Document:

Exhibit 10.40

 

STOCK AGREEMENT

 

THIS AGREEMENT, made and entered into as of the 1st day of January, 2010 by and between Affinity Group, Inc., a Delaware corporation (“AGI”)
and [                   ]
(“Executive”);

 

W I T N E S S E T H

 

WHEREAS, AGI proposes to employ the Executive in the
operations of the Company (as hereinafter defined) and AGI is desirous of
affording Executive incentives, in the form of phantom stock of the Company, in
connection therewith;

 

NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, AGI and Executive
hereby agree as follows:

 

ARTICLE I

 

EMPLOYMENT

 

Section l.l.   Employment.  The Company hereby employs the Executive as [                     ]
of the Company to perform such duties and discharge such functions in and about
the business and affairs of AGI and/or one or more of its subsidiaries, as the
board of directors of the Company may from time to time determine.  Executive agrees, during the term hereof, to
diligently and in good faith perform and discharge such duties and functions
and Executive shall devote all of his working time, energy and ability
exclusively to the performance of his duties hereunder.  Executive shall not directly or indirectly
engage or participate in the operations or management of, or render any
services to, any other businesses or enterprises.

 

Section l.2.  Basic
Compensation.  The Company agrees to
pay Executive a base annual salary and annual bonus (or such other amount as
may be from time to time determined by the board of directors of the Company)
(collectively the “Basic Compensation”). 
Basic Compensation payable under this section shall be payable in
accordance with such practices and procedures as are generally applicable to
other employees of the Company.

 

Section l.3.  Fringe
Benefits.  While Executive is in the
employ of the Company, the Company agrees to provide to Executive such benefits
as may be provided by the Company from time to time to its similarly situated
employees.

 

Section 1.4.  Severance.  If the Company terminates the employment of
the Executive without Cause or if the Executive terminates employment with the
Company for Good Reason, the Company shall (i) make a lump sum severance
payment equal to one (1) year of Basic Compensation (at the level being
paid at the time of termination), and (ii) pay to the Executive the amount
of the bonus, if any, accrued or earned to the date of such termination under
section 1.5 hereof.  Such severance
payment shall be made within 30 days after the determination of the amount of
the accrued bonus calculated pursuant to the provisions of section 1.5
hereof.  It is agreed that any
termination of employment is without prejudice to

 

1

 

any
other remedy to which the Company may be entitled, either by law, in equity or
under this Agreement.

 

In addition to the foregoing, if, during the period of three (3) years
following a Change of Control, the Company terminates the employment of the
Executive without Cause or if the Executive terminates employment with the
Company for Good Reason, the Company shall, at its expense, continue providing
to Executive, for the period of three (3) years following a Change of
Control, the same life and health insurance benefits as provided to Executive
immediately prior to such termination.

 

The Company has the absolute right to terminate this Agreement, and the
employment of the Executive hereunder, for Cause without any further obligation
to the Executive in respect of severance payments to the Executive
hereunder.  For purposes of this
Agreement, Cause includes, but is not limited to the following:

 

(i)Executive’s breach of the terms of this Agreement or any other legal
obligation to the Company; or

 

(ii)Executive’s fraud, dishonesty, negligence, misconduct or other
deliberate action which causes injury to the Company or any of its subsidiaries
or to their respective reputations or an act of the Executive involving moral
turpitude or a serious crime.

 

The Executive shall not be entitled to severance under this section 1.4
if the employment of the Executive is terminated for any of the following
reasons:

 

(i)the Executive terminates this Agreement at any time;

 

(ii)death of the Executive;

 

(iii)the Disability of the Executive.

 

Section 1.5.  Bonus.  The Company adopts, from time to time, formal
written bonus programs for certain of its executives.  Such written bonus programs, if adopted and
if extended to the Executive, shall be in addition to the Basic Compensation payable
under section 1.2 hereof.  The amount of
the bonus will be determined on mutually agreed-upon objectives.  The Company reserves the absolute right to
amend, replace or terminate, from time to time, any such written bonus program
and to determine the extent of its application, all without any liability to
the Executive.  The bonus, if any,
payable under this section 1.5 shall be paid in accordance with the terms of
the formal written bonus program adopted by the Company.

 

Section l.6.  Term.  The term of this Agreement shall commence on January 1,
2010 and continue through December 31, 2012; provided, however, that
Executive shall have the continuing option to immediately terminate the
employment provided by section l.l hereof by giving two weeks’ notice thereof
to the Company and the Company shall have the continuing option to immediately
terminate the employment provided by section l.l hereof by giving written
notice thereof to Executive which notice may be effective immediately.  Upon any such termination, all of the rights
and obligations set forth in this Article I shall terminate provided,
only, that the Company shall pay to Executive the severance, if any, payable
under section 1.4 hereof.

