<PAGE>
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
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
INTEGRA LIFESCIENCES 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 price 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.:
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(3) Filing Party:
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(4) Date Filed:
<PAGE>
INTEGRA LIFESCIENCES CORPORATION
[LOGO] 105 MORGAN LANE
PLAINSBORO, NEW JERSEY 08536
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1998
To the Stockholders of Integra LifeSciences Corporation:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting (the "Meeting")
of the Stockholders of Integra LifeSciences Corporation (the "Company") will
be held as, and for the purposes, set forth below:
TIME 9:00 a.m. on Monday, May 18, 1998
PLACE Hyatt Regency Princeton
102 Carnegie Center
Princeton, New Jersey
ITEMS OF BUSINESS 1. To consider and vote upon a proposal
to approve and adopt an amendment to the
Company's Amended and Restated Certificate of
Incorporation to effect a one-for-two reverse
split of the Common Stock of the Company.
2. To consider and vote upon a proposal to
approve and adopt the Integra LifeSciences
Corporation 1998 Stock Option Plan.
3. To consider and vote upon a proposal to approve
and adopt the Integra LifeSciences Corporation
Employee Stock Purchase Plan.
4. To elect six directors of the Company to
hold office as specified in the accompanying
Proxy Statement.
5. To ratify the appointment of Coopers & Lybrand
L.L.P. as the Company's auditors for the
current fiscal year.
6. To act upon any other matters properly coming
before the meeting or any adjournment or
postponement thereof.
RECORD DATE Holders of Common Stock of record at the close of
business on April 8, 1998 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 105 Morgan
Lane, Plainsboro, New Jersey.
<PAGE>
ANNUAL REPORT The 1997 Annual Report of Integra
LifeSciences 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/ William M. Goldstein
Plainsboro, New Jersey William M. Goldstein
April 17, 1998 Secretary
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<PAGE>
INTEGRA LIFESCIENCES CORPORATION
105 MORGAN LANE
PLAINSBORO, NEW JERSEY 08536
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1998
Purpose of Meeting
This Proxy Statement is being furnished to holders of common stock,
par value $.01 per share (the "Common Stock"), of Integra LifeSciences
Corporation (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company from such holders for use at the 1998
annual meeting of stockholders of the Company (the "Meeting") to be held on
May 18, 1998 at 9:00 a.m. local time at the Hyatt Regency Princeton, 102
Carnegie Center, Princeton, 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 the stockholders
of the Company on or about April 17, 1998.
At the Meeting, the stockholders of the Company will be asked to
consider and vote upon (i) a proposal to approve and adopt an amendment to the
Company's Amended and Restated Certificate of Incorporation to effect a
one-for-two reverse split of the Common Stock (see "Proposal 1. Reverse Split
of Common Stock"); (ii) a proposal to approve and adopt the Integra
LifeSciences Corporation 1998 Stock Option Plan (see "Proposal 2. 1998 Stock
Option Plan"); (iii) a proposal to approve and adopt the Integra LifeSciences
Corporation Employee Stock Purchase Plan (see "Proposal 3. Employee Stock
Purchase Plan"); (iv) 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 4. Election of Directors"); and (v) the ratification
of the appointment of Coopers & Lybrand L.L.P. as the Company's auditors for
the current fiscal year (see "Proposal 5. Ratification of Appointment 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 8,
1998 (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 29,905,097 shares of Common Stock, which constituted
the only outstanding securities of the Company entitled to vote.
Voting and Revocability of Proxies
Each share of Common Stock entitles the holder of record thereof to
one vote, exercisable 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
<PAGE>
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.
Under the General Corporation Law of the State of Delaware, the
affirmative vote of the holders of a majority of the issued and outstanding
shares of Common Stock on the Record Date is required to approve and adopt the
Reverse Split of Common Stock. 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 1998 Stock Option Plan and the Employee Stock Purchase Plan, and
to ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
auditors for the current fiscal year. 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 enclosed proxy is being solicited by the Board of Directors for
use in connection with the Meeting and any postponement or adjournment
thereof. All Common Stock represented at the Meeting by 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 of Common Stock 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 of Common Stock are voted in favor of the proposal
than the number of shares of Common Stock 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 Corporation, 105 Morgan Lane, 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.
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<PAGE>
PROPOSAL 1. REVERSE SPLIT OF COMMON STOCK
General
The stockholders of the Company are being asked to consider and vote
upon a proposal providing for a one-for-two reverse split of the Common Stock.
The Reverse Split of Common Stock will be effected by an amendment to the
Company's Amended and Restated Certificate of Incorporation in the form set
forth in Appendix A to this Proxy Statement (the "Reverse Split Amendment").
If approved by the Company's stockholders, the Reverse Split Amendment will
become effective upon its filing with the Secretary of State of the State of
Delaware on or about May 25, 1998 (the "Effective Date"). Fractional shares of
Common Stock will not be issued as a result of the Reverse Split of Common
Stock.
The Reverse Split Amendment will amend Article Fourth of the
Company's Amended and Restated Certificate of Incorporation. At the Effective
Date, without further action on the part of the Company or the stockholders,
each share of Common Stock will be converted into one-half of a share of
Common Stock.
A vote for the Reverse Split of Common Stock will include
authorization of the Company's Board of Directors not to file the Reverse
Split Amendment in the event the Board of Directors determines that filing the
Reverse Split Amendment would not be in the best interest of the Company's
stockholders.
Effect of the Reverse Split of Common Stock
Under Delaware law, no appraisal rights are available to dissenting
stockholders in connection with the Reverse Split of Common Stock. Each
stockholder who owns fewer than two shares of Common Stock will have his
fractional share of Common Stock converted into the right to receive cash as
set forth below in "--Exchange of Stock Certificates and Payment for
Fractional Shares." The interest of such stockholder in the Company will
thereby be terminated, and such stockholder will have no right to share in the
assets or any future growth of the Company. Each stockholder who owns two or
more shares of Common Stock will continue to own shares of Common Stock and
will share in the assets and any future growth of the Company. Such interest
will be represented by one-half as many shares as such stockholder owned
before the Reverse Split of Common Stock, except that no fractional shares
will be issued.
