The Board of Directors (the "Board") of Cenveo, Inc. (the "Company") hereby constitutes and establishes an Audit Committee (the "Committee") with the authority, purpose, responsibilities and specific duties described below.
Purpose and Responsibilities
The Committee has been formed to assist the Board in fulfilling its oversight responsibilities and to carry out the requirements of applicable law and the requirements of the New York Stock Exchange ("NYSE"). The Committee shall be directly responsible for the appointment, compensation, and oversight of the work of the Company's independent auditors (including resolution of disagreements between management and the independent auditors regarding financial reporting) for the purpose of preparing or issuing an audit report or related work.
The primary purpose and responsibilities of the Committee are to:
- Assist Board oversight of (a) the integrity of the Company's financial statements, (b) the Company's compliance with legal and regulatory requirements, (c) the independent auditor's qualifications and independence, and (d) the performance of the Company's internal audit function and independent auditors.
- Prepare the Audit Committee report required by the Securities and Exchange Commission ("SEC") to be included in the Company's annual proxy statement.
- Fulfill the responsibilities of the Audit Committee set out in Rule 10A-3(b)(2), (3), (4) and (5) of the Securities Exchange Act of 1934 (the "Exchange Act") and Section 303A of the Listing Standards of the NYSE.
- Monitor the integrity of the Company's financial reporting process;
- Monitor the Company's systems of internal controls regarding finance, accounting, and legal and regulatory compliance;
- Monitor the independence and performance of the Company's financial executives; and
- Provide an avenue of communication among the independent auditors, management, the internal audit department and the Board of Directors.
Membership and Operations
Committee members shall meet the independence, experience and expertise requirements of the Exchange Act, including the Sarbanes-Oxley Act of 2002 ("Sarbanes"), as well as all applicable rules and regulations of the NYSE and the SEC. The Committee shall be comprised of three or more directors. All members of the Committee shall have a basic understanding of finance and accounting practices and be able to read and understand fundamental financial statements, and at least one member of the Committee shall have accounting or related financial management expertise.
A Committee member shall not serve on the audit committee of more than two other companies. Members of the Committee and the Chair shall be appointed and removed from time to time by the independent members of the Board.
The Committee shall meet at least four times annually, or more frequently as circumstances dictate. The Committee Chair shall prepare and/or approve an agenda in advance of each meeting. The Chair shall have full voting rights. The Chair may call, in his or her discretion, special meetings of the Committee which meetings may be conducted telephonically. In the event that the Chair is absent from a meeting, the member with the greatest seniority on the Board shall chair the meeting unless the members agree otherwise.
The Chair shall appoint a secretary of the Committee who need not be a member of the Committee or the Board and who may be an employee of the Company. The secretary shall keep minutes of the meeting but shall not be entitled to vote on matters presented for a vote unless otherwise a member of the Committee. Attendance by persons other than members of the Committee at meetings of the Committee shall be allowed only at the invitation of the Chair or a majority of the members. The duties, responsibilities and powers of the Committee may be delegated to a subcommittee upon a majority vote of the members.
The Audit Committee will fulfill its primary purpose and responsibilities by carrying out the following duties:
A. General Committee Authority and Responsibilities.
- The Committee shall review and reassess the adequacy of this Charter at least annually. The Committee shall submit this Charter to the Board of Directors for approval and have the document published at least every three years in accordance with SEC regulations.
- The Committee annually shall review its own performance.
- The Committee shall meet privately in executive session at least semi-annually with management, the director of the internal audit department, the independent auditors and as a committee to discuss any matters that the Committee or each of these groups believe should be discussed.
- The Committee, or its Chair, shall communicate with management and the independent auditors quarterly to review the Company's financial statements and significant findings raised by the auditors.
- The Committee shall obtain reports from the Company's management, senior internal audit executive and independent auditors that the Company and its subsidiaries are in compliance with applicable legal requirements.
- The Committee shall, no less frequently than annually, review and discuss with management the Company's policies with respect to risk assessment and risk management.
- The Committee shall maintain minutes of meetings and report to the Board of Directors on significant results of its activities at the next scheduled meeting of the Board following the meeting of the Audit Committee.