 

2

 

ARTICLE II

 

PHANTOM STOCK INTEREST

 

Section 2.l.  Award of
Phantom Stock Interest.  The Company
hereby awards the Phantom Stock Interest to the Executive.

 

Section 2.2.   Payment of Phantom Stock Interest.  The Company shall pay, and Executive shall be
entitled to receive, the cash value of the Phantom Stock Interest, which shall
be paid as follows:

 

(i) one-third thereof within 30 days of the determination of such
cash value in accordance with the provisions of section 4.3 hereof, and

 

(ii) one-third thereof on the first anniversary of the
Determination Date, and

 

(iii) one-third thereof on the second anniversary of the
Determination Date.

 

Section 2.3.  Beneficiary.  Executive may designate (by filing with the
Company a written beneficiary designation form in form reasonably acceptable to
the Company) one or more primary beneficiaries or contingent beneficiaries to
receive all or a specified part of the cash value of the Phantom Stock Interest
which, at the time of Executive’s death, may remain unpaid under this Agreement
and Executive may change or revoke any such designation from time to time. No
such designation, change or revocation shall be effective unless executed by
Executive and accepted by the Company during Executive’s lifetime.  Each such designation, change or revocation
shall be effective under this Agreement until changed or revoked in the manner
specified herein.  No such change or
revocation shall require the consent of any beneficiary theretofore designated
by Executive.  If Executive fails to designate
a beneficiary, or designates a beneficiary and thereafter revokes such
designation without naming another beneficiary, or designates one or more
beneficiaries and all such beneficiaries so designated fail to survive
Executive, then the beneficiary of the Phantom Stock Interest, or the part
thereof as to which Executive’s designation fails, as the case may be, shall be
the representative of Executive’s estate. 
Unless Executive has otherwise specified in the beneficiary designation,
the beneficiary or beneficiaries designated by Executive shall become fixed as
of Executive’s death so that, if a beneficiary survives Executive but dies
before the receipt of all payments due such beneficiary, such remaining
payments shall be payable to the representative of such beneficiary’s estate.

 

Section 2.4.  Benefits Not Transferable.  Neither Executive nor any beneficiary
hereunder shall have any transferable interest in the payments due hereunder
nor any right to anticipate, alienate, dispose of, pledge or encumber the same
prior to actual receipt thereof, nor shall the same be subject to attachment,
garnishment, execution following judgment or other legal process instituted by
creditors of Executive or any such beneficiary provided that the unpaid cash
value of Executive’s Phantom Stock Interest and any payments due hereunder
shall at all times be subject to set-off for debts owed by the Executive to the
Company or its affiliates.

 

3

 

Section 2.5.  Nature of the
Company’s Obligation.  The Company
shall maintain a record of the Phantom Stock Interest but the Company shall not
be required to segregate any funds or other assets to be used for the payment
of benefits under this Agreement and no such record shall be considered as
evidence of the creation of a trust fund, an escrow or any other segregation of
assets for the benefit of Executive or any beneficiary of Executive.  The obligation of the Company to make the
payments described in this Agreement is an unsecured contractual obligation of
the Company only, and neither Executive nor any beneficiary of Executive shall
have any beneficial or preferred interest by way of trust, escrow, lien or
otherwise in and to any specific assets or funds.  Executive specifically acknowledges that the
Phantom Stock Interest to be awarded pursuant to the terms of this Agreement
are not securities in the Company and do not create any right in the equity or
capital of the Company or any of its affiliates.  Executive and each beneficiary of Executive
shall look solely to the general credit of the Company for satisfaction of any
obligations due or to become due under this Agreement, it being expressly
acknowledged by the Executive that the obligations of the Company hereunder are
junior and subordinate in right of payment to the obligations of the Company to
its or the Company’s lenders.  If the
Company should, in its sole discretion, earmark or set aside any funds or other
assets to pay benefits hereunder, the same shall, nevertheless, remain and be
regarded as part of the general assets of the Company subject to the claims of
its general creditors (and shall not be considered to be held in a fiduciary
capacity for the benefit of Executive or any beneficiary hereunder), and
neither Executive nor any beneficiary of Executive shall have any legal,
beneficial, security or other property interest therein.  Upon delivery by the Company to Executive of
the consideration as provided in section 2.2, the rights and obligations of the
Company and Executive under this Article II shall terminate and Executive
shall have no other or further rights under this Article or in respect
hereof.

