Amended August 4, 2005

 

AUDIT COMMITTEE

Committee Members:

     *  Membership

Douglas C. Yearley, Chairman

     *  Purposes

E. C. "Pete" Aldridge, Jr.

     *  Responsibilities

James M. Schneider

     *  Authorities

Anne Stevens

     *  Procedures

James R. Ukropina

     *  Limitations Inherent in the Audit                           

 

         Committee's Role

 


Membership:

The Audit Committee shall consist of three (3) or more directors who meet the independence and financial literacy and expertise requirements of the New York Stock Exchange.  The members of the Audit Committee shall be elected by the Board of Directors to serve at the pleasure of the Board of Directors.  The Board of Directors shall designate a chairman from among the membership of the Audit Committee.  Upon recommendation by the Nominating and Corporate Governance Committee, the Board may remove any committee member at any time.  Vacancies on the Committee shall be filled by the Board of Directors.

Purposes:

The purpose of the Audit Committee shall be to assist the Board of Directors in fulfilling its oversight responsibilities relating to (i) the integrity of the Corporationís financial statements, (ii) the Corporationís compliance with legal and regulatory requirements, (iii) the qualifications, independence and performance of the Corporationís independent auditors and (iv) the performance of the Corporationís internal audit function.  The Audit Committee shall, except when such powers are by statute or regulation reserved to the Board of Directors, possess and may exercise the powers of the Board of Directors relating to all accounting and auditing matters for the Corporation.

Responsibilities:

In order to achieve the purposes outlined in this charter, the Audit Committee shall be assigned the following responsibilities:

1. Independent Auditors.

(a) Be directly responsible for the appointment, compensation, retention, oversight and termination of the independent auditors, which auditors shall report directly to the Audit Committee;

(b) Ensure that the independent auditors submit on a periodic basis (but at least annually) to the Audit Committee a report delineating all relationships between the independent auditor and the Corporation, and have authority to take appropriate action in response to the independent auditorsí report to satisfy itself of the independent auditorsí independence;

(c) Ensure that the independent auditors submit on a periodic basis (but at least annually) to the Audit Committee a report or reports describing (i) the independent auditorsí internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the auditors or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, regarding one or more independent audits carried out by the auditing firm; and any steps taken to deal with any such issues; and have authority to take appropriate action in response to any such report;

(d) Pre-approve the audit, audit-related and non-audit services to be provided by the Corporationís independent auditors, and the related fees, pursuant to pre-approval policies and procedures established by the Audit Committee;

(e) Review with the independent auditors any audit problems or difficulties and managementís response thereto, and be directly responsible for the resolution of disagreements between management and the independent auditors regarding the Corporationís financial reporting;

(f) Require that the independent auditors advise the Audit Committee of any matters identified during reviews of quarterly financial statements or audits of annual financial statements which are required to be communicated to the Audit Committee by the independent auditors under generally accepted auditing standards, and that the independent auditors provide such communication prior to the related quarterly or annual press release or, if not practicable, prior to filing the related Securities and Exchange Commission filings on Form 10-Q or Form 10-K;

(g) Evaluate the independent auditorsí qualifications, performance and independence, including evaluation of the lead partner of the independent auditor, and monitor the rotation of the lead partner;

(h) Establish policies for the Corporationís hiring of current or former employees of the independent auditors.

2. Internal Auditors.  Review the qualifications and work of the Corporationís internal audit staff, the scope of the internal audit staffís work plan for the year, its budget and staffing and, as appropriate, review significant findings and managementís actions to address these findings.

3. Financial Statements, Disclosures and Related Matters.

(a) Review with the Corporationís management, independent auditors and internal auditors, as appropriate, the following:

(i) Any major issues regarding accounting principles and financial statement presentations, including any significant changes in the Corporationís selection or application of accounting principles, and major issues as to the adequacy of the Corporationís internal controls;

(ii) Any analyses prepared by management and/or the independent auditors setting forth significant accounting and financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative methods under generally accepted accounting principles on the financial statements; and

(iii) The effect of regulatory and accounting initiatives, as well as off-balance sheet structures, on the financial statements of the Corporation.

