CORPORATE GOVERNANCE: AUDIT COMMITTEE CHARTER

As amended by the Audit Committee on January 26, 2004

Composition of the Audit Committee:

The Audit Committee shall consist of at least three directors, all of whom the Board has determined have no material relationship with the Company and are otherwise "independent" under the rules of the New York Stock Exchange (NYSE) and as defined under Section 301 of the Sarbanes-Oxley Act of 2002 (the "Act") and the rules promulgated thereunder by the Securities and Exchange Commission (the "Commission"). Each member of the Audit Committee shall be, or will become within a reasonable period of time after appointment to the Committee, "financially literate," as interpreted by the Board of Directors in its business judgment. It is the intention of the Company and the Board that at least one member of the Audit Committee will qualify as an "audit committee financial expert," as that term is defined under Section 407 of the Act and the rules promulgated by the Commission thereunder, and the Company shall take such action necessary to designate such expert and ensure compliance with the Act and the foregoing rules. 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 and discloses this determination in the Company’s annual proxy statement.

Members of the Audit Committee shall be appointed by the Board based on nominations from the Company’s 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. The Board shall designate one member of the Committee as its chairperson.

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Purposes of the Audit Committee:

The Audit Committee shall be responsible for assisting the Board of Directors in fulfilling its oversight responsibilities reviewing (i) the quality and integrity of the Company’s financial statements, (ii) the Company’s audit process, financial reporting function, systems of internal controls and compliance programs, (iii) the independent auditors’ qualifications and independence, (iv) the Company’s compliance with legal and regulatory requirements and (v) the performance of the Company’s internal audit function and independent auditors as follows:

(1) The Audit Committee recognizes that the independent auditors for the company are accountable to the Board of Directors and the Audit Committee of the Company, and that the Audit Committee shall have the sole authority and direct responsibility to select, appoint, evaluate, determine the compensation of, retain, oversee the work of and, where appropriate, terminate and/or replace the independent auditors. Accordingly, the Audit Committee shall instruct the Board to present to the shareholders the yearly engagement of independent auditors for the Company, subject to shareholder ratification, and the Audit Committee shall discharge such auditors when deemed necessary or desirable by it. The independent auditors shall report directly to the Audit Committee.

(2) The Audit Committee shall (i) review with the independent auditors and approve the plans and fees of the independent auditors for all auditing services and all non-audit engagements, and on an annual basis confirm the independence of the independent auditors, including reviewing each non-audit service provided by them and the fees therefor; (ii) at least annually, obtain from the independent auditors a written statement delineating all relationships between the auditors and the Company; (iii) review with the independent auditors the nature and scope of any disclosed relationships or professional services that may impact the objectivity and independence of the independent auditors; (iv) recommend that the Board of Directors take appropriate action to satisfy itself of the independence of the auditors; (v) ensure that the independent auditors prepare and deliver annually a formal written statement (the "Auditors’ Statement") describing the independent 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 auditors, and any steps taken to deal with any such issues; (vi) 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; (vii) review and evaluate the qualifications, performance and independence of the lead partner of the independent auditors; (viii) discuss with management the timing and process for implementing the rotation of the lead audit partner and the reviewing partner, and consider whether there should be a regular rotation of the audit firm itself; and (ix) take into account the opinions of management and the Company’s internal auditors in assessing the independent auditors’ qualifications, performance and independence.

 

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(3) The Audit Committee shall (i) review the objectivity of the internal audit function, satisfying itself that the internal auditing staff is protected from undue pressure and is provided with the independence necessary to work in compliance with recognized standards of internal auditing; (ii) review the historical and proposed activities of the internal audit department; (iii) approve the planned scope of internal audits, and any changes thereto; (iv) review and approve the staffing of the internal audit department, including the sufficiency of technical knowledge and adequacy of information systems auditing expertise; (v) review and concur in the appointment, replacement, reassignment or dismissal of the chief internal auditor and (vi) set clear hiring policies for the Company in connection with the Company’s hiring of employees or former employees of the independent auditors.

(4) The Audit Committee shall inquire of management, the chief internal auditor and the independent auditors about significant financial risks to the Company and assess the steps management has taken to minimize such risks. The Audit Committee shall also discuss policies with respect to risk assessment and risk management.

 

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(5) The Audit Committee shall consider, review and discuss with the Company’s management (including the Company’s chief internal auditor) and independent auditors

                                 i.            the adequacy of the Company’s system of internal controls;

                               ii.            any significant matters arising from any audit, including without limitation any audit problems or difficulties, whether raised by management, the internal auditing department or the independent auditors, relating to the Company’s financial statements;

                              iii.            any difficulties the independent auditors encountered in the course of the audit, including without limitation any restrictions on their activities or access to requested information and any significant disagreements with management;

                              iv.            any accounting adjustments that were noted or proposed by the independent auditors but were "passed" (as immaterial or otherwise), any alternative accounting treatments that were discussed by the independent auditors where applicable accounting rules permit alternative treatments, 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;

                                v.            any related significant audit findings and recommendations, together with management’s responses thereto;

                              vi.            any major issues regarding accounting principles and financial statement presentations, including without limitation 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;

                             vii.            the types of financial information and earnings guidance provided, earnings press releases (which may be after issuance of such releases) and the types of presentations made, to analysts and rating agencies; and

                           viii.            such additional financial matters, reports or other disclosures as may be required by the rules of the NYSE, the Act, the Commission and/or other applicable securities laws.

