2004 Committee Charter : IHIBoard of Directors
The Board of Directors (the "Board") of Information Holdings Inc. (the "Company") hereby amends and restates the charter of the Board's Audit Committee (the "Committee"), providing the Committee with the authority, responsibility and specific powers described below.
The purpose of the Committee is to oversee the broad range of issues surrounding the accounting and financial reporting processes of the Company and its subsidiaries and audits of the financial statements of the Company and its subsidiaries. The Committee's primary focus will be (1) to assist the Board in monitoring (a) the integrity of the financial statements of the Company and its subsidiaries, (b) the compliance by the Company and its subsidiaries with legal and regulatory requirements, (c) the independent auditor's qualifications and independence, and (d) the performance of the Company's internal audit function and independent auditor, and (2) to prepare the internal control report that the United States Securities and Exchange Commission (the "SEC") rules require be included in the Company's annual proxy statement.
The Company's Amended and Restated Bylaws (the "Bylaws") and this charter (the "Charter") govern the operation of the Committee; in the event of a conflict, the terms of the Bylaws shall govern. The Committee shall provide a medium within the Company for consideration of matters relating to any audit issues. The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of any registered accounting firm engaged (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of performing any audit, review or attest services and shall deal directly with such accounting firm. At its sole discretion, the Committee has the power to retain outside legal, accounting and financial consultants or other advisors or to delegate to subcommittees to assist it in its activities to the extent permitted by the SEC and the New York Stock Exchange (the "NYSE"). The fees and expenses of such consultants and advisors shall be borne by the Company.
The members of the Committee shall be appointed by the Board and shall consist of three (3) or more independent directors, as the Board may determine from time to time, of the Company's Board and shall serve until their successors are duly elected and qualified. Each Committee member may receive his or her director fee in cash and/or Company stock or options or other in-kind consideration. Committee members shall not be affiliated with the Company or any of its subsidiaries or receive any fees paid directly or indirectly for services as a consultant or financial advisor regardless of amount from the Company or any of its subsidiaries. This includes payments to any firm of which a Committee member is an executive officer, partner, member, principal or designee, but does not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company (provided that such compensation is not contingent in any way on continued service). Each Committee member shall meet the independence requirements of the SEC and NYSE.
The Board recognizes that director independence is an issue that is actively being reviewed by multiple constituencies, and may amend its criteria for determining what constitutes an "independent director" to reflect changing standards.
All members of the Committee shall be financially literate, or must become financially literate within a reasonable period of time after his or her appointment to the Committee, as required by the NYSE. "Financial Literacy" shall be determined by the Board in the exercise of its business judgment, and shall include a working knowledge of skills and competencies that the Board will need for the Company to be successful in the future. Committee members, if they or the Board deem it appropriate, may enhance their understanding of their duties by participating in educational programs conducted by the Company or an outside consultant or firm.
At least one (1) member of the Committee must have accounting or financial management expertise. The Board has determined that a person who qualifies as a "financial expert," as such term is defined by the SEC, has such accounting or related financial management expertise.
The Committee shall maintain and submit to the Board copies of minutes of each meeting of the Committee, and each written consent to action taken without a meeting, reflecting the actions so authorized or taken by the Committee since the preceding meeting of the Board. A copy of the minutes of each meeting shall be placed in the Company's minute book.
Any member of the Committee may submit proposed Charter amendments to the Board. The Board shall circulate any proposed charter amendment(s) to all of the members of the Committee immediately upon receipt.
The Committee shall hold such regular meetings as may be necessary or advisable, but no less frequently than quarterly, and special meetings as may be called by the Committee's chairperson. The presence in person or by telephone of a majority of the Committee's members shall constitute a quorum for any meeting of the Committee. All actions of the Committee will require the vote of a majority of its members present at a meeting of the Committee at which a quorum is present.
The Committee chairperson should consult with management in the process of establishing agendas for Committee meetings.
