CORPORATE GOVERNANCE GUIDELINES
The Board of Directors (the "Board") of Integra LifeSciences Holdings 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 in the best interests of the Company and its stockholders or as required by applicable laws and regulations.
These Guidelines are available on the Company's website at "www.integralife.com" and to any stockholder who otherwise requests a copy.
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, but in no event will be less than three or more than thirteen. The Nominating and Corporate Governance Committee will periodically review the size of the Board, and determine 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") under the listing standards of the Nasdaq National Market (the "NASDAQ").
The Board will review annually the relationships that each director has with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company) in order to determine the independence of such director under the NASDAQ listing standards and, rules and standards that proscribe membership for the Board and its committees, such as the Securities Exchange Act of 1934, as amended and Section 162(m) of the Internal Revenue Code. The Company will disclose in its annual proxy statement or, if the Company does not file an annual proxy statement, in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission, those directors that the Board has determined to be independent under the NASDAQ listing standards.
Separate Sessions of Independent Directors
The Independent Directors will meet in executive session without non-Independent Directors or management present no less than two times a year. The Independent Directors will review the Company's implementation of and compliance with its Guidelines and consider such matters as they may deem appropriate at such meetings.
Director Qualification Standards
The Nominating and Corporate Governance Committee is responsible for recommending candidates for election to the Board. 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, take into account many factors, including ability to make independent analytical inquiries, experience in corporate management, a general understanding of marketing, finance and other elements relevant to the success of a publicly traded company in today's business environment, experience in the Company's industry and with relevant social policy concerns, understanding of the Company's business on a technical level, other board service and educational and professional background. Each candidate nominee must also possess fundamental qualities of intelligence, honesty, good judgment, high ethics and standards of integrity, fairness and responsibility. The Nominating and Corporate Governance Committee and the Board evaluate 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 judgment using its diversity of experience and background. The Nominating and Corporate Governance Committee and the Board consider a broad range of diversity for this purpose. In determining whether to recommend a director for re-election, the Nominating and Corporate Governance Committee also considers the director's past attendance at meetings and participation in and contributions to the activities of the Board. The Nominating and Corporate Governance Committee applies the same criteria to nominees recommended by directors, officers, employees, stockholders and others that it does to evaluate all other candidates.
Selection of New Directors
The entire Board will stand for election by the stockholders of the Company each year at the Company's annual meeting. 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 responsible for identifying, screening and recommending candidates to the entire Board for Board membership.
Recommendations for candidates to the Board of Directors must be submitted in writing to Integra LifeSciences Holdings Corporation, 311 Enterprise Drive, Plainsboro, New Jersey 08536, Attention: Corporate Vice President, General Counsel, Administration and Secretary. The recommendation must include all other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended.
Selection of Chairman of the Board
The Board will select the Chairman of the Board in accordance with the Company's Bylaws.
Upon the recommendation of the Nominating and Corporate Governance Committee, the Board may appoint a Presiding Director for a term not to exceed one year. Such term shall end on the date of the Annual Meeting each year. Any Presiding Director shall be an Independent Director.
The primary responsibilities of any Presiding Director are as follows:
- serve as the primary liaison between the Independent Directors and the President and Chief Executive Officer;
- counsel the President and Chief Executive Officer on key Board governance issues;
- coordinate, develop the agenda for and chair executive sessions of the Board's independent directors; provide feedback to the Chairman of the Board and the President and Chief Executive Officer on the executive sessions;
- preside over Board meetings if the Chairman of the Board is absent;
- review and provide input on the agendas for the Board and committee meetings;
- review the implementation of and compliance with the Corporate Governance Guidelines;
- assist the Board with the review and establishment of committee memberships and chairs; and
- perform such other functions as the Board directs.
Limitation on Other Board Service
The Board does not believe that its members should be prohibited from serving on boards of other organizations. However, Board members should not serve on more than four other boards of companies whose stock is publicly traded in addition to the Company's Board. The Nominating and Corporate Governance Committee and the Board will 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. In addition, directors should advise the Chairman of the Board or the President and Chief Executive Officer in advance of accepting an invitation to serve on another board.
Service on other boards and/or committees should be consistent with the Company's conflict of interest policies set forth below.