 

ARTICLE III

 

COVENANT NOT TO COMPETE

 

Section 3.l.  Covenant
Not to Compete.  Executive hereby
covenants that, for a period of eighteen months next following the
Determination Date (or such shorter period for which the Company continues to
be owned or operated by the Parent or its affiliates), Executive shall not be
engaged or interested in any business which competes, directly or indirectly,
with the publication or membership businesses of the Company or any subsidiary
of the Company (whether as a proprietor, partner with another, shareholder,
agent or consultant of, employee of or lender to, another) in the recreational
vehicle, camping, outdoor living or other markets then served by the Company or
such subsidiary, except as a proprietor, partner, shareholder, employee or
consultant in or to the Company or any entity controlled by, controlling or
under common control with the Company, provided that if the employment of
Executive is terminated by the Company without Cause, the foregoing covenant
shall not apply (without affecting the obligations hereinafter contained in
this section 3.l in respect of disclosures or solicitations by Executive)
unless the Executive shall have been paid severance pursuant to section 1.4
hereof.  Executive agrees that he will
not at any time disclose to any person or other entity who or which is, or
reasonably may be expected to be, in competition with the Company or its
affiliates, any confidential information or trade secrets of the Company, any
subsidiary of the Company or any of their respective affiliates, the contents
of any customer lists of the Company, any subsidiary of the Company or any of
their respective affiliates or the general needs of the customers or other
contracting parties with the Company, any subsidiary of the Company or any of
their respective affiliates, provided, however, the

 

4

 

foregoing shall not prevent Executive from responding to the request of
a governmental agency or pursuant to a court order or as otherwise required by
law.  For a period of one year following
the Determination Date, Executive agrees not to offer employment to, not to
discuss the nature of any prospective employment opportunities with, and not to
otherwise solicit any employee of the Company or such subsidiary (or any person
who was an employee of the Company or such subsidiary within 180 days of the Determination
Date) on his own behalf, on behalf of any employer of the Executive, on behalf
of any entity with which the Executive is acting as a consultant or with which
the Executive is then otherwise affiliated.

 

Section 3.2.  Remedies.  Recognizing that a breach of the covenant
contained in section 3.1 would cause the Company irreparable injury and the
damages at law would be difficult to ascertain, Executive consents to the
granting of equitable relief by way of a restraining order or temporary or
permanent injunction by any court of competent jurisdiction to prohibit the
breach or enforce the performance of the covenants contained in section
3.l.  The invalidity or unenforceability
of any provision of this Article or the application thereof to any person or
circumstance shall not affect or impair the validity or enforceability of any
other provision or the application of the first provision to any other person
or circumstance.  Any provision of this Article that
might otherwise be invalid or unenforceable because of contravention of any
applicable law, statute or governmental regulation shall be deemed to be
amended to the extent necessary to remove the cause of such invalidation or
unenforceability and such provision as so amended shall remain in full force
and effect as a part hereof.

 

ARTICLE IV.

 

DEFINITIONS AND GENERAL
PROVISIONS

 

Section 4.l.  Definitions.  As used in this Agreement, the following
terms shall have the respective meanings set forth below:

 

Accounting Period:  If
the Determination Date falls on December 15th through December 31st,
inclusive, the Fiscal Year of the Company in which the Determination Date
falls; if the Determination Date falls on January 1st through June 14th,
inclusive, the Fiscal Year of the Company ending immediately prior to the date
on which the Determination Date falls; if the Determination Date falls on June 15th
through December 14th, inclusive, the Rolling Four Fiscal Quarters ending
immediately prior to the date on which the Determination Date falls.

 

Acquisition:  The
purchase by the Company an existing business operation as a going concern.

 

Base Cost:  $[              ]
(US dollars) plus (i) the purchase price (or other consideration therefore
determined in accordance with generally accepted accounting principles) for any
Acquisition made after the date hereof less (ii) the sales price (or other
consideration therefor determined in accordance with generally accepted
accounting principles) any Disposition made after the date hereof.

 

Company: 
Collectively, AGI and each subsidiary of AGI that is an “S corporation”
or a substantially similar pass-through entity (including limited liability
companies and partnerships) for federal income tax purposes.

 

5

 

Company Value:  With
respect to any Accounting Period, the excess, if any, of (x) the Formula
Value for such Accounting Period over (y) the Base Cost.

