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Corporate Governance




(As of July 22, 2015)

The following corporate governance principles have been adopted by the Board of Directors (the “Board”) of Blue Buffalo Pet Products, Inc. (the “Corporation”) and shall constitute the Corporate Governance Principles (the “Corporate Governance Principles”) of the Corporation.

I. Role and Responsibility of the Board

The Board represents shareholders’ interests and is responsible for fostering the long-term success and value of the Corporation, consistent with its fiduciary duty to the shareholders. The Board has responsibility for establishing broad corporate policies, setting strategic direction and overseeing management, which is responsible for the day-to-day operations of the Corporation. In fulfilling this role, each director must exercise his or her good faith business judgment in the best interests of the Corporation and its shareholders.

  1. Board Size

  2. The Board will periodically review its size and take appropriate actions to increase or decrease the Board size as necessary, including, if required, obtaining shareholder approval of such changes.

  3. Independence Standards

  4. The Board will satisfy the independence requirements of the NASDAQ Stock Exchange (“NASDAQ”), subject to an election by the Corporation to rely on any exemptions therefrom, including exemptions for “controlled companies” within the meaning of the listing standards of NASDAQ as then in effect. Subject to an election by the Company to rely on the exemption for controlled companies and the applicable transition periods under the applicable rules of the NASDAQ, the Board shall make an annual determination as to the independence of each independent director following a review of all relevant information.

  5. Board Determination of Independence

  6. No director will be considered “independent” unless the Board affirmatively determines at least annually that the director has no material relationship with the Corporation (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Corporation), which in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. When making “independence” determinations, the Board shall follow the rules and regulations specified by NASDAQ, by law or any other regulatory body or self-regulatory body applicable to the Corporation. When assessing the materiality of a director’s relationship with the Corporation, the Board shall broadly consider all relevant facts and circumstances and consider the issue not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships (among others). As the concern is independence from management, the Board does not view ownership of even a significant amount of stock, by itself, as a bar to an independence finding.

    In making its “independence” determinations, the Board has adopted as a guideline the standards set forth in Rule 5605 (a)(2) of the NASDAQ Listing Rules.

  7. Additional “Independence” Requirements for Audit and Compensation Committee Membership

  8. No director may serve on the Audit Committee or the Compensation Committee of the Board unless such director meets all of the criteria established for such committee service by NASDAQ and the Securities and Exchange Commission (the “SEC”), subject, in each case, to an election by the Company to rely on any exemption available to controlled companies and the transition periods applicable to initial public offerings.

  9. Term Limits

  10. The Board does not believe it should limit the number of terms for which an individual may serve as director as such a policy may deprive the Board of the service of directors who have developed valuable insight into the operations and future of the Corporation based on their experience with, and understanding of, the Corporation.

  11. Selection of Chairman of the Board and Chief Executive Officer

  12. The Board shall select the Chairman of the Board (the “Chairman”) and the Corporation’s Chief Executive Officer (“CEO”) in any way it considers in the best interests of the Corporation. Therefore, the Board does not have a policy on whether the role of Chairman and CEO should be separate or combined, and, if it is to be separate, whether the Chairman should be selected from the independent directors or should be an employee of the Corporation.

II. Director Qualification Standards

  1. Selection of Directors

  2. Subject to any obligations and procedures governing the nomination of directors to the Board that may be set forth in any stockholders agreement to which the Corporation is a party, the Board is responsible for nominating directors for election by shareholders. The Board may identify candidates for election to the Board on its own, or with the assistance of a nominating/corporate governance committee (if such a committee should exist), as well as by considering recommendations from shareholders, officers and employees of the Corporation and other sources that the Board deems appropriate. The Board may retain a third-party search firm to assist in the identification of possible candidates for election to the Board.

    In nominating a slate of directors, the Board’s objective is to select individuals with skills and experience to oversee and evaluate management’s performance in operating the Corporation’s business. When evaluating nominees, the Board shall take into account (a) minimum individual qualifications, including integrity, accountability, experience and an ability to work collegially with the other members of the Board, and (b) all other factors it considers appropriate, which may include diversity, existing commitments to other businesses, potential conflicts of interest with other pursuits, legal considerations such as antitrust issues, corporate governance background, relevant business or government acumen, financial and accounting background, executive compensation background and the size, composition and combined expertise of the existing Board.

