Exhibit 3.2
Amended and Restated
Charter of the Audit Committee
of the
Board of Directors
of
SPAR Group, Inc.
Dated (as of) May 18, 2004
I. ESTABLISHMENT AND PURPOSE
1. The Board of Directors (the "Board") of SPAR Group, Inc. ("SGRP"), has
established a standing committee of the members of the Board (the "Audit
Committee") to assist the Board in fulfilling its oversight responsibilities
respecting the accounting, auditing and financial reporting and disclosure
principles, policies, practices and controls of SGRP and its direct and indirect
subsidiaries (together with SGRP, collectively, the "Company"), the integrity of
the Company's financial statements, the audits of the financial statements of
the Company and the Company's compliance with legal and regulatory requirements
and disclosure. In furtherance thereof, the Board has adopted this Amended and
Restated Charter of the Audit Committee of the Board of Directors of SPAR Group,
Inc., Dated (as of) May 18, 2004 (as the same may be supplemented, modified,
amended, restated or replaced from time to time in the manner provided herein,
this "Charter"), to establish and govern (among other things) the purposes,
membership, meetings, responsibilities, duties and powers of the Audit
Committee. The Audit Committee and its meetings and activities also shall be
governed by and conducted in accordance with the provisions applicable to
committees generally as contained in the By-Laws (as defined in item V.2 below).
2. The Audit Committee's primary duties and responsibilities are to:
(a) Serve as an independent and objective party to monitor the Company's
financial reporting process and internal accounting and disclosure
control system and their adequacy and effectiveness;
(b) Be directly responsible for the appointment, compensation, retention
and oversight of the work of any registered public accounting firm
engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company
(hereinafter referred to as the "Company's Independent Accountants");
(c) Resolve disagreements between the Company's senior management and the
Company's Independent Accountants regarding financial reporting;
(d) Communicate directly with the Company's Independent Accountants;
(e) Review and appraise the audit efforts of the Company's Independent
Accountants;
(f) Provide an open avenue of communication among the Company's
Independent Accountants, the Company's financial and senior management
and the Board;
(g) Review and approve, in advance, all non-audit services to be performed
by the Company's Independent Accountants;
(h) Review the performance, qualifications and independence of the
Company's Independent Accountants;
(i) Review the financial reports and other financial information provided
by SGRP to any governmental body or the public;
(j) Encourage continuous improvement of, and foster adherence to, the
Company's accounting, disclosure and similar control policies,
procedures and practices at all levels;
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(k) Furnish the committee report required by the rules of the U. S.
Securities and Exchange Commission (the "SEC") to be included in
SGRP's annual proxy statement;
(l) Review and approve the overall fairness of all material related-party
transactions; and
(m) Perform such other functions as may be required from time to time by
the Nasdaq Stock Market, Inc. (the "Nasdaq"), the SEC or other
applicable law.
3. The Audit Committee will fulfill these responsibilities by carrying out
the activities enumerated in Section IV of this Charter and by performing such
other activities consistent with this Charter as may from time to time be
necessary or appropriate.
II. COMPOSITION OF THE AUDIT COMMITTEE
1. The Audit Committee shall consist of three or more members of the Board
(as such number may be fixed from time to time by the Board).
2. The members of the Audit Committee shall be independent directors and
free from any relationship that, in the opinion of the Board, would interfere
with the exercise of his or her independent judgment as a member of the Audit
Committee. For purposes of this Charter, the minimum standards for an
independent director shall be as provided in the applicable rules of the
Nasdaq's National Market System (as the same may be supplemented, modified,
amended, restated or replaced from time to time, the "Nasdaq Rules"), and the
provisions of the Securities Exchange Act of 1934, as amended (as the same may
be supplemented, modified, amended, restated or replaced from time to time, the
"Exchange Act"), and the rules and regulations promulgated thereunder (as the
same may be supplemented, modified, amended, restated or replaced from time to
time, the "Exchange Act Rules"), in each case as then in effect respecting Audit
Committees.
3. All members of the Audit Committee shall be "financially literate" and
otherwise qualified to serve as members under the Nasdaq Rules, as determined by
the Board. The Nasdaq Rules currently require (among other things) that all
members of the Audit Committee must be able to read and understand fundamental
financial statements, including (without limitation) a balance sheet, income
statement and cash flow statement.
