CHARTER OF THE
GOVERNANCE AND
NOMINATING COMMITTEE
OF THE BOARD OF DIRECTORS
OF EP MEDSYSTEMS, INC.
I.
Purpose
The Governance and Nominating
Committee (the “Committee”) of the Board of Directors
(“Board”) of EP MedSystems, Inc. (the “Company”) is
appointed by, and generally acts on behalf, of the
Board. The Committee’s purposes shall be:
A.
To advise the Board regarding the membership and
operations of the Board;
B. To identify individuals
qualified to serve as members of the Board, to select,
subject to ratification by the Board, the director
nominees for the next annual meeting of stockholders,
and to recommend to the Board individuals to fill
vacancies on the Board;
C. To recommend to the
Board the responsibilities of each Board committee, the
structure and operation of each Board committee, and the
director nominees for assignment to each Board
committee;
D. To oversee the Board’s
annual evaluation of its performance and the performance
of other Board committees; and
E. To develop and
recommend to the Board a set of corporate governance
guidelines applicable to the Company and to periodically
review the guidelines.
II.
Membership
A.
Number and Independence. The Committee
shall be composed of at least two directors, a majority
of whom shall be independent. A director shall qualify
as independent if the Board has affirmatively
determined, consistent with the independence criteria
set forth in the Company’s Corporate Governance
Guidelines, that the director is independent.
B.
Selection and Removal. The members of the
Committee shall be designated and approved by a majority
of the whole Board and shall serve for one-year terms or
until their successors shall be appointed, subject to
their earlier resignation, retirement, or removal. No
member of the Committee shall be removed except by
majority vote of the independent directors of the full
Board then in office. The Committee shall recommend,
and the Board shall designate, one member of the
Committee to serve as Chairperson.
III.
Meetings and Procedures
A.
Meetings. The Committee shall meet as
often as it may deem necessary and appropriate in its
judgment. A majority of the members of the Committee
shall constitute a quorum.
B.
Special Meetings. The Chairperson of the
Committee or a majority of the members of the Committee
may call a special meeting of the Committee.
C.
Delegation. The Committee may delegate
authority to one or more members of the Committee when
appropriate, but no such delegation shall be permitted
if the authority is required by law, regulation, or
listing standard to be exercised by the Committee as a
whole.
D.
Additional Attendees. The Committee may
request that any directors, officers, or employees of
the Company, or any other person whose advice and
counsel is sought by the Committee, attend any meeting
to provide such information as the Committee requests.
E.
Minutes. The Committee shall keep written
minutes of its meetings, which minutes shall be
maintained with the books and records of the Company.
F.
Reporting. The Committee shall report to
the Board on the matters discussed at each meeting of
the Committee, including describing all actions taken by
the Committee at the meeting.
IV.
Duties and Responsibilities
The Committee shall have the following duties and
responsibilities:
A.
Board Size and Composition.
1.
Consider and recommend to the Board the
appropriate size, function, and needs of the Board, so
that the Board as a whole collectively possesses a broad
range of skills, expertise, industry, and other
knowledge, and business and other experience useful to
the effective oversight of the Company’s business. The
Board also seeks members from diverse backgrounds so
that the Board consists of members with a broad spectrum
of experience and expertise and with a reputation for
integrity. Directors should have experience in
positions with a high degree of responsibility, be
leaders in the companies or institutions with which they
are affiliated, and be selected based upon contributions
that they can make to the Company.
2.
Determine what types of backgrounds, skills, and
attributes of Board members are needed to help
strengthen and balance the Board, taking into account
the competencies described above, and actively seek
individuals qualified to become Board members.
3.
Recommend to the Board one member of the Board to
serve as Chairperson of the Board. The Chairperson
shall preside at all meetings of the Board and, in the
absence of the Chief Executive Officer (“CEO”) (unless
the Chairperson is also the CEO), at meetings of the
stockholders. The director who is appointed Chairperson
is appointed by at least a majority of the remaining
directors and serves at the pleasure of the Board.
