Corporate Governance

Download the Corporate Governance Guidelines

The Board of Directors (the “Board”) of Aratana Therapeutics, Inc., a Delaware corporation (the “Company”), has adopted the following Corporate Governance Guidelines (the “Guidelines”) to assist the Board in the exercise of its responsibilities and to serve the interests of the Company and its stockholders.  These Guidelines should be interpreted in the context of all applicable laws and the Company’s certificate of incorporation, bylaws and other corporate governance documents.  These Guidelines acknowledge the leadership exercised by the Board’s standing committees and their chairs and are intended to serve as a flexible framework within which the Board may conduct its business and not as a set of legally binding obligations.  The Guidelines are subject to modification from time to time by the Board as the Board may deem appropriate and in the best interests of the Company and its stockholders or as required by applicable laws and regulations. 

The Board

Size of the Board

The Company’s certificate of incorporation provides that the number of directors will be fixed from time to time by the Board. The Nominating and Corporate Governance Committee will periodically review the size of the Board, and may make recommendations to the Board regarding the size that is most effective in relation to future operations.

Independence of the Board

The Board will be comprised of a majority of directors who qualify as independent directors (the “Independent Directors”) as required under the listing standards of The NASDAQ Stock Market (“Nasdaq”). 

Separate Sessions of Non-Management Directors and Independent Directors

The non-management directors will meet in executive session without management directors or management present on a regularly scheduled basis, but no less than twice per year.  The non-management directors will review the Company’s implementation of, and compliance with, the Guidelines and consider such matters as they may deem appropriate at such meetings.  Non-management directors are all directors who are not Company officers (as that term is defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), including such directors who are not independent by virtue of a material relationship, former status or family membership, or for any other reason. 

In addition, if the non-management directors include directors who are not also Independent Directors, the Independent Directors shall also meet separately at least once per year in an executive session.

Director Qualification Standards

The Nominating and Corporate Governance Committee is responsible for reviewing with the Board, on an annual basis, the appropriate characteristics, skills and experience required for the Board as a whole and its individual members.  In evaluating the suitability of individual candidates (both new candidates and current Board members), the Nominating and Corporate Governance Committee, in recommending candidates for election, and the Board, in approving (and, in the case of vacancies, appointing) such candidates, may take into account many factors, including: personal and professional integrity, ethics and values; experience in corporate management, such as serving as an officer or former officer of a publicly held company; strong finance experience and with relevant social policy concerns; experience relevant to the Company’s industry; experience as a board member or executive officer of another publicly held company; relevant academic expertise or other proficiency in an area of the Company’s operations; diversity of expertise and experience in substantive matters pertaining to the Company’s business relative to other board members; diversity of background and perspective, including, but not limited to, with respect to age, gender, race, place of residence and specialized experience; practical and mature business judgement, including, but not limited to, the ability to make independent analytical inquiries; and any other relevant qualifications, attributes or skills.  The Board evaluates each individual in the context of the Board as a whole, with the objective of assembling a group that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgement using its diversity of experience in these various areas. In determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee may also consider the director’s past attendance at meetings and participation in and contributions to the activities of the Board.

Pursuant to disclosure requirements of the Securities and Exchange Commission (the “SEC”), the Company must disclose the following in proxy statements and/or annual reports on Form 10-K:

• Director and director nominee qualifications:  with respect to each director, a description of the basis for selecting such director for Board service, all directorships held by such director at public companies or registered investment companies during the past five (5) years and certain legal proceedings against such director during the past ten (10) years; and
• Diversity: whether and how the Nominating and Corporate Governance Committee considers “diversity” in identifying directors.

Selection of New Directors

Our Board is divided into three (3) classes.  As a result, approximately one-third (1/3) of the Board will stand for election by the stockholders of the Company each year at the Company’s annual meeting for three (3) year terms.  Each year, at the annual meeting, the Board will recommend a slate of directors for election by the stockholders.  In accordance with the bylaws of the Company, the Board will also be responsible for filling vacancies or newly-created directorships on the Board that may occur between annual meetings of stockholders.  The Nominating and Corporate Governance Committee is primarily responsible for identifying, screening and recommending candidates to the entire Board for Board membership, although the Board may also consider candidates recommended by a majority of the Independent Directors in a vote in which only Independent Directors participate.

Director Orientation and Continuing Education

Management, working with the Nominating and Corporate Governance Committee, shall provide an orientation process for new directors, including background material on the Company and its business.  As appropriate, the Nominating and Corporate Governance Committee shall oversee the preparation of additional educational sessions for directors on matters relevant to the Company and its business.

No Specific Limitation on Other Board Service

The Board does not believe that its members should be prohibited from serving on boards of other organizations and has not adopted any guidelines limiting such activities.  However, the Nominating and Corporate Governance Committee may take into account the nature of and time involved in a director’s service on other boards and/or committees in evaluating the suitability of individual director candidates and current directors and making its recommendations to the Company’s stockholders. 

Service on other boards and/or committees should be consistent with the Company’s conflict of interest policies set forth below.

Directors Who Resign or Materially Change Their Current Positions With Their Own Company or Become Aware of Circumstances that May Adversely Reflect upon the Director or the Company

When a director, including any director who is currently an officer or employee of the Company, resigns or materially changes his or her position with his or her employer or becomes aware of circumstances that may adversely reflect upon the director or the Company, such director should notify the Nominating and Corporate Governance Committee of such circumstances.  The Nominating and Corporate Governance Committee will consider the circumstances, and may in certain cases consider requesting that the director submit his or her resignation from the Board if, for example, continuing service on the Board by the individual is not consistent with the criteria deemed necessary for continuing service on the Board.    

Term Limits

As each director is periodically subject to election by stockholders, the Board does not believe it is in the best interests of the Company to establish term limits at this time.  Additionally, such term limits may cause the Company to lose the contribution of directors who have been able to develop, over a period of time, increasing insight into the Company’s business and therefore can provide an increasingly significant contribution to the Board.

Director Responsibilities

The business and affairs of the Company will be managed by or under the direction of the Board, including through one or more of its committees as set forth in the bylaws and committee charters.  Each director is expected to spend the time and effort necessary to properly discharge his or her responsibilities.  These include:

1. overseeing the conduct of the Company’s business, to evaluate whether the business is being properly managed;
2. reviewing and, where appropriate, approving the Company’s major financial objectives, plans and actions;
3. reviewing and, where appropriate, approving major changes in, and determinations of other major issues respecting, the appropriate auditing and accounting principles and practices to be used in the preparation of the Company’s financial statements;
4. reviewing and, where appropriate, approving major changes in, and determinations under, the Company’s Guidelines, Code of Business Conduct and Ethics and other Company policies;
5. reviewing and, where appropriate, approving actions to be undertaken by the Company that would result in a material change in the financial structure or control of the Company, the acquisition or disposition of any businesses or asset(s) material to the Company or the entry of the Company into any major new line of business;
6. reviewing the performance of the Chief Executive Officer, considering reports from the Compensation Committee;
7. planning for succession with respect to the position of Chief Executive Officer and monitoring management’s succession planning for other key executives; and
8. ensuring that the Company’s business is conducted with the highest standards of ethical conduct and in conformity with applicable laws and regulations.

Pursuant to SEC disclosure requirements, the Company must disclose the following in proxy statements and/or annual reports on Form 10-K:

• Board Leadership Structure: explanation of the Board structure (i.e., whether the principal executive officer and chairperson positions are combined and whether there is a lead independent director) and why that particular structure is appropriate for the Company; and
• Risk Oversight:  description of the Board’s role is risk oversight and how this oversight is administered.

Compensation

The Company’s executive officers shall not receive additional compensation for their service as directors.  The Compensation Committee will report once a year to the Board regarding the status of the Company’s non-management director compensation in relation to other U.S. companies of comparable size and the Company’s competitors.  Such report will include consideration of both direct and indirect forms of compensation to the Company’s non-management directors.  Following a review of the report, the Compensation Committee will recommend any changes in non-management director compensation to the Board, which changes will be approved or disapproved by the Board after a full discussion.

Members of the Audit Committee and Compensation Committee may not directly or indirectly receive any compensation from the Company other than their directors’ compensation, including any compensation for service on committees of the Board and the receipt of equity incentive awards.

Stock Ownership

The Company encourages directors to own shares of the Company’s stock.  However, the number of shares of the Company’s stock owned by any director is a personal decision and, at this time, the Board has chosen not to adopt a policy requiring ownership by directors of a minimum number of shares.

Conflicts of Interest

Directors are expected to avoid any action, position or interest that conflicts with the interests of the Company or gives the appearance of a conflict.  If an actual or potential conflict of interest develops, the director should immediately report all facts regarding the matter to the Board.  Any significant conflict must be resolved or the director should resign.  If a director has a personal interest in a matter before the Board, the director must disclose the interest to the Board, excuse himself or herself from discussion on the matter and not vote on the matter.  The Board may delegate any decision with respect to such transaction to the Audit Committee and/or Nominating and Corporate Governance Committee.

Interaction with Institutional Investors, the Press and Customers

The Board believes that management speaks for the Company.  Each director should refer all inquiries from institutional investors, the press or customers regarding the Company’s operations to management.  Individual Board members may, from time to time at the request of the management, meet or otherwise communicate with various constituencies that are involved with the Company.  If comments from the Board are appropriate, they should, in most circumstances, come from the Chairman of the Board.

Board Access to Senior Management

The Board will have complete access to Company management in order to ensure that directors can ask any questions and receive all information necessary to perform their duties.  Directors should exercise judgment to ensure that their contact with management does not distract managers from their jobs or disturb the business operations of the Company.  Any meetings or contacts that a director wishes to initiate may be arranged through the Chief Executive Officer or the Chairman of the Board, or if neither are available or neither is appropriate, directly by the director.  To the extent appropriate, such contact, if in writing, should be copied to the Chief Executive Officer of the Company.

