KapStone Audit Commitee Charter

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KAPSTONE PAPER AND PACKAGING CORPORATION CHARTER OF THE AUDIT COMMITTEE Organization The Audit Committee of KapStone Paper and Packaging Corporation (the “Company”) is appointed by the Board of Directors (the “Board”) to assist the Board in monitoring (1) the integrity of the financial statements of the Company; (2) the compliance by the Company with legal and regulatory requirements and the Company’s Code of Conduct and Ethics; and (3) the independence and performance of the Company’s internal and external auditors. The Audit Committee also serves in an oversight role providing advice, counsel and direction to management and the independent auditors on the basis of the information it receives, discussions with the independent auditors and the experience of the Committee’s members in business, financial and accounting matters. The Audit Committee is comprised of not less than three members who shall meet the independence and experience requirements as provided in the applicable Marketplace Rules of the NASDAQ Stock Market. The members of the Audit Committee, including the designation of the Chair of the Committee, shall be made by the full Board on an annual basis. At least one member of the Audit Committee shall be a financial expert as defined by the Securities and Exchange Commission (the “SEC”). Audit Committee members are generally not expected to serve on the audit committees of more than two other public companies. The Audit Committee shall ...
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KAPSTONE PAPER AND PACKAGING CORPORATION
CHARTER OF THE AUDIT COMMITTEE
Organization
The Audit Committee of KapStone Paper and Packaging Corporation (the “Company”) is
appointed by the Board of Directors (the “Board”) to assist the Board in monitoring (1) the
integrity of the financial statements of the Company; (2) the compliance by the Company with
legal and regulatory requirements and the Company’s Code of Conduct and Ethics; and (3) the
independence and performance of the Company’s internal and external auditors.
The Audit Committee also serves in an oversight role providing advice, counsel and direction to
management and the independent auditors on the basis of the information it receives, discussions
with the independent auditors and the experience of the Committee’s members in business,
financial and accounting matters.
The Audit Committee is comprised of not less than three members who shall meet the
independence and experience requirements as provided in the applicable Marketplace Rules of
the NASDAQ Stock Market. The members of the Audit Committee, including the designation of
the Chair of the Committee, shall be made by the full Board on an annual basis.
At least one member of the Audit Committee shall be a financial expert as defined by the
Securities and Exchange Commission (the “SEC”). Audit Committee members are generally not
expected to serve on the audit committees of more than two other public companies.
The Audit Committee shall have the authority to retain independent legal, accounting or other
advisors as it deems appropriate to advise the Committee at the Company’s expense. ittee shall meet as necessary, but not less than once per calendar quarter. The
Audit Committee shall make regular reports to the Board at the next Board of Directors Meeting
following each quarterly Audit Committee meeting.
Responsibilities
The Audit Committee shall:
1. Review and reassess the adequacy of its charter annually and recommend any
proposed changes to the Board for approval.
2. Review the annual audited financial statements with management and the
independent auditor, including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could significantly affect the
Company’s financial statements. Recommend to the Board of Directors that the audited financial
statements be included in the Annual Report and on Form 10-K.
3. Discuss with management the Company’s earnings press releases, including the
use of “pro-forma” or “adjusted” non-generally accepted accounting principles (“GAAP”)


12095232 information, as well as financial information and earnings guidance provided to analysts and
rating agencies.
4. Review disclosures made to the Audit Committee by the Company’s Chief
Financial Officer and Chief Executive Officer during their certification process for the Form 10-
K and Form 10-Q concerning any significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving management or other employees
who have a significant role in the Company’s internal controls.
5. Review and discuss quarterly reports from the independent auditor on:
(a) All critical accounting policies and practices to be used.
(b) All alternative treatments of financial information within GAAP that have
been discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred by the
independent auditor.
(c) Other material written communications between the independent auditor
and management, such as any management letter or schedule of
unadjusted differences.
6. Review with management and the independent auditor the effect of regulatory and
accounting initiatives as well as off-balance sheet structures and certain transactions out of the
ordinary on the Company’s financial statements.
7. Review with management and the independent auditor the Company’s quarterly
financial statements prior to the filing of its Form 10-Q, including the results of the independent
auditors’ reviews of the quarterly financial statements.
8. Review with the independent auditor any problems or difficulties the auditor may
have encountered in the course of the audit work, including any restrictions on the scope of
activities or access to required information, and any disagreements with management.
9. Possess direct responsibility for the resolution of disagreements between
management and the independent auditor regarding financial reporting.
10. Meet at least quarterly with the Chief Financial Officer, the lead internal auditor
and the independent auditor in separate executive sessions.
11. Possess the sole authority to appoint or replace the independent auditor, which
reports directly to the Audit Committee.
12. Review and evaluate with regular annual input from management the lead partner
of the independent auditor team.
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12095232 13. Ensure the rotation of the lead (or coordinating) audit partner having primary
responsibility for the audit and the audit partner responsible for reviewing the audit as required
by law.
14. Obtain and review a report from the independent auditor at least annually
regarding (a) the independent auditor’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, (c) any steps taken
to deal with any such issues, and (d) all relationships between the independent auditor and the
Company. Evaluate the qualifications, performance and independence of the independent
auditor, including considering whether the auditor’s quality controls are adequate and the
provision of permitted non-audit services is compatible with maintaining the auditor’s
independence, and taking into account the opinions of management and internal auditors. The
Audit Committee shall present its conclusions with respect to the independent auditor to the
Board.
15. Possess direct responsibility for pre-approval of the estimated fees or structure of
the fees to be paid to the independent auditor for audit services.
16. Possess direct responsibility for pre-approval of the retention of the independent
auditor for any non-audit service and the estimated fee or structure of the fee for such service.
17. Meet with the independent auditor at the beginning of each calendar year to
review the planning, staffing and conduct of the annual audit process.
18. Review the annual performance evaluation and the appointment and replacement
of the lead internal auditor.
19. Review the significant findings in the reports to management prepared by the
internal auditor and management’s responses.
20. Discuss with the independent auditor and management the internal audit function
and responsibilities, budget and staffing and any recommended changes in the planned scope of
the internal audit.
21. Obtain reports from management and the Company’s lead internal auditor that the
Company, including its subsidiary/affiliated entities, are in conformity with applicable legal
requirements and the Company’s Code of Conduct and Ethics, including disclosures of insider
and affiliated party transactions.
22. Review with management and the independent auditor any correspondence with
regulators or governmental agencies and any published reports, which raise material issues
regarding the Company’s financial statements or accounting policies.
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12095232 23. Review with the Company’s General Counsel or outside counsel legal matters
that may have a material impact on the financial statements, the Company’s compliance policies
and any material reports or inquiries received from regulators or governmental agencies.
24. Review and approve the Company’s procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, and the confidential, anonymous submission by employees of
concerns regarding questionable accounting or auditing matters.
25. Review and approve all related party transactions, which shall include all
transactions required to be disclosed pursuant to SEC Regulation S-K, Item 404.
26. Prepare the Audit Committee report required by the rules of the Securities and
Exchange Commission to be included in the Company’s annual proxy statement.
Limitation of Audit Committee’s Role
While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not
the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s
financial statements are complete and accurate and are in accordance with GAAP and applicable
rules and regulations. These are the responsibilities of management and the independent auditor.
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12095232

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