Directors Who Resign Their Current Positions With Their Company
When a director resigns or materially changes his or her position with his or her employer, such director shall tender a letter of proposed resignation from the Board to the Chair of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee shall review the director's continuation on the Board, and recommend to the Board whether, in light of all the circumstances, the Board should accept such proposed resignation or request that the director continue to serve.
As each director is subject to election by stockholders on an annual basis, the Board does not believe that 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.
The Board does not believe that a fixed retirement age for directors is appropriate.
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:
- overseeing the conduct of the Company's business, to evaluate whether the business is being properly managed;
- reviewing and, where appropriate, approving the Company's major financial objectives, plans and actions;
- 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;
- reviewing and, where appropriate, approving major changes in, and determinations under the Company's Guidelines, Code of Conduct and other Company policies;
- 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;
- regularly evaluating the performance and, upon the recommendation of the Compensation Committee, approving the compensation of the President and Chief Executive Officer;
- with the input of the President and Chief Executive Officer and the Compensation Committee, regularly evaluating the performance of principal senior executives;
- planning for succession with respect to the position of President and Chief Executive Officer and monitoring management's succession planning for other key executives; and
- ensuring that the Company's business is conducted with the highest standards of ethical conduct and in conformity with applicable laws and regulations.
The Company's executive officers shall not receive additional compensation for their service as directors. Senior management of the Company will report from time to time to the Compensation Committee 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, including any charitable contributions by the Company to organizations in which a non-management director is involved. Following a review of the report, the Compensation Committee will recommend any changes in non-management director compensation to the Chairman of the Board, which changes will be approved or disapproved by the Board after a full discussion.
Director fees are the sole form of compensation that members of the Audit Committee may receive from the Company.
The Company believes that directors and executive officers should be stockholders and have a financial stake in the Company. All non-employee directors are required to hold Company common stock with a value equal to three times a director's annual cash retainer. The President and Chief Executive Officer is required to hold common stock with a value equal to six times his or her annual base salary. The Corporate Vice President, Finance and Administration, and Chief Financial Officer is required to hold common stock with a value equal to two times his or her annual base salary. All other executive officers are required to hold common stock with a value equal to their annual base salary. Vested shares of restricted stock, vested restricted stock units, and the “in the money” value (difference between the greater market price and lesser strike price) of vested stock options may be included to determine whether the required ownership interest has been met. In addition, unvested shares of restricted stock and unvested restricted stock units may be included to determine whether the required ownership interest has been met, provided that such shares or units vest based on time and not performance. The stock ownership guidelines as stated above are required for non-employee directors and executive officers after their completion of five years of service on the Board or as an executive officer. Notwithstanding the preceding sentence, non-employee directors and executive officers should not sell their Integra equity at any time to the extent such individual would not satisfy the stock ownership guidelines as stated above based on such sale.
The Company's non-employee directors and executive officers are required to hold common stock received from the Company upon the exercise of stock options or the vesting of equity awards, including but not limited to restricted stock and restricted stock units, net of shares withheld for applicable taxes, pursuant to such individual's applicable stock ownership guidelines. The Company's non-employee directors and executive officers may petition the Compensation Committee for temporary waiver of the stock retention requirement due to special circumstances.
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 the matter to the Chairman of 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 will disclose the interest to the Board, excuse himself or herself from discussion on the matter and not vote on the matter.
Board Orientation and Continuing Education of Board Members
The Nominating and Corporate Governance Committee is responsible for the orientation program for new directors and continuing education programs for existing directors.
The Company provides new directors with a director orientation program to familiarize them with, among other things, the Company's business, strategic plans, significant financial, accounting and management issues, compliance programs, conflicts policies, Code of Business Conduct and Ethics, Guidelines, principal officers, internal auditors and independent auditors.
Continuing education programs for directors may include a combination of internally developed materials and presentations, programs presented by third parties at the Company and financial and administrative support for attending independent programs, including programs approved by Institutional Shareholder Services.
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 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. Such contact, if in writing, should be copied to the President and Chief Executive Officer of the Company.
Board Access to Independent Advisors
The Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee 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.
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 purpose of the review will be to improve the performance of the Board as a unit, and not to target the performance of any individual Board member. 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.
Frequency of Meetings
The Board will meet at least five 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.
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.
