TRIZEC PROPERTIES, INC.
AUDIT COMMITTEE
CHARTER

 

 

 

I.

 

Purpose

The purpose of the Audit Committee is to assist the board of directors (the “Board of Directors”) of Trizec Properties, Inc. (the “Corporation”) in (i) fulfilling its responsibilities to oversee the Corporation’s financial reporting process, including monitoring the integrity of the Corporation’s financial statements and the independence and performance of the Corporation’s internal and external auditors, (ii) fulfilling its responsibilities to oversee the Corporation’s compliance with legal and regulatory requirements, and (iii) monitoring the ownership and transfer of the Corporation’s shares for the purpose of ensuring that the Corporation achieves and preserves its status as a “domestically-controlled REIT.” The Audit Committee shall also be responsible for preparing the report of the audit committee included in the Corporation’s annual proxy statement.

The Audit Committee’s responsibilities are those of monitoring and supervision and, in carrying out its responsibilities, the Audit Committee is not providing any expert or other special assurances as to the Corporation’s financial statements or as to the Corporation’s status as a “domestically-controlled REIT.” The Corporation’s executive management remains responsible for the preparation of the financial statements in accordance with generally accepted accounting principles and the Corporation’s independent auditor remains responsible for auditing those financial statements.

 

 

 

II.

 

Membership Requirements

The Audit Committee shall be comprised of that number of Directors as the Board of Directors shall determine from time to time, such number not to be less than three (3) in accordance with the Corporation’s by-laws (the “By-Laws”). Each Director shall meet all applicable requirements of the New York Stock Exchange, the SEC and any other applicable laws, rules and regulations with respect to independence, financial literacy, accounting or related financial expertise, as determined by the Board of Directors. Audit Committee Members shall not serve simultaneously on the audit committees of more than two other public companies without approval of the entire Board. The members of the Audit Committee shall be appointed annually by the Board of Directors and may be removed at any time, with or without cause, by the Board of Directors. The Board of Directors, upon recommendation by the members of the Audit Committee, shall appoint the Chairman of the Audit Committee.

 

 

 

III.

 

Authority

In discharging its oversight responsibilities, the Audit Committee shall have unrestricted access to the Corporation’s management, books and records and the authority to retain outside counsel, accountants or other consultants in the Audit Committee’s sole discretion. The Audit Committee shall also have sole authority to approve the fees and other retention terms of such consultants and to terminate such consultants. The Audit Committee shall also have the authority to create subcommittees with such powers as the Audit Committee shall from time to time confer.

 

 

 

IV.

 

Audit Committee Compensation

Audit Committee members shall not receive any compensation from the Company other than directors’ fees (including any equity-based awards), which may include amounts paid to directors for service on committees and as chairmen of committees of the Board.

 

 

 

V.

 

Responsibilities

The following are the general responsibilities of the Audit Committee and are set forth only for its guidance. The Audit Committee may assume such other responsibilities as it deems necessary or appropriate in carrying out its oversight functions.

 

A.

 

On at least an annual basis, the Audit Committee shall:

 

 

1.

 

Appoint, and approve the fees and engagement terms for, the independent auditor who shall be accountable to the Board of Directors and the Audit Committee; when circumstances warrant, discharge the independent auditor; and recommend the independent auditor to the Board of Directors for shareholder approval in the proxy statement.

 

 

2.

 

Review a report by the independent auditor describing:

 

 

 

a.

 

the firm’s internal quality control procedures;

 

 

b.

 

any material issues raised by the most recent quality-control review, peer review or government or professional investigation, within the preceding five years, of the independent auditor’s independent audits, and steps taken to deal with these issues; and

 

 

 

c.

 

relationships between the independent auditor and the Corporation to assess the independent auditor’s independence.

 

 

 

3.

 

Determine whether to recommend to the Board of Directors that the Corporation’s financial statements be included in its annual report on Form 10-K for filing with the Securities and Exchange Commission (the “SEC”). To carry out this responsibility, the Audit Committee shall:

 

 

a.

 

review the proposed scope of the annual audit and agree thereon with the independent auditor;

 

 

b.

 

review and discuss the audited financial statements, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” with management and the independent auditor;

 

 

 

c.

 

review a report of the independent auditor with respect to:

 

 

 

(1)

 

all critical accounting policies and practices used;

 

 

(2)

 

all alternative treatments of financial information within GAAP that have been discussed with management as well as the ramifications of these alternatives and the treatment preferred by the audit firm; and

 

 

 

(3)

 

any other material written communications between the audit firm and management (including the management letter and schedule of unadjusted differences).

 

 

 

d.

 

discuss with the independent auditor the matters required by Statement on Auditing Standards No. 61;

 

 

e.

 

review and discuss with the independent auditor the written disclosures required by Independence Standards Board Standard No. 1 regarding their independence and, where appropriate, recommend that the Board of Directors take appropriate action in response to the disclosures to satisfy itself of the independence of the Corporation’s independent auditor; and

 

 

f.

 

based upon the reviews and discussions, issue its report for inclusion in the Corporation’s proxy statement.

 

 

4.

 

Review with the independent auditor any audit problems and management’s response to those problems.

 

 

5.

 

Consider whether the provision of services by the independent auditor not related to the audit of the annual financial statement and the review of the interim financial statements included in the Corporation’s reports on Form 10-Q for such year is compatible with maintaining the auditors’ independence.

