Nominating and Governance Committee
The Nominating and Corporate Governance Committee (the "Committee") of the Board of Directors (the "Board") of Aradigm Corporation, a California corporation (the "Company"), shall consist of at least two (2) members of the Board. No Committee member shall be an employee of the Company and each member shall be free from any relationship that would interfere with the exercise of his or her independent judgment, as determined by the Board, in accordance with the applicable independence requirements of The NASDAQ Stock Market and the rules and regulations of the Securities and Exchange Commission ("SEC"). The members of the Committee and the Committee chairperson shall be appointed by the Board.
The purpose of the Committee shall be to (i) oversee all aspects of the Company's corporate governance functions on behalf of the Board; (ii) make recommendations to the Board regarding corporate governance issues; (iii) identify, review and evaluate candidates to serve as directors of the Company; (iv) serve as a focal point for communication between such candidates, non-committee directors and the Company's management; (v) recommend such candidates to the Board; and (vi) make such other recommendations to the Board regarding affairs relating to the directors of the Company, including director compensation (in coordination with the Compensation Committee).
In fulfilling its function and responsibilities, the Committee should give due consideration to the following operating principles and processes:
- Communication – Regular and meaningful contact throughout the year with the Board, committee chairpersons, members of senior management and independent professional advisors to the Board and its various committees, as applicable, is viewed as important for strengthening the Committee's knowledge of relevant current and prospective corporate governance issues.
- Committee Education/Orientation – Developing with management and participating in a process for systematic review of important corporate governance issues and trends in corporate governance practices that could potentially impact the Company will enhance the effectiveness of the Committee.
- Resources – The Committee shall be authorized to access such internal and, in consultation with senior management, external resources as the Committee deems necessary or appropriate to fulfill its defined responsibilities, including engagement of independent counsel, consultants and other professional advisors, as well as executive search firms to help identify director candidates. The Committee shall have sole authority to approve fees, costs and other terms of engagement of such outside resources. The Committee shall have the authority to perform such other functions, and shall have such powers, as may be necessary or appropriate in the efficient and lawful discharge of its responsibilities hereunder.
- Reporting to the Board – The Committee, through the Committee chairperson, shall report all material activities of the Committee to the Board from time to time, or whenever so requested by the Board.
The operation of the Committee will be subject to the provisions of the Bylaws of the Company and the California Corporations Code, each as in effect from time to time. The Committee will have the full power and authority to carry out the following primary responsibilities or to delegate such power and authority to one (1) or more subcommittees of the Committee:
Director Nominations – The Committee, in consultation with the Chief Executive Officer, has the primary responsibility for establishing criteria for Board membership and identifying, evaluating, reviewing and recommending qualified candidates to serve on the Board, including consideration of any potential conflicts of interest as well as applicable independence and experience requirements.
The Committee shall have the primary responsibility for evaluating, reviewing and considering the recommendation for nomination of current directors for reelection to the Board as well as monitoring the size of the Board. The selection of nominees for director to be presented to the shareholders for election or reelection, and the selection of new Directors to fill vacancies and newly created directorships on the Board shall be made by the full Board based on the recommendations of the Committee.
The Committee shall also have the power and authority to consider board nominees and proposals submitted by the Company's shareholders and to establish any procedures, including procedures to facilitate shareholder communication with the Board of Directors, and to make any such disclosures required by applicable law in the course of exercising such authority. The Committee will evaluate any director nominee recommendations received from shareholders in the same manner as recommendations received from management, Committee members or members of the Board.
- Director Qualifications – The Committee shall consider candidates' qualifications based on the needs of the Board and the Company when recommending candidates for election to the Board.
- Board Conflicts – If a Committee member has a conflict or a potential conflict he should bring it to the attention of the Committee Chair.
- The Committee shall review and reassess this Charter periodically and submit any recommended changes to the Board for its consideration.
- Board Assessment – The Committee shall periodically review, discuss and assess the performance of the Board, including Board committees, seeking input from senior management, the full Board and others. The assessment includes evaluation of the Board's contribution as a whole, specific areas in which the Board and/or management believe better contributions could be made, and overall Board composition and makeup, including the reelection of current Board members. The factors to be considered shall include whether the Directors, both individually and collectively, can and do provide the skills and expertise appropriate for the Company. The Committee shall also consider and assess the independence of Directors, including whether a majority of the Board continue to be independent from management in both fact and appearance, as well as within the meaning prescribed by The NASDAQ Stock Market. The results of such reviews shall be provided to the Board for further discussion as appropriate. The Committee shall also consider possible conflicts of interest of Directors, and whether a Director candidate has special interests that would impair his or her ability to effectively represent the interests of all shareholders.
- Board Committee Nominations – The Committee, in consultation with the Chief Executive Officer, and after due consideration of the wishes, independence and experience of the individual directors and independence and experience requirements in accordance with The NASDAQ Stock Market, the rules and regulations of the Securities and Exchange Commission and applicable law, shall recommend to the entire Board annually the chairmanship and membership of each committee and the chairmanship of the Board.
- Continuing Education – The Committee shall also consider instituting a plan or program for the continuing education of directors.
- Compliance with the Code. The Committee shall review the results of management's efforts to monitor compliance with the Company's programs and policies designed to ensure adherence to applicable laws and rules, as well as to its Code of Business Conduct and Ethics. The Committee will coordinate as needed with the Company's Audit Committee relating to any violations (or any reports of possible violations) of the Code of Business Conduct and Ethics.
- Procedures for Information Dissemination – The Committee shall oversee and review the processes and procedures used by the Company to provide information to the Board and its committees. The Committee should consider, among other factors, the reporting channels through which the Board and its committees receive information and the level of access to outside advisors where necessary or appropriate, as well as the procedures for providing accurate, relevant and appropriately detailed information to the Board and its committees on a timely basis.
- Director Attendance at Annual Shareholder Meeting – Absent unusual circumstances, members of the Board are expected to attend the Company's annual shareholder meeting.
The Committee will hold at least two (2) regular meetings per year and additional meetings as the Committee deems appropriate. At the discretion of the Committee, the President, Chief Executive Officer, Chairman of the Board (if so designated) and Chief Financial Officer may attend any meeting of the Committee, except for portions of the meetings where his, her or their presence would be inappropriate, as determined by the Committee.
Minutes of each meeting will be kept and distributed to each member of the Committee, members of the Board who are not members of the Committee and the Secretary of the Company. The Chairman of the Committee will report to the Board from time to time, or whenever so requested by the Board.
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