Exhibit 99.3
STEIN MART, INC.
Audit Committee Charter
Revised as of April 7, 2004
I. Purpose & Membership
The Audit Committee of the Board of Directors (the "Board") of Stein, Mart,
Inc. (the "Audit Committee") is appointed by the Board to oversee the accounting
and financial reporting processes of the Company and the audits of the Company's
financial statements. 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 National Market
("NASDAQ"). Thus, the members of the Audit Committee shall meet the following
criteria:
(A) The members must meet the Company's Director Independence Criteria as
set forth on Exhibit A hereto; and
(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:
(1) Whether one member of the Audit Committee has the following
attributes:
o An understanding of Generally Accepted Accounting Principles
and financial statements;
o The ability to assess the general application of such
principles in connection with the accounting for estimates, accruals
and reserves;
o 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 Company's financial statements, or experience actively supervising
one or more persons engaged in such activities;
o An understanding of internal controls and procedures for
financial reporting; and
o An understanding of audit committee functions; and
(2) Whether that person acquired such attributes through any one or
more of the following:
o 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;
o Experience actively supervising a principal financial
officer, principal accounting officer, controller, public accountant,
auditor or person performing similar functions;
o Experience overseeing or assessing the performance of
companies or public accountants with respect to the preparation,
auditing or evaluation of financial statements; or
o Other relevant experience.
(C) Each member of the Audit Committee shall also be "independent," as
defined in Section 301 of 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.
(D) Each member shall not have participated in the preparation of the
financial statements of the Company or any current subsidiary of the Company at
any time during the past three years.
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
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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:
(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 204 of the Sarbanes
Act, regarding critical accounting policies, alternative treatments of financial
information discussed with management, and other material written communications
between the outside auditors and management.
(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 an Accounting Complaint shall cause a report of such
Accounting Complaint (the "Complaint Report") to be made to the Committee
Chairperson 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 Accounting 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 Accounting 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
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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 Controller, the Company's
Director of Financial Reporting, the Company's Vice President of Audit, the
Company's Vice President of Operations and 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.
(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
"Year-End Meeting", (b) a "Late Spring Meeting", (c) a "Late Summer Meeting",
(d) a "Winter Meeting", and (e) 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;
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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) the independent auditors have not engaged in any prohibited
consulting services for the Company 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;
b) as part of their certification process for the Form 10-Q,
the Company's Chief Executive Office and Chief Financial Officer have
reported to and discussed with the Audit Committee and the auditors
any: (i) significant deficiencies or material weaknesses in the design
or operation of internal controls over financial reporting, and (ii)
fraud involving management or other employees who have a significant
role in the Company's internal controls over financial reporting, as
required by Section 302 of the Sarbanes Act and, beginning with the
audit for fiscal 2004, 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
c) the independent auditors have reported any material
non-compliance as a result of testing.
(B) Year-End 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.
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(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,
consistent with Independence Standards Board Standard 1, 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 ("SAS 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. 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) 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
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(9) Beginning with fiscal 2004, 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
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.
(10) 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 (as described in section (6) above),
(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 statement be included in the Company's Annual Report on
SEC Form 10-K.
(11) Verify that the Company's Annual Report on Form 10-K and annual
meeting proxy statement filed with the Securities and Exchange Commission
contain required disclosures about (i) the Committee's pre-approval policy
for audit and permissible non-audit services and (ii) the fees billed to
the Company by the independent auditor.
(12) 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.
(13) 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.
(14) Review with the head of the Company's internal audit staff
matters relating to the ongoing internal audits activities of that staff.
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(15) Review with management actual capital expenditures compared with
budget and discuss with the Disclosure Committee representative any changes
in the Company's policies as to authority to approve capital expenses.
(16) Discuss the adequacy and effectiveness of the Company's internal
controls with a representative of the Company's Disclosure Committee.
(17) Meet in executive session individually with the Company's
independent auditors, the Company's Chief Financial Officer and a
representative of the Company's internal audit staff.
(C) Late Spring Meeting:
(1) Review any management letter provided by the independent auditor
and the Company's response to that letter.