- The Committee shall advise the entire Board on a regular basis with respect to the Company's financial policies and procedures regarding compliance with applicable laws and regulations, as well as the performance of the independent auditors and internal audit function, and the independence of the independent auditors.
- The Committee shall set clear hiring policies for employees or former employees of the independent auditors.
B. Financial Statement and Disclosure Matters.
- The Committee shall review, and discuss with management and the independent auditors, the Company's annual and quarterly financial statements, including any certification, report, opinion or review rendered by the independent auditors, and including the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations."
- The Committee shall review and discuss with management and the independent auditors the Company's financial information and earnings guidance provided to analysts and rating agencies, and the Company's earnings press releases (paying particular attention to any use of "pro forma" or "adjusted" non-GAAP information). These reviews and discussions may be done generally (i.e., discussion of the types of information to be disclosed and the type of presentation to be made) rather than with respect to each release and each instance of guidance.
- The Committee shall consider the integrity of the Company's financial reporting and operational processes and controls, in consultation with management, the independent auditors and the internal auditors. The Committee shall discuss significant financial risk exposures and the steps management has taken to monitor, control and report such exposures.
- The Committee shall establish procedures to ensure that the Company's filed financial reports comply with the enhanced financial disclosure requirements regarding material correcting adjustments, off-balance sheet transactions and pro forma figures, as set forth in Section 401 of Sarbanes and rules to be promulgated by the SEC.
- The Committee shall review significant findings, including any audit problems or difficulties prepared by the independent auditors in connection with the preparation of quarterly and annual financial statements, together with management's responses.
- The Committee quarterly shall review and discuss the following:
- Major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company's selection or application of accounting principles, and major issues as to the adequacy of the Company's internal controls and any special audit steps adopted in light of material control deficiencies;
- Analyses prepared by management and/or the independent auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative GAAP methods on the financial statements; and
- The effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Company.
- The Committee shall review with the Board any issues that arise with respect to the quality and integrity of the Company's financial statements.
C. Oversight of the Company's Relationship with the Independent Auditors.
- The independent auditors shall be directly accountable to the Committee and the Board of Directors. The Committee shall review the qualifications, independence and performance of the independent auditors. In connection with this review, the Committee shall:
- Assure regular rotation of the lead audit partner in accordance with applicable law;
- Consider whether, in order to assure continuing auditor independence, there should be a regular rotation of the firm of independent auditors; and
- Annually (or more frequently) review and discuss with the independent auditors all significant relationships they have with the Company that could impair the auditors' independence.
- The Committee shall present its conclusions to the Board and, if so determined by the Committee, recommend that the Board take additional action to satisfy itself as to the qualifications, independence and performance of the independent auditors.
- The Committee annually shall receive from the independent auditors written certification that their firm is registered with the Public Company Accounting Oversight Board (the "Oversight Board") to the extent such registration is required under Sarbanes.
- The Committee shall receive from the independent auditors, prior to approving the appointment of the independent auditors for audit services, written confirmations of the following:
- Neither the auditor having primary responsibility for the audit nor the auditor responsible for reviewing the audit has performed audit services for the Company in each of the five previous fiscal years of the Company; and
- None of the CEO, CFO or Controller was employed by the independent auditors and participated in any capacity in the audit of the Company during the one-year period preceding the date of the initiation of the audit.
- The Committee shall receive annually from the independent auditors a report describing:
- Their firm's internal quality-control procedures;
- Any material issues raised by the most recent internal quality-control review, or peer review, or any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by their firm, and any steps taken to deal with any such issues; and
- All relationships between the independent auditors and the Company to assess the auditor's independence.
- The Committee annually shall retain the independent auditors on terms approved by the Committee, and any audit services and fees therefore shall be subject to pre-approval, and discharge the independent auditors when circumstances warrant.
- The Committee shall ensure that the independent auditors do not provide for the Company any non-audit services prohibited by applicable law or rules of the New York Stock Exchange.
- The Committee shall approve, subject to review in advance, the engagement of the independent auditors for any permitted non-audit services, as well as the fees and other compensation to be paid to the independent auditors in connection with such non-audit services. The Committee shall communicate all such approvals to the Company's management for disclosure in the appropriate periodic report of the Company to the SEC. The authority to grant the approvals required under this section may be delegated to any one or more members of the Committee (each, an "Approving Member"). Each Approving Member shall present to the full Committee any approvals made by such Approving Member since the last meeting of the Committee.
