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
[X] Definitive Proxy Statement Rule 14a6(e)(2))
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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2
[INTEGRA LIFESCIENCES LOGO]
311 ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 21, 2002
To the Stockholders of Integra LifeSciences Holdings Corporation:
NOTICE IS HEREBY GIVEN that the 2002 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 Tuesday, May 21, 2002
PLACE Holiday Inn Monroe
390 Forsgate Drive
Monroe, New Jersey 08831
ITEMS OF BUSINESS 1. To elect five directors of the Company to hold
office as specified in the accompanying Proxy
Statement.
2. To ratify the appointment of
PricewaterhouseCoopers LLP as the Company's
auditors for the current fiscal year.
3. 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 16, 2002 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 2001 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,
/s/ John B. Henneman, III
Plainsboro, New Jersey John B. Henneman, III
April 24, 2002 Secretary
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
311 ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 2002
PURPOSE OF MEETING
This Proxy Statement is being furnished to holders of common stock ("Common
Stock") of Integra LifeSciences Holdings Corporation (the "Company") in
connection with the solicitation of proxies by the Board of Directors of the
Company from such stockholders for use at the 2002 annual meeting of
stockholders of the Company (the "Meeting") to be held on Tuesday, May 21, 2002
at 9:00 a.m. local time at the Holiday Inn Monroe, Monroe Township, New Jersey
and at any adjournment or postponement thereof. This Proxy Statement, the
enclosed Notice of Annual Meeting of Stockholders, and the form of proxy are
first being mailed to stockholders of the Company on or about April 24, 2002.
At the Meeting, the stockholders of the Company will be asked to consider
and vote upon:
(i) the election of five 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) the ratification of the appointment of PricewaterhouseCoopers LLP as
the Company's auditors for the current fiscal year (see "Proposal 2.
Ratification of Auditors").
The Board knows of no matters that will be presented for consideration at
the Meeting other than those matters set forth in the Notice of Annual Meeting
of Stockholders. If any other matters are properly presented at the Meeting or
any postponement or adjournment thereof, the persons named in the enclosed proxy
and acting thereunder will have authority to vote on such matters, to the extent
permitted by the rules of the Securities and Exchange Commission (the
"Commission"), in accordance with the judgment of the persons voting such
proxies.
RECORD DATE
Only stockholders of record as of the close of business on April 16, 2002
(the "Record Date") will be entitled to notice of, and to vote at, the Meeting
or at any adjournment or postponement thereof. As of the Record Date, there were
outstanding 26,897,253 shares of Common Stock, which constituted the only
outstanding securities of the Company entitled to vote.
VOTING AND REVOCABILITY OF PROXIES
On each matter voted upon at the Meeting and any adjournment or
postponement thereof, holders of Common Stock will vote together as a single
class.
Each share of 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.
2
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 ratify
the appointment of PricewaterhouseCoopers LLP as the Company's auditors for the
current fiscal year.
The enclosed proxy is being solicited by the Board of Directors 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 a quorum for the Meeting is not obtained or, as to any one or more
proposals, if fewer shares are voted in favor of the Proposal than the number of
shares required for such approval, the Meeting may be adjourned 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 such proxies would have been voted at the original meeting (except for
any proxies that have theretofore effectively been revoked or withdrawn),
notwithstanding that they may have been effectively voted on the same or any
other matter at a previous meeting. 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.
Proxies may be revoked by those persons executing the proxies 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.
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be borne by the Company. In addition to
solicitation by use of the mail, proxies may be solicited by telephone,
telegraph or personally by the directors, officers and employees of the Company,
who will receive no extra compensation for their services. The Company 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.
3
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors has nominated five persons for election as directors
whose terms will expire at the 2003 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: 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. George W.
McKinney, III, Ph.D., a current director of the Company, will not stand for
re-election and will retire from the Board of Directors at the Meeting.
If any nominee should be unable to serve as director, an event not now
anticipated, it is intended that the shares of Common Stock represented by
proxies will 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.
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 57 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 58 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 broad health care 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 Vital Signs,
Incorporated and St. Jude Medical Corporation. Mr. Essig is 40 years old.
4
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 36 years old.
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 58 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 seven meetings during 2001. During 2001, all
incumbent directors 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 they 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 which 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. A copy of the Charter of the Audit Committee is
attached as APPENDIX A. 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 2001,
the Audit Committee was comprised of Dr. Bradley, Mr. Sullivan and Mr.
Moszkowski and met six times.
The Compensation Committee makes decisions concerning salaries and
incentive compensation for employees and consultants of the Company. During
2001, the Compensation Committee was comprised of Drs. Bradley and Caruso and
Mr. Moszkowski and met twice.
