METRETEK TECHNOLOGIES, INC.
AUDIT COMMITTEE CHARTER
Amended and Restated as of March 24, 2005
The purpose of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Metretek Technologies, Inc., a Delaware Company (the “Company”), is to assist the Board in fulfilling its oversight responsibilities with respect to (i) the quality and integrity of the Company's financial statements; (ii) the Company's system of internal control over financial reporting and disclosure controls and procedures; (iii) the quality and integrity of the Company's auditing, accounting and financial reporting processes generally; (iv) the Company’s independent registered public accounting firm (“independent auditors”), including their qualifications, independence and performance; and (v) the Company’s compliance with legal and regulatory requirements. In addition, the Committee shall prepare annually the report required by the rules of the Securities and Exchange Commission (“SEC”) to be included in the Company’s proxy statement for its annual meeting of stockholders.
Structure and Membership
1. Number. The Committee shall consist of at least three members of the Board, with the exact number to be fixed from time to time by the Board.
3. Selection, Removal and Vacancies. The members of the Committee shall be appointed annually by the Board and shall serve until their respective successors are duly appointed, or until their earlier death, resignation or removal. Members of the Committee may be removed by the Board at any time, with or without cause, and shall be deemed to be automatically removed if they fail to meet the requirements and qualifications set forth in this Charter. Vacancies on the Committee shall be filled by the Board.
4. Chairman. The Chairman of the Committee shall be appointed by the Board, provided that if the Board fails to make such appointment, then the members of the Committee may elect a Chairman of the Committee by majority vote of the members of the Committee.
5. Subcommittees. The Committee may form and delegate authority to one or more subcommittees as it deems appropriate from time to time. Each such subcommittee shall consist of one or more members of the Committee. Any such subcommittee shall be formed and operate in compliance with any Applicable Exchange Requirements.
6. Compensation. The compensation of Committee members shall be as determined by the Board. No member of the Committee may accept, directly or indirectly, any compensation from the Company, other than fees paid for services as a member of the Board or a committee of the Board.
Meetings and Procedures
1. Frequency of Meetings. The Committee shall meet (in person or by telephone) as often as it deems necessary or appropriate in order to perform its responsibilities, but not less than quarterly. The Committee shall meet periodically with management, the internal accountants and the independent auditors in separate executive sessions to discuss any matters that the Committee or any of these groups believe should be discussed privately. The Committee shall meet quarterly with the independent auditors and management to review the Company’s quarterly financial statements, and the matters required to be discussed by Statement on Auditing Standards (“SAS”) No. 61, prior to the filing of the Quarterly Report on Form 10-Q or prior to the release of earnings reports.
2. Meeting Formalities. A majority of the members of the Committee shall constitute a quorum for a meeting. When a quorum is present, the act of a majority of the members of the Committee present at a meeting shall constitute the act of the Committee. The Committee may take actions by unanimous written consent of its members in lieu of a meeting. The Chairman of the Board, the Chairman of the Committee, the Board, any two members of the Committee, or the Chief Financial Officer of the Company may call meetings of the Committee. The Committee shall maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the Board.
3. Taking Action by Unanimous Written Consents in Lieu of Meetings. The Committee may take actions by unanimous written consent of its members in lieu of a meeting.
4. Rules of Procedure. The Committee may from time to time establish and modify its own rules of procedure, provided such rules are consistent with this Charter.
5. Reports to Board. The Committee shall provide regular reports to the Board with respect to its meetings.
6. Attendance of Company Representatives. The Committee may request that any director, officer or employee of the Company, or any other persons whose advice and counsel are sought by the Committee, such as the Company’s outside counsel or independent auditors, attend any meeting of the Committee or meet with any members of, or consultants to or advisors of, the Committee.
7. Charter. The Committee shall annually review and reassess the adequacy of this Charter and recommend any proposed changes to the Board for approval.
Authority and Resources
1. Generally. The Committee shall have the resources and authority appropriate to discharge its duties and responsibilities.
2. Access to Company Property. The Committee shall have full access to all Company books, records, facilities, personnel and outside advisors.