    The invitation to join the Board should be extended on behalf of the Board, as a whole, by the Chairman.

    In determining whether to recommend a director for re-election, the Board shall consider all information it determines to be relevant, including the director’s past attendance at meetings and participation in, and contributions to, the activities of the Board.

  3. Lead Independent Director

  4. Whenever the Chairman is also the CEO or is a director who does not otherwise qualify as an “independent director,” the independent directors may elect from among themselves a Lead Independent Director who will call and chair the regularly scheduled executive sessions of the independent directors and serve as a non-exclusive liaison among the independent directors and the other Board members.

  5. Change in Present Job Responsibility

  6. Directors should notify the Board upon a significant change of the director’s principal current employer or principal employment, or other similarly significant change in professional occupation or association. The Board shall determine the action, if any, to be taken with respect to such information and may request such director to resign. If so requested, the director shall offer his or her resignation.

III. Director Responsibilities

  1. Basic Responsibilities

  2. The Corporation is committed to conducting its business in accordance with ethical business principles. Integrity and ethical behavior are core values of the Corporation. The Board shall provide the best example of these values and shall reinforce their importance at appropriate times. The Audit Committee shall review the Corporation’s Code of Ethics and Business Conduct (the “Code”) periodically, as well as the adequacy of the policies included in the Code. The Audit Committee shall confirm with the Corporation’s executive officers periodically that the officers understand and are implementing those policies. The Audit Committee shall, monitor compliance with the Code, investigate any alleged breach or violation of the Code, and enforce the Code.

    The director’s basic responsibility is to exercise his or her good faith business judgment in the best interests of the Corporation. In fulfilling this responsibility directors shall:

    • Adhere to the Code, including acting pursuant to the duty of loyalty owed to the Corporation.

    • Approve major strategic decisions and oversee, develop and implement Board policies.

    • Provide oversight of risk assessment processes and processes designed to promote legal compliance.

    • Monitor and assess performance and ask appropriate questions of management to address accountability with established goals.

    • Stay well informed regarding the Company’s businesses.

    • Oversee internal and external audit processes and financial reporting through the Audit Committee.

    • Select, and, through the Compensation Committee, evaluate and approve the compensation of, the CEO.

    • Review and approve compensation of other executive officers through the Compensation Committee.

    • Oversee the Company’s disclosure controls and internal controls through the Audit Committee.

    • Perform such other functions as the Board believes appropriate or necessary, or as otherwise prescribed by rules or regulations.

    Each director shall be entitled to rely on the honesty and integrity of the Company’s senior executives and its outside advisors and auditors absent evidence that makes such reliance unwarranted. The directors shall also be entitled (i) to the benefits of indemnification to the fullest extent permitted by the Company’s Amended and Restated Articles of Incorporation (the “Articles of Incorporation”), Bylaws and any indemnification agreements and (ii) to exculpation as provided by Delaware law and the Articles of Incorporation.

  3. Board Meetings

  4. The Board currently plans to meet at least quarterly each year and special meetings may be held as specified in the Bylaws. Directors are expected to make every effort to attend and participate in Board meetings and meetings of committees on which they serve, and to spend the time needed and meet as frequently as necessary, to discharge properly their responsibilities. Directors are encouraged to attend Board meetings and meetings of committees of which they are members in person but may also attend such meetings by telephone or video conference. They are expected to review relevant materials and prepare appropriately for meetings and for discussions with management. Every effort should be made to schedule meetings sufficiently in advance to ensure maximum attendance at each meeting. Directors are also expected to make every effort to attend the Annual Meeting of Shareholders.

