Audit Committee Charter

This is the Charter of the Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of CBOT Holdings, Inc. (the “Corporation”).

 

Purpose

 

            The Committee will be appointed by the Board to assist the Board in overseeing the integrity of the Corporation’s financial statements and financial reporting processes, external auditor’s engagement, independence and performance, internal audit, accounting, and control functions with regards to financial reporting and compliance by the Corporation with legal and regulatory requirements.  The Audit Committee also will be responsible for the preparation of the Audit Committee report that Securities and Exchange Commission (“SEC”) rules require to be included in the Corporation’s annual proxy statement.

 

Membership and Qualification

 

            The Committee will be composed of at least three members of the Board.  The nominating committee of the Board will recommend to our Board nominees for membership on the Committee.  The chairperson of the Committee, as well as all Committee members, shall be appointed, removed or replaced by a majority vote of the Board.  A majority of the Committee members shall constitute a quorum for the transaction of business.  It is the responsibility of the chairperson of the Committee to schedule meetings and provide the Committee with a written agenda for all meetings.

 

Each member of the Committee shall be free of any relationship that, as determined by the Board, would interfere with his of her individual exercise of independent judgment and all members of the Committee shall be “independent” within the meaning provided below.

 

            The members of the Committee shall be “financially literate” as such term is interpreted by the Board and at least one member shall be an “audit committee financial expert” within the meaning of item 402 of Regulation S-K under the Securities Act of 1933, as amended (“Securities Act”).

 

Independenceof Committee Members

 

            All members of the Committee must be independent directors under the New York Stock Exchange (“NYSE”) rules and the requirements set forth in the Corporation’s Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws.  To be considered independent under the NYSE rules, the Board must affirmatively determine that a director does not have any direct or indirect material relationship with the Corporation. 

 

To assist it in determining director independence in accordance with the NYSE rules, the Board has established that an individual meeting one of the following criteria shall not be considered an independent director:

 

a person who is, or was within the previous three years, an employee, or person whose immediate family member is an executive officer, of the Corporation;

 

a person who receives, or has received in the three prior years, or whose immediate family member receives, or has received in the three prior years, more than $100,000 per year in direct compensation from the Corporation, other than director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued services);

 

a person who is, or was within the three prior years, affiliated with or employed by, or whose immediate family member is, or was within the three prior years, affiliated with or employed in a professional capacity by, a present or former internal or external auditor of the Corporation;

 

a person who is, or was within the three prior years, employed, or whose immediate family member is, or was within the three prior years, employed, as an executive officer of another Corporation where any of the Corporation’s present executives serve on that Corporation’s compensation committee; or

 

a person who is, or was within the three prior years, an executive officer or an employee, or whose immediate family member is, or was an executive officer of a Corporation that makes payments to, or receives payments from, the Corporation for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million, or 2% of such other Corporation’s consolidated gross revenues.

            For purposes of these independence standards, the term “the Corporation” includes any subsidiary and the term “immediate family member” includes a person’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law and anyone (other than domestic employees) who shares such person’s home.

 

            For relationships not covered by the independence standards above, the determination of whether a relationship is material, and therefore whether the director is independent, will be made by the directors who satisfy the independence standards set forth above and the basis for the determination will be explained in the Corporation’s annual proxy statement. Any determination by the Board that a director is independent despite the fact that the director does not meet the independence standards set forth above will also be explained in the Corporation’s annual proxy statement.

 

            Each member of the Committee will notify the Board as soon as practical in the event that his or her circumstances change in any manner that may affect the Board’s independence determination.

 

Additional Independence Criteria for Audit Committee Members

 

            In addition to being an “independent director,” as defined above, each member of the Committee must not, except in his or her capacity as a member of the Committee, the Board or any other committee of the Board, or any of its consolidated majority-owned subsidiaries: (1) accept, directly or indirectly, any consulting advisory or other compensatory fee from the Corporation; or (2) be an affiliated person of the Corporation or any of its subsidiaries.  For this purpose, the term “affiliated person” means one who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Corporation or any of its subsidiaries.  A person will not be deemed in control of the Corporation or any subsidiary, however, if the person is not: (A) the beneficial owner, directly or indirectly, of more than 10% of any class of equity securities of the Corporation or such subsidiary; or (B) an executive officer or director of the Corporation or such subsidiary.

 

Meetings and Other Actions

 

The Committee shall meet at least quarterly and as often as it determines appropriate to carry out its obligations under this Charter.  The Committee shall periodically report on its activities to the Board and make such recommendations and findings as it deems appropriate.

 

Meetings of the Committee may be held in person or by telephone.  Action may also be taken by the Committee without a meeting if all members thereof consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of the Committee.

 

The Committee shall keep a separate book of minutes of their proceedings and actions.  All meetings shall be at the call of the chairperson.  The Committee shall elect a Secretary to the Committee who shall give notice personally or by mail, telephone, facsimile or electronically to each member of the Committee of all meetings, not later than 12 noon, Central time, of the day before the meeting, unless all of the members of the Committee in office waive notice thereof in writing at or before the meeting, in which case the meeting may be held without the aforesaid advance notice.  A majority of the members of the Committee shall constitute a quorum for the transaction of business.