The authorized capital stock of the Company will not be reduced or
otherwise affected by the Reverse Split of Common Stock. On the Record Date,
there were 29,905,097 shares of Common Stock issued and outstanding. Based on
the Company's best estimate, the aggregate number of shares of Common Stock that
will be issued and outstanding after giving effect to the Reverse Split of
Common Stock is approximately 14,952,500.
Reasons for the Reverse Split of Common Stock
Management of the Company believes that it may be more difficult to
attract new investors to the Company because the shares of Common Stock trade
at a relatively low price (the closing price on the Record Date was $4.0625 per
share). Institutional investors typically are unwilling to invest in companies
whose stock trades at less than $5 or, in some cases, $10 per share.
Stockbrokers also are sometimes subject to internal restrictions on their
ability to recommend stocks trading at less than $5 per share because of the
general presumption that such stock may be highly speculative. In addition,
stock which trades in the trading range of the Common Stock may not be
marginable under the internal policies of some stockbrokers.
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<PAGE>
It is anticipated that following the Reverse Split of Common Stock,
the shares of Common Stock will trade at a price that is higher than the
current market price. However, there can be no assurance that, after the
consummation of the Reverse Split of Common Stock, the shares of Common Stock
will trade at two times the market price of the shares of Common Stock prior
to the Reverse Split of Common Stock.
Exchange of Stock Certificates and Payment for Fractional Shares
The exchange of shares of Common Stock will occur on the Effective
Date without any action on the part of stockholders of the Company and without
regard to the date certificates representing pre-split shares of Common Stock
are physically surrendered for certificates representing post-split shares of
Common Stock. The Company's Transfer Agent will exchange certificates. In the
event that the number of shares of post-split Common Stock includes a
fraction, the Company will pay to the stockholder, in lieu of the issuance of
fractional shares of Common Stock, a cash amount in United States dollars
which will be equal to the same fraction multiplied by two times the average
closing price of the Common Stock on the Nasdaq National Market for the five
trading days immediately preceding the Effective Date. The closing price of
the Common Stock ranged from $4.125 to $4.3125 for the five trading days
immediately preceding the Record Date, with an average closing price of $4.1875.
A change in the closing price of the Common Stock will affect the amount
received for a fractional share by a stockholder.
As soon as practicable after the Effective Date, transmittal forms
will be mailed to each holder of record of certificates for shares of Common
Stock to be used in forwarding their certificates for surrender and exchange
for certificates representing the number of shares of post-split Common Stock
such stockholders are entitled to receive as a consequence of the Reverse
Split of Common Stock. After receipt of such transmittal form, each holder
should surrender the certificates representing pre-split shares of Common
Stock. Each holder who surrenders certificates will receive new certificates
representing the whole number of shares of post-split Common Stock to which he
is entitled and any cash payable in lieu of a fractional share. The
transmittal forms will be accompanied by instructions specifying other details
of the exchange. STOCKHOLDERS SHOULD NOT SEND THEIR CERTIFICATES UNTIL THEY
RECEIVE A TRANSMITTAL FORM.
After the Effective Date, each certificate representing pre-split
shares of Common Stock will, until surrendered and exchanged as described
above, be deemed, for all corporate purposes, to evidence ownership of the
whole number of post-split shares of Common Stock, and the right to receive
from the Company the amount of cash for any fractional share, into which the
shares evidenced by such certificate have been converted, except that the
holder of such unexchanged certificates will not be entitled to receive any
dividends or other distributions, if any, payable by the Company after the
Effective Date, until the certificates representing pre-split shares of Common
Stock have been surrendered. Such dividends and distributions, if any, will be
accumulated and, at the time of the surrender of the certificates for
pre-split shares of Common Stock, will be paid without interest.
Federal Income Tax Consequences
The following discussion describes certain federal income tax
consequences of the Reverse Split of Common Stock. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed regulations thereunder, reports to congressional committees, judicial
decisions and current administrative rulings and practices, all as amended and
in effect on the date hereof. Any of these authorities could be repealed,
overruled or modified at any time. Any such change could be retroactive and,
accordingly, could cause the tax consequences to vary substantially from the
consequences described below. No ruling from the Internal Revenue Service (the
"IRS") with respect to the matters discussed herein has been requested, and
there is no assurance that the IRS would agree with the conclusions set forth
in this discussion.
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<PAGE>
This discussion is for general information only and does not address
the federal income tax consequences that may be relevant to particular
stockholders in light of their personal circumstances or to certain types of
stockholders (such as dealers in securities, insurance companies, foreign
individuals and entities, financial institutions and tax-exempt entities) who
may be subject to special treatment under the federal income tax laws. This
discussion also does not address any tax consequences under state, local or
foreign laws.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE REVERSE SPLIT OF COMMON STOCK,
INCLUDING THE APPLICABILITY OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES
IN APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION.
The Company should not recognize any gain or loss as a result of the
Reverse Split of Common Stock. No gain or loss should be recognized by a
stockholder who receives only Common Stock upon the Reverse Split of Common
Stock. The aggregate tax basis of post-split Common Stock received by such a
stockholder in connection with the Reverse Split of Common Stock will equal
the stockholder's aggregate tax basis in the pre-split Common Stock exchanged
therefor and generally will be allocated among post-split Common Stock
received on a pro rata basis. Stockholders who have used the specific
identification method to identify their basis in pre-split Common Stock
surrendered in the Reverse Split of Common Stock should consult their own tax
advisors to determine their basis in the post-split Common Stock received in
exchange therefor. A stockholder who receives cash in lieu of a fractional
share of Common Stock that otherwise would be held as a capital asset
generally should recognize capital gain or loss equal to the difference
between the cash received and his, her or its basis in such fractional share
of Common Stock. For this purpose, a stockholder's basis in such fractional
share of Common Stock will be determined as if the stockholder actually
received such fractional share.
--------------------
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING THE
PROPOSED REVERSE SPLIT OF COMMON STOCK AND HEREBY RECOMMENDS THAT THE
STOCKHOLDERS OF THE COMPANY VOTE "FOR" THE APPROVAL OF THE REVERSE SPLIT OF
COMMON STOCK.