4. Additionally, at least one member of the Audit Committee shall be an
"audit committee financial expert" under the Exchange Act Rules, as determined
by the Board. The Exchange Act Rules currently require (among other things) that
such member have past employment experience in finance or accounting, requisite
professional certification in accounting, or other comparable experience or
background which results in such member's financial sophistication, including
(without limitation) being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities or any other comparable experience or background resulting in
financial sophistication.
5. The candidates for membership in the Audit Committee shall be nominated
by the Governance Committee prior to the consideration of the election of its
members at the annual organizational meeting of the Board (the "Organizational
Meeting"), generally held in conjunction with SGRP's annual stockholders
meeting. If no such nominations have been received by the time such matter is
considered at the Organizational Meeting, nominations to the Audit Committee may
be made by any member of the Board.
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6. The members of the Audit Committee shall be elected by the Board at the
annual organizational meeting of the Board (generally held in conjunction with
the Organizational Meeting) or in any other meeting duly called or action duly
taken as provided in the By-Laws.
7. The Board, in any meeting duly called or other action duly taken as
provided in the By-Laws, at any time may (a) designate a chairman of the Audit
Committee (the "Chairman") from among the members of the Audit Committee and (b)
remove any such member as Chairman, either with or without cause. If the Board
has not so acted, the members of the Audit Committee may designate the Chairman
by majority vote of the full Audit Committee membership. Any Chairman who ceases
to be a member of the Board or Audit Committee automatically shall
simultaneously cease to be Chairman of the Audit Committee.
III. MEETINGS
1. The Audit Committee may provide for the holding of regular meetings,
with or without notice, and may fix the time and place at which such meetings
shall be held, with all notices given or waived and all meetings held in
accordance with the By-Laws. Each scheduled Board meeting shall be deemed to
include a corresponding scheduled Audit Committee meeting unless expressly
stated otherwise in scheduling such Board meeting.
2. The notice of a meeting may provide, or the Audit Committee may request
(in advance or at the meeting), that members of the Company's senior management
or others attend a meeting of the Audit Committee and provide pertinent
information as necessary and available.
3. As part of its responsibility to foster open communication, the Audit
Committee shall meet at least semi-annually with the Company's senior management
and the Company's Independent Accountants in separate executive sessions to
discuss any matters that the Audit Committee or any of these groups believe
should be discussed privately. In addition, the Audit Committee shall meet with
the Company's Independent Accountants and the Company's senior management to
review and discuss the Company's quarterly financial statements consistent with
Section IV below.
4. The Audit Committee shall maintain minutes or other records of its
meetings and activities, which shall be maintained with the minutes of the
Board, and shall report the same to the Board as and when requested. Written
consents by the Audit Committee shall be filed with the minutes of the Board.
IV. RESPONSIBILITIES AND DUTIES
The Audit Committee's responsibilities, duties and powers shall consist of
the following:
Documents and Reports
1. On an annual basis, and more often as it determines circumstances
reasonably warrant, the Audit Committee shall review and discuss this Charter
and recommend to the Board any changes in or additions to this Charter that it
may deem necessary or desirable.