4.
Have the sole authority, and necessary funding,
to retain, set compensation and retention terms for, and
terminate any consultants, legal counsel or other
advisors, including any search firm to be used to
identify director candidates, that the Committee
determines to employ to assist it in the performance of
its duties.
5.
Evaluate and recommend to the Board the director
nominees of the Board to be elected by the stockholders
at the Company’s next annual meeting of stockholders
and, where applicable, recommend to the Board
individuals to fill vacancies on the Board. In
selecting nominees, the Committee shall consider
individuals recommended by Company stockholders. Such
recommendations should be submitted, along with the
following information, to the Chairman of the Committee
at least 120 days before the one-year anniversary of the
date on which the Company first mailed its proxy
materials for the prior year’s annual meeting of
stockholders:
·
the name and address of the recommending
stockholder;
·
the name of the candidate and information
about the candidate that would be required to be
included in a proxy statement under the rules of the
SEC;
·
information about the relationship between
the candidate and the recommending stockholder;
·
the consent of the candidate to serve as a
director; and
·
proof of the number of shares of the
Company’s common stock that the recommending stockholder
owns and the length of time the shares have been owned.
B.
Board Committees.
1.
Recommend to the Board the responsibilities of
the Board committees, including each committee’s
membership, operations, and authority to delegate to
subcommittees.
2.
Evaluate and recommend to the Board those
directors to be appointed to the various Board
committees, including the persons recommended to serve
as chairperson of each committee. In making its
evaluations and recommendations, the Committee should
consider: (i) the qualifications for membership on each
committee; (ii) the extent to which there should be a
policy of periodic rotation of directors among the
committees; (iii) any limitations on the number of
consecutive years a director should serve on any one
committee; and (iv) the number of boards and other
committees on which the directors serve.
C.
Evaluation of the Board and Board Committees.
1.
Oversee the periodic evaluation of the Board and
the Audit and Compensation Committees and deliver
reports to the Board setting forth the results of such
evaluations. The Committee also shall monitor director
performance throughout the year (noting particularly any
directors who have had a change in their primary job
responsibilities or who have assumed additional
directorships since their last assessment). If any
serious problems are identified, the Committee will work
with the director to resolve such problems or, if
necessary, recommend to the Board that it seek such
director’s resignation.
2.
Periodic review and assess the performance of the
Committee and deliver a report to the Board setting
forth the results of its evaluation. In conducting this
review, the Committee shall address matters that it
considers relevant to its performance, including, at a
minimum, the adequacy, appropriateness and quality of
the information and recommendations presented to the
Board, the manner in which they were discussed or
debated, and whether the number and length of meetings
of the Committee were adequate for the Committee to
complete its work in a thorough and thoughtful manner.
D.
General Corporate Governance Matters.
1.
Periodically review and assess the adequacy of
the Company’s Corporate Governance Guidelines and
recommend any changes to the Board for its approval.
2.
Recommend other corporate governance related
matters for consideration by the Board, including: (i)
the structure of Board meetings, including
recommendations for the improvement in the conduct of
such meetings, and the timeliness and adequacy of the
information provided to the Board prior to such
meetings; (ii) director retirement policies; (iii)
director and officer insurance policy requirements; (iv)
policies regarding the number of Boards on which a
director may serve; and (v) director orientation
and training.
3.
Review periodically the Company’s Code of
Conduct.
4.
Review periodically the compensation of
non-employee directors and the principles upon which
such compensation is determined, and recommend to the
Board, for its approval, the components and amounts of
compensation for non-employee directors. In this
regard, Company management should report periodically as
to how the Company’s non-employee director compensation
practices compare with those of other similarly situated
public corporations.
5.
Consult with the CEO, as appropriate and other
Board members to assure that its decisions facilitate a
sound relationship between and among the Board, Board
committees, individual directors, and management.