- The Committee shall review the independent auditors' audit plan prior to the audit, and shall discuss with the independent auditors their scope, staffing, locations, reliance upon management and internal audit, and general audit approach.
- The Committee shall receive from the independent auditors timely reports respecting:
- All critical accounting policies and practices to be used;
- All alternative treatments of financial information within generally accepted accounting principles that have been discussed with the Company's management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors; and
- Other material written communications between the independent auditors and the Company's management, such as any management letter or schedule of unadjusted differences.
- The Committee shall discuss the results of the audit with the independent auditors prior to releasing the year-end earnings, including matters required to be communicated to audit committees in accordance with Statement of Auditing Standards No. 61. Further to this point, the Committee shall discuss with the independent auditors:
- Any changes to the audit plan, restrictions on scope of activities and observations of control weaknesses;
- Any audit problems or difficulties and management's response;
- The adoption of, or changes to, the Company's significant auditing and accounting principles and practices as suggested by the independent auditors, internal audit department or management;
- Any "management" or "internal control" letter issued, or proposed to be issued, by the independent auditors and the Company's response to such letter.
- The Audit Committee shall discuss with the national office of the independent auditors any issues on which such office was consulted by the Company's audit team and matters of audit quality and consistency.
D. Oversight of the Company's Internal Audit Function.
- The internal audit department shall be responsible to senior management, but have a direct reporting responsibility to the Board of Directors through the Committee. The Committee shall review the appointment, performance and replacement of the senior internal audit executive. Changes in the senior internal audit executive shall be subject to committee approval.
- The Committee shall review the annual internal audit plan, staffing and audit costs.
- The Committee shall discuss with the independent auditors the internal audit responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audit.
- The Committee shall review significant reports prepared by the internal audit department together with management's responses and follow-up to these reports.
- The Committee shall review with the Board any issues that arise with respect to the performance of the internal audit function.
E. Compliance Oversight Responsibilities.
- The Committee shall establish procedures for the following:
- The receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and
- The confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
- The Committee quarterly (or more frequently) shall review with the Company's internal and/or external counsel, any legal matters that could have a significant impact on the organization's financial statements, the Company's compliance with applicable laws and regulations and inquiries received from regulators or governmental agencies.
- The Committee annually shall receive reports from management, the senior internal audit executive and the independent auditors that the Company and its subsidiaries are in conformity with applicable legal and regulatory requirements and, if applicable, the Company's Code of Business Conduct and Ethics.
- The Committee shall review with the Board any issues that arise with respect to the Company's compliance with legal and regulatory requirements and with the Company's Code of Business Conduct and Ethics.
- The Committee regularly shall review reports and disclosures of insider and affiliated party transactions.
- The Committee shall discuss with management and the independent auditors any correspondence with regulators or governmental agencies and any employee complaints or published reports that raise material issues regarding the Company's financial statements or accounting policies.
The Committee shall have such powers as are necessary or appropriate to accomplish its purposes, responsibilities and duties including the power to engage (at the Company's expense) outside advisors to assist the Committee in the performance of its duties. The Committee may be required to investigate an activity of the Company related to the Committee's charter, and all employees are directed to cooperate in such investigation as requested by members of the Committee. The Committee shall have the sole authority to retain (at the Company's expense) and terminate any search firm used to identify director candidates, including the sole authority to approve the search firm's fees and other retention terms. The Committee shall have the power to amend this charter from time to time subject to ratification by a majority of the independent members of the entire Board.
- The Committee may form and delegate authority to subcommittees consisting of one or more members of the Committee when appropriate.
- The Audit Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities and it has direct access to the independent auditors as well as anyone in the organization.
- The Committee shall have the authority, without seeking Board approval, to retain independent counsel and other advisors as the Committee determines necessary to carry out its duties. As determined by the Committee, the Company shall provide appropriate funding for payment of compensation to any such advisors.
- The Committee shall perform such other activities consistent with this Charter, the Company's by-laws and governing law, as the Committee or the Board deems necessary or appropriate.
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty 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 duties of the Company's management and independent auditors.