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| I. |
Statement of Principles
Under the Sarbanes-Oxley Act of 2002 (the "Act"), the Audit Committee of the
Board of Directors is responsible for the appointment, compensation and
oversight of the work of the independent auditor. As part of this
responsibility, in addition to the audit services, the Audit Committee is
required to pre-approve the non-audit services performed by the independent
auditor in order to assure that they do not impair the auditor's independence
from the Company. To implement these provisions of the Act, the Securities and
Exchange Commission (the "SEC") has issued rules specifying the types of
services that an independent auditor may not provide to its audit client, as
well as the audit committee's administration of the engagement of the
independent auditor. Accordingly, the Audit Committee has adopted the Audit and
Non-Audit Services Pre-Approval Policy (the "Policy"), which sets forth the
procedures and the conditions pursuant to which services proposed to be
performed by the independent auditor may be pre-approved.
The SEC's rules establish two different approaches to pre-approving services,
which the SEC considers to be equally valid. Proposed services may either (1)
be pre-approved without consideration of specific case-by-case services by the
Audit Committee ("general pre-approval"); (2) or require the specific
pre-approval of the Audit Committee ("specific pre-approval"). The Audit
Committee believes that the combination of these two approaches in this Policy
will result in an effective and efficient procedure to pre-approve services
performed by the independent auditor. As set forth in this Policy, unless a
type of service has received general pre-approval, it will require specific
pre-approval by the Audit Committee if it is to be provided by the independent
auditor. Any proposed services exceeding120 % of pre-approved cost levels or
budgeted amounts will also require specific pre-approval by the Audit
Committee.
For both types of pre-approval, the Audit Committee will consider whether such
services are consistent with the SEC's rules on auditor independence. The Audit
Committee will also consider whether the independent auditor is best positioned
to provide the most effective and efficient service, for reasons such as its
familiarity with the Company's business, people, culture, accounting systems,
risk profile and other factors, and whether the service might enhance the
Company's ability to manage or control risk or improve audit quality. All such
factors will be considered as a whole, and no one factor should necessarily be
determinative.
The appendices to this Policy describe the Audit, Audit-related, Tax and All
Other services that have the general pre-approval of the Audit Committee. The
term of any general pre-approval is 12 months from the date of pre-approval,
unless the Audit Committee considers a different period and states otherwise.
The Audit Committee will annually review and pre-approve the services that may
be provided by the independent auditor without obtaining specific pre-approval
from the Audit Committee. The Audit Committee will add or subtract to the list
of general pre-approved services from time to time, based on subsequent
determinations.
The purpose of this Policy is to set forth the procedures by which the Audit
Committee intends to fulfill its responsibilities. It does not delegate the
Audit Committee's responsibilities to pre-approve services performed by the
independent auditor to management.
The independent auditor has reviewed this Policy and believes that
implementation of the Policy will not adversely affect the auditor's
independence.
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| II. |
Delegation
As provided in the Act and the SEC's rules, the Audit Committee may delegate
either type of pre-approval authority to one or more of its members. The member
to whom such authority is delegated must report, for informational purposes
only, any pre-approval decisions to the Audit Committee at its next scheduled
meeting. The Chairman of the Audit Committee is hereby delegated authority to
approve or disapprove any non-audit service by the independent auditor for
which approval is sought on an emergency basis or otherwise at a time when
there is no scheduled Audit Committee meeting within one week after the date on
which the approval is sought.
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| III. |
Audit Services
The annual Audit services engagement terms and fees will be subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit (including required quarterly reviews), subsidiary
audits, equity investment audits and other procedures required to be performed
by the independent auditor to be able to form an opinion on the Company's
consolidated financial statements. These other procedures include information
systems and procedural reviews and testing performed in order to understand and
place reliance on the systems of internal control, and consultations relating
to the audit or quarterly review. Audit services also include the attestation
engagement for the independent auditor's report on management's report on
internal controls for financial reporting. The Audit Committee will monitor the
Audit services engagement as necessary, but no less than on a quarterly basis,
and will also approve, if necessary, any changes in terms, conditions and fees
resulting from changes in audit scope, Company structure or other items.
