APPENDIX I
AUDIT COMMITTEE CHARTER
CHARTER OF THE BOVIE MEDICAL
CORPORATION AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS
The Board of Directors ("Board") of Bovie Medical Corporation ("Company") has
established an Audit Committee ("Committee") as a permanent standing committee
with authority, responsibility and specific duties as described herein. This
Charter of the Audit Committee of the Board of Directors ("Charter") and the
composition of the Committee are intended to comply with applicable law,
including state and federal securities laws, the rules and regulations of the
Securities and Exchange Commission ("SEC") and the American Stock Exchange
("ASE"), and the Company's Bylaws.
I. Purpose and Scope
The purpose of the Committee is to assist the Board to fulfill its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company and to perform such
other duties as may be required of it by the Board. The committee's duties and
responsibilities include, without limitation, oversight of: (i) the accounting
and financial reporting processes and systems of internal accounting and
financial controls of the Company; (ii) the performance of the internal audits
and integrity of the financial statements of the Company; (iii) the annual
independent audit of the Company's financial statements, the engagement of the
independent auditor and the annual evaluation of the independent auditor's
function, qualifications, services, performance and independence; (iv) the
performance of the Company's internal and independent audit functions; (v) the
compliance by the Company with legal and regulatory requirements related to this
Charter, including the Company's disclosure controls and procedures; and (vi)
the evaluation of the Company's risk issues.
II. Audit Committee Charter, Membership and Organization
A. Charter. This Charter shall be reviewed and reassessed by the Committee at
least annually. Any proposed changes shall be submitted to the Board for
its approval.
B. Member. The Committee shall consist of no fewer than two (2) members of the
Company's Board based on the recommendation of the Nominating and Corporate
Governance Committee. The Committee shall be compromised of Directors who
meet the independence, experience and expertise requirements of the SEC,
ASE and other applicable law. The Nominating and Corporate Governance
Committee will assess and determine the qualifications of the Committee
members.
C. Term of Members and Selection of Chair. The members of the Committee shall
be appointed annually by the Board. Committee members may not
simultaneously serve on the audit committee of more than three public
companies without the consent of the Board obtained in each case.
D. Meetings. In order to discharge its responsibilities, the Committee shall
each year establish a schedule of meetings; additional meetings may be
scheduled but the Committee must meet not less frequently than quarterly.
In planning the annual schedule of meetings, the Committee shall ensure
that sufficient opportunities exist for its members to meet separately with
the independent auditors and/or the head of the Company's internal audit
function without management present; to meet separately with management
without the independent auditors and/or head of the Company's internal
auditors present; to meet separately with management without the
independent auditors and/or head of the Company's internal auditors
present; and to meet in private with only the Committee members present.
Such meetings may be held in person or telephonically and may be held at
such times and places as the Committee determines. The Committee is to
maintain free and open communication with the independent auditor, the
internal auditors and management of the Company. In discharging this
oversight role, the Committee shall endeavor to investigate any matter
brought to its attention, and shall have full access to all books, records,
facilities and personnel of the Company and the power to retain outside
counsel, accountants or other experts. The Committee may form and delegate
authority to subcommittees when appropriate.
E. Quorum. A quorum at any meeting of the Committee shall consist of a
majority of the members. All determinations of the Committee shall be by a
majority of the members present at a meeting duly called or held, except as
may be otherwise specifically provided for in this Charter. In the event
that there are only two members present, and such presence constitutes a
quorum, all determinations of the Committee, shall be unanimous. Any
decision or determination of the Committee reduced to writing and consented
to (including, but not limited to, by means of electronic transmission) by
all of the members of the Committee shall be fully as effective as if it
had been made at a meeting duly called and held.
F. Agenda, Minutes and Reports. An agenda, together with materials relating to
the subject matter of each meeting, shall be sent to members of the
Committee prior to each meeting. Minutes for all meetings of the Committee
shall be prepared to document the Committee's discharge of its
responsibilities. The minutes shall be circulated in draft form to all
Committee members to ensure an accurate final record, and shall be approved
at a subsequent meeting of the Committee. In addition, the Committee shall
make regular reports to the Board, including therein any issues that arise
with respect to the quality or integrity of the Company's financial
statements, the Company's compliance with legal or regulatory requirements,
the performance of the Company's independent auditors, or the performance
of the Company's internal audit function. The Committee shall make such
other periodic reports to the Board as seem useful to it from time to time,
or as may be required of it by the Board.
G. Performance and Evaluation. The Committee shall evaluate its performance on
an annual basis based on criteria established by the Nominating and
Corporate Governance Committee.
III. Audit Committee Compensation
The compensation of the Committee members shall be as determined by the
Compensation Committee and approved by the Board. Fees may be paid in cash,
stock, options, or other forms ordinarily available to members of the Board.
Committee members may also receive all regular benefits accorded to members of
the Board generally. Members of the Committee may receive no other compensation
from the Company other than such director's fees and benefits.
IV. Audit Committee Authority and Responsibilities
A. Authority Over Independent Auditor. The Company's independent auditor is
solely accountable to the Committee, as representatives of the
stockholders. The Committee (subject to any action that may be taken by the
Board) shall have the ultimate authority and responsibility to select (or
nominate for stockholder ratification), evaluate and, where appropriate,
replace the independent auditor; to approve the compensation of the
independent auditor; and to oversee the performance of the independent
auditor's duties. The Committee may obtain input from management, as
necessary. The independent auditors shall report directly to the Committee.
