[OBJECT OMITTED]
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as permitted by Rule 14a6(e)
(2)
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
________________________________________________
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[INTEGRA LOGO]
311 ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 21, 2003
To the Stockholders of Integra LifeSciences Holdings Corporation:
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting (the "Meeting") of
the Stockholders of Integra LifeSciences Holdings Corporation (the "Company")
will be held as, and for the purposes, set forth below:
TIME 9:00 a.m. on Wednesday, May 21, 2003
PLACE Radisson Hotel, Princeton
4355 Route 1 at Ridge Road
Princeton, New Jersey 08540
ITEMS OF BUSINESS 1. To elect six directors of the Company to hold
office as specified in the accompanying
Proxy Statement.
2. To consider and vote upon a proposal to
approve and adopt the Company's 2003 Equity
Incentive Plan.
3. To ratify the appointment of
PricewaterhouseCoopers LLP as the Company's
auditors for the current fiscal year.
4. To act upon any other matters properly coming
before the meeting or any adjournment or
postponement thereof.
RECORD DATE Holders of record of the Company's common stock at
the close of business on April 9, 2003 are entitled
to notice of, and to vote at, the Meeting and any
adjournment or postponement thereof. A complete
list of stockholders entitled to vote at the
Meeting will be available for inspection by any
stockholder for any purpose germane to the Meeting
for ten days prior to the Meeting during ordinary
business hours at the Company's headquarters
located at 311 Enterprise Drive, Plainsboro, New
Jersey.
ANNUAL REPORT The 2002 Annual Report of Integra LifeSciences
Holdings Corporation is being mailed
simultaneously herewith. The Annual Report is not
to be considered part of the proxy solicitation
materials.
IMPORTANT: In order to avoid additional soliciting
expense to the Company, please MARK, SIGN, DATE and
MAIL your proxy PROMPTLY in the return envelope
provided, even if you plan to attend the Meeting.
If you attend the Meeting and wish to vote your
shares in person, arrangements will be made for you
to do so.
By order of the Board of Directors,
Plainsboro, New Jersey /S/ John B. Henneman, III
April 16, 2003
John B. Henneman, III
Secretary
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
311 ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 2003
PURPOSE OF MEETING
We are providing this Proxy Statement to holders of our common stock in
connection with the solicitation by the Board of Directors of Integra
LifeSciences Holdings Corporation of proxies to be voted at the Company's 2003
annual meeting of stockholders (the "Meeting") and at any adjournments or
postponements thereof. The Meeting will begin at 9:00 a.m. local time on
Wednesday, May 21, 2003 at the Radisson Hotel Princeton, 4355 Route 1 at Ridge
Road, Princeton, New Jersey. We are first mailing this Proxy Statement, the
enclosed Notice of Annual Meeting of Stockholders, and the form of proxy to
stockholders of the Company on or about April 16, 2003.
At the Meeting, we will ask the stockholders of the Company to consider
and vote upon:
(i) the election of six directors to serve until the next annual
meeting of stockholders and until their successors are duly
elected and qualified (see "Proposal 1. Election of Directors");
(ii) a proposal to approve and adopt the Company's 2003 Equity
Incentive Plan (see "Proposal 2. 2003 Equity Incentive Plan");
and
(iii) the ratification of the appointment of PricewaterhouseCoopers LLP
as the Company's auditors for the current fiscal year (see
"Proposal 3. Ratification of Auditors").
We know of no other matters that will be presented for consideration at
the Meeting. If any other matters are properly presented at the Meeting or any
postponement or adjournment thereof, the persons named in the enclosed proxy
will have authority to vote on such matters in accordance with their best
judgment.
RECORD DATE
As of April 9, 2003, the record date for the Meeting, 25,985,421 shares
of our common stock were outstanding. Only persons who hold of record our common
stock as of the close of business on the record date are entitled to notice of,
and to vote at, the Meeting or at any adjournment or postponement thereof.
VOTING AND REVOCABILITY OF PROXIES
Holders of common stock will vote together as a single class on each
matter voted upon at the Meeting and any adjournment or postponement thereof.
Each share of our common stock entitles the holder of record thereof to
one vote. Each stockholder may vote in person or by properly executed proxy on
all matters that properly come before the Meeting and any adjournment or
postponement thereof. The presence, in person or by proxy, of stockholders
entitled to vote a majority of the shares of common stock outstanding on the
Record Date will constitute a quorum for purposes of voting at the Meeting.
Directors are to be elected by the affirmative vote of the holders of a
plurality of the issued and outstanding shares of common stock present, in
person or by proxy, at the Meeting and entitled to vote. Cumulative voting in
the election of directors is not permitted. The affirmative vote of the holders
of a majority of the issued and outstanding shares of common stock present, in
person or by proxy, at the Meeting and entitled to vote is required to approve
and adopt the 2003 Equity Incentive Plan and to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's auditors for the current fiscal
year.
The Board of Directors is soliciting the enclosed proxy for use in
connection with the Meeting and any postponement or adjournment thereof. All
properly executed proxies received prior to or at the Meeting or any
postponement or adjournment thereof and not revoked in the manner described
below will be voted in accordance with the instructions indicated on such
proxies. If no instructions are indicated, such proxies will be voted "FOR" the
approval and adoption of each of the proposals set forth herein.
If a proxy is marked as "Withhold Authority" or "Abstain" on any
matter, or if specific instructions are given that no vote be cast on any
specific matter (a "Specified Non-Vote"), the shares represented by such proxy
will not be voted on such matter. Abstentions will be included within the number
of shares present at the Meeting and entitled to vote for purposes of
determining whether such matter has been authorized, but nominee and other
Specified Non-Votes will not be so included.
If we fail to obtain a quorum for the Meeting or a sufficient number of
votes to approve a proposal, we may adjourn the Meeting for the purpose of
obtaining additional proxies or votes or for any other purpose. At any
subsequent reconvening of the Meeting, all proxies will be voted in the same
manner as they would have been voted at the original Meeting (except for any
proxies that have theretofore effectively been revoked or withdrawn). Proxies
voting against a Proposal set forth herein will not be used to adjourn the
Meeting to obtain additional proxies or votes with respect to such proposal.
You may revoke your proxy by (a) delivering to the Secretary of the
Company at or before the Meeting a written notice of revocation bearing a later
date than the proxy, (b) duly executing a subsequent proxy relating to the same
shares of common stock and delivering it to the Secretary of the Company at or
before the Meeting or (c) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute revocation of a
proxy). Any written notice revoking a proxy should be delivered at or prior to
the Meeting to: Secretary, Integra LifeSciences Holdings Corporation, 311
Enterprise Drive, Plainsboro, New Jersey 08536.
We will bear all expenses of this solicitation, including the cost of
preparing and mailing this Proxy Statement. In addition to solicitation by use
of the mail, proxies may be solicited by telephone, telegraph or personally by
our directors, officers and employees, who will receive no extra compensation
for their services. We will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
sending proxy soliciting materials to beneficial owners of shares of common
stock.
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PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors has nominated six persons for election as
directors whose terms will expire at the 2004 Annual Meeting of Stockholders, or
when their successors are elected and qualified. The proxies cannot be voted for
a greater number of persons than the following nominees: David C. Auth, Ph.D.,
Keith Bradley, Ph.D., Richard E. Caruso, Ph.D., Stuart M. Essig, Neal Moszkowski
and James M. Sullivan, each of whom are currently directors of the Company.
If any nominee should be unable to serve as director, an event not now
anticipated, the shares of common stock represented by proxies would be voted
for the election of such substitute as the Board of Directors may nominate. Set
forth below is certain information with respect to the persons nominated as
directors of the Company.
DAVID C. AUTH, PH.D. has been a director of the Company since 2002.
Dr. Auth is an independent investor and an Affiliate Professor of
Bioengineering at the University of Washington. From 1989 to 1995, Dr. Auth
served as Chief Executive Officer of Heart Technology, Inc., a company that
Dr. Auth founded and that was later acquired by Boston Scientific Corporation.
Dr. Auth served as Director, Biophysics International, a division of E.R.
Squibb and Sons, Inc. from 1985 to 1989 and as Director, New Product Ventures,
of Squibb Medical Products from 1982 to 1985. Dr. Auth was a Professor of
Electrical Engineering at the University of Washington from 1969 to 1982.
He holds a Ph.D. degree from Georgetown University and is a registered
professional electrical engineer in the State of Washington. Dr. Auth is 62
years old.
KEITH BRADLEY, PH.D. has been a director of the Company since 1992.
He has been a director of Ockham Holdings plc, a London Stock Exchange
corporation, since 1996 and has been a consultant to a number of business,
government and international organizations. Dr. Bradley has held visiting
professorships at the Harvard Business School, Wharton, UCLA, and has been a
visiting fellow at Harvard's Center for Business and Government. Recently
he was professor of international management and management strategy at the
Open University and City University, London Business Schools. Dr. Bradley
has taught at the London School of Economics and was the director of the
school's Business Performance Group for more than six years. He received
B.A., M.A. and Ph.D. degrees from British Universities. Dr. Bradley is 58 years
old.
RICHARD E. CARUSO, PH.D. has served as the Company's Chairman since
March 1992. Prior to December 1997, Dr. Caruso served as the Company's Chief
Executive Officer since March 1992 and as the Company's President since
September 1995. From 1969 to 1992, Dr. Caruso was a principal of LFC
Financial Corporation, a project finance company, where he was also a
director and Executive Vice President. Dr. Caruso is on the Board of
Susquehanna University, The Baum School of Art and The Uncommon Individual
Foundation (Founder). He received a B.S. degree from Susquehanna University,
an M.S.B.A. degree from Bucknell University and a Ph.D. degree from the
London School of Economics, University of London (United Kingdom). Dr. Caruso
is 59 years old.
STUART M. ESSIG has served as President and Chief Executive Officer
and as a director of the Company since December 1997. Prior to joining the
Company, Mr. Essig supervised the medical technology practice at Goldman,
Sachs & Co. as a managing director. Mr. Essig had ten years of experience at
Goldman Sachs serving as a senior merger and acquisitions advisor to a
broad range of domestic and international medical technology,
pharmaceutical and biotechnology clients. Mr. Essig received an A.B.
degree from the Woodrow Wilson School of Public and International Affairs at
Princeton University and an M.B.A. and a Ph.D. degree in Financial Economics
from the University of Chicago, Graduate School of Business. Mr. Essig
also serves as a director of St. Jude Medical Corporation and ADVAMED, the
advanced medical technology association. Mr. Essig is 41 years old.
NEAL MOSZKOWSKI has been a director of the Company since March 1999.
Mr. Moszkowski has been a partner of Soros Private Equity Partners LLC since
August 1998 and is currently a Managing Director of Soros Private Funds
Management LLC. Prior thereto, Mr. Moszkowski was an Executive Director of
Goldman Sachs International and a Vice President of Goldman, Sachs & Co. in its
Principal Investment Area, which he joined in August 1993. He received a B.A.
degree from Amherst College and an M.B.A. degree from Stanford University. Mr.
Moszkowski also serves as a director of JetBlue Airways, Bluefly, Inc. and
MedicaLogic/Medscape, Inc. Mr. Moszkowski is 37 years old.
3
JAMES M. SULLIVAN has been a director of the Company since 1992.
Since 1986, he has held several positions with Marriott International, Inc.
(and its predecessor, Marriott Corp.), including Vice President of Mergers
and Acquisitions, and his current position of Executive Vice President of
Development for the Lodging Group of Marriott. From 1983 to 1986, Mr.
Sullivan was Chairman, President and Chief Executive Officer of Tenly
Enterprises, Inc., a privately held company operating 105 restaurants.
Prior to 1983, he held senior management positions with Marriott Corp.,
Harrah's Entertainment, Inc., Holiday Inns, Inc., Kentucky Fried Chicken Corp.
and Heublein, Inc. He also was employed as a senior auditor with Arthur
Andersen & Co. and served as a director of Classic Vacation Group, Inc. until
it was acquired by Expedia, Inc. in March 2002. Mr. Sullivan received a B.S.
degree in Accounting from Boston College and an M.B.A. degree from the
University of Connecticut. Mr. Sullivan is 59 years old.
THE BOARD OF DIRECTORS HEREBY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" THE ELECTION OF EACH NOMINEE FOR DIRECTOR.
INFORMATION CONCERNING MEETINGS AND CERTAIN COMMITTEES
The Board of Directors held five meetings during 2002. During 2002,
each incumbent director attended in person or by conference telephone at least
75% of the total number of meetings of the Board of Directors and committees of
the Board on which he served that were held during the period in which he
served. The Company has a standing Audit Committee, Compensation Committee and
Equity Award Committee of its Board of Directors. The Board of Directors has not
designated a Nominating Committee; rather, the Board of Directors as a whole
performs the functions that would otherwise be delegated to such committee.
The Audit Committee is comprised entirely of nonemployee, independent
members of the Board of Directors and operates under a written charter adopted
by the Board of Directors. The Audit Committee (1) assists the Board of
Directors in fulfilling its responsibilities of ensuring that management is
maintaining an adequate system of internal controls such that there is
reasonable assurance that assets are safeguarded and that financial reports are
properly prepared, that there is compliance with management's policies and
procedures, and that there is consistent application of generally accepted
accounting principles, (2) makes recommendations to the Board of Directors
regarding the selection of independent accountants, and (3) reviews the results
and scope of the audit and other services provided by the Company's independent
accountants. During 2002, the Audit Committee was comprised of Dr. Bradley, Mr.
Sullivan and Mr. Moszkowski and met seven times.
4
The Compensation Committee makes decisions concerning salaries and
incentive compensation for employees and consultants of the Company. During
2002, the Compensation Committee was comprised of Drs. Bradley and Caruso and
Mr. Moszkowski and met twice.
The Equity Award Committee makes decisions concerning issuance of stock
options and other equity awards to employees and consultants of the Company and
also administers the Company's 2001 and 2000 Equity Incentive Plans, the
Company's 1998 and 1999 Stock Option Plans, the Company's 1993 and 1996
Incentive Stock Option and Non-Qualified Stock Option Plans, and the Company's
Employee Stock Purchase Plan and Deferred Compensation Plan (collectively, the
"Approved Plans"). During 2002, the Equity Award Committee was comprised of Dr.