5
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 2001, the Equity Award Committee was comprised of Dr.
Bradley and Mr. Moszkowski and met three times.
COMPENSATION OF DIRECTORS
In 2001, the Company granted Dr. Caruso options to purchase 15,000 shares
of Common Stock under the 2000 Equity Incentive Plan for his service as Chairman
of the Board of Directors. Additionally, in 2001, the Company granted each of
its other non-employee directors options to purchase 10,000 shares of Common
Stock under the 2000 Equity Incentive Plan as compensation for their service on
the Board of Directors. The Company did not pay any cash compensation to its
directors for their service as directors. The Company also pays reasonable
travel and out-of-pocket expenses incurred by non-employee directors in
connection with attendance at meetings to transact the business of the Company
or attendance at meetings of the Board of Directors or any committee thereof.
6
PROPOSAL 2. RATIFICATION OF AUDITORS
The firm of PricewaterhouseCoopers LLP served as the Company's independent
accountants for 2001 and has been selected by the Board of Directors to serve in
the same capacity for 2002. 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 the Company's By-laws. Traditionally, the
Company has submitted this matter to the stockholders and believes that it is
good practice to continue to do so.
Ratification of PricewaterhouseCoopers LLP as the Company's 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, the
Company will appoint other independent accountants as soon as practicable and
before the close of the 2002 year.
During fiscal year 2001, PricewaterhouseCoopers LLP not only acted as the
independent auditors for the Company, but also rendered on their behalf other
services, including tax and acquisition related due diligence services and
services provided in connection with the follow-on public offering of the
Company's common stock in August 2001. The following sets forth the aggregate
fees billed or expected to be billed by PricewaterhouseCoopers LLP to the
Company:
AUDIT FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for professional
services rendered for the audit of the Company's annual financial statements for
the fiscal year ended December 31, 2001 and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for that
fiscal year were $261,500.
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, 2001.
ALL OTHER FEES
The aggregate fees billed by PricewaterhouseCoopers LLP for services
rendered to the Company, other than the services described above under "Audit
Fees" and "Financial Information Systems Design and Implementation Fees", for
the fiscal year ended December 31, 2001 were $316,000. These fees included tax
and acquisition related due diligence services and services provided in
connection with the follow-on public offering of the Company's common stock in
August 2001. The Audit Committee of the Board of Directors considered the
services listed above to be compatible with maintaining PricewaterhouseCoopers
LLP's independence.
A representative of PricewaterhouseCoopers LLP is expected to be present at
the Annual Meeting and will be 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 2002.
7
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, 2001 whose total annual
salary and bonus during 2001 exceeded $100,000 (collectively, the "Named
Officers"):
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation Awards
---------------------------------- -----------------------------
Other Annual Restricted Securities Other
Compensation Stock Awards Underlying Compensation
Name and Principal Position Year Salary (1) (2) Options (3)
----------------------------------------- ----- --------- ------------ ------------ ----------- ------------
Stuart M. Essig 2001 $325,000 -- -- 31,565 $ 1,575
President and Chief Executive 2000 $317,500 -- $13,515,000 520,000 $ 49,646
Officer 1999 $308,250 -- -- 70,560 $ 1,000
George W. McKinney, III, Ph.D 2001 $270,000 -- -- -- $204,075
Executive Vice President and Chief 2000 $260,000 -- -- 20,000 $ 1,040
Operating Officer (4) 1999 $240,000 -- -- 38,110 $ 960
John B. Henneman, III 2001 $240,000 -- -- 152,000 $ 1,575
Senior Vice President, Chief 2000 $220,000 -- -- 25,000 $ 1,050
Administrative Officer and Secretary 1999 $161,600 -- -- 44,560 $ 1,000
Michael D. Pierschbacher, Ph.D 2001 $240,000 -- -- 19,500 $ 1,575
Senior Vice President, Research and 2000 $220,000 -- -- 95,000 $ 1,045
Development and Director of the 1999 $198,000 -- -- 24,560 $ 975
Corporate Research Center
Robert D. Paltridge 2001 $165,000 $34,302 -- 10,000 $ 1,575
Vice President, Sales 2000 $150,000 $10,000 -- 13,690 $ 900
1999 $139,583 -- -- 25,130 $ 853
(1) The amounts reported in this column for Mr. Paltridge in 2001 and 2000
represent contingent compensation that is based upon the achievement of
sales targets for certain products in the United States
(2) The terms of Mr. Essig's Restricted Units are described herein under the
heading "Employment Agreements." As of December 31, 2001, Mr. Essig held
Restricted Units which 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, 2001 of $26.34 per share, Mr. Essig's Restricted
Units had an aggregate value of $59,265,000 as of December 31, 2001.
