<PAGE> 1
EXHIBIT "10.18"
CHARTER
OF THE
AUDIT COMMITTEE
OF THE
AMERICAN NATIONAL FINANCIAL, INC.
BOARD OF DIRECTORS, INC.
I. Audit Committee Purpose
The Audit Committee (hereinafter sometimes referred to as the
"Committee") is appointed by the Board of Directors (the "Board") to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
o Monitor the integrity of the Company's financial reporting process
and systems of internal controls regarding finance, and accounting.
o Monitor the independence and performance of the Company's
independent auditors and internal auditing department.
o Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of
Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to the
independent auditors as well as anyone in the organization. The Audit Committee
has the ability to retain, at the Company's expense, legal, accounting or other
consultants or experts it deems necessary in the performance of its duties.
II. Audit Committee Composition and Meetings
Audit Committee members shall meet the requirements of the National
Association of Securities Dealers Automated Quotation ("NASDAQ"). The Audit
Committee shall be comprised of three or more directors as determined by the
Board, each of whom shall be independent non-executive directors, free from any
relationship that would interfere with the exercise of his or her independent
judgment. The NASDAQ requires annual written affirmation of the Audit Committee
independence. The criteria for assessing independence are:
<PAGE> 2
I. Former employees and family members of former employees. Must be
a minimum of three years since employment with the Company,
except that NASDAQ rules allow one former employee or one family
member of a former employee, with less than three years
separation, to be an audit committee member if it is determined
by the Board to be in the Company's best interest.
II. Business Relationships. If a director's employer receives revenue
in excess of $200,000 per year, or five (5%) percent of its total
revenue from the Company, the director is not considered
independent.
III. Cross-directorships. An audit committee member's compensation
cannot be impacted by an employee of the Company.
All members of the Committee shall have a basic understanding of
finance and accounting and be able to read and understand fundamental financial
statements, and at least one member of the Committee shall have accounting or
related financial management expertise.
Audit Committee members shall be appointed by the Board on
recommendation of the Nominating Committee. If the Chairman of the Audit
Committee (the "Committee Chairman") is not designated or present, the members
of the Committee may designate a Committee Chairman by majority vote of the
Committee membership.
The Committee shall meet at least four times annually, or more
frequently as circumstances dictate. The Audit Committee Chairman shall prepare
and/or approve an agenda in advance of each meeting. The Committee should meet
privately in executive session at least annually with management, the director
of the internal auditing department, the independent auditors, and as a
committee to discuss any matters that the Committee or each of these groups
believe should be discussed. In addition, the Committee, or at least its
Committee Chairman, should communicate with management and the independent
auditors quarterly to review the Company's financial statements and significant
findings based upon the auditors limited review procedures.
III. Audit Committee Responsibilities and Duties
Review Procedures
I. Review and reassess the adequacy of this Charter at least
annually. Submit the charter to the Board for approval and have
the document published at least every three years in accordance
with Securities and Exchange Commission ("SEC") regulations.
<PAGE> 3
II. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues
regarding accounting principles, practices, and judgments.
III. In consultation with the management, the independent auditors,
and the internal auditors, consider the integrity of the
Company's financial reporting processes and controls. Discuss
significant financial risk exposures and the steps management has
taken to monitor, control, and report such exposures. Review
significant findings prepared by the independent auditors and the
internal auditing department together with management's
responses.
IV. Review with financial management and the independent auditors the
Company's quarterly financial results prior to the release of
earnings and/or the Company's quarterly financial statements
prior to filing or distribution. Discuss any significant changes
to the Company's accounting principles and any items required to
be communicated by the independent auditors in accordance with
SAS 61 (see item 9 below). The Committee Chairman may represent
the entire Audit Committee for purposes of this review.
Independent Auditors
V. The independent auditors are ultimately accountable to the Audit
Committee and the Board. The Committee shall review the
independence and performance of the auditors and annually
recommend to the Board the appointment of the independent
auditors or approve any discharge of auditors when circumstances
warrant.
VI. Approve the fees and other significant compensation to be paid to
the independent auditors. Review and approve requests for
significant management consulting engagements to be performed by
the independent auditors' firm and be advised of any other
significant study undertaken at the request of management that is
beyond the scope of the audit engagement letter.
VII. On an annual basis, the Committee shall review and discuss with
the independent auditors all significant relationships they have
with the Company that could impair the auditors' independence.
VIII. Review the independent auditors' audit plan. Discuss scope,
staffing, locations, reliance upon management, and internal audit
and general audit approach.
IX. Prior to releasing the year-end earnings, discuss the results of
the audit with the independent auditors. Discuss certain matters
required to be communicated to audit committees in accordance
with AICPA SAS 61.
<PAGE> 4
X. Consider the independent auditors' judgments about the quality
and appropriateness of the Company's accounting principles as
applied in its financial reporting.
Internal Audit Department and Legal Compliance
XI. Review the budget, plan, changes in plan, activities,
organizational structure, and qualifications of the internal
audit department, as needed.
XII. Review the appointment, performance, and replacement of the
senior internal audit executive.
XIII. Review significant reports prepared by the internal audit
department together with management's response and follow-up to
these reports.
XIV. On at least an annual basis, review with the Company's counsel,
any legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance
with applicable laws and regulations, and inquiries received from
regulators or governmental agencies.
Other Audit Committee Responsibilities
XV. Annually prepare a report to stockholders as required by the SEC.
The report should be included in the Company's annual proxy
statement.
XVI. Perform any other activities consistent with this Charter, the
Company's by-laws, and governing law, as the Committee or the
Board deems necessary or appropriate.
XVII. Maintain minutes of meetings and periodically report to the Board
on significant results of the foregoing activities.