(b) Review with the Corporationís management the type and presentation of information included in its earnings press releases, paying particular attention to the use of non-GAAP financial information, and financial information and earnings guidance provided to analysts and rating agencies.

(c) Prior to filing with the Securities and Exchange Commission, review and discuss with management and the independent auditors:

(i) the Corporationís annual audited financial statements to be filed on Form 10-K, and recommend to the Board whether the annual audited financial statements should be included in the Corporationís Form 10-K, with the review to include: (x) the independent auditorsí judgment about the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements and (y) the disclosure included in ďManagementís Discussion and Analysis of Financial Condition and Results of Operations;Ē

(ii) managementís assessment of and report on the effectiveness of internal control over financial reporting as of the end of the most recent fiscal year, and the independent auditorís related report;

(iii) the Corporationís quarterly financial statements to be filed on Form 10-Q, with the review to include the disclosures included in ďManagementís Discussion and Analysis of Financial Condition and Results of Operations;Ē and

(iv) any significant deficiencies or material weaknesses identified by management in connection with required quarterly certifications, and any significant changes in internal control over financial reporting that are disclosed.

(d) Obtain and review a report from the independent auditors, prior to filing of the Form 10-K with the Securities and Exchange Commission, related to the Corporationís critical accounting policies and practices used; all alternative treatments under generally accepted accounting principles that have been discussed with management, including the ramifications of the use of such alternatives and the independent auditorsí preferred treatment; and other material written communication between the independent auditors and management, as appropriate; and

(e) Prepare an Audit Committee report as required by the Securities and Exchange Commission to be included in the Corporationís annual proxy statement.

4. Other Risk Management Matters.  Review the Corporationís policies and practices with respect to risk assessment and risk management, including discussing with management the Corporationís major financial risk exposures and the steps that have been taken to monitor and control such exposures.

5. Legal and Regulatory Compliance Matters.

(a) Establish procedures for (i) the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters and (ii) the confidential, anonymous submission  to the Corporation of concerns regarding questionable accounting or auditing matters; and review any complaints regarding accounting, internal accounting controls or auditing matters received pursuant to such procedures;

(b) Review with the General Counsel the status of pending claims, litigation and other legal matters on a periodic basis.

6. Committee Self-Assessment.  The Audit Committee shall annually conduct a performance evaluation of the Committee.

Authorities:

In furtherance of its responsibilities, the Audit Committee shall have the power to investigate any matter falling within its jurisdiction, and it shall also possess the following authorities:

1. Outside Advisors.  The Audit Committee may retain, at the Corporationís expense, special legal, accounting or other advisors and may request any officer or employee of the Corporation or the Corporationís outside counsel or independent auditors to meet with any members of, or advisors to, the Audit Committee.

2. Delegated Authority.  The Audit Committee shall perform such other functions and exercise such other powers as may be delegated to it from time to time by the Board of Directors. 

3. Subcommittees.  The Audit Committee may delegate its authority to subcommittees (which may consist of one (1) or more members of the Committee) when it deems appropriate and in the best interests of the Corporation.

4. Reports to Board of Directors.  The Committee shall report regularly to the Board of Directors.

5. Committee Charter.  The Committee shall review and recommend to the Board of Directors the adequacy of its charter and proposed changes annually or as otherwise needed.

Procedures:

The Audit Committee shall hold at least four meetings each year, and shall at least annually meet in executive session and periodically in executive session with representatives of the Corporationís independent auditors, management and internal audit department.

Limitations Inherent in the Audit Committeeís Role:

While the Audit Committee has the responsibilities and powers set forth in this charter, it is not the responsibility of the Audit Committee to plan or conduct audits or to determine that the Corporationís financial statements are complete and accurate and are in accordance with accounting principles generally accepted in the United States.  This is the responsibility of management and the independent auditors.  Nor is it the responsibility of the Audit Committee to assure compliance with laws and regulation and the Corporationís Code of Ethics and Business Conduct.