(2) Evaluate the performance of the independent auditor and appoint or
replace the independent auditor, which firm is ultimately accountable to
the Audit Committee.
(3) Request educational information on accounting topics as to which
the Committee seeks a greater understanding.
(4) Review with the head of the Company's internal audit staff matters
relating to the ongoing internal audits activities of that staff.
(5) Discuss the adequacy and effectiveness of the Company's internal
controls with a representative of the Company's Disclosure Committee
(6) Meet in executive session individually with the Company's
independent auditors, the Company's Chief Financial Officer and a
representative of the Company's internal audit staff.
(D) Late-Summer Meeting:
(1) Review the significant reports to management prepared by the
internal auditing department and management's responses.
(2) Review the appointment or replacement of the senior internal
auditing executive.
(3) Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit and approve the fees to be paid to the
independent auditor.
(4) Discuss the adequacy and effectiveness of the Company's internal
controls with a representative of the Company's Disclosure Committee.
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(5) Review with the head of the Company's internal audit staff matters
relating to the ongoing internal audits activities of that staff.
(6) Review with management actual capital expenditures compared with
budget and discuss with the Disclosure Committee representative any changes
in the Company's policies as to authority to approve capital expenses.
(7) Meet in executive session individually with the Company's
independent auditors, the Company's Chief Financial Officer and a
representative of the Company's internal audit staff.
(E) Winter 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) Review and reassess the adequacy of this Charter, 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.
(4) Provide the 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.
(5) Review with the head of the Company's internal audit staff matters
relating to the ongoing internal audits activities of that staff.
(6) Discuss the adequacy and effectiveness of the Company's internal
controls with a representative of the Company's Disclosure Committee
(7) Meet in executive session individually with the Company's
independent auditors, the Company's Chief Financial Officer and a
representative of the Company's internal audit 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.
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As revised by the Audit Committee, April 7, 2004.
/s/Linda McFarland Farthing
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Linda McFarland Farthing, Chairperson of
Audit Committee
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Exhibit A
STEIN MART, INC.
Director Independence Criteria
April 7, 2004
A member of the Company's board of Directors shall be "Independent" only if
such director meets all of the following (the "Stein Mart Director Independence
Criteria"):
The director 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. A
director shall not be considered independent, if such director:
(1) is, or at any time during the past three years was, employed by
the Company or by any parent or subsidiary of the Company;
(2) accepts or who has a Family Member (as defined below) who
accepted any payments from the Company or any parent or subsidiary of the
Company in excess of $60,000 during the current or any of the past three
fiscal years, other than the following:
(i) compensation for board or board committee service;
(ii) payments arising solely from investments in the Company's
securities;
(iii) compensation paid to a Family Member who is a
non-executive employee of the Company or a parent or
subsidiary of the Company;
(iv) benefits under a tax-qualified retirement plan, or
non-discretionary compensation; or
(v) loans permitted under Section 13(k) of the
Sarbanes-Oxley Act (the "Sarbanes Act");
(3) is a Family Member of an individual who is, or at any time during
the past three years was, employed by the Company or by any parent or
subsidiary of the Company as an executive officer;
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(4) is, or has a Family Member who is, a partner in, or a controlling
shareholder or an executive officer of, any organization to which the
Company made, or from which the Company received, payments for property or
services in the current or any of the past three fiscal years that exceed
5% of the recipient's consolidated gross revenues for that year, or
$200,000, whichever is more, other than the following:
(i) payments arising solely from investments in the
Company's securities; or
(ii) under non-discretionary charitable contribution matching
programs.
(5) is, or has a Family Member who is, employed as an executive
officer of another entity where at any time during the past three years any
of the executive officers of the Company served on the compensation
committee of such other entity; or
(6) is, or has a Family Member who is, a current partner of the
Company's outside auditor, or was a partner or employee of the Company's
outside auditor who worked on the Company's audit at any time during the
past three years.
"Family Member" is a person's spouse, parents, children and siblings,
whether by blood, marriage or adoption, and anyone residing in such
person's house).
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