Bradley and Mr. Moszkowski and met three times.
COMPENSATION OF DIRECTORS
In 2002, we granted Dr. Caruso options to purchase 15,000 shares of
common stock under the 2001 Equity Incentive Plan as compensation for his
service as Chairman of the Board of Directors. Additionally, in 2002, we granted
Dr. Bradley, Mr. Moszkowski, and Mr. Sullivan each options to purchase 10,000
shares of common stock under the 2001 Equity Incentive Plan as compensation for
their service on the Board of Directors. In October 2002, we granted Dr. Auth
options to purchase 10,000 shares of common stock under the 2000 Equity
Incentive Plan in connection with the beginning of his service on the Board of
Directors. We did not pay any cash compensation to our directors for their
service as directors. We pay reasonable travel and out-of-pocket expenses
incurred by non-employee directors in connection with attendance at meetings to
transact business of Integra or attendance at meetings of the Board of Directors
or any committee thereof.
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PROPOSAL 2. 2003 EQUITY INCENTIVE PLAN
The Board of Directors believes that an equity incentive plan enhances the
ability of the Company to attract and retain officers and other employees
(collectively, "Eligible Employees") and directors, consultants, and certain
other non-employees (together with the Eligible Employees, the "Eligible
Individuals") and to motivate them to exercise their best efforts on behalf of
the Company, any subsidiary or parent of the Company (a "Related Corporation"),
or any affiliate of the Company or a Related Corporation. As of January 31,
2003, there remained approximately 1,270,000 shares of common stock available
for grant as equity-based awards under the Company's stock option plans. Because
it is the Company's practice to grant stock options to virtually all of its U.S.
employees, including those of acquired companies, the shares now available for
grant may prove insufficient to meet the Company's needs. Accordingly, the Board
of Directors proposes and recommends that the stockholders approve the Company's
2003 Equity Incentive Plan (the "Plan"), which the Board of Directors approved
on February 24, 2003, subject to stockholder approval. Stockholder approval of
the Plan is necessary in order to preserve full deductibility of performance
based awards under the Plan. In addition, stockholder approval is required in
order to grant incentive stock options ("ISO"), within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code") under the
Plan.
The text of the Plan is attached as APPENDIX A to this Proxy Statement. The
following description of the Plan is intended merely as a summary of its
principal features and is qualified in its entirety by reference to the Plan
itself. On April 10, 2003, the closing price of a share of the common stock on
the NASDAQ National Market was $23.05.
1. NUMBER OF SHARES. The total number of shares of common stock that can
be delivered under the Plan is 2,500,000. No individual may receive
options and/or stock appreciation rights for more than 1,000,000 shares
of common stock during any calendar year under the Plan. If any award
that requires the participant to exercise it in order for shares of
common stock to be delivered terminates without having been exercised in
full, or if any award payable in cash or shares of common stock is paid
in cash rather than shares, the number of shares of common stock as
to which such award was not exercised or for which cash was paid will
continue to be available for future awards. In addition, the aggregate
fair market value (determined at the time the option is granted) of
shares of common stock with respect to which ISOs are exercisable for the
first time by any participant during a calendar year (under the Plan
and under any other ISO plan of the Company or a Related Corporation) may
not exceed $100,000. The shares of common stock issued under the Plan
may be authorized but unissued shares or reacquired shares, and the
Company may purchase shares required for this purpose, from time to time,
if it deems such purchase to be advisable.
2. ADMINISTRATION. The Plan will be administered by the Company's Equity Award
Committee, which consists of not fewer than two directors of the Company's
Board of Directors who are designated by the entire Board of Directors.
Under the Plan, the Equity Award Committee will have the authority (i) to
select the Eligible Individuals to be granted awards under the Plan, (ii)
to grant awards on behalf of the Company, and (iii) to set the terms of
such awards. Currently, the members of the Equity Award Committee are Keith
Bradley, Ph.D. and Neal Moszkowski.
3. ELIGIBILITY. Officers, executives, managerial and non-managerial employees
of the Company, a Related Corporation or an affiliate as well as
non-employee directors, consultants and other service providers to the
Company are eligible to participate in the Plan. Only eligible employees of
the Company or a Related Corporation may receive ISOs under the Plan. Other
types of awards may be granted to all eligible individuals. As of the date
of this Proxy Statement, approximately 860 employees and directors are
eligible to receive equity awards under the Plan. The benefits that will be
received under the Plan by the Company's current executive officers,
directors and all other eligible individuals are not currently
determinable.
6
4. TERM OF PLAN. The Plan by its terms has no expiration date. However, no ISO
may be granted under the Plan after February 23, 2013, although ISOs
outstanding on February 23, 2013 may extend beyond that date.
5. STOCK OPTIONS. The Plan permits the Equity Award Committee to grant
options that qualify as ISOs under the Code, and stock options that do
not so qualify ("nonqualified stock options" or "NQSOs"). The Equity
Award Committee determines the exercise price of each option. However,
the exercise price of an option may not be less than 100% of the fair
market value of the shares of common stock on the date of grant (110% in
the case of an ISO granted to a greater-than-10% stockholder). The
exercise price of any option may not be less than the par value of the
shares. The Equity Award Committee may not reduce the exercise price
of an option after it is granted. For purposes of the Plan, the per
share fair market value of the Company's common stock on the relevant
date equals the quoted closing price on such date.
The term of each option will be fixed by the Equity Award Committee, but
may not exceed 10 years from the date of grant. The maximum term of each
option is reduced to 5 years from the date of grant in the case of an ISO
granted to a greater than 10% stockholder. The Equity Award Committee will
determine at what time or times each option may be exercised; however, no
option may be exercisable less than three months after its grant. Options
may be made exercisable in installments, and the Equity Award Committee may
accelerate the exercisability of options.
The exercise price of an option granted under the Plan may be paid in full
(i) in cash or by check, bank draft, or money order, (ii) in shares of
common stock previously acquired by the participant (subject to certain
holding period requirements), (iii) in a broker assisted cashless exercise,
or (iv) by any combination of the foregoing.
6. STOCK APPRECIATION RIGHTS. The Equity Award Committee may grant stock
appreciation rights, either alone or in tandem with options,
entitling the participant upon exercise to receive an amount in cash
and/or shares of common stock (as determined by the Equity Award
Committee), measured by the increase since the date of grant in the value
of the shares covered by such right. Stock appreciation rights granted
in tandem with options will be exercisable only at such times, and
to the extent, that the related option is exercisable and will
terminate upon the exercise of the related option. The Equity Award
Committee may accelerate the dates on which stock appreciation rights not
granted in tandem with stock options may be exercised.
7. RESTRICTED STOCK. The Equity Award Committee may grant shares of common
stock to participants either with or without any required payment by the
participant, subject to such restrictions as the Equity Award Committee may
determine. The Equity Award Committee may accelerate the dates on which the
restrictions will lapse. Prior to the lapse of restrictions on shares of
restricted stock, the participant will have voting and dividend rights on
the shares. Any participant who makes an election under Section 83(b) of
the Code with respect to restricted stock (regarding the immediate
recognition of income) must provide a copy thereof to the Company within 10
days of the filing of such election with the Internal Revenue Service.
7
8. PERFORMANCE STOCK. The Equity Award Committee may grant awards entitling a
participant to receive shares of common stock without payment provided
certain performance criteria are met. In determining the performance
criteria applicable to a grant of performance stock, the Equity Award
Committee may use one or more of the following criteria (the "Performance
Criteria"):
- return on assets; - return on net assets;
- asset turnover; - return on equity;
- return on capital; - economic value added;
- market price appreciation - total stockholder return;
of the Company's common stock; - pre-tax income;
- net income; - operating profit margin;
- earnings per share; - sales margin;
- net income margin; - market share;
- cash flow; - sales growth;
- inventory turnover; - diversity;
- capacity utilization; - quality; and/or
- increase in customer base; - environmental health and safety.
The business criteria selected by the Equity Award Committee may be
expressed in absolute terms or relative to the performance of other
companies or an index.
9. CONTRACT STOCK. The Equity Award Committee may grant shares of common stock
to participants, conditioned upon the participant's continued provision of
services to the Company through the date specified in the award. The Equity
Award Committee has discretion to determine the number of shares of common
stock to be granted and to establish the contract date on which such shares
will be delivered to the participant. If the participant is still providing
services to the Company on the contract date, the Equity Award Committee
must deliver the shares of common stock specified in the award in
accordance with the terms thereof.
10. DIVIDEND EQUIVALENT RIGHTS. The Equity Award Committee may grant awards
that entitle the participant to receive a benefit in lieu of cash dividends
that would have been payable on any or all shares of common stock subject
to another award granted to the participant had such shares been
outstanding.
11. TRANSFERABILITY. No ISO granted under the Plan may be transferred other
than by will or by the laws of descent and distribution. No other award may
be transferred except to the extent permitted by the applicable award
agreement. During a participant's lifetime, only the participant may
exercise an award requiring exercise (or, in the event of the participant's
incapacity, by the person or persons legally appointed to act on the
participant's behalf).
12. TREATMENT OF AWARDS UPON TERMINATION OF SERVICE. If a participant's service
(as an employee, consultant, director, or otherwise) terminates by reason
of death or disability, all options and stock appreciation rights then held
by the participant that were not exercisable immediately prior to such
termination of service will terminate on that date (except as otherwise
determined by the Equity Award Committee). Any remaining options and stock
appreciation rights will remain exercisable for one year from the date of
termination of service by reason of death or disability (or such shorter or
longer period as the Equity Award Committee decides). In the event of any
other termination of service, all options and stock appreciation rights
held by the participant that were not exercisable immediately prior to such
termination of service will terminate on that date (except as otherwise
determined by the Equity Award Committee). Any options or stock
appreciation rights that were exercisable will generally continue to be so
for 6 months (or for such longer period as the Equity Award Committee
decides). Notwithstanding the post-termination exercise periods described
above, no option or stock appreciation right may be exercised beyond its
original term.
8
Except as otherwise determined by the Equity Award Committee, if a
participant who holds shares of restricted stock terminates his or her
service for any reason, including death or disability, prior to the lapse
of the restrictions, the participant must resell to the Company the shares
of restricted stock for the amount paid for such shares, or forfeit them to
the Company if no cash was paid. Further, except as otherwise decided by
the Equity Award Committee, rights under a performance award and dividend
equivalent rights to which a participant has not become irrevocably
entitled and rights to the payment of contract stock will terminate upon
the participant's termination of service with the Company for any reason
(including death or disability).
13. ADJUSTMENTS IN SHARES; CERTAIN CORPORATE TRANSACTIONS. In the event of a
stock dividend, stock split, reverse split, or similar change in the
capitalization of the Company, the Equity Award Committee will make
appropriate adjustments to the maximum number of shares of common stock
that may be delivered under the Plan, the maximum number of Shares with
respect to which ISOs may be granted, the maximum number of Shares with
respect to which other options or stock appreciation rights may be granted,
the exercise price of outstanding awards, and the number of shares of
common stock issuable upon exercise or vesting of an award.
In the event of a "change in control" of the Company (as defined in the
Plan), all outstanding options and any stock appreciation rights will
become fully vested and exercisable, all awards of performance stock and
dividend will become fully vested, all rights to the payment of contract
stock will become immediately due and payable and all restrictions will be
removed from any outstanding shares of restricted stock.
In the event of a corporate transaction (as, for example, a merger,
consolidation, or acquisition of property or stock), each outstanding award
will be assumed by the surviving or successor entity. However, in the event
of a proposed corporate transaction, the Equity Award Committee may
terminate all or a portion of any outstanding award if it determines that
doing so is in the best interests of the Company. If so, the Equity Award
Committee will give each participant holding an option or a stock
appreciation right not less than seven days' notice prior to the
termination, and any option or stock appreciation right that is to be so
terminated may be exercised (to the extent it is then exercisable) before
the termination. Further, in the event of a corporate transaction, the
Equity Award Committee, in its discretion, may (i) accelerate the date on
which options and stock appreciation rights become exercisable, (ii) remove
restrictions from the outstanding shares of restricted stock, (iii) cause
the delivery of any performance stock, even if the associated performance
goals have not been met, (iv) cause the payment of any dividend equivalent
rights, (v) cause the delivery of contract stock, even if the contract date
has not yet passed and/or (vi) forgive all or any portion of a loan. In
lieu of the action described above, the Equity Award Committee may arrange
to have the surviving or acquiring entity grant the participant a
replacement award substantially equivalent to the participant's existing
award.
14. WITHHOLDING REQUIREMENTS. The grant or exercise of awards may be subject to
tax withholding requirements. Where shares of common stock may be delivered
under an award, the Equity Award Committee may require that the participant
either remit to the Company an amount necessary to satisfy the withholding
requirements or make other satisfactory arrangements (including, if the
Equity Award Committee so permits, the holding back of Shares from payments
under the award).
9
15. DISCONTINUANCE, CANCELLATIONS, AMENDMENT, AND TERMINATION. The Equity Award
Committee may at any time discontinue granting awards under the Plan. The
Board may at any time amend the Plan (and the Equity Award Committee may
amend any outstanding award, other than lowering the exercise price of
options or the purchase price of restricted stock) for any purpose, or may
at any time terminate the Plan, except that the following amendments may
not be made without the approval of the stockholders of the Company: (i) an
increase in the maximum number of shares of common stock with respect to
which ISOs may be granted under the Plan, (ii) a change in the class of
employees eligible to receive ISOs under the Plan, (iii) a repricing or
regranting through cancellation, or modification without stockholder
approval (except in connection with a change in the Company's
capitalization), if the effect would be to reduce the exercise price for
the shares underlying such award. (iv) an extension of the duration of the
Plan with respect to ISOs, and (v) any amendment to the Plan requiring
stockholder approval for purposes of the $1 million deduction limit on
compensation under Section 162(m) of the Code. Further, no amendment or
termination of the Plan may adversely affect the rights of any participant
(without the participant's consent) under any award previously granted.
