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Audit Committee Charter
DAVE & BUSTER’S ENTERTAINMENT, INC.
AUDIT COMMITTEE CHARTER
(Adopted September 6, 2012)
This Audit Committee Charter (“Charter”) was adopted by the Board of Directors (the “Board”) of Dave & Buster’s Entertainment, Inc. (the “Company”) and sets forth the purpose and membership requirements of the Audit Committee (the “Committee”) of the Board and establishes the authority and responsibilities delegated to it by the Board.
This Charter is intended as a component of the flexible governance framework within which the Board, assisted by its committees, directs the affairs of the Company. While it should be interpreted in the context of all applicable laws, regulations and listing requirements, as well as in the context of the Company’s Certificate of Incorporation and Bylaws, it is not intended to establish by its own force any legally binding obligations.
- Purpose. The purpose of the Committee is to oversee (i) the integrity of the Company’s financial statements and disclosures, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the engagement, compensation, retention, qualifications, independence and performance of the independent registered public accounting firm that shall audit the annual financial statements of the Company (the “External Auditor”) and any other registered public accounting firms engaged by the Company, (iv) the performance of the Company’s internal audit function, (v) the Company’s internal control systems, and (vi) the Company’s procedures for monitoring compliance with its Code of Business Ethics (the “Code of Ethics”).
In connection with the foregoing, the Committee shall engage in such activities as are necessary or appropriate in order for it to render the annual report of the Committee required to be included in the Company’s annual report by the rules of the Securities and Exchange Commission (“SEC”). All references in this charter to the Company are intended to refer also to any subsidiary of the Company and any “variable interest entity” whose results of operations are consolidated with those of the Company, except where the context otherwise requires.
- Committee Members.
2.1 Composition and Appointment. Other than as permitted by the rules and regulations of the SEC or any securities exchange upon which the Company’s securities may then be listed, the Committee shall consist of three (3) or more members of the Board. Membership on the Committee shall rotate at the Board’s discretion. The Board shall fill vacancies on the Committee and may remove a Committee member from the membership of the Committee at any time without cause. Members shall serve until their successors are appointed by the Board.
2.2 Qualifications. To the extent required by the Securities Exchange Act of 1934 (the “1934 Act”), any other rule or regulation of the SEC or any securities exchange on which securities of the Company may then be listed, each member of the Committee shall be “independent,” as such term is defined under applicable rules and regulations.
2.3 Financial Literacy. Each member of the Committee shall, in the Board’s business judgment, be financially literate and shall meet the financial literacy requirements of any securities exchange on which securities of the Company may then be listed. In addition, at least one member of the Committee shall, in the Board’s business judgment, have accounting or related financial management expertise and such Committee member shall be an “audit committee financial expert,” as such term is defined under the applicable rules promulgated by the SEC.
2.4 Simultaneous Service on Other Audit Committees. If a member of the Committee serves on the audit committee (or, in the absence of an audit committee, the board committee performing equivalent functions, or, in the absence of such committee, the board of directors) of more than three (3) public companies (including the Company), the Board must affirmatively determine that such simultaneous service on multiple audit committees will not impair the ability of such member to serve on the Committee
2.5 Compensation. Members of the Committee shall, at the discretion of the Board, be entitled to receive fees for service on the Committee or for service as Chairperson of the Committee in addition to the normal fees paid to all directors.
- Education. To help ensure that the members of the Committee have the proper knowledge to perform their responsibilities, Committee members, shall have the authority, at the Company’s expense, to attend outside educational programs, retain outside professionals to conduct educational programs and undertake other appropriate steps to keep current with developments in accounting, disclosure, risk management, internal controls, auditing and other matters that are relevant to the carrying out of the Committee’s responsibilities.
- Advisors. The Committee shall have the authority (i) to retain, at the Company’s expense, and terminate the retention of, any independent legal, financial and other advisors (“Advisors”) it deems necessary to fulfill its responsibilities, and (ii) determine the compensation of such Advisors.
- Investigations. The Committee shall have the authority to conduct investigations that it deems necessary to fulfill its responsibilities.
- Information. The Committee shall have the authority to require any officer, director or employee of the Company, the Company’s outside legal counsel and the External Auditor to meet with the Committee and any of its Advisors and to respond to their inquiries. The Committee shall have full access to the books, records and facilities of the Company in carrying out its responsibilities.