Board Access to Independent Advisors

The Board committees may hire independent advisors as set forth in their applicable charters.  The Board as a whole shall have access to such advisors and such other independent advisors that the Company retains or that the Board considers necessary to discharge its responsibilities. 

Annual Self-Evaluation

Following the end of each fiscal year, the Nominating and Corporate Governance Committee will oversee an annual assessment by the Board of the Board’s performance.  The Nominating and Corporate Governance Committee will be responsible for establishing the evaluation criteria and implementing the process for such evaluation, as well as considering other corporate governance principles that may, from time to time, merit consideration by the Board. 

The assessment should include a review of any areas in which the Board or management believes the Board can make a better contribution to the governance of the Company, as well as a review of the committee structure and an assessment of the Board’s compliance with the principles set forth in these Guidelines.  The Nominating and Corporate Governance Committee will utilize the results of the Board evaluation process in assessing and determining the characteristics and critical skills required of prospective candidates for election to the Board.

Board Meetings

Frequency of Meetings

The Board will meet at least four (4) times annually.  In addition, special meetings may be called from time to time as determined by the needs of the business.  It is the responsibility of the directors to attend meetings.

Director Attendance

A director is expected to spend the time and effort necessary to properly discharge his or her responsibilities.  Accordingly, a director is expected to regularly prepare for and attend meetings of the Board and all committees on which the director sits (including separate meetings of non-management directors and the Independent Directors), with the understanding that, on occasion, a director may be unable to attend a meeting.  A director who is unable to attend a meeting is expected to notify the Chairman of the Board or the Chairman of the appropriate committee in advance of such meeting, and, whenever possible, participate in such meeting via teleconference.

Attendance of Non-Directors

The Board encourages the Chairman of the Board or of any committee to invite Company management and outside advisors or consultants from time to time to participate in Board and/or committee meetings to (i) provide insight into items being discussed by the Board which involve the manager, advisor or consultant, (ii) make presentations to the Board on matters which involve the manager, advisor or consultant, and (iii) bring managers with high potential into contact with the Board.  Attendance of non-directors at Board meetings is at the discretion of the Board.

Advance Receipt of Meeting Materials

Information regarding the topics to be considered at a meeting is essential to the Board’s understanding of the business and the preparation of the directors for a productive meeting.  To the extent feasible, the meeting agenda and any written materials relating to each Board meeting will be distributed to the directors sufficiently in advance of each meeting to allow for meaningful review of such agenda and materials by the directors.  Directors are expected to have reviewed and be prepared to discuss all materials distributed in advance of any meeting.   

Committee Matters

Number, Name, Responsibilities and Independence of Committees

The Board currently has three (3) committees: (i) the Audit Committee, (ii) the Compensation Committee and (iii) the Nominating and Corporate Governance Committee.  The Audit, Compensation and Nominating and Corporate Governance Committees are each composed entirely of Independent Directors, subject to any exceptions provided by the listing standards of Nasdaq and applicable laws and regulations.  From time to time and depending upon the circumstances, the Board may form a new committee or disband a current committee.  Each committee will perform its duties as assigned by the Board in compliance with the Company’s bylaws and the committee’s charter. 

Assignment and Rotation of Committee Members

Committee members and committee chairs will be assigned according to criteria set forth in the applicable committee charter and such other criteria that the Board determines to be appropriate in light of the responsibilities of each committee.  Committee membership and the position of committee chair will not be rotated on a mandatory basis unless the Board determines that rotation is in the best interest of the Company.

Each member of the Audit Committee must satisfy the independence requirements of Rule 10A-3 under the Exchange Act and must be financially literate, as determined by the Board in its business judgment, and at least one (1) member of the Audit Committee must have accounting or related financial management expertise as determined by the Board in its business judgment.  In addition, at least one (1) member of the Audit Committee must meet the definition of “audit committee financial expert” as determined by the Board in its business judgment in accordance with Item 407(d) of Regulation S-K. 

Frequency of Committee Meetings

Each committee shall meet as often as it deems necessary or desirable in order to perform its responsibilities.  The Audit Committee shall periodically meet separately with management, with the internal auditor and with the independent auditor.  In addition, special meetings may be called by the Chairperson of the committee from time to time as determined by the needs of the business.  It is the responsibility of the directors to attend the meetings of the committees on which they serve.

Committee Agendas

The Chairperson of each committee will develop his or her committee’s agenda.

Committee Self-Evaluations

Following the end of each fiscal year, each committee will review its performance and charter and recommend to the Board any changes it deems necessary.

Succession Planning

The Board (or a committee delegated by the Board) will work on a periodic basis with the Chief Executive Officer to evaluate the Company’s succession plans upon the Chief Executive Officer’s retirement and in the event of an unexpected occurrence. 

Oversight of Risk Management

The Board and the Board committees shall have an active role in overseeing management of the Company’s risks. The Board shall regularly review information regarding the Company’s credit, liquidity and operations, as well as the risks associated with each.  The Company’s Compensation Committee shall be responsible for overseeing the management of risks relating to the Company’s executive compensation plans and arrangements.  The Company’s Audit Committee shall oversee management of financial risks.   The Nominating and Corporate Governance Committee shall manage risks associated with the independence of the Board and potential conflicts of interest.  While each committee shall be responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about such risks.

Ethics Helpline

The Audit Committee will cause the Company to implement, maintain and monitor an ethics helpline that is designed to receive anonymous reports of any known or suspected violations of the Company’s Code of Business Conduct and Ethics or any applicable laws and regulations.  The Audit Committee will investigate any reports received through the ethics helpline and report to the Board periodically with respect to the information received through the ethics helpline and any related investigations.

Download the Code of Business Conduct and Ethics

Employees and directors have access to a variety of confidential information regarding the Company. Confidential information includes all non-public information that might be of use to competitors, or, if disclosed, harmful to the Company or its customers. Employees have a duty to safeguard all confidential information of the Company or third parties with which the Company conducts business, except when disclosure is authorized or legally mandated. An employee’s obligation to protect confidential information continues after he or she leaves the Company. Unauthorized disclosure of confidential information could cause competitive harm to the Company or its customers and could result in legal liability to you and the Company.

Any questions or concerns regarding whether disclosure of Company information is legally mandated should be promptly referred to the Company’s Chief Financial Officer.

COMPETITION AND FAIR DEALING

All employees should endeavor to deal fairly with fellow employees and with the Company’s collaborators, customers, suppliers and competitors. Employees should not take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair-dealing practice.

Relationships with Collaborators, Licensors and Customers

Our business success depends upon our ability to foster lasting collaborator, licensor and customer relationships. The Company is committed to dealing with collaborators, licensors and customers fairly, honestly and with integrity. Specifically, you should keep the following guidelines in mind when dealing with collaborators, licensors and customers:

• Information we supply to collaborators, licensors and customers should be accurate and complete to the best of our knowledge. Employees should not deliberately misrepresent information to collaborators, licensors or customers.
• Employees should not refuse to sell, service or maintain products the Company has produced simply because a collaborator or customer is buying products from or collaborating with another supplier.
• Employees should maintain and protect any intellectual property licensed from licensors with the same care as they employ with regard to Company-developed intellectual property.
• Collaborator, licensor and customer entertainment should not exceed reasonable and customary business practice. Employees should not provide entertainment or other benefits that could be viewed as an inducement to or a reward for, collaborator, licensor and customer purchase decisions. Please see “Gifts and Entertainment” below for additional guidelines in this area.
• You must handle the nonpublic information of our collaborators, licensors and customers responsibly and in accordance with our agreements with them, including information regarding their technology and product pipelines. Nonpublic information of our collaborators, licensors and customers includes notes, reports, conclusions and other materials prepared by a Company employee based on the nonpublic information of others. You should use all reasonable efforts to abide by the terms of our agreements with our collaborators, licensors and customers and limit the use of nonpublic information received from our collaborators, licensors and customers to the purpose for which it was disclosed.
• You may not unlawfully obtain or use the materials, products, intellectual property, proprietary or nonpublic information or other assets of anyone, including our collaborators, licensors, customers, suppliers and competitors.

Relationships with Suppliers

The Company deals fairly and honestly with its suppliers. This means that our relationships with suppliers are based on price, quality, service and reputation, among other factors. Employees dealing with suppliers should carefully guard their objectivity. Specifically, no employee should accept or solicit any personal benefit from a supplier or potential supplier that might compromise, or appear to compromise, his or her objective assessment of the supplier’s products and prices. Employees can give or accept promotional items of nominal value or moderately scaled entertainment within the limits of responsible and customary business practice. Please see “Gifts and Entertainment” below for additional guidelines in this area.

Relationships with Competitors

The Company is committed to free and open competition in the marketplace. Employees should avoid actions that would be contrary to laws governing competitive practices in the marketplace, including federal and state antitrust laws. Such actions include misappropriation and/or misuse of a competitor’s confidential information or making false statements about the competitor’s business and business practices. For further discussion of appropriate and inappropriate business conduct with competitors, see “Compliance with Antitrust Laws” below.

GIFTS AND ENTERTAINMENT

The giving and receiving of gifts is a common business practice. Appropriate business gifts and entertainment are welcome courtesies designed to build relationships and understanding among business partners. Gifts and entertainment, however, should not compromise, or appear to compromise, your ability to make objective and fair business decisions. In addition, it is important to note that the giving and receiving of gifts are subject to a variety of laws, rules and regulations applicable to the Company’s operations. These include, without limitation, laws covering the marketing of products, bribery and kickbacks. You are expected to understand and comply with all laws, rules and regulations that apply to your job position.

It is your responsibility to use good judgment in this area. As a general rule, you may give or receive gifts or entertainment to or from collaborators, customers or suppliers only if the gift or entertainment would not be viewed as an inducement to or reward for any particular business decision. All gifts and entertainment expenses should be properly accounted for on expense reports. The following specific examples may be helpful:

• Meals and Entertainment. You may occasionally accept or give meals, refreshments or other entertainment if:
  • The items are of reasonable value;
  • A primary purpose of attending the meal or entertainment is business related; and
  • The expenses would be paid by the Company as a reasonable business expense if not paid for by another party.