  5. Information

  6. Written information and data that management believes are important to the Board’s understanding of the business to be conducted at a Board or committee meeting, or are requested by directors, will be distributed before the meeting. Directors should review these materials in advance of the meeting. In addition, various materials will be distributed to the Board on a continuing basis from time to time to keep the Board informed of developments concerning the Corporation, its businesses and the industries and markets in which the Corporation operates.

  7. Conduct of Meetings

  8. Board meetings shall be run by the Chairman, and shall be conducted in accordance with customary practice in a manner that ensures open communication, meaningful participation and timely resolution of issues. The Chairman shall set the agenda for each meeting together with management and the Lead Independent Director, if any, as appropriate. All directors are encouraged to raise items for consideration. To the extent feasible, management and any committees of the Board should provide directors with materials concerning matters to be acted upon in advance of the applicable meeting.

  9. Executive Session

  10. The non-management directors will meet in executive session in regularly scheduled executive sessions and, if the non-management directors include directors who have not been determined to be independent, then the independent directors will meet in a private session at least twice a year. The Lead Independent Director, if any, or if no Lead Independent Director has been elected, a director designated by the non-management directors or independent directors, as applicable, will preside over these executive sessions.

  11. Board Interaction with Investors, Press, Customers and Shareholders

  12. Directors receiving media or other third-party inquiries about the Corporation should refer such inquiries to the Chairman. If a response to any such inquiry is appropriate, they should, in most circumstances, come from the Chairman. Individual directors are not precluded from communicating with shareholders or other interested parties but it is expected that in most circumstances, any such communications will be at the request of management.

  13. Commitment and Limits on Other Activities

  14. It is expected that, without specific approval from the Board, directors will not serve on more than six public company boards (including the Corporation's Board) and no member of the Corporation's Audit Committee shall serve on the audit committee of more than three public companies (including the Corporation's Audit Committee). In addition, directors who also serve on CEOs or in equivalent positions generally should not serve on more than two outside public company boards. Directors shall advise the Chairman in advance of accepting an invitation to serve on another board of directors or other significant commitments involving affiliation with other businesses, non-profit entities or governmental units

  15. Confidentiality

  16. The proceedings and deliberations of the Board and its committees are confidential. Each director shall maintain the confidentiality of information received in connection with his or her service as a director.

IV. Board Committees

The Board will have at all times an Audit Committee and a Compensation Committee and such other committees as may be required by NASDAQ and the SEC from time to time (the “Committees”). The qualifications of the members of the Committees will comply with and the membership requirements set forth in the relevant Committee charter. Subject to any obligations and procedures that may be set forth in any stockholders agreement to which the Corporation is a party, the Board will make appointments of Board members to the Committees and appoint the chairman of the Committees. A director may serve on more than one committee. The Board may, from time to time, establish or maintain additional committees as necessary or appropriate.

Each Committee will have such charters as may be required by NASDAQ and the SEC or as specified by the Board. The chairman of each Committee will set the Committee’s agenda. Each Committee shall report regularly to the Board summarizing the Committee’s actions and any significant issues considered by the Committee.

V. Director Access to Management, Employees and Independent Advisors

  1. Director Access to Management and Employees

  2. Directors shall have full, free and complete access to the Corporation’s management and employees in order to become and remain informed about the Corporation’s business and for such other purposes as may be helpful to the Board in fulfilling its responsibilities. Directors are expected to use judgment to be sure that this contact is not distracting to the business operations of the Corporation and that the CEO is appropriately informed of contacts between the Board members and management.

    The Board will encourage management to, from time to time, invite to Board meetings managers who (i) can provide additional insight into the matters being discussed because of responsibility for and/or personal involvement in these areas, and/or (ii) are managers with future potential that the senior management believes should be given exposure to the Board.

  3. Board Access to Independent Advisors

  4. The Board shall have the autonomy to retain such outside professionals to act as advisors to the Board and/or management as may be deemed necessary or appropriate in the discharge of their duties.

    Committees may wish to hire their own outside counsel, consultants and other professionals to advise them in the discharge of their duties. The parameters for any such retention shall be set forth in the respective Committee charters.