16. FEDERAL INCOME TAX ASPECTS OF OPTIONS UNDER THE PLAN. Based on the advice
of counsel, the Company believes that, under current Federal income tax
laws and regulations, the principal Federal income tax consequences to the
Company and to the Eligible Individuals receiving ISOs and NQSOs
("Optionees") pursuant to the Plan will be as follows. The consequences
described below do not take into account any changes to the Code or the
regulations thereunder that may occur after April 9, 2003. Nor does the
following describe alternative minimum tax, other Federal taxes, or
foreign, state or local income taxes which may vary depending on individual
circumstances and from locality to locality.
If an option qualifies for ISO treatment, the Optionee will recognize no
income upon grant or exercise of the option except that the excess at the
time of exercise of the then fair market value of the common stock over the
exercise price will be an item of tax preference for purposes of the
alternative minimum tax. If the Optionee holds the shares for more than two
years after grant of the option and more than one year after exercise of
the option, upon an Optionee's sale of his or her shares of common stock,
any gain will be taxed to the Optionee as long-term capital gain. If the
Optionee disposes of his or her shares of common stock prior to the
expiration of the above holding period, the Optionee generally will
recognize ordinary income in an amount measured as the difference between
the exercise price and the lower of the fair market value of the common
stock at the exercise date or the sale price of the common stock. Any gain
recognized on such a disposition of the common stock in excess of the
amount treated as ordinary income will be characterized as capital gain.
The Company will be allowed a business expense deduction to the extent the
Optionee recognizes ordinary income, subject to Sections 162(m) and 280G of
the Code.
An Optionee will not recognize any taxable income at the time the Optionee
is granted an NQSO. However, upon exercise of the option, the Optionee will
recognize ordinary income for Federal income tax purposes in an amount
generally measured as the excess of the then fair market value of the
common stock over the exercise price, and the Company will be entitled to a
corresponding deduction at the time of exercise, subject to Sections 83,
162(m) and 280G of the Code. Upon an Optionee's sale of such shares, any
difference between the sale price and fair market value of such shares on
the date of exercise will be treated as capital gain or loss and will
qualify for long-term capital gain or loss treatment if the common stock
has been held for more than 12 months.
Under Code Section 162(m), in general, income tax deductions of
publicly-traded companies may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and
nonqualified benefits) for certain executive officers exceeds $1 million in
any one taxable year.
However, under Code Section 162(m), the deduction limit does not apply to
certain "performance-based" compensation established by an independent
compensation committee that conforms to certain restrictive conditions
stated under the Code and related regulations.
10
Stockholder approval of the Plan is necessary for the awards thereunder to
qualify as "performance based" for purposes of Code Section 162(m) and
therefore allow any compensation paid to the executive officers subject to
Code Section 162(m) as a result of such awards to be deductible by the
Company. The Plan has been structured with the intent that Awards granted
under the Plan may meet the requirements for "performance-based"
compensation under Code Section 162(m). To the extent granted at a fair
market value exercise price, options granted under the Plan are intended to
qualify as "performance-based" under Section 162(m) of the Code. Stock
appreciation rights will also qualify as "performance-based" under Section
162(m) of the Code, to the extent they relate to the increase in the market
value of the Shares from the date of grant. Other Awards granted under the
Plan may also qualify as "performance-based" under Code Section 162(m) if
they vest or are otherwise payable based solely upon the Performance
Criteria.
17. REGISTRATION STATEMENT ON FORM S-8. If the Plan is approved by the
stockholders of the Company, the Company intends to file with the
Commission a Registration Statement on Form S-8 relating to the Plan to
register the issuance and sale by the Company of the shares of common stock
that may be issued pursuant to the Plan.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2002 regarding
existing compensation plans (including individual compensation arrangements)
under which equity securities of Integra are authorized for issuance:
Number of securities to Weighted-average Number of securities remaining
be issued upon exercise exercise price of available for
of outstanding options, outstanding options, future issuance under
Plan Category warrants and rights warrants and rights equity compensation plans (1)
----------------------------------------- ------------------------- ------------------------- --------------------------------
Equity compensation plans approved by
the Company's stockholders 6,544,727 (2) $7.97 (3) 2,017,873 (4)
Equity compensation plans not
approved by the Company's -- -- --
stockholders _________ ________ ________
Total 6,544,727 $7.97 2,017,873
(1) Excludes securities to be issued upon the exercise of outstanding options,
warrants and rights.
(2) Includes 1,250,000 Restricted Units issued in December 2000 under the 2000
Equity Incentive Plan and 1,000,000 Restricted Units issued in December
1997. Each Restricted Unit represents the right to receive one share of our
common stock without payment of any exercise price. The remaining awards are
comprised entirely of stock options under the 1993 Incentive Stock Option
and Non-Qualified Stock Option Plan, the 1996 Incentive Stock Option and
Non-Qualified Stock Option Plan, the 1998 Stock Option Plan, the 1999
Stock Option Plan, the 2000 Equity Incentive Plan and the 2001 Equity
Incentive Plan.
(3) Excluding the 2,250,000 Restricted Units, the weighted average exercise
price was $12.15.
(4) Includes 247,548 shares of common stock which remain
available for issuance under the Employee Stock Purchase Plan, 500,000
shares which are subject to issuance under the Deferred Compensation Plan,
which was terminated in April 2003, and 1,270,325 shares which remain
subject to awards under the 1993 Incentive Stock Option and Non-Qualified
Stock Option Plan, the 1996 Incentive Stock Option and Non-Qualified Stock
Option Plan, the 1998 Stock Option Plan, the 1999 Stock Option Plan, the
2000 Equity Incentive Plan and the 2001 Equity Incentive Plan. Does not
include any shares subject to the 2003 Equity Incentive Plan which remains
subject to stockholder approval.
11
NEW PLAN BENEFITS
The table below sets forth the assumed amount of awards that would have been
received by the Named Officers (as defined within the "Executive Compensation"
section) and other groups during 2002 if the 2003 Equity Incentive Plan as
proposed had been in place. These issuances are based upon the awards actually
issued during 2002 and consist entirely of stock options.
Number of Shares
Under the 2003
Equity Incentive
Name and Position Plan
---------------------------------------------------------- --------------------
Stuart M. Essig
President and Chief Executive Officer 36,208
John B. Henneman, III
Executive Vice President, Chief Administrative
Officer and Secretary 35,062
Michael D. Pierschbacher, Ph.D.
Senior Vice President, Research and Development,
and Director of the Corporate Research Center 13,333
Robert D. Paltridge
Senior Vice President, Worldwide Sales 15,125
David B. Holtz
Senior Vice President, Finance and Treasurer 20,583
All Current Executive Officers as a Group 153,044
All Current Directors Who are Not Executive Officers as
a Group 55,000
All Employees, Including All Current Officers Who are
Not Executive Officers, as a Group 405,698
Since the value of stock options depends upon the future market price of the
Company's common stock, we cannot determine the ultimate dollar value of the
above stock options assumed granted under the 2003 Equity Incentive Plan.
Awards granted under the 2003 Equity Incentive Plan are to be determined from
time to time by the Equity Award Committee. It is impossible at this time to
indicate the precise number, name or positions of persons who will hereafter
receive awards under the 2003 Equity Incentive Plan.
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING THE 2003
EQUITY INCENTIVE PLAN AND HEREBY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" THE APPROVAL OF THE 2003 EQUITY INCENTIVE PLAN.
12
PROPOSAL 3. RATIFICATION OF AUDITORS
The firm of PricewaterhouseCoopers LLP served as our independent
accountants for 2002 and has been selected by the Board of Directors to serve in
the same capacity for 2003. The stockholders will be asked to ratify this
appointment at the Meeting. The ratification of independent accountants by the
stockholders is not required by law or our By-laws. We have traditionally
submitted this matter to the stockholders and believe that it is good practice
to continue to do so.
Ratification of PricewaterhouseCoopers LLP as our auditors requires the
affirmative vote of the holders of at least a majority of the issued and
outstanding shares of common stock present, in person or by proxy, at the
Meeting and entitled to vote. If a majority of the votes cast on this matter are
not cast in favor of the ratification of PricewaterhouseCoopers LLP, we will
appoint other independent accountants as soon as practicable and before the
close of the 2003 year.
During fiscal year 2002, PricewaterhouseCoopers LLP not only acted as
our independent auditors, but also rendered other services, including tax and
acquisition related due diligence services. The following sets forth the
aggregate fees billed or expected to be billed by PricewaterhouseCoopers LLP to
us:
Audit Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services rendered for the audit of our annual financial statements
for the fiscal year ended December 31, 2002 and for the reviews of the financial
statements included in our Quarterly Reports on Form 10-Q for that fiscal year
were $374,723.
Financial Information Systems Design and Implementation Fees
There were no fees billed by PricewaterhouseCoopers LLP for
professional services rendered for information technology services relating to
financial information systems design and implementation for the fiscal year
ended December 31, 2002.
All Other Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for services
rendered to us, other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees," for the fiscal
year ended December 31, 2002 were $352,651. These fees included tax and
acquisition related due diligence services. The Audit Committee of the Board of
Directors considered the services listed above to be compatible with maintaining
PricewaterhouseCoopers LLP's independence.
We expect a representative of PricewaterhouseCoopers LLP to be present
at the Meeting and available to respond to appropriate questions. The
representative will also have the opportunity to make a statement if he or she
desires to do so.
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING THE
APPOINTMENT OF AUDITORS AND HEREBY RECOMMENDS THAT THE STOCKHOLDERS
VOTE "FOR" RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
AS THE COMPANY'S AUDITORS FOR 2003.
13
ADDITIONAL INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth certain information for the Company's
last three fiscal years concerning the annual, long-term and other compensation
of the chief executive officer of the Company and each of the Company's four
highest paid executive officers as of December 31, 2002 whose total annual
salary and bonus during 2002 exceeded $100,000 (collectively, the "Named
Officers"):
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation Awards
-------------------------------------- ----------------------------------
Name and Principal Position Year Salary Other Annual Restricted Securities Other
Compensation Stock Awards Underlying Compensation
(1) (2) Options (3)
------------------------------------------ --------- ----------- ---------------- ---------------- ----------------- ---------------
--
Stuart M. Essig 2002 $362,500 -- -- 36,208 $2,200
President and Chief Executive 2001 $325,000 -- -- 31,565 $1,575
Officer 2000 $317,500 $13,515,000 520,000 $49,646
John B. Henneman, III 2002 $257,500 -- -- 35,062 $2,200
Executive Vice President, Chief 2001 $240,000 -- -- 152,000 $1,575
Administrative Officer and Secretary 2000 $220,000 -- -- 25,000 $1,050
Michael D. Pierschbacher, Ph.D. 2002 $257,500 -- -- 13,333 $2,200
Senior Vice President, Research and 2001 $240,000 -- -- 19,500 $1,575
Development and Director of the 2000 $220,000 -- -- 95,000 $1,045
Corporate Research Center
Robert D. Paltridge 2002 $172,500 $55,127 -- 15,125 $2,200
Senior Vice President, Worldwide 2001 $165,000 $34,302 -- 10,000 $1,575
Sales 2000 $150,000 $10,000 -- 13,690 $ 900
David B. Holtz 2002 $180,000 $30,000 -- 20,583 $2,170
Senior Vice President, Finance and 2001 $175,000 -- -- 70,000 $1,313
Treasurer 2000 $150,000 -- -- 25,000 $ 600
(1) The amounts reported in this column for Mr. Paltridge represent contingent
compensation that is based upon the achievement of sales targets for
certain products in the United States. The amount reported in this column
in 2002 for Mr. Holtz represents compensation associated with his
assumption of responsibility for the Company's European operations.
(2) The terms of Mr. Essig's Restricted Units are described herein under the
heading "Employment Agreements." As of December 31, 2002, Mr. Essig held
Restricted Units that entitled him to receive an aggregate of 2,250,000
shares of common stock. Based on the closing price of the Company's common
stock on December 31, 2002 of $17.65 per share, Mr. Essig's Restricted
Units had an aggregate value of $39,712,500 as of December 31, 2002.
Dividends will be paid on Mr. Essig's Restricted Units to the extent they
are paid on the common stock.
(3) Other than certain moving expenses reimbursed to Mr. Essig in 2000, the
amounts reported in this column consist of the Company's matching
contributions to the Company's 401(k) Plan. The amount reported in this
column for Mr. Essig during 2000 includes $48,596 for moving expenses
reimbursed by the Company.
14
The following tables set forth certain information concerning stock options
granted to Named Officers during 2002 and the unexercised options held by them
at December 31, 2002.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term
--------------------------------------------------------------------------- ----------------------
% of Total
Number of Securities Options Granted Exercise
Underlying Options to Employees in Price Per
Name Granted (1) Fiscal Year (2) Share Expiration Date 5% 10%
--------------------------------- ---------------------- ------------------- -------------- ----------------- ----------- ----------
Stuart M. Essig 36,208 6.5% $17.65 12/31/08 $217,345 $493,082
John B. Henneman, III 10,000 1.8% $14.87 08/02/08 $50,572 $114,731
5,000 0.9% $17.72 11/21/08 $30,132 $68,360
1,000 0.2% $17.60 12/16/08 $5,986 $13,579
19,062 3.4% $17.65 12/31/08 $114,423 $259,587
Michael D. Pierschbacher, Ph.D 13,333 2.4% $17.65 12/31/08 $80,034 $181,569
Robert D. Paltridge 2,000 0.4% $14.87 08/02/08 $10,114 $22,946
13,125 2.4% $17.65 12/31/08 $78,785 $178,737
David B. Holtz 10,000 1.8% $14.87 08/02/08 $50,572 $114,731
1,000 0.2% $17.60 12/16/08 $5,986 $13,579
9,583 1.7% $17.65 12/31/08 $57,524 $130,502
(1) Such options were granted with an exercise price equal to the fair market
value of the Company's common stock on the grant date, are nontransferable
and vest over a period of four years commencing with the date of grant.