 

 

 

6.

 

Establish, and review at least annually, procedures:

 

 

 

a.

 

for dealing with complaints received by the Corporation regarding accounting, internal accounting controls or audit matters; and

 

 

b.

 

for the confidential anonymous submission by employees of concerns regarding accounting or auditing matters.

 

 

 

7.

 

Review and reassess the adequacy of this charter of the Audit Committee annually and submit any proposed modifications to the Board of Directors for approval.

 

 

8.

 

Review and evaluate the Audit Committee’s performance annually with the committee or individual designated by the Board of Directors to undertake such review.

 

 

 

B.

 

On a quarterly basis, the Audit Committee shall:

 

 

1.

 

Review and discuss with management and the independent auditor the Corporation’s interim financial statements, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” to be included in the Corporation’s quarterly reports to be filed with the SEC.

 

 

2.

 

Review each quarter the report of the committee or individual in charge of internal control system review, with a more detailed review of the internal control report filed with the Form 10-K; and meet with the Chief Executive Officer and Chief Financial Officer each quarter to discuss the report, any deficiencies or material weaknesses in the design or operation of internal controls, and any fraud involving persons with a significant role in the Corporation’s internal controls or disclosure controls.

 

 

 

3.

 

Review each quarter the report of the Disclosure Controls and Procedures Committee and meet with the Chief Executive Officer and Chief Financial Officer each quarter to discuss the report, any deficiencies or material weaknesses in disclosure controls and procedures, and any fraud involving persons with a significant role in the Corporation’s disclosure controls and procedures. The review should include a discussion of the Corporation’s risk assessment and risk management policies, including discussion of major financial risk exposures and steps management has taken to monitor and control them.

 

 

 

4.

 

Review the process for the Chief Executive Officer and Chief Financial Officer certifications required by the SEC with respect to the Company’s financial statements.

 

 

 

5.

 

Discuss, within the committee, earnings releases and financial information and earnings guidance provided to analysts and rating agencies.

 

 

 

6.

 

Meet privately with the independent auditor and with the head of the Internal Audit Department to review the Corporation’s accounting practices, internal accounting controls and such other matters as the Audit Committee deems appropriate.

 

 

 

 

C.

 

From time to time and as necessary, the Audit Committee shall:

 

 

1.

 

Review and approve all audit and non-audit services to be provided by the independent auditor prior to the Corporation’s receipt of such services in accordance with all applicable laws, rules and regulations.

 

 

2.

 

Oversee the functioning of the internal audit review, including its organization, staffing and work plans, and review periodic reports prepared by such organization, with a formal review of the internal audit function at least annually.

 

 

 

3.

 

Discuss with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures and aggregate contractual obligations on the Company’s financial statements.

 

 

 

4.

 

Oversee the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit at least once every five years, and oversee the rotation of other audit partners, in accordance with all applicable laws, rules and regulations.

 

 

 

5.

 

Discuss with management and the independent auditor any correspondence between the Company and regulators or governmental agencies and any associated complaints or published reports that raise material issues regarding the Company’s financial statements or accounting policies.

 

 

 

6.

 

Review and approve all related-party transactions in accordance with all applicable laws, rules and regulations.

 

 

 

7.

 

Set clear hiring policies for employees or former employees of independent auditor, and review such policies at least annually, which policies shall meet the requirements of all applicable laws, rules and regulations.

 

 

 

8.

 

Review any complaints received by the Corporation regarding accounting, internal accounting controls or audit matters and any submissions by employees of concerns regarding accounting or auditing matters.

 

 

 

9.

 

Regularly report to the Board of Directors its conclusions with respect to the matters that the Audit Committee has considered.

 

 

 

D.

 

In addition, in connection with the Corporation’s obligations as a “domestically-controlled REIT,” the Audit Committee shall:

 

 

1.

 

Unless the Board of Directors has already done so, designate an appropriate officer (“Monitor”) who, with the assistance of such personnel as may be appropriate, shall monitor and enforce ownership and transfer limitations and restrictions necessary to ensure that the Corporation achieves and maintains qualification as a “domestically-controlled REIT.”

 

 

 

2.

 

Review and discuss with the Monitor any matter relating to ownership or transfer of the Corporation’s shares in violation of the Corporation’s Certificate of Incorporation, as may be amended from time to time, or any other matters of which the Monitor is required to inform the Audit Committee in accordance with the Corporation’s Policies and Procedures.

 

 

 

3.

 

Semi-annually review the performance of the Monitor to ensure that the Monitor diligently performs his or her duties in accordance with the Corporation’s Policies and Procedures and at that time consider whether any changes to the Corporation’s Policies and Procedures may be appropriate.

 

 

 

 

VI.

 

Meetings

Subject to the By-Laws and resolutions of the Board of Directors, the Audit Committee shall meet at least four (4) times annually at such times as the Chairman of the Committee shall designate. The Audit Committee shall also meet with management, the internal auditors and the independent auditor in separate executive sessions to discuss matters for which the Audit Committee has responsibility. The Audit Committee shall fix its own rules of procedure, and a majority of the members serving shall constitute a quorum. The Audit Committee shall keep minutes of its meetings and all action taken shall be reported to the Board of Directors.