- Funding. The Committee shall have the authority to determine, on behalf of the Company, the compensation of (i) the External Auditor for its services in rendering an audit report, and (ii) any Advisors employed by the Committee pursuant to Section 3.2. The Company shall provide adequate resources to support such Committee activities.
- Subcommittees. The Committee shall have the authority to delegate authority and responsibilities to subcommittees provided that no subcommittee shall consist of less than two members.
- Periodic Meetings. The Committee shall meet at least once per fiscal quarter. The Chairperson may call a special meeting at any time as he or she deems advisable.
- Executive Sessions. The Committee shall maintain free and open communication with (i) the Company’s chief executive officer (the “CEO”), (ii) the Company’s chief financial officer (the “CFO”), (iii) the Company’s chief of internal auditing (the “Internal Auditor”), (iv) the External Auditor, and (v) the Company’s general counsel (the “General Counsel”) and shall periodically meet, in its sole discretion, in separate executive (private) sessions with each such person to discuss any matters that the Committee or any of them believes should be discussed privately with the Committee.
- Minutes. Minutes of each meeting of the Committee shall be kept to document the discharge by the Committee of its responsibilities and a copy thereof shall be sent to the members of the Board.
- Notice; Manner of Meeting. Notice of meetings shall be given to all Committee members, or may be waived, in the same manner as required for meetings of the Board. Meetings of the Committee may be held by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other.
- Quorum. A quorum shall consist of a majority of the Committee’s members. The act of a majority of the Committee members present at a meeting at which a quorum is present shall be the act of the Committee. The Committee may also act by unanimous written consent of its members.
- Agenda. The Chairperson of the Committee shall prepare an agenda for each meeting of the Committee in consultation with Committee members and any appropriate member of the Company’s management or staff. Appropriate members of the Company management and staff shall assist the Chairperson with the preparation of any background materials necessary for any Committee meeting.
- Presiding Officer. The Chairperson of the Committee shall be appointed from among the Committee members by, and serve at the pleasure of, the Board and shall preside at all Committee meetings. If the Chairperson is absent at a meeting, a majority of the Committee members present at a meeting shall appoint a different presiding officer for that meeting.
- Responsibilities. The following duties, responsibilities and functions are set forth as a guide to fulfilling the Committee’s purposes, with the understanding that the Committee may undertake other and different activities, and that the Committee’s activities may diverge from those described below, as appropriate under the circumstances.
In such manner as the Committee determines is appropriate to fulfill its purposes, the Committee shall undertake the following:
- General Financial Oversight. The Committee’s responsibilities shall include reviewing and discussing with management and the External Auditor (i) major issues regarding accounting principles and financial statement presentations, including any significant changes in the Company’s selection or application of accounting principles, and major issues as to the adequacy of the Company’s internal controls and any special audit steps adopted in light of material control deficiencies, (ii) any analyses prepared by management or the External Auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any analyses of the effects of alternative generally accepted accounting principles (“GAAP”) methods on the presentation of the Company’s financial statements, (iii) the effect of regulatory and accounting industry initiatives, as well as off-balance sheet structures, on the Company’s financial statements, and (iv) the type and presentation of information to be included in earnings press releases that contain information with respect to the historical or projected financial performance of the Company (with particular attention on the use of “pro forma,” or “adjusted” non-GAAP, information), as well as any other financial information provided to a financial analyst or a rating agency.
- External Auditor Oversight.
- Selection and Evaluation. The Committee shall have the responsibility and sole authority for the appointment, compensation, retention, oversight, termination and replacement of the External Auditor and for the approval of all audit and engagement fees. The Committee shall annually, following the completion of the audit reports and at such other times as it deems appropriate, review and evaluate the performance of the External Auditor, including a specific evaluation of the External Auditor’s lead (or coordinating) audit partner having primary responsibility for the Company’s audit. The Committee shall present its conclusions with respect to the External Auditor to the Board.
- Pre-Approval of External Auditor Services.
- Committee Pre-Approval. No audit services or non-audit services shall be performed by the External Auditor for the Company unless first pre-approved by the Committee and unless permitted by applicable federal securities laws and the rules and regulations of the SEC. If the Committee approves an audit service within the scope of the engagement of the External Auditor, such audit service shall be deemed to have been pre-approved for purposes of this Section.
- Delegation of Pre-Approval Authority. The Committee may delegate to one (1) or more members of the Committee the authority to grant pre-approval of non-audit services required by this Section. The decision of any member to whom such authority is delegated to pre-approve non-audit services shall be reported to the full Committee at its next scheduled meeting.
