Audit Committee/Charter

Committee Members:
     Martha O. Hesse, Chairman
     Edward N. Basha, Jr.
     Pamela Grant
     William S. Jamieson, Jr.
     Humberto S. Lopez
     Kathryn L. Munro
     Bruce J. Nordstrom


Audit Committee Charter:

GENERAL

The Audit Committee is a committee of the Board of Directors of the Company.   Its primary function is to assist the Board in monitoring (1) the integrity of the Company's financial statements, (2) the independent auditor’s qualifications and independence, (3) the performance of the Company’s internal audit function and independent auditors, and (4) the compliance by the Company with legal and regulatory requirements.

The Audit Committee shall prepare the report required by the rules of the Securities and Exchange Commission (the “Commission”) to be included in the Company’s annual proxy statement.

The Audit Committee will report regularly to the Board.


COMMITTEE COMPOSITION AND MEMBER QUALIFICATIONS

The Audit Committee will consist of three or more directors who meet the independence and experience requirements of the New York Stock Exchange ("NYSE").     

No Audit Committee member may simultaneously serve on the audit committee of more than three public companies, including the Company.

Each member of the Audit Committee must meet the independence requirements of Rule 10A-3(b)(1) of the Securities Exchange Act of 1934 (the "Exchange Act"), as reflected in Commission Release No. 34-47654 (April 1, 2003).   Under these requirements, a member of the Audit Committee will not be considered independent if he or she (a) accepts directly or indirectly any consulting, advisory, or other compensatory fee from the Company or (b) is an affiliated person of the Company or any of its subsidiaries, in each case, other than in his or her capacity as a member of the Board or a Board committee.  The Board will determine whether the Audit Committee members meet the required independence standards.

At least one member of the Audit Committee shall be an "audit committee financial expert," as defined by the Commission. 

The Board will select the members of the Audit Committee on at least an annual basis.   Members of the Audit Committee may be removed by the Board at any time.

MEETINGS

The Committee will meet as often as it determines, but not less frequently than quarterly. The Committee may create subcommittees and vest those subcommittees with the authority of the full Committee with respect to specific matters delegated to such subcommittees.

The Committee will meet separately, at least quarterly, with each of management, the internal auditors, and the independent auditor.

AUDIT COMMITTEE AUTHORITY AND RESPONSIBILITIES

General
1.
The Audit Committee shall be directly responsible for the appointment, compensation, retention, and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company.  The independent auditor shall report directly to the Audit Committee.

2. The Audit Committee shall preapprove all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditor, subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior to the completion of the audit.  The Audit Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant preapprovals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant preapprovals are presented to the full Audit Committee at its next scheduled meeting.

3. The Audit Committee shall have the authority to engage independent counsel and other advisors, as it determines necessary to carry out its duties.  The Company shall provide for appropriate funding, as determined by the Audit Committee, for payment of (a) compensation to the independent auditor and any such advisors and (b) ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.

Oversight of the Company's Relationship With the Independent Auditor

4. Review and evaluate the lead partner of the independent auditor team.

5. At least annually, obtain and review a report by the independent auditor describing

(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) (to assess the auditor's independence) all relationships between the independent auditor and the Company. In addition to discussing the foregoing matters with the independent auditor, the Committee shall take other appropriate actions as it may deem necessary to satisfy itself of the independent auditor's independence. The Audit Committee shall present its conclusions with respect to the independent auditor to the Board.


6. Ensure the rotation of the audit partners as required by law.

7. Set clear hiring policies for the Company’s hiring of employees or former employees of the independent auditor.

8. Discuss with the independent auditor any issues on which the Company's audit team consulted the independent auditor's national accounting office on auditing or accounting issues presented by the engagement and, if the Committee deems it necessary or appropriate, discuss such issues directly with the national accounting office.

9. Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit. 

Oversight of the Company’s Internal Audit Function

10. Review and concur in the appointment, replacement or dismissal of the Director of Audit Services.

11. Review the significant reports to management prepared by the internal Audit Services Department and management’s responses.

12. Discuss with the independent auditor and the Director of Audit Services the  responsibilities, budget, and staffing and any recommended changes in the planned scope of the internal audit.

Financial Statement and Disclosure Matters

13. Review and discuss with management and the independent auditor, prior to the filing of the Company's Annual Report on Form 10-K,

(a) the annual audited financial statements contained in the Form 10-K, and

(b) the "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Form 10-K.

14. Review and discuss with management and the independent auditor, prior to the filing of the Company's Quarterly Report on Form 10-Q,

(a) the Company’s quarterly financial statements contained in the Form 10‑Q, as well as the results of the independent auditor’s review of the quarterly financial statements, and

(b) the "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Form 10-Q

15. Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal controls and any special steps adopted in light of material control deficiencies.

16. Review and discuss quarterly reports from the independent auditors on:

(a) All critical accounting policies and practices to be used.

(b) All alternative treatments of financial information within generally accepted accounting principles 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.

17. Discuss with management the Company’s earnings press releases, including the use of “pro forma” or “adjusted” non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies.  Such discussion may be done generally (consisting of discussing the types of information to be disclosed and the types of presentations to be made).

18. Discuss with management and the independent auditor the effect on the Company's financial statements of regulatory and accounting initiatives and off-balance sheet structures.

19. Discuss with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company’s risk assessment and risk management policies.

20. Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any problems or difficulties encountered in the course of the audit work and management's response; any restrictions on the scope of activities or access to requested information; and any significant disagreements with management.

21. Review disclosures made to the Audit Committee by the Company’s CEO and CFO during their certification process for the Form 10-K and Form 10‑Q about 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.

Compliance Oversight Responsibilities

22. Obtain from the independent auditor assurance that Section 10A(b) of the Exchange Act has not been implicated.  Generally, Section 10A(b) requires the independent auditor, if it detects or becomes aware of any illegal act, to ensure that the Audit Committee is adequately informed.

23. Review management's monitoring of the Company's compliance with the Company's Ethics Policy and Standards of Business Practices

24. Discuss 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 

25. Discuss with the Company’s General Counsel legal matters that may have a material impact on the financial statements or the Company’s compliance policies.

26. Establish procedures for (a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters, and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

27. Conduct a Committee self-assessment on at least an annual basis to determine whether the Committee is functioning effectively, consistent with the self-assessment process reflected in the Company’s corporate governance principles (see Paragraph 3(f) of the Corporate Governance Committee Charter).

28. Review this Audit Committee Charter at least annually and, if appropriate, recommend changes to the Board of Directors

AUDIT COMMITTEE'S ROLE - GENERAL

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 generally accepted accounting principles.   This is the responsibility of management and the independent auditor.  Nor is it the duty of the Audit Committee to conduct investigations or to assure compliance with laws and regulations and the Company's Ethics Policy and Standards of Business Practices.

This Audit Committee Charter is not intended to change or augment the obligations of the Company or its directors or management under the federal securities laws or to create new standards for determining whether directors or management have fulfilled their duties, including fiduciary duties, under applicable state law.

Effective as of February 23, 2005.