Entertainment of reasonable value may include food and tickets for sporting and cultural events if they are generally offered to other collaborators, customers, suppliers or vendors.

• Advertising and Promotional Materials. You may occasionally accept or give advertising or promotional materials of nominal value.
• Personal Gifts. You may accept or give personal gifts of reasonable value that are related to recognized special occasions such as a graduation, promotion, new job, wedding, retirement or a holiday. A gift is also acceptable if it is based on a family or personal relationship and unrelated to the business involved between the individuals.
• Gifts Rewarding Service or Accomplishment. You may accept a gift from a civic, charitable or religious organization specifically related to your service or accomplishment.

If you conduct business in other countries, you must be particularly careful that gifts and entertainment are not construed as bribes, kickbacks or other improper payments. See “The Foreign Corrupt Practices Act” section of this Code for a more detailed discussion of our policies regarding giving or receiving gifts related to business transactions in other countries.

You should make every effort to refuse or return a gift that is beyond these permissible guidelines. If it would be inappropriate to refuse a gift or you are unable to return a gift, you should promptly report the gift to your supervisor. Your supervisor will bring the gift to the attention of the Chief Financial Officer, who may require you to donate the gift to an appropriate community organization. If you have any questions about whether it is permissible to accept a gift or something else of value, contact your supervisor or a principal financial officer for additional guidance.

Note: Gifts and entertainment may not be offered or exchanged under any circumstances to or with any employees of the U.S. government or state or local governments. If you have any questions about this policy, contact your supervisor or the Company’s Chief Financial Officer for additional guidance. For a more detailed discussion of special considerations applicable to dealing with the U.S., state and local governments, see “Interactions with Governments.”

COMPANY RECORDS

Accurate and reliable records are crucial to our business. Our records are the basis of our earnings statements, financial reports, regulatory submissions and many other aspects of our business and guide our business decision-making and strategic planning. Company records include financial records, personnel records, records relating to our technology and product development, clinical development, customer collaborations, manufacturing and regulatory submissions and all other records maintained in the ordinary course of our business.

All Company records must be complete, accurate and reliable in all material respects. Each employee and director must follow any formal document retention policy of the Company with respect to Company records within such employee’s or director’s control. Please contact your supervisor or the Company’s Chief Financial Officer to obtain a copy of any such policy or with any questions concerning any such policy.

PROTECTION AND USE OF COMPANY ASSETS

Employees should protect the Company’s assets and ensure their efficient use for legitimate business purposes only. Theft, carelessness and waste have a direct impact on the Company’s profitability. The use of Company funds or assets, whether or not for personal gain, for any unlawful or improper purpose is prohibited.

To ensure the protection and proper use of the Company’s assets, each employee should:

• Exercise reasonable care to prevent theft, damage or misuse of Company property;
• Report the actual or suspected theft, damage or misuse of Company property to a supervisor;
• Use the Company’s telephone system, other electronic communication services, written materials and other property primarily for business-related purposes;
• Safeguard all electronic programs, data, communications and written materials from inadvertent access by others; and
• Use Company property only for legitimate business purposes, as authorized in connection with your job responsibilities.

Employees should be aware that Company property includes all data and communications transmitted or received to or by, or contained in, the Company’s electronic or telephonic systems. Company property also includes all written communications. Employees and other users of this property should have no expectation of privacy with respect to these communications and data. To the extent permitted by law, the Company has the ability, and reserves the right, to monitor all electronic and telephonic communication. These communications may also be subject to disclosure to law enforcement or government officials.

ACCURACY OF FINANCIAL REPORTS AND OTHER PUBLIC COMMUNICATIONS

As a public company we are subject to various securities laws, regulations and reporting obligations. Both federal law and our policies require the disclosure of accurate and complete information regarding the Company’s business, financial condition and results of operations. Inaccurate, incomplete or untimely reporting will not be tolerated and can severely damage the Company and result in legal liability.

The Company’s principal financial officers and other employees working in the Finance Department have a special responsibility to ensure that all of our financial disclosures are full, fair, accurate, timely and understandable. These employees must understand and strictly comply with generally accepted accounting principles and all standards, laws and regulations for accounting and financial reporting of transactions, estimates and forecasts.

COMPLIANCE WITH LAWS AND REGULATIONS

Each employee and director has an obligation to comply with all laws, rules and regulations applicable to the Company’s operations. These include, without limitation, laws covering bribery and kickbacks, the development, testing, approval, manufacture, marketing and sale of our products and product candidates, copyrights, trademarks and trade secrets, information privacy, insider trading, illegal political contributions, antitrust prohibitions, foreign corrupt practices, offering or receiving gratuities, environmental hazards, employment discrimination or harassment, occupational health and safety, false or misleading financial information or misuse of corporate assets. You are expected to understand and comply with all laws, rules and regulations that apply to your job position. If any doubt exists about whether a course of action is lawful, you should seek advice from your supervisor or the Company’s Chief Financial Officer.

THE FOOD, DRUG AND COSMETIC ACT AND INTERACTIONS WITH THE FOOD AND DRUG ADMINISTRATION

The Company’s drug products, product candidates and its operations are subject to extensive and rigorous regulation by the U.S. Food and Drug Administration (the “FDA”) under the Federal Food, Drug, and Cosmetic Act (the “FFDCA”) and its implementing regulations. The FDA regulates many areas of the Company’s operations, including, but not limited to, the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, adverse event reporting, advertising, promotion, marketing, sale and distribution of our products. The FDA also regulates the export of drug products manufactured in the United States to international markets. Violation of these laws and regulations can result in severe civil and criminal penalties, adverse publicity for the Company, total or partial suspension of production of a Company product, withdrawal of a Company product from the market, and disciplinary action by the Company against the responsible individuals, up to and including termination of employment.

Company employees with responsibilities in the areas governed by the FFDCA and the FDA are required to understand and comply with these laws and regulations. These employees are expected to have a thorough understanding of the laws, regulations and other relevant standards applicable to their job positions, and to comply with those requirements. If any doubt exists regarding whether your job position or a particular course of action is governed by these laws and regulations, you should seek advice immediately from your supervisor and the Company’s Chief Financial Officer.

INTERACTIONS WITH THE GOVERNMENT

The Company may conduct business with the U.S. government, state and local governments and the governments of other countries. The Company is committed to conducting its business with all governments and their representatives with the highest standards of business ethics and in compliance with all applicable laws and regulations, including the special requirements that apply to communications with governmental bodies that may have regulatory authority over our products and operations, such as government contracts and government transactions. In your interactions with the government, you should:

• Be forthright and candid at all times. No employee or director should intentionally misstate or omit any material information from any written or oral communication with the government.
• Ensure that all required written submissions are made to the government and are timely, and that all written submissions, whether voluntary or required, satisfy applicable laws and regulations.
• You should not offer or exchange any gifts, gratuities or favors with, or pay for meals, entertainment, travel or other similar expenses for, government employees, except as in compliance with all applicable laws and regulations.

If your job responsibilities include interacting with the government, you are expected to understand and comply with the special laws, rules and regulations that apply to your job position as well as with any applicable standard operating procedures that the Company has implemented. If any doubt exists about whether a course of action is lawful, you should seek advice immediately from your supervisor and the Company’s Chief Financial Officer.

In addition to the above, you must obtain approval from the Company’s Chief Executive Officer or Chief Financial Officer for any work activity that requires communication with any member or employee of a legislative body or with any government official or employee. Work activities covered by this policy include meetings with legislators or members of their staffs or with senior executive branch officials on behalf of the Company. Preparation, research and other background activities that are done in support of lobbying communication are also covered by this policy even if the communication ultimately is not made. If any doubt exists about whether a given work activity would be considered covered by this provision, you should seek advice immediately from your supervisor and the Company’s Chief Financial Officer.

POLITICAL CONTRIBUTIONS AND VOLUNTEER ACTIVITIES

The Company encourages its employees and directors to participate in the political process as individuals and on their own time. However, federal and state contribution and lobbying laws severely limit the contributions the Company can make to political parties or candidates. It is Company policy that Company funds or assets not be used to make a political contribution to any political party or candidate, unless prior approval has been given by our Chief Executive Officer or Chief Financial Officer.

The following guidelines are intended to ensure that any volunteer political activity you pursue complies with this policy:

• Contribution of Funds. You may contribute your personal funds to political parties or candidates. The Company will not reimburse you for personal political contributions.
• Volunteer Activities. You may participate in volunteer political activities during non-work time. You may not participate in any political activities during working hours.
• Use of Company Facilities. The Company’s facilities generally may not be used for political activities (including fundraisers or other activities related to running for office). However, the Company may make its facilities available for limited political functions, including speeches by government officials and political candidates, with the approval of our Chief Executive Officer or Chief Financial Officer.
• Use of Company Name. When you participate in non-Company political affairs, you should be careful to make it clear that your views and actions are your own, and not made on behalf of the Company. For instance, Company letterhead should not be used to send out personal letters in connection with political activities.

These guidelines are intended to ensure that any political activity you pursue is done voluntarily and with your own resources and on your own time. Please contact the Company’s Chief Financial Officer if you have any questions about this policy.

