exv10w37



 





Exhibit 10.37




RED TRAIL ENERGY, LLC




AUDIT COMMITTEE CHARTER




ADOPTED ON April 9, 2007




I. PURPOSE




     The primary functions of the Audit Committee (the “Committee”) are to assist the Board of
Governors of Red Trail Energy, LLC (the “Company”) with the oversight of (i) the Company’s
accounting and financial reporting processes and audits of the Company’s financial statements and
(ii) the qualifications, independence, appointment, retention, compensation and performance of the
Company’s registered public accounting firm. The term “registered public accounting firm” as used
herein shall mean any public accounting firm registered with the Public Company Accounting
Oversight Board (the “Accounting Board”) under Section 102 of the Sarbanes-Oxley Act of 2002 that
performs the auditing function for the Company. Although the Committee has the powers and
responsibilities set forth in this Charter, the role of the Committee is oversight. It is not the
duty of the Committee to conduct audits, to establish and maintain disclosure controls and
procedures and internal controls over financial reporting, 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 subject to audit by the Company’s registered public accounting firm.



II. EFFECTIVE DATE, COMPOSITION AND INDEPENDENCE




     This Charter shall become effective upon the effective date (the “Effective Date”) of the
Company’s filing with the Securities and Exchange Commission (the “SEC”) pursuant to the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Subject to any permitted exceptions,
exemptions and phase-in compliance periods of the Nasdaq Stock Market Listing Standards, the
Committee shall consist of three or more governors of the Company, as the Board of Governors may
determine, each of whom shall meet the independence and other qualification requirements of the
Exchange Act, the rules and regulations thereunder and the applicable rules of the Nasdaq Stock
Market Listing Standards. Consistent with the applicable exceptions, exemptions and phase-in
periods, the Committee only shall be required to include: (i) one independent director during the
90 day period following the Effective Date; and (ii) a majority of independent directors thereafter
until the first anniversary of the Effective Date. At least one of the Committee members must
satisfy the financial sophistication requirements of the listing standards of the Nasdaq Stock
Market, and the Committee shall use diligent efforts to assure that at least one member qualifies
as an “audit committee financial expert,” as defined by rules of the SEC.




 









 





III. MEETINGS AND PROCEDURES



     The Committee shall meet at least once every fiscal quarter. The Committee may request that
members of management, representatives of the registered public accounting firm and others attend
meetings and provide pertinent information, as necessary. In order to foster open communications,
the Committee shall meet at such times as it deems appropriate or as otherwise required by
applicable law, rules or regulations in separate executive sessions to discuss any matters that the
Committee believes should be discussed privately. Committee meetings will be governed by the
quorum and other procedures generally applicable to meetings of the Board of Governors under the
Company’s Operating Agreement, unless otherwise stated by resolution of the Board of Governors.



IV. RESPONSIBILITIES AND DUTIES




     A. General Matters




	 	1.	 	The Committee, in its capacity as a committee of the Board of
Governors, shall be directly responsible for the appointment, compensation,
retention (including termination) and oversight of the work of the registered
public accounting firm (including resolution of disagreements between
management and the registered public accounting firm regarding financial
reporting) engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company. The
registered public accounting firm shall report directly to and be accountable
to the Committee.
	 
	 	2.	 	To the extent required by applicable law, rules and
regulations, the Committee shall pre-approve all auditing services and
non-audit services (including the fees and terms thereof) permitted to be
provided by the Company’s registered public accounting firm contemporaneously
with the audit, subject to certain de minimus exceptions for permitted
non-audit services described in Section 10A(i)(1)(B) of the Exchange Act, which
shall be approved by the Committee prior to the completion of the audit.
	 
	 	3.	 	The Committee shall have the authority to engage independent
counsel and other advisers, as it determines necessary to carry out its duties.
The Committee shall determine the extent of funding to be provided by the
Company for payment of (i) compensation to any registered public accounting
firm engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company, (ii)
compensation to any independent counsel and other advisers retained to advise
the Committee, and (iii) ordinary administrative expenses of the Committee that
are necessary or appropriate in carrying out its duties.
	 
	 	4.	 	The Committee may form subcommittees consisting of one or more
members and delegate to such subcommittees authority to perform specific
functions, including without limitation pre-approval of audit and







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	 	 	 	non-audit services, to the extent permitted by applicable law, rules and
regulations.