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<PAGE>
PROPOSAL 2. 1998 STOCK OPTION PLAN
The Board of Directors believes that a stock option plan enhances the
ability of the Company to attract and retain officers and key employees
(collectively, "Key Employees") and directors, consultants, and certain other
non-employees (together with the Key Employees, the "Optionees") 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. Since the Company has grown
significantly in recent years and the number of Optionees has also increased,
the Board of Directors believes that the number of shares reserved that remain
available for option grants under the Company's existing stock option plans is
inadequate. Accordingly, the Board of Directors proposes and recommends that
the stockholders approve the Integra LifeSciences Corporation 1998 Stock
Option Plan, which the Board of Directors approved on February 27, 1998,
subject to stockholder approval.
The text of the 1998 Stock Option Plan is attached as Appendix B to
this Proxy Statement. The following description of the 1998 Stock Option Plan
is intended merely as a summary of its principal features and is qualified in
its entirety by reference to the 1998 Stock Option Plan.
1. Number of Shares. The aggregate maximum number of shares of Common
Stock which may be issued pursuant to options granted under the 1998 Stock
Option Plan will be 2,000,000 shares; provided, however, that no Key Employee
may be granted options covering more than an aggregate of 1,000,000 shares of
Common Stock over any one-year period. Both of the foregoing limits are
subject to adjustment to reflect stock dividends, stock splits, share
combinations (including the proposed Reverse Split of Common Stock), and
similar changes in the capitalization of the Company. The shares issued under
the 1998 Stock Option 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 1998 Stock Option Plan will be administered by
the Company's Stock Option Committee, which consists of at least two directors
of the Company's Board of Directors who are designated by the entire Board of
Directors. Under the 1998 Stock Option Plan, the Stock Option Committee will
have the authority to (i) select the Key Employees and other Optionees to be
granted "incentive stock options" ("ISOs"), within the meaning of Section 422
of the Code, and non-qualified stock options ("NQSOs"), (ii) grant options on
behalf of the Company, and (iii) set the date of grant and other terms of the
options, including the times at which and the price at which options shall be
granted. Currently, the members of the Stock Option Committee are Keith
Bradley, Ph.D. and Edmund L. Zalinski, Ph.D.
3. Eligibility. Only Key Employees of the Company and/or a Related
Corporation are eligible to receive ISOs under the 1998 Stock Option Plan.
Non-qualified stock options may be granted to all Optionees. As of the date of
this Proxy Statement, there are approximately 162 Key Employees of the Company
and Related Corporations eligible to receive ISOs and approximately 200
Optionees (including Key Employees) eligible to receive NQSOs.
4. Term of Plan. No option may be granted under the 1998 Stock Option
Plan after February 26, 2008, although options outstanding on February 26,
2008 may extend beyond that date.
5. Term of Option. All options terminate on the earliest of: (a) the
expiration of the term specified in the option agreement, which may not exceed
ten years from the date of grant or, in the case of an ISO, five years after
the date of grant if the Optionee on the date of grant owns, directly or by
attribution under the Code, shares possessing more than 10% of the total
combined voting power of all classes of stock of the Company; (b) in the event
the Optionee's employment or service with the Company, Related Corporations,
and affiliates terminates prior to the expiration of his or her option, an
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<PAGE>
accelerated expiration date, if any, set by the Stock Option Committee; or (c)
an accelerated expiration date, if any, set by the Stock Option Committee in
the event of certain corporate transactions (e.g., a merger, consolidation,
reorganization, or liquidation).
6. Option Price. The option price for an option granted under the
1998 Stock Option Plan may not be less than the greater of one hundred percent
(100%) of the fair market value of the shares subject to the option on the
date that the option is granted or the par value thereof. However, if an ISO
is granted to an employee who then owns, directly or by attribution under the
Code, shares possessing more than 10% of the total combined voting power of
all classes of shares of the Company, the option price must be at least 110%
of the fair market value of the shares on the date that the option is granted.
For purposes of the 1998 Stock Option Plan, the per share fair market value of
the Company's Common Stock on the relevant date shall equal the quoted closing
price on the last business day prior to such date.
7. Exercisability. Options are exercisable in such installments as
the Stock Option Committee may determine, but not earlier than three months
from the date of grant except under specified circumstances. On a change in
control of the Company (as defined in Section 9A of the 1998 Stock Option
Plan), all outstanding options become fully vested and exercisable.
8. Payment. An Optionee may, in the discretion of the Stock Option
Committee, pay for shares covered by his or her option (i) in cash or its
equivalent, (ii) in shares of the Company's Common Stock previously acquired
by the Optionee (subject to certain holding period requirements), (iii) in
shares of the Company's Common Stock acquired upon exercise of the option,
(iv) through any combination of (i), (ii) or (iii) above, or (v) 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.
9. Option Agreement; Restriction on Transferability. All options will
be evidenced by a written option agreement which, subject to certain
limitations, may contain provisions that are inconsistent with the 1998 Stock
Option Plan and such other provisions as the Stock Option Committee deems
appropriate. No ISO and, except as otherwise provided in the option agreement,
no NQSO granted under the 1998 Stock Option Plan may be assigned or
transferred, except by will or the laws of descent and distribution. If the
Optionee is married at the time of exercise and if the Optionee requests at
the time of exercise, the certificate will be registered in the name of the
Optionee and his or her spouse, jointly, with right of survivorship.
10. Amendments to Options and the 1998 Stock Option Plan;
Discontinuance of the 1998 Stock Option Plan. Subject to the provisions of the
1998 Stock Option Plan, the Stock Option Committee may not amend an option
agreement without an Optionee's consent if the amendment is unfavorable to the
Optionee. The Board of Directors may suspend or discontinue the 1998 Stock
Option Plan or, subject to such shareholder approval as may be then required
under the applicable rules and regulations of the Code, amend it in any
respect whatsoever.