6.
Review and reassess the adequacy of this Charter
and the charters of each of the other standing
committees of the Board annually and recommend any
proposed changes to the Board for its approval.
7.
Perform any other activities consistent with this
Charter, the Company’s Certificate of Incorporation, the
Company’s Bylaws and governing law as the Committee or
the Board deems necessary or appropriate.
E.
Other Matters.
Nothing contained in this charter is intended to, or
should be construed as, creating any responsibility or
liability of the members of the Committee except to the
extent otherwise provided under applicable New Jersey
law, which shall continue to set the legal standard for
the conduct of the members of the Committee.
I. Purpose
The Audit Committee
(the “Committee”) of the Board of Directors (the
“Board”) of EP MedSystems, Inc. (the “Company”) is
appointed by, and generally acts on behalf of, the
Board. The Committee’s purposes shall be:
A. To assist the Board in its oversight of: (i)
the integrity of the Company’s financial statements; and
(ii) the Company’s compliance with legal and regulatory
requirements;
B. To interact directly with and evaluate the
performance of the independent auditors, including to
determine whether to engage or dismiss the independent
auditors and to monitor the independent auditors’
qualifications and independence; and
C. To prepare the report required by the rules of
the Securities and Exchange Commission (the “SEC”) to be
included in the Company’s proxy statement.
Although the Committee has the powers and responsibilities set
forth in this Charter, the role of the Committee is
oversight. The members of the Committee are not
full-time employees of the Company and may or may not be
accountants or auditors by profession or experts in the
fields of accounting or auditing and, in any event, do
not serve in such capacity. Consequently, it is not the
duty of the Committee to conduct audits, to
independently verify management’s representations, or to
determine that the Company’s financial statements are
complete and accurate, prepared in accordance with
generally accepted accounting principles (“GAAP”), or
fairly present the financial condition, results of
operations, and cash flows of the Company in accordance
with GAAP. These are the responsibilities of
management and the independent auditors. The
Committee’s considerations and discussions with
management and the independent auditors do not assure
that the Company’s financial statements are presented in
accordance with GAAP, that the audit of the Company’s
financial statements has been carried out in accordance
with GAAP, or that the Company’s independent auditors
are in fact “independent.”
II.
Membership
A. Number and Independence. The Committee
shall consist of at least three directors, each of whom
must be independent. A director shall qualify as
independent if the Board has affirmatively determined
that such director has met the independent director
requirements set forth in the Nasdaq Marketplace rules.
In addition, members of the Committee also shall satisfy
the following additional requirements in order to be
independent:
1. No Committee member or immediate family
member of such Committee member may be an affiliated
person of the Company or any of its subsidiaries, as
that term is defined by the SEC; and
2. No Committee member may accept, directly or
indirectly, any consulting, advisory, or other
compensatory fees from the Company or any of its
subsidiaries, except for fees for services as a director
and member of the Audit Committee and any other Board
committee.
B. Financial Sophistication. All members
of the Committee must be financially literate. At least
one member shall have past employment experience in
finance or accounting, requisite professional
certification in accounting, or any other comparable
experience or background that results in such member’s
financial sophistication, including being or having been
a chief executive officer, chief financial officer, or
other senior officer with financial oversight
responsibilities. At least one member of the Committee
shall be an “audit committee financial expert” as that
term is defined by the SEC.
C. Selection and Removal. The members of
the Committee shall be designated and approved by a
majority of the whole Board and shall serve for one-year
terms or until their successors shall be appointed,
subject to their earlier resignation, retirement, or
removal. No member of the Committee shall be removed
except by majority vote of the independent directors of
the full Board then in office. The Governance and
Nominating Committee shall recommend, and the Board
shall designate, one member of the Committee to serve as
Chairperson.
III.
Meetings, Procedures, and Funding
A. Meetings. The Committee shall meet as
often as it may deem necessary and appropriate in its
judgment, but in no event fewer than four times per
year. A majority of the members of the Committee shall
constitute a quorum.