     B. Oversight of the Company’s Relationship with the Auditors



     With respect to any registered public accounting firm that proposes to perform audit services
for the Company, the Committee shall:




	 	1.	 	On an annual basis, review and discuss all relationships the
registered public accounting firm has with the Company in order to consider and
evaluate the registered public accounting firm’s continued independence. In
connection with its review and discussions, the Committee shall: (i) ensure
that the registered public accounting firm submits to the Committee a formal
written statement (consistent with the Accounting Board independence standards
as then in effect) delineating all relationships and services that may impact
the objectivity and independence of the registered public accounting firm; (ii)
discuss with the registered public accounting firm any disclosed relationship,
services or fees (audit and non-audit related) that may impact the objectivity
and independence of the registered public accounting firm; (iii) review the
registered public accounting firm’s statement of the fees billed for audit and
non-audit related services, which statement shall specifically identify those
fees required to be disclosed in the Company’s annual proxy statement; (iv)
satisfy itself as to the registered public accounting firm’s independence; and
(v) obtain and review a report by the registered public accountants describing
their internal quality control procedures and any material issues raised by the
most recent internal quality review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional authorities, within
the preceding five years and any steps taken to deal with such issues.
	 
	 	2.	 	Ensure the rotation of the lead (or coordinating) audit partner
and other significant audit partners as required by applicable law, rules and
regulations.
	 
	 	3.	 	Establish clear hiring policies for employees or former
employees of the registered public accounting firm proposed to be hired by the
Company that meet applicable SEC regulations and Nasdaq Stock Market Listing
Standards. In addition, on an annual basis, confirm that the registered public
accounting firm is not disqualified from performing any audit service for the
Company due to the fact that any of the Company’s chief executive officer,
chief financial officer, controller, chief accounting officer (or a person
serving in an equivalent position) was employed by that registered public
accounting firm 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 of
the current year’s financial statements.







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	 	4.	 	Establish with the registered public accounting firm the scope
and plan of the work to be performed by the registered public accounting firm
as part of the audit for the fiscal year.





     C. Financial Statements and Disclosure Matters



     With respect to the Company’s financial statements and other disclosure matters, the Committee
shall:




	 	1.	 	Review and discuss with management and the registered public
accounting firm the Company’s quarterly financial statements.
	 
	 	2.	 	Review and discuss with management and the registered public
accounting firm the Company’s annual audited financial statements and the
report of the registered public accounting firm thereon.
	 
	 	3.	 	Review and discuss all material correcting adjustments
identified by the registered public accounting firm in accordance with
generally accepted accounting principles and SEC rules and regulations that are
reflected in each annual and quarterly report that contains financial
statements, and that are required to be prepared in accordance with (or
reconciled to) generally accepted accounting principles under Section 13(a) of
the Exchange Act and filed with the SEC.
	 
	 	4.	 	Review and discuss all material off-balance sheet transactions,
arrangements, obligations (including contingent obligations) and other
relationships of the Company with unconsolidated entities or other persons,
that have or are reasonably likely to have a current or future effect on
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources, which are required to be disclosed
in response to Item 303, Management’s Discussion and Analysis of Financial
Condition and Results of Operation, of Regulation S-K.
	 
	 	5.	 	Discuss with management and the registered public accounting
firm significant financial reporting issues and judgments made in connection
with the preparation of the Company’s financial statements, including any
judgments about the quality, appropriateness and acceptability of the Company’s
accounting principles, significant changes in the Company’s selection or
application of accounting principles and any other significant changes to the
Company’s accounting principles and financial disclosure practices that are
suggested by the registered public accounting firm or management.
	 
	 	6.	 	Review with management, the registered public accounting firm
and the Company’s counsel, as appropriate, any legal, regulatory or compliance
matters that could have a significant impact on the Company’s financial
statements, including significant changes in accounting standards or rules







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	 	 	 	as promulgated by the Financial Accounting Standards Board, the SEC or other
regulatory authorities with relevant jurisdiction.
	 
