Committee Charters

Audit Committee Charter

Zyla Life Sciences

Audit Committee Charter

 

I.       Organization

The Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Zyla Life Sciences (the “Company”) is established pursuant to the Bylaws of the Company.

II.     Purpose

The Committee’s primary duties and responsibilities are to:

  1. Oversee the quality and integrity of the Company’s accounting and financial reporting processes and the audits of the financial statements reported to the public.
  2. Oversee the Company’s systems of internal controls and compliance with applicable laws and regulations.
  3. Oversee the Company’s legal, regulatory and ethical programs established by management and the Board, including the Code of Conduct.
  4. Appoint, and monitor the independence, qualifications and performance of, the Company’s independent auditors and provide an avenue of communication between the independent auditors, management and the Board.

It shall be the responsibility of management to prepare the Company’s financial statements and periodic reports to be filed with the Securities and Exchange Commission (the “SEC”), and the responsibility of the independent auditors to audit those financial statements.  Notwithstanding the Committee’s purposes set forth above, the Committee is not responsible for certifying the Company’s financial statements or guaranteeing the auditor’s report.  The fundamental responsibility for the Company’s financial statements and disclosures rests with management.

III.   Composition

  1. Appointment and Chairperson. Committee members shall be appointed by the Board.  The Board will also appoint the Chairperson of the Committee.
  2. Term.  Each of the directors serving on the Committee shall serve for such term or terms as the Board may determine or until his or her successor has been duly elected and qualified or his or her death, resignation or removal, if earlier. 
  3. Composition and Qualifications

1.   The Committee shall be composed of three or more directors.

2.   Except as otherwise permitted by the rules of the Company’s principal stock exchange, each Committee member (a) must be independent as defined in such stock exchange’s rules, (b) must not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company or any subsidiary thereof (other than in his or her capacity as a member of the Board, the Committee or any other Board committee), (c) must not be an affiliated person of the Company or any of its subsidiaries and (d) must not have participated in the preparation of the Company’s financial statements at any time during the past three years.

3.   All members of the Committee shall, at the time of their appointment, have a basic understanding of finance and accounting and be able to read and understand fundamental financial statements, and at least one member of the Committee shall have accounting or related financial management expertise and be considered a “financial expert” as defined under Item 407 of Regulation S-K promulgated under the Securities Act of 1933.  A person who satisfies this definition of “audit committee financial expert” will also be presumed to have financial sophistication.  Members of the Committee are encouraged, at the expense of the Company, to enhance their familiarity with finance and accounting by participating in continuing educational programs.

IV.    Responsibilities and Duties.  The Committee shall have the following specific duties and responsibilities:

  1. Financial Statements and Related Disclosures

1.     Annual Audit Results.  The Committee will review the Company’s annual audited financial statements and related footnotes and report to the Board as to whether it recommends that the audited financial statements should be included in the Company’s Annual Report on Form 10-K filed with the SEC. 

2.     Quarterly Results.  The Committee will review and discuss with management and with the independent auditors, as it deems appropriate, the Company’s quarterly financial statements and the results of the independent auditors’ review of the Company’s quarterly financial statements, prior to public disclosure of quarterly financial information, if practicable, or filing with the SEC of the Company’s Quarterly Report on Form 10-Q.

3.     Management’s Discussion and Analysis.  The Committee will review and discuss with management and the independent auditors, as it deems appropriate, the Company’s disclosures contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in its periodic reports to be filed with the SEC.

4.     Press Releases and Other Disclosures; Earnings and Guidance Policies.  The Committee will review and discuss with management and the independent auditors, as it deems appropriate, earnings press releases, and may review press releases containing information relating to material developments, as well as the substance of financial information and earnings guidance provided to analysts and rating agencies prior to dissemination, which discussions may be general discussions of the type of information to be disclosed or the type of presentation to be made.  Also, the Committee will periodically review with management any policies regarding earnings releases and earnings guidance as provided to the public.

5.     Discussions with Management and Independent Auditors.  The Committee’s review of annual and quarterly results should include separate discussions with management and with the independent auditors of significant issues and disagreements (if any) regarding accounting principles, practices and judgments, any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information, and the effect of using different accounting principles, practices and judgments.

