INSURANCE AUTO AUCTIONS INC.
NOMINATING, GOVERNANCE AND
COMPENSATION COMMITTEE CHARTER


   The Nominating, Governance and Compensation Committee (the “Committee”) is responsible for matters relating to the organization and membership of the Board of Directors (the “Board”) of Insurance Auto Auctions, Inc. (the “Company”) and for other matters relating to the Company’s corporate governance. The Committee is also responsible for matters relating to senior executive and director compensation and employee benefit programs and such other matters as set forth in this Charter (this “Charter”).

Composition and Term of Office

   The Committee shall be comprised of at least three members, all of whom are non-employee directors of the Company and individuals that meet the independence requirements that shall from time to time be promulgated by the National Association of Securities Dealers for companies listed on the NASDAQ National Market (“NASDAQ”) and any other applicable laws, rules or regulations. One member shall serve as Chairman of the Committee. The members of the Committee shall serve one-year terms and shall be elected annually on the day of the Annual Meeting of Shareholders or on such other date as the Board shall determine.

Committee Meetings

   The Committee shall hold at least three (3) regular meetings per year and any special meetings as may be called by the Chairman of the Committee or at the request of the Company’s management.  Members of the Company’s management and independent consultants and advisors may attend meetings of the Committee at the invitation of the Committee and shall provide pertinent information as necessary.  The Committee may meet via telephone conference calls or take action in writing executed by all the members.  A quorum for Committee meetings shall consist of two (2) members.


   The Chairman of the Committee shall set the agenda of each meeting and arrange for the distribution of the agenda, together with supporting material, to the Committee members prior to each meeting.  The Chairman will also cause to be promptly prepared and circulated to the Committee members minutes of each Committee meeting.

 

Senior Executive and Director Compensation/Employee Benefits Responsibilities

   With respect to senior executive and director compensation and employee benefit matters, the Committee shall have such powers and functions as may be assigned to it by the Board from time to time; however, such functions shall, at a minimum, include the following:
 

1.      To review, monitor, administer and establish or recommend to the full Board, on a fair and equitable basis, compensation arrangements, including annual salary, bonus, annual and long-term incentives, perquisites and other benefits (direct and indirect) including severance, retirement and other post-employment benefits, for the Company’s Chief Executive Officer (“CEO”), with a view to ensuring that the Company is attracting, retaining and motivating highly qualified management, through competitive salary and benefit programs, and encouraging extraordinary effort and performance, not only with respect to the Company’s internal goals but also in comparison to industry performance levels;
 

2.      To ensure that a significant portion of the CEO’s compensation is connected to the long-term interests of the Company’s shareholders and that there is maintained an appropriate balance between short-term pay and long-term incentives;
 

3.      To review and approve Company goals and objectives relevant to CEO compensation, and evaluate the CEO’s performance in light of those goals and objectives, and to set the CEO’s compensation level based on this evaluation; in determining the long-term incentive component of CEO compensation, the Committee shall consider the Company’s performance, the value of similar incentive awards to CEO’s at comparable companies, and the awards previously given to the Company’s CEOs;
 

4.      To administer the Company’s stock option plan and option agreements and regularly review statistics on the number and percentage of shares under options and the price and number of outstanding options, including calculations of the present value of current commitments, and supervise the administration of Company plans and benefit programs falling within the scope of the Employee Retirement Security Act of 1974 (“ERISA”);
 

5.      To review this Charter at least annually and update as necessary;
 

6.      To periodically evaluate the performance of the Committee and report on such performance to the Board; and
 

7.      To retain and terminate any compensation consultant or consulting firm to assist in the evaluation of director and CEO compensation or the compensation of other members of senior management, including sole authority to approve the consultant’s fees and other retention terms, and to engage outside legal counsel or other advisers as it deems necessary to carry out these functions.
 

Nominating and Corporate Governance Responsibilities

   With respect to nominating and corporate governance matters, the Committee shall have such powers and functions as may be assigned to it by the Board from time to time; however, such functions shall, at a minimum, include the following, as well as any additional functions as shall be required of nominating or corporate governance committees by the NASDAQ:
 

1.       The Committee shall review, at least annually, the size and structure of the Board to assure that the proper skills and experience are represented on the Board.  The composition of the Board shall include a majority of “independent” directors, as defined by the NASDAQ listing standards.
 

2.       The Committee shall review and develop the Board’s criteria for selecting new directors.  Criteria that will be used in connection with evaluating and selecting new directors will include factors relating to whether the director candidate would meet the definition of “independent” specified in the NASDAQ listing standards, as well as strength of character, mature judgment, career specialization, relevant technical skills, diversity and the extent to which the candidate would fill a present need on the Board. 
 

3.       The Committee shall evaluate, propose and approve nominees for election to the Board, and consider and evaluate stockholder nominees for election to the Board. 
 

4.       The Committee shall recommend to the Board nominees to fill vacancies on the Board.  The Committee shall also consider matters relating to the retirement of Board members.
 

5.       The Committee shall review potential conflicts of prospective Board members.
 

6.       The Committee shall aid in attracting and maintaining a list of persons who may be potential directors.
 

7.       The Committee shall review the suitability of each Board member for continued service when his or her term expires and when he or she has a significant change in status.
 

8.       The Committee shall make recommendations to the Board as to the qualifications of members of the Board’s committees, committee member appointment and removal, and committee reporting to the Board. 
 

9.       The Committee shall take such steps as the Committee deems necessary or appropriate with respect to oversight and evaluation of the Board, management, and each Board committee.
 

10.    The Committee shall consider matters of corporate governance generally and shall review and recommend to the Board, periodically, to the extent required or considered desirable, the Company’s corporate governance principles.
 

11.    The Committee shall have the authority, in fulfilling its responsibilities under this Charter, to obtain advice, reports or opinions from internal or external counsel and expert advisors, including director search firms and approve fees of such advisors. 
 

12.    The Committee shall annually review and re-examine this Charter to make recommendations to the Board with respect to any proposed changes.
 

13.    The Committee shall perform such other functions which from time to time may be assigned by the Board.
 

March 2004