 

Change of Control:  A “Change
of Control” will be deemed to have occurred at such time as (a) the
Existing Holders, individually or in the aggregate, shall cease to beneficially
own (as defined under Rule 13(d)(3) or any successor rule or
regulation promulgated under the Securities Exchange Act of 1934), directly or
indirectly, 50.1% or more of the voting equity interests of the Company, (b) there
shall be consummated any consolidation or merger of the Company or the Parent
in which the Company or the Parent, as the case may be, is not the continuing
or surviving corporation or pursuant to which the voting equity interests of
the Company or the Parent would be converted into cash, securities or other
property, other than a merger or consolidation of the Company or the Parent in
which the holders of the voting equity interests of the Company or the Parent,
as the case may be, outstanding immediately prior to the consolidation or
merger hold, directly or indirectly, at least a majority of the voting equity
interests of the surviving corporation immediately after such consolidation or
merger, (c) there is a sale, lease or transfer of all or substantially all
of the assets of the Company or the Parent to any person or group (as such term
is defined in Section 13(d)(3) of the Securities Exchange Act of
1934), or (d) the shareholders of the Company or the Parent shall approve
any plan or proposal for the liquidation or dissolution of the Company or the
Parent, as the case may be.

 

Determination Date:  The date of any of the following events: (i) termination
of the Executive’s employment, whether by death or otherwise, (ii) a Sale,
or (iii) December 31, 2012.

 

Disability:  The
physical or mental incapacity of Executive for a period of more than 60
consecutive days, the determination of which by the board of directors of the
Company shall be conclusive on the parties hereto.

 

Disposition:  The sale by
the Company an existing business operation as a going concern.

 

Existing Holders: 
Stephen Adams, his spouse and lineal descendants and trusts for the
exclusive benefit of any of the foregoing persons and any affiliate of Stephen
Adams.

 

Fiscal Quarter:  The
fiscal quarter of the Company ending on the last day of the calendar quarter.

 

Fiscal Year:  The fiscal
year of the Company as the case may be, ending on the last day of the calendar
year.

 

Formula Value:  For
any Accounting Period, the product of eight (8) and Operating Profit of
the Company for such Accounting Period.

 

Good Reason:  The
occurrence of one or more of the following events, without Executive’s written
consent, within three (3) years following a Change in Control (or before the
Change in Control if the occurrence is directly connected to the Change in
Control and the Change in Control occurs): 
(a) the Executive is assigned any duties inconsistent with
Executive’s position (including status, offices, titles and reporting requirements),
authorities, duties or any other responsibilities as in effect immediately
prior to the announcement of the

 

6

 

Change in Control, (b) a reduction in base compensation or in any
bonus plan from the amounts in effect immediately prior to the announcement of
the Change in Control, or (c) Executive is required to be located outside
the same metropolitan area as Executive’s office location immediately prior to
the announcement of the Change in Control.

 

Operating Profit:  With
respect to any Accounting Period (i) the net income of the Company derived
from the ongoing business operations of such entity or entities for such period
plus (ii) interest, federal and state income taxes or any provision for
such taxes, depreciation, amortization, financing costs, management fees and 90
% of aircraft expenses.  Operating Profit
shall be determined on the accrual method of accounting and in accordance with
generally accepted accounting principles consistently applied, provided that (i) in
no event shall tradeout or barter transactions or extraordinary items of
revenue or expense (including revenue or expense from non-operating
investments, revenue or expense from the sale or purchase of assets not
considered an Acquisition or Disposition or revenue or expense not derived from
business operations) be reflected in net income and (ii) amounts paid or
received in settlement of (or payment of judgments in respect of) litigation
which did not arise in the ordinary course of the business operations of such
entity or entities or any of their respective subsidiaries, shall not be
reflected in net income (it being understood that subsidiaries of the Company
do have litigation which shall be considered litigation in the “ordinary course”
of business operations).  If there has
occurred a Disposition within the Accounting Period and the net proceeds of
such Disposition have been received by the Company prior to the date on which
Company Value is to be calculated as herein provided, the net income relating
to the subject of such Disposition shall be deleted from the calculation of
Operating Profit.  If there has occurred
an Acquisition within the Accounting Period, the income from which is reflected
in the Accounting Period only partially, the Operating Profit with respect to
the subject of such Acquisition shall be adjusted, on a historical pro forma
basis, to reflect Operating Profit for the complete Accounting Period.

 

Parent:  Affinity
Group Holding, Inc., a Delaware corporation, or such other entity which
holds in excess of 80 % of the issued and outstanding equity securities of the
Parent.

 

Phantom Stock Interest:  The cash equivalent of [                 ]
(        %) of Company Value.

