DIVERSEY, INC.
Audit Committee Charter
(As Adopted by the Board of Directors March 17, 2010)
Purposes
The Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of
Diversey, Inc., a Delaware corporation (the “Company”) shall provide assistance to the Board in
fulfilling its oversight responsibilities with respect to (a) the integrity of the Company’s financial
statements, (b) the Company’s compliance with legal and regulatory requirements, (c) the
independent auditors’ qualifications and independence, and (d) the performance of the
independent auditors and the Company’s internal audit function, in all cases, subject to the
provisions of, and requirements and limitations contained in, the Second Amended and Restated
Certificate of Incorporation of Diversey Holdings, Inc. (“DHI”) (as amended from time to time,
the “Certificate of Incorporation”), the Second Amended and Restated Bylaws of DHI (as
amended from time to time, the “Bylaws”) and, if then in effect, the Stockholders Agreement,
dated as of November 24, 2009 (as amended from time to time, the “Stockholders Agreement”),
by and among DHI, Commercial Markets Holdco, Inc., CDR Jaguar Investor Company, LLC,
CDR F&F Jaguar Investor, LLC and SNW Co., Inc. Subject to the foregoing, the Committee’s
primary duties and responsibilities are to:
(i)
Discuss with management and the independent auditors the annual audited
financial statements, quarterly financial statements, press releases and any public
filings prior to public release.
(ii)
Review and discuss with the independent auditors (a) the report or proposed
report of their annual audit, (b) the accompanying management letter, (c) the
reports of their reviews of the Company’s interim financial statements conducted
in accordance with Public Company Accounting Oversight Board (“PCAOB”)
Interim Auditing Standard AU Section 722 (Statement on Auditing Standards No.
100), and (d) the reports of the results of such other examinations outside of the
course of the independent auditors’ normal audit procedures that the independent
auditors may from time to time undertake. The foregoing shall include the reports
required by Section 204 of the Sarbanes-Oxley Act and any rules promulgated
thereunder by the PCAOB and Securities and Exchange Commission (“SEC”).
(iii)
Monitor the integrity of the Company’s financial reporting process and systems of
internal control, including monitoring the internal auditing process.
(iv)
Monitor the scope of work performed by, and the qualifications, independence
and performance of, the Company’s independent auditors.
(v)
Review the Company’s policies and compliance procedures with respect to
business practices, which shall include the compliance and disclosures regarding
internal controls and matters required by Sections 302 and 404 of the SarbanesOxley Act and any rules promulgated thereunder by the PCAOB and SEC.
(vi)
Appoint, retain and terminate the services of the independent auditors of the
Company for the purpose of preparing or issuing an audit report or performing
other audit review or attest services for the Company. Determine the
compensation of and provide oversight over the work of the independent auditors.
(vii)
Monitor compliance with legal and regulatory requirements.
(viii)
Monitor compliance with hiring practices of the Company regarding employees of
the independent auditors and ensure that such hiring practices are consistent with
the restrictions set forth in Section 206 of the Sarbanes-Oxley Act.
(ix)
Provide an independent avenue of communication to the Committee and for
confidential submission by employees of concerns regarding questionable
accounting or auditing matters.
(x)
Approve the use of and compensation for permitted non-audit services provided
by the appointed independent auditor.
(xi)
Perform other assignments as directed by the Requisite Approval (as defined in
the Certificate of Incorporation).
Composition
The Committee shall have four members, subject to the requirements and limitations of
the Certificate of Incorporation, Bylaws and the Stockholders Agreement (if then in effect). The
Committee Chair shall be appointed in accordance with the provisions of the Bylaws and the
requirements of the Stockholders Agreement (if then in effect). Each member of the Committee
shall be financially literate, as such qualification is interpreted by the Board in its business
judgment, or must become financially literate within a reasonable period of time after
appointment to the Committee. At least one member of the Committee shall meet the criteria of
as an audit committee financial expert, as defined by the rules and regulations promulgated by
the SEC. The designation or identification of a person as an audit committee financial expert
shall not (1) impose on such person any duties, obligations or liability greater than the duties,
obligations and liability imposed on such person as a member of the Committee and the Board in
the absence of such designation or identification, or (2) affect the duties, obligations or liability
of any other member of the Committee or the Board.
Each Committee member (whether designated at an annual meeting of the Board or to fill
a vacancy or otherwise) shall serve at the pleasure of the Board in accordance with the provisions
of the Certificate of Incorporation, Bylaws and Stockholders Agreement (if then in effect).