- Independence. The Committee shall periodically meet with the External Auditor to assess and satisfy itself that the External Auditor is “independent” in accordance with the rules and regulations of the SEC. The Committee shall annually obtain from the External Auditor a written statement delineating (i) all relationships between the External Auditor and the Company and services provided in connection therewith, consistent with Public Company Accounting Oversight Board (“PCAOB”) Rule 3526, including any relationships or services that may impact the External Auditor’s objectivity and independence, (ii) confirmation that the Company’s CEO, controller, CFO, chief accounting officer, Internal Auditor, or any person serving in an equivalent position to any of the foregoing for the Company, was not employed by the External Auditor and did not participate in any capacity in the audit of the Company during the one (1) year period preceding the date of the initiation of the audit for which the External Auditor is engaged, and (iii) all the disclosures required by Independence Standards Board Standard No. 1. The Committee shall establish a policy regarding the Company’s hiring of any employee or former employee of the External Auditor.
- Quality Control. The Committee shall annually obtain and review a written report from the External Auditor describing (i) the External Auditor’s internal quality-control procedures, and (ii) any material issues raised by (a) the External Auditor’s most recent internal quality-control review, or peer review or (b) any inquiry or investigation by governmental or professional authorities, in each case, within the preceding five (5) years, respecting one or more independent audits carried out by the External Auditor, and any steps taken to deal with any such issues.
- Audit Partner Rotation. The Committee shall annually obtain from the External Auditor a written statement confirming that the lead (or coordinating) audit partner having primary responsibility for the Company’s audit, or the audit partner responsible for reviewing the audit, has not performed any audit services for the Company in each of the Company’s five (5) previous fiscal years.
- Review of External Auditor Reports. The Committee shall review with management, the Internal Auditor and the External Auditor all reports required to be made by the External Auditor under applicable federal securities laws and the rules and regulations of the SEC regarding (i) all critical accounting policies and practices used by the Company, (ii) all alternative treatments of the Company’s financial information within GAAP that have been discussed with management, the ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the External Auditor, (iii) all other material written communications between the External Auditor and management, such as any management letter or schedule of unadjusted differences, and (iv) management’s assessment of the Company’s internal controls.
- Internal Control Assessment. To the extent required by the 1934 Act and the Regulations thereunder, the Committee shall annually obtain from the External Auditor a written report in which the External Auditor attests to and reports on the assessment of the Company’s internal controls made by the Company’s management.
- Non-Audit Services. The Committee shall review with management and decide whether to approve the retention of the External Auditor for any non-auditing services proposed to be rendered to the Company, including assessing their compatibility with maintaining the External Auditor’s independence. No non-audit services may be provided to the Company by the External Auditor unless approved in advance by the Committee under Section 6.2 above. The External Auditor shall not provide to the Company, and the Committee shall not have the authority to approve the provision to the Company by the External Auditor of, those services described in Section 201 of the Sarbanes-Oxley Act of 2002 (the “Act”) or any other service that the Public Company Accounting Oversight Board established under the Act determines, by regulation may not be provided to the Company by the External Auditor.
- Accountability. The External Auditor shall report directly to the Committee and shall be ultimately accountable to the Committee. The Committee shall obtain an annual written statement from the External Auditor confirming its direct accountability to the Committee.
- Audit Assessment. The Committee shall review with management, the Internal Auditor and the External Auditor the responsibility of the External Auditor under generally accepted auditing standards with respect to the Company’s financial statements and any problems or difficulties encountered and management response in connection with the audit process, including any restrictions on the scope of the External Auditor’s activities or on access to requested information, any significant disagreements with management, any accounting adjustments that were noted or proposed by the External Auditor but that were passed (as immaterial or otherwise), any communications between the External Auditor’s team assigned to the Company’s audit and the External Auditor’s national office respecting auditing or accounting issues presented by the Company’s audit, and any “management” or “internal control” letter issued, or proposed to be issued, by the External Auditor to the Company.
- SAS 61. The Committee shall discuss with the External Auditor the matters required to be discussed under Statement on Auditing Standards No. 61.
- Disagreements. The Committee shall periodically inquire of management and the External Auditor as to any disagreements that may have occurred between them relating to the Company’s audit process, financial statements or disclosures. The Committee shall have sole responsibility for the resolution of any disagreements between management and the External Auditor regarding financial reporting.