B. Specific Duties and Responsibilities. The Committee also shall have the
following specific duties and responsibilities:
1. Financial Statement and Disclosure Matters
o Review of the Company's Annual Report on Form 10-K
o Review of the Company's Quarterly Reports on Form 10-Q
o Review of other public releases of financial information, including
earnings release announcements
o Review process for CEO and CFO certifications mandated by the SEC
o Review use of pro-forma and other non-GAAP financial information and
off-balance sheet structures
o Consult with independent auditor regarding significant reporting
issues, judgments and risk exposures, and the Company's internal
controls
o Discuss with independent auditor the matters required to be discussed
by Statement on Auditing Standards No. 61, as amended
o Prepare the Audit Committee report required to be included as part of
the Company's annual proxy statement
o Periodically review with management the Company's then-current
disclosure controls and procedures
2. Oversight of the Company's Relationship with the Independent Auditor
a. Engagement of Independent Auditor. The Committee shall, prior to
commencement of the annual audit, review with management, the internal
auditors, and the independent auditors the proposed scope of the audit
plan and fees, including the areas of business to be examined, the
adequacy of the personnel to be assigned to the audit and other
factors that may affect the time lines of such audit, the procedures
to be followed, special areas to be investigated, as well as the
adequacy of the program for integration of the independent and
internal audit efforts. The Committee shall give due consideration to
whether the independent auditor's performance of non-audit services is
legally permissible and compatible with the auditor's independence and
review and pre-approve all audit and permitted non-audit services. The
Committee shall also give final approval to any fees paid to the
independent auditor including fees for any non-audit services.
b. Review of Reports of Independent Auditor. The Committee shall receive
and review all reports prepared by the independent auditor and ensure
that the independent auditor has full access to the Committee and the
Board during its performance of the annual audit to report on any and
all appropriate matters.
c. Determination of Performance of Independent Auditor. The Committee
shall, on an annual basis, evaluate the qualifications, performance
and independence of the independent auditor, including review of the
lead partner, considering whether the auditor's quality controls are
adequate and the provision of permitted non-audit services is
compatible with maintaining the auditor's independence and taking into
account the opinions of management and the internal auditor. In
connection with this assessment, the Committee shall obtain and review
a report by the independent auditor describing all relationships
between the independent auditor and the Company, including the
disclosures required by the Independence Standard Boards Standard No.
1. The Committee also shall review a report from the independent
auditor at least annually regarding any material issues raised by the
most recent quality-control review, or peer review, of the firm, or by
any other inquiry or investigation regarding the firm within the
preceding five years. The Committee shall present its conclusions to
the Board and, if so determined by the Committee, recommend that the
Board take additional action to satisfy itself of the qualifications,
performance and independence of the independent auditor.
d. Policies for Employment of Former Audit Staff. The Committee shall set
clear hiring policies for the Company's hiring of employees or former
employees of the independent auditor.
3. Oversight of the Company's Internal Audit Function
a. Succession Planning. The Committee shall review financial and
accounting personnel succession planning within the Company, including
the appointment and replacement of the senior internal auditing
executive.
b. Review of Internal Audit Function. The Committee shall discuss with
the independent auditor the internal audit department
responsibilities, budget and staffing and any recommended changes in
the planned scope of the internal audit. The Committee also shall
review the significant reports to management prepared by the internal
auditing department and management's responses.
c. Internal Review of Company's Disclosure Controls. The Committee shall
receive reports from the CEO and CFO on all significant deficiencies
in the design or operation of internal controls which could adversely
affect the Company's ability to record, process, summarize and report
financial data and any fraud, whether or not material, that involved
management or other employees who have a significant role in the
Company's internal controls. The Committee shall review such
deficiency reports with the CEO, the CFO and the General Counsel and
shall discuss the quality and adequacy of the Company's internal
controls periodically as required.
4. Compliance Oversight Responsibilities.
a. Review Adequacy of the Company's Code of Conduct. The Committee shall
review the Company's Code of Conduct at least annually. The Committee
shall recommend to management any necessary changes to ensure that the
codes are adequate in meeting the Committee's requirements and all
applicable legal and regulatory requirements including the
requirements of the ASE.
b. Obtain and Review Annual Compliance Reports. The Committee shall
obtain annual reports from management and the Company's senior
internal auditing executive confirming that the Company and its
subsidiary/foreign affiliated entities are in conformity with
applicable legal requirements and the Company's Code of Conduct and
any applicable policies of the Company's Disclosure Committee. The
Committee shall discuss any concerns with management.
c. Establishment of "Whistle Blowing" Procedures. The Committee shall
establish and review whistleblower procedures with respect to the
protection of employees who act lawfully to: (i) provide information,
cause information to be provided, or otherwise assist in an
investigation; or (ii) file, cause to be filed, testify, participate
in or otherwise assist in a proceeding filed as a result of a
violation of securities laws relating to fraud against shareholders.
The Committee shall establish procedures for: (i) the receipt,
retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing
matters; and (ii) the confidential, anonymous submissions by Company
employees of concerns regarding questionable accounting or auditing
matters.
d. Discussion of Legal and Compliance Matters. The Committee shall
discuss with the Company's General Counsel legal matters that may have
a material impact on the financial statements or the Company's
compliance policies. The Committee shall review with the General
Counsel the programs and policies of the Company with respect to
compliance with applicable laws, regulations and any covenants and
restrictions in any third party agreements and monitor the results of
these compliance efforts.
e. Review of Certain Transactions with Directors and Related Parties. The
Committee shall review, no less frequently than annually, a summary of
the Company's transactions with Directors and officers of the Company
and with firms that employ Directors, as well as any other material
related party/insider transactions.
5. Limitation of Audit Committee's Role
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits, prepare
the Company's financial statements, or to determine that the Company's financial
statements and disclosures are complete and accurate and are in accordance with
generally accepted accounting principles and applicable law. These duties are
the responsibilities of the Company's management and the independent auditor.