(2) The Company granted options to employees to purchase an aggregate of
558,742 shares of common stock during 2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Shares Number of Securities Underlying Value of Unexercised In-the-Money
Acquired Value Unexercised Options At Fiscal Year Options At
On Realized End Fiscal Year End (2)
------------------------------------ ---------------------------------
Name Exercise (1) Exercisable Nonexercisable Exercisable Nonexercisable
--------------------------------- ------------ -------------- ----------------- ------------------ ---------------- ----------------
Stuart M. Essig 24,867 $399,986 720,794 462,522 $7,713,782 $2,741,711
John B. Henneman, III 6,000 $77,939 204,993 167,599 $2,098,000 $179,453
Michael D. Pierschbacher, Ph.D. 10,247 $238,779 91,721 67,120 $537,392 $198,097
Robert D. Paltridge 10,000 $94,770 36,024 32,921 $385,001 $93,450
David B. Holtz 15,000 $204,874 62,634 89,438 $482,192 $154,776
(1) Calculated on the basis of the fair market value of the underlying
securities at the exercise date minus the exercise price.
(2) In-the-money options are those in which the fair market value of the
underlying securities exceeds the exercise price of the option. The closing
price of the Company's common stock on December 31, 2002 was $17.65 per
share. Value is calculated on the basis of the fair market value of the
underlying securities on December 31, 2002 minus the exercise price.
15
EMPLOYMENT AGREEMENTS
Stuart M. Essig, Integra's current President and Chief Executive
Officer, entered into an Amended and Restated Employment Agreement with the
Company in December 2000 that extended the term of his employment with the
Company as its President and Chief Executive Officer through December 31, 2005.
The Amended Employment Agreement supersedes Mr. Essig's prior employment
agreement with the Company dated December 1997.
Under the Amended Employment Agreement, the Company will pay Mr. Essig
an annual base salary in 2003 of $400,000 plus such increases, if any, as may be
established by the Company's Board of Directors. Mr. Essig is eligible to
receive a performance bonus of up to fifty percent (50%) of his base salary,
based upon the satisfaction of certain performance goals established by the
Company's Board of Directors. Mr. Essig is also entitled to life insurance equal
to the lesser of (a) a $3,000,000 four-year minimum renewable term life
insurance policy and (b) the four-year minimum renewable term life policy
purchasable by the Company by paying premium payments of $5,000 per year for
such policy. Mr. Essig is also entitled to participate in the Company's medical,
disability, pension and other employee benefit plans and programs maintained
from time to time by the Company for the benefit of its senior executives. The
Amended Employment Agreement is for an initial term through December 31, 2005
and shall automatically extend on December 31, 2005 and on each subsequent
one-year anniversary thereof for one year unless the Company or Mr. Essig
provides written notice of termination at least six months prior to the
expiration of the then-current term.
The Amended Employment Agreement further provides that the Company
generally will reimburse, or "gross-up," Mr. Essig on an after-tax basis for any
excise tax liability he may incur by reason of any "excess parachute payments"
he receives from the Company. Section 280G of the Internal Revenue Code of 1986,
as amended, provides that if payments of compensation that are contingent on a
change in control exceed three times an employee's "base amount" (his average
annual compensation during certain prior years), they will constitute "parachute
payments," and the excess of such parachute payments over such base amount
generally will constitute "excess parachute payments." Such excess parachute
payments are nondeductible by the employer and are subject to a 20% excise tax
payable by the employee.
In connection with the extension of the term of Mr. Essig's employment
pursuant to the Amended Employment Agreement in 2000, the Company granted Mr.
Essig (i) a non-qualified stock option to purchase 250,000 shares of the
Company's common stock under Integra's 1999 Stock Option Plan, (ii) a
non-qualified stock option to purchase 250,000 shares of the Company's common
stock under Integra's 2000 Equity Incentive Plan and (iii) 1,250,000 "Restricted
Units" under Integra's 2000 Equity Incentive Plan. Each stock option (each, an
"Option") expires on December 21, 2010 and has an exercise price equal to $11.00
per share (the closing price of the Company's common stock on The NASDAQ
National Market on December 21, 2000). Each Option vested and became exercisable
with respect to 62,500 shares on December 22, 2001 and, assuming the
continuation of Mr. Essig's employment with the Company, each Option will vest
and become exercisable with respect to 1/36th of the remaining shares on the
first business day of each following month. In the event of a (i) "change in
control" of the Company (as defined in the Amended Employment Agreement) or (ii)
the termination of Mr. Essig's employment with the Company (a) by Integra
without "cause" (as defined in the Amended Employment Agreement) or (b) by Mr.
Essig for "good reasons" (as defined in the Amended Employment Agreement), the
Options shall vest and become exercisable immediately. The Option granted
pursuant to Integra's 1999 Stock Option Plan may be transferred by Mr. Essig to
members of his immediate family, to trusts established for the benefit of his
immediate family or to partnerships or limited liability companies of which the
partners or members are members of his immediate family. Otherwise, the Options
may not be transferred by Mr. Essig other than by will or by the laws of descent
and distribution.
16
Under a Restricted Units Agreement, the Company issued to Mr. Essig a
fully vested equity-based signing award bonus in the form of 1,250,000
restricted units (the "Restricted Units") in 2000. Each Restricted Unit
represents the right to receive one share of the Company's common stock. The
shares of the Company's common stock underlying the Restricted Units ("Unit
Shares") shall be delivered to Mr. Essig on January 1, 2006 if Mr. Essig is
employed by the Company on December 31, 2005 or on such earlier date as a change
in control of the Company occurs; provided, however, that Mr. Essig has the
right to defer the delivery of the Unit Shares on as many occasions prior to the
date Mr. Essig becomes entitled to delivery of the Unit Shares as Mr. Essig
determines from time to time through, but not beyond, June 30, 2025. The Unit
Shares may be delivered to Mr. Essig prior to January 1, 2006 in the event of a
termination of Mr. Essig's employment with the Company other than (a) for cause
or (b) due to his voluntary departure (other than for good reasons or due to
disability). If, prior to December 31, 2005 and prior to a change of control of
the Company, (i) Mr. Essig's employment with Integra is terminated for cause or
(ii) Mr. Essig voluntarily leaves his employment with the Company (other than
for good reasons or due to disability), the Unit Shares will be distributed to
Mr. Essig on January 1, 2010.
The Company has also granted Mr. Essig registration rights requiring
the Company to file a "shelf" registration statement at Mr. Essig's request that
will provide for the registration and sale on a continuous or delayed basis of
the shares of Integra common stock underlying the Options and the Restricted
Units.
John B. Henneman, III, Integra's Executive Vice President and Chief
Administrative Officer, entered into an Employment Agreement with the Company in
September 2002 that replaced his September 1998 employment agreement. The
employment agreement provides for an annual base salary of $270,000. Mr.
Henneman is entitled to participate and receive benefits under any employee
benefit plan or stock-based plan of the Company and shall be eligible for any
medical, disability and other plans and benefits covering executives of the
Company. The employment agreement has an initial term through December 31, 2003
and will automatically extend on December 31, 2003 and on each one-year
anniversary thereof for one year unless the Company or Mr. Henneman provides
written notice at least 30 days prior to the expiration of the then-current
term. Mr. Henneman shall be entitled to receive a severance amount equal to 2.99
times his then-current annual base salary, if within twelve months of a change
of control of the Company, (a) Mr. Henneman terminates his employment agreement
for good reason or for the failure of the ultimate parent of the surviving
entity or the surviving entity, as applicable, to grant Mr. Henneman the title
and responsibility he now has with Integra, or (b) the Company terminates or
fails to extend the employment agreement of Mr. Henneman for reasons other than
cause, retirement, disability or death. Mr. Henneman shall be entitled to
receive a severance amount equal to his then-current base salary if, in the
absence of a change of control, (a) Mr. Henneman terminates his employment
agreement for good reason or (b) the Company terminates Mr. Henneman or fails to
extend his employment agreement for reasons other than cause, retirement,
disability or death.
Michael D. Pierschbacher, Ph.D., Integra's Senior Vice President,
Research and Development, and Director of the Corporate Research Center, entered
into an employment agreement with the Company in April 2003 that replaced his
December 1998 agreement. The employment agreement provides for an annual base
salary of $275,000. Dr. Pierschbacher is entitled to participate and receive
benefits under any employee benefit plan or stock-based plan of the Company and
shall be eligible for any medical, disability and other plans and benefits
covering executives of the Company. The employment agreement had an initial term
through December 31, 2003 and will automatically extend on December 31, 2003 and
on each one-year anniversary thereof for one year unless the Company or Dr.
Pierschbacher provides written notice at least 30 days prior to the expiration
of the then-current term. Dr. Pierschbacher shall be entitled to receive a
severance amount equal to 2.99 times his then-current annual base salary, if,
within twelve months of a change in control of the Company, Dr. Pierschbacher
terminates the agreement for good reason or the Company terminates or fails to
renew the agreement for reasons other than cause, retirement, disability or
death. In the event the employment agreement is earlier terminated or not
renewed as aforesaid without a change in control, Dr. Pierschbacher shall be
entitled to receive a severance amount equal his then-current annual base
salary.
17
Robert Paltridge, Integra's Senior Vice President, Worldwide Sales,
entered in a Severance Agreement with the Company in February 2003. Under that
agreement, Mr. Paltridge shall be entitled to receive a severance amount equal
to his then-current base salary (including commissions) if, within twelve months
of a change of control of the Company, (a) Mr. Paltridge terminates his
employment agreement for good reason or (b) the Company terminates Mr. Paltridge
for reasons other than cause, retirement, disability or death.
David B. Holtz, Integra's Senior Vice President, Finance, and Treasurer, entered
into an Employment Agreement with the Company in September 2002 that replaced
his December 1998 employment agreement. The employment agreement provides for an
annual base salary of $185,000. Mr. Holtz is entitled to participate and receive
benefits under any employee benefit plan or stock-based plan of the Company and
shall be eligible for any medical, disability and other plans and benefits
covering executives of the Company. The employment agreement has an initial term
through December 31, 2003 and will automatically extend on December 31, 2003 and
on each one-year anniversary thereof for one year unless the Company or Mr.
Holtz provides written notice at least 30 days prior to the expiration of the
then-current term. Mr. Holtz shall be entitled to receive a severance amount
equal to 2.99 times his then-current annual base salary, if within twelve months
of a change of control of the Company, (a) Mr. Holtz terminates his employment
agreement for good reason or for the failure of the ultimate parent of the
surviving entity or the surviving entity, as applicable, to grant Mr. Holtz the
title and responsibility he now has with Integra, or (b) the Company terminates
or fails to extend the employment agreement of Mr. Holtz for reasons other than
cause, retirement, disability or death. Mr. Holtz shall be entitled to receive a
severance amount equal to his then-current base salary if, in the absence of a
change of control, (a) Mr. Holtz terminates his employment agreement for good
reason or (b) the Company terminates Mr. Holtz or fails to extend his employment
agreement for reasons other than cause, retirement, disability or death.
18
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Caruso, Dr. Bradley and Mr. Moszkowski served as members of the
Compensation Committee in 2002. Dr. Caruso was the Company's Chief Executive
Officer from March 1992 to December 1997.
The Company leases its manufacturing facility in Plainsboro, New Jersey
from Plainsboro Associates, a New Jersey general partnership. Ocirne, Inc., a
subsidiary of Cono Industries ("Cono"), owns a 50% interest in Plainsboro
Associates. Cono is a corporation whose stockholders are trusts whose
beneficiaries include the children of Dr. Caruso, the Chairman and a principal
stockholder of the Company. Dr. Caruso is the President of Cono. The Company
paid $231,000 in rent for this facility during 2002.
The Company leases certain production equipment from Medicus
Corporation. The sole stockholder of Medicus is Trust Partnership, a
Pennsylvania general partnership, for which Dr. Caruso is a partner and the
President. Under the terms of the lease, the Company paid $90,000 to Medicus
Corporation during 2002.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee is required by the
rules of the Commission to be included in this Proxy Statement and addresses the
Company's executive compensation policies for the year ended December 31, 2002.
This report shall not be deemed incorporated by reference into any filing under
the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
Act of 1934, as amended (the "Exchange Act"), by virtue of any general statement
in such filing incorporating this Proxy Statement by reference, except to the
extent that the Company specifically incorporates the information contained in
this section by reference, and shall not otherwise be deemed filed under either
the Securities Act or the Exchange Act.
GENERAL. The Company's compensation policies for executives are
intended to further the interests of the Company and its stockholders by
encouraging growth of its business through securing, retaining and motivating
management employees of high caliber who possess the skills necessary to the
development and growth of the Company. The Compensation Committee is mindful of
the need to align the interests of management with the interests of the
Company's stockholders. The establishment of the Company's equity-based plans
was designed to permit the Company to attract and retain talented managers and
motivate such managers to enhance profitability and stockholder returns. The
Committee believes that the utilization of equity-based plans serves the
interests of the stockholders by creating an appropriate incentive for employees
to identify with the stockholders' interests.
The Company's compensation package consists of four major components:
base compensation; performance bonuses; deferred compensation; and stock options
(and, where appropriate, restricted equity grants). Together these elements
comprise total compensation value. The total compensation paid to the Company's
executive officers is influenced significantly by the need to attract management
employees with a high level of expertise and to motivate and retain key
executives for the long-term success of the Company and its stockholders.
BASE COMPENSATION. The Committee establishes annual base salary levels
for executives based on competitive data, level of experience, position,
responsibility, and individual and Company performance. The Company has sought
to align base compensation levels comparable to its competitors.
PERFORMANCE BONUSES. The Company supplements base compensation with
awards of performance bonuses in the form of cash or equity awards. The
Compensation Committee determined that it was in the Company's best interests to
pay performance bonuses for the year ended December 31, 2002 with equity awards
and not to establish a cash bonus program for its executives.