In addition to the annual Audit services engagement approved by the Audit
Committee, the Audit Committee may grant general pre-approval to other Audit
services, which are those services that only the independent auditor reasonably
can provide. Other Audit services may include statutory audits or financial
audits for subsidiaries or affiliates of the Company and services associated
with SEC registration statements, periodic reports and other documents filed
with the SEC or other documents issued in connection with securities offerings.
The Audit Committee has generally pre-approved the Audit services in Appendix
A. At least quarterly, the Audit Committee will review and approve a
pre-approved cost level for the services identified on Appendix A which the
Company may utilize. All other Audit services not listed in Appendix A, and any
Audit services listed on Appendix A for which no pre-approved cost level has
been set or which will exceed 120% of the pre-approved cost level, must be
specifically pre-approved by the Audit Committee.
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| IV. |
Audit-related Services
Audit-related services are assurance and related services that are reasonably
related to the performance of the audit or review of the Company's financial
statements or that are traditionally performed by the independent auditor.
Because the Audit Committee believes that the provision of Audit-related
services does not impair the independence of the auditor and is consistent with
the SEC's rules on auditor independence, the Audit Committee may grant general
pre-approval to Audit-related services. Audit-related services include, among
others, due diligence services pertaining to potential business
acquisitions/dispositions; accounting consultations related to accounting,
financial reporting or disclosure matters not classified as "Audit services";
assistance with understanding and implementing new accounting and financial
reporting guidance from rulemaking authorities; financial audits of employee
benefit plans; agreed-upon or expanded audit procedures related to accounting
and/or billing records required to respond to or comply with financial,
accounting or regulatory reporting matters; and assistance with internal
control reporting requirements.
The Audit Committee has pre-approved the Audit-related services in Appendix B.
At least quarterly, the Audit Committee will review and approve a pre-approved
cost level for the services identified on Appendix B which the Company may
utilize, if any. All other Audit-related services not listed in Appendix B, and
any Audit-related services listed on Appendix B for which no pre-approved cost
level has been set or which will exceed 120% of the pre-approved cost level,
must be specifically pre-approved by the Audit Committee.
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| V. |
Tax Services
The Audit Committee believes that the independent auditor can provide tax
services to the Company such as tax compliance, tax planning and tax advice
without impairing the auditor's independence, and the SEC has stated that the
independent auditor may provide such services. Hence, the Audit Committee may
grant general pre-approval to those Tax services that have historically been
provided by the auditor, that the Audit Committee has reviewed and believes
would not impair the independence of the auditor, and that are consistent with
the SEC's rules on auditor independence. The Audit Committee will specifically
review the retention of the independent auditor in connection with a
transaction initially recommended by the independent auditor, the primary
business purpose of which is tax -reduction , and the tax treatment of which
may not be supported in the Internal Revenue Code and related regulations or by
the laws and regulations of another tax jurisdiction which would have
subject-matter jurisdiction over the transaction.
Pursuant to the preceding paragraph, the Audit Committee has pre-approved the
Tax services in Appendix C-1. At least quarterly, the Audit Committee will
review and approve a pre-approved cost level for the services identified on
Appendix C-1 which the Company may utilize, if any. All other Tax services, and
any Tax services listed on Appendix C-1 for which no pre-approved cost level
has been set or which will exceed 120% of the pre-approved cost level, must be
specifically pre-approved by the Audit Committee. In addition, all Tax services
involving large and complex transactions not identified specifically on
Appendix C-1 or which may subject the Company to significant interest and
penalties if successfully challenged by tax authorities must be specifically
pre-approved by the Audit Committee, including: tax services proposed to be
provided by the independent auditor to any executive officer or director of the
Company, in his or her individual capacity, where such services are paid for by
the Company. The form of quarterly pre-approved cost level documentation will
take the form of Appendix C-2.