(3) Other than certain moving expenses reimbursed to Mr. Essig and a payment
made to Dr. McKinney in connection with his retirement from the Company on
December 31, 2001, 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. The amount reported in this
column for Dr. McKinney during 2001 includes a payment of $202,500 made
pursuant to his amended employment agreement in connection with his
retirement--see "Employment Agreements".
(4) Dr. McKinney retired on December 31, 2001 and resigned from his position as
Executive Vice President and Chief Operating Officer of the Company. Dr.
McKinney will remain employed by the Company as consultant to the President
and Chief Executive Officer through June 30, 2002.
8
The following tables set forth certain information concerning stock options
granted to Named Officers during 2001 and the unexercised options held by them
at December 31, 2001.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term
--------------------------------------------------------------------- --------------------------
Number of
Securities % of Total Options
Underlying Granted to Employees Exercise
Options in Price Per
Name Granted (1) Fiscal Year (2) Share Expiration Date 5% 10%
------------------------------ --------------- --------------------- ---------- ---------------- ------------ -----------
Stuart M. Essig 31,565 4.5% $26.34 12/31/07 $ 282,763 $ 641,493
George W. McKinney, III, Ph.D -- -- -- -- -- --
John B. Henneman, III 10,000 1.4% $27.78 8/14/07 $ 94,479 $ 214,340
2,500 0.4% $25.99 12/14/07 $ 22,098 $ 50,132
125,000 17.8% $26.70 12/17/07 $1,135,069 $2,575,085
14,500 2.1% $26.34 12/31/07 $ 129,893 $ 294,682
Michael D. Pierschbacher, Ph.D 5,000 0.7% $27.78 8/14/07 $ 47,239 $ 107,170
14,500 2.1% $26.34 12/31/07 $ 129,893 $ 294,682
Robert D. Paltridge 10,000 1.4% $26.34 12/31/07 $ 89,581 $ 203,229
(1) Such options were granted at a price at or above fair market value, 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
701,798 shares of Common Stock during 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Securities Underlying Value of Unexercised In-the-Money
Shares Unexercised Options At Options At
Acquired Value Fiscal Year End Fiscal Year End (2)
On Realized ------------------------------- ---------------------------------
Name Exercise (1) Exercisable Nonexercisable Exercisable Nonexercisable
------------------------------- -------- ---------- ------------ -------------- ------------- --------------
Stuart M. Essig 25,150 $ 543,869 701,067 470,908 $13,721,642 $6,974,124
George W. McKinney, III, Ph.D 190,000 $1,847,400 69,457 45,831 $ 1,417,763 $ 853,228
John B. Henneman, III -- -- 130,531 212,999 $ 2,812,666 $1,181,858
Michael D. Pierschbacher, Ph.D 32,779 $ 155,426 60,339 95,416 $ 950,776 $1,110,713
Robert D. Paltridge 875 $ 7,000 32,570 31,250 $ 651,320 $ 390,766
(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, 2001 was $26.34 per
share. Value is calculated on the basis of the fair market value of the
underlying securities on December 31, 2001 minus the exercise price.
9
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 of $400,000 for 2002. For each subsequent year that he is
employed, Mr. Essig's annual base salary will be $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. At the request of Mr. Essig, the Company will disburse a loan to
Mr. Essig in the amount of up to $500,000 subject to certain conditions. 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
10
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.
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"). 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 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.
George W. McKinney, III, Ph.D., entered into an employment agreement with
the Company in December 1998 to serve as the Company's Executive Vice President
and Chief Operating Officer. Dr. McKinney was entitled under that agreement to
participate and receive benefits under any employee benefit plan or stock-based
plan of the Company and was eligible for any medical, disability and other plans
and benefits covering executives of the Company. The employment agreement
provided for an initial term expiring on December 31, 2001.
On February 22, 2001 the Company and Dr. McKinney entered into a new
employment agreement (as later amended on December 20, 2001) that superseded his
prior employment agreement. The new employment agreement, as amended, provided
that Dr. McKinney would serve as Executive Vice President and Chief Operating
Officer until December 31, 2001 at a salary at the rate of $270,000 per year, at
which point he retired from such position. Thereafter, until June 30, 2002, Dr.
McKinney will remain employed by the Company as consultant to the President and
CEO and shall receive $67,500 as compensation for such six-month period. On
December 31, 2001, Dr. McKinney received a lump sum payment of $202,500, net of
applicable taxes and other withheld items. Until June 30, 2002, Dr. McKinney is
generally eligible for medical, disability and other plans and benefits covering
executives of the Company under the new employment agreement, as amended.