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2. The Audit Committee shall, prior to its filing, mailing or release (as
the case may be), in consultation with the Company's Independent Accountants
and/or the Company's senior management, as and to the extent the Audit Committee
deems appropriate:
(a) review and discuss each report to be filed by SGRP with the SEC on
Forms 10-K and 10-Q and each related quarterly or annual financial
statement, as applicable, in each case including (without limitation)
the review and discussion of:
(i) the proposed presentations of earnings, underlying material
reserves and accruals, highly judgmental areas, audit adjustments
(whether or not recorded), and suitability of the significant
accounting policies and principles applied;
(ii) the proposed disclosures under "Management's Discussion and
Analysis of Financial Condition and Results of Operations",
including the development, selection and disclosure of accounting
policies that may be regarded as critical;
(iii)any certification, report, opinion or review summary rendered by
the Company's Independent Accountants or the Company's
management, including (without limitation) those setting forth
significant financial reporting issues and judgments made in
connection with the preparation of the financial statements or
the effects of using alternative GAAP methods on the Company's
financial statements; and
(iv) any major issue regarding the Company's accounting principles and
financial statement presentations within its knowledge, including
any significant changes in the Company's selection or application
of accounting principles and financial statement presentation;
(b) review and discuss SGRP's Annual Report to its shareholders and its
Proxy Statement;
(c) furnish the Audit Committee's annual report to be included in the
Proxy Statement as required by the Exchange Act Rules;
(d) review and discuss earnings press releases, including the type and
presentation of information to be included in earnings press releases
(and in particular the use of "pro forma" or "adjusted" non-GAAP
information);
(e) review and discuss financial information and earnings guidance
provided to analysts and rating agencies; and
(f) review and discuss such other reports or documents within its
authority and knowledge for submission to the SEC, Nasdaq or the
public as:
(i) may from time to time be required under the Exchange Act Rules,
the Nasdaq Rules, the DGCL (as defined below) or other applicable
law; or
(ii) the Audit Committee may from time to time deem appropriate,
provided that the Audit Committee or Chairman shall have given
the Chief Executive Officer and Chief Financial Officer
reasonable prior written notice of its desire to make such
review;
provided that in the case of paragraphs (d), (e) and (f) the Chairman may
represent and act on behalf of the entire Audit Committee for purposes of this
review, with or without consultation of the other members, and shall present the
results thereof at the next meeting of the Audit Committee.
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Company's Independent Accountants
3. On an annual basis, the Audit Committee shall appoint the Company's
Independent Accountants to be engaged by the Company for the forthcoming fiscal
year, and periodically (as often as it determines that circumstances reasonably
warrant) the Audit Committee shall review and determine the fees and other
compensation and terms of engagement of the Company's Independent Accountants.
4. On an annual basis, and more often as it determines circumstances
reasonably warrant, the Audit Committee shall confirm and assure the
qualifications and independence of the Company's Independent Accountants under
the Exchange Act Rules, and (without limiting the foregoing) the Audit Committee
shall:
(a) review and discuss with the Company's Independent Accountants all of
such firm's significant relationships that would be reasonably likely
to adversely effect its independence or objectivity, including
(without limitation) whether such firm's performance of permissible
non-audit services is compatible with the auditor's independence, any
relationship or service between such firm and the Company (other than
the audit and approved non-audit services), and any other relationship
or service reported by such firm to the Board that would be reasonably
likely to adversely affect the independence or objectivity of such
firm;
(b) receive, review and discuss the written statements from the Company's
Independent Accountants (i) required by Independence Standards Board
Standard No. 1, as amended, modified or supplemented from time to
time, and (ii) respecting its internal quality-control procedures, any
material issues raised by (A) the most recent internal quality-control
review, or peer review, of such firm, or (B) any inquiry or
investigation by governmental or professional authorities within the
last five years, in either case respecting one or more independent
audits carried out by such firm, and any steps taken to deal with any
such issues;
(c) review and discuss the performance of the Company's Independent
Accountants, including (without limitation) (i) the performance and
qualifications of such firm's lead audit partner and senior audit
manager assigned to the Company's audit, (ii) the rotation of such
firm's audit partners and others as may be required by GAAP or
applicable law, and present its conclusions to the Board conclusions
with respect thereto;
(d) report to the Board its conclusions respecting such reviews and
discussions and recommend appropriate action(s) to be taken to
confirm, assure or enforce the independence and other qualifications
and performance of the Company's Independent Accountants, and
(e) direct, recommend or approve any proposed discharge of the Company's
Independent Accountants when circumstances reasonably warrant.