 

Rolling Four Fiscal Quarters:  Four consecutive Fiscal Quarters.

 

Section 4.2.  Withholding
Taxes.  The Company may withhold from
any payment to be made under this Agreement (and transmit to the proper taxing
authority) such amount as it may be required to withhold under any federal,
state or other law.

 

Section 4.3.  Administration.  The Company and its executive officers shall
have full power to interpret, construe and administer this Agreement, including
authority to determine any dispute or claim with respect thereto.  The determination of the Company in any
matter, made in good faith, shall be binding and conclusive upon Executive and
all other persons having any right or benefit hereunder.  Unless Executive shall give notice to the
Company objecting to the Company’s calculation of Base Cost, Company Value,
Formula Value or Operating Profit for any period (or any other calculation to
be determined for the purposes of this Agreement) within thirty days after
notice of the determination thereof by the Company, such calculation shall
conclusively be deemed to have been accepted by the parties hereto.  The cash value of the Phantom Stock Interest
shall be set forth in a certificate of the chief

 

7

 

financial officer of the Company, the determination of which shall be
made within 150 days of the Determination Date and shall be conclusive and
binding upon the Executive provided that, if the Executive shall disagree with
the amount of the Base Cost, Company Value, Formula Value or Operating Profit
as determined by the chief financial officer of the Company (written notice of
which shall be given by the Executive within 30 days of the receipt of such
determination by the chief financial officer), Base Cost, Company Value,
Formula Value or Operating Profit shall be determined by the independent
certified public accountants of the Company or, if the Company has not then
engaged a firm of independent certified public accountants, any “big six” firm
of public accountants selected by the Company (the “Independent Accountant”).  The Independent Accountant shall determine
the Base Cost, Company Value, Formula Value or Operating Profit of the Company
within 30 days after its appointment and shall be instructed to deliver to the
Company and the Executive a written report of its determination of the amount
of such Base Cost, Company Value, Formula Value or Operating Profit.

 

The cost of the accounting services performed by the Independent
Accountant shall be borne by the Company unless the amount of the Base Cost,
Company Value, Formula Value or Operating Profit as determined by the
Independent Accountant is the same as the amount determined by the Company’s
chief financial officer (or is an amount which results in a lower value for the
Executive of the Phantom Stock Interest or the bonus payable under section
1.5), in which event the entire cost of the services of the Independent
Accountant shall be borne by the Executive and shall be deducted by the Company
from the Phantom Stock payment to be made pursuant to section 2.2 hereof or the
bonus payable under section 1.5, as the case may be.

 

Any of the obligations of the Company hereunder may be performed by an
affiliate of the Company and such performance by an affiliate shall be deemed
to satisfy any such obligation of the Company hereunder.

 

Section 4.4.  Notices.  All notices, requests and other
communications from any of the parties hereto to the other shall be in writing
and shall be considered to have been duly given or served when personally
delivered to any individual party, an executive officer of any corporate party,
or on the first day after the date of deposit with Federal Express for next day
delivery, postage prepaid, or on the third day after deposit in the United
States mail, certified or registered, return receipt requested, postage
prepaid, or on the date of telecopy, fax or similar telephonic transmission
during normal business hours, provided that the recipient has specifically
acknowledged by telephone receipt of such telecopy, fax or telephonic
transmission; addressed, in all cases, to the party at his or its address set
forth below, or to such other address as such party may hereafter designate by
written notice to the other party:

 

(i)  If to the Company to:

 

2575 Vista Del Mar Drive

Ventura, CA  93001

Attn:  Stephen Adams

 

8

 

(ii)  If to Executive to:

 

 

Section 4.5.  Binding
Effect.  The provisions of this
Agreement shall not give Executive any rights to continue to be employed or
otherwise retained by the Company or any affiliate thereof.  Except as so provided, this Agreement shall
be binding upon and inure to the benefit of the parties hereto, the respective
successors and assigns of the Company and the beneficiaries, personal
representatives and heirs of Executive.

 

Section 4.6.  Controlling
Law.  This Agreement shall be
construed, and the legal relations between the parties determined, in
accordance with the laws of the state of incorporation of the Company.

 

Section 4.7.  Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original without the
production of the others, but all of which together shall constitute one and
the same instrument.

 

Section 4.8.  Entire
Agreement.  This Agreement contains
the entire understanding of the parties with respect to the subject matter
hereof and may not be varied, modified or amended except by a writing signed by
the parties to be charged.  The making,
execution and delivery of this Agreement by the parties hereto have been
induced by no representations, statements, warranties or agreements of the
other except those herein expressed.