John B. Henneman, III entered into an employment agreement with the Company
in September 1998 to serve as the Company's Senior Vice President, Chief
Administrative Officer and General Counsel. Effective with the hiring of a new
General Counsel for the Company in September 2000, Mr. Henneman no longer serves
as the Company's General Counsel. The employment agreement provides for an
annual salary of $240,000. 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 had an initial term
through December 31, 2000 and was automatically extended through December 31,
2002. The employment agreement will automatically extend on December 31, 2002
and on each one-year
11
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. In the event the employment agreement is earlier terminated by Mr.
Henneman for good reason or by the Company for reasons other than cause,
retirement, disability or death, in each case within six months of a change in
control of the Company, Mr. Henneman shall be entitled to receive a severance
amount equal to 2.99 times his then-current annual base salary. In the event the
employment agreement is earlier terminated as aforesaid without a change in
control, Mr. Henneman shall be entitled to receive a severance amount equal to
the unpaid portion of Mr. Henneman's base salary for the remainder of the
then-current term, but in no event for a period of less than one year.
Michael D. Pierschbacher, Ph.D., entered into an employment agreement with
the Company in December 1998 to serve as the Company's Senior Vice President,
Research and Development and General Manager, Corporate Research Center. The
employment agreement provides for an annual salary of $240,000. 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, 2000
and was automatically extended through December 31, 2002. The employment
agreement will automatically extend on December 31, 2002 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. In the event the employment agreement is earlier terminated
by Dr. Pierschbacher for good reason or by the Company for reasons other than
cause, retirement, disability or death, in each case within six months of a
change in control of the Company, Dr. Pierschbacher shall be entitled to receive
a severance amount equal to 2.99 times his then-current annual base salary. In
the event the employment agreement is earlier terminated as aforesaid without a
change in control, Dr. Pierschbacher shall be entitled to receive a severance
amount equal to the greater of his then-current annual base salary or the unpaid
portion of Dr. Pierschbacher's base salary for the remainder of the then-current
term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
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 $216,400 in rent for this facility during 2001.
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 2001.
12
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, 2001.
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.
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,
especially by permitting the Company to preserve cash for other operational
purposes.
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. In establishing
cash bonuses for the fiscal year ended December 31, 2001, the Compensation
Committee determined that it was not in the Company's best interests to have a
cash bonus program for any executive except for the Vice President, Sales.
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.
DEFERRED COMPENSATION PLAN. The Company permits certain select management
and highly compensated employees to elect to defer up to 50 percent of their
base compensation. The Company believes that a non-qualified deferred
compensation plan enhances the ability of the Company to attract and retain
certain executive officers and motivate them to exercise their best efforts on
behalf of
13
the Company and its stockholders. For fiscal year 2001, two employees elected to
defer a portion of their base compensation.
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.
CHIEF EXECUTIVE OFFICER COMPENSATION. Mr. Essig served as the Company's
President and Chief Executive Officer during 2001 pursuant to an employment
agreement. Under Mr. Essig's employment agreement, the Company paid Mr. Essig a
base salary of $325,000 in 2001. Mr. Essig waived his right to receive a cash
performance bonus in 2001. In 2001, the Company granted to Mr. Essig options to
purchase 31,565 shares of the Company' s Common Stock. For a numerical
description of Mr. Essig's compensation in 2001, see "Executive Compensation."
The other terms and conditions of Mr. Essig's employment agreement were
substantially similar to the terms and conditions of Mr. Essig's Amended and
Restated Employment Agreement, which is 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
14
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 was last amended and restated by the Board on March
21, 2002, a copy of which is attached to this Proxy Statement as APPENDIX A.
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". Management has represented to
the Committee that the Company's consolidated financial statements were prepared
in accordance with generally accepted accounting principles, and has discussed
with PricewaterhouseCoopers LLP their independence in relation to the Company.
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".
15
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, 2001 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
16
STOCK PERFORMANCE GRAPH
The following line graph and table compare, for the period from December
31, 1996 through December 31, 2001, 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, 1996 and
that all dividends were reinvested. The closing market price of the Company's
Common Stock on December 31, 2001 was $26.34 per share.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
VALUE OF INVESTMENT OF $100 ON DECEMBER 31, 1996
[GRAPHIC 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
12/96 12/97 12/98 12/99 12/00 12/01
------ ------- ------- ------- ------ --------
Integra LifeSciences Holdings Corporation $100 $ 95 $ 36 $ 64 $147 $285
Nasdaq Medical Devices, Instruments and Supplies,
Manufacturers and Distributors Index $100 $114 $127 $154 $159 $174
Nasdaq Stock Market - U.S. Index $100 $122 $173 $321 $193 $153
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.