STOCK OPTIONS. The Company has granted stock options to its executive
management under its stock option plans. Option grants are intended to bring the
total compensation to a level that the Company believes is competitive with
amounts paid by the Company's competitors and which will offer significant
returns if the Company is successful and, therefore, provides significant
incentives to devote the effort called for by the Company's strategy. The
Compensation Committee believes that executives' interests are directly tied to
enhanced stockholder value. Thus, stock options have been used to provide the
executive management team with a strong incentive to perform in a manner that
will benefit the long-term success of the Company and its stockholders.
OTHER BENEFITS. The Company makes available health care benefits and a
401(k) plan for executive officers on terms generally available to all Company
employees. The Committee believes that such benefits are comparable to those
offered by other companies of similar size. The amount of perquisites, as
determined in accordance with the rules of the Securities and Exchange
Commission relating to executive compensation, did not exceed $50,000 or 10% of
the salary of any executive officer in the last fiscal year.
19
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Essig served as the Company's
President and Chief Executive Officer during 2002 pursuant to an employment
agreement, which provided for a base salary of $400,000. Mr. Essig waived his
right to a portion of that salary and received a base salary of $362,500 in
2002. In addition, Mr. Essig waived his right to receive a cash performance
bonus in 2002. In 2002, the Company granted to Mr. Essig options to purchase
36,208 shares of the Company' s common stock. For a numerical description of Mr.
Essig's compensation in 2002, see "Executive Compensation." The terms and
conditions of Mr. Essig's employment agreement are described in the section
entitled "Employment Agreements."
Under Code Section 162(m), in general, income tax deductions of
publicly-traded companies may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and nonqualified
benefits paid in 1994 and thereafter) for certain executive officers exceeds $1
million in any one taxable year. However, compensation that qualifies as
"performance-based" is excluded from the $1 million limit if, among other
requirements the compensation is payable only upon attainment of pre-established
objective performance goals under a plan approved by stockholders.
The Compensation Committee does not presently expect total cash
compensation payable as salaries and bonuses to exceed the $1 million limit for
any individual executive. Having considered the requirements of Section 162(m),
the Compensation Committee believes that stock option grants to date meet the
requirements that such grants be "performance-based" and are, therefore, exempt
from the limitations on deductibility. The Compensation Committee will continue
to monitor the compensation levels potentially payable under its cash
compensation programs, but intends to maintain the flexibility necessary to
provide total cash compensation in line with competitive practices, the
Company's compensation philosophy and the Company's best interests.
The Compensation Committee of the Board of Directors
RICHARD E. CARUSO, PH.D.
KEITH BRADLEY, PH.D.
NEAL MOSZKOWSKI
20
AUDIT COMMITTEE REPORT
The following report of the Audit Committee is required by the rules of
the Commission to be included in this Proxy Statement. This report shall not be
deemed incorporated by reference into any filing under the Securities Act or the
Exchange Act, by virtue of any general statement in such filing incorporating
this Proxy Statement by reference, except to the extent that the Company
specifically incorporates the information contained in this section by
reference, and shall not otherwise be deemed filed under either the Securities
Act or the Exchange Act.
The role of the Audit Committee is to assist the Board of Directors in
its oversight of the Company's financial reporting process. The Committee
operates pursuant to a Charter that the Board amended and restated on March 21,
2002, a copy of which was attached to the Company's 2002 Proxy Statement.
As set forth in the Charter, management of the Company is responsible
for the preparation, presentation and integrity of the Company's financial
statements, the Company's accounting and financial reporting principles and
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditors are
responsible for auditing the Company's financial statements and expressing an
opinion as to their conformity with generally accepted accounting principles.
In the performance of its oversight function, the Committee has
considered and discussed the audited financial statements with management and
the independent auditors. The Committee has also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61, Communication with Audit Committees, as currently in effect. Finally,
the Committee has received the written disclosures and the letter from the
independent auditors required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees" and has discussed with
PricewaterhouseCoopers LLP their independence in relation to the Company.
Management has represented to the Committee that the Company's consolidated
financial statements were prepared in accordance with generally accepted
accounting principles.
The members of the Committee are not professionally engaged in the
practice of auditing or accounting and are not experts in the fields of
accounting or auditing, including in respect of auditor independence. Members of
the Committee rely without independent verification on the information provided
to them and on the representations made by management and the independent
accountants. Accordingly, the Committee's oversight does not provide an
independent basis to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate internal control
and procedures designed to assure compliance with accounting standards and
applicable laws and regulations.
Furthermore, the Committee's considerations and discussions referred to
above do not assure that the audit of the Company's financial statements has
been carried out in accordance with generally accepted auditing standards, that
the financial statements are presented in accordance with generally accepted
accounting principles or that the Company's auditors are in fact "independent".
21
Based upon the reports and discussions described in this report, and
subject to the limitations on the role and responsibilities of the Committee
referred to above and in the Charter, the Committee recommended to the Board
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2002 that was filed with the
Securities and Exchange Commission.
SUBMITTED BY THE AUDIT COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS
JAMES M. SULLIVAN
KEITH BRADLEY
NEAL MOSZKOWSKI
22
STOCK PERFORMANCE GRAPH
The following line graph and table compare, for the period from
December 31, 1997 through December 31, 2002, the yearly percentage change in the
cumulative total stockholder return on the Company's common stock with the
cumulative total return of companies on the NASDAQ Stock Market - U.S. Index and
the NASDAQ Medical Devices, Instruments and Supplies, Manufacturers and
Distributors Index. The graph assumes that the value of the investment in the
Company's common stock and the relevant index was $100 at December 31, 1997 and
that all dividends were reinvested. The closing market price of the Company's
common stock on December 31, 2002 was $17.65 per share.
[LINE GRAPH OMITTED]
Comparison of Cumulative Total Return among Integra LifeSciences Holdings
Corporation, the NASDAQ Medical Devices, Instruments and Supplies, Manufacturers
and Distributors Index, and the NASDAQ Stock Market -- U.S. Index
12/97 12/98 12/99 12/00 12/01 12/02
-------- -------- -------- ------- -------- --------
Integra LifeSciences Holdings Corporation $100 $ 38 $ 67 $154 $297 $199
NASDAQ Medical Devices, Instruments and Supplies,
Manufacturers and Distributors Index $100 $111 $135 $139 $153 $124
NASDAQ Stock Market - U.S. Index $100 $141 $261 $158 $125 $ 87
The graph and table above depict the past performance of the Company's
stock price. The Company neither makes nor endorses any predictions as to future
stock performance. The graph and table set forth above shall not be deemed (i)
incorporated by reference into any filing under the Securities Act or the
Exchange Act by virtue of any general statement in such filing incorporating
this Proxy Statement by reference, except to the extent that the Company
specifically incorporates the information contained in this section by
reference, or (ii) filed under either the Securities Act or the Exchange Act.
23
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of common stock as of March 31, 2003 by: (a) each person or
entity known to the company to own beneficially five percent or more of the
outstanding shares of common stock, based upon company records or Securities and
Exchange Commission records; (b) each of the company's directors; (c) each of
the officers named below; and (d) all executive officers and directors of the
company as a group. Except as otherwise indicated, each person has sole voting
power and sole investment power with respect to all shares beneficially owned by
such person.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES (1) OF CLASS
-------------------------------------------------------------- ---------------- ------------
David Auth 60,000(2) *
Keith Bradley, Ph.D. 20,500(3) *
Richard E. Caruso, Ph.D. 7,170,168(4) 27.5%
Stuart M. Essig 654,729(5) 2.5%
Neal Moszkowski 40,000(6) *
James M. Sullivan 49,041(7) *
John B. Henneman, III 233,204(8) *
David Holtz 81,060(9) *
Robert D. Paltridge 43,787(10) *
Michael D. Pierschbacher, Ph.D. 111,244(11) *
All directors and executive officers as a group (13
persons) 8,669,169(12) 31.7%
AXA Financial,Inc.
1290 Avenue of the Americas, New York, NY 10104 1,328,300(13) 5.1%
Quantum Industrial Partners LDC
Kaya Flamboyan 9
Willemsted, Curacao, Netherlands Antilles 2,630,625(14) 10.1%
SFM Domestic Investments LLC
888 Seventh Avenue, 33rd Floor, New York, NY 10106 694,675(15) 2.7%
Trust Partnership
c/o Richard E. Caruso, Ph.D., 919 Conestoga Road,
Building 2, Suite 106, Rosemont, PA 19010 7,091,205(16) 27.3%
* Represents beneficial ownership of less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual to acquire them within 60 days of March 31, 2003
upon the exercise of an option or other convertible security are
treated as outstanding for purposes of determining beneficial ownership
and the percentage beneficially owned by such individual.
(2) Includes 10,000 shares that Mr. Auth has the right to acquire within 60
days of March 31, 2003 upon the exercise of options held by him.
(3) Consists of 20,500 shares that Dr. Bradley has the right to acquire
within 60 days of March 31, 2003 upon the exercise of options held by
him.
24
(4) Includes the 7,091,205 shares held by Trust Partnership L.P., a
Pennsylvania general partnership of which Dr. Caruso is a partner and
the President (also see Note 16 below). Also includes 23,338 shares
held by Provco Leasing Corporation ("Provco") of which Dr. Caruso is
President. Provco is a wholly owned subsidiary of Cono Industries,
Incorporated, a corporation whose stockholders are trusts whose
beneficiaries include Dr. Caruso's children. Also includes 55,625
shares that Dr. Caruso has the right to acquire within 60 days of March
31, 2003 upon the exercise of options held by him. Dr. Caruso's address
is 919 Conestoga Road, Building 2, Suite 106, Rosemont, Pennsylvania
19010.
(5) Includes 583,468 shares that Mr. Essig has the right to acquire within
60 days of March 31, 2003 upon the exercise of options held by him.
Excludes Restricted Units awarded to Mr. Essig in 1997 and 2000, which
entitle him to receive an aggregate of 2,250,000 shares of common
stock. The Restricted Units held by Mr. Essig do not give him the right
to acquire any shares within 60 days of March 31, 2003.
(6) Consists of 40,000 shares that Mr. Moszkowski has the right to acquire
within 60 days of March 31, 2003 upon the exercise of options held by
him.
(7) Includes 45,500 shares that Mr. Sullivan has the right to acquire
within 60 days of March 31, 2003 upon the exercise of options held by
him.
(8) Includes 214,837 shares that Mr. Henneman has the right to acquire
within 60 days of March 31, 2003 upon the exercise of options held by
him.
(9) Includes 75,097 shares that Mr. David Holtz has the right to acquire
within 60 days of March 31, 2003 upon the exercise of options held by
him.
(10) Includes 40,378 shares that Mr. Paltridge has the right to acquire
within 60 days of March 31, 2003 upon the exercise of options held by
him.
(11) Includes 5,854 shares held by a revocable trust of which Dr.
Pierschbacher is co-trustee. Also includes 105,390 shares that Dr.
Pierschbacher has the right to acquire within 60 days of March 31, 2003
upon the exercise of options held by him.
(12) See Notes 2 through 11 above. Also includes 35,321 shares held by three
executive officers of the Company and/or its subsidiaries who are not
listed in the table, as well as 170,115 shares that those officers have
the right to acquire within 60 days of March 31, 2003 upon the exercise
of options held by them.
(13) AXA Financial, Inc. is the parent of Alliance Capital Management, L.P.
and The Equitable Life Assurance Society of The United States. As of
December 31, 2002, Alliance Capital Management L.P. had sole voting
power of 683,100 shares, shared voting power for 484,900 shares, no
voting power for 88,200 shares, and sole dispositive power for all
1,256,200 of its shares. As of December 31, 2002, The Equitable Life
Assurance Society of The United States had sole voting power and sole
dispositive power for 72,100 shares. The foregoing information has been
included solely in reliance upon, and without independent investigation
of, the disclosures contained in the Form 13F filed by AXA Financial,
Inc. with the Securities and Exchange Commission on March 28, 2003.
(14) QIH Management Investor, L.P. is a minority shareholder of and is
vested with investment discretion with respect to the portfolio assets
held for the account of Quantum Industrial Partners LDC. The sole
general partner of QIH Management Investor, L.P. is QIH Management LLC.
Soros Private Funds Management LLC is the sole managing member of QIH
Management LLC and Mr. Soros is the sole member of Soros Private Funds
Management LLC. Mr. Soros has entered into an agreement dated as of
January 1, 1997 with Soros Fund Management LLC, pursuant to which Mr.
Soros has, among other things, agreed to use his best efforts to cause
QIH Management LLC to act at the direction of Soros Fund Management
LLC. Accordingly, each of QIH Management Investor, L.P., QIH
Management, LLC, Soros Fund Management and Mr. Soros may be deemed the
beneficial owner of the Quantum Industrial Partners Shares.
(15) Mr. Soros is the sole managing member of SFM Domestic Investments LLC
and may be deemed the beneficial owner of the SFM Domestic Investments
LLC Shares.
(16) The partners of Trust Partnership are Athena Venture Partners, L.P.,
Dr. Caruso and Provco, each of which may be deemed to beneficially own
the shares held by Trust Partnership; however, such partners of Trust
Partnership disclaim beneficial ownership of all such shares except to
the extent represented by their respective equity and profit
participation interests in Trust Partnership.
25
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, as well as persons beneficially owning more than 10% of the
Company's outstanding shares of common stock and certain other holders of such
shares (collectively, "Covered Persons"), to file with the Commission and the
NASDAQ Stock Market, within specified time periods, initial reports of
ownership, and subsequent reports of changes in ownership, of common stock and
other equity securities of the Company.