5. The Audit Committee periodically (as often as it determines that
circumstances reasonably warrant) shall:
(a) consult with the Company's Independent Accountants out of the presence
of the Company's management about internal accounting, reporting and
disclosure controls, the completeness and accuracy of the Company's
financial statements and other matters of concern to the Audit
Committee;
(b) review and discuss the nature and scope of the annual audit proposal
by the Company's independent accountant and its views and
recommendations (if any);
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(c) receive and discuss any reports or communications submitted to the
Audit Committee by the Company's Independent Accountants as required
or permitted by SAS 61;
(d) approve, in advance, either:
(i) each audit or permitted non-audit service to be performed by the
Company's Independent Accountants, provided that between meetings
the Chairman may represent and act on behalf of the entire Audit
Committee in approving such services, with or without
consultation of the other members, and shall present the results
thereof at the next meeting of the Audit Committee, or
(ii) policies and procedures respecting the Company's engagement of
the Company's Independent Accountants for particular types of
audit or permitted non-audit services to be performed within
specified periods of time, which also may included specified
expense limits; provided that (A) the Audit Committee is given
notice of each engagement for such service by the Company, and
(B) such policies and procedures do not include delegation of the
Audit Committee's responsibilities under the Exchange Act and
Exchange Act Rules to the Company's management;
(e) recommend to the Board the advisability of having the Company's
Independent Accountants or other independent public accountants make
specified studies and reports as to auditing matters, accounting
procedures, tax or other matters, which in the case of the Company's
Independent Accountants shall be only to the extent permitted under
the Exchange Act Rules; and
(f) receive direct reports from the Company's Independent Accountants.
Financial Reporting Principles, Processes and Improvements
6. The Audit Committee periodically (as often as it determines that
circumstances reasonably warrant) shall, in consultation with the Company's
Independent Accountants and/or the Company's senior management, as and to the
extent the Audit Committee deems appropriate:
(a) review the integrity of the financial and regulatory reporting
practices and processes of the Company and its subsidiaries, both
internal and external, including (without limitation) the adequacy of
the Company's internal accounting, auditing, reporting and disclosure
controls, any significant deficiencies in such controls within its
knowledge (and any special audit steps that have been or should be
adopted in light of material control deficiencies), and any material
changes in or additions to such controls, and recommend to the Board
and management any material changes in or additions to them that it
deems necessary or desirable;
(b) review and consider the quality and appropriateness of the Company's
accounting principles, policies and practices as applied in its
financial reporting, including (without limitation) all critical
accounting principles, policies and practices, all alternative
treatments of financial information within generally accepted
accounting principles ("GAAP") that have been discussed with
management officials of the Company, the ramifications of the use of
such alternative disclosures and treatments, and the treatment
preferred by the Company's Independent Accountants;
(c) review and discuss the likely effect of changes in or additions to
applicable law, regulation or GAAP or their interpretation (including
those pending and proposed) within its knowledge likely to be material
to any of the matters within its authority;
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(d) review and discuss any material financial or non-financial arrangement
of the Company within its knowledge that does not appear on the
financial statements of the Company;
(e) review and, if not required by GAAP, approve any proposed material
change in or addition to the Company's accounting, auditing, reporting
and disclosure principles, policies, practices or controls as proposed
to the Audit Committee by the Company's Independent Accountants or the
Company's senior management;
(f) review the implementation and effect of all material changes in and
additions to the accounting, auditing, reporting and disclosure
principles, practices or controls within its knowledge, whether as
previously approved or recommended by the Audit Committee, as required
by GAAP, Nasdaq Rules, Exchange Act Rules or applicable law or
otherwise; and
(g) review the Company's policies with respect to risk assessment and risk
management.
7. The Audit Committee shall establish regular and separate systems of
disclosure to the Audit Committee by each of the Company's senior management and
the Company's Independent Accountants regarding any significant judgments made
by the Company's senior management in their preparation of the financial
statements and the view of each as to appropriateness of such judgments.
8. The Audit Committee shall review (following its completion) and discuss
separately with each of the Company's senior management and the Company's
Independent Accountants the results of the Company's annual audit and any
significant difficulties encountered during the course of the audit, including
(without limitation) the overall scope of the audit (if changed from that
previously presented to the Audit Committee), any restrictions on the scope of
work of or access to required information by the Company's Independent
Accountants, the results of the annual audit examination by the Company's
Independent Accountants and any accompanying management letters, any audit
problems or difficulties encountered by the Company's Independent Accountants in
the course of their audit work and management's response to such audit problems
or difficulties, any reports by the Company's Independent Accountants with
respect to interim periods, and any schedule of unadjusted differences or other
material written communications between the Company's Independent Accountants
and the Company's management.