17
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock and Series C Convertible Preferred Stock ("Series C
Preferred Stock") as of March 15, 2002 by: (a) each person or entity known to
the Company to own beneficially five percent or more of the outstanding shares
of Common Stock or Series C Preferred Stock, based upon Company records or
Commission records; (b) each of the Company's directors; (c) each of the Named
Officers; and (d) all executive officers and directors of the Company as a
group. Each share of Series C Preferred Stock was subsequently converted into
11.111 shares of Common Stock by the holders on April 16, 2002. Except as
otherwise indicated, each person has sole voting power and sole investment power
with respect to all shares beneficially owned by such person.
COMMON STOCK SERIES C PREFERRED
NAME OF BENEFICIAL OWNER SHARES (1) PERCENT SHARES PERCENT
------------------------------------- -------------- ----------- --------- ---------
Richard E. Caruso, Ph.D 7,152,668 (2) 27.2%
Trust Partnership 7,091,205 (3) 27.0%
Frances C. Holtz 7,091,205 (4) 27.0%
Quantum Industrial Partners LDC 2,630,625 (5) 9.8% 48,699 90.2%
SFM Domestic Investments LLC 694,675 (6) 2.6% 5,301 9.8%
Stuart M. Essig 803,535 (7) 3.0%
John B. Henneman, III 163,987 (8) *
Michael D. Pierschbacher, Ph.D 77,542 (9) *
Judith O'Grady 75,431(10) *
Robert D. Paltridge 38,711(11) *
George W. McKinney, III, Ph.D. 119,112(12) *
James M. Sullivan 39,041(13) *
Neal Moszkowski 30,000(14) *
Keith Bradley, Ph.D 10,500(15) *
All directors and executive officers
as a group (13 persons) 8,648,617(16) 31.3%
* 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 15, 2002 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 the 7,091,205 shares held by Trust Partnership, a Pennsylvania
general partnership of which Dr. Caruso is a partner and the President
(also see Note 3 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, a corporation whose
stockholders are trusts whose beneficiaries include Dr. Caruso's children.
Also includes 38,125 shares that Dr. Caruso has the right to acquire within
60 days of March 15, 2002 upon the exercise of options held by him. Dr.
Caruso's address is 919 Conestoga Road, Building 2, Suite 106, Rosemont,
Pennsylvania 19010.
(3) The partners of Trust Partnership are Pagliacci Trust, Rigoletto Trust,
Trust for Jonathan Henry Caruso, Trust for Peter James Caruso (the
beneficiaries of all such trusts (the "Trusts") being Dr. Caruso's
children), 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
18
Partnership. The Trust Partnership's address is c/o Richard E. Caruso,
Ph.D., 919 Conestoga Road, Building 2, Suite 106, Rosemont, Pennsylvania
19010.
(4) Frances C. Holtz is a trustee of the Trusts, which collectively have a
controlling interest in Trust Partnership. As such, Ms. Holtz may be deemed
to beneficially own the shares held by Trust Partnership; however, Ms.
Holtz disclaims beneficial ownership of all such shares. Ms. Holtz's
address is 8111 Marshall Avenue, Margate, New Jersey 08402.
(5) Includes 541,100 shares of Common Stock issuable upon conversion of 48,699
shares of Series C Preferred Stock held by Quantum Industrial Partners. The
Series C Preferred Stock was subsequently converted into Common Stock on
April 16, 2002. The principal address of Quantum Industrial Partners is at
Kaya Flamboyan 9, Willemsted, Curacao, Netherlands Antilles. QIH Management
Investor, L.P. is vested (pursuant to constituent documents of Quantum
Industrial Partners) with investment discretion with respect to the
portfolio assets held for the account of Quantum Industrial Partners.
Pursuant to an agreement between George Soros and Soros Fund Management
LLC, Mr. Soros has agreed to use his best efforts to cause QIH Management,
Inc., as the sole general partner of QIH Management Investor, L.P., to act
at the discretion of Soros Fund Management. Mr. Soros is the Chairman of
Soros Fund Management. Accordingly, each of QIH Management, Inc., QIH
Management, Inc., Soros Fund Management and Mr. Soros may be deemed the
beneficial owner of the Quantum Industrial Partners Shares. Each has its
principal business office at 888 Seventh Avenue, 33rd Floor, New York, New
York 10106.
(6) Includes 58,900 shares of Common Stock issuable upon conversion of 5,301
shares of Series C Preferred Stock held by SFM Domestic Investments LLC.
