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GREAT WOLF RESORTS, INC.
AUDIT COMMITTEE CHARTER
I.
Composition
of the Audit Committee: The Audit Committee of Great Wolf Resorts,
Inc. (the “Company”) shall be comprised of at least three directors,
each of whom the Board of Directors (the “Board”) has determined has
no material relationship with the Company and each of whom is otherwise “independent”
under the rules of the Nasdaq Stock Market, Inc. and the Securities and Exchange
Commission (the “SEC”). The Board shall also determine that each member
is “financially literate,” and that one member of the Audit Committee
has “accounting or related financial management expertise,” as such
qualifications are interpreted by the Board in its business judgment.
Unless the Board determines otherwise, at least one member of the Audit Committee
shall be an “audit committee financial expert” as such term is defined
by the rules and regulations of the SEC.
No director may serve as a member of the Audit Committee if such director serves
on the audit committees of more than two other public companies, unless the Board
determines that such simultaneous service would not impair the ability of such director
to effectively serve on the Audit Committee.
No member of the Audit Committee may be an affiliate of the Company or receive any
compensation from the Company other than: (i) director’s fees, which may be
received in cash, stock options or other in-kind consideration ordinarily available
to directors and (ii) any other regular benefits that other directors receive.
Members shall be appointed by the
Board based on nominations recommended by the Nominating and Corporate Governance
Committee, and shall serve at the pleasure of the Board and for such term or terms
as the Board may determine.
II.
Purposes of the Audit Committee: The purposes
of the Audit Committee are to:
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assist
the Board in oversight of (i) the quality and integrity of the Company’s financial
statements, (ii) the integrity and effectiveness of the Company’s disclosure
and internal controls, (iii) the Company’s structure for compliance with legal
and regulatory requirements, and (iv) the performance and independence of the Company’s
independent auditors; and
prepare the report required to be prepared by the Audit
Committee pursuant to the SEC’s proxy rules for inclusion in the Company’s
annual proxy statement.
The function of the Audit Committee is oversight. The
management of the Company is responsible for the preparation, presentation and integrity
of the Company’s financial statements. The independent auditors are responsible
for planning and carrying out a proper audit of the Company’s annual financial
statements, reviews of the Company’s quarterly financial statements prior
to the filing of each quarterly report on Form 10-Q, and other procedures.
III. Meetings of the
Audit Committee: The Audit Committee shall meet once every
fiscal quarter, or more frequently if circumstances dictate, (i) to discuss with
management and the independent auditors the annual audited financial statements
or quarterly financial statements, as applicable, including the Company’s
disclosures under Management’s Discussion and Analysis of Financial Condition
and Results of Operations, and (ii) to perform any other activities consistent with
this charter, the Company’s Bylaws and applicable law, as the Audit Committee
or the Board deems necessary or appropriate.
Periodically, the Audit Committee should meet separately with management and the
independent auditors to discuss any matters that the Audit Committee or any of these
persons or firms believe should be discussed privately. The Audit Committee may
request any officer or employee of the Company or the Company’s outside counsel
or independent auditors to attend a meeting of the Audit Committee or to meet with
any members of, or consultants to, the Audit Committee. Members of the Audit Committee
may participate in a meeting of the Audit Committee by means of conference call
or similar communications equipment by means of which all persons participating
in the meeting can hear each other.
IV.
Duties and Powers of the Audit Committee:
To carry out its purposes, the Audit Committee shall have the following duties and
powers:
1.
with respect to the
independent auditor,
(i)
to appoint, compensate,
retain, evaluate, terminate and oversee the work of any registered public accounting
firm engaged for the purpose of preparing or issuing any audit report or performing
other audit, review or attest services for the Company, including resolution of
any disagreements between management and the auditors regarding financial reporting;
(ii)
to approve (a) all audit
engagement fees and terms and (b) all non-audit engagements permitted by Section
10A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”);
(iii)
to (a) obtain and review,
at least annually, a report by the independent auditors (the “Auditors’
Statement”) describing: the auditors’ internal quality-control procedures;
any material issues raised by the most recent internal quality-control review, or
peer review, of the independent auditors, 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 independent auditors, and any
steps taken to deal with any such issues; and (in order to assess the auditors’
independence) all relationships between the independent auditors and the Company,
including, at a minimum, each non-audit service provided to the Company and the
matters set forth in Independence Standards Board Standard No. 1, and (b) discuss
with the independent auditors any relationships or services disclosed in the Auditors’
Statement that may impact the quality of audit services or the objectivity and independence
of the Company’s independent auditors;
(iv)
if applicable, to consider
whether the independent auditors’ provision of (a) audit-related services,
(b) tax compliance, tax advisory or tax planning services, or (c) other non-audit
services to the Company is compatible with maintaining the independence of the independent
auditors;
(v)
after reviewing the
Auditors’ Statement and the independent auditor’s work throughout the
year, evaluate the qualifications, performance and independence of the independent
auditors;
(vi)
in making the evaluations
described in (v) above, to ensure the rotation of the lead audit partner and the
reviewing partner as required by law, discuss with management the timing and process
for implementing the rotation, and consider whether there should be a regular rotation
of the audit firm itself;
(vii)
to take into account
the opinions of management in assessing the independent auditors’ qualifications,
performance and independence; and
(viii)
to instruct the independent
auditors that the independent auditors are ultimately accountable to the Audit Committee,
as representatives of the stockholders;
2.