Duties and Responsibilities
The Committee's policies and procedures shall remain flexible in order to best react to changing conditions and help ensure that the Company's accounting and reporting practices are consistent with applicable legal requirements and are of the highest quality. The Committee shall:
1.Select, appoint, retain, dismiss and oversee the work of the Company's independent auditors;
2.Pre-approve appropriate funding for payment of (a) compensation to the Company's independent auditors for rendering audit and non-audit services, (b) compensation to any advisors employed by the Committee and (c) ordinary administrative expenses necessary to carry out its duties. The Committee may delegate the duty to pre-approve any such payment to any member of the Committee provided that the decisions of such member to grant pre-approvals shall be presented to the full Committee for ratification;
3.Approve all related party transactions entered into by the Company with any of the Company's directors or executive officers;
4.Ensure audit partner rotation if the lead (or coordinating) audit partner (having primary responsibility for the audit), or the audit partner responsible for reviewing the audit, has performed audit services for the Company in each of the Company's five previous fiscal years and, in accordance with applicable regulations, to consider whether to have a regular rotation of the audit firm itself;
5.Review and reassess the adequacy of the Charter annually and recommend any proposed changes to the Board for approval;
6.Review, evaluate and reassess the performance of the Audit Committee annually and discuss such annual performance evaluation with the Board;
7.Review the Company's annual audited financial statements and quarterly unaudited financial statements with the Company's management and independent auditors;
8.Review the Company's disclosure under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's periodic reports and registration statements filed with the SEC;
9.Review and discuss with the Company's management and independent auditors the Company's quarterly earnings press releases (paying particular attention to any use of "Pro Forma," or "Adjusted" non-GAAP, information) and earnings guidance; provided, that the Committee need not discuss in advance each earnings release or each instance in which the Company may provide earnings guidance;
10.Review and discuss generally with the Company's management and independent auditors the type of other financial information provided to analysts and rating agencies, provided that the Committee need not discuss such other financial information before it is provided to analysts and rating agencies;
11.Review any major changes to the Company's auditing and accounting principles and practices as suggested by the Company's management or independent auditors;
12.At least annually, obtain and review a report by the Company's independent auditor describing:
a.the 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 independent auditor, and any steps taken to deal with any such issues; and
c.all relationships between the independent auditor and the Company (to assess the auditor's independence);
13.Review and receive periodic reports (as well as the written disclosures and the letter from the independent accountants required by Independence Standards Board Standard No. 1 as it may be modified or supplemented) from the Company's independent auditor regarding the auditor's qualifications, performance, independence and registration with the SEC; discuss such materials with the auditor; after receipt of the annual report provided by the independent auditors discussed in Section 12 above, present its conclusions with respect to the independent auditor to the full Board; and, if so determined by the Committee, recommend that the Board take appropriate action to insure the independence of the auditor and continued registration with the SEC;
14.Meet regularly with the Board and review with the Company's management any legal matters that may have a material impact on the Company's financial statements or compliance policies and any material reports or inquiries received from regulators or governmental agencies;
15.Review with the Company's independent auditor any problems or difficulties the auditor may have encountered and any management letter provided (or intended to be provided) by the auditor and the Company's response, including:
a.any difficulties encountered in the course of the audit work, including any restrictions on the scope of the activities or access to required information;
b.any changes required in the planned scope of the external audit;
c.any significant disagreements with management;
d.any material written communications between the independent auditors and the Company's management, such as any management letter or schedule of unadjusted differences;
e.any accounting adjustments that were noted or proposed by the Company's independent auditors but were "passed" (as immaterial or otherwise); and
f.any material communications between the audit team and the independent auditor's national office respecting auditing or accounting issues presented by the engagement;
16.Review and discuss with the Company's independent auditor the responsibilities, budget and staffing of the Company's internal audit function;
17.Review and discuss with the Board any issues that arise with respect to the quality or integrity of the performance of the Company's internal audit function;
18.Review annually with the Company's management and independent auditors:
a.analyses prepared by the Company's management and/or independent auditors setting forth significant financial reporting issues and judgments made in connection with the preparation of the financial statements, including analyses of the effects of alternative generally accepted accounting period methods on financial statements;
b.the effect of regulatory and accounting initiatives; and
c.review and approve any off-balance sheet structures on the Company's financial statements;
19.Review annually major issues regarding accounting principles and financial statement presentations, including 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 control deficiencies;
20.Review the audit report provided by the Company's independent auditors, which should include:
a.all critical accounting policies and practices used;
b.all alternative treatments of financial information within GAAP that have been discussed with management officials of the Company, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors; and
c.other material written communications between the independent auditor and the Company's internal auditor and management, such as any management letter or schedule of unadjusted differences;
21.Review any failures of the Company's financial reporting controls;
22.Meet periodically with the Company's management and independent auditors in separate sessions to review the Company's policies with respect to major risk exposures and the steps management has taken to monitor and control such exposures;
23.Meet periodically with the Company's management, the independent auditors and the personnel or third party responsible for the internal audit function in separate sessions to encourage entirely frank discussions with the Committee, including without limitation discussions regarding the Company's financial reporting control procedures, the quality of the Company's financial reporting and the adequacy and competency of the Company's financial management;
24.Meet and 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 of the Company's annual financial statements and the matters required to be discussed relating to the conduct of the review of the Company's quarterly financial statements;
25.Meet and discuss with the internal auditors (or other personnel or independent third party responsible for the internal audit function) the Company's risk management processes and systems of internal control;
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.Obtain assurance from the Company's independent auditor that it has notified the Committee of any failure on the part of the Company to comply with applicable legal requirements of which the independent auditor is aware;
28.Advise the Board with respect to the Company's policies and procedures regarding compliance with applicable laws and regulations and with any code of business conduct adopted by the Committee from time to time;
29.Set clear hiring policies for employees or former employees of the independent auditors so as to avoid any conflict of interest under the rules and regulations set forth by the SEC and the NYSE;
30.Meet regularly with the Board to effect the Committee's purpose noted above; and
31.Do every other act incidental to, arising out of or in connection with, or otherwise related to, the authority granted to the Committee hereby or the carrying out of the Committee's duties and responsibilities hereunder.
Pre-Approval of Audit and Non-Audit Services
The Committee shall approve the engagement of the Company's independent auditors for audit and permissible non-audit services. At the beginning of each fiscal quarter, the Committee shall pre-approve all fees and specific terms of the services to be performed for the Company by its independent auditor during the relevant quarter. The Committee may delegate such pre-approval authority to one or more of its members. If the Committee does not delegate such authority to a member, the full Committee shall reconvene in response to any requests or applications to provide services that have not been previously approved at the beginning of the relevant quarter or have been approved but exceed the pre-approved fee range for such services. The Committee shall designate a member of management to monitor the performance of all services provided by the independent auditor and to report his or her findings to the Committee.
Limitation of Committee's Role
While the Committee has the authority, powers, and responsibilities set forth in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with GAAP and applicable legal, accounting, and other requirements. These are the responsibilities of the Company's management and the independent auditor.