Audit Committee Charter
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Amended and Restated Charter
This Charter identifies the purpose, composition, meeting requirements,
committee responsibilities, annual evaluation procedures and investigations
and studies of the Audit Committee (the "Committee") of the Board
of Directors (the "Board") of Regeneration Technologies, Inc. (the "Company").
I. Purpose
The Committee has been established to: (a) assist the Board in its oversight
responsibilities regarding (1) the integrity of the Company's financial statements,
(2) the Company's compliance with legal and regulatory requirements and (3)
the independent auditors' qualifications and independence; (b) prepare the
report required by the United States Securities and Exchange Commission (the "SEC")
for inclusion in the Company's annual proxy statement; (c) retain and terminate
the Company's independent auditors; (d) approve audit and non-audit services
to be performed by the independent auditors; and (e) perform such other functions
as the Board may from time to time assign to the Committee. In performing
its duties, the Committee shall seek to maintain an effective working relationship
with the Board, the independent auditors and management of the Company.
II. Composition
The Committee shall have a minimum of three members appointed by the Board
who serve until replaced by the Board. The Chairman of the Board shall designate
the Chairman of the Committee. The members of the Committee shall meet the
independence, experience and financial literacy requirements of The Nasdaq
Stock Market, Inc., Section 10A(m)(3) of the Securities Exchange Act of 1934
(the "Exchange Act") and the rules and regulations of the SEC. In
addition, at least one member shall be an "audit committee financial
expert", as defined by the SEC. All members of the Committee shall have
a working familiarity with basic finance and accounting practices. The Board
shall review these requirements on an annual basis to insure continued compliance
by the members of the Committee.
Except for Board and Committee fees, a member of the Committee shall not
be permitted to accept any fees paid directly or indirectly for services as
a consultant, legal advisor or financial advisor or any other fees prohibited
by the rules of the SEC and The Nasdaq Stock Market. In addition, no member
of the Committee may be an affiliated person of the Company or any of its
subsidiaries. Members of the Committee may receive their Board and Committee
fees in cash, Company stock or options or other in-kind consideration as determined
by the Board or the Compensation Committee, as applicable, in addition to
all other benefits that other directors of the Company receive. No director
may serve on the Committee, without the approval of the Board, if such director
simultaneously serves on the audit committee of more than three public companies.
III. Meeting Requirements
The Committee shall meet as necessary, but at least quarterly, to enable
it to fulfill its responsibilities. The Committee shall meet at the call of
its Chairperson, preferably in conjunction with regular Board meetings. The
Committee may meet by telephone conference call or by any other means permitted
by law or the Company's Bylaws. A majority of the members of the Committee
shall constitute a quorum. The Committee shall act on the affirmative vote
of a majority of members present at a meeting at which a quorum is present.
Without a meeting, the Committee may act by unanimous written consent of all
members. The Committee shall determine its own rules and procedures, including
designation of a chairperson pro tempore, in the absence of the Chairperson,
and designation of a secretary. The secretary need not be a member of the
Committee and shall attend Committee meetings and prepare minutes. The Committee
shall keep written minutes of its meetings, which shall be recorded or filed
with the books and records of the Company. Any member of the Board shall be
provided with copies of such Committee minutes if requested.
The Committee may ask members of management, employees, outside counsel,
the independent auditors or others whose advice and counsel are relevant to
the issues then being considered by the Committee, to attend any meetings
and to provide such pertinent information as the Committee may request.
The Chairperson of the Committee shall be responsible for leadership of
the Committee, including preparing the agenda, presiding over Committee meetings,
making Committee assignments and reporting the Committee's actions to the
Board from time to time (but at least once each year) as requested by the
Board.
IV. Committee Authority, Duties and Responsibilities
The Company's independent auditor shall report directly to the Committee.
The Committee shall be directly responsible for, and have sole authority as
to, the appointment, retention and termination, compensation and oversight
of the work of the independent auditors, including resolution of disagreements
between management and the auditors regarding accounting matters and financial
reporting matters.