11. Federal Income Tax Aspects of the 1998 Stock Option Plan. Based
on the advice of counsel, the Company believes that, under federal tax laws
and regulations in effect on March 1, 1998, the federal income tax
consequences to the Company and to the Optionees receiving ISOs and NQSOs
pursuant to the 1998 Stock Option Plan will be as follows:
If an option is treated as an ISO, the Optionee will recognize no
income upon grant or exercise of the option unless the alternative minimum tax
rules apply. Upon an Optionee's sale of his or her shares of Common Stock
(assuming that the sale occurs no sooner than two years after grant of the
option and one year after exercise of the option), any gain will be taxed to
the Optionee as capital gain, which will either be mid-term (if at least 12
months have elapsed since exercise) or long-term (if at least 18 months have
elapsed since exercise). Currently, the maximum mid-term rate is 28% and the
maximum
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<PAGE>
long-term rate is 20%. 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 or loss recognized on such a disposition of the Common Stock
in excess of the amount treated as ordinary income will be characterized as
capital gain or loss. The Company will be allowed a business expense deduction
to the extent the Optionee recognizes ordinary income, subject to Sections 83
and 162(m) 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 and
162(m) 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 mid-term
or long-term capital gain or loss treatment if the Common Stock has been held
for more than 12 months or 18 months, respectively.
The foregoing does not purport to be a complete summary of the effect
of federal income taxation upon holders of options or upon the Company. It
also does not reflect provisions of the income tax laws of any municipality,
state or foreign country in which an Optionee may reside.
--------------------
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING THE 1998
STOCK OPTION PLAN AND HEREBY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE APPROVAL OF THE 1998 STOCK OPTION PLAN.
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<PAGE>
PROPOSAL 3. EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has approved and is proposing for stockholder
approval the Integra LifeSciences Corporation Employee Stock Purchase Plan.
The purpose of the Employee Stock Purchase Plan is to enable eligible
employees of the Company or any participating subsidiary, through payroll
deductions, to purchase shares of the Company's Common Stock and thus to
encourage stock ownership by employees of the Company and to encourage the
continued employment of employees of the Corporation.
The text of the Employee Stock Purchase Plan is attached as Appendix
C to this Proxy Statement. The following description of the Employee Stock
Purchase Plan is intended merely as a summary of its principal features and is
qualified in its entirety by reference to the Employee Stock Purchase Plan.
1. Number of Shares. The aggregate maximum number of shares of Common
Stock which may be issued pursuant to options granted under the Employee Stock
Purchase Plan will be 1,000,000 (subject to adjustment to reflect stock
dividends, stock splits, share combinations (including the proposed Reverse
Split of Common Stock), and similar changes in the capitalization of the
Company). The shares issued under the Employee Stock Purchase 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 Employee Stock Purchase Plan will be
administered by the Stock Option Committee. The Stock Option Committee shall
have full and final authority, in its discretion but subject to the express
provisions of the Employee Stock Purchase Plan: (a) to interpret the Employee
Stock Purchase Plan; (b) to make, amend, and rescind rules and regulations
relating to the Employee Stock Purchase Plan; (c) to determine the terms and
provisions of the instruments by which options shall be evidenced; and (d) to
make all other determinations necessary or advisable for the administration of
the Employee Stock Purchase Plan.
3. Eligibility. Any employee of the Company or certain subsidiary
corporations may participate in the Employee Stock Purchase Plan, except the
following, who are ineligible to participate: (a) an employee whose customary
employment is for less than five months in any calendar year; (b) an employee
whose customary employment is 20 hours or less per week; (c) an employee who,
after exercising his or her rights to purchase stock under the Employee Stock
Purchase Plan, would own stock (including stock that may be acquired under any
outstanding options) representing five percent or more of the total combined
voting power of all classes of stock of the Company; and (d) an employee
classified as "temporary" and who has been employed for less than six months.
The Board may approve participation in the Plan by employees of certain
related corporations of the Company.
4. Option Terms. Options to purchase shares of Common Stock will be
deemed granted to participating employees as of the first business day of each
Option Term. The first Option Term will commence July 1, 1998 (or as soon as
administratively practicable thereafter) and end December 31, 1998. Subsequent
Option Terms will commence each January 1 thereafter and end on the following
December 31. Payroll deductions will be accumulated during an Option Term and
purchases of shares will occur at the end of each Option Term (from the
amounts accumulated during that Option Term).
5. Participation. An eligible employee may become a participant in
the Employee Stock Purchase Plan for an Option Term by authorizing the Company
to have deductions of up to 15% made from his or her basic rate of
compensation during the Option Term. If an employee first becomes eligible for
the Employee Stock Purchase Plan after the commencement but before October 1
of an Option Term, the employee shall be eligible to participate by making
payroll deductions for the remainder of the Option Term, commencing on the
first business day of the calendar quarter coincident with or immediately
-9-
<PAGE>
following the date he or she first becomes eligible. Payroll deduction amounts
under the Employee Stock Purchase Plan will be held as general assets of the
Company. During an Option Term, an employee may not change his or her
percentage of payroll deduction, but may cease payroll deductions for the
remainder of the Option Term. However, an employee may not withdraw any
contributed funds other than by terminating participation in the Employee
Stock Purchase Plan (as described below).
6. Purchase Price. The purchase price for each share (the "Purchase
Price") will be equal to the lesser of (i) 85% of the fair market value of the
Common Stock on the first business day of the applicable Option Term (or, in
the case of an employee who first becomes eligible for the Employee Stock
Purchase Plan after the beginning of an Option Term, 85% of the fair market
value of the Common Stock on the first business day of the applicable calendar
quarter), or (ii) 85% of the fair market value of the Common Stock on the last
business day of the applicable Option Term. For purposes of the Plan, the per
share fair market value of the Company's Common Stock on the relevant date
will equal the quoted closing price on the last business day prior to such
date.
7. Exercise of Option. Subject to the limits of the Employee Stock
Purchase Plan, on the last business day of each Option Term, a participating
employee's option is automatically exercised for the number of whole shares of
Common Stock purchasable with his or her accumulated payroll deductions under
the Employee Stock Purchase Plan for such Option Term. An employee must be
employed on the last day of the Option Term in order to acquire stock for that
Option Term under the Employee Stock Purchase Plan. In no event may the number
of whole shares of Common Stock purchased by an employee during an Option Term
exceed 8,000 (subject to adjustment to reflect stock dividends, stock splits,
share combinations (including the proposed Reverse Split of Common Stock), and
similar changes in the capitalization of the Company).