  5. Funding for Committee Advisors

  6. The Corporation shall provide appropriate funding as determined by the Audit Committee, for payment of compensation: (i) to the registered public accounting firm employed by the Corporation for the purposes of rendering an audit report; and (ii) to any other adviser employed by the Audit Committee. In addition, the Corporation shall provide appropriate funding as determined by the Board and such other Committees to any adviser employed by the Board and such Committees.

VI. Director Compensation

The form and amount of director compensation will be determined by the Board based on a recommendation of the Compensation Committee. The Compensation Committee will periodically review director compensation, including additional compensation for Committee members.

VII. Director Orientation and Continuing Education

The Corporation shall establish an orientation program for all new directors in order to ensure that the Corporation’s directors are fully informed as to their responsibilities and the means at their disposal for the effective discharge of those responsibilities and shall coordinate director continuing education programs. It is expected that the orientation program shall, at a minimum, familiarize new directors with the Corporation’s (i) strategic plans, (ii) financial control systems and procedures and any significant financial, accounting and risk-management issues, (iii) compliance programs, including with SEC reporting obligations and NASDAQ corporate governance requirements, (iv) code of ethics, conflict policies and other controls, (v) principal officers and (vi) internal and independent auditors. The new directors shall be introduced to such management and other personnel, and representatives of the Corporation’s outside legal, accounting and other outside advisors as is appropriate to familiarize them with the resources available to them. As appropriate, the Corporation shall prepare additional educational sessions for directors on matters relevant to the Corporation and its business. Directors are also encouraged to participate in educational programs relevant to their responsibilities, including programs conducted by universities and other educational institutions.

VIII. Evaluation and Management Succession

  1. Succession Planning

  2. The Board shall periodically review succession planning, including policies and principles for CEO selection, as well as policies regarding succession in the event of an emergency or the retirement of the CEO.

  3. Formal Evaluation of the CEO

  4. The Board shall undertake an annual evaluation of the CEO and discuss the results of the assessment. The Chairman of the Compensation Committee shall communicate the results of the assessment to the CEO. The evaluation shall be based on criteria the Board deems relevant, including performance of the business, accomplishment of long-term strategic objectives, and the development of management.

    The Compensation Committee shall use this evaluation, together with the CEO and Company’s performance against his and its goals and objectives, in determining the CEO’s annual compensation.

IX. Annual Board Performance Evaluation

It is expected that the Board will periodically evaluate the effectiveness of the Board and its committees. The evaluation shall be based on objective criteria including performance of the business, accomplishment of long-term strategic objectives, development of management, and the degree to which shareholder interests have been satisfied.

X. Shareholders and Other Interested Parties Access to Directors

  1. Communications With Directors

  2. Shareholders and other interested parties may communicate with (i) the Chairman, (ii) any then-serving Lead Independent Director (iii) the non-management or independent directors as a group or (iv) the Chairman of any Committee by sending written correspondence to the following address: Blue Buffalo Pet Products, Inc., 11 River Road, Wilton, CT 06897, Attention: Corporate Secretary or Such communications may be done confidentially or anonymously.

  3. Process for Collecting and Organizing Communications With Directors

  4. The Corporate Secretary of the Corporation and his or her duly authorized agents shall be responsible for collecting and organizing shareholder and other interested party communications. Absent a conflict of interest, the Corporate Secretary is responsible for evaluating the materiality of each shareholder communication and determining whether further distribution is appropriate, and, if so, whether to (i) the Chairman, (ii) any then-serving Lead Independent Director, (iii) the non-management or independent directors as a group or (iv) the Chairman of any Committee.

XI. Corporate Governance Principles

  1. Annual Review

  2. It is expected that the Audit Committee will review these Corporate Governance Principles periodically, including in the event that the Corporation ceases to be a “controlled company” within the meaning of the listing standards of NASDAQ, and recommend amendments to the Board, as necessary. These Corporate Governance Principles will be communicated to the Corporation’s shareholders via posting on the Corporation’s website.

XIII. Certification

These Corporate Governance Principles were duly approved and adopted by the Board of the Corporation on the 22nd day of July, 2015.