6.     Accounting Principles and Policies.  The Committee will periodically review and discuss with management the significant accounting principles, policies, and practices followed by the Company in accounting for and reporting its financial results in accordance with generally accepted accounting principles, including management’s critical accounting estimates and off-balance sheet transactions if any. The Committee will obtain and consider the independent auditors’ judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting. 

B.  Internal Controls, Disclosure Controls, Compliance and Internal Audit

1.   Internal Controls Over Financial Reporting.  The Committee will periodically review and discuss with management the effectiveness and adequacy of the Company's system of internal controls over financial reporting.  This would include discussing at least annually with management and the independent auditors the Company’s key financial, business, developmental and other operational risks, and the steps management has taken to monitor and control such risks (including management’s risk assessment and risk management policies). The Committee will also review written reports and significant findings regarding internal controls prepared by the independent auditors, and if appropriate, discuss the information contained in the reports with the independent auditors. The Committee will review management’s responses, if any, to such reports and findings, including the status of previous recommendations. 

2.   Internal Control Reports.  The Committee will review and discuss with management and the independent auditors (i) the annual report of management that is included in the Company’s Form 10-K affirming management's responsibility for establishing and maintaining internal control over financial reporting and assessing the effectiveness of the internal control over financial reporting and (ii) the independent auditors’ report on, and attestation of, management’s annual report, provided that the filing thereof is required by applicable law.

3.   Disclosure Controls.  In consultation with management and the independent auditors, the Committee will review the integrity of the Company’s financial reporting processes and adequacy of disclosure controls. 

4.   Complaint ProceduresThe Committee shall establish and maintain appropriate procedures for (i) the receipt, retention and treatment of complaints received by the Company and the Committee regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.  A memo setting forth such procedures shall be distributed to all employees of the Company on an annual basis, and more frequently if circumstances require.

5.   Code of Conduct.  The Committee will periodically review and oversee the administration of the Company’s Code of Conduct, as provided therein, including review of reports from the officer of the Company charged with administration of the Code of Conduct, review of violations thereunder and the monitoring of activity raising questions thereunder.

6.   Conflicts of Interest and Related Party Transactions.  The Committee will review and approve (i) certain transactions involving potential conflicts of interest under the Company’s Code of Conduct and (ii) other related-party transactions.

7.   Quarterly Legal Review.  On a quarterly basis, the Committee will review with the Company’s counsel, any legal matters that could have a significant impact on the Company’s financial statements, the Company’s compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies.

8.   Internal Audit.  The Committee will review and approve the functions of the Company's internal audit department, if any, including its purpose, organization, responsibilities, budget and performance; and review the scope, performance and results of any such department's internal audit plans, including any reports to management and management's response to those reports.

C.  Independent Auditors

1.  Selection, Retention and Evaluation.  The Committee has sole authority and responsibility to select and hire, oversee, evaluate, determine the compensation of and, where appropriate, replace the independent auditors. The Committee shall annually review the performance of the independent auditors, the experience and qualifications of the senior members of the independent auditor team and the quality control procedures of the independent auditors.  The Company shall provide appropriate funding, as determined by the Committee, for payment of compensation to the independent auditors.

2.  Auditor Independence.  On an annual basis, the Committee shall receive from the independent auditors a formal written statement delineating all relationships between the independent auditors and the Company and representing to the Company the independent auditors’ independence consistent with applicable standards, including the applicable Public Company Accounting Oversight Board rules (and any successor or related rules).  The Committee should discuss with the independent auditors the disclosed relationships or services that may impact the objectivity and independence of the auditors, and take, or recommend that the Board take, appropriate action to ensure the independence of the auditors.

3.   Approval of Audit and Non-Audit Services.  The Committee shall approve in advance the provision of all audit services and any permissible non-audit services by the independent auditors and the related fees of the independent auditors therefor. The Committee shall consider whether the provision of these other services is compatible with maintaining the auditors’ independence.  As permitted by law, this duty may be delegated by the Committee to one or more designated members of the Committee with any such preapproval reported to the Committee at its next regularly scheduled meeting.  The Committee will review disclosure of information regarding the approval of independent auditors’ non-audit services as required by the SEC in periodic reports to investors.