8. Accrual Limitation. No employee may be granted an option under the
Employee Stock Purchase Plan which permits his or her rights to purchase stock
under the Employee Stock Purchase Plan and all other "employee stock purchase
plans" of the Corporation and any parent or subsidiary to accrue at a rate
that exceeds $25,000, determined as of the first business day of the Option
Term.
9. Termination of Participation. A participating employee will be
refunded all payroll deductions held on his or her behalf, and his or her
participation in the Employee Stock Purchase Plan will be terminated, if: (a)
the employee elects to terminate participation and withdraw his or her payroll
deductions by providing notice to that effect to the Company; (b) the employee
ceases to be employed by the Company or a participating subsidiary; (c) the
Board of Directors elects to terminate the Employee Stock Purchase Plan; or
(d) the employee ceases to be eligible to participate in the Employee Stock
Purchase Plan. However, termination of participation during an Option Term
will not affect an employee's ability to participate in later Option Terms,
provided the employee continues to satisfy the eligibility requirements of the
Employee Stock Purchase Plan.
10. Nonassignability. No participating employee may assign his or her
payroll deductions or options to purchase shares of Common Stock under the
Employee Stock Purchase Plan, whether voluntarily, by operation of law or
otherwise. However, the right to receive a return of accumulated payroll
deductions (if any) after death of the employee may be transferred by will or
by the laws of descent and distribution.
11. Amendment. The Board of Directors may, at any time, amend the
Employee Stock Purchase Plan in any respect; provided, however, that without
approval of the stockholders of the Company no amendment shall be made (a)
increasing the number of shares that may be made available for purchase under
the Employee Stock Purchase Plan, (b) changing the eligibility requirements
for participating in the Employee Stock Purchase Plan, or (c) otherwise
causing options issued under the Employee Stock Purchase Plan to fail to meet
Section 423 of the Code.
-10-
<PAGE>
12. Termination. With respect to any shares of Common Stock not
subject to options under the Employee Stock Purchase Plan, the Board of
Directors may terminate the Employee Stock Purchase Plan at any time. In any
event, the Employee Stock Purchase Plan shall, without further action of the
Board of Directors, terminate at such time as all shares of Common Stock that
may be made available for purchase under the Employee Stock Purchase Plan have
been issued.
13. Federal Income Tax Aspects of the Employee Stock Purchase Plan.
Based on the advice of counsel, the Company believes that, under federal tax
laws and regulations in effect on March 1, 1998, the federal income tax
consequences to the Company and the participating employees receiving options
pursuant to the Employee Stock Purchase Plan will be as follows:
The Employee Stock Purchase Plan is intended to meet the requirements
of Section 423 of the Code. Under Section 423, no income will be recognized
for federal income tax purposes by participants when they are granted an
option under the Plan at the beginning of an Option Term (or on a delayed
grant date) or upon purchase of shares at the end of an Option Term. The
Company receives no deduction at either the applicable grant date or end of an
Option Term. If the shares acquired by a participant pursuant to an option
granted under the Plan are disposed of more than two years after the
applicable grant date (or if the participant dies while owning the shares),
the participant will recognize ordinary income to the extent of the lesser of:
(a) the purchase price discount of the shares at the applicable grant date; or
(b) the amount by which the fair market value of the shares at the time of
disposition exceeded the price paid for the shares. Additional gain, if any,
will be taxed as capital gain, which will either be mid-term (if at least 12
months have elapsed since the end of the Option Term) or long-term (if at
least 18 months have elapsed since the end of the Option Term). Currently, the
maximum mid-term rate is 28% and the maximum long-term rate is 20%. The
Company receives no deduction if the shares are disposed of more than two
years after the applicable grant date of the Option Term in which they are
acquired.
If the shares are disposed of within two years from the applicable
grant date of an Option Term, the participant will recognize ordinary income
in the year of disposition in the amount by which the fair market value of the
shares on the date of acquisition exceeded the price paid for the shares. Any
additional gain or loss on the disposition of the shares is treated as
short-term, mid-term, or long-term capital gain or loss, depending on how long
the shares were held by the participant. The Company may take a deduction in
the year a participant makes a disqualifying disposition (i.e., disposes of
shares within two years from the applicable grant date) to the extent the
participant recognizes ordinary income on the disposition, subject to Sections
83 and 162(m) of the Code.
The foregoing does not purport to be a complete summary of the effect
of Federal income taxation upon employees under the Employee Stock Purchase
Plan. It also does not reflect provisions of the income tax laws of any
municipality, state or foreign country in which an employee may reside.
--------------------
THE BOARD OF DIRECTORS HAS ADOPTED A RESOLUTION APPROVING THE
EMPLOYEE STOCK PURCHASE PLAN AND HEREBY RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE EMPLOYEE STOCK PURCHASE
PLAN.
-11-
<PAGE>
PROPOSAL 4. ELECTION OF DIRECTORS
The Board of Directors has nominated six persons for election as
directors whose terms will expire at the 1999 Annual Meeting of Stockholders,
or when their successors are elected and qualified. The nominees are Keith
Bradley, Ph.D., Richard E. Caruso, Ph.D., Stuart M. Essig, George W. McKinney,
III, Ph.D., James M. Sullivan and Edmund L. Zalinski, Ph.D., each of whom are
currently directors of the Company. William M. Goldstein, Esq. and Frederic V.
Malek, each of whom have served as a director of the Company since 1992, have
informed the Company of their decision not to stand for reelection 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 is the Professor of International Management at The Open University
Business School, Milton Keynes, England, and a Director of Ockham Holdings
plc, a London Stock Exchange corporation. Dr. Bradley was the founder and
formerly Executive Director of the London School of Business Performance
Group, an interdisciplinary research institute which specializes in
organizational performance. He has extensive experience as a consultant to a
variety of business, government and international organizations and has
published widely on management and industrial policy. Dr. Bradley has served
as Visiting Professor at Harvard Business School, the UCLA Graduate School of
Management and the Wharton School of the University of Pennsylvania. Dr.