Based solely upon the Company's review of copies of such reports
furnished to it and upon representations of Covered Persons that no other
reports were required, to the Company's knowledge all of the Section 16(a)
filing requirements applicable to Covered Persons were complied with during
2002, except for the following:
a) a statement of changes in beneficial ownership of securities on
Form 4 was filed late by Michael D. Pierschbacher, Ph.D., Senior
Vice President of Research and Development, for the purchase of
common stock in April 2002;
b) the initial statements of changes in beneficial ownership of
securities on Form 4 filed by John B. Henneman, III, Executive
Vice President, Chief Administrative Officer and Secretary, and
Donald R. Nociolo, Senior Vice President, Operations, for the
purchase of common stock and the acquisition of employee stock
options in December 2002 were amended to correct clerical errors
and the amendments were deemed late filings; and
c) the initial statement of changes in beneficial ownership of
securities on Form 4 filed by Judith E. O'Grady, Senior Vice
President, Regulatory, Quality Assurance and Clinical Affairs, for
the acquisition of employee stock options in December 2002 was
amended to correct clerical errors and the amendment was deemed a
late filing.
STOCKHOLDER PROPOSALS
The deadline for stockholders to submit proposals pursuant to Rule
14a-8 of the Exchange Act for inclusion in the Company's proxy statement and
form of proxy for the 2004 Annual Meeting of Stockholders (the "Annual Meeting")
is December 16, 2003. The date after which notice of a stockholder Proposal
submitted outside of the processes of Rule 14a-8 of the Exchange Act is
considered untimely is March 9, 2004. If notice of a stockholder Proposal
submitted outside of the processes of Rule 14a-8 of the Exchange Act is received
by the Company after March 1, 2004, then the Company's proxy for the Annual
Meeting may confer discretionary authority to vote on such matter without any
discussion of such matter in the proxy statement for the Annual Meeting.
26
OTHER MATTERS
A copy of the Company's 2002 Annual Report to Stockholders is being
mailed simultaneously herewith to stockholders but is not to be regarded as
proxy solicitation material.
THE COMPANY, UPON REQUEST, WILL FURNISH TO RECORD AND BENEFICIAL
HOLDERS OF ITS COMMON STOCK, FREE OF CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM
10-K (INCLUDING FINANCIAL STATEMENTS AND SCHEDULES BUT WITHOUT EXHIBITS) FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2002. COPIES OF EXHIBITS TO THE FORM 10-K ALSO
WILL BE FURNISHED UPON REQUEST AND THE PAYMENT OF A REASONABLE FEE. ALL REQUESTS
SHOULD BE DIRECTED TO JOHN BOSTJANCIC, SENIOR DIRECTOR OF FINANCE, AT THE
OFFICES OF THE COMPANY SET FORTH ON PAGE ONE OF THIS PROXY STATEMENT.
By order of the Board of Directors,
/S/ John B. Henneman, III
Plainsboro, New Jersey
April 16, 2003
John B. Henneman, III
Secretary
27
APPENDIX A
INTEGRA LIFESCIENCES
HOLDINGS CORPORATION
2003 EQUITY INCENTIVE PLAN
A1
1. Purpose..................................................................................................1
2. Definitions..............................................................................................1
3. Administration...........................................................................................4
4. Effective Date and Term of Plan..........................................................................5
5. Shares Subject to the Plan...............................................................................5
6. Eligibility..............................................................................................5
7. Types of Awards..........................................................................................5
7.1 Options...........................................................................................5
7.2 Stock Appreciation Rights.........................................................................7
7.3 Restricted Stock..................................................................................8
7.4 Performance Stock; Performance Goals..............................................................9
7.5 Contract Stock....................................................................................9
7.6 Dividend Equivalent Rights........................................................................9
8. Events Affecting Outstanding Awards......................................................................9
8.1 Termination of Service (Other Than by Death or Disability)........................................9
8.2 Death or Disability..............................................................................10
8.3 Capital Adjustments..............................................................................11
8.4 Certain Corporate Transactions...................................................................11
8.5 Exercise Upon Change in Control..................................................................11
9. Amendment or Termination of the Plan....................................................................13
10. Miscellaneous...........................................................................................14
10.1 Documentation of Awards..........................................................................14
10.2 Rights as a Stockholder..........................................................................14
10.3 Conditions on Delivery of Shares.................................................................14
10.4 Registration and Listing of Shares...............................................................14
10.5 Compliance with Rule 16b-3.......................................................................14
10.6 Tax Withholding..................................................................................14
10.7 Transferability of Awards........................................................................15
10.8 Registration.....................................................................................15
10.9 Acquisitions.....................................................................................15
10.10 Employment Rights................................................................................15
10.11 Indemnification of Board and Committee...........................................................15
10.12 Application of Funds.............................................................................16
10.13 Governing Law....................................................................................16
A2
INTEGRA LIFESCIENCES
HOLDINGS CORPORATION
2003 EQUITY INCENTIVE PLAN
WHEREAS, Integra LifeSciences Holdings Corporation (the
"Company") desires to have the ability to award certain equity-based benefits to
certain "Key Employees" and "Associates" (as defined below);
NOW, THEREFORE, the Integra LifeSciences Holdings Corporation
2003 Equity Incentive Plan is hereby adopted under the following terms and
conditions:
1) Purpose. The Plan is intended to provide a means whereby the
Company may grant ISOs to Key Employees and may grant NQSOs,
Restricted Stock, Stock Appreciation Rights, Performance Stock, Contract
Stock and Dividend Equivalent Rights to Key Employees and Associates.
Thereby, the Company expects to attract and retain such Key Employees
and Associates and to motivate them to exercise their best efforts on
behalf of the Company and any Related Corporations and Affiliates.
2) Definitions
a) "Affiliate" shall mean an entity in which the Company or a Related
Corporation has a 50 percent or greater equity interest.
b) "Associate" shall mean a designated nonemployee director,
consultant or other person providing services to the
Company, a Related Corporation or an Affiliate.
c) "Award" shall mean ISOs, NQSOs, Restricted Stock, Stock
Appreciation Rights, Performance Stock, Contract Stock
and/or Dividend Equivalent Rights awarded by the Committee
to a Participant.
d) "Award Agreement" shall mean a written document evidencing
the grant of an Award, as described in Section 10.1.
e) "Board" shall mean the Board of Directors of the Company.
f) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
g) "Committee" shall mean the Company's Equity Award
Committee, which shall consist solely of not fewer than
two directors of the Company who shall be appointed by,
and serve at the pleasure of, the Board (taking into
consideration the rules under section 16(b) of the
Exchange Act and the requirements of section 162(m) of the
Code).
h) "Company" shall mean Integra LifeSciences Holdings
Corporation, a Delaware corporation.
i) "Contract Date" shall mean the date specified in the Award
Agreement on which a Participant is entitled to receive
Contract Stock, provided he or she is still providing
services to the Company, a Related Corporation, or an
Affiliate on such date.
j) "Contract Stock" shall mean an Award that entitles the
recipient to receive unrestricted Shares, without payment,
if the recipient is still providing services to the
Company or a Related Corporation as of a future date
specified in the Award Agreement.
A3
k) "Disability" shall mean separation from service as a
result of "permanent and total disability," as defined in
section 22(e)(3) of the Code.
l) "Dividend Equivalent Right" shall mean an Award that
entitles the recipient to receive a benefit in lieu of
cash dividends that would have been payable on any or all
Shares subject to another Award granted to the Participant
had such Shares been outstanding.
m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
n) "Fair Market Value" shall mean the following, arrived at
by a good faith determination of the Committee:
i) if there are sales of Shares on a national securities
exchange or in an over-the-counter market on the date of
grant (or on such other date as value must be determined),
then the quoted closing price on such date; or
ii) if there are no such sales of Shares on the date of grant
(or on such other date as value must be determined) but
there are such sales on dates within a reasonable period
both before and after such date, the weighted average of
the quoted closing price on the nearest date before and
the nearest date after such date on which there were such
sales; or
iii) if actual sales are not available during a reasonable
period beginning before and ending after the date of grant
(or on such other date as value must be determined), then
the mean between the bid and asked price on such date as
reported by the National Quotation Bureau; or
iv) if paragraphs (i) through (iii) above are not applicable,
then such other method of determining fair market value as
shall be adopted by the Committee.
Where the Fair Market Value of Shares is determined under paragraph (ii) above,
the average of the quoted closing prices on the nearest date before and the
nearest date after the last business day prior to the specified date shall be
weighted inversely by the respective numbers of trading days between the dates
of reported sales and such date (i.e., the valuation date), in accordance with
Treas. Reg. ss.20.2031-2(b)(1), or any successor thereto.
o) "ISO" shall mean an Option which, at the time such Option is
granted under the Plan, qualifies as an incentive stock option
within the meaning of section 422 of the Code, unless the Award
Agreement states that the Option will not be treated as an ISO.
p) "Key Employee" shall mean an officer, executive, or managerial or
nonmanagerial employee of the Company, a Related Corporation, or
an Affiliate.
q) "More-Than-10-Percent Stockholder" shall mean any person who at
the time of grant owns, directly or indirectly, or is deemed to
own by reason of the attribution rules of section 424(d) of the
Code, Shares possessing more than 10 percent of the total combined
voting power of all classes of Shares of the Company or of a
Related Corporation.
r) "NQSO" shall mean an Option that, at the time such Option is
granted to a Participant, does not meet the definition of an ISO,
whether or not it is designated as a nonqualified stock option in
the Award Agreement.
s) "Option" is an Award entitling the Participant on exercise thereof
to purchase Shares at a specified exercise price.
A4
t) "Participant" shall mean a Key Employee or Associate who has been
granted an Award under the Plan.
u) "Performance Stock" shall mean an Award
that entitles the recipient to receive Shares, without payment,
following the attainment
of designated Performance Goals.
v) "Performance Goals" shall mean goals deemed by the Committee to be
important to the success of the Company or any of its Related
Corporations or Affiliates. The Committee shall establish the
specific measures for each such goal at the time an Award of
Performance Stock is granted. In creating these measures, the
Committee shall use one or more of the following business
criteria: return on assets, return on net assets, asset turnover,
return on equity, return on capital, market price
appreciation of Shares, economic value added, total stockholder
return, net income, pre-tax income, earnings per share,
operating profit margin, net income margin, sales margin, cash
flow, market share, inventory turnover, sales growth, capacity
utilization, increase in customer base, environmental health and
safety, diversity, and/or quality. The business criteria may
be expressed in absolute terms or relative to the performance of
other companies or an index.
w) "Plan" shall mean the Integra LifeSciences Holdings Corporation
2003 Equity Incentive Plan, as set forth herein and as it may be
amended from time to time.
x) "Related Corporation" shall mean either a "subsidiary corporation"
of the Company (if any), as defined in section 424(f) of the Code,
or the "parent corporation" of the Company (if any), as defined in
section 424(e) of the Code.
y) "Restricted Stock" shall mean an Award that grants the recipient
Shares at no cost but subject to whatever restrictions are
determined by the Committee.
z) "Securities Act" shall mean the Securities Act of 1933, as
amended.
aa) "Shares" shall mean shares of common stock of the Company, par
value $0.01 per share.
bb) "Stock Appreciation Right" shall mean an Award entitling
the recipient on exercise to receive an amount, in cash or
Shares or a combination thereof (such form to be determined by
the Committee), determined in whole or in part by reference to
appreciation in Share value.
3. Administration
a) The Plan shall be administered by the Committee. Each member of
the Committee, while serving as such, shall be deemed to be acting
in his or her capacity as a director of the Company. Acts approved
by a majority of the members of the Committee at which a quorum is
present, or acts without a meeting reduced to or approved in
writing by a majority of the members of the Committee, shall be
the valid acts of the Committee. Any authority of the Committee
(except for the authority described in subsection (b)(i)-(iv)
below) may be delegated to a Plan administrator.
b) The Committee shall have the authority:
i) to select the Key Employees and Associates to be granted
Awards under the Plan and to grant such Awards at such
time or times as it may choose;
ii) to determine the type and size of each Award, including
the number of Shares subject to the Award;
iii) to determine the terms and conditions of each Award;
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iv) to amend an existing Award in whole or in part (including
the extension of the exercise period for any NQSO),
except that the Committee may not (A) lower the exercise
price of any Option, or (B) without the consent of the
Participant holding the Award, take any action under this
clause if such action would adversely affect the rights
of such Participant;
v) to adopt, amend and rescind rules and regulations for the
administration of the Plan;
vi) to interpret the Plan and decide any questions and settle
any controversies that may arise in connection with it;
and
vii) to adopt such modifications, amendments, procedures,
sub-plans and the like, which may be inconsistent with
the provisions of the Plan, as may be necessary to comply
with the laws and regulations of other countries in which
the Company and its Related Corporations and Affiliates
operate in order to assure the viability of Awards
granted under the Plan to individuals in such other
countries.
Such determinations and actions of the Committee, and all other determinations
and actions of the Committee made or taken under authority granted by any
provision of the Plan, shall be conclusive and shall bind all parties. Nothing
in this subsection (b) shall be construed as limiting the power of the Board or
the Committee to make the adjustments described in Sections 8.3 and 8.4.
4. Effective Date and Term of Plan
a) Effective Date. The Plan, having been adopted by the Board on
February 2, 2003, shall become effective on that date, but subject
to the approval of the stockholders of the Company pursuant to
Section 9(b). Awards may be granted under the Plan prior to such
stockholder approval (but after the Board's adoption of the Plan),
subject to such stockholder approval.
b) Term of Plan for ISOs. No ISO may be granted under the Plan after
February 23, 2013, but ISOs previously granted may extend beyond
that date. Awards other than ISOs may be granted after that date.
5. Shares Subject to the Plan. The aggregate number of Shares that
may be delivered under the Plan is 2,500,000. Further, no Key
Employee shall receive Options and/or Stock Appreciation Rights
for more than 1,000,000 Shares during any calendar year under the
Plan. However, the limits in the preceding two sentences shall be
subject to the adjustment described in Section 8.3. Shares
delivered under the Plan may be authorized but unissued Shares or
reacquired Shares, and the Company may purchase Shares required
for this purpose, from time to time, if it deems such purchase to
be advisable. Any Shares still subject to an Option which expires
or otherwise terminates for any reason whatever (including,
without limitation, the surrender thereof) without having been
exercised in full, any Shares that are still subject to an Award
that is forfeited, any Shares withheld for the payment of taxes
with respect to an Award, and the Shares subject to an Award which
is payable in Shares or cash and that is satisfied in cash rather
than in Shares shall continue to be available for Awards under the
Plan.