 

Section 4.9.  Headings.  The division of this Agreement into sections
and paragraphs and the titles assigned thereto is only a matter of convenience
for reference and shall not define or limit any of the terms or provisions
thereof.

 

IN WITNESS WHEREOF, the individual party has
hereunto set his hand and the corporate party has caused these presents to be
executed by a proper officer thereunto duly authorized all as of the day and
year first above written.

 

AFFINITY
GROUP, INC.

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

9Exhibit 10.41

 

AFFINITY GROUP, INC.

BOARD OF DIRECTORS

AUDIT COMMITTEE CHARTER

Adopted August 3, 2004

Revised June 15, 2010

 

I.             INTRODUCTION AND PURPOSE

 

The
primary function of the Audit Committee is to assist the Board of Directors of
Affinity Group, Inc. (the “Company”) in fulfilling its fiduciary
responsibilities by overseeing the Company’s financial reporting and public
disclosure activities.  The Board of
Directors may serve as the Audit Committee of the Company and may designate one
or more of its members to act as its representative.  The Audit Committee’s primary purposes are
to:

 

·      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 and independence, and (4) the performance of the
Company’s independent auditor.

 

·      Serve as an independent and
objective party to monitor the Company’s financial reporting process and
internal control system.

 

·      Provide an open avenue of
communication among the independent auditor, financial and senior management,
the internal auditors and the Board of Directors.

 

The
Audit Committee, in its capacity as a committee of the Board of Directors,
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 or performing other audit, review or attest services for the
Company, and each such independent auditor shall report directly to the Audit
Committee.

 

The
Audit Committee will primarily fulfill these responsibilities by carrying out
the activities specified in Section IV of this Charter.

 

Although
the Audit Committee has the responsibilities and powers set forth in this
Charter, the role of the Audit Committee is oversight.  The members of the Audit Committee are not
employees of the Company and may or may not be auditors or accountants by
profession and 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
are in accordance with generally accepted accounting principles.  These are the responsibilities of Company
management and the independent auditor.

 

1

 

II.            COMPOSITION

 

The
Audit Committee shall be comprised of one or more Directors as determined from
time to time by the Board and shall be elected by the Board.  Audit Committee members shall serve until
their successors shall be duly elected and qualified.  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.  If
an Audit Committee member desires to serve on the Audit Committees of more than
three companies with publicly traded debt or equity securities, then in each
such case, the Board must determine that such simultaneous service would not
impair the ability of such member to effectively serve on the Company’s Audit
Committee.

 

The
Audit Committee may, in its discretion, form and delegate authority to a
subcommittee of the Audit Committee or to the Chair.  If the Board of Directors is serving as the
Audit Committee, the Board of Directors may, in its descretion, delegate any of
its authority as the Audit Committee to one or more Directors.

 

Each
member of the Audit Committee shall be financially literate, as such
qualification is interpreted by the Company’s Board of Directors in its
business judgment, or must become financially literate within a reasonable
period of time after his or her appointment to the Audit Committee.  The Board of Directors shall determine
whether one or more members of the Audit Committee is an “Audit Committee
Financial Expert” as such term is defined by the Securities and Exchange
Commission (“SEC”).

 

III.          MEETINGS AND COMMITTEE OPERATIONS

 

The
Audit Committee shall meet in person or telephonically at least four times
annually, with additional meetings as often as necessary, at times and places
determined by the Chair, with further actions to be taken by unanimous written
consent, when deemed necessary or desirable by the Audit Committee or its
Chair.  To the extent practicable, each
of the Audit Committee members shall attend two regularly scheduled meetings
(the pre-audit and post-audit meetings) 
in person.  The Audit Committee
shall periodically make time available during its regularly scheduled meetings
to meet with management and the independent auditors in separate sessions to
discuss any matters that the Audit Committee or any of these groups believe
should be discussed privately.

 

A
majority of the Audit Committee members currently holding office constitutes 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 or by
unanimous written action.

 

IV.          COMMITTEE DUTIES AND RESPONSIBILITIES

 

The
Audit Committee shall undertake the following responsibilities and duties:

 

2

 

A.        Documents/Financial
Statements/Reports

 

·                  Review and reassess the adequacy of this
Charter from time to time.

 

·                  Review and discuss with management and the
independent auditor the Company’s quarterly financial statements, including the
Company’s disclosures under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the independent auditor’s review of
the quarterly financial statements together with the accompanying quarterly
report on Form 10-Q prior to submission to shareholders, any governmental
body, any stock exchange or the public.