The Company's Director of Tax will enter into a "Standard Terms and Conditions
Letter" for any Tax service approved pursuant to this Policy, which will
incorporate Appendix C-1 and each statement of pre-approved cost level approved
under this Policy in the form of Appendix C-2.
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| VI. |
All Other Services
The Audit Committee believes, based on the SEC's rules prohibiting the
independent auditor from providing specific non-audit services, that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may grant general pre-approval to those permissible non-audit
services classified as All Other services that it believes are routine and
recurring services, would not impair the independence of the auditor and are
consistent with the SEC's rules on auditor independence.
The Audit Committee has pre-approved the All Other services in Appendix D. At
least quarterly, the Audit Committee will review and approve a pre-approved
cost level for the services identified on Appendix D which the Company may
utilize, if any. Permissible All Other services not listed in Appendix D, and
any such services listed on Appendix D for which no pre-approved cost level has
been set or which will exceed 120% of the pre-approved cost level, must be
specifically pre-approved by the Audit Committee.
A list of the SEC's prohibited non-audit services is attached to this Policy as
Exhibit 1.
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| VII. |
Pre-Approved Fee Levels or Budgeted Amounts
Pre-approved fee levels or budgeted amounts for all services to be provided by
the independent auditor will be established at least annually and reviewed at
least quarterly by the Audit Committee. Any proposed services exceeding 120% of
these levels or amounts will require specific pre-approval by the Audit
Committee.
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| VIII. |
Procedures
All requests or applications for tax services to be provided by the independent
auditor will be submitted, as an initial matter, to the Chief Financial Officer
of the Company and must include a detailed description of the services to be
rendered. The Chief Financial Officer will determine whether such services are
included within the list of services that have received the general
pre-approval of the Audit Committee and for which a pre-approved cost level has
been set. If the requested services have not expressly and clearly received
Audit Committee pre-approval, the services must not be performed until they
have been approved as provided in this policy.
If a request or application to provide services requires specific approval by
the Audit Committee, the request or application will be submitted to the Audit
Committee by both the independent auditor and the Chief Financial Officer, and
must include a joint statement as to whether, in their view, the request or
application is consistent with the SEC's rules on auditor independence.
The Audit Committee will be informed on a timely basis of all services rendered
by the independent auditor. The Chief Financial Officer will monitor the
performance of all services provided by the independent auditor and, together
with the independent auditor, will report to the Audit Committee periodically
regarding those services in order to assist the Audit Committee in monitoring
compliance with this Policy. Management will immediately report to the chairman
of the Audit Committee any breach of this Policy that comes to the attention of
any member of management.
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APPENDIX A
Pre-Approved Audit Services for March 2005 - March 2006
Dated: March 2005
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Annual financial statement audit
for the Company, including quarterly reviews; |
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Statutory audit engagements for
each subsidiary and affiliate as required by applicable companies and
securities legislation; |
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Financial statement audit
engagements for any subsidiary or affiliate, incremental to the audit work
required for the purpose of the consolidated financial statements, where
required by applicable laws or regulations or as requested to meet internal
management requirements for audited financial statements of nominated
subsidiary or affiliate entities; |
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Services associated with SEC
registration statements, periodic reports and other documents filed with the
SEC or other documents issued in connection with securities offerings (e.g.,
comfort letters, consents), and assistance in responding to SEC comment
letters; |
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Attestation of management reports
on internal controls under the Sarbanes-Oxley Act of 2002; |
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Consultations with management as
to the accounting or disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules, standards or
interpretations by the SEC, FASB, or other regulatory or standard setting
bodies (Note: Under SEC rules, some consultations may be "audit-related"
services rather than "audit" services). |
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APPENDIX B
Pre-Approved Audit-Related Services for March 2005 - March 2006
Dated: March 2005
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Due diligence services pertaining
to potential acquisitions of complete businesses or significant investments in
businesses, joint ventures, or strategic alliances, including, without
limitation, (a) identification of financial statement and business risks, (b)
investigation of the target's financial condition, including quality of assets
and liabilities, quality of earnings, quality of cash flows, review of
accounting policies and practices, and consideration of internal controls, (c)
investigation of the target's tax position, risks, and implications, (d) advice