COMPLIANCE WITH ANTITRUST LAWS

Antitrust laws of the United States and other countries are designed to protect consumers and competitors against unfair business practices and to promote and preserve competition. Our policy is to compete vigorously and ethically while complying with all antitrust, monopoly, competition or cartel laws in all countries, states or localities in which the Company conducts business. Violations of antitrust laws may result in severe penalties against the Company and its employees, including potentially substantial fines and criminal sanctions. You are expected to maintain basic familiarity with the antitrust principles applicable to your activities, and you should consult the Company’s Chief Financial Officer with any questions you may have concerning compliance with these laws. The following is a summary of actions that could be violations of applicable antitrust laws:

• Price Fixing. The Company may not agree with its competitors to raise, lower or stabilize prices or any element of price, including discounts and credit terms.
• Limitation of Supply. The Company may not agree with its competitors to limit its quantity or type of production or restrict the supply of its services.
• Allocation of Business. The Company may not agree with its competitors to divide or allocate markets, territories or customers.
• Monopolies. The Company may not engage in any behavior that can be construed as an attempt to monopolize.
• Boycott. The Company may not agree with its competitors to refuse to sell to or purchase from third parties. In addition, the Company may not prevent a customer from purchasing or using non-Company products or services.
• Tying. The Company may not require a customer to purchase a product that it does not want as a condition to the sale of a different product that the customer does wish to purchase.
• Price Discrimination. The Company may under some circumstances be prohibited from charging similarly situated customers different prices for the same good. Consult with the Company’s Chief Financial Officer before undertaking any such pricing programs.

Meetings with Competitors

Employees should exercise caution in meetings with competitors. Any meeting with a competitor may give rise to the appearance of impropriety. As a result, if you are required to meet with a competitor for any reason, you should obtain the prior approval of an executive officer of the Company. You should try to meet with competitors in a closely monitored, controlled environment for a limited period of time. You should create and circulate agendas in advance of any such meetings, and the contents of your meeting should be fully documented. Specifically, you should avoid any communications with a competitor regarding:

• Prices;
• Costs;
• Market share;
• Allocation of sales territories;
• Profits and profit margins;
• Supplier’s terms and conditions;
• Product or service offerings;
• Customer collaborations and development projects;
• Terms and conditions of sale and collaborative development programs;
• Bids for a particular contract or program;
• Selection, retention or quality of customers;
• Distribution methods or channels;
• Marketing strategies;
• Future development plans or product pipelines or roadmaps; or
• Other subjects relating to or affecting the production or sale of products and services to existing or prospective collaborators or customers.

If you participate in a meeting with a competitor in which any of the above topics are broached, you should affirmatively end the discussion, and you should state your reasons for doing so. During meetings with competitors, avoid sharing or obtaining confidential information from the competitor. Also avoid statements that could be construed as unfair acts such as harassment, threats or interference with the competitors’ existing contractual relationships.

Professional Organizations and Trade Associations

Employees should be cautious when attending meetings of professional organizations and trade associations at which competitors are present. Attending meetings of professional organizations and trade associations is both legal and proper, if such meetings have a legitimate business purpose and are conducted in an open fashion, adhering to a proper agenda. At such meetings, you should not discuss the restricted topics listed above, the Company’s pricing policies or other competitive terms or any other proprietary, competitively sensitive information. You are required to notify your supervisor or the Company’s Chief Financial Officer or internal counsel prior to attending any meeting of a professional organization or trade association.

COMPLIANCE WITH INSIDER TRADING LAWS

Consistent with the Company’s Insider Trading Compliance Program which has been separately circulated to all employees and directors, the Company’s employees and directors are prohibited from trading in the stock or other securities of the Company while in possession of material nonpublic information about the Company. In addition, Company employees and directors are prohibited from recommending, “tipping” or suggesting that anyone else buy or sell the Company’s stock or other securities on the basis of material non-public information. Employees and directors who obtain material non-public information about another company in the course of their duties are prohibited from trading in the stock or securities of the other company while in possession of such information or “tipping” others to trade on the basis of such information. Violation of insider trading laws can result in severe fines and criminal penalties, as well as disciplinary action by the Company, up to and including termination of employment. You are required to read carefully and observe our Insider Trading Compliance Program, as amended from time to time. Please contact the Company’s Chief Financial Officer for a copy of the Insider Trading Compliance Program or with any questions you may have about insider trading laws.

PUBLIC COMMUNICATIONS AND REGULATION FD

Public Communications Generally

The Company places a high value on its credibility and reputation in the community. What is written or said about the Company in the news media and investment community directly impacts our reputation, positively or negatively. Our policy is to provide timely, accurate and complete information in response to public requests (from media, analysts, etc.), consistent with our obligations to maintain the confidentiality of competitive and proprietary information and to prevent selective disclosure of market- sensitive financial data. The Company has adopted a separate Policy Statement – Guidelines for Corporate Disclosure to maintain the Company’s credibility and reputation in the community, to maintain the confidentiality of competitive and proprietary information and to prevent selective disclosure of market-sensitive financial data. Please contact the Company’s Chief Financial Officer for a copy of the Policy Statement – Guidelines for Corporate Disclosure or with any questions you may have about disclosure matters.

Compliance with Regulation FD

In connection with its public communications, the Company is required to comply with a rule under the federal securities laws referred to as Regulation FD (which stands for “fair disclosure”).

Regulation FD provides that, when we disclose material non-public information about the Company to securities market professionals or stockholders (where it is reasonably foreseeable that the stockholders will trade on the information), we must also disclose the information to the public. “Securities market professionals” generally include analysts, institutional investors and other investment advisors. You are required to read carefully and comply with our Policy Statement – Guidelines for Corporate Disclosure, as amended from time to time. Please inform your supervisor or the Chief Financial Officer if you do not have a copy of our Policy Statement – Guidelines for Corporate Disclosure.

THE FOREIGN CORRUPT PRACTICES ACT

The Foreign Corrupt Practices Act (the “FCPA”) prohibits the Company and its employees, directors and agents from offering or giving money or any other item of value to win or retain business or to influence any act or decision of any government official, political party, candidate for political office or official of a public international organization. Stated more concisely, the FCPA prohibits the payment of bribes, kickbacks or other inducements to foreign officials. This prohibition also extends to payments to a sales representative or agent if there is reason to believe that the payment will be used indirectly for a prohibited payment to foreign officials. Violation of the FCPA is a crime that can result in severe fines and criminal penalties, as well as disciplinary action by the Company, up to and including termination of employment.

Certain small facilitation or “grease” payments to foreign officials may be permissible under the FCPA if customary in the country or locality and intended to secure routine governmental action.
Governmental action is “routine” if it is ordinarily and commonly performed by a foreign official and does not involve the exercise of discretion. For instance, “routine” functions would include setting up a telephone line or expediting a shipment through customs. To ensure legal compliance, all facilitation payments, whether or not covered by the FCPA, must receive prior written approval from the Company’s Chief Financial Officer and must be clearly and accurately reported as a business expense.

IMPORT LAWS AND COUNTER-TERRORISM

The Company must comply with import regulations as well as counter-terrorism requirements when engaging in international trade. If you are involved with importing, you need to be aware of the applicable governmental regulations and requirements, including those required by the Customs-Trade Partnership Against Terrorism (C-TPAT). A failure to comply can result in fines, penalties, imprisonment and/or a loss of import privileges.

EXPORT LAWS

In general, anything the Company ships out of the United States must be covered by an export license. There are certain statutory general licenses which allow the Company to export some products without a specific license. Export control regulations are, however, quite complex and differ for companies located in the United States and abroad. Any employees involved in any export transaction must observe at least these three rules:

• satisfy themselves that there is some export license which allows the export they want to make;
• familiarize themselves with the list of countries against which the United States maintains total or partial bans on U.S. exports and the rules relating to exporting to such countries either directly or indirectly through foreign subsidiaries or other third parties; and
• any information which any employee furnishes to other Company employees, the government or companies that the Company may have hired to facilitate its export transactions must be truthful.

It is important to note that a domestic company may not facilitate or encourage a non-domestic company or subsidiary to perform a transaction that the domestic company could not perform directly itself pursuant to the export sanctions laws. If you have questions regarding import/export laws, contact the Company’s Chief Financial Officer.

ENVIRONMENT, HEALTH AND SAFETY

The Company is committed to providing a safe and healthy working environment for its employees and to avoiding adverse impact and injury to the environment and the communities in which it does business. Company employees and directors must comply with all applicable environmental, health and safety laws, regulations and Company standards. It is your responsibility to understand and comply with the laws, regulations and policies that are relevant to your job. Failure to comply with environmental, health and safety laws and regulations can result in civil and criminal liability against you and the Company, as well as disciplinary action by the Company, up to and including termination of employment. You should contact the Company’s Chief Financial Officer if you have any questions about the laws, regulations and policies that apply to you.

Environment

All Company employees and directors should strive to conserve resources and reduce waste and emissions through recycling and other energy conservation measures. You have a responsibility to promptly report any known or suspected violations of environmental laws or any events that may result in a discharge or emission of hazardous materials.

Health and Safety

The Company is committed not only to comply with all relevant health and safety laws, but also to conduct business in a manner that protects the safety of its employees. All employees and directors are required to comply with all applicable health and safety laws, regulations and policies relevant to their positions. If you have a concern about unsafe conditions or tasks that present a risk of injury to you, please report these concerns immediately to your supervisor or the Company’s Chief Financial Officer.

EMPLOYMENT PRACTICES

The Company pursues fair employment practices in every aspect of its business. The following is only intended to be a summary of certain of our employment policies and procedures. Copies of the Company’s detailed policies, including its Employee Handbook, are available from the Human Resources Department. Company employees must comply with all applicable labor and employment laws, including anti-discrimination laws and laws related to freedom of association and privacy. It is your responsibility to understand and comply with the laws, regulations and policies that are relevant to your job. Failure to comply with labor and employment laws can result in civil and criminal liability against you and the Company, as well as disciplinary action by the Company, up to and including termination of employment. You should contact the Company’s Human Resources Department if you have any questions about the laws, regulations and policies that apply to you.

Harassment and Discrimination

The Company is committed to providing equal opportunity and fair treatment to all individuals on the basis of merit, without discrimination because of race, color, religion, national origin, sex (including pregnancy), sexual orientation, age, disability, veteran status or other characteristic protected by law. The Company also prohibits harassment based on these characteristics in any form, whether physical or verbal and whether committed by supervisors, non-supervisory personnel or non-employees. Harassment may include, but is not limited to, offensive sexual flirtations, unwanted sexual advances or propositions, verbal abuse, sexually or racially degrading words, or the display in the workplace of sexually suggestive or racially degrading objects or pictures.

