Document:

Audit Committee Charter

 

Exhibit 4.21

Sea Breeze Power Corp.

(the “Company”)

AUDIT COMMITTEE CHARTER

1. Mandate

The audit committee will assist the board of directors (the “Board”) in fulfilling its financial
oversight responsibilities. The audit committee will review and consider in consultation with the
auditors the financial reporting process, the system of internal control and the audit process. In
performing its duties, the committee will maintain effective working relationships with the Board,
management, and the external auditors. To effectively perform his or her role, each committee
member must obtain an understanding of the principal responsibilities of committee membership as
well and the Corporation’s business, operations and risks.

2. Composition

The Board will appoint from among their membership an audit committee after each annual general
meeting of the shareholders of the Corporation. The audit committee will consist of a minimum of
three directors.

2.1 Independence

A majority of the members of the audit committee must not be officers, employees or control persons
of the Corporation.

2.2 Expertise of Committee Members

Each member of the audit committee must be financially literate or must become financially literate
within a reasonable period of time after his or her appointment to the committee. At least one
member of the committee must have accounting or related financial management expertise. The Board
shall interpret the qualifications of financial literacy and financial management expertise in its
business judgment and shall conclude whether a director meets these qualifications.

3. Meetings

The audit committee shall meet in accordance with a schedule established each year by the Board,
and at other times that the audit committee may determine. The audit committee shall meet at least
annually with the Corporation’s Chief Financial Officer and external auditors in separate executive
sessions.

4. Roles and Responsibilities

The audit committee shall fulfill the following roles and discharge the following responsibilities:

4.1 External Audit

The audit committee shall be directly responsible for overseeing the work of the external auditors
in preparing or issuing the auditor’s report, including the resolution of disagreements between
management and the external auditors regarding financial reporting and audit scope or procedures.
In carrying out this duty, the audit committee shall:

(a) recommend to the Board the external auditor to be nominated by the shareholders for the
purpose of preparing or issuing an auditor’s report or performing other audit, review or
attest services for the Corporation;

(b) review (by discussion and enquiry) the external auditors’ proposed audit scope and
approach;

(c) review the performance of the external auditors and recommend to the Board the
appointment or discharge of the external auditors;

(d) review and recommend to the Board the compensation to be paid to the external auditors;
and

 

 

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(e) review and confirm the independence of the external auditors by reviewing the non-audit
services provided and the external auditors’ assertion of their independence in accordance
with professional standards.

4.2 Internal Control

The audit committee shall consider whether adequate controls are in place over annual and interim
financial reporting as well as controls over assets, transactions and the creation of obligations,
commitments and liabilities of the Corporation. In carrying out this duty, the audit committee
shall:

(a) evaluate the adequacy and effectiveness of management’s system of internal controls over
the accounting and financial reporting system within the Corporation; and

(b) ensure that the external auditors discuss with the audit committee any event or matter
which suggests the possibility of fraud, illegal acts or deficiencies in internal controls.

4.3 Financial Reporting

The audit committee shall review the financial statements and financial information prior to its
release to the public. In carrying out this duty, the audit committee shall:

General

(a) review significant accounting and financial reporting issues, especially complex,
unusual and related party transactions; and

(b) review and ensure that the accounting principles selected by management in preparing
financial statements are appropriate.

Annual Financial Statements

(c) review the draft annual financial statements and provide a recommendation to the Board
with respect to the approval of the financial statements;

(d) meet with management and the external auditors to review the financial statements and
the results of the audit, including any difficulties encountered; and

(e) review management’s discussion & analysis respecting the annual reporting period prior
to its release to the public.

Interim Financial Statements

(f) review and approve the interim financial statements prior to their release to the
public; and

(g) review management’s discussion & analysis respecting the interim reporting period prior
to its release to the public.

Release of Financial Information

(h) where reasonably possible, review and approve all public disclosure, including news
releases, containing financial information, prior to its release to the public.