6. Eligibility. The class of individuals who shall be eligible to
receive Awards under the Plan shall be the Key Employees
(including any directors of the Company who are also officers or
Key Employees) and the Associates. More than one Award may be
granted to a Key Employee or Associate under the Plan.
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7. Types of Awards
7.1 Options
a) Kinds of Options. Both ISOs and NQSOs may be granted by the
Committee under the Plan. However, ISOs may only be granted to Key
Employees of the Company or of a Related Corporation. NQSOs may be
granted to both Key Employees and Associates. Once an ISO has been
granted, no action by the Committee that would cause the Option to
lose its status as an ISO under the Code will be effective without
the consent of the Participant holding the Option.
b) $100,000 Limit. The aggregate Fair Market Value of the Shares with
respect to which ISOs are exercisable for the first time by a Key
Employee during any calendar year (counting ISOs under this Plan
and under any other stock option plan of the Company or a Related
Corporation) shall not exceed $100,000. If an Option intended as
an ISO is granted to a Key Employee and the Option may not be
treated in whole or in part as an ISO pursuant to the $100,000
limit, the Option shall be treated as an ISO to the extent it may
be so treated under the limit and as an NQSO as to the remainder.
For purposes of determining whether an ISO would cause the limit
to be exceeded, ISOs shall be taken into account in the order
granted. The annual limits set forth above for ISOs shall not
apply to NQSOs.
c) Exercise Price. The exercise price of an Option shall be
determined by the Committee, subject to the following:
i) The exercise price of an ISO shall not be less than the
greater of (A)100 percent (110 percent in the case of an ISO
granted to a More-Than-10-Percent Stockholder) of the Fair
Market Value of the Shares subject to the Option, determined
as of the time the Option is granted, or (B) the par value
per Share.
ii) The exercise price of an NQSO shall not be less than the
greater of (A) 100 percent of the Fair Market Value of the
Shares subject to the Option, determined as of the time the
Option is granted, or (B) the par value per Share.
d) Term of Options. The term of each Option may not be more than 10
years (five years, in the case of an ISO granted to a
More-Than-10-Percent Stockholder) from the date the Option was
granted, or such earlier date as may be specified in the Award
Agreement.
e) Exercise of Options. An Option shall become exercisable at such
time or times (but not less than three months from the date of
grant), and on such conditions, as the Committee may specify.
The Committee may at any time and from time to time accelerate
the time at which all or any part of the Option may be exercised.
Any exercise of an Option must be in writing, signed by the
proper person, and delivered or mailed to the Company, accompanied
by (i) any other documents required by the Committee and (ii)
payment in full in accordance with subsection (f) below for the
number of Shares for which the Option is exercised (except that,
in the case of an exercise arrangement approved by the Committee
and described in subsection (f)(iii) below payment may be made as
soon as practicable after the exercise). Only full shares shall
be issued under the Plan, and any fractional share that might
otherwise be issuable upon exercise of an Option granted hereunder
shall be forfeited.
f) Payment for Shares. Shares purchased on the exercise of an Option
shall be paid for as follows:
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i) in cash or by check (acceptable to the Committee), bank
draft, or money order payable to the order of the Company;
ii) in Shares previously acquired by the Participant; provided,
however, that if such Shares were acquired through the
exercise of an ISO and are used to pay the Option price of an
ISO, such Shares have been held by the Participant for a
period of not less than the holding period described in
section 422(a)(1) of the Code on the date of exercise, or if
such Shares were acquired through the exercise of an NQSO and
are used to pay the Option price of an ISO, or if such
Shares were acquired through the exercise of an ISO or an
NQSO and are used to pay the Option price of an NQSO, such
Shares have been held by the Participant for such period of
time as required to be considered "mature" Shares for
purposes of accounting treatment;
iii) by delivering a properly executed notice of exercise of the
Option to the Company and a broker, with irrevocable
instructions to the broker promptly to deliver to the Company
the amount of sale or loan proceeds necessary to pay the
exercise price of the Option; or
iv) by any combination of the above-listed forms of payment.
In the event the Option price is paid, in whole or in part, with Shares, the
portion of the Option price so paid shall be equal to the Fair Market Value on
the date of exercise of the Option of the Shares surrendered in payment of such
Option price.
7.2. Stock Appreciation Rights
a) Grant of Stock Appreciation Rights. Stock Appreciation Rights may
be granted to a Key Employee or Associate by the Committee.
Stock Appreciation Rights may be granted in tandem with, or
independently of, Options granted under the Plan. A Stock
Appreciation Right granted in tandem with an Option that is not an
ISO may be granted either at or after the time the Option is
granted. A Stock Appreciation Right granted in tandem with an ISO
may be granted only at the time the ISO is granted.
b) Nature of Stock Appreciation Rights. A Stock Appreciation Right
entitles the Participant to receive, with respect to each Share as
to which the Stock Appreciation Right is exercised, the excess of
the Share's Fair Market Value on the date of exercise over its
Fair Market Value on the date the Stock Appreciation Right was
granted. Such excess shall be paid in cash, Shares, or a
combination thereof, as determined by the Committee.
c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights
are granted in tandem with Options, the number of Stock
Appreciation Rights granted to a Participant that shall be
exercisable during a specified period shall not exceed the number
of Shares that the Participant may purchase upon the exercise of
the related Option during such period. Upon the exercise of
an Option, the Stock Appreciation Right relating to the Shares
covered by such Option will terminate. Upon the exercise of a
Stock Appreciation Right, the related Option will terminate to the
extent of an equal number of Shares. The Stock Appreciation Right
will be exercisable only at such time or times, and to the extent,
that the related Option is exercisable and will be exercisable in
accordance with the procedure required for exercise of the related
Option. The Stock Appreciation Right will be transferable only
when the related Option is transferable, and under the same
conditions. A Stock Appreciation Right granted in tandem with an
ISO may be exercised only when the Fair Market Value of the Shares
subject to the ISO exceeds the exercise price of such ISO.
d) Exercise of Independent Stock Appreciation Rights. A Stock
Appreciation Right not granted in tandem with an Option shall
become exercisable at such time or times, and on such conditions,
as the Committee may specify in the Award Agreement. The Committee
may at any time accelerate the time at which all or any part of
the Stock Appreciation Right may be exercised. Any exercise of an
independent Stock Appreciation Right must be in writing, signed by
the proper person, and delivered or mailed to the Company,
accompanied by any other documents required by the Committee.
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7.3. Restricted Stock
a) General Requirements. Restricted Stock may be issued or
transferred to a Key Employee or Associate (for no consideration).
b) Rights as a Stockholder. Unless the Committee determines
otherwise, a Key Employee or Associate who receives Restricted
Stock shall have certain rights of a stockholder with respect to
the Restricted Stock, including voting and dividend rights,
subject to the restrictions described in subsection (c) below and
any other conditions imposed by the Committee at the time of
grant. Unless the Committee determines otherwise, certificates
evidencing shares of Restricted Stock will remain in the
possession of the Company until such Shares are free of all
restrictions under the Plan.
c) Restrictions. Except as otherwise specifically provided by
the Plan, Restricted Stock may not be sold, assigned,
transferred, pledged, or otherwise encumbered or disposed
of, and if the Participant ceases to provide services to any of
the Company and its Related Corporations and Affiliates for any
reason, must be forfeited to the Company. These restrictions will
lapse at such time or times, and on such conditions, as the
Committee may specify in the Award Agreement. Upon the lapse of
all restrictions, the Shares will cease to be Restricted Stock
for purposes of the Plan. The Committee may at any time
accelerate the time at which the restrictions on all or any part
of the Shares will lapse.
d) Notice of Tax Election. Any Participant making an election
under section 83(b) of the Code for the immediate recognition of
income attributable to an Award of Restricted Stock must provide
a copy thereof to the Company within 10 days of the filing of such
election with the Internal Revenue Service.
7.4. Performance Stock; Performance Goals
a) Grant. The Committee may grant Performance Stock to any Key
Employee or Associate, conditioned upon the meeting of
designated Performance Goals. The Committee shall determine the
number of Shares of Performance Stock to be granted.
b) Performance Period and Performance Goals. When Performance Stock
is granted, the Committee shall establish the performance period
during which performance shall be measured, the Performance Goals,
and such other conditions of the Award as the Committee deems
appropriate.
c) Delivery of Performance Stock. At the end of each performance
period, the Committee shall determine to what extent the
Performance Goals and other conditions of the Award have been met
and the number of Shares, if any, to be delivered with respect to
the Award.
7.5. Contract Stock
a) Grant. The Committee may grant Contract Stock to any Key
Employee or Associate, conditioned upon the Participant's
continued provision of services to the Company and its Related
Corporations and Affiliates through the date specified in the
Award Agreement. The Committee shall determine the number of
Shares of Contract Stock to be granted.
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b) Contract Date. When Contract Stock is granted, the Committee shall
establish the Contract Date on which the Contract Stock shall be
delivered to the Participant, provided the Participant is still
providing services to the Company and its Related Corporations and
Affiliates on such date.
c) Delivery of Contract Stock. If the Participant is still
providing services to the Company and its Related Corporations and
Affiliates as of the Contract Date, the Committee shall cause the
Contract Stock to be delivered to the Participant in accordance
with the terms of the Award Agreement.
7.6. Dividend Equivalent Rights. The Committee may provide for payment to
a Key Employee or Associate of Dividend Equivalent Rights, either
currently or in the future, or for the investment of such Dividend
Equivalent Rights on behalf of the Participant.
8. Events Affecting Outstanding Awards
8.1. Termination of Service (Other Than by Death or Disability). If a
Participant ceases to provide services to the Company and its Related
Corporations and Affiliates for any reason other than death or
Disability, as the case may be, the following shall apply:
a) Except as otherwise determined by the Committee, all Options and
Stock Appreciation Rights held by the Participant that were not
exercisable immediately prior to the Participant's termination of
service shall terminate at that time. Any Options or Stock
Appreciation Rights that were exercisable immediately prior to the
termination of service will continue to be exercisable for six
months (or for such longer period as the Committee may determine),
and shall thereupon terminate, unless the Award Agreement provides
by its terms for immediate termination or for termination in less
than six months in the event of termination of service. In no
event, however, shall an Option or Stock Appreciation Right remain
exercisable beyond the latest date on which it could have been
exercised without regard to this Section. For purposes of this
subsection (a), a termination of service shall not be deemed to
have resulted by reason of a sick leave or other bona fide leave
of absence approved for purposes of the Plan by the Committee.
b) Except as otherwise determined by the Committee, all Restricted
Stock held by the Participant at the time of the termination of
service must be transferred to the Company (and, in the event the
certificates representing such Restricted Stock are held by the
Company, such Restricted Stock shall be so transferred without any
further action by the Participant), in accordance with Section
7.3.
c) Except as otherwise determined by the Committee, all
Performance Stock, Contract Stock, and Dividend Equivalent Rights
to which the Participant was not irrevocably entitled prior to the
termination of service shall be forfeited and the Awards canceled
as of the date of such termination of service.
8.2. Death or Disability. If a Participant dies or incurs a Disability, the
following shall apply:
a) Except as otherwise determined by the Committee, all Options and
Stock Appreciation Rights held by the Participant immediately
prior to death or Disability, as the case may be, to the extent
then exercisable, may be exercised by the Participant or by the
Participant's legal representative (in the case of Disability),
or by the Participant's executor or administrator or by the
person or persons to whom the Option or Stock Appreciation Right
is transferred by will or the laws of descent and distribution,
at any time within the one-year period ending with the first
anniversary of the Participant's death or Disability (or such
shorter or longer period as the Committee may determine), and
shall thereupon terminate. In no event, however, shall an Option
or Stock Appreciation Right remain exercisable beyond the latest
date on which it could have been exercised without regard to this
Section. Except as otherwise determined by the Committee, all
Options and Stock Appreciation Rights held by a Participant
immediately prior to death or Disability that are not then
exercisable shall terminate at the date of death or Disability.
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b) Except as otherwise determined by the Committee, all Restricted
Stock held by the Participant at the date of death or Disability,
as the case may be, must be transferred to the Company (and, in
the event the certificates representing such Restricted Stock are
held by the Company, such Restricted Stock shall be so
transferred without any further action by the Participant), in
accordance with Section 7.3.
c) Except as otherwise determined by the Committee, all Performance
Stock, Contract Stock, and Dividend Equivalent Rights to which
the Participant was not irrevocably entitled prior to death or
Disability, as the case may be, shall be forfeited and the Awards
canceled as of the date of death or Disability.
8.3. Capital Adjustments. The maximum number of Shares that may be delivered
under the Plan, and the maximum number of Shares with respect to which
Options or Stock Appreciation Rights may be granted to any Key Employee
or Associate under the Plan, both as stated in Section 5, and the number
of Shares issuable upon the exercise or vesting of outstanding Awards
under the Plan (as well as the exercise price per Share under outstanding
Options), shall be proportionately adjusted, as may be deemed appropriate
by the Committee, to reflect any increase or decrease in the number of
issued Shares resulting from a subdivision (share-split), consolidation
(reverse split), stock dividend, or similar change in the capitalization
of the Company.
8.4. Certain Corporate Transactions
a) In the event of a corporate transaction (as, for example, a merger,
consolidation, acquisition of property or stock, separation,
reorganization, or liquidation), each outstanding Award shall be
assumed by the surviving or successor entity; provided, however,
that in the event of a proposed corporate transaction, the Committee
may terminate all or a portion of any outstanding Award, effective
upon the closing of the corporate transaction, if it determines that
such termination is in the best interests of the Company. If the
Committee decides to terminate outstanding Options or Stock
Appreciation Rights, the Committee shall give each Participant
holding an Option or Stock Appreciation Right to be terminated not
less than seven days' notice prior to any such termination, and any
Option or Stock Appreciation Right that is to be so terminated may
be exercised (if and only to the extent that it is then exercisable)
up to, and including the date immediately preceding such
termination. Further, the Committee, in its discretion, may (i)
accelerate, in whole or in part, the date on which any or all
Options and Stock Appreciation Rights become exercisable, (ii)
remove the restrictions from outstanding Restricted Stock, (iii)
cause the delivery of any Performance Stock, even if the associated
Performance Goals have not been met, (iv) cause the delivery of any
Contract Stock, even if the Contract Date has not been reached;
and/or (v) cause the payment of any Dividend Equivalent Rights.
