Amended and Restated Charter for the Audit Committee of the Board of Directors of Double Eagle Petroleum Co.
I. INTRODUCTION AND PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors (the “Board”) of Double Eagle Petroleum Co. (the “Company”) in fulfilling its fiduciary responsibilities by overseeing the Company's financial reporting and public disclosure activities. The Audit Committee's primary duties and responsibilities are to:
A. Assist Board oversight of (1) the integrity of the Company's financial statements; (2) the Company's compliance with legal and regulatory requirements; (3) the independent auditor's qualifications, performance and independence; (4) the performance of the Company’s internal auditors, if applicable; (5) the Company’s accounting and financial reporting processes; and (6) the audits of the Company’s financial statements; and.
B. Prepare a report in the Company’s proxy statement in accordance with the requirements and regulations promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
II. COMPOSITION
The members of the Audit Committee shall be elected by the Board and consist of three* or more Directors. The Board may remove any member of the Audit Committee with or without cause. Unless a Chair is elected by the full Board, the members of the Audit Committee may designate a Chair by majority vote of the full Audit Committee membership.
A. Independence
Each member of the Audit Committee shall have been affirmatively determined by the Board to be “independent” as that term is defined by the exchange or other market(s) on which the Company’s stock is traded, or the definition of independence adopted by the Board, and shall otherwise meet the independence and experience requirements of the exchange or other market(s) on which the Company’s stock is traded, Rule 10A-3 of the Exchange Act and the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Notwithstanding the foregoing, one director who is not “independent” as defined by the exchange or market(s) on which the Company’s stock is traded, but who satisfies the requirements of Rule 10A-3 under the Exchange Act, and is not a current officer or employee of the Company, or an immediate family member of such an officer or employee, may be appointed to the Audit Committee if the Board, under exceptional circumstances, determines that that director’s membership on the Audit Committee is required by the best interests of the Company and its shareholders, and the Board discloses in the Company’s next annual proxy statement or Report on Form 10-K or 10-KSB, as applicable, the nature of the relationship and the reasons for the determination.
B. Financial Literacy and Expertise
Each member of the Audit Committee shall be financially literate, as such qualification is interpreted by the Board, in its business judgment or as defined by the exchange or other market(s) on which the Company’s stock is traded. No member of the Committee shall have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years. The Board will undertake its reasonable best efforts to appoint at least one Committee member who shall be considered financially sophisticated, through education and experience as a public accountant or auditor, or a principal financial officer, controller or principal accounting officer or a chief executive officer, or from performance of similar functions, sufficient financial expertise in accounting and auditing so as to be a “financial expert”, in accordance with such regulations as may be applicable to the Company from time to time. If the Audit Committee does not have a “financial expert", the Company shall disclose that fact and the reasons therefore in accordance with the rules and regulations of the SEC.
C. Other
Audit Committee members shall not simultaneously serve on the Audit Committees of more than two other public companies.
D. Report of Noncompliance
If the Audit Committee is aware of any material noncompliance with the structure or expertise requirements set forth above, the Audit Committee shall report such noncompliance to the Board, who must then notify the exchange or other market(s) on which the Company’s stock is traded promptly of such noncompliance.
III. MEETINGS
The Audit Committee shall meet at least four times annually, or more frequently as circumstances dictate. To the extent both requested by the Audit Committee and practicable, each of the Audit Committee members shall attend each of the regularly scheduled meetings in person.
At any time, a majority of the Audit Committee members then holding office will constitute a quorum for the transaction of business. The Audit Committee shall take action by the affirmative vote of a majority of the Audit Committee members present at a duly held meeting.
The Audit Committee shall meet periodically in separate executive sessions with management (including the chief financial or accounting officer), the internal auditors, if applicable, and the independent auditor, and have such other direct and independent interaction with such persons from time to time as the members of the Audit Committee deem appropriate.
The Audit Committee may request any officer or employee of the Company or the Company's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.
IV. COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Audit Committee shall have the following duties and responsibilities, in addition to any duties and responsibilities assigned to the Audit Committee from time to time by the Board:
Engagement of Independent Auditor
1. The Audit Committee shall have the sole authority to appoint or replace the independent auditor (subject, if applicable, to shareholder ratification). The Audit Committee shall be directly responsible for the appointment, compensation, and oversight of the work of any independent auditor employed by the Company (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work, and each such independent auditor shall report directly to the Audit Committee. The Audit Committee has the sole authority to approve all audit engagement fees and terms, as well as all significant non-audit engagements with the independent auditor.
2. The Audit Committee shall pre-approve all audit and permitted non-audit services subject to de minimus exceptions for other than audit, review, or attest services that are approved by the Audit Committee prior to completion of the audit. Alternatively, the engagement of the independent auditor may be entered into pursuant to pre-approved policies and procedures established by the Audit Committee, provided that the policies and procedures are detailed as to the particular services and the Audit Committee is informed of each service. In considering whether to pre-approve any non-audit services, the Audit Committee shall consider whether the provision of such services is compatible with maintaining the independence of the auditor. The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee’s approval of any non-audit services shall be publicly disclosed pursuant to applicable laws, rules and regulations.
3. The Audit Committee shall have the authority to retain, to the extent it deems necessary or appropriate, without prior permission from the Board or management, special legal, accounting or other consultants to advise the Audit Committee. The Company shall provide for appropriate funding, as determined by the Audit Committee, in its capacity as a committee of the Board, for payment of compensation to any advisors employed by the Audit Committee and for the ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.
4. As required by applicable SEC rules and regulations, at least annually, the Audit Committee shall obtain and review a report by the independent auditor describing the firm's internal quality control procedures; 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 (to assess the auditor's independence) all relationships between the independent auditor and the Company.