Bradley received a Diploma in Education from Culham College and a Ph.D. degree
in Economics from the University of Essex. Dr. Bradley is 53 years old.
Richard E. Caruso, Ph.D. has served as the Company's Chairman since
March 1992. Prior to being replaced by Mr. Essig in 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. He has 25 years experience
in finance and entrepreneurial ventures. 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 also
a certified public accountant. Dr. Caruso is 54 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 has 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. He also serves as
a director of Neuromedical Systems, Inc. Mr. Essig is 36 years old.
George W. McKinney, III, Ph.D. has been a director of the Company
since 1992 and has served as Vice Chairman of the Board since May 1997 and as
Executive Vice President and Chief Operating Officer of the Company since July
1997. He has more than 25 years of experience in industry and new ventures.
Between 1990 and 1997, Dr. McKinney was Managing Director of Beacon Venture
Management Corporation, a venture capital firm. From 1983 to 1989, he was
Managing Partner and Chief Operating Officer for American Research and
Development, a venture capital firm. Prior thereto,
-12-
<PAGE>
he held various senior management positions with Corning Glass Works
(now Corning, Inc.), a specialty materials firm. Dr. McKinney received a B.S.
degree from MIT and a Ph.D. degree from the Stanford University School of
Business. Dr. McKinney is 55 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 Tenley 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. He received a
B.S. degree in Accounting from Boston College and an M.B.A. degree from the
University of Connecticut. Mr. Sullivan is also a certified public accountant.
Mr. Sullivan is 54 years old.
Edmund L. Zalinski, Ph.D. has been a director of the Company since
1992. Since 1938, Dr. Zalinski has been active in a variety of public and
privately held companies engaged in insurance, mutual funds, banking, leasing
and real estate. From 1973 until he retired in 1992, he was Chairman of the
Board of the American Capital Open End Funds, a mutual fund management
company. He was a principal organizer and President of the Life Insurance
Company of North America and was Chairman and Chief Executive Officer of the
Greenfield Real Estate Investment Trust. He currently serves as Chairman of A+
Marketing Services. Dr. Zalinski received a B.A. degree from Cornell
University, an M.B.A. degree from Harvard Business School and a Ph.D. degree
from New York University. Dr. Zalinski is 82 years old.
Information Concerning Meetings and Certain Committees
The Board of Directors held four formal meetings during 1997. During
1997, 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 during their incumbency. The
Company has a standing Audit Committee, Compensation Committee and Stock
Option Committee of its Board of Directors.
The Audit Committee, currently comprised of Messrs. Goldstein and
Sullivan, makes recommendations to the Board of Directors regarding the
selection of independent accountants, reviews the results and scope of the
audit and other services provided by the Company's independent accountants,
and reviews and evaluates the Company's internal accounting control. Mr.
Goldstein's position on the Audit Committee will be filled by another
qualified director after the Meeting. During 1997, the Audit Committee met
once.
The Compensation Committee, currently comprised of Messrs. Bradley
and Caruso, makes decisions concerning salaries and incentive compensation for
employees and consultants of the Company. During 1997, the Compensation
Committee met once.
The Stock Option Committee, currently comprised of Messrs. Bradley
and Zalinski, makes decisions concerning issuance of stock options to
employees and consultants of the Company and also administers the Company's
1992 Stock Option Plan, the Company's 1993 and 1996 Incentive Stock Option and
Non-Qualified Stock Option Plans and, if approved by the stockholders at
Meeting, the Company's 1998 Stock Option Plan and the Employee Stock Purchase
Plan. During 1997, the Stock Option Committee met four times.
-13-
<PAGE>
Compensation of Directors
The Company has not paid any cash compensation to its directors for
their service as directors. The Company 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.
PROPOSAL 5. APPOINTMENT OF AUDITORS
The firm of Coopers & Lybrand L.L.P. served as the Company's
independent accountants for 1997 and has been selected by the Board of
Directors to serve in the same capacity for 1998. 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 Coopers & Lybrand L.L.P. 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 Coopers & Lybrand L.L.P.,
the Company will appoint other independent accountants as soon as practicable
and before the close of the 1998 year.
A representative of Coopers & Lybrand L.L.P. is expected to be
present at the 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 COOPERS & LYBRAND L.L.P. AS THE COMPANY'S
AUDITORS FOR 1998.
ADDITIONAL INFORMATION
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 through
February 1998, except that one report of changes of beneficial ownership on
Form 4, each with respect to one transaction, was filed late by each of the
following: Richard E. Caruso, the Chairman and a director and principal
stockholder of the Company; Provco Leasing Corporation, a principal
stockholder of the Company; and Frederick Cahn, the Senior Vice President,
Technology of the Company.
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<PAGE>
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 the four most
highly compensated executive officers of the Company other than the chief
executive officer (collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------
Annual Compensation Awards
--------------------------- ----------------------------
Securities
Restricted Underlying All Other
Name and Principal Position Year Salary Bonus Stock Awards Options Compensation(1)
- --------------------------- ---- ------ ----- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stuart M. Essig (2)...................... 1997 - - $5,875,000 1,000,000 -
President and Chief 1996 - - - - -
Executive Officer 1995 - - - - -
Michael D. Pierschbacher, Ph.D.(3)....... 1997 $198,000 - - 142,750 $1,485
Senior Vice President, Research 1996 $198,000 - - - $1,485
and Development 1995 $ 74,520 - - 170,000 -
George W. McKinney, III, Ph.D. (4)...... 1997 $165,807 - - 500,000 $844
Executive Vice President and 1996 - - - - -
Chief Operating Officer 1995 - - - - -
Richard E. Caruso, Ph.D. (5)............ 1997 $165,000 - - 127,750 $475
Chairman 1996 $165,000 - - - $475
1995 $ 48,125 - - 170,000 -
Andre P. Decarie......................... 1997 $131,667 $10,000 - 136,057 -
Senior Vice President, Business 1996 $130,200 - - - -
Development 1995 $130,200 - - - -
</TABLE>
- ----------------------------------------
(1) Consists of the Company's matching contributions to the Company's
401(k) Plan.