Each director is encouraged to attend the Company's annual meeting of stockholders.
Attendance of Non-Directors
The Board encourages the Chairman of the Board or of any committee to bring Company management and outside advisors or consultants from time to time into 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.
The Chairman establishes the agenda for each Board meeting with input from the management, any Presiding Director and, as necessary or desired, from the other directors.
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.
Number, Name, Responsibilities and Independence of Committees
The Board currently has four committees, each composed entirely of Independent Directors. From time to time, the Board may form a new committee or disband a current committee, depending upon the circumstances. Each committee will perform its duties as assigned by the Board in compliance with the Company's Bylaws and the committee's charter.
The current committees are:
- Audit Committee. The Audit Committee consists of at least three members and oversees the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. The committee has sole authority to appoint and fire the Company's independent auditors and to approve any significant non-audit relationship with the independent auditors.
- Compensation Committee. The Compensation Committee consists of at least three members and discharges the Board's responsibilities relating to compensation of the Company's executives, including by designing (in consultation with management or the Board), recommending to the Board for approval, and evaluating the compensation plans, policies and programs of the Company. The committee also produces an annual report on executive compensation for inclusion in the Company's proxy statement, in accordance with applicable rules and regulations.
- Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee consists of at least three members and is responsible for assisting the Board in the identification of qualified candidates to become directors, the selection of nominees for election as directors at the stockholders meeting, the selection of candidates to fill any vacancies on the Board, developing and recommending to the Board the Guidelines, the oversight of the evaluation of the Board and otherwise taking a leadership role in shaping the corporate governance of the Company.
- Finance Committee. The Finance Committee consists of at least three members and advises management on matters related to financing strategy, as well as the Company's capital structure and capital allocation initiatives.
Assignment and Rotation of Committee Members
Based on the recommendations of the Nominating and Corporate Governance Committee, the Board appoints committee members and committee chairs 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. Any Presiding Director shall assist the Board with the review and establishment of committee memberships and chairs.
Each member of the Audit Committee must satisfy the independence requirements of Rule 10A-3 under the Securities Exchange Act of 1934 and must be able to read and understand fundamental financial statements, including a company's balance sheet, income statement, and cash flow statement. At least one member of the Audit Committee must 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 being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. In addition, at least one 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)(5)(ii) of Regulation S-K.
Frequency of Committee Meetings
Each committee will meet at least two times annually, other than the Finance Committee which shall meet at least annually. In addition, special meetings may be called by the Chairman 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.
The Chairman of each committee, in consultation with the appropriate members of the Committee and any Presiding Director, will develop his or her committee's agenda.
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.
Annual Review of President and Chief Executive Officer
The Board with input from the President and Chief Executive Officer, shall annually establish the performance criteria (including both long-term and short-term goals) to be considered in connection with the President and Chief Executive Officer's next annual performance evaluation. At the end of each year, the President and Chief Executive Officer shall make a presentation or furnish a written report to the Board indicating his or her progress against such established performance criteria. Thereafter, with the President and Chief Executive Officer absent, the Board shall meet to review the President and Chief Executive Officer's performance. The results of the review and evaluation shall be communicated to the President and Chief Executive Officer by the Chairman of the Compensation Committee.
The Nominating and Corporate Governance Committee shall work on a periodic basis with the President and Chief Executive Officer to review, maintain and revise, if necessary, the Company's succession plan upon the President and Chief Executive Officer's retirement and in the event of an unexpected occurrence. The President and Chief Executive Officer shall report annually to the Board on succession planning for the President and Chief Executive Officer and senior management positions, including a discussion of assessments, leadership development plans and other relevant factors. There should also be available to the Nominating and Corporate Governance Committee, on a continuing basis, the President and Chief Executive Officer's recommendations regarding his or her successor should he or she be unexpectedly disabled.
The Board will determine that a satisfactory system is in effect for the education, development and orderly succession of senior and mid-level managers throughout the Company.
Stockholders may communicate with the Board, any of its constituent committees or any member thereof by means of a letter addressed to the Board of Directors, its constituent committees or individual directors and sent care of Integra LifeSciences Holdings Corporation, 311 Enterprise Drive, Plainsboro, NJ 08536, Attention: Corporate Vice President, General Counsel, Administration and Secretary.