Responsibilities and Duties
The Committee shall take appropriate steps to set the overall corporate “tone” for quality
financial reporting, sound business risk practices and ethical behaviors. The Committee’s duties
and responsibilities shall be limited to each of the items enumerated below and such other
matters as may from time to time be delegated to the Committee by the Requisite Approval (as
defined in the Certificate of Incorporation):
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1.
Review with the independent auditors its plans for, and the scope of, its annual
audit and other examinations.
2.
Ensure that the Company has an anonymous and independent avenue for
communications to the Committee for confidential submission of concerns
regarding questionable accounting or auditing matters. Review and address any
concerns raised by employees regarding questionable accounting or auditing
matters. Establish procedures for the confidential receipt, retention and treatment
of complaints received by the Company regarding accounting, internal accounting
controls, or auditing matters.
3.
Reassess the adequacy of this Charter annually or as required by applicable rules
and regulations.
4.
Have the sole authority to appoint, retain and terminate the services of the
independent auditors (subject to the provisions of, and requirements and
limitations contained in, the Certificate of Incorporation), determine the scope of
the annual audit and establish the fees to perform such audit or other work to be
performed at the request of the Committee. It is the responsibility of the
Committee to negotiate and execute the auditor engagement letter.
5.
Approve all non-audit engagements with the Company’s independent auditors.
Such authority shall be exercised in a manner consistent with Sections 201 and
202 of the Sarbanes-Oxley Act and any rules promulgated thereunder by the SEC.
The Committee Chair shall have authority to grant any pre-approvals required by
such sections, subject to the Committee Chair reporting any such pre-approvals to
the Committee at its next scheduled meeting.
6.
At least annually, obtain and review a report from the independent auditors
regarding (a) the audit firm’s internal quality control procedures, (b) any material
issues raised by the most recent internal quality control review, or peer review, of
the firm, or by any inquiry or investigation by governmental or professional
authorities within the preceding five years respecting one or more independent
audits carried out by the firm, and (c) any steps taken to deal with any such issues.
7.
Annually review with the independent auditors their independence as it relates to
their responsibilities with the Company, including, among other things,
information related to the non-audit services provided and expected to be
provided by the auditors. The Committee is responsible for (a) ensuring that the
independent auditors submit at least annually to the Committee a formal written
statement delineating all relationships between the auditors and the Company
consistent with applicable independence standards, (b) actively engaging in a
dialogue with the auditors with respect to any disclosed relationship or services
that may impact the objectivity and independence of the auditors, and (c) taking
appropriate action in response to the auditors’ report to satisfy itself of the
auditors’ independence. In connection with the Committee’s evaluation of the
auditors’ independence, the Committee shall also take such steps as may be
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required by law with respect to the identification and regular rotation of the audit
partners serving on the Company’s audit engagement team.
8.
Maintain an understanding of the material operational and financial control risks
and risk management strategies of the Company, and the steps management has
taken to monitor and control these exposures.
9.
Review the effectiveness of the internal control systems of the Company, the
Company’s financial, auditing and accounting organizations and personnel, and
the Company’s policies and compliance procedures with respect to business
practices which shall include (a) the disclosures regarding internal controls and
matters required by Sections 302 and 404 of the Sarbanes-Oxley Act and any
rules promulgated thereunder by the PCAOB and SEC, and (b) a review with the
independent auditors of their opinion on the effectiveness of management’s
assessment of internal controls over financial reporting and the independent
auditor’s analysis of matters requiring modification to management’s
certifications pursuant to Section 302 of the Sarbanes-Oxley Act.
10.
Evaluate management’s implementation of mandated changes to accounting and
reporting requirements, as outlined by the independent auditors, or other
recommendations made by the independent auditors.
11.
Meet to review and discuss the audited annual financial statements and quarterly
financial statements with management and the independent auditors prior to
release, including (a) the disclosures regarding internal controls and other matters
required to be reported to the Committee pursuant to Sections 302 and 404 of the
Sarbanes-Oxley Act and any rules promulgated thereunder by the SEC, (b)
material reserves and accruals, (c) material changes in the Company’s accounting
principles and their application, (d) any proposed changes by the auditors or
matters in disagreement, and (e) the Company’s disclosures under
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in any quarterly or annual reports filed with the SEC.
12.
Review all public releases from the Company which contain earnings and other
financial information, including guidance provided to analysts and rating agencies
(which review may occur after issuance and may be done generally as a review of
the types of information to be disclosed and the form of presentation to be made).
13.
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.
14.
Approve all hirings by the Company of an employee or former employee of the
independent auditor to Salary Tier Level 4 or higher, and ensure that all hirings
comply with the restrictions set forth in Section 206 of the Sarbanes-Oxley Act
and any rules promulgated thereunder by the SEC.