(2) Mr. Essig joined the Company in December 1997. The terms of Mr.
Essig's compensation are described herein under the heading
"--Employment Agreements."
(3) Dr. Pierschbacher's employment with the Company commenced in August 1995.
(4) Dr. McKinney's employment with the Company commenced in May 1997.
(5) In September 1995, Dr. Caruso commenced receiving an annual salary of
$165,000. Prior to September 1995, Dr. Caruso declined to receive a
salary. Dr. Caruso held the positions of President and Chief
Executive Officer until the hiring of Mr. Essig in December 1997.
-15-
<PAGE>
The following tables set forth certain information concerning stock
options granted to and exercised by the Named Officers during the fiscal year
ended December 31, 1997 and the unexercised options held by them at December
31, 1997:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants Potential Realizable
--------------------------------------------------------- Value at Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options Appreciation for Option
Underlying Granted to Exercise Term
Options Employees in Price per Expiration ----------------------------
Name Granted (1) Fiscal Year (1) Share Date 5% 10%
- ---- ----------- --------------- --------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Stuart M. Essig.................. 1,000,000(2) 33.7% $2.9375 12/26/07 $1,848,018 $4,683,608
Michael D. Pierschbacher, Ph.D... 127,750(3) 4.3 $4.00 08/14/01 $ 117,725 $ 255,148
15,000 * $3.00 05/29/02 $ 12,433 $ 27,473
George W. McKinney, III, Ph.D.... 100,000 3.4 $4.00 05/20/02 $ 110,513 $ 244,204
200,000 6.7 $4.00 07/20/02 $ 221,025 $ 488,408
200,000 6.7 $2.9375 12/26/02 $ 162,315 $ 358,675
Richard E. Caruso, Ph.D.......... 127,750(3) 4.3 $4.00 09/30/01 $ 121,688 $ 264,607
Andre P. Decarie................. 111,057(3) 3.7 $4.00 05/31/99 $ 46,516 $ 95,397
5,000 * $3.00 05/29/02 $ 4,144 $ 9,158
20,000 * $4.00 08/28/02 $ 22,102 $ 48,840
</TABLE>
- ----------------------------------------
* Less than 1%.
(1) The Company granted options to employees to purchase a total of
2,968,667 shares of Common Stock during 1997. Except as described in
notes 2 and 3, such options were granted at a price at or above fair
market value, are nontransferable and vest ratably over periods
between two and four years commencing with the date of grant.
(2) The terms of Mr. Essig's stock option are described herein under the
heading "--Employment Agreements."
(3) Issued pursuant to an option exchange program under which employees
with options having an exercise price in excess of $4.00 per share
under the Company's stock option plans could elect to exchange such
options for new stock options with an exercise price of $4.00. Under
the exchange program, (i) the number of replacement options issued in
exchange for the original options was determined by the utilization
of a formula based on the percentage decrease in exercise price from
the original grant (not to exceed 25% of the original options and
excluding the first 1,000 options), (ii) the replacement options'
expiration dates were adjusted to one year later than the original
options' expiration dates, and (iii) the vesting terms of the
replacement options were adjusted to proportionately reflect the
decrease in options, when applicable.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised In-the-Money
Shares Unexercised Options at Fiscal Year End Options at Fiscal Year End(2)
Acquired Value -------------------------------------- ---------------------------------
Name on Exercise Realized(1) Exercisable Nonexercisable Exercisable Nonexercisable
- ---- ----------- ----------- ----------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Stuart M. Essig............... - - - 1,000,000 - $1,500,000
Michael D. Pierschbacher, Ph.D. - - 76,696 66,054 $35,655 $ 41,799
George W. McKinney, III, Ph.D.. 36,500 $105,494 42,000 458,000 $18,375 $ 412,875
Richard E. Caruso, Ph.D........ 45,000(3) $193,275 68,985 58,765 $30,181 $ 25,710
Andre P. Decarie............... - - 113,357 22,700 $50,294 $ 14,231
</TABLE>
- -----------------------------------------
(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, 1997 was
$4.4375 per share.
(3) Represents the exercise of an option by Provco Leasing Corporation
(of which Dr. Caruso is President), which is a wholly-owned
subsidiary of Cono Industries, a corporation whose stockholders are
trusts whose beneficiaries include Dr. Caruso's children.
-16-
<PAGE>
REPORT ON REPRICING OF OPTIONS
The Company's stock option plans were established to further the
interests of the Company and its stockholders by encouraging the growth of its
business through securing, retaining and motivating management employees of
high caliber who possess the skills necessary to accelerate the development
and growth of the Company. In May 1997, as a result of the decrease in the
market value of the Common Stock during the preceding year, and recognizing
that previously granted stock options had lost much of their value and that
the Company's ability to motivate employees (including the Named Officers) to
remain with the Company would be significantly impaired unless value was
restored in the form of options at the current market price, the Stock Option
Committee of the Board of Directors, pursuant to authority granted under the
Company's stock option plans, approved an option exchange program. The option
exchange program allowed employees of the Company, including executive
officers, holding options under the Company's stock option plans having an
exercise price in excess of $4.00 per share (the "Old Options") to exchange
such options for a reduced number of new stock options with an exercise price
of $4.00 per share (the "New Options"), which was in excess of the closing
price of the Common Stock on the Nasdaq National Market on the date of
approval of the program. The number of New Options issued in exchange for the
Old Options was determined by the utilization of a formula based on the
percentage decrease in exercise price from the original exercise price of the
Old Option (not to exceed 25% of the Old Options and excluding the first 1,000
options). Under the option exchange program, (i) the expiration dates of the
New Options were adjusted to one year later than the expiration dates of the
Old Options and (ii) the vesting terms of the New Options were adjusted to
proportionately reflect the decrease in options, when applicable. Pursuant to
the option exchange program, New Options covering 891,623 shares of Common
Stock (including New Options covering 366,557 shares of Common Stock issued to
the Named Officers) were issued in replacement of the Old Options.
The Stock Option Committee of the Board of Directors
Keith Bradley, Ph.D.
Edmund L. Zalinski, Ph.D.