3. Independent Advisors. The Committee shall have the authority, without further action by the Board, to engage to retain independent legal counsel, accounting or other consultants or experts as it deems necessary or appropriate to advise the Committee and to assist the Committee in the fulfillment of its responsibilities and duties, at the Company’s expense. The Committee may also utilize the services of the Company’s regular counsel and other advisors to the Company. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to any advisors engaged by the Committee.
4. Investigations. The Committee shall have the power to conduct or authorize investigations into any matters within the Committee’s scope of responsibilities. The Committee shall be empowered, without further action by the Board, to retain independent counsel, accountants or other advisors as the Committee deems necessary or appropriate to advise the Committee and to assist the Committee in any investigation or in the performance of its functions and duties, at the Company’s expense. The Committee shall have full access to all Company books, records, facilities, personnel and outside advisors.
Responsibilities and Duties
To fulfill its responsibilities and duties, the Committee shall:
A. Financial Statements and Disclosure
1. Review and discuss with management, the internal accountants and the independent auditors (i) the Company's audited annual financial statements, including the related notes thereto, (ii) the independent auditors’ report thereon, and (iii) the Company’s disclosures with respect thereto under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and recommend to the Board whether the annual financial statements of the Company should be included in the Company’s Annual Report on Form 10-K, prior to filing the Annual Report on Form 10-K and publicly releasing annual earnings.
2. Review and discuss with management, the internal accountants and the independent auditors the Company’s quarterly financial statements, including the related notes thereto, and the Company’s disclosures with respect thereto under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, prior to filing the Quarterly Report on Form 10-Q and publicly releasing quarterly earnings.
3. Review and discuss with management the Company’s earnings press releases, including the use of “pro forma” or “adjusted” non-GAAP financial information and earnings guidance, prior to public disclosure thereof.
4. Review and discuss with management, the internal accountants and the independent auditors, and the Company’s counsel, as appropriate, any legal and regulatory matters that may have a material impact on the Company’s financial statements.
5. Review and discuss with management, the internal accountants and the independent auditors any significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements including any significant changes in the selection or application of accounting principles.
6. Review and discuss with management, the internal accountants and the independent auditors any off-balance sheet transactions, special purpose entities and transactions with affiliated companies.
B. Independent Auditors
1. Have the sole authority and responsibility for the appointment, setting of compensation and other engagement terms, oversight and evaluation of performance and, where appropriate, termination and replacement of the independent auditors.
2. Have the sole authority and responsibility to pre-approve all audit and permissible non-audit services to be provided to the Company by the independent auditors, including the fees and terms of all audit and non-audit services (except for permitted de minimus non-audit services) by the independent auditors, in each case as may be permissible and compatible with the independence of the independent auditors.
3. Meet with the independent auditors prior to the audit to discuss the planning and staffing of the audit.
4. Evaluate the performance of the independent auditors.
5. Review and discuss with management, the internal accountants and the independent auditors (i) any significant risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies, and (ii) any significant audit findings identified by the independent auditors.
6. Be available during the course of the audit or at other times discuss any matters that might affect the financial statements, internal controls or other financial aspects of the operations of the Company.
7. Receive copies of the annual comments from the independent auditors on accounting procedures and systems of control, subsequent to the completion of the audit, and review with the independent auditors any questions, comments or suggestions they may have relating to the internal controls, accounting practices or procedures of the Company.
8. On an annual basis, obtain from and review with the independent auditors written disclosure delineating all relationships between the independent auditors and the Company and its affiliates and their potential impact on independence, including the written disclosure and letter required by Independence Standards Board (“ISB”) Standard No. 1, as it may be modified or supplemented, and discuss with the independent auditors any relationships or services disclosed in this letter that may impact their independence.
9. On an annual basis, obtain from and review with the independent auditors a report regarding: (i) the independent auditors’ internal quality control procedures, (ii) any material issues raised by the most recent quality control review, or peer review, of the independent auditors, 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 auditors, and (iii) any steps taken to deal with any such issues.
10. Inform the independent auditors that they are ultimately accountable to the Committee.
11. Periodically discuss with the independent auditors out of the presence of management the Company's internal controls, including their recommendations, if any, for improvements in the Company's internal controls and the implementation of such recommendations, the fullness and accuracy of the Company's financial statement and the other matters required to be discussed by SAS No. 61, as it may be modified or supplemented, and information that would be required to be disclosed by generally accounting auditing standards (“GAAS”).