	 	7.	 	The review and discussions hereunder with respect to audits
performed by the registered public accounting firm shall include the matters
required to be discussed by the Accounting Board auditing standards then in
effect. These matters would include the auditor’s responsibility under
generally accepted auditing standards, the Company’s significant accounting
policies, management’s judgments and accounting estimates, significant audit
adjustments, the auditor’s responsibility for information in documents
containing audited financial statements (e.g., MD&A), disagreements with
management, consultation by management with other accountants, major issues
discussed with management prior to retention of the auditor and any
difficulties encountered in the course of the audit work.
	 
	 	8.	 	Receive and review all other reports required under the
Exchange Act to be provided to the Committee by the registered public
accounting firm including, without limitation, reports on (i) all critical
accounting policies and practices used by the Company, (ii) all alternative
treatments of financial information within generally accepted accounting
principles that have been discussed with management, ramifications of the use
of such alternative disclosures and treatments, and the treatment preferred by
the registered public accounting firm, and (iii) all other material written
communications between the registered public accounting firm and management,
such as any management letter or schedule of unadjusted differences.
	 
	 	9.	 	Following completion of its review of the annual audited
financial statements, recommend to the Board of Governors, if appropriate, that
the Company’s annual audited financial statements and the report of the
registered public accounting firm thereon be included in the Company’s annual
report on Form 10-K filed with the SEC.
	 
	 	10.	 	Prepare the Audit Committee report required by the SEC to be
included in the Company’s annual proxy statement and any other Committee
reports required by applicable laws, rules and regulations.





     D. Internal Controls and Compliance Matters



     With respect to the Company’s internal controls over financial reporting and compliance
matters:




	 	1.	 	When applicable, review and assess any disclosures made to the
Committee by the Company’s Chief Executive Officer and Chief Financial Officer
during their certification process for the Company’s Forms 10-K and Forms 10-Q
about any significant deficiencies in the






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	 	 	 	design or operation of internal controls over financial reporting or
material weaknesses therein and any fraud involving management or other
employees who have a significant role in the Company’s internal controls
over financial reporting.
	 
	 	2.	 	When applicable, review and discuss with management and the
registered public accounting firm any major issues as to the adequacy of the
design or operation of the Company’s internal controls over financial
reporting, any special steps adopted in light of significant deficiencies or
material weaknesses therein and the adequacy of disclosures about changes in
internal controls over financial reporting.
	 
	 	3.	 	When applicable, review and discuss with management and the
registered public accounting firm management’s annual assessment of the
Company’s internal controls over financial reporting and the registered public
accounting firm’s attestation report thereon.
	 
	 	4.	 	Establish and review procedures within the time period required
by applicable law, rules and regulations for (i) the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and (ii) the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters.





E. Other Miscellaneous Matters



The Committee shall also have the responsibility to:





	 	1.	 	Review and discuss the Company’s practices regarding earnings
press releases, as well as financial information.
	 
	 	2.	 	Review and discuss all corporate attorneys’ reports of evidence
of a material violation of securities laws or breaches of fiduciary duty.
	 
	 	3.	 	Review and approve all related-party transactions (i.e., those
transactions required to be disclosed in response to Item 404, Certain
Relationships and Related Transactions, of Regulation S-K) for potential
conflict of interest situations on an ongoing basis, unless otherwise delegated
to another committee of the Board of Governors consisting solely of independent
governors.
	 
	 	4.	 	If required by applicable law, rules or regulations, review and
approve (i) the adoption of, and any change to or waiver of, the Company’s
code(s) of business conduct and ethics applicable to governors, senior
financial officers (including the chief executive officer, chief financial
officer, controller, or persons performing similar functions) or employees, and
(ii) any disclosure made in the manner permitted by SEC rules that is required
to be made regarding such change or waiver, unless these duties are







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	 	 	 	otherwise delegated to another committee of the Board of Governors
consisting solely of independent governors.
	 
	 	5.	 	Review and discuss with management and the registered public
accounting firm the Company’s major financial risk exposures and the steps
management has taken to monitor and control such exposures (including
management’s risk assessment and risk management policies).
	 
	 	6.	 	Review with management and the registered public accounting
firm the sufficiency in number and the quality of financial and accounting
personnel of the Company.
	 
	 	7.	 	Review and reassess the adequacy of this Charter annually and
recommend to the Board of Governors any changes or amendments the Committee
deems appropriate.
	 
	 	8.	 	Perform any other activities consistent with this Charter, the
Company’s Operating Agreement and governing law as the Committee or the Board
of Governors deems necessary or appropriate.








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