management, and the independent auditor is responsible for the annual audit of those statements and for performing other audit, review or attest services pre-approved by the Committee.  Nor is it the duty of the Committee to conduct investigations (unless specific circumstances are brought to its attention warranting such a review) or to assure compliance with laws and regulations.