 

·                  Review and discuss with management and the
independent auditor the Company’s annual financial statements, including the
Company’s disclosures under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the annual audit together with the
accompanying annual report on Form 10-K prior to submission to
shareholders, any governmental body, any stock exchange or the public.

 

·                  Review the significant recommendations made
to management by the independent auditor and management’s responses.

 

·                  Recommend to the Board of Directors, if
appropriate, that the Company’s annual audited financial statements be included
in the Company’s annual report on Form 10-K for filing with the SEC.

 

·                  Discuss with the independent auditor the
matters required to be discussed by Statement on Auditing Standards No. 61,
as amended (AICPA, Professional Standards,
Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight
Board in Rule 3200T, relating to the conduct of the audit.

 

B.                        Independent
Auditors

 

·                  Be responsible for (i) the
appointment of an independent auditor for the Company, (ii) review and
approval of the compensation of such independent auditor and (iii) oversight
of the work of such independent auditor (including resolution of disagreements
between management and the independent auditor regarding financial reporting).

 

·                  Have the sole authority to
review in advance, and grant any appropriate pre-approvals of, (i) all
auditing services to be provided by the independent auditor and (ii) all
significant non-audit services to be provided by the independent auditor as
permitted by Section 10A of the Securities and Exchange Act of 1934, and
in connection therewith to approve all fees and terms of engagement.  The Audit Committee shall also review and
approve disclosures required to be included in periodic reports filed under Section 13(a) of
the Securities and Exchange Act of 1934 with respect to non-audit services.

 

·                  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 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.

 

3

 

·                  On an annual basis, the Audit Committee shall
receive from the independent auditor a written statement delineating all
significant relationships (and related fees) the Company’s independent auditor
has with the Company to consider in the evaluation of the independent auditor’s
independence.  The Audit Committee is
responsible for actively engaging in a dialogue with the independent auditor
with respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent auditor and for taking
appropriate action in response to the independent auditor’s report to satisfy
itself of the independent auditor’s independence.

 

·                  Confirm that neither the lead audit partner
nor the audit partner responsible for reviewing the audit for the Company’s
independent auditor performs audit services for the Company for more than  five consecutive years.

 

·                  Review all reports required to be submitted
by the independent auditor to the Audit Committee under Section 10A of the
Securities and Exchange Act of 1934.

 

·                  Review any communications between the
independent auditor’s audit team and the independent auditor’s national office
respecting auditing or accounting issues presented by the engagement.

 

·                  Periodically consult with the Company’s
independent auditor (outside of the presence of management) about the
independent auditor’s judgments about the appropriateness, quality, and
acceptability of the Company’s accounting principles as applied to its
financial reporting, and the Company’s internal controls and the completeness
and accuracy of the Company’s financial statements.

 

C.                        Financial
Reporting Processes

 

·                  In consultation
with the Company’s independent auditor, monitor the integrity of the Company’s
financial reporting processes, both internal and external.

 

·                  Review and
discuss the scope of the annual audit plan for the independent auditors.

 

·                  Review major
issues regarding, and approve if appropriate, significant changes to the
Company’s accounting principles and practices, financial reporting process and
presentations, and system of internal controls, as suggested by the Company’s
independent auditor or management.

 

·                  Review with the
Company’s independent auditor and management the extent to which significant
changes or improvements in financial or accounting practices, as approved by
the Audit Committee, have been implemented.

 

·                  Review with
management, the independent auditor and the Company’s legal counsel, as
appropriate, any legal, regulatory or compliance matters, including off balance
sheet structures, that could have a significant impact on the Company’s
financial statements, including significant changes in accounting initiatives,
standards or rules as promulgated by the Financial Statements Accounting
Standards Board, the SEC or other regulatory authorities with relevant
jurisdiction.

 

4

 

D.                        Process
Analysis and Review

 

·                  Review the systems of reporting to the Audit
Committee by management and the independent auditor regarding any significant
financial reporting issues and judgments made in connection with the
preparation of the financial statements, including the effect of alternative
GAAP methods, and the view of each as to the appropriateness of such judgments.

 

·                  Following completion of the annual audit,
review with the independent auditor any audit problems or difficulties or
significant disagreement with management encountered during the course of the
audit, including any restrictions on the scope of work or access to requested
information, and management’s response.

 

·                  Review with the independent auditor any
accounting adjustments that were noted or proposed by the auditor but were “passed”
(as immaterial or otherwise).