If you have any complaints about discrimination or harassment, report such conduct to your supervisor or the Human Resources Department. All complaints will be treated with sensitivity and discretion. Your supervisor, the Human Resources Department and the Company will protect your confidentiality to the extent possible, consistent with law and the Company’s need to investigate your concern. Where our investigation uncovers harassment or discrimination, we will take prompt corrective action, which may include disciplinary action by the Company, up to and including, termination of employment. The Company strictly prohibits retaliation against an employee who, in good faith, files a complaint.

Any member of management who has reason to believe that an employee has been the victim of harassment or discrimination or who receives a report of alleged harassment or discrimination is required to report it to the Human Resources Department immediately.

Alcohol and Drugs

The Company is committed to maintaining a drug-free work place. All Company employees must comply strictly with Company policies regarding the abuse of alcohol and the possession, sale and use of illegal substances. Drinking alcoholic beverages is prohibited while on duty or on the premises of the Company, except at specified Company-sanctioned events or as otherwise authorized by management. Possessing, using, selling or offering illegal drugs and other controlled substances is prohibited under all circumstances while on duty or on the premises of the Company. Likewise, you are prohibited from reporting for work, or driving a Company vehicle or any vehicle on Company business, while under the influence of alcohol or any illegal drug or controlled substance.

Violence Prevention and Weapons

The safety and security of Company employees is vitally important. The Company will not tolerate violence or threats of violence in, or related to, the workplace. If you experience, witness or otherwise become aware of a violent or potentially violent situation that occurs on the Company’s property or affects the Company’s business you must immediately report the situation to your supervisor or the Human Resources Department.

The Company does not permit any individual to carry weapons of any kind on Company property. This is true even if you have obtained legal permits to carry weapons. The only exception to this policy applies to security personnel who are specifically authorized by Company management to carry weapons.

CONCLUSION

This Code of Business Conduct and Ethics contains general guidelines for conducting the business of the Company consistent with the highest standards of business ethics. If you have any questions about these guidelines, please contact your supervisor or the Company’s Chief Financial Officer or the Ethics Helpline at www.aratana.ethicspoint.com or 855-327-4485. The Company expects all of its employees and directors, to adhere to these standards.

This Code of Business Conduct and Ethics, as applied to the Company’s principal financial officers, shall be our “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.

This Code and the matters contained herein are neither a contract of employment nor a guarantee of continuing Company policy. The Company reserves the right to amend, supplement or discontinue this Code and the matters addressed herein, without prior notice, at any time.

Download the Nominating and Corporate Governance Committee Charter

I. Purpose

1. The purpose of the Nominating and Corporate Governance Committee (the “Committee”) of the Board of Directors (the “Board”) of Aratana Therapeutics, Inc. (the “Company”) is to assist the Board in discharging the Board’s responsibilities regarding:

•   the identification of qualified candidates to become Board members;
•   the selection of nominees for election as directors at the next annual meeting of stockholders (or special meeting of stockholders at which directors are to be elected);
•   the selection of candidates to fill any vacancies on the Board and any committees thereof;
•   the development and recommendation to the Board of corporate governance guidelines and principles applicable to the Company (the “Corporate Governance Guidelines”); and
•   oversight of the evaluation of the Board.

2. In addition to the powers and responsibilities expressly delegated to the Committee in this Charter, the Committee may exercise any other powers and carry out any other responsibilities delegated to it by the Board from time to time consistent with the Company’s bylaws. The powers and responsibilities delegated by the Board to the Committee in this Charter or otherwise shall be exercised and carried out by the Committee as it deems appropriate without requirement of Board approval, and any decision made by the Committee (including, but not limited to, any decision to exercise or refrain from exercising any of the powers delegated to the Committee hereunder) shall be at the Committee’s sole discretion. While acting within the scope of the powers and responsibilities delegated to it, the Committee shall have and may exercise all the powers and authority of the Board. To the fullest extent permitted by law and consistent with this Charter, the Committee shall have the power to determine which matters are within the scope of the powers and responsibilities delegated to it.

II. Membership

1. The Committee shall consist of such number of directors as the Board shall from time to time determine. Except as otherwise permitted by the applicable rules of The NASDAQ Stock Market (“Nasdaq”), each member of the Committee shall be an “independent director” as defined by Rule 5605(a)(2) of the Nasdaq rules.
2. The members of the Committee, including, but not limited to, the Chairperson of the Committee (the “Chair”), shall be appointed by the Board. Committee members may be removed from the Committee, with or without cause, by the Board. Any action duly taken by the Committee shall be valid and effective, whether or not the members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership provided herein.

III. Meetings and Procedures

1. The Chair (or in his or her absence, a member designated by the Chair) shall preside at each meeting of the Committee and set the agendas for Committee meetings. The Committee shall have the authority to establish its own rules and procedures for notice and conduct of its meetings so long as they are not inconsistent with any provisions of the Company’s bylaws that are applicable to the Committee.
2. The Committee shall meet as often as the Committee deems necessary or desirable in order to perform its responsibilities.
3. The Committee may retain any independent counsel, experts or advisors that the Committee believes to be desirable and appropriate. The Committee also may use the services of the Company’s regular legal counsel or other advisors to the Company. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to any such persons employed by the Committee and for ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties. The Committee shall have sole authority to retain and terminate any search firm to be used to identify director candidates, including, but not limited to, sole authority to approve such search firm’s fees and other retention terms.
4. The Committee, through its Chair, shall report regularly to (or at appropriate times and as otherwise requested by the Chairman of the Board), and review with, the Board the activities of the Committee or any issues that the Committee determines are necessary or advisable to report. The reports shall include any recommendations the Committee deems appropriate and any other matters that are relevant to the fulfillment of the Committee’s responsibilities.

IV. Duties and Responsibilities

1. (a) At an appropriate time prior to each annual meeting of stockholders at which directors are to be elected or reelected, the Committee shall recommend to the Board for nomination by the Board such candidates as the Committee, in the exercise of its judgment, has found to be well qualified and willing and available to serve.
   
   (b) At an appropriate time after a vacancy arises on the Board or any committee thereof or a director advises the Board of his or her intention to resign, the Committee shall recommend to the Board for appointment by the Board to fill such vacancy, such prospective member of the Board as the Committee, in the exercise of its judgment, has found to be well qualified and willing and available to serve.
   
   (c) For purposes of (a) and (b) above, the Committee may consider the following criteria, among others the Committee shall deem appropriate, in recommending candidates for election to the Board:

• personal and professional integrity, ethics and values;
• experience in corporate management, such as serving as an officer or former officer of a publicly held company;
• strong finance experience and with relevant social policy concerns;
• experience relevant to the Company’s industry;
• experience as a board member of executive officer of another publicly held company;
• relevant academic expertise or other proficiency in an area of the Company’s operations;
• diversity of expertise and experience in substantive matters pertaining to the Company’s business relative to other board members;
• diversity of background and perspective, including, but not limited to, with respect to age, gender, race, place of residence and specialized experience;
• practical and mature business judgment, including, but not limited to, the ability to make independent analytical inquiries; and
• any other relevant qualifications, attributes or skills.

2. In appropriate circumstances, the Committee, in its discretion, shall consider and may recommend to the Board the removal of a director for cause, in accordance with the applicable provisions of the Company’s certificate of incorporation, bylaws and the Corporate Governance Guidelines.
3. The Committee shall guide the Board in the Board’s annual review of its performance (including, but not limited to, its composition and organization) and may make recommendations to improve performance.
4. The Committee may investigate any matter brought to its attention.
5. The Committee shall develop and recommend to the Board the Corporate Governance Guidelines. The Corporate Governance Guidelines shall address (i) director qualification standards, (ii) director responsibilities, (iii) director access to management and, as necessary and appropriate, independent advisors, (iv) director compensation, (v) director orientation and continuing education, and (vi) annual performance evaluations of the Board.
6. The Committee shall periodically review the Corporate Governance Guidelines and recommend to the Board changes as necessary.
7. The Committee may review the certificate of incorporation, bylaws and any committee charters of the Company and may recommend to the Board they be amended.
8. The Committee shall periodically review the Company’s practices and policies with respect to directors, the size of the Board, the leadership structure of the Board (including, but not limited to, whether the roles of Chairman of the Board and Chief Executive Officer should be separate), the ratio of management directors to non-management directors, the meeting frequency of the Board and make recommendations to the Board with respect thereto.
9. The Committee shall develop and recommend to the Board a policy regarding the consideration of director candidates recommended by the Company’s stockholders and procedures for submission by stockholders of director nominee recommendations.
10. The Committee shall recommend to the Board or the appropriate committee thereof, processes for annual evaluations of the performance of the Board, the Chairman of the Board and the Chief Executive Officer.
11. The Committee shall consider, develop and recommend to the Board such policies and procedures with respect to the nomination of directors or other corporate governance matters as may be required or required to be disclosed pursuant to any rules promulgated by the Securities and Exchange Commission or otherwise considered to be desirable and appropriate in the discretion of the Committee.
12. The Committee shall provide for new director orientation and continuing education for existing directors as the Committee deems necessary.
13. The Committee shall, at least annually, evaluate its own performance, including, but not limited to, its compliance with this Charter, and provide any written material with respect to such evaluation to the Board, as appropriate, with any recommendations for changes in procedures or policies governing the Committee. The Committee shall conduct such evaluation and review in such manner as it deems appropriate.
14. The Committee shall periodically report to the Board on its findings and actions.
15. The Committee shall review and reassess this Charter at least annually and submit any recommended changes to the Board for its consideration.

V. Delegation of Duties

In fulfilling its responsibilities, the Committee shall be entitled to delegate any or all of its responsibilities to a subcommittee of the Committee, to the extent consistent with the Company’s certificate of incorporation, bylaws, Corporate Governance Guidelines and applicable Nasdaq rules.