12. Recommend to the Board policies for the hiring by the Company of any employees or former employees of the independent auditors.
13. Oversee the rotation of the lead audit partner as and when that rotation is required to occur and consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditors on a regular basis.
C. Internal Controls and Processes
1. Review and discuss with the independent auditors, the internal accountants and management (i) the adequacy of the Company’s system of internal controls and the process designed to ensure compliance with SEC reporting requirements and with other applicable laws and regulations, (ii) any special steps adopted in light of material control deficiencies, and (iii) policies and procedures with respect to internal auditing and financial and accounting controls.
2. Review and discuss with management, the internal accountants and the independent auditors the Company’s report on internal control over financial reporting and the independent auditor’s attestation of the report prior to the filing of the Company’s Annual Report on Form 10-K, when such requirement becomes applicable to the Company.
3. Meet at least annually with the Company's management and the independent auditors in separate executive sessions to discuss any matters that the Committee or each of these groups believes should be discussed confidentially.
4. In consultation with the independent auditors, review the integrity and quality of the Company's financial reporting processes, both internal and external, and the independent auditor's perception of the Company's financial and accounting personnel.
5. Consider the independent auditors' judgments about the quality and appropriateness of the Company's accounting principles as applied and significant judgments affecting its financial reporting.
6. Review and attempt to resolve any significant disagreement among management and the independent auditors in connection with the preparation of the financial statements.
7. Consider and recommend to the Board, if appropriate, major changes to the Company's financial reporting, auditing and accounting principles and practices as suggested by the independent auditors or management.
8. Review with the independent auditors and management the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented.
9. Review the certifications filed with or furnished to the SEC by the Company’s Chief Executive Officer and Chief Financial Officer, and discuss and address (i) any significant deficiencies in the design or operation of internal controls which could adversely affect the Company’s ability to record, process, summarize and report financial data, and (ii) any fraud, whether or not material, that involved management or other employees who have a significant role in internal controls.
10. Review and, as the Committee deems appropriate, discuss with the independent auditors and management (i) the appointment and performance of the principal accounting officer, (ii) the significant reports to management prepared by the internal accounting staff, and management’s responses thereto, and (iii) the internal accounting staff responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audit.
D. Other Responsibilities
1. Prepare, in accordance with the rules and regulations promulgated by the SEC and applicable thereto, the Committee's Report for inclusion in the Company's proxy statement for its annual meeting of stockholders, and state therein whether, based on its review and discussions, the Committee recommended to the Board that the Company’s audited financial statements be included in the Company's Annual Report on Form 10-K for the last fiscal year.
2. Conduct or authorize investigations into any matters within its scope of responsibilities and utilizing the assistance of independent counsel, accountants, or others as it may, in its sole discretion, determine to be advisable.
3. Establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls and auditing matters, and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
4. Perform any other activities consistent with this Charter, the Company's By-laws and applicable law, as the Committee or the Board deems necessary or appropriate.
Limitations on Responsibility and Duties
The Committee’s responsibility is oversight. The Company’s management is responsible for the preparation, presentation and integrity of the Company’s financial statements. The Company’s independent auditors are responsible for planning and conducting an annual audit of the Company’s annual financial statements, expressing an opinion as to the conformity of such annual financial statements with generally accepted accounting principles (“GAAP”) and reviewing the Company’s quarterly financial statements. While the Committee has the responsibilities and duties set forth in this Charter, its members are not auditors or certifiers of the Company’s financial statements, and it is not the duty of the Committee (i) to prepare financial statements, (ii) to plan or conduct audits, or (iii) to determine that the Company's financial statements are complete and accurate and in accordance with GAAP and other applicable rules and regulations, which are the responsibility of the Company's management and independent auditors. The members of the Committee are entitled to rely, to the fullest extent permitted by law, on the integrity of those persons within and outside the Company from whom he or she receives information, and the accuracy of the financial and other information provided to the Committee by such persons.
© 2004 Metretek Technologies, Inc.