Exhibit 99.3
STEIN MART, INC.
AUDIT COMMITTEE CHARTER
Amended March 24, 2003
Purpose. The Audit Committee of the Board of Directors (the "Board") of
Stein Mart, Inc. (the "Audit Committee") is appointed by the Board to assist the
Board in monitoring (1) the integrity of the financial statements of the
Company, (2) the compliance by the Company with legal and regulatory
requirements and (3) the independence and performance of the Company's internal
and external auditors.
I. Members
There shall be not less than three members of the Audit Committee, one
of whom shall be elected by the Board to serve as Chairperson of the Audit
Committee (the "Committee Chairperson"), and each of whom shall meet the
independence and experience requirements of The Nasdaq Stock Market(R)
("Nasdaq"). Thus, the members of the Audit Committee shall meet the following
criteria:
A. Each shall be a person other than an officer or employee of the
Company or its subsidiaries or any other individual having a
relationship, which, in the opinion of the Board, would interfere with
the exercise of independent judgment in carrying out the
responsibilities of a director. The following persons shall not be
considered independent:
1. a director who is employed by the Company or any of its
affiliates for the current year or any of the past three years;
2. a director who was a partner or employee of the Company's outside
auditors who worked on the Company's audit engagement for the
current year or any of the past three years;
3. a director who accepts or who has an "Immediate Family Member"
(as defined below) who accepts any compensation or payments from
the Company or any of its affiliates in excess of $60,000 during
the current or any of the past three years, other than
compensation for board service, benefits under a tax-qualified
retirement plan, or non-discretionary compensation;
4. a director who is an Immediate Family Member of an individual who
is, or has been in any of the past three years, employed by the
Company or any of its affiliates as an executive officer;
5. a director who is a partner in, or a controlling shareholder or
an executive officer of, any for-profit business organization to
which the corporation made, or from which the corporation
received, payments (other than those arising solely from
investments in the corporation's securities) that exceed 5% of
the Company's or such business organization's consolidated gross
revenues for that year, or $200,000, whichever is more, in the
current or any of the past three years;
6. a director who is employed as an executive of another entity
where any of the Company's executives serve on that entity's
compensation committee.
"Immediate Family Member" includes, but is not limited to, a
person's spouse, parents, children, siblings, mother-in-law,
father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law and anyone who resides in such person's home.
B. Each member shall be able to read and understand fundamental financial
statements, including a balance sheet, income statement and cash flow
statement. At least one member shall qualify as an "Audit Committee
Financial Expert" under Securities & Exchange Commission ("SEC")
regulations. In determining whether a member is such a financial
expert, the Board of Directors will determine:
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1. Whether one member of the Audit Committee has the following
attributes:
a. an understanding of generally accepted accounting principles
and financial statements;
b. the ability to assess the general application of such
principles in connection with the accounting for estimates,
accruals and reserves;
c. experience preparing, auditing, analyzing or evaluating
financial statements that present a breadth and level of
complexity of accounting issues that are generally
comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's
financial statements, or experience actively supervising one
or more persons engaged in such activities;
d. an understanding of internal controls and procedures for
financial reporting; and
e. an understanding of audit committee functions; and
2. Whether that person acquired such attributes through any one or
more of the following:
a. education and experience as a principal financial officer,
principal accounting officer, controller, public accountant
or auditor or experience in one or more positions that
involve the performance of similar functions;
b. experience actively supervising a principal financial
officer, principal accounting officer, controller, public
accountant, auditor or person performing similar functions;
c. experience overseeing or assessing the performance of
companies or public accountants with respect to the
preparation, auditing or evaluation of financial statements;
or
d. other relevant experience.
C. Each member of the Audit Committee shall also be "independent," as
defined in Section 301 of the Sarbanes-Oxley Act (the "Sarbanes Act").
Thus, each member may not, other than in his or her capacity as a
member of the Board of Directors, the Audit Committee or any other
board committee:
1. accept, directly or indirectly, any consulting, advisory, or
other compensatory fee from the Company; or
2. be an affiliated person of the Company or any subsidiary.