In addition to such other duties as the Board may from time to time assign,
the Committee shall have the following responsibilities:
A. Oversight of the Financial Reporting Processes
- In consultation with the independent accountants review the integrity
of the organization's financial reporting processes, both internal and external.
- Review and approve all related-party transactions.
- Consider the independent accountants' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting. Consider any alternative accounting principles and estimates
presented to it.
- Annually review major issues regarding the Company's auditing and accounting
principles and practices and its presentation of financial statements, including
the adequacy of internal controls and special audit steps adopted in light
of material internal control deficiencies.
- Discuss with management and legal counsel the status of pending litigation,
taxation matters, compliance policies and other areas of oversight applicable
to the legal and compliance area as may be appropriate.
- Meet at least annually with the chief financial officer and the independent
accountants in separate executive sessions.
- Review analyst reports and press articles about the Company's accounting
and disclosure practices and principles.
- Review all analyses prepared by management and the independent accountants
of significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements, including any
analysis of the effect of alternative generally accepted accounting principle
("GAAP") methods on the Company's financial statements and a description
of any transactions as to which management obtained Statement on Auditing
Standards No. 50 letters.
- Review with management and the independent accountants the effect of
regulatory and accounting initiatives, as well as off-balance sheet structures,
on the Company's financial statements.
B. Review of Documents and Reports
- Review and discuss with management and the independent auditors the Company's
annual audited financial statements and quarterly financial statements (including
disclosures under the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations") and any
reports or other financial information submitted to investors, including
any certification, report, opinion or review rendered by the independent
auditors. Consider, as appropriate, whether the information contained in
these documents is consistent with the information contained in the financial
statements and whether the independent auditors and legal counsel are satisfied
with the disclosure and content of such documents. These discussions shall
include consideration of the quality of the Company's accounting principles
as applied in its financial reporting, including review of audit adjustments
(whether or not recorded) and any such other inquires as may be appropriate.
Based on the review, the Committee shall make its recommendation to the Board
as to the inclusion of the Company's audited consolidated financial statements
in the Company's annual report on Form 10-K.
- Review and discuss with management and the independent auditors earnings
press releases, as well as financial information and earnings guidance provided
to investors and rating agencies.
- Review with management and the independent auditors any correspondence
with regulators or government agencies and any employee complaints or published
reports that raise material issues regarding the Company's financial statements
or accounting policies.
- Prepare the report of the Committee required by the rules of the SEC
to be included in the Company's annual proxy statement.
- Submit the minutes of all meetings of the Committee to, or discuss the
matters discussed at each Committee meeting with, the Board.
C. Independent Accountant Matters
- Interview and retain the Company's independent auditors, considering
the accounting firm's independence and effectiveness and approve the engagement
fees and other compensation to be paid to the independent auditors.
- Meet with the independent auditors and the Company's financial management
to review the scope of the proposed external audit for the current year.
- Approve, in advance of the work being performed, the scope of all audit
and permissible non-audit services of the independent accountant.
- On an annual basis, the Committee shall evaluate the independent auditors'
qualifications, performance and independence. To assist in this undertaking,
the Committee shall request information and consider (a) the independent
auditors' internal quality-control procedures, (b) any material issues raised
by the most recent internal quality-control review, or peer review, of the
accounting firm or by any inquiry or investigations by governmental or professional
authorities (within the preceding five years) respecting one or more independent
audits carried out by the independent auditors, and any steps taken to deal
with any such issues and (c) all relationships the independent auditors have
with the Company and relevant third parties in order to determine the impact,
if any, of such relationships on the independent auditors' independence.
In making its determination, the Committee shall consider not only auditing
and other traditional accounting functions performed by the independent auditors,
but also non-audit services performed or proposed to be performed.
- The Committee shall also consider whether the provision of any of these
non-audit services is compatible with the independence standards under the
guidelines of the SEC and other applicable authorities (including, possibly,
the Public Company Accounting Oversight Board) and shall approve in advance
any non-audit services to be provided by the independent auditors.
- Review on an annual basis the experience and qualifications of the senior
members of the external audit team. Discuss the knowledge and experience
of the independent auditors and the senior members of the external audit
team with respect to the Company's industry. The Committee shall ensure the
regular rotation of the lead audit partner and audit review partner as required
by law.