- Engagements of Other Registered Public Accounting Firms. The Committee shall appoint, evaluate, compensate, oversee the work of, and if appropriate terminate the appointment of any other registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services (including the resolution of any disagreements between management and the auditor regarding financial reporting), each of which firms shall report to the Committee, and, if such firm is required to be independent of the Company in accordance with SEC rules, review a formal written statement from the independent auditor delineating all relationships between such firm and the Company and discuss with such firm any relationships or services that may impact the objectivity and independence of the firm, and take appropriate action to satisfy itself of such firm’s independence, and approve any audit-related and permitted non-audit services (including the fees and material terms thereof) to be provided by any registered public accounting firm so engaged.
- Internal Auditing Oversight.
- Internal Auditing Staff. The Committee shall annually evaluate the performance of, and recommend any appointments or dismissals of, the Internal Auditor and the internal auditing department with the Board, management and the External Auditor.
- Internal Audit Process. The Committee shall meet periodically with the Internal Auditor, the External Auditor and management to review (i) plans for the internal audit program (including scope, responsibilities, budget and staffing) for the coming year, (ii) the coordination of such plans with the work of the External Auditor, and (iii) the progress and results of the internal auditing process.
- Internal Audit Reports. The Committee shall meet periodically with the Internal Auditor to review any significant reports to management prepared by the internal auditing staff. The Internal Auditor shall provide a summary of all significant internal audit reports to the Committee each quarter. The Internal Auditor shall provide management and the Committee with ongoing assessments of the Company’s risk management processes and system of internal controls.
- Financial Statements And Disclosure Oversight.
- SEC Filings and Earnings Releases and Guidance. Prior to the filing by the Company with the SEC of any annual report on Form 10-K or any quarterly report on Form 10-Q, the Committee shall meet to review and discuss with management and the External Auditor the financial statements and the Company’s specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein. The Committee shall periodically review and discuss with management and the External Auditor the Company’s procedures (including types of information to be disclosed and the type of presentation to be made) with respect to press releases and with respect to financial information and earnings guidance provided to financial analysts and rating agencies.
- Accounting Changes. The Committee shall, before their implementation, review with management and the External Auditor and approve all significant changes proposed to be made in the Company’s accounting principles and practices.
- Adequate Disclosure. The Committee shall periodically inquire of management, the External Auditor, the General Counsel and, if the Committee deems it appropriate, outside legal counsel as to whether the Company’s financial statements comport with the disclosure requirements of federal securities laws, notwithstanding their conformity to accounting principles and practices.
- Criticisms. The Committee shall periodically inquire of management, the General Counsel and the External Auditor as to their knowledge of any criticism of the Company’s financial statements or disclosures by any financial analysts, rating agencies, media sources or other reliable third-party sources. The Committee shall establish procedures for, and oversee the effectiveness of (i) the receipt, retention, treatment, investigation and resolution of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the confidential, anonymous submission by the Company’s employees of concerns regarding questionable accounting or auditing matters, and, as necessary, investigate any reports provided by securities counsel to the Company regarding evidence of unremedied material violations of U.S. federal or state securities or any similar other law or a material breach of fiduciary duties by directors, officers, employees or agents of the Company arising under such laws.
- Internal Controls, Legal Compliance, Code of Business Conduct and Ethics and Related Party Transactions Oversight.
- Internal Controls and Compliance Policies. For the purpose of assessing their adequacy and effectiveness, the Committee (i) shall periodically review and assess with management, the Internal Auditor, the General Counsel and the External Auditor (a) the internal control systems of the Company, including whether such controls are reasonably designed to ensure that appropriate information comes to the attention of the Committee in a timely manner, prevent violations of law and corporate policy and permit the Company to prepare accurate and informative financial reports, (b) the Company’s policies on compliance with laws and regulations, (c) the Code of Business Conduct and Ethics, (d) the Company’s Insider Trading and Public Communications Policy, (e) the Company’s Related Person Transaction Policy and (f) the methods and procedures for monitoring compliance with such policies, and (ii) shall elicit from them any recommendations for the improvement of the Code of Business Conduct and Ethics and such other controls, policies, methods and procedures. The Committee shall review with management and the External Auditor, prior to its annual filing, the internal control report (containing the annual assessment of the effectiveness of the internal control structure and procedures of the Company for financial reporting) that is required to be filed by the Company with the SEC on Form 10-K.
- Information Security. The Committee shall periodically review and assess with management and the External Auditor the adequacy of the security for the Company’s information systems and the Company’s contingency plans in the event of a systems breakdown or security breach.