II. Appointment; Authority; Complaints
A. Appointment. The Board shall appoint members of the Audit Committee.
B. Professional Advisors. The Audit Committee shall have the authority,
and is hereby authorized to incur costs, to retain special legal,
accounting or other consultants to advise the Committee and/or to
assist with any investigations, which the Audit Committee may wish to
undertake. The Audit Committee may request any officer or employee of
the Company or the Company's outside counsel or independent auditor to
attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee.
C. Outside Auditors. The Audit Committee shall have direct responsibility
for appointment, compensation and oversight of the Company's outside
auditors, including resolving disagreements between management and the
auditors regarding financial reporting. The outside auditors shall
report directly to the Audit Committee. The Audit Committee shall
pre-approve (i) all audit services, and (ii) all non-audit services
provided by the outside auditor that are permitted by Section 201 of
the Sarbanes Act, except if:
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1. in the case of permissible non-audit services, such services
qualify as de minimus under Section 202 of the Sarbanes Act and
the Company did not recognize that such services were non-audit
services at the time of the engagement;
2. the Audit Committee, or one or more of its designated members,
approves the permissible non-audit services before completion of
the audit; and
3. when one or more designated members approve such services, such
approval is presented to the Audit Committee at its next
scheduled meeting.
The Audit Committee shall be responsible for receiving from the
outside auditors, and where the Audit Committee determines it
necessary or desirable, to question the outside auditors and
management about, all reports required to be made by the auditors to
the Audit Committee under Section 205 of the Sarbanes Act.
D. Complaints
1. Contacts. The Audit Committee shall appoint an independent person
(who may be an attorney who is not otherwise engaged by the
Company and who is called the "Independent Contact") to receive
calls from persons who wish to make a complaint or express
concern about the accounting procedures, internal controls,
auditing matters and/or reporting methods of the Company (an
"Accounting Complaint") and to facilitate Accounting Complaints
by those wishing to maintain an anonymous status.
2. Retention. The Independent Contact and any Audit Committee Member
who receives a Complaint shall cause a report of such Complaint
(the "Complaint Report") to be made to the Committee Chairman who
shall maintain a confidential file of all Complaint Reports that
are made in writing and such written Complaint Reports shall be
preserved for 10 years following the receipt of such Complaint.
3. Action on Complaint. The Committee Chairperson shall review each
Complaint Report to make a preliminary determination as to the
probable validity of such Complaint and the Committee Chairperson
is authorized to undertake such investigation as the Committee
Chairperson believes warranted under the circumstances.
E. Disclosure Committee
1. Responsibility. The Company shall have a committee (the
"Disclosure Committee") which is responsible for reviewing
internal controls relating to financial reporting and for making
certain that the appropriate questions are asked of various
members of the financial department and of operations and that
appropriate certificates are obtained from various individuals
within those areas of responsibility in the Company to provide
assurance to the Company and to the Company's Chief Financial
Officer and Chief Executive Officer in connection with those
parties' certification of the periodic reports of the Company's
activities.
2. Committee Members. The Disclosure Committee shall be made up of
persons holding the offices of the Company's Vice President,
Controller, the Company's Director of Financial Reporting, the
Company's Vice President of Internal Audit, Safety and Security,
the Company's Senior Vice President, Director of Stores, the
Company's Vice President of Planning and Allocation and the
Company's Vice President of Information Systems.
3. Report to Audit Committee. At least annually, the Disclosure
Committee shall report to the Audit Committee on its activities
and the results of its oversight of disclosure matters.
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F. Related-party Transactions. The Audit Committee shall review and
approve all "related-party transactions". A transaction is a
"related-party transaction" if it is a financial or contractual
transaction between the Company and any Director or executive officer.