 

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(6) The Audit Committee shall review and discuss the quarterly financial statements, including the Company’s disclosures under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," with management and the independent auditors prior to the filing of each Form 10-Q to determine that the independent auditors do not take exception to the disclosure and content of the financial statements, and discuss any other matters required to be communicated to the Audit Committee by the independent auditors.

(7) The Audit Committee shall review and discuss the financial statements contained in the Annual Report and Form 10-K, including the Company’s disclosures under "Management’s Discussion and Analysis of Financial Condition and Results of Operations," with management and the independent auditors to determine that the independent auditors do not take exception to the disclosure and content of the financial statements. In connection with these activities, the Audit Committee shall review with management and the independent auditors the qualitative judgments on both the appropriateness and acceptability of accounting policies and principles and financial disclosure practices used or proposed to be adopted by the Company, and the independent auditors’ reasoning in accepting or questioning significant estimates made by management. The Audit Committee shall also discuss any other matters required by applicable law and professional standards and practices to be communicated to the Audit Committee by the independent auditors.

(8) The Audit Committee shall prepare a report to be included in the Company’s annual proxy statement or, if the Company does not file a proxy statement, in the Company’s annual report filed on Form 10-K with the Commission in accordance with the Commission’s requirements.

 

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(9) The Audit Committee shall review with management, the chief internal auditor and the independent auditors the results of the Company’s monitoring of compliance with the Code of Business Ethics and the yearly circularization of the statement of the Company’s commitment to internal controls.

(10) The Audit Committee shall prepare and review with the Board an annual performance evaluation of the Audit Committee, which evaluation shall be conducted in such manner as the Audit Committee deems appropriate, and the report to the Board may be made orally by the chairperson of the Audit Committee or any other member of the Audit Committee designated by the Audit Committee to make this report.

(11) The Audit Committee shall provide both the independent and the internal auditors with access to the Board of Directors (through the Audit Committee of the Board). At its meetings, the Audit Committee shall meet separately, periodically, with management, the Company’s chief internal auditor and the independent auditors to discuss any matters that the Audit Committee or any of these persons or firms believe should be discussed privately. Among the items to be discussed in these meetings are the auditors’ evaluation of the Company’s financial, accounting and auditing personnel as applicable, and the cooperation which the auditors received during the course of their audits.

(12) The Audit Committee shall conduct such investigations into matters within the general scope of the Audit Committee’s responsibilities as it may deem appropriate from time to time or as may be referred to it by the Board.

 

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(13) The Audit Committee shall (i) meet at least once every fiscal quarter and more frequently as circumstances require and report committee actions to the Board of Directors with such recommendations, as the Audit Committee may deem appropriate, (ii) ask members of management or others to attend the Audit Committee meetings and provide pertinent information as necessary and (iii) prepare minutes of the Audit Committee meetings and ensure that they are filed with the Corporate Secretary.

(14) The Audit Committee shall (i) review the policy and procedures with respect to officers’ expense accounts and perquisites, including their use of corporate assets; (ii) consider the results of any review of these areas by the internal or external auditors; and (iii) review annually, with the Chief Financial Officer, the results of the review of Officers’ Travel and Entertainment Expenses.

(15) The Audit Committee shall ensure that the Company provides annual written affirmation to the NYSE regarding (i) any Board of Directors' determination regarding the independence of Audit Committee members; (ii) the financial literacy of Audit Committee members; (iii) the determination that at least one member of the Audit Committee qualifies as an "audit committee financial expert," and (iv) the annual review of this charter.

(16) The Audit Committee shall establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls and auditing matters, and for the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

(17) The Audit Committee shall report regularly to the Board of Directors 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, and the performance of the internal audit function.

 

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Delegation to Subcommittee:

The Audit Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the Committee consistent with applicable standards for such delegation.

Compensation of Audit Committee Members:

No member of the Audit Committee may 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; (ii) pension or other deferred compensation for prior service that is not contingent on future service and (iii) any other regular benefits that other directors receive. No member of the Audit Committee may receive any consulting, advisory or other compensatory fee from the Company other than in his or her capacity as a member of the Audit Committee, the Company’s Board of Directors or any other committee of the Board.

Resources and Authority of the Audit Committee:

The Audit Committee shall obtain advice and assistance from outside legal, accounting or other advisors, as the Audit Committee deems necessary to carry out its duties. In this regard, the Audit Committee shall have the resources and authority appropriate to discharge its duties and responsibilities, including without limitation the authority to select, retain, terminate, and approve the fees and other retention terms of special or independent counsel, accountants or other experts or consultants, as it deems appropriate, without seeking approval of the Board or management. In addition, the Audit Committee shall be authorized and empowered to take any and all such action as it may determine is necessary or desirable to comply with the Act, the rules promulgated by the Commission pursuant to the Act, and the rules of the NYSE, all as amended from time to time.