The Series C Preferred Stock was subsequently converted into Common Stock
on April 16, 2002. The principal business office of SFM Domestic
Investments LLC is at 888 Seventh Avenue, 33rd Floor, New York, New York
10106. George Soros is a managing member of SFM Domestic Investments LLC
and may be deemed the beneficial owner of the SFM Domestic Investments LLC
Shares.
(7) Includes 758,090 shares that Mr. Essig has the right to acquire within 60
days of March 15, 2002 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 (see "Employment
Agreements"). The Restricted Units held by Mr. Essig do not give him the
right to acquire any shares within 60 days of March 15, 2002.
(8) Includes 148,569 shares that Mr. Henneman has the right to acquire within
60 days of March 15, 2002 upon the exercise of options held by him.
(9) Includes 1,376 shares held by a revocable trust of which Dr. Pierschbacher
is co-trustee. Also includes 72,449 shares that Dr. Pierschbacher has the
right to acquire within 60 days of March 15, 2002 upon the exercise of
options held by him.
(10) Includes 64,266 shares that Ms. O'Grady has the right to acquire within 60
days of March 15, 2002 upon the exercise of options held by her.
(11) Includes 36,221 shares that Mr. Paltridge has the right to acquire within
60 days of March 15, 2002 upon the exercise of options held by him.
(12) Includes 45,834 shares that Dr. McKinney has the right to acquire within 60
days of March 15, 2002 upon the exercise of options held by him.
(13) Includes 35,500 shares that Mr. Sullivan has the right to acquire within 60
days of March 15, 2002 upon the exercise of options held by him.
(14) Consists of 30,000 shares that Mr. Moszkowski has the right to acquire
within 60 days of March 15, 2002 upon the exercise of options held by him.
(15) Consists of 10,500 shares that Dr. Bradley has the right to acquire within
60 days of March 15, 2002 upon the exercise of options held by him.
(16) See Notes 2 and 7 through 15 above. Also includes 18,842 shares held by
three executive officers of the Company and/or its subsidiaries who are not
listed in the table, as well as 107,653 shares that these three executive
officers have the right to acquire within 60 days of March 15, 2002 upon
the exercise of options held by them.
19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (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 2001,
except that a statement of changes in beneficial ownership of securities on Form
4 was filed late by Deborah Leonetti, Vice President of Marketing, for the
purchase and sale of Common Stock in May 2001.
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 2003 Annual Meeting of Stockholders (the "Annual Meeting") is
December 24, 2002. 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, 2003. 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 9, 2003, 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.
OTHER MATTERS
A copy of the Company's 2001 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, 2001. 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 John B. Henneman, III
April 24, 2002 Secretary
20
APPENDIX A
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
FOREWORD
The purpose of the Audit Committee (the "Committee") is to provide
assistance to the Board of Directors (the "Board") of Integra LifeSciences
Holdings Corporation (the "Company") in fulfilling the Board's oversight
responsibilities regarding the Company's accounting and system of internal
controls, the quality and integrity of the Company's financial reports and the
independence and performance of the Company's outside auditor. In so doing, the
Committee should endeavor to maintain free and open means of communication
between the members of the Committee, other members of the Board, the outside
auditor and the financial management of the Company.
The Committee's responsibility is oversight. Management of the Company has
the responsibility for the Company's financial statements as well as the
Company's financial reporting process, principles and internal controls. The
outside auditor is responsible for performing an audit of the Company's annual
financial statements, expressing an opinion as to the conformity of such annual
financial statements, reviewing the Company's quarterly financial statements and
other procedures. It is recognized that the members of the Committee are not
engaged in the accounting or auditing profession and, consequently, are not
experts in matters involving auditing or accounting including in respect of
auditor independence. As such, it is not the duty of the Committee to plan or
conduct audits or to determine that the Company's financial statements fairly
present the Company's financial position and results of operation and are in
accordance with generally accepted accounting principles and applicable laws and
regulations. Each member of the Committee shall be entitled to rely on (i) the
integrity of those persons within the Company and of the professionals and
experts (such as the outside auditor) from which it receives information, (ii)
the accuracy of the financial and other information provided to the Committee by
such persons, professionals or experts absent actual knowledge to the contrary
and (iii) representations made by management or the outside auditor as to any
information technology services of the type described in Rule 2-01(c)(4)(ii) of
Regulation S-X and other non-audit services provided by the outside auditor to
the Company.
In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to all books,
records, facilities and personnel of the Company and, subject to any action of
the Board, the power to retain outside counsel, auditors or other experts for
this purpose. The Board and the Committee are in place to represent the
Company's stockholders. Accordingly, the outside auditors are ultimately
accountable to the Board and the Committee.
The Committee charter should be reviewed by the Company's counsel and
approved by the Board. The Board and the Committee shall review the adequacy of
this charter on at least an annual basis and modify the charter as necessary.