4.4 Non-Audit Services

All non-audit services (being services other than services rendered for the audit and review of the
financial statements or services that are normally provided by the external auditor in connection
with statutory and regulatory filings or engagements) which are proposed to be provided by the
external auditors to the Corporation or any subsidiary of the Corporation shall be subject to the
prior approval of the audit committee.

Delegation of Authority

(a) The audit committee may delegate to one or more independent members of the audit
committee the authority to approve non-audit services, provided any non-audit services
approved in this manner must be presented to the audit committee at its next scheduled
meeting.

 

 

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De-Minimis Non-Audit Services

(b) The audit committee may satisfy the requirement for the pre-approval of non-audit
services if:

(i) the aggregate amount of all non-audit services that were not pre-approved is
reasonably expected to constitute no more than five per cent of the total amount of
fees paid by the Corporation and its subsidiaries to the external auditor during the
fiscal year in which the services are provided; or

(ii) the services are brought to the attention of the audit committee and approved,
prior to the completion of the audit, by the audit committee or by one or more of its
members to whom authority to grant such approvals has been delegated.

Pre-Approval Policies and Procedures

(c) The audit committee may also satisfy the requirement for the pre-approval of non-audit
services by adopting specific policies and procedures for the engagement of non-audit
services, if:

(i) the pre-approval policies and procedures are detailed as to the particular
service;

(ii) the audit committee is informed of each non-audit service; and

(iii) the procedures do not include delegation of the audit committee’s
responsibilities to management.

4.5 Other Responsibilities

The audit committee shall:

(a) establish procedures for the receipt, retention and treatment of complaints received by
the Corporation regarding accounting, internal accounting controls, or auditing matters;

(b) establish procedures for the confidential, anonymous submission by employees of the
Corporation of concerns regarding questionable accounting or auditing matters;

(c) ensure that significant findings and recommendations made by management and external
auditor are received and discussed on a timely basis;

(d) review the policies and procedures in effect for considering officers’ expenses and
perquisites;

(e) perform other oversight functions as requested by the Board; and

(f) review and update this Charter and receive approval of changes to this Charter from the
Board.

4.6 Reporting Responsibilities

The audit committee shall regularly update the Board about committee activities and make
appropriate recommendations.

5. Resources and Authority of the Audit Committee

The audit committee shall have the resources and the authority appropriate to discharge its
responsibilities, including the authority to

(a) engage independent counsel and other advisors as it determines necessary to carry out
its duties;

(b) set and pay the compensation for any advisors employed by the audit committee; and

(c) communicate directly with the internal and external auditors.

6. Guidance – Roles & Responsibilities

The following guidance is intended to provide the Audit Committee members with additional guidance
on fulfilment of their roles and responsibilities on the committee:

 

 

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6.1 Internal Control

(a) evaluate whether management is setting the goal of high standards by communicating the
importance of internal control and ensuring that all individuals possess an understanding of
their roles and responsibilities;

(b) focus on the extent to which external auditors review computer systems and applications,
the security of such systems and applications, and the contingency plan for processing
financial information in the event of an IT systems breakdown; and

(c) gain an understanding of whether internal control recommendations made by external
auditors have been implemented by management.

6.2 Financial Reporting

General

(a) review significant accounting and reporting issues, including recent professional and
regulatory pronouncements, and understand their impact on the financial statements; and

(b) ask management and the external auditors about significant risks and exposures and the
plans to minimize such risks; and

(c) understand industry best practices and the Corporation’s adoption of them.

Annual Financial Statements

(d) review the annual financial statements and determine whether they are complete and
consistent with the information known to committee members, and assess whether the financial
statements reflect appropriate accounting principles in light of the jurisdictions in which
the Corporation reports or trades its shares;

(e) pay attention to complex and/or unusual transactions such as restructuring charges and
derivative disclosures;

(f) focus on judgmental areas such as those involving valuation of assets and liabilities,
including, for example, the accounting for and disclosure of loan losses; warranty,
professional liability; litigation reserves; and other commitments and contingencies;

(g) consider management’s handling of proposed audit adjustments identified by the external
auditors; and

(h) ensure that the external auditors communicate all required matters to the committee.