VI. Limitations on Scope

The Committee members shall serve on the Committee subject to the understanding on their part and the part of the Company’s management that:

1. The Committee members are not employees or officers of the Company and are not directly involved in the Company’s daily operations, and they will not serve as members of the Committee on a full-time basis.
2. The Committee members expect the Company’s management to provide the Committee with prompt and accurate information, so that the Committee can discharge its duties properly.
3. To the extent permitted by law, the Committee shall be entitled to rely on the information and opinions of the persons and entities noted above in carrying out its responsibilities.
4. The Committee members, in agreeing to serve on the Committee pursuant to this Charter, do so in reliance on, among other things, the indemnification agreements between the Company and each member and the provisions of the Company’s certificate of incorporation which (a) together with the bylaws, provide indemnification for their benefit, and (b) to the fullest extent provided by law, provide that no director shall be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as director.

Download the Audit Committee Charter

I. Purpose

1. The purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of Aratana Therapeutics, Inc. (the "Company") is to oversee the accounting and financial reporting processes, and the audits of the financial statements of the Company.
2. In addition to the powers. and responsibilities expressly delegated to the Committee in this Charter, the Committee may exercise any other powers and carry out any other responsibilities delegated to it by the Board from time to time consistent with the Company's bylaws. The Committee shall report regularly to, and review with, the Board any issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent auditor, the performance of the Company's internal audit function, if any, or any other matter the Committee determines is necessary or advisable to report to the Board. The powers and responsibilities delegated by the Board to the Committee in this Charter or otherwise shall be exercised and carried out by the Committee as it deems appropriate without requirement of Board approval, and any decision made by the Committee (including, but not limited to, any decision to exercise or refrain from exercising any of the powers delegated to the Committee hereunder) shall be at the Committee's sole discretion. While acting within the scope of the powers and responsibilities delegated to it, the Committee shall have and may exercise all the powers and authority of the Board. To the fullest extent permitted by law and consistent with this Charter, the Committee shall have the power to determine which matters are within the scope of the powers and responsibilities delegated to it.
3. Notwithstanding the foregoing, the Committee's responsibilities are limited to oversight. Management of the Company is responsible for the preparation, presentation and integrity of the Company's financial statements as well as the Company's financial reporting process, accounting policies, internal audit function, internal accounting controls and disclosure controls and procedures. The independent auditor is responsible for performing an audit of the Company's annual financial statements, expressing an opinion as to the conformity of such annual financial statements with generally accepted accounting principles in the United States ("GAAP") and reviewing the Company's quarterly financial statements. It is not the responsibility of the Committee to plan or conduct audits or to determine that the Company's financial statements and disclosure are complete and accurate or that they were prepared in accordance with GAAP and applicable laws, rules and regulations. Absent actual knowledge to the contrary, each member of the Committee shall be entitled to rely on the integrity of those persons within the Company and the integrity of the professionals and experts, if any (including, but not limited to, the Company's internal auditor, if any (or others responsible for the internal audit function, including, but not limited to, contracted non-employee or audit or accounting firms engaged to provide internal audit services, if any (the "internal auditor")), and the Company's independent auditor) from which the Committee receives information and, absent actual knowledge to the contrary, the accuracy of the financial and other information provided to the Committee by such persons, professionals or experts.
4. Further, auditing literature, particularly Statement on Auditing Standards No. 100 (AU 722), defines the term "review" to include a particular set of required procedures to be undertaken by independent auditors. The members of the Committee are not independent auditors, and the term "review" as used in this Charter is not intended to have that meaning and should not be interpreted to suggest that the Committee members can or should follow the procedures required of auditors performing reviews of financial statements.
5. The Charter includes requirements for companies subject to (i) the reporting requirements of Section 13 or15 (d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (as so amended and inclusive of such rules and regulations, the "Exchange Act”), and (ii) the listing and. other standards of The NASDAQ Stock Market ("Nasdaq"). Any such requirements shall only be imposed on the Committee's composition and/or activities effective as of the date upon which the Company is either subject to such reporting requirements and/or such listing and other standards of Nasdaq.

II. Membership

1. Except as otherwise permitted by the applicable rules of Nasdaq, the Committee shall consist of at least three (3) members of the Board. Each Committee member must be able to read and understand fundamental financial statements, including, but not limited to, a company's balance sheet, income statement and cash flow statement. Members of the Committee are not required to be engaged in the accounting and auditing profession and, consequently, some members may not be expert in financial matters, or in matters involving auditing or accounting. However, at least one (1) member of the Committee shall have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which- results in the individual's financial sophistication, including, but not limited to, being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. In addition, at least one (1) member of the Committee shall be an "audit committee financial expert" within the definition adopted by the Securities and Exchange Commission (the "SEC”) or the Company shall disclose in its periodic reports required pursuant to the Exchange Act the reasons why at least one (1) member of the Committee is not an "audit committee financial expert." Except as otherwise permitted .by the applicable Nasdaq rules, each member of the Committee shall be an "independent director" as defined by Rule 5605(a)(2) of the Nasdaq rules, meet the criteria for independence set forth in Rule 10A-3(b)(l) under the Exchange Act (subject to the exemptions provided in Rule 10A-3(c)), and not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years.
2. The members of the Committee, including, but not limited to, the Chairperson of the Committee (the "Chair"), shall be appointed by the Board after considering any recommendation of the Nominating and Corporate Governance Committee of the Board. Committee members may be removed from the Committee, with or without cause, by the Board. Any action duly taken by the Committee shall be valid and effective, whether or not the members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership provided herein.

III. Meetings and Procedures

1. The Chair (or in his or her absence, a member designated by the Chair) shall preside at each meeting of the Committee and set the agendas for Committee meetings. The Committee shall have the authority to establish its own rules and procedures for notice and conduct of its meetings so long as they are not inconsistent with any provisions of the Company's bylaws that are applicable to the Committee.
2. The Committee shall meet as often as the Committee deems necessary or desirable in order to perform its responsibilities. The Committee shall periodically meet separately with management, with the internal auditor and with the independent auditor.
3. The Committee may retain any independent counsel, experts or advisors (accounting, financial or otherwise) that the Committee believes to be necessary or appropriate. The Committee also may utilize the services of the Company's regular legal counsel or other advisors to the Company. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the independent auditor for the purpose of rendering or issuing an audit report or performing other audit, review or attestation services, for payment of compensation to any advisors employed by the Committee and for ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
4. The Committee may conduct or authorize investigations, including; but not limited to, through the use of independent counsel, experts or advisors, into any matters within the scope of the powers and responsibilities delegated to the Committee, and shall have full access to all books, facilities, records and personnel when necessary or advisable.

IV. Powers and Responsibilities

Interaction with the Independent Auditor

1. Appointment and Oversight. The Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor (including, but not limited to, resolution of any disagreements between Company management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work or performing other audit, review or attestation services for the Company, and the independent auditor shall report directly to the Committee.
2. Pre-Approval of Services. Before the independent auditor is engaged by the Company or its subsidiaries to render audit or non-audit services, the Committee shall pre-approve the engagement. Committee pre-approval of audit and non-audit services will not be required if the engagement for the services is entered into pursuant to pre-approval policies and procedures established by the Committee regarding the Company's engagement of the independent auditor, provided the policies and procedures are detailed as to the particular service, the Committee is informed of each service provided and such policies and procedures do not include de1egation of the Committee's responsibilities under the Exchange Act to the Company's management. The Committee may delegate to one (I) or more designated members of the Committee the authority to grant pre-approvals, provided such approvals are presented to the Committee at a subsequent meeting. If the Committee elects to establish pre-approval policies and procedures regarding non-audit services, the Committee must be informed of each non-audit service provided by the independent auditor. Committee pre-approval of non-audit services (other than review and attestation services) also will not be required if such services fall within available exceptions established by the SEC. The Committee shall not engage the independent auditor to perform non-audit services prohibited by law or regulation, including, but not limited to, the prohibition of services set forth under Section 10A(g) of the Exchange Act.
3. Independence of Independent Auditor. The Committee shall, at least annually, review the independence and quality control procedures of the independent auditor and the experience and qualifications of the independent auditor's senior personnel that are providing audit services to the Company. In conducting its review:

•   The Committee shall obtain and review any report that may be prepared by the independent auditor describing the auditing firm's internal quality-control procedures or any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditor, or by any inquiry or investigation by governmental or professional authorities within the preceding five (5) years, respecting one ( 1) or more independent audits carried out by the independent auditor and any steps taken to deal with such issues.
•   The Committee shall ensure that the independent auditor prepare and deliver, at least annually, a written statement delineating all relationships between the independent auditor and the Company, consistent with Rule 3526 of the PCAOB. The Committee shall actively engage in a dialogue with the independent auditor with respect to any disclosed relationships or services that, in the view of the Committee, may impact the objectivity and independence of the independent auditor. If the Committee determines that further inquiry is advisable, the Committee shall take appropriate action in response to the independent auditor's report to satisfy itself of the auditor's independence.
•   The Committee shall confirm with the independent auditor that the independent auditor is in compliance with the partner rotation _requirements established by the SEC.
•   The Committee shall, if applicable, consider whether the independent auditor's provision of any permitted information technology services or other non-audit services to the Company is compatible with maintaining ·the independence of the independent auditor.

Annual Financial Statements and Annual Audit

4. Meetings with Management, the Independent Auditor and the Internal Auditor.

• The Committee shall meet with management, the independent auditor and the internal auditor, if any, in connection with each annual audit to discuss the scope of the audit, the procedures to be followed and the staffing of the audit.
• The Committee shall review and discuss with management and the independent auditor: (i) accounting principles and financial statement presentations, including, but not limited to, any changes in the Company's selection or application of accounting principles, significant estimates and accruals, the reasonableness of significant judgments, and issues as to the adequacy and effectiveness of the Company's internal controls and any special remedial actions adopted in light of significant deficiencies or material control deficiencies, if any (including, but not limited to, a discussion of management's process for assessing the effectiveness of internal controls under Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act”')); (ii) any analyses prepared by management or the independent auditor setting forth significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements, including, but not limited to, analyses of the effects of alternative methods under GAAP on the Company's financial statements; and (iii) the effect of regulatory and accounting initiatives on the financial statements.
• The Committee shall review and discuss with management and the independent auditor any material off-balance sheet transactions, arrangements, obligations (including, but not limited to, contingent obligations) and other relationships of the Company with unconsolidated entities of which the Committee is made aware that do not appear on the financial statements of the Company and that may have a material current or future effect on the Company's financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues and expenses.
• The Committee shall review and discuss the annual audited financial statements with management and the independent auditor, if any, including, but not limited to, the Company's disclosures in any periodic report or other filing under "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Committee shall also discuss the results of the annual audit and any matters required to be communicated to the Committee by the independent auditor under the standards of the PCAOB.