 

·                  Discuss with management, the
type and presentation of information to be included in earnings press releases
(paying particular attention to any use of “pro forma,” or “adjusted” non-GAAP,
information), as well as review any financial information and earnings guidance
provided to analysts and rating agencies prior to public release.

 

E.                        Other

 

·                  Ensure appropriate procedures are established
and maintained 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 to the Audit Committee.

 

·                  Review and discuss with management (i) the
Company’s major financial risk exposures and the steps management has taken to
monitor and control such exposures (including management’s guidelines and
policies with respect to financial risk assessment and financial risk
management); and (ii) the program that management has established to
monitor compliance with its code of business conduct and ethics for directors,
officers and employees.

 

·                  Report regularly to the Board of Directors on
the activities of the Audit Committee and make such recommendations with
respect to the above matters as the Audit Committee may deem necessary or
appropriate.  This report shall include a
review of any issues that arise with respect to the quality or integrity of the
Company’s financial statements, the Company’s compliance with legal or
regulatory requirements or the performance and independence of the Company’s
independent auditor.

 

V.            HIRING GUIDELINES
FOR INDEPENDENT AUDITOR EMPLOYEES

 

The
Audit Committee has adopted the following practices regarding the hiring by the
Company of any partner, director, manager, advising member of the department of
professional practice, reviewing actuary, reviewing tax professional and any
other persons 

 

5

 

having
similar responsibility for providing audit assurance (including all work that
results in the expression of an opinion on financial statements and audits of
statutory accounts) to the Company’s independent auditor on any aspect of its
certification of the Company’s financial statements:

 

·              No member, with the position
listed above, of an audit team that is auditing the Company or any of its
businesses can be hired by the Company for a period of two years following
association with that audit.

 

·              No former employee of the
independent auditor may sign a Company SEC filing for 5 years following
employment with the independent auditor.

 

·              No former employee of the
independent auditor may be named an officer of the Company or any of its
subsidiaries for 3 years following employment by the independent auditor.

 

·              The Audit Committee must approve
in advance all hires by the Company from an independent auditor.

 

VI.                               PROCESS
FOR HANDLING QUESTIONS, CONCERNS AND COMPLAINTS ABOUT ACCOUNTING OR AUDITING
MATTERS

 

The
Audit Committee has established the following procedures for:  (i) the receipt, retention, and
treatment of questions, concerns or complaints received by the Company
regarding accounting, internal accounting controls, or auditing matters; and (ii) the
confidential, anonymous submission by Company employees of questions, concerns
or complaints regarding questionable accounting or auditing matters:

 

·                  Questions,
concerns or complaints regarding accounting, internal accounting controls, or
auditing matters should be directed to the Company’s Chief Financial Officer at
the mail or email address published on the Company’s website.

 

·                  Copies of all such questions, concerns or
complaints will be sent to members of the Audit Committee.

 

·                  All questions,
concerns and complaints will be tracked by the Audit Committee, but handled by
the Company’s finance staff and legal counsel in the normal manner, except as the
Audit Committee may request.

 

·                  The status of
all questions, concerns or complaints will be reported on a quarterly basis to
the Audit Committee, and, if the Audit Committee so directs, to the full Board
of Directors of the Company.

 

·                  The Audit
Committee may request special treatment, including the retention of outside
legal counsel or other advisors, for any question, concern or complaint.

 

6

 

VII.         COMMITTEE REPORTS

 

1.              Present an annual
performance evaluation of the Audit Committee, which shall assess the
performance of the Audit Committee in fulfilling the requirements of this
charter, recommend any amendments to this charter, and set forth the goals and
objectives of the Audit Committee for the ensuing twelve months.

 

2.              Transmit to the
Board notices of Audit Committee meetings, agendas, and meeting minutes.

 

VIII.       RESOURCES AND
AUTHORITY OF THE COMMITTEE

 

The
Audit Committee shall have such resources and authority as it deems necessary
to discharge its duties and responsibilities, including the sole authority to
retain, discharge, and approve fees and other terms for retention of the
independent auditors, independent legal counsel, and other independent experts
or advisors.  The Company shall provide
appropriate funding, as determined by the Audit Committee, in its capacity as a
committee of the Board of Directors of the Company, for the payment of
compensation of the independent auditors, independent legal counsel, and other
independent experts or advisors so retained by the Audit Committee and ordinary
administrative expenses that are necessary and appropriate to carry out its
duties. The Audit Committee may direct any officer or employee of the Company
or request any employee of the Company’s independent auditor or outside legal
counsel to attend an Audit Committee meeting or meet with any Audit Committee
members.

 

7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}]]