The Committee also may, in its discretion, change the terms of any
outstanding Award to reflect any such corporate transaction,
provided that, in the case of ISOs, such change would not constitute
a "modification" under section 424(h) of the Code, unless the
Participant consents to the change.
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b) With respect to an outstanding Award held by a Participant who,
following the corporate transaction, will be employed by or
otherwise providing services to an entity which is a surviving or
acquiring entity in such transaction or an affiliate of such an
entity, the Committee may, in lieu of the action described in
subsection (a) above, arrange to have such surviving or acquiring
entity or affiliate grant to the Participant a replacement award
which, in the judgment of the Committee, is substantially equivalent
to the Award.
8.5. Exercise Upon Change in Control
a) Notwithstanding any other provision of this Plan, all outstanding
Options and all Stock Appreciation Rights shall become fully
vested and exercisable, all Performance Stock and all Dividend
Equivalent Rights shall become fully vested, all Contract Stock shall
become immediately payable, and all restrictions shall be removed
from any outstanding Restricted Stock, upon a Change in Control.
b) "Change in Control" shall mean:
i) An acquisition (other than directly from the Company) of any
voting securities of the Company ("Voting Securities") by any
"Person" (as such term is used for purposes of section 13(d)
or 14(d) of the Exchange Act) immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 50 percent or
more of the combined voting power of all the then outstanding
Voting Securities, other than the Company, any trustee or
other fiduciary holding securities under any employee
benefit plan of the Company or an affiliate thereof, or any
corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their
ownership of stock of the Company; provided, however, that any
acquisition from the Company or any acquisition pursuant to a
transaction which complies with paragraph (iii)(A) and (B)
below shall not be a Change in Control under this paragraph
(i);
ii) The individuals who, as of March 1, 2003, are members of the
Board (the "Incumbent Board") cease for any reason to
constitute at least two-thirds of the Board; provided,
however, that if the election, or nomination for election by
the stockholders, of any new director was approved by a vote
of at least two-thirds of the members of the Board who
constitute Incumbent Board members, such new directors
shall for all purposes be considered as members of the
Incumbent Board as of March 1, 2003, provided further,
however, that no individual shall be considered a member of
the Incumbent Board if such individual initially assumed
office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board of Directors (a "Proxy Contest") including by reason
of any agreement intended to avoid or settle any Election
Contest or Proxy Contest;
iii) consummation by the Company of a reorganization, merger, or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of assets or stock of another entity (a "Business
Combination"), unless immediately following such Business
Combination: (A) more than 50 percent of the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors of (I) the
corporation resulting from such Business Combination (the
"Surviving Corporation"), or (II) if applicable, a corporation
which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly
or through one or more subsidiaries (the "Parent
Corporation"), is represented, directly or indirectly, by
Company Voting Securities outstanding immediately prior to
such Business Combination (or, if applicable, is represented
by shares into which such Company Voting Securities were
converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially the
same proportions as their ownership, immediately prior to such
Business Combination, of the Company Voting Securities; and
(B) at least a majority of the members of the board of
directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) were members of the
Incumbent Board at the time of the execution of the initial
agreement, or the action of the Board, providing for such
Business Combination;
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iv) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company; or
v) acceptance by the stockholders of the Company of shares in a
share exchange if the stockholders of the Company immediately
before such share exchange do not own, directly or indirectly,
immediately following such share exchange more than 50 percent
of the combined voting power of the outstanding Voting
Securities of the corporation resulting from such share
exchange in substantially the same proportion as their
ownership of the Voting Securities outstanding immediately
before such share exchange.
9. Amendment or Termination of the Plan
a) In General. The Board, pursuant to a written resolution, may from
time to time suspend or terminate the Plan or amend it and, except as
provided in Section 3(b)(iv), 7.1(a), and 8.4(a), the Committee may
amend any outstanding Awards in any respect whatsoever; except that,
without the approval of the stockholders (given in the manner set
forth in subsection (b) below):
i) no amendment may be made that would:
(A) change the class of employees eligible to participate in
the Plan with respect to ISOs;
(B) except as permitted under Section 8.3, increase the
maximum number of Shares with respect to which ISOs may
be granted under the Plan;
(C) extend the duration of the Plan under Section 4(b) with
respect to any ISOs granted hereunder; or
(D) reprice or regrant through cancellation, or modify
(except in connection with a change in the Company's
capitalization) any award, if the effect would be to
reduce the exercise price for the shares underlying such
award.
ii) no amendment may be made that would constitute a modification
of the material terms of the "performance goal(s)" within the
meaning of Treas. Reg. ss.1.162-27(e)(4)(vi) or any successor
thereto (to the extent compliance with section 162(m) of the
Code is desired).
Notwithstanding the foregoing, no such suspension, termination or amendment
shall materially impair the rights of any Participant holding an outstanding
Award without the consent of such Participant.
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b) Manner of Stockholder Approval. The approval of stockholders must be
effected by a majority of the votes cast (including abstentions, to the
extent abstentions are counted as voting under applicable state law)
in a separate vote at a duly held stockholders' meeting at which a
quorum representing a majority of all outstanding voting stock is,
either in person or by proxy, present and voting on the Plan.
10. Miscellaneous
10.1. Documentation of Awards. Awards shall be evidenced by such written Award
Agreements, if any, as may be prescribed by the Committee from time to
time. Such instruments may be in the form of agreements to be executed by
both the Participant and the Company, or certificates, letters, or similar
instruments, which need not be executed by the Participant but acceptance
of which will evidence agreement to the terms thereof.
10.2. Rights as a Stockholder. Except as specifically provided by the Plan or an
Award Agreement, the receipt of an Award shall not give a Participant
rights as a stockholder; instead, the Participant shall obtain such
rights, subject to any limitations imposed by the Plan or the Award
Agreement, upon the actual receipt of Shares.
10.3. Conditions on Delivery of Shares. The Company shall not deliver any
Shares pursuant to the Plan or
remove restrictions from Shares previously delivered under the Plan
(i) until all conditions of the Award have been satisfied or removed,
(ii) until all applicable Federal and state laws and regulations have
been complied with, and (iii) if the outstanding Shares are at the
time of such delivery listed on any stock exchange, until the Shares
to be delivered have been listed or authorized to be listed on such
exchange. If an Award is exercised by the Participant's legal
representative, the Company will be under no obligation to deliver
Shares pursuant to such exercise until the Company is satisfied as to
the authority of such representative.
10.4. Registration and Listing of Shares. If the Company shall deem it
necessary to register under the Securities Act or any other applicable
statute any Shares purchased under this Plan, or to qualify any such
Shares for an exemption from any such statutes, the Company shall take
such action at its own expense. If Shares are listed on any national
securities exchange at the time any Shares are purchased hereunder, the
Company shall make prompt application for the listing on such national
securities exchange of such Shares, at its own expense. Purchases and
grants of Shares hereunder shall be postponed as necessary pending any
such action.
10.5. Compliance with Rule 16b-3. All elections and transactions under this
Plan by persons subject to Rule 16b-3, promulgated under section 16(b) of
the Exchange Act, or any successor to such Rule, are intended to comply
with at least one of the exemptive conditions under such Rule. The
Committee shall establish such administrative guidelines to facilitate
compliance with at least one such exemptive condition under Rule 16b-3 as
the Committee may deem necessary or appropriate.
10.6. Tax Withholding
a) Obligation to Withhold. The Company shall withhold from any cash
payment made pursuant to an Award an amount sufficient to satisfy
all Federal, state, and local withholding tax requirements (the
"Withholding Requirements"). In the case of an Award pursuant to
which Shares may be delivered, the Committee may require that the
Participant or other appropriate person remit to the Company an
amount sufficient to satisfy the Withholding Requirements, or make
other arrangements satisfactory to the Committee with regard to the
Withholding Requirements, prior to the delivery of any Shares.
A14
b) Election to Withhold Shares. The Committee, in its discretion, may
permit or require the Participant to satisfy the federal, state,
and/or local withholding tax, in whole or in part, by electing to
have the Company withhold Shares (or by returning previously
acquired Shares to the Company); provided, however, that the Company
may limit the number of Shares withheld to satisfy the Withholding
Requirements to the extent necessary to avoid adverse accounting
consequences. Shares shall be valued, for purposes of this
subsection (b), at their Fair Market Value (determined as of the
date an amount is includible in income by the Participant (the
"Determination Date"), rather than the date of grant). If Shares
acquired by the exercise of an ISO are used to satisfy the
Withholding Requirements, such Shares must have been held by the
Participant for a period of not less than the holding period
described in section 422(a)(1) of the Code as of the Determination
Date. The Committee shall adopt such withholding rules as it deems
necessary to carry out the provisions of this Section.
10.7. Transferability of Awards. No ISO may be transferred other than by will
or by the laws of descent and distribution. No other Award may be
transferred, except to the extent permitted in the applicable Award
Agreement. During a Participant's lifetime, an Award requiring exercise
may be exercised only by the Participant (or, in the event of the
Participant's incapacity, by the person or persons legally appointed to
act on the Participant's
behalf).
10.8. Registration. If the Participant is married at the time Shares are
delivered and if the Participant so requests at such time, the
certificate or certificates for such Shares shall be registered in the
name of the Participant and the Participant's spouse, jointly, with right
of survivorship.
10.9. Acquisitions. Notwithstanding any other provision of this Plan, Awards
may be granted hereunder in substitution for awards held by directors,
key employees, and associates of other corporations who are about to, or
have, become Key Employees or Associates as a result of a merger,
consolidation, acquisition of assets, or similar transaction by the
Company or a Related Corporation or (in the case of Awards other than
ISOs) an Affiliate. The terms of the substitute Awards so granted may
vary from the terms set forth in this Plan to such extent as the
Committee may deem appropriate to conform, in whole or in part, to the
provisions of the awards in substitution for which they are granted.
10.10. Employment Rights. Neither the adoption of the Plan nor the grant of
Awards will confer upon any person any right to continued employment by
the Company or any of its Related Corporations or Affiliates or affect in
any way the right of any of the foregoing to terminate an employment
relationship at any time.
10.11. Indemnification of Board and Committee.
Without limiting any other rights of indemnification that they may have
from the Company or any of its Related Corporations or Affiliates, the
members of the Board and the members of the Committee shall be
indemnified by the Company against all costs and expenses reasonably
incurred by them in connection with any claim, action, suit or proceeding
to which they or any of them may be a party by reason of any action taken
or failure to act under, or in connection with, the Plan or any Award
granted thereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by legal counsel selected
by the Company) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except a judgment based upon a finding of
willful misconduct or recklessness on their part. Upon the making or
institution of any such claim, action, suit or proceeding, the Board or
Committee member shall notify the Company in writing, giving the Company
an opportunity, at its own expense, to handle and defend the same before
such Board or Committee member undertakes to handle it on his or her own
behalf. The provisions of this Section shall not give members of the
Board or the Committee greater rights than they would have under the
Company's by-laws or Delaware law.
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10.12. Application of Funds. Any cash proceeds received by the Company from the
sale of Shares pursuant to Awards granted under the Plan shall be added
to the general funds of the Company. Any Shares received in payment for
additional Shares upon exercise of an Option shall become treasury stock.
10.13. Governing Law. The Plan shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, except as provided
in Section 10.12, the laws of the State of Delaware (without reference to
the principles of conflict of laws) shall govern the operation of, and
the rights of Participants under, the Plan and Awards granted hereunder.
A16
PROXY CARD
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
311 ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
PROXY - ANNUAL MEETING OF STOCKHOLDERS - WEDNESDAY, MAY 21, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Stuart M. Essig and John B. Henneman, III as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated on the reverse side hereof, all the
shares of Common Stock, of Integra LifeSciences Holdings Corporation (the
"Company") held of record by the undersigned on April 9, 2003 at the Annual
Meeting of Stockholders to be held on Wednesday, May 21, 2003 or at any
adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
IN FAVOR OF PROPOSALS 2 AND 3; FOR ALL NOMINEES LISTED FOR ELECTION OF
DIRECTORS UNDER PROPOSAL 1; AND IN ACCORDANCE WITH THE PROXIES' JUDGMENT UPON
OTHER MATTERS PROPERLY COMING BEFORE THE MEETING AND ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
Please sign and date your Proxy on the reverse side and return it promptly.
ANNUAL MEETING OF STOCKHOLDERS OF
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
May 21, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon as possible.
Please detach and mail in the envelope provided.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE, PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
1. ELECTION OF FOR all nominees WITHHOLD FOR ALL EXCEPT
DIRECTORS AUTHORITY (See instructions
NOMINEES: FOR ALL NOMINEES below)
---------
David C. Auth |_|
Keith Bradley |_|
Richard E. Caruso |_| |_| |_| |_|
Stuart M. Essig |_|
Neal Moszkowski |_|
James M. Sullivan |_|
INSTRUCTION: To WITHHOLD AUTHORITY to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here |X|
FOR AGAINST ABSTAIN
2. Proposal to approve and adopt the Company's
2003 Equity Incentive Plan |_| |_| |_|
3. Proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the
Company's auditors for the current fiscal year. |_| |_| |_|
In their discretion, the Proxies are authorized, to the extent permitted by the
rules of the Securities and Exchange Commission, to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
_______________________________________________________________________________
_______________________________________________________________________________
To change the address on your account, please check the box at right and |__|
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
SIGNATURE OF SHAREHOLDER____________________________________ DATE_______________
SIGNATURE OF SHAREHOLDER____________________________________ DATE_______________
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such.
If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.