5. Separate Meetings with the Independent Auditor.

•   The Committee shall review with the independent auditor any problems or difficulties the independent auditor may have encountered during the course of the audit work, including, but not limited to, special audit risks, materiality and any restrictions on the scope of activities or access to required information or any significant disagreements with management and management's responses to such matters. Among the items that the Committee should consider r:eviewing with the independent auditor are: (i) any accounting adjustments that were noted or proposed by the auditor but were "passed" (as immaterial or otherwise); (ii) any communications between the audit team and the independent auditor's national office respecting auditing or accounting issues presented by the engagement; and (iii) any "management" or "internal control" letter issued, or proposed to be issued, by the independent auditor to the Company. The Committee shall obtain from the independent auditor assurances that Section 1OA(b) of the Exchange Act has not been implicated.
•   The Committee shall discuss with the independent auditor the report that such auditor is required to make to the Committee regarding: (i) all accounting policies and practices to be used that the independent auditor identifies as critical; (ii) all alternative treatments within GA.AP for policies and practices related to material. items that have been discussed among management and the independent auditor, including, but not limited to, the ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and (iii) all other material written communications between the independent auditor and management of the Company, such as any management letter, management representation letter, reports on observations and recommendations. on internal controls, independent auditor's engagement letter, independent auditor's independence letter, schedule of unadjusted audit differences and a listing of adjustments and reclassifications not recorded, if any.
•   The Committee shall discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 114, "The Auditor's Communication with Those Charged With Governance," as adopted by the PCAOB in Rule 3200T (including, but not limited to, any successor rule adopted by the PCAOB).

6. Recommendation to Include Financial Statements in Annual Report. If applicable, the Committee shall, based on the review and discussions in paragraphs 4(d) and 5 above, and based on the disclosures received from the independent auditor regarding its independence and discussions with the auditor regarding such independence pursuant to paragraph 3(b) above, determine whether to recommend to the Board that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year subject to the audit.

Quarterly Financial Statements

7. Meetings with Management and the Independent Auditor. The Committee shall receive, review and discuss the quarterly financial statements with management and the independent auditor, including, but not limited to, the Company's disclosures in any periodic report or other filing under "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Committee shall also discuss the results of the quarterly review and any matters required to be communicated to the Committee by the independent auditor under the standards of the PCAOB.

Internal Control over Financial Re porting

8. The Committee shall discuss with management its process for assessing the effectiveness of internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, including, but not limited to, any material weaknesses or significant deficiencies identified. The Committee shall review management's report on its assessment of the effectiveness of internal control over financial reporting as of the end of each fiscal year and the independent auditor's report on the effectiveness of internal control over financial reporting. The Committee shall discuss with the independent auditor the characterization of deficiencies in internal control over financial reporting. The Committee shall also discuss with management its remediation plan to address internal control deficiencies. The Committee shall determine that the disclosures describing any identified material weaknesses and management's remediation plans are clear and complete. The Committee shall discuss with management its process for performing its required quarterly certifications under Section 302 of the Sarbanes-Oxley Act, including, but not limited to, the evaluation of the effectiveness of disclosure controls by the Chief Executive Officer and Chief Financial Officer. The Committee shall discuss with management and the independent auditor any (1) changes in internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting that are required to be disclosed and (2) any other changes in internal control over financial reporting that were considered for disclosure in the Company's periodic filings with the SEC.

Internal Audit

9. Appointment. The Committee shall appoint an internal auditor if and when it deems it appropriate to do so (including, but not limited to, on account of applicable Nasdaq requirements) and shall thereafter review the appointment and replacement of the internal auditor.
10. Separate Meetings with the · Internal Auditor. The Committee shall meet periodically in executive session with the Company's internal auditor, if any, to discuss the responsibilities, budget and staffing of the Company's internal audit function and any issues that the internal auditor believes warrant audit committee attention. The Committee shall discuss with the internal auditor, if any, any significant reports to management prepared by the internal auditor and any responses from management.

Other Powers and Responsibilities

11. The Committee shall discuss with management and the independent auditor the Company's earnings press releases, if any (with particular focus on any "pro forma" or "adjusted" non­ GAAP financial information), as well as financial information and earnings guidance, if any, provided to analysts and rating agencies. The Committee's discussion in this regard may be general in nature (i.e., discussion of the types of information to be disclosed and the type of presentation to be made). The Committee should be furnished with an advance copy of each earnings release for its review prior to publication.
12. The Committee shall review all related-party transactions which are required to be reported under applicable SEC regulations (other than compensation-related matters) on an ongoing basis and all such transactions must be approved by the Committee. The Committee may adopt and administer a policy regarding the review and approval of such transactions, if and as appropriate.
13. The Committee shall review on a periodic basis, or as appropriate, any investment policy of the Company and recommend to the Board any changes to the investment policy.
14. The Committee shall review and request assurances from management that the Company is complying with the appropriate legal and audit requirements for any Company sponsored retirement plans, including, but not limited to, the Company's 401(k) plan.
15. The Committee shall discuss with management and the independent auditor any correspondence from or with regulators or governmental agencies, any published reports and any employee complaints that, in each case, raise material issues regarding the Company's financial statements, financial reporting process, accounting policies or internal audit function, if any.
16. The Committee shall discuss with the Company's chief legal officer, if any, or outside counsel any legal matters brought to the Committee's attention that could reasonably be expected to have a material impact on the Company's financial statements.
17. The Committee shall request assurances from management and the Company's internal auditors, if any, that the Company's foreign subsidiaries and foreign affiliated entities, if any, are in conformity with applicable legal requirements, including, but not limited to, disclosure of affiliated­ party transactions.
18. The Committee shall discuss with management the Company's policies with respect to risk assessment and risk management. The Committee shall discuss with management the Company's significant risk exposures and the actions management has taken to limit, monitor or control such exposures.
19. The Committee shall set clear hiring policies for employees or former employees of the Company's independent auditor that meet applicable SEC regulations and Nasdaq requirements.
20. The Committee shall establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters. The Committee shall also establish procedures for the confidential and anonymous submission by employees regarding questionable accounting or auditing matters. Among other things, the Committee will cause the Company to implement, maintain and monitor an ethics helpline that is designed to receive anonymous reports of any known or suspected violations of the Company's Code of Business Conduct and Ethics, if and when applicable, or any applicable laws and regulations. The Committee will investigate any reports received through the ethics helpline and report to the Board periodically with respect to the information received through the ethics helpline and any related investigations.
21. The Committee shall provide the Company with the report of the Committee with respect to the audited financial statements required by Item 407 of Regulation S-K of the Exchange Act, for inclusion in each of the Company's annual proxy statements, if applicable.
22. The Committee, through its Chair, shall report regularly to, and review with, the Board any issues that the Committee determines are necessary or advisable to report to the Board, such as any issues with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and the independence of the Company's in dependent auditor, and the performance of the Company's internal auditor, if any.
23. If and when applicable, the Committee shall periodically consider and discuss with management and the independent auditor the Company's Code of Business Conduct and Ethics and the procedures in place to enforce the Code of Business Conduct and Ethics. If and when applicable, the Committee shall also consider and discuss and, as appropriate, grant requested waivers from the Code of Business Conduct and Ethics brought to the attention of the Committee, though the Committee may defer any decision with respect to any waiver to the Board.
24. The Committee shall, at least annually, (a) perform an evaluation of the performance of the Committee and its members, including, but not limited to, a review of the Committee's compliance with this Charter, and (b) provide any written material with respect to such evaluation to the Board, as appropriate, including, but not limited to, any recommendations for changes in procedures or policies governing the Committee.
25. The Committee shall at least annually review and reassess this Charter and submit any recommended changes to the Board for its consideration.

V. Limitations on Scope

The Committee members shall serve on the Committee subject to the understanding on their part and the part of the Company's management and the independent auditors that:

1. The Committee members are not employees or officers of the Company and are not directly· involved in the Company's daily operations, and they will not serve as members of the Committee on a full-time basis.
2. The Committee members expect the Company's management and the independent auditors to provide the Committee with prompt and accurate information, so that the Committee can discharge its duties properly.
3. To the extent permitted by law, the Committee shall be entitled to rely on the information and opinions of the persons and entities noted above in carrying out its responsibilities.
4. The Committee members, in agreeing to serve on the Committee pursuant to this Charter, do so in reliance on, among other things, the indemnification agreements between the Company and each member and the provisions of the Company's certificate of incorporation which (a) together with the bylaws, provide indemnification for their benefit, and (b) to the fullest extent provided by law, provide that no director shall be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as director.