III. Committee Meetings
The Audit Committee will hold meetings at such times and at such places as
it shall deem necessary but shall hold at least the following meetings: (a) a
March/April meeting (the "Year-End Review Meeting") prior to the release of the
Company's audited financial statements for the prior year, (b) a mid-year
meeting (the "Mid-Year Meeting") to generally coincide with the annual meeting
of the Company's shareholders, (c) an October/November meeting (the "Fall
Meeting") to generally coincide with the fall meeting of the Company's Board of
Directors, and (d) meetings to approve each release of the Company's quarterly
financial numbers.
IV. Specific Responsibilities
The Audit Committee shall make regular reports to the Board. The Audit
Committee shall undertake the following tasks generally at the times
indicated:
A. Quarterly
1. Review with management and the independent auditor, the Company's
quarterly financial statements prior to filing of SEC Form 10-Q.
Determine through questioning management and the independent
auditor that the reports reflect:
a. all material, correcting adjustments identified by the
Company's independent auditor;
b. any off-balance sheet transactions;
c. all SEC requirements regarding any disclosure of pro-forma
information;
d. management's assessment of disclosure controls and
procedures and internal controls;
e. in plain English, the material changes in financial
condition or results of operations.
2. Ascertain through questioning management and the independent
auditor that:
a. all audit documents and E-mails are preserved for the period
of time required by current rules of the SEC;
b. the independent auditors report to the Committee critical
accounting policies and practices used, alternative
treatments within GAAP and any other material communications
with management;
c. the independent auditors have not engaged in any prohibited
consulting services such as: (i) bookkeeping and accounting,
(ii) financial information systems design, (iii) appraisals,
valuations, fairness opinions, etc., (iv) actuarial
services, (v) internal audit outsourcing, (vi) management or
human resources functions, (vii) broker dealer and
investment banking, or (viii) legal and expert services
unrelated to audit;
d. the independent auditors have reported on management's
assessment of internal controls including findings,
evaluation of whether internal controls include proper
maintenance of records, whether there is a reasonable
assurance that transactions are recorded in accordance with
GAAP, and description of any material weaknesses in
controls, and as part of their certification process for the
Form 10-Q, the Company's Chief Executive Officer and Chief
Financial Officer have reported to and discussed with the
Audit Committee and the auditors any: (i) significant
deficiencies in the design or operation of internal
controls, (ii) material weaknesses in internal controls, and
(iii) fraud involving management or other employees who
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have a significant role in the Company's internal controls,
as required by Section 302 of the Sarbanes-Oxley Act; and
e. the independent auditors have reported any material
non-compliance as a result of testing.
B. Year-End Review Meeting
1. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing
principles and practices as well as the quality and acceptability
of such principles, practices and underlying estimates, and the
adequacy of internal controls that could significantly affect the
Company's financial statements.
2. Review an analysis prepared by management and the independent
auditor of significant financial reporting issues and judgments
made in connection with the preparation of the Company's
financial statements.
3. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor,
internal auditors or management.
4. Obtain from the independent auditor a formal written statement
delineating all relationships between the auditor and the
Company, discuss with the auditor any disclosed relationships or
services that may impact auditor objectivity and independence,
and take appropriate action to insure the independence of the
auditor.
5. Obtain from the independent auditor assurance that Section 10A of
the Private Securities Litigation Reform Act of 1995 (which deals
with the requirement that auditors report any illegal acts which
they have discovered) has not been implicated.
6. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 (such as: (i)
the methods used to account for significant unusual transactions;
(ii) the effect of significant accounting policies in
controversial or emerging areas for which there is a lack of
authoritative guidance or consensus; (iii) the process used by
management in formulating particularly sensitive accounting
estimates and the basis for the auditor's conclusions regarding
the reasonableness of those estimates; and (iv) disagreements
with management over the application of accounting principles,
the basis for management's accounting estimates, and the
disclosures in the financial statements) relating to the conduct
of the audit.