- Review the performance of the independent auditors and terminate the
independent auditors when circumstances warrant.
- Establish and periodically review the Company's hiring policies relating
to current or former employees of the independent auditors.
- Review with the independent auditors any problems or difficulties the
auditors may have encountered and any "management" or "internal
control" letter provided by the independent auditors and the Company's
response to that letter. Such review should include:
(a) any difficulties encountered in the course of the audit
work, including any restrictions on the scope of activities or access to
required information and any disagreements with management; and
(b) any accounting adjustments that were proposed by the
independent auditors that were not agreed to by the Company.
- Communicate with the independent auditors regarding (a) alternative treatments
of financial information within the parameters of GAAP, (b) critical accounting
policies and practices to be used in preparing the audit report and (c) such
other matters as the SEC and he Nasdaq Stock Market may direct by rule or
regulation.
- Periodically consult with the independent auditors out of the presence
of management about internal controls and the fullness and accuracy of the
organization's financial statements.
- Oversee the relationship with the independent auditors by discussing
with the independent auditors the nature and rigor of the audit process,
receiving and reviewing audit reports and ensuring that the independent auditors
have full access to the Committee (and the Board) to report on any and all
appropriate matters.
- Discuss with the independent auditors prior to the audit the general
planning and staffing of the audit.
D. Audit Control Matters
- Discuss with management policies with respect to risk assessment and
risk management. Although it is management's duty to assess and manage the
Company's exposure to risk, the Committee should discuss guidelines and policies
to govern the process by which risk assessment and management is handled
and review the steps management has taken to monitor and control the Company's
risk exposure.
- Following completion of the annual external audit, review separately
with each of management and the independent auditors any significant difficulties
encountered during the course of the audit, including any restrictions on
the scope of work or access to required information.
- Review with the independent auditors and management the extent to which
changes or improvements in financial or accounting practices have been implemented.
This review should be conducted at an appropriate time subsequent to implementation
of changes or improvements, as decided by the Committee.
- Periodically review and monitor compliance with the Company's code of
conduct.
- Maintain procedures for receiving accounting complaints and concerns
and anonymous submissions from employees and others regarding questionable
accounting, internal controls or auditing matters.
- Periodically discuss with the chief executive officer and chief financial
officer (a) significant deficiencies in the design or operation of the internal
controls that could adversely affect the Company's ability to record, process,
summarize and report financial data and (b) any fraud that involves management
or other employees who have a significant role in the Company's internal
controls.
V. Annual Evaluation Procedures
The Committee shall annually assess its own performance to confirm that
it is meeting its responsibilities under this Charter. In this review, the
Committee shall consider, among other things, (a) the appropriateness of the
scope and content of this Charter, (b) the appropriateness of matters presented
for information and approval, (c) the sufficiency of time for consideration
of agenda items, (d) frequency and length of meetings and (e) the quality
of written materials and presentations. The Committee may recommend to the
Board such changes to this Charter as the Committee deems appropriate.
VI. Investigations and Studies
The Committee shall have the authority and sufficient funding to retain
special legal, accounting or other consultants (without seeking Board approval)
to advise the Committee. The Committee may conduct or authorize investigations
into or studies of matters within the Committee's scope of responsibilities
as described herein, and may retain, at the expense of the Company, independent
counsel or other consultants necessary to assist the Committee in any such
investigations or studies. The Committee shall have sole authority to negotiate
and approve the fees and retention terms of such independent counsel or other
consultants.
VII. Miscellaneous
Nothing contained in this Charter is intended to expand applicable standards
of liability under statutory or regulatory requirements for the directors
of the Company or members of the Committee. The purposes and responsibilities
outlined in this Charter are meant to serve as guidelines rather than as inflexible
rules and the Committee is encouraged to adopt such additional procedures
and standards as it deems necessary from time to time to fulfill its responsibilities.
This Charter, and any amendments thereto, shall be displayed on the Company's
web site and a printed copy of such shall be made available to any shareholder
of the Company who requests it.
February 11, 2004