and consultation on accounting structure and reporting requirements for the
transaction, (e) advice and consultation on tax structure for the transaction
and (f) integration risk assessment of the contemplated transaction; |
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Consultations with management as
to the accounting or disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules, standards or
interpretations by the SEC, FASB, or other regulatory or standard-setting
bodies (Note: Under SEC rules, some consultations may be "audit" services
rather than "audit-related" services); |
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Subsidiary or equity investee
audits incremental to the audit of the consolidated financial statements; |
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Closing balance sheet audits
pertaining to dispositions; |
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Review of the effectiveness of
the internal audit function; |
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General assistance with
implementation of the requirements of SEC rules or listing standards
promulgated pursuant to the Sarbanes-Oxley Act; |
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Financial statement audits of
employee benefit plans; |
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Agreed-upon or expanded audit
procedures related to accounting required to respond to or comply with
financial, accounting or regulatory reporting matters, including, without
limitation, the review of subsidiary stand-alone financial statements to
satisfy state business licensing requirements; |
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Internal control reviews and
assistance with internal control reporting requirements; |
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Attest services not required by
statute or regulation, including, without limitation, reporting on the
financial statements of subsidiary stand-alone financial statements,
information requested by existing or potential borrowing requirements, and
special reports related to dispositions as required by the buyer in a purchase
agreement; |
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Information systems reviews not
performed in connection with the audit (e.g., application, data center and
technical reviews); |
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Consultations on the accounting
treatment or disclosure requirements of transactions or events including
discussions, research consultations and auditing procedures relating to unusual
or non-recurring transactions. |
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APPENDIX C-1
Pre-Approved Tax Services for March 2005 - March 2006
Dated: March 2005
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U.S. and foreign Federal, state
and local tax planning and advice related to routine day-to-day hourly
consulting on the following: |
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Assistance and preparation of
federal or national income and non-income tax compliance matters, including,
without limitation, assistance with IRS or similar inquiries |
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Assistance and preparation on
state and local tax matters, including, without limitation, income and
franchise tax, employment tax, sales and use tax, property tax, business
incentive credits, state tax inquiries and controversy |
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Assistance and advice on
international transactions, including reorganizations, transfer pricing, and
repatriation of foreign earnings.
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Advice on U.S, state and local
and international interpretations of statutes, regulations, administrative
opinions, including proposed legislative changes. |
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Assistance and advice on employee
benefit plans and compensation and benefits. |
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U.S. and foreign Federal, state
and local tax compliance |
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Research assistance with respect
to U.S. and International Federal, state and local income tax and non-income
tax return issues, including, without limitation, assistance with elections to
be included in returns |
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Preparation or review of U.S. and
International Federal, state and local income tax and non-income tax returns
and supporting schedules, including the use of software licensed by the
independent auditor, state exemption filings, and estimated tax payments
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Assistance with tax audits and
appeals before the IRS and similar state, local and foreign agencies |
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Tax advice and assistance
regarding statutory, regulatory or administrative developments |
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Expatriate tax assistance and
compliance including, without limitation, preparation of U.S. Federal and
foreign tax returns and assistance in determining withholding and equalization
payments for employees on foreign assignment |
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APPENDIX D
Pre-Approved Other Services for March 2005 - March 2006
Dated: March 2005
None.
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EXHIBIT 1
Prohibited Services
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| 1. |
Bookkeeping; |
| 2. |
Financial information system
design; |
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Appraisal or valuation services; |
| 4. |
Actuarial services; |
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Internal Auditing; |
| 6. |
Investment adviser or broker; |
| 7. |
Legal Services; |
| 8. |
Human Resource functions; and |
| 9. |
Other services determined by
regulations to be prohibited. |
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