with respect to financial
reporting principles and policies, internal controls and procedures, and the other
matters referred to below:
(i)
to advise management
and the independent auditors that they are expected to provide to the Audit Committee
a timely analysis of significant financial reporting issues and practices;
(ii)
to consider any reports or communications (and management’s responses thereto)
submitted to the Audit Committee by the independent auditors required by or referred
to in Statement on Auditing Standards No. 61 (as codified by AU Section 380), as
may be modified or supplemented;
(iii)
to meet with management
and the independent auditors:
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to discuss the scope of the annual
audit;
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to review and discuss the annual audited
financial statements and quarterly financial statements, including the Company’s
disclosures under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations”;
and to recommend to the Board, if appropriate, that the Company’s annual audited
financial statements be included in the Company’s annual report on Form 10-K
for filing with the SEC;
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to discuss earnings press releases,
including the use of “pro forma” or “adjusted” non-GAAP
information, as well as financial information and earnings guidance provided to
analysts, rating agencies and other third parties; provided, however, that these
discussions may be held generally (i.e., discussion of the types of information
to be disclosed and the type of presentation to be made) and the Audit Committee
need not discuss in advance each earnings release or each instance in which the
Company may provide earnings guidance;
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to discuss any significant matters
arising from any audit, including any audit problems or difficulties, whether raised
by management or the independent auditors, relating to the Company’s financial
statements;
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review with the independent auditors
any problems or difficulties the independent auditors encountered in the course
of the audit, including any restrictions on their activities or access to requested
information and any significant disagreements with management, and management’s
response;
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review with the independent auditors
any accounting adjustments that were noted or proposed by the independent auditors
but were “passed” (as immaterial or otherwise), any communications between
the audit team and their national office with respect to auditing or accounting
issues presented by the engagement and any “management” or “internal
control” letter issued, or proposed to be issued, by the independent auditors
to the Company;
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to review the form of opinion the
independent auditors propose to render to the Board and stockholders;
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to discuss any significant changes
to the Company’s auditing and accounting principles, policies, controls, procedures
and practices proposed or contemplated by the independent auditors or management;
and
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review, as appropriate: (a) any 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;
(b) analyses prepared by management and/or the independent auditors setting forth
significant financial reporting issues and judgments made in connection with the
preparation of the financial statements including analyses of the effects of alternative
GAAP methods on the financial statements; and (c) the effect of regulatory and accounting
initiatives, as well as off-balance sheet structures, on the financial statements
of the Company;
(iv)
to discuss guidelines
and policies governing the process by which senior management of the Company and
the relevant departments of the Company assess and manage the Company’s exposure
to risk, and to discuss the Company’s major financial risk exposures and the
steps management has taken to monitor and control such exposures;
(v)
to obtain from the independent
auditors assurance that the audit was conducted in a manner consistent with Section
10A of the Exchange Act, which sets forth certain procedures to be followed in any
audit of financial statements required under the Exchange Act;
(vi)
to discuss with the
Company’s General Counsel any significant legal, compliance or regulatory
matters that may have a material effect on the financial statements or the Company’s
business, financial statement or compliance policies, including material notices
to or inquiries received from governmental agencies;
(vii)
to establish hiring
policies for employees or former employees of the independent auditors;
(viii)
to establish procedures
for:
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the
receipt, retention, treatment, investigation and resolution of complaints received
by the Company regarding accounting, internal accounting controls or auditing matters;
and
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the confidential, anonymous submission
by employees of the Company of concerns regarding questionable accounting or auditing
matters; and
(ix)
to review (i) the internal
control report prepared by management, including management’s assessment of
the effectiveness of the Company’s internal control structure and procedures
for financial reporting; and (ii) the independent auditors’ attestation, and
report, on the assessment made by management;
3.
with respect to reporting
and recommendations,
(i)
to prepare any report
or other disclosures, including any recommendation of the Audit Committee, required
by the rules of the SEC to be included in the Company’s annual proxy statement;
(ii)
to review this Charter
at least annually and recommend any changes to the full Board;
(iii)
to report its activities
to the full Board on a regular basis and to make such recommendations with respect
to the above and other matters as the Audit Committee may deem necessary or appropriate;
and
(iv)
to annually evaluate
the performance of the Audit Committee;
4.
Review and approve all
“related-party transactions” (for purposes of this charter, “related
party transactions” shall mean those transactions required to be disclosed
by Item 404 of Regulation S-K); and
5.
Review and approve (a)
any change or waiver in the Company’s code of ethics for senior financial
officers and (b) any disclosure made on Form 8-K or the Company’s website
regarding such change or waiver.
V.
Resources and Authority of the Audit Committee:
The Audit Committee shall have the resources and authority appropriate to discharge
its responsibilities, including the authority to select, engage, terminate, and
approve the fees and other retention terms of special or independent counsel, accountants
or other advisers, as it deems necessary to carry out its duties, without seeking
approval of the Board or management. The Company will provide for appropriate funding,
as determined by the Audit Committee, for payment of: (i) compensation to 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; (ii)
compensation to any advisors employed by the Audit Committee under the preceding
sentence; and (iii) ordinary administrative expenses of the Audit Committee that
are necessary or appropriate in carrying out its duties.
VI.
Delegation to Subcommittee:
To the extent permitted by the Company’s Bylaws and applicable law, the Audit
Committee may, in its discretion, delegate all or a portion of its duties and responsibilities
to a subcommittee of the Audit Committee; provided, however, that any actions taken
pursuant to any such delegation shall be reported to the Audit Committee at its
next meeting.
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