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15.
Obtain assurance from the independent auditors that there have been no acts
detected or that otherwise come to the attention of the independent auditors that
require disclosure to the Committee under Section 10A(b) of the Exchange Act.
16.
Discuss with the independent auditors matters required to be discussed by
PCAOB Interim Auditing Standard AU Section 380 (Statement on Auditing
Standards No. 114), relating to the conduct of the audit, as well as any audit
problems or difficulties and management’s response, including (a) any restriction
on audit scope or on access to requested information, (b) any disagreements with
management regarding financial reporting, and (c) significant issues discussed
with the independent auditors’ national office. Such discussions should occur on
a timely basis as the issues are identified. Unresolved disagreements between
management and the independent auditors regarding financial reporting shall be
decided by the Committee.
17.
Review and periodically assess the adequacy of the Finance Officers’ Code of
Ethics and the compliance of the executive officers and covered financial officers
of the Company therewith.
18.
Consider possible conflicts of interest of management and make
recommendations to prevent, minimize or eliminate such conflicts of interest.
19.
Review the auditor’s management letter and management responses and monitor
the implementation of any required actions.
20.
Review and approve the annual internal audit plan and review quarterly a
summary of internal audit findings and compliance with material internal audit
recommendations.
21.
Report the Committee’s activities regularly to the Board in such manner and at
such times as the Committee and the Board deem appropriate, but in no event less
than once a year. Such report shall include a review of 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 independent auditors or the performance of
the internal audit function, as well as an evaluation of the Committee’s
performance with respect to the requirements of this Charter.
22.
Review such other matters in relation to the accounting, auditing and financial
reporting practices and procedures of the Company as the Committee may, in its
own discretion, deem desirable in connection with the review functions described
above.
Notwithstanding any of the foregoing, the Committee’s power and authority in all
respects shall be subject to, and limited by, the provisions of, and requirements and limitations
contained in, the Certificate of Incorporation, Bylaws and Stockholders Agreement (if then in
effect).
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Meetings
The Committee shall meet at least once every fiscal quarter, or more frequently as
circumstances shall dictate, and shall conduct meetings in accordance with the provisions of the
Certificate of Incorporation, Bylaws and Stockholders Agreement (if then in effect). The
Committee shall meet privately in executive sessions periodically, with each of management, the
independent auditors and the Company’s Director of Internal Audit to discuss any matters that
the Committee or the independent auditors deem appropriate. The Committee Chair shall, in
consultation with the other members of the Committee and appropriate officers of the Company,
establish the agenda for each Committee meeting. Each Committee member may submit items
to be included on the agenda. Committee members may also raise subjects that are not on the
agenda at any meeting; provided, however, that notwithstanding anything to the contrary in this
Charter or the Bylaws, the approval of three of the four members of the Committee shall be
required to approve any proposal that was not reasonably described on the agenda of the
Committee meeting.
Either the Committee Chair or any two of the Committee members may call a meeting of
the Committee at any time, subject to the quorum requirements set forth in the Bylaws. In the
event the number of Committee members voting in favor of a proposal and the number of
Committee members voting against such proposal are equal, the proposal shall be submitted to a
vote of the Board. The Committee Chair shall supervise the conduct of the meetings and shall
have the other responsibilities set forth herein and which the Committee may designate from
time to time; provided, that the Committee may not designate any rules of procedure or
governance that are inconsistent with the provisions of this Charter, the Certificate of
Incorporation, Bylaws or Stockholders Agreement (if then in effect).
The Committee may request any officer or employee of the Company or any
representative of the Company’s advisors, to attend a meeting or to meet with any members or
representatives of the Committee.
Resources and Authority
The Committee shall have the resources and authority appropriate to discharge its
responsibilities as required by law, including the authority to engage external accounting
advisors, independent counsel and other advisors as the Committee deems necessary to carry out
its duties, without further approval by the Board. The Committee may also, to the extent it
deems necessary or appropriate, meet with the Company’s investment bankers or financial
analysts who follow the Company, without further approval by the Board.
The Company shall provide for appropriate funding, as determined by the Committee, for
payment of (a) compensation to the Company’s independent auditors engaged for the purpose of
rendering or issuing an audit report or related work or performing other audit, review or attest
services for the Company, (b) compensation to independent counsel or any other advisors
employed by the Committee, and (c) ordinary administrative expenses of the Committee that are
necessary or appropriate in carrying out its duties.
All references in this Charter to laws, rules and regulations and statements on auditing
standards refer to such laws, rules and regulations and statements on auditing standards as in
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effect on the date of this Charter as they may be amended, modified, supplemented or superseded
from time to time.
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