B. Meetings with Independent Auditors.
The Committee shall meet with the independent auditors
and management in separate meetings as often as it deems
necessary and appropriate in its judgment.
C. Special Meetings. The Chairman of the
Committee or a majority of the members of the Committee
may call a special meeting of the Committee.
D.
Additional Attendees. The Committee may request
that any directors, officers, or employees of the
Company, or other persons whose advice and counsel are
sought by the Committee, attend any meeting to provide
such information as the Committee requests.
E. Reporting. The Committee shall report
to the Board on the matters discussed at each meeting of
the Committee, including describing all actions taken by
the Committee at the meeting.
F. Minutes. The Committee shall keep
written minutes of its meetings, which minutes shall be
maintained with the books and records of the Company.
G. Delegation. The Committee may delegate
authority to one or more members of the Committee where
appropriate, but no such delegation shall be permitted
if the authority is required by a law, regulation, or
listing standard to be exercised by the Committee as a
whole.
H. Company Resources. The Committee shall
have the authority to obtain advice and assistance from
internal and external legal, accounting, and other
advisors, and the Company shall provide appropriate
funding, as determined by the Committee, for the
Committee to retain any such advisors without requiring
the Committee to seek Board approval.
IV.
Duties and Responsibilities
The
Committee shall have the following duties and
responsibilities:
A. Financial Reporting Process.
1. The Committee shall review and discuss with
management and the independent auditors the annual
audited financial statements to be included in the
Company’s annual report on Form 10-K, the quarterly
financial statements to be included in the Company’s
Form 10-Qs, the Company’s disclosures under
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and any other
financial disclosures to be included in SEC filings
prior to their release. This discussion should include,
where appropriate, a discussion about the Company’s
accounting principles, critical accounting estimates,
financial statement presentation, significant financial
reporting issues and judgments (including off-balance
sheet structures and the use of pro forma or non-GAAP
financial information), the adequacy of the Company’s
internal controls, and any regulatory and accounting
initiatives, correspondence with regulators, or
published reports that raise material issues with
respect to, or that could have a significant effect on,
the Company’s financial statements.
2. The Committee shall recommend to the Board
whether the audited financial statements should be
included in the Company’s annual report on Form 10-K.
3. The Committee shall review earnings press
releases prior to their release, as well as the types of
financial information and earnings guidance provided to
analysts and rating agencies.
4. The Committee shall prepare the report
required by the rules of the SEC to be included in the
Company’s annual proxy statement.
B. Risks and Control Environment.
1. The Committee shall discuss periodically with
management the Company’s policies and guidelines
regarding risk assessment and risk management, as well
as the Company’s major financial risk exposures and the
steps that management has taken to monitor and control
such exposures.
2. The Committee shall oversee the Company’s
disclosure controls and procedures, including applicable
internal control over financial reporting, as well as
internal control over financial reporting relating to
the authorization of transactions and safeguarding and
control of assets, and, where applicable, shall oversee
the changes in internal control over financial reporting
intended to address any significant deficiencies in the
design or operation of internal control over financial
reporting or material weaknesses therein and any fraud
involving management or other employees that are
reported to the Committee. In addition, the Committee
shall review and discuss the annual report of management
on internal control over financial reporting and the
independent auditors’ attestation report on management’s
evaluation of internal control over financial reporting,
when those reports are required by SEC rules.
C. Independent Auditors.
1. The
Committee shall have the sole authority to retain, set
compensation and retention terms for, terminate,
oversee, and evaluate the activities of the Company’s
independent auditors. The independent auditors shall
report directly to the Committee. The Company shall
provide for appropriate funding, as determined by the
Committee, for payment of compensation to the
independent auditors.
2. The Committee shall review and approve in
advance the retention of the independent auditors for
the performance of all audit and lawfully permitted
non-audit services and the fees for such services.