Financial Statement and Disclosure Matters
The Audit Committee shall undertake each of the following:
1. Review and discuss with management and the independent auditor, before release, the annual audited financial statements, including the Company's specific disclosures made in management's discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the Company's Report on Form 10-K.
2. Review and discuss with management and the independent auditor, before filing with the SEC, the Company's quarterly financial statements prior to the filing of its Report on Form 10-Q, including the results of the independent auditor's review of the quarterly financial statements.
3. Review with management and the independent auditor: (a) major issues regarding accounting principles and financial statement presentation, including any significant changes in the Company's selection or application of accounting principles; and (b) the effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.
4. Review and discuss with management and the independent auditor any major issues as to the adequacy of the Company's internal controls, any special steps adopted in light of material control deficiencies and the adequacy of disclosures about changes in internal controls over financial reporting.
5. Obtain and timely review and discuss timely reports from the independent auditor on:
a. All critical accounting policies and practices to be used;
b. All alternative treatments with Generally Accepted Accounting Principles for policies and practices related to material items that have been discussed with management, including ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor.
c. Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.
6. Discuss earnings press releases, as well as financial information provided to analysts and rating agencies. This may be done generally and does not require the Audit Committee to discuss in advance each earnings release or each instance in which the Company may provide earnings guidance.
7. Discuss with management the Company's major risk exposures and the steps management has taken to monitor and control such exposures including the Company's risk assessment and risk management policies.
8. Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 (as amended) relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.
9. Review disclosures made to the Audit Committee by the Company's CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operations of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company's internal controls.
10. Review changes in promulgated accounting and auditing standards that may materially affect the Company’s financial reporting practices.
11. Obtain from the independent auditor assurance that Section 10A(b) of the Exchange Act has not been implicated.
Oversight of the Company's Relationship with the Independent Auditor
1. At least annually, evaluate the independent auditor’s qualifications, performance and independence, including that of the lead audit partner, taking into account the opinions of management and internal auditors, if applicable. The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.
2. At least annually, obtain and review a report by the independent auditor describing: the firm's internal quality-control procedures; any material issues raised by the most recent internal quality-control review, or PCAOB inspection, 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 all relationships between the independent auditor and the Company.
3. Review the independent auditor’s proposed audit scope, approach and independence.
4. Request from the independent auditor a formal written statement delineating all relationships between the auditor and the Company, consistent with Independent Standards Board Standard No. 1, and engage in a dialogue with the independent auditor with respect to any disclosed relationships or services that may impact the objectivity and independence of the auditor.
5. Review with the independent auditor any audit problems or difficulties and management's response. Discuss with the independent auditor material issues on which the independent auditor was consulted by the Company's audit team.
Proxy Statement Report of Audit Committee
1. Prepare the report required by the rules of the SEC to be included in the Company’s annual proxy statement.
Related Person Transactions
1. Review reports and disclosures of insider and related person transactions. Review and approve all related-person transactions. A related-person is one who can exercise control or significant influence over another party, to the extent that one of the parties may be prevented from pursuing its own separate interests.
Compliance Oversight Responsibilities (unless otherwise delegated by the Board to another committee of the Board)
1. Review reports from management with respect to the Company's compliance with applicable legal and regulatory requirements and the Company’s Code of Ethics.
2. Advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws and regulations and with the Company’s Code of Business Conduct and Ethics.
3. Ensure appropriate procedures are established and maintained:
· to permit the Audit Committee to monitor the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and
· to permit the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters to the Audit Committee.
4. Perform such other duties as may be requested by the Board.
Exclusive Duties
The following duties shall be the exclusive responsibility of the Audit Committee:
1. Select and retain the independent auditor; determine and approve compensation of the independent auditor; resolve disagreements between management and the independent auditor; oversee and evaluate the independent auditor and, where appropriate, replace the independent auditor, with the understanding that the independent auditor shall report directly to the Audit Committee.
2. Pre-approve the retention of the independent auditor for all audit and such non-audit services as the independent auditor is permitted to provide to the Company and approve the fees for such services. (Pre-approval of audit and non-audit services may be delegated to one or more independent members of the Audit Committee so long as that member or those members report their decisions to the Audit Committee at all regularly scheduled meetings).
3. Establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters.
4. Establish procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
V. EVALUATION
The Audit Committee shall review and reassess the adequacy of this Charter at least annually and submit proposed changes to the Board for approval. The Audit Committee has the powers and responsibilities delineated in this Charter. It is not, however, the Audit Committee’s responsibility to prepare and certify the Company’s financial statements, to guaranty the independent auditor’s report, or to guaranty other disclosures by the Company. These are the fundamental responsibilities of management and the independent auditor. Audit Committee members are not full-time Company employees and are not performing the functions of auditors or accountants.
If required by the exchange or other market(s) on which the Company’s stock is traded, the Audit Committee shall obtain or perform an annual evaluation of the Audit Committee’s performance and make applicable recommendations for improvement.
VI. QUALIFICATION
Considering that the Audit Committee’s job is one of oversight, it recognizes that the Company’s management is responsible for preparing the Company’s financial statements and that the outside auditors are responsible for auditing those financial statements. Additionally, the Audit Committee recognizes that financial management, as well as the outside auditors, has more time, knowledge and more detailed information on the Company than do Audit Committee members. Consequently, in carrying out its oversight responsibilities, the Audit Committee is not providing any expert or special assurances as to the Company’s financial statements or any professional certification as to the outside auditors work.
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty or responsibility of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of Company management and the independent auditor. Nor is it the duty or responsibility of the Audit Committee to conduct investigations or to assure compliance with laws and regulations.
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* If the Company is or becomes a Small Business Issuer as defined under Regulation S-B, then the Audit Committee may consist of only two members, who both must be independent and meet the requirements of Rule 10A-3 under the Exchange Act.