- Code of Business Conduct and Ethics. The Committee shall periodically inquire of management, the Internal Auditor and the External Auditor as to their knowledge of (i) any violation of the Code of Business Conduct and Ethics, (ii) any waiver of compliance with the Code of Business Conduct and Ethics, and (iii) any investigations undertaken with regard to compliance with the Code of Business Conduct and Ethics. Any waiver of the Code of Business Conduct and Ethics with respect to a director or executive officer may only be granted by the Committee. All waivers granted by the Committee shall be promptly reported to the entire Board and disclosed as required by rules and regulations of the SEC and any securities exchange on which securities of the Company may then be listed.
- Related Party Transaction Policy. The Committee shall review all related person transactions (as defined under the Related Party Transaction Policy) and approve such transactions in advance of it being given effect in accordance with the Related Party Transaction Policy. Further, in accordance with the Related Party Transaction Policy, the Committee shall have the authority to (i) determine categories of transactions that are not considered related person transactions for the purposes of the Related Party Transaction Policy given their nature, size and/or degree of significance to the Company and (ii) approve in advance categories of related person transactions that need not be individually reported to, reviewed by, and/or approved or ratified by the Committee.
- Misconduct Allegations. The Committee shall periodically inquire of management and the General Counsel of their knowledge of any allegations of director or officer misconduct or misconduct by the Company (whether made by employees or third parties).
- Disagreements. The Committee shall inquire of management, the General Counsel and, if appropriate, outside legal counsel of any disagreements that may have occurred between management and legal counsel regarding any public disclosures or any other legal compliance issue.
- Risk Management Oversight.
- Risk Exposure. The Committee shall periodically meet with management and the External Auditor to review and discuss the Company’s major risks or exposures and to assess the steps taken by management to monitor and control such risks and exposures. The Committee shall discuss guidelines and policies to govern the process by which risk assessment and management is undertaken.
- Insurance. The Committee shall periodically review and assess with management and the General Counsel insurance coverage, including Directors and Officers Liability, property and casualty loss, and surety bonds.
- Special-Purpose Entities and Off-Balance Sheet Transactions. The Committee shall periodically meet with management, the Internal Auditor, the General Counsel and the External Auditor to review and assess all “special-purpose” entities of the Company and all complex financing transactions involving the Company, including all related off-balance sheet accounting matters.
- Consultation with Legal Counsel. The Committee shall periodically receive reports from, and review with the General Counsel and, if the Committee deems appropriate, outside legal counsel legal matters (including material claims, pending legal proceedings, government investigations and material reports, notices or inquiries received from governmental agencies) that may have a significant impact on the Company’s financial statements or risk management.
- Reports and Assessments.
- Board Reports. The Chairperson of the Committee shall report regularly to the Board on Committee actions and on the fulfillment of the Committee’s responsibilities under this Charter. Such reports shall include 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 and independence of the Company’s External Auditors and the performance of the Company’s internal audit function.
- Charter Assessment. The Committee shall annually review and assess the adequacy of this Charter and advise the Board of its assessment and of its recommendation for any changes to the Charter and for the inclusion of the Charter on the Company’s corporate website..
- Committee Self-Assessment. The Committee shall conduct an annual self-evaluation of its performance.
- Annual Report Report. The Committee shall prepare an annual report as required by the rules and regulations of the SEC.
- Recommend Action. The Committee shall annually make a determination as to whether to recommend to the Board that the audited financials (certified by the External Auditor) be included in the Company’s Annual Report on Form 10-K for filing with the SEC.
- Board Access to External Auditor. The Committee shall, whenever the Board of Directors or the Committee deems it appropriate, have the External Auditor attend a meeting of the full Board to discuss specific issues and to answer questions from the directors.
- General Financial Statement Responsibility. The Company’s management is responsible for the preparation, presentation and integrity of the Company’s financial statements and disclosures, and the External Auditor is responsible for auditing year-end financial statements and reviewing quarterly financial statements and conducting other procedures. It is not the duty of the Committee to certify the Company’s financial statements, to guarantee the External Auditor’s report, or to plan or conduct audits. Since the primary function of the Committee is oversight, the Committee shall be entitled to rely on the expertise, skills and knowledge of management, the Internal Auditor and the External Auditor and the accuracy of information provided to the Committee by such persons in carrying out its oversight responsibilities. Nothing in this Charter is intended to change the responsibilities of management and the External Auditor.
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