Pre-approval of lawfully permitted non-audit services
may be pursuant to appropriate policies and procedures
established by the Committee for the pre-approval of
such non-audit services, provided that any such
pre-approved non-audit services are reported to the full
Committee at its next scheduled meeting.
3. Prior to initiation of the audit, the
Committee shall meet with the independent auditors to
discuss the planning and staffing of the audit,
including the impact of applicable rotation requirements
and other independence rules on the staffing.
4. The Committee shall, at least annually,
obtain and review a report by the independent auditors
describing: (i) the independent auditors’ internal
quality-control procedures; (ii) 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 or a private sector regulatory board, within
the preceding five years, respecting one or more
independent audits performed by the firm, and any steps
taken to deal with any such issues; and (iii) in order
to assess the firm’s independence, all relationships
between the firm and the Company.
5. The Committee shall review periodically any
reports prepared by the independent auditors and
provided to the Committee relating to significant
financial reporting issues and judgments including,
among other things, the Company’s selection,
application, and disclosure of critical accounting
policies and practices, all alternative treatments,
assumptions, estimates, or methods that have been
discussed with management, including the ramifications
of such treatments and the treatment preferred by the
independent auditors, and any other material written
communications between the independent auditors and
management, such as any management letter or schedule of
unadjusted differences.
6. The Committee shall discuss with the
independent auditors any audit problems or difficulties,
including any restrictions on the scope of the
independent auditors’ activities or on access to
requested information, and management’s response to
same, shall discuss with the independent auditors any
other matters required to be brought to its attention
under auditing standards (e.g., Statement on
Auditing Standards No. 61 and Independent Standards
Board Standard No. 1), and shall resolve any
disagreements between the independent auditors and
management.
7. After reviewing the reports from the
independent auditors and the independent auditors’ work
throughout the audit period, the Committee will conduct
an annual evaluation of the independent auditors’
performance and independence, including considering
whether the independent auditors’ quality controls are
adequate. This evaluation also shall include the review
and evaluation of the audit engagement team, including
the lead partner. In making its evaluation, the
Committee shall take into account the opinions of
management. The Committee shall present its conclusions
with respect to the evaluation of the independent
auditors to the Board.
8. The Committee shall set clear policies for
the hiring by the Company of employees or former
employees of the independent auditors.
D. Evaluations and Reports.
1. The Committee shall periodically review and
assess the performance of the Committee and each
Committee member and deliver a report to the Board
setting forth the results of its evaluation. In
conducting this review, the Committee shall address
matters that it considers relevant to its performance,
including at a minimum, the adequacy, appropriateness,
and quality of the information and recommendations
presented to the Board, the manner in which they were
discussed or debated, and whether the number and length
of meetings of the Committee were adequate for the
Committee to complete its work in a thorough and
thoughtful manner.
2. The Committee shall make regular reports to
the Board on its activities, including reviewing any
issues that arise respecting the quality and integrity
of the Company’s public reporting, the performance and
independence of the Company’s independent auditors, and
the effectiveness of the Company’s disclosure controls
and procedures.
E. Other Matters.
1. The Committee shall establish procedures for
the approval of all related-party transactions involving
executive officers and directors.
2. 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 submission by Company employees
of concerns regarding questionable accounting or
auditing matters.
3. The Committee shall review and reassess the
adequacy of this Charter annually and recommend any
proposed changes to the Board for its approval.
4. The Committee shall maintain free and open
communication with the Board, management, the internal
auditor, and the independent auditors.
5. The Committee shall perform any other
activities consistent with this Charter, the Company’s
Certificate of Incorporation, the Company’s Bylaws (as
each such document may be amended and restated from time
to time), and governing law, as the Committee or the
Board may deem necessary or appropriate.
6. The Company shall provide appropriate
funding, as determined by the Committee, for payment of
ordinary administrative expenses of the Committee that
are necessary or appropriate in carrying out its
duties.