A1
I. COMPOSITION
A. Committee members will be recommended by the Chairman of the Board and will
be designated by the Board.
B. The Committee shall consist of not less than three members of the Board who
meet the requirements of the audit committee policy of the NASD.
Accordingly, all of the members of the Committee will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate within
a reasonable period of time after appointment to the Committee. In
addition, at least one member of the Committee will have accounting or
related financial management expertise.
C. The members of the Committee shall appoint a Chair of the Committee by
majority vote. The Chair (or in his or her absence, a member designated by
the Chair) shall preside at all meetings of the Committee.
D. The Committee shall have the authority to establish its own rules and
procedures consistent with the bylaws of the Company for notice and conduct
of its meetings, should the Committee, in its discretion, deem it desirable
to do so.
E. The Committee shall meet at least four times in each fiscal year, and more
frequently as the Committee in its discretion deems desirable.
F. The Committee may, in its discretion, include in its meetings members of
the Company's financial management, representatives of the outside auditor,
the senior internal audit manager and other financial personnel employed or
retained by the Company. The Committee may meet with the outside auditor or
the senior internal audit manager in separate executive sessions to discuss
any matters that the Committee believes should be addressed privately,
without management's presence. The Committee may likewise meet privately
with management, as it deems appropriate.
G. The Committee may, in its discretion, utilize the services of the Company's
regular corporate legal counsel with respect to legal matters or, at its
discretion, retain other legal counsel if it determines that such counsel
is necessary or appropriate under the circumstances.
H. Committee members will serve until the Board shall designate their
successors.
I. To ensure that the Committee has continuity of membership from one year to
the next, Committee members will be appointed with the expectation that
they will serve at least three years. The Board will use its best efforts
to avoid the replacement of more than one member of the Committee at a
time.
A2
II. AUTHORIZATION
A. Regarding the Company's financial statements and the external audit of
same, the Committee is authorized:
1. Subject to any action of the Board, to select, evaluate and, where
appropriate, replace the Company's independent public accounting firm
(or nominate the independent public accounting firm for stockholder
approval in any proxy statement) with respect to the audit of the
financial statements for the then current fiscal year and such other
audit-related services as the Committee deems necessary;
2. To review, discuss and approve the overall scope of the external audit
for the then current fiscal year;
3. To review and discuss the results of the external audit;
4. To review and discuss the management report of the independent public
accounting firm regarding the external audit and the response by
management thereto;
5. To review and discuss the method of evaluation by the independent
public accounting firm of the adequacy and effectiveness of the
accounting procedures and internal accounting controls of the Company;
6. To review and discuss the audited annual financial statements of the
Company;
7. To review and discuss the financial statements included in any
securities offering;
8. To review and discuss the quarterly financial statements of the
Company;
9. To establish procedures which ensure that the Committee is advised on
a timely basis of any breakdown in internal accounting controls or
management fraud; and
10. To discuss recent Financial Accounting Standards Board, Securities and
Exchange Commission, or other regulatory pronouncements that might
affect the Company's financial statements.
B. The Committee shall:
1. Receive from the Company's Chief Financial Officer notice in writing
of any material breakdown in internal accounting controls or any
alleged management fraud;
2. Request from the independent public accounting firm annually a formal
written statement delineating all relationships between the
independent public accounting firm and the Company consistent with
Independence Standards Board Standard 1;
3. Request from the independent public accounting firm annually a formal
written statement of the fees billed for each of the following
categories of services rendered by the outside auditors: (i) the audit
of the Company's annual financial statements for the most recent
fiscal year and the reviews of the financial statements included in
the Company's
A3
Quarterly Reports on Form 10-Q for that fiscal year; (ii) information
technology consulting services for the most recent fiscal year, in the
aggregate and by each service (and separately identifying fees for
such services relating to financial information systems design and
implementation); and (iii) all other services rendered by the outside
auditors for the most recent fiscal year, in the aggregate and by each
service;
4. Discuss with the independent public accounting firm any such disclosed
relationships and their impact on the independent public accounting
firm's independence;
5. Recommend that the Board take appropriate action to oversee the
independence of the independent public accounting firm;
6. Approve the fees to be paid to the outside auditor and any other terms
of the engagement of the outside auditor; and
7. Through its Chair, report periodically, as deemed necessary or
desirable by the Committee, but at least annually, to the full Board
regarding the Committee's actions and recommendations, if any.
C. The Committee shall review with management and the independent public
accounting firm the audited financial statements to be included in the
Company's annual report on Form 10-K and review and consider with the
independent public accounting firm the matters required to be discussed by
Statement of Auditing Standards ("SAS") 61.