 

The Committee shall meet periodically in separate executive sessions with management, including the Chief Financial Officer and the President and Chief Executive Officer, internal and external auditors, and have such other direct and independent interaction with such persons from time to time as the members of the Committee deem appropriate.  In addition, the Committee may request any officer or employee of the Corporation, or the Corporation’s outside counsel to attend a meeting of the Committee to meet with any members of, or consultants to, the Committee.

 

Goals, Responsibilities, and Authority

 

The Committee shall have the authority, to the extent it deems necessary or appropriate, to retain independent legal counsel, accounting or other advisors. The Corporation shall provide appropriate funding, as determine by the Committee, for payment of compensation to: (1) the external auditors for the purpose of rendering or issuing an audit report; or (2) any other advisors retained by the Committee.

 

The Committee shall review and reassess the adequacy of this charter at least annually and recommend any proposed changes to the Board for approval.  The Committee shall review its own performance at least annually.

 

External Auditor’s Engagement and Independence

 

            The Committee shall have the sole authority to appoint or replace the external auditors and shall be directly responsible for the compensation and oversight of the external auditors (including resolution of any disagreement between management and the external auditors regarding financial reporting that is brought to its attention).  The external auditors will report directly to the Committee.  The Committee shall pre-approve all auditing services, internal control related services, and permitted non-audit services (including the terms thereof) to be performed for the Corporation by its external auditor in accordance with the terms of this charter and any policies and procedures adopted by the Committee, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are approved by the Committee prior to the completion of the audit.

 

The Committee shall obtain and  review a report from the external auditors on a periodic basis, regarding: (1) the external auditor’s internal quality control procedures, (2) 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; (3) any steps taken to deal with any such issues, and (4) all relationships between the external auditors and the Corporation.  The Committee shall evaluate the qualifications, performance and independence of the external auditors, including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence. The Committee will also recommend that the Board take appropriate action in response to the outside auditor’s report to satisfy itself of the outside auditor’s independence. The Committee will ensure that the lead audit and concurring audit partner responsible for the current fiscal year audit of the Corporation’s financial statements are rotated in accordance with applicable law.  The Committee will recommend to the Board policies and procedures concerning the hiring of former auditor employees.

 

Financial Statements and Disclosure Matters

 

            The Committee shall, to the extent it deems necessary or appropriate, review and discuss with the external auditors and/or management:

 

the annual audited financial statements and quarterly financial statements, including disclosures made in MD&A, and recommend to the Board whether the financial statements should be included in any report to stockholders, or in reports and registration statements filed with the SEC;

 

any relevant reports of financial information submitted by the Corporation to any governmental body, including the CFTC, to third parties, or to the public;

 

the Corporation’s press releases and other announcements, 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;

 

the matters required to be discussed by SAS No.  61 relating to the conduct of the audit, including critical accounting policies used, significant adjustments or estimates employed, any difficulties encountered in the course of the audit, any restrictions on the scope of activities or on access to requested information and any significant disagreements with management;

 

significant financial reporting issues and judgments in connection with the preparation of the Corporation’s financial statements, including any significant changes in the selection or application of accounting principles, all alternative treatments of financial information within GAAP that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditor and any other material written or communications between the external auditor and management;

 

to the extent applicable, disclosures made to the Committee by the Chief Executive Officer and Chief Financial Officer during their certification process 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 significant role in the Corporation’s internal controls; and

 

the policies in existence with respect to financial risk assessment and risk management.

Internal Control Considerations

 

            The Committee shall, to the extent it deems necessary or appropriate, review and discuss with management and the external and internal auditors any major issues as to the adequacy of the Corporation’s internal controls, any special steps adopted in light of material control deficiencies and the adequacy of disclosures about changes in internal control over financial reporting.  In addition, as appropriate, the Committee shall review and discuss with management (including senior internal audit personnel) and the external auditor the Corporation’s internal controls report and the external auditor’s attestation of the report prior to the filing of the Corporation’s Annual Report on Form 10-K.

 

The Committee shall, to the extent it deems necessary or appropriate, review and discuss with management, the internal auditors and the external auditors any correspondence with regulators or governmental agencies and any published reports which raise material issues regarding the Corporation’s financial statements or accounting policies.  In addition, the Committee shall, to the extent it deems necessary or appropriate, discuss with the President and Chief Executive Officer or General Counsel legal matters that may have a material impact on the financial statements or the Corporation’s compliance policies and internal controls.

 

The Committee will establish, in conjunction with management, written procedures to receive, report, and evaluate any anonymous reports of misconduct in areas of accounting, internal control, auditing or fraud.

 

The Committee will have the responsibilities and powers set forth above.  The Committee is not responsible for planning or conducting audits or determining that the Corporation’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These activities are the responsibilities of management and the external auditors.

 

Nothing contained in this charter is intended to create or should be construed as creating any responsibility or liability of the members of the Committee, except to the extent otherwise provided under the applicable laws of the State of Delaware, which shall be applicable with respect to the conduct of the members of the Committee.