4.   Approval of Audit Plan.  The Committee will annually review the independent auditors’ audit plan, discussing the scope, staffing, locations, reliance upon management and general audit approach.

5.   Required Communications.  The Committee shall discuss with the independent auditors certain matters required to be communicated to audit committees in accordance with the American Institute of Certified Public Accountants Statement of Auditing Standards No. 61 (or any successor provision), including such matters as (i) the consistency of application of the Company’s accounting policies; (ii) the completeness of information contained in the financial statements and related disclosures; (iii) the selection of new, or changes to the Company’s existing, accounting policies; (iv) estimates, judgments and uncertainties; (v) unusual transactions and (vi) accounting policies relating to significant financial statement items, including the timing of transactions and the period in which they are recorded.

6.   Audit Partner Rotation.  The Committee will monitor the rotation of the partners of the independent auditors on the Company’s audit engagement team as required by applicable laws and rules.

7.   Former Employees of Auditors.  The Committee will review and approve the hiring as an employee of the Company an employee of the independent auditor who was engaged on the Company’s account, subject to the provisions of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations of the SEC promulgated pursuant thereto. The Committee will discuss with independent auditors any recommendations they may have regarding this action.

D.  Other Responsibilities.

1.   Succession Planning.  The Committee will periodically review financial and accounting personnel succession planning within the Company.

2.   Audit Committee Report.  The Committee shall annually prepare an Audit Committee report to stockholders as required by the SEC to be included in the Company’s annual proxy statement.

3.   Review of Charter.  The Committee shall review and reassess the adequacy of this Charter on an annual basis, or more frequently if circumstances require.  The Board must approve any amendments to this Charter.  The Committee shall post this Charter on the Company’s website or have this Charter periodically published in a proxy or information statement in accordance with SEC regulations.

4.   Self-Evaluation.  The Committee will annually conduct an evaluation of its performance of its duties under this Charter.

5.   General Authority.  The Committee will perform any other activities consistent with this Charter, the Company’s bylaws and governing law, as the Committee or the Board deems necessary or appropriate.       

VI.       Investigative Authority; Retention of Advisors

  1. Investigations.  The Committee has the authority to conduct or authorize investigations into any matter within the scope of its responsibilities and it shall have direct access to the independent auditors as well as anyone in the Company.
  2. Retention of Consultants and Advisors.  The Committee, in its sole discretion, has the ability to retain, at the Company’s expense, special legal, accounting, or other consultants or advisors it deems necessary in the performance of its duties or to assist in the conduct of any investigation.

VII.     Meetings and Other Matters

  1. Frequency and Conduct of Meetings.  The Committee will have regular meetings four times per year (which should coincide with, and precede, the Company’s public announcement of its quarterly and annual results) or more frequently as circumstances dictate. The chairperson of the Committee shall prepare and/or approve an agenda in advance of each meeting. If the chairperson of the Committee is not present for a meeting, the members of the Committee may designate a chairperson for the meeting by majority vote of the Committee membership. The Committee may meet privately, or with management and with the independent auditors separately as is reasonably necessary, to discuss any matters within the purview of the Committee.
  2. Quorum Requirement.  A majority of the Committee members shall constitute a quorum.
  3. Reports to the Board.  The Committee shall make regular reports to the Board about its activities and recommendations.  This will generally take place at the first Board meeting following a Committee meeting.
  4. Minutes.  Minutes of each meeting will be kept and filed in the Minute Books of the Company.
  5. Expenses.  The Company shall provide appropriate funding, as determined by the Committee, for payment of ordinary administrative expenses of the Committee that are necessary and appropriate in carrying out its duties. 
  6. The Committee shall have full access to all books and records of the Company in carrying out its duties under this charter.

 

Amended and Restated, March 6, 2019

 


 

 

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ZYLA LIFE SCIENCES

U.S. Operations
600 Lee Road, Suite 100
Wayne, PA 19087
Tel: 610.833.4200

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