D. The Committee shall review with the independent public accountants the
Company's interim financial results to be included in the Company's
quarterly reports to be filed with the Securities and Exchange Commission
and the matters required to be discussed by SAS 61. This review will occur
prior to the Company's filing of Form 10-Q.
E. The Committee shall prepare a report to be included in the Company's annual
proxy statement, which states:
1. Whether the Committee has reviewed and discussed the Company's audited
financial statements with management.
2. Whether the Committee has discussed with the independent public
accountants the matters required to be discussed by SAS 61.
3. Whether the Committee has received written disclosures and the letter
from the independent public accountants required by Independence
Standards Board Standard 1 and has discussed with the independent
public accounting firm the independence of the independent public
accounting firm.
4. That the Committee, based on the reviews and discussions referenced
above, recommends to the Board that the audited financial statements
for the last fiscal year be included in the Company's 10-K.
F. The Committee shall provide guidelines for, or approve in advance, the
engagement of the outside auditor to provide any non-audit services,
including the terms of the engagement, the cost thereof and whether
providing non-audit services will, in the opinion of the Committee,
adversely
A4
affect the independence of the independent public accounting firm in
carrying out its audit services.
G. To enhance the independence of the outside auditor, the Committee is
authorized to encourage access to the Committee by a representative of the
independent public accounting firm (generally the engagement partner), and
by the Chief Financial Officer of the Company. Generally this is
accomplished through private sessions with each of these persons. In
addition, the Committee may have a private executive session.
H. The Committee is authorized to review the accounting policies, procedures
and principles adopted or continued by the management of the Company for
the purpose of:
1. Maintaining or establishing the books, records, accounts and internal
accounting controls of the Company in compliance with the Foreign
Corrupt Practices Act of 1977; and
2. Preventing or detecting:
a. any improper or illegal disbursement of Company funds or property
of value; or
b. the making of any arrangement on behalf of the Company which may
provide for or result in the improper or illegal disbursement of
funds or property of value, in order that the Company shall be in
compliance with the Foreign Corrupt Practices Act of 1977.
I. The Committee is authorized to establish an internal audit program and to
review the overall scope of the internal audit program thereafter. In
addition, the Committee is authorized to determine when it is appropriate
to establish an internal audit department. The Committee is also authorized
to review the overall adequacy of the internal audit function and the
competence of the personnel engaged in such function. This may include
reviewing staffing requirements, budgetary matters, and continuing
professional development. The Committee must approve the hiring or
termination of the director of the internal audit department.
J. The Committee is authorized to conduct investigations relating to financial
affairs, records, accounts and reports as the Committee may in its
discretion deem necessary, or as the Board may from time to time request.
K. The Committee is authorized to discuss the quality and depth of staffing in
the accounting, treasury and tax departments of the Company.
L. The Committee must be advised by management when the Company is seeking a
second opinion on a significant accounting/financial reporting issue.
M. The Committee is authorized to review the program that monitors compliance
with the Company's corporate code of conduct policy.
N. The Committee is authorized to review transactions between the Company and
members of the Board or management.
O. The Committee is authorized to report orally its findings to the Board and
will maintain written minutes of each Committee meeting.
A5
III. INDEMNIFICATION
In the course of their service on the Committee, Committee members may be
made a party to a legal action or other proceeding resulting in a personal
economic loss to the member. In the event of any such loss resulting from their
service on the Committee, Committee members are indemnified by the Company to
the maximum extent provided under Delaware law or in accordance with any
indemnification agreements between the Company and such Committee members.
A6
INTEGRA LIFESCIENCES HOLDINGS CORPORATION
311 ENTERPRISE DRIVE
PLAINSBORO, NEW JERSEY 08536
PROXY - Annual Meeting Of Stockholders - Tuesday, May 21, 2002
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 16, 2002 at the Annual
Meeting of Stockholders to be held on Tuesday, May 21, 2002 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 PROPOSAL 2; 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.
(CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE)
|X| PLEASE MARK
YOUR VOTE
AS IN THIS EXAMPLE
1. ELECTION OF FOR all nominees WITHHOLD
DIRECTORS listed (except as AUTHORITY
NOMINEES: marked to the To vote for all nominees
--------- contrary below) listed at left.
Keith Bradley
Richard E. Caruso |_| |_|
Stuart M. Essig
Neal Moszkowski
James M. Sullivan
To WITHHOLD AUTHORITY to vote for any individual nominee(s), print such
nominee's name below:
----------------------------------------
FOR AGAINST ABSTAIN
2. 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.
PLEASE SIGN AND RETURN THE CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE (S)____________________________________________ DATE__________________
NOTE: (Executors, Administrators, etc. should give full title)