9. The Audit Committee shall review any significant disagreement or dispute
among the Company's senior management and the Company's Independent Accountants
in connection with the preparation of any of the Company's financial statements.
10. The Audit Committee shall review and discuss any disclosures made to
the Audit Committee by the Company's Chief Executive Officer and Chief Financial
Officer during their certification process for the Form 10-K and 10-Q about any
significant deficiencies in the design or operation of internal controls or
material weaknesses therein and any fraud involving management or other
employees who have a significant role in the Company's internal controls.
11. The Audit Committee shall review and discuss with the Company's counsel
any legal matter that could have a significant impact on the Company's financial
statements.
Complaints
12. The Audit Committee shall establish procedures for the receipt, retention
and treatment of complaints received by the Company regarding accounting,
internal accounting controls, or auditing matters.
13. The Audit Committee shall establish procedures for the receipt, retention
and treatment of confidential, anonymous submission by employees of the Company
and its subsidiaries of concerns regarding questionable accounting or auditing
matters.
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Related Party Transactions
14. The Audit Committee shall review and approve (in accordance with the
Nasdaq Rules, the Exchange Act Rules, the DGCL and other applicable law) the
overall fairness of any agreement, arrangement or non-recurring transaction with
the Company in which any of the following persons has or will have a direct or
indirect material interest that would require disclosure under Item 404 of SEC
Regulation S-K:
(a) Any director or executive officer of the Company;
(b) Any nominee for election as a director;
(c) Any security holder who is known to the Company to own of record or
beneficially more than five percent of any class of the Company's
voting securities; and
(d) Any family member of any of the foregoing persons under the Nasdaq
Rules (currently, (i) such person's spouse, (ii) the parents,
brothers, sisters and children of such person, whether by blood,
marriage or adoption, and (iii) anyone else residing in such person's
home).
Any such person may have such an indirect interest through any corporation,
partnership, limited liability company, trust or other entity owned or
controlled by them, as provided in the Exchange Act Rules.
The Audit Committee shall make such review and fairness approval (A) prior to
the commencement of any such material agreement, arrangement or non-recurring
transaction and (B) periodically thereafter as often as the Audit Committee
determines that circumstances reasonably warrant.
Legal Compliance and Updates
15. The Audit Committee periodically (as often as it determines that
circumstances reasonably warrant) shall, in consultation with the Company's
counsel, alone and/or with the Company's senior management, as and to the extent
the Audit Committee deems appropriate:
(a) review and discuss any regulatory, compliance, legal or other issue
respecting any financial statement, reporting, audit or related matter
within its knowledge that could have a significant impact on the
Company or its financial statements, SEC filings or other public
disclosures, and recommend to the Board any corrective or other action
that it may deem necessary or desirable;
(b) review and discuss the potential effect on financial statement,
reporting, audit or related issue of any applicable material change or
initiative in any Nasdaq Rule, any Exchange Act Rule, the DGCL or
other applicable law or the interpretation thereof within its
knowledge, and recommend to the Board any changes in or additions to
the Company's governing documents, policies, principles, practices or
processes respecting financial statement, reporting, audit or related
matters that it deems necessary or desirable to deal with such effect;
(c) review the implementation of changes in and additions to the Company's
governing documents, policies, principles, practices or processes
respecting financial statement, reporting, audit or related matters
within its knowledge, whether as previously approved or recommended by
the Audit Committee or as previously required by the Nasdaq Rules, the
Exchange Act Rules, the DGCL or other applicable law;
(d) recommend to the Board the advisability of having the Company's
counsel, auditors or other experts or professionals make specified
studies and reports as to financial statement, reporting, audit or
related matters; and
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(e) receive direct reports from the Company's counsel.
16. The Audit Committee shall establish regular and separate systems of
communication with each of the Company's senior management and the Company's
counsel, review and discuss with them any matter within its authority and
knowledge that is reasonably likely to have a significant impact on the Company,
and recommend to the Board any corrective or other action that it may deem
necessary or desirable.
Other Responsibilities, Duties and Powers
17. The Audit Committee shall report its actions and any recommendations to
the Board after each Audit Committee meeting.