Download the Compensation Committee Charter

III. Meetings and Procedures

1. The Chair (or in his or her absence, a member designated by the Chair) shall preside at each meeting of the Committee and set the agendas for Committee meetings. The Committee shall have the authority to establish its own rules and procedures for notice and conduct of its meetings so long as they are not inconsistent with any provisions of the Company’s bylaws that are applicable to the Committee.
2. The Committee shall meet as often as it deems necessary or desirable in order to perform its responsibilities. The Committee shall keep such records of its meetings as it shall deem appropriate.
3. The Committee may, in its discretion, invite other directors of the Company, members of the Company’s management, compensation and benefits consultants, the internal and/or external legal counsel to the Company or any other person whose presence the Committee believes to be desirable and appropriate to attend and observe meetings of the Committee. Notwithstanding the foregoing, no person may be present during the voting or deliberations concerning his or her compensation.
4. The Committee shall (a) have the authority, in its sole discretion, to retain or obtain the advice of any compensation consultant, legal counsel, or other advisors as the Committee deems necessary or appropriate to carry out its responsibilities; (b) be directly responsible for the appointment, compensation and oversight of the work of any compensation consultant, legal counsel and other advisor retained by the Committee; and (c) subject to any exceptions permitted under Nasdaq rules, select, or receive advice from, a compensation consultant, legal counsel or other advisor, other than in-house legal counsel, only after taking into consideration the factors required by any applicable requirements of the Exchange Act and Nasdaq rules. The Company shall provide for appropriate funding, as determined by the Committee, for payment of reasonable compensation to a compensation consultant, legal counsel or any other advisor retained by the Committee.
5. The Committee may conduct or authorize investigations, including, but not limited to, through the use of independent counsel, experts or advisors, into any matters within the scope of the powers and responsibilities delegated to the Committee, shall have full access to all books, facilities, records and personnel when necessary or advisable, and shall have authority to request any officer, employee or advisor of the Company to meet with the Committee or any advisors engaged by the Committee.

IV. Powers and Responsibilities

1. The Committee shall, at least annually, review the compensation philosophy of the Company, including, but not limited to, the policies and strategy relative to executive compensation, including, but not limited to, the mix of base salary, short-term and long-term incentive compensation within the context of stated guidelines for compensation relative to peer companies.
2. The Committee shall obtain information on market trends in executive compensation and shall review the competitiveness of the Company’s executive compensation programs to ensure (a) the attraction and retention of executive officers; (b) the motivation of executive officers to achieve the Company’s business objectives; and (c) the alignment of the interests of executive officers with the long-term interests of the Company’s stockholders.
3. The Committee shall, at least annually, review and recommend to the Board for approval the corporate goals and objectives relating to the compensation of the chief executive officer, evaluate the performance of the chief executive officer in light of those goals and objectives and review and recommend to the Board for approval all compensation for the chief executive officer, including, but not limited to, salary, bonus, stock options and other benefits, direct and indirect, based on such evaluation. The chief executive officer may not be present during voting or deliberations on his or her compensation.
4. At least annually, the chief executive officer will present to the Committee the proposed corporate goals and objectives relating to the compensation of the executive officers (other than the chief executive officer) and the other executives and officers who report directly to the chief executive officer (collectively, the “senior executives”) and the proposed total compensation to be paid to such senior executives. The Committee shall review the chief executive officer’s recommendations, modify them as appropriate and then approve the corporate goals and objectives relating to the compensation of the senior executives and the compensation to be paid to such senior executives. Subject to paragraph 5, the Committee shall also review and approve all employment agreements and severance arrangements, any change in control agreements and change in control provisions affecting any elements of compensation and benefits and any special or supplemental compensation arrangements and benefits for the senior executives.
5. Between the annual reviews referenced in paragraph 4, the chief executive officer will present to the Committee any proposed changes or amendments to the compensation of the senior executives (excluding any management board member), including changes to employment agreements and severance arrangements, any change in control agreements and change in control provisions affecting any elements of compensation and benefits and any special or supplemental compensation arrangements. The Committee will evaluate and consider such proposed changes, and may approve such changes or amendments.
6. The Committee shall periodically review and recommend to the Board compensation for service on the Board and any committees. In addition, the Committee shall periodically consider and recommend to the Board the appropriate additional compensation directors should receive for service as chair of the Board or a committee thereof.
7. The Committee shall have the authority to periodically engage in a general review of base compensation levels for all other employees of the Company.
8. Subject to stockholder approval requirements under Nasdaq, if applicable, or otherwise required by the Exchange Act, the Code or other applicable law, the Committee shall have the authority to periodically review, approve, and where appropriate, terminate, all annual bonus, long-term incentive compensation, equity compensation, employee pension and welfare benefit plans (including, but not limited to, 401(k) plans, employee stock purchase plans, long-term incentive plans, management incentive plans and others) and with respect to each plan shall have the authority to:

(a) conduct general administration;

(b) subject to paragraphs 3 and 4 above, set performance targets under all annual bonus and long-term incentive compensation plans as appropriate;

(c) determine that any and all performance targets used for any performance-based equity compensation plans have been met before payment of any executive bonus or compensation or exercise of any executive award granted under any such plan(s);

(d) subject to paragraphs 3 and 4 above, approve all new executive compensation programs, amendments to, and terminations of, all compensation plans and any awards under such plans (other than any increase in any share reserve under the Company’s equity incentive plan(s));

(e) subject to paragraphs 3 and 4 above, grant any awards under any performance-based annual bonus, long-term incentive compensation and equity compensation plans, including, but not limited to, stock options and other equity rights (e.g., restricted stock, stock purchase rights);

(f) make recommendations to the Board with respect to awards for the Company’s directors under the Company’s equity incentive plan(s);

(g) make recommendations to the Board with respect to any increase in any share reserve under the Company’s equity incentive plan(s);

(h) make determinations as to whether to repurchase securities from terminated employees, other than ordinary course repurchases of unvested shares in connection with the termination of an employee’s employment; and

(i) provide compensation risk assessments.

The Committee’s authority to conduct plan reviews may include reviewing the plan’s administrative costs, reviewing current plan features relative to any proposed new features, and assessing the performance of the plan’s internal and external administrators if any duties have been delegated.

9. The Committee shall have the authority to establish and periodically review policies concerning perquisite benefits.
10. The Committee shall have the authority to periodically review the need for a Company policy regarding compensation paid to the Company’s executive officers subject to the limits on deductibility under Section 162(m) of the Code.
11. The Committee shall have the authority to recommend to the Board policies with respect to change of control or “parachute” payments.
12. The Committee shall review and recommend to the Board any employee loans; provided that no such review or recommendation shall be necessary in the case of ordinary course loans under the Company’s 401(k) or similar employee savings plans; provided, further, that all loans to executive officers and directors shall be prohibited at any time the Company is subject to Section 402 of the Sarbanes-Oxley Act of 2002.
13. If applicable, the Committee shall (a) review and discuss with management the Company's compensation discussion and analysis to be included in the Company’s annual proxy statement or annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), and based on such discussions, determine whether to recommend to the Board that such compensation discussion and analysis be included in such proxy statement or annual report, and (b) produce an annual report on executive compensation for inclusion in the Company’s annual proxy materials in accordance with applicable rules and regulations of Nasdaq, the SEC and other regulatory bodies.
14. The Committee shall monitor the Company’s compliance with the requirements of the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and other applicable laws, regulations and rules, and shall have the authority to oversee the Company’s response to regulatory developments, in each case relating to compensation arrangements for directors and executive officers.
15. The Committee shall, with the assistance of any external resources as the Committee deems appropriate, (a) have the authority to oversee the Company’s assessment of, including, but not limited to, reviewing reports from management or outside advisors with respect to, whether the Company’s compensation programs and policies are reasonably likely to encourage excessive risk-taking by any employee that could reasonably be expected to have a material adverse effect on the Company, and (b) review and discuss any disclosure in the Company’s proxy statement regarding risks related to the Company’s compensation programs and policies.
16. The Committee shall oversee the Company’s compliance with the requirement under Nasdaq rules that, with limited exceptions, stockholders approve equity compensation plans.
17. The Committee, through its Chair, shall report regularly to, and review with, the Board any issues that the Committee determines are necessary or advisable to report to the Board.
18. The Committee shall, at least annually, perform an evaluation of the performance of the Committee and its members, including, but not limited to, a review of the Committee’s compliance with this Charter, and provide any written material with respect such evaluation to the Board, including, but not limited to, any recommendations for changes in procedures or policies governing the Committee. The Committee shall conduct such evaluation and review in such manner as it deems appropriate.
19. The Committee shall, at least annually, review and reassess this Charter and submit any recommended changes to the Board for its consideration.

V. Delegation of Duties

1. The Committee may form and delegate authority to one or more subcommittees of the Committee as it deems appropriate from time to time under the circumstances (including, not limited to, a subcommittee consisting of a single member and a subcommittee consisting of at least two members, each of whom qualifies as a “non-employee director” within the meaning of Rule 16b-3 promulgated under the Exchange Act and an “outside director” under the regulations promulgated under Section 162(m) of the Code).
2. In furtherance of the foregoing, to the extent permitted by applicable law and the terms of any equity plan(s), the Committee may from time to time delegate to one (1) or more officers of the Company the authority to grant or amend equity awards pursuant to such equity plan(s) to persons other than (a) individuals who are subject to Section 16 of the Exchange Act, (b) employees of the Company who are, or are reasonably expected to be, “covered employees” within the meaning of Section 162(m) of the Code, or (c) officers of the Company (or members of the Board) to whom authority to grant or amend equity awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Committee specifies at the time of such delegation, and the Committee may at any time rescind the authority so delegated or appoint a new delegate. The Committee shall report any such delegation to the Board.

VI. Limitations on Scope

The Committee members shall serve on the Committee subject to the understanding on their part and the part of the Company’s management that:

1. The Committee members are not employees or officers of the Company and are not directly involved in the Company’s daily operations, and they will not serve as members of the Committee on a full-time basis.
2. The compensation of Committee members shall be as determined by the Board.
3. The Committee members expect the Company’s management to provide the Committee with prompt and accurate information, so that the Committee can discharge its duties properly.
4. To the extent permitted by law, the Committee shall be entitled to rely on the information and opinions of the persons and entities noted above in carrying out its responsibilities.
5. The Committee members, in agreeing to serve on the Committee pursuant to this Charter, do so in reliance on, among other things, the indemnification agreements between the Company and each member and the provisions of the Company’s certificate of incorporation which (a) together with the bylaws, provide indemnification for their benefit, and (b) to the fullest extent provided by law, provide that no director shall be liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as director.