7. Review with the independent auditor any problems or difficulties
the auditor may have encountered and any management letter
provided by the auditor and the Company's response to that
letter. Such review should include:
a. any difficulties encountered in the course of the audit
work, including any restrictions on the scope of activities
or access to required information;
b. any changes required in the planned scope of the internal
audit;
c. the internal audit department responsibilities, budget and
staffing.
8. Determine that the Company's annual report includes:
a. a statement of the responsibility of management for
establishing and maintaining an adequate internal control
structure and procedures for financial reporting, including,
with respect to controls to assure that: (i) the Company's
transactions are properly authorized, (ii) the Company's
assets are safeguarded against unauthorized or improper use,
and (iii) the Company's transactions are properly reported;
and
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b. an assessment, as of the end of the Company's most recent
fiscal year, of the effectiveness of those controls. Obtain
from the independent auditor an attestation to, and report
on management's assessment of internal controls.
9. Approve the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement stating whether the committee (a) reviewed and
discussed the audited financial statements with management, (b)
discussed with the auditors the matters requiring discussion by
SAS 61, (c) received the written disclosures and letter from the
auditor required to confirm the auditors' independence and
discussed with the auditors their independence, and (d) based on
the above, recommended to the Board that the audited financial
statements be included in the Company's Annual Report on SEC Form
10-K.
10. Review with the Company's General Counsel legal matters that may
have a material impact on the financial statements, the Company's
compliance policies and any material reports or inquiries
received from regulators or governmental agencies. Determine from
questioning the General Counsel that he or she has maintained an
open door policy encouraging all outside counsel to report any
concerns about material violations of securities laws or
fiduciary duties by the Company or any of its personnel.
11. Review with independent auditor the adequacy of the Company's
management information systems and the security of such systems
for the purpose of producing fairly stated financial statements.
12. Review with the head of the Company's internal audit staff
matters relating to the ongoing internal audits activities of
that staff.
13. Meet in executive session individually with such of the following
as the Committee deems appropriate at the meeting: the Company's
independent auditors, the Company's Chief Financial Officer and a
representative of the Company's internal audit staff.
14. Meet with a representative of the Company's Disclosure Committee
to review that committee's activities since the last meeting with
the Audit Committee.
C. Mid-Year Meeting
1. Evaluate the performance of the independent auditor and appoint
or replace independent auditor, which firm is ultimately
accountable to the Audit Committee, and approve the fees to be
paid to the independent auditor.
2. Review the appointment or replacement of the senior internal
auditing executive.
3. Review the significant reports to management prepared by the
internal auditing department and management's responses.
4. Review and reassess the adequacy of this Charter annually, submit
it to the Board for approval, and cause a copy of this Charter to
be attached to the Company's annual proxy statement every three
years, in accordance with SEC Rule Item 7(e) of Schedule 14A.
5. Request educational information on accounting topics as to which
the Committee seeks a greater understanding.
6. Provide The Nasdaq Stock Market(R) ("Nasdaq") with written
confirmation as to the Audit Committee member qualifications and
related Board determinations, as well as the annual review and
re-evaluation of the Audit Committee Charter.
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7. Meet in executive session individually with such of the following
as the Committee deems appropriate at the meeting: the Company's
independent auditors, the Company's Chief Financial Officer and a
representative of the Company's internal audit staff.
D. Fall Meeting
1. Meet with management to review the Company's major financial risk
exposures and the steps management has taken to monitor and
control such exposures.
2. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and
regulations.
3. Meet with the independent auditor prior to the audit to review
the planning and staffing of the audit.
4. Meet with the chief financial officer, the senior internal
auditing executive and the independent auditor in separate
executive sessions.
5. Review with the head of the Company's internal audit staff,
matters relating to the ongoing internal audits activities of
that staff.
V. Limitation on Duties
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 are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor. Nor is it
the duty of the Audit Committee to conduct investigations or to assure
compliance with laws and regulations and the Company's Code of Conduct.
As revised by the Audit Committee March 24, 2003.
Linda McFarland Farthing, Chairperson
Michael D. Rose
James H. Winston
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