Interim Financial Statements

(i) be briefed on how management develops and summarizes interim financial information, the
extent to which the external auditors review interim financial information;

(j) meet with management and the auditors, either telephonically or in person, to review the
interim financial statements; and

(k) to gain insight into the fairness of the interim statements and disclosures, obtain
explanations from management on whether:

(i) actual financial results for the quarter or interim period varied significantly
from budgeted or projected results;

(ii) changes in financial ratios and relationships of various balance sheet and
operating statement figures in the interim financials statements are consistent with
changes in the Corporation’s operations and financing practices;

(iii) generally accepted accounting principles have been consistently applied;

(iv) there are any actual or proposed changes in accounting or financial reporting
practices;

 

 

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(v) there are any significant or unusual events or transactions;

(vi) the Corporation’s financial and operating controls are functioning effectively;

(vii) the Corporation has complied with the terms of loan agreements, security
indentures or other financial position or results dependent agreement; and

(viii) the interim financial statements contain adequate and appropriate disclosures.

6.3 Compliance with Laws and Regulations

(a) periodically obtain updates from management regarding compliance with this policy and
industry “best practices”;

(b) be satisfied that all regulatory compliance matters have been considered in the
preparation of the financial statements; and

(c) review the findings of any examinations by securities regulatory authorities and stock
exchanges.

6.4 Other Responsibilities

(a) review, with the Corporation’s counsel, any legal matters that could have a significant
impact on the Corporation’s financial statements.<PAGE>

                                                                   EXHIBIT 10.31

WARRANT NO.: 2004 - [___]

                                     WARRANT

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE REGISTERED OWNER FOR
INVESTMENT PURPOSES ONLY, WITHOUT A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND
MAY NOT BE SOLD, TRANSFERRED OR DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT AND
REGISTRATION OR QUALIFICATION UNDER APPLICABLE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION STATEMENT IS NOT REQUIRED.

                                 FIRST AMENDMENT
                                       TO
                        WARRANT TO PURCHASE COMMON STOCK
                                       OF
                           STELLAR TECHNOLOGIES, INC.

         THIS FIRST AMENDMENT TO WARRANT TO PURCHASE COMMON STOCK OF STELLAR
TECHNOLOGIES, INC. (this "Amendment"), is made as of [___________], 2005, for
the purpose of amending Warrant No.: 2004 - [___] (the "Warrant") of Stellar
Technologies, Inc. (the "Company"), dated [________], 2004, issued to
[_______________] to purchase [___________] shares of Common Stock. Capitalized
terms not otherwise defined herein shall have the meanings ascribed to such
terms in the Warrant.

                                    RECITALS

         WHEREAS, the Company hereto desires to amend the Warrant to reduce the
Exercise Price of the Warrant; and

         WHEREAS, Section 10 of the Warrant permits the Company to supplement or
amend the warrant without the approval of the holder of the Warrant, provided
that the Company deems the amendment necessary or advisable and provided that
the amendment does not materially adversely affect the interest of the Holder.

         NOW, THEREFORE, in consideration of the foregoing premises, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the Warrant is
hereby amended as follows:
<PAGE>

         1. The introductory paragraph of the Warrant is hereby amended to
provide that "Exercise Price" shall mean $1.00 per share of Common Stock (which
reflects the one-for-four reverse stock split of the Company's Common Stock that
became effective on March 11, 2004).

         2. Except as expressly provided herein, the Warrant shall remain in
full force and effect.

         IN WITNESS WHEREOF, the Company has caused this Amendment to be signed
by its officer hereunto duly authorized, as of the date first written above.

                           STELLAR TECHNOLOGIES, INC.

                           By:____________________________________
                              Name:
                              Title:

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