18. The Audit Committee shall have the responsibility, duty and power, at
any time and from time to time, to the same extent and with the same effect as
if the entire Board were acting:
(a) to conduct or authorize investigations into matters within the Audit
Committee's scope of responsibilities under this Charter and
applicable law;
(b) to retain independent counsel, accountants or others to assist it in
the conduct of an investigation or such other action as the Audit
Committee may otherwise determine as necessary to carry out its duties
under this Charter and applicable law, the fees and expenses of all of
which will be paid by the Company; and
(c) to perform any other activities related or incidental to the duties
and rights conferred on the Audit Committee (by this Charter or
otherwise) as the Audit Committee or the Board from time to time may
deem necessary or reasonably appropriate.
19. In addition to the responsibilities, duties and powers of the Audit
Committee set forth in this Charter, the Audit Committee also shall have such
other responsibilities, duties and powers (if any) as may from time to time be
expressly granted to it under the Certificate, the By-Laws, any Board resolution
with continuing effect, any Nasdaq Rule, any Exchange Act Rule, the DGCL or any
other applicable law.
V. MISCELLANEOUS
1. Notwithstanding anything in this Charter to the contrary: (a) the Audit
Committee is an oversight body, and it is not the role or duty of the Audit
Committee to (i) implement, administer or apply the accounting, auditing or
financial reporting or disclosure policies, practices or controls of the
Company, (ii) plan or conduct any audit of the Company or any audit of the work
of the Company's Independent Accountants or the Company's management, (iii)
prepare or certify any of the Company's financial statements or any portion
thereof, (iv) determine or assure that the Company's financial statements and
disclosures are complete or accurate or are in accordance with GAAP or any
applicable rule or regulation, or (v) determine or assure the Company's
compliance with any legal or regulatory requirement, all of which are and
continue to be the responsibilities of the Company's management and/or the
Company's Independent Accountants, as the case may be; (b) the members of the
Audit Committee are not, and shall not under any circumstance be deemed or
construed to be (by virtue of their Audit Committee membership, this Charter or
any action taken as contemplated hereunder or otherwise), (i) officers,
employees or auditors of SGRP or any of its subsidiaries and (ii) directors of
any of SGRP's subsidiaries; (c) the Audit Committee may rely on the
representations of and other information provided by the Company's Independent
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Accountants, the Company's officers, employees and counsel and experts or other
professionals retained by the Company or the Audit Committee; and (d) the legal
liability (actual, potential or otherwise) of the Audit Committee members shall
not be (and shall not be deemed or construed to be) any greater than that of any
outside director of SGRP who is not a member of the Audit Committee.
2. For the purposes of this Charter:
(a) "Certificate" shall mean the Certificate of Incorporation of SGRP
filed on November 29, 1995, with the Secretary of State of the State
of Delaware, as the same may have been and from time to time hereafter
may be duly amended or restated in the manner provided under
applicable law.
(b) "By-Laws" shall mean the Amended and Restated By-Laws of SGRP dated as
of May 18, 2004, as the same may have been and from time to time
hereafter may be supplemented, amended or restated in the manner
provided therein.
(c) "DGCL" shall mean the General Corporation Law of the State of
Delaware, as the same may have been and from time to time hereafter
may be amended or restated, and any succeeding statute.
3. This Charter constitutes supplemental by-laws of SGRP and shall be
governed and supplemented by and construed and interpreted in accordance with
the By-Laws. Without in any way limiting the preceding sentence, the provisions
of Article X of the By-Laws (and the applicable definitions appearing elsewhere)
are hereby incorporated into this Charter by reference as if fully set forth
herein and shall be construed as if this Charter were the "By-Laws" referred to
in those incorporated provisions. In the event of any conflict between any
specific provision of this Charter and the By-Laws, the specific provision of
this Charter shall control and be given effect.
4. The terms and provisions of this Charter are each subject to the
relevant terms and provisions of the Certificate and applicable law. In the
event that any term or provision of this Charter conflicts or is inconsistent
with any term or provision of the Certificate or applicable law, the term or
provision of the Certificate or applicable law shall control and be given
effect.
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