The following table sets forth information with respect to each
executive officer of the Company who held an option during the last ten fiscal
years ended December 31, 1997 and who participated in the option exchange
program:
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Number of Length of
Securities Exercise Original
Underlying Market Price of Price at Option Term
Options Stock at Time Time of New Remaining at
Repriced or of Repricing or Repricing or Exercise Date of Repricing
Name Date Amended Amendment Amendment Price or Amendment
- ---- ---- ------- --------- --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
Michael D. Pierschbacher, Ph.D May 16, 1997 127,750 $3.75 $8.65 $4.00 40 months
Richard E. Caruso, Ph.D May 16, 1997 127,750 $3.75 $8.65 $4.00 41 months
Andre P. Decarie May 16, 1997 111,057 $3.75 $8.53 $4.00 13 months
David B. Holtz May 16, 1997 24,382 $3.75 $6.53 $4.00 17 months
May 16, 1997 19,441 $3.75 $4.25 $4.00 59 months
Donald R. Nociolo May 16, 1997 24,382 $3.75 $6.53 $4.00 20 months
May 16, 1997 19,441 $3.75 $4.25 $4.00 59 months
Frederick Cahn May 16, 1997 60,665 $3.75 $6.53 $4.00 19 months
May 16, 1997 10,000 $3.75 $8.00 $4.00 53 months
Robert Paltridge May 16, 1997 22,750 $3.75 $8.00 $4.00 33 months
May 16, 1997 1,750 $3.75 $8.65 $4.00 40 months
</TABLE>
-17-
<PAGE>
Employment Agreements
Stuart M. Essig entered into a four-year employment agreement with
the Company in December 1997 to serve as the President and Chief Executive
Officer of the Company. As compensation for his services during the first year
of the agreement, the Company will pay Mr. Essig an annual salary of $300,000.
For each subsequent year that he is employed, Mr. Essig's salary will be
$300,000 plus such increases, if any, as may be established by the Board of
Directors. Mr. Essig is also entitled to receive a performance bonus of up to
fifty percent (50%) of his base salary, based upon the satisfaction of certain
performance goals pertaining principally to the trading price of the Common
Stock. He 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 in the amount of up to $500,000
subject to certain conditions. He 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 Employment Agreement is for an initial term through
December 31, 2001 and shall automatically extend on December 31, 2001 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 such anniversary. Mr. Essig has the right to terminate the Employment
Agreement in the event the Company fails to appoint him as President and Chief
Executive Officer or as a Director or for other good reason (as defined
therein).
The 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 Code 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
for the employer and are subject to a 20% excise tax in the hands of the
employee. In the case of Mr. Essig, the value of any acceleration of his
Option and Restricted Units (each as defined below) upon a change in control
of the Company will constitute "payments" for these purposes, which --
depending upon the timing of such change in control, the value of the
Company's stock at that time and other relevant factors -- may be substantial
enough to constitute parachute payments. In such an event, a substantial
gross-up payment could be required of the Company under the Employment
Agreement, and substantial compensation amounts payable by the Company to Mr.
Essig (including such gross-up payment) could be nondeductible by the Company
for federal income tax purposes.
Under a Stock Option Grant and Agreement, the Company granted Mr.
Essig options under the Company's 1996 Incentive Stock Option and
Non-Qualified Stock Option Plan to purchase 1,000,000 shares (the "Option
Shares") of Common Stock at an exercise price of $2.9375 per share (the
"Option"), the last reported sale price on the date immediately prior to the
date of grant, and with an expiration date of December 28, 2007. The Option
vests and becomes exercisable with respect to 250,000 shares on December 29,
1998 and thereafter with respect to 1/36th of the remaining shares on the
first business day of each following month. In the event of (a) a change in
control of the Company or (b) the termination of Mr. Essig's employment (i) by
the Company without cause, (ii) by Mr. Essig for good reason or (iii) due to
Mr. Essig's death, the Option vests and becomes exercisable in full
immediately.
Under a Restricted Units Agreement, the Company issued to Mr. Essig a
fully vested equity-based signing award bonus in the form of 2,000,000
restricted units (the "Restricted Units"), each unit representing the right to
receive one share of Common Stock. The shares of Common Stock underlying the
restricted units (the "Unit Shares") are deliverable to Mr. Essig on January
1, 2002 if Mr. Essig is employed by the Company on December 31, 2001, although
Mr. Essig has the right to defer delivery of the Unit Shares for a period of
up to six years. The Unit Shares may be delivered to Mr. Essig prior to
January 1, 2002 in the event of (a) a change of control of the Company or (b)
the termination of Mr. Essig's employment (i) by the Company without cause,
(ii) by Mr. Essig for good reason, (iii) due to disability or (iv) due to
death. If, prior to December 31, 2001, (a) the
-18-
<PAGE>
Company terminates Mr. Essig's employment for cause or (b) Mr. Essig
voluntarily leaves his employment with the Company (other than for good
reason or due to disability), the Unit Shares are to be distributed to
Mr. Essig on January 1, 2018.
The Restricted Units Agreement provides for anti-dilution protection
in the event (a) that the outstanding shares of Common Stock are increased
through share dividends or split ups or decreased through combinations or
similar changes, (b) of reclassifications (including reclassifications in
connection with a consolidation or merger in which the Company is the
continuing entity), and (c) of distributions to the holders of Common Stock of
indebtedness or assets of the Company in order to preserve the relative
interest in the Company represented by the Option Shares or Unit Shares
immediately prior to the occurrence of such event. In addition, if the Company
distributes rights or warrants to all holders of its Common Stock entitling
them to purchase such shares of Common Stock at a price per share less than
the then-current market price per share, the Restricted Units Agreement
provides that an equivalent amount of such rights or warrants be distributed
with respect to the Unit Shares. The Restricted Units Agreement provides that
in the event of a spinoff by the Company to its shareholders, the holder of
Option Shares and Unit Shares shall participate in such spinoff in an
appropriate and equitable manner including, to the extent practicable, through
ownership of (or option to acquire) an equity interest in the spinoff entity.
The Company has agreed to file, following the request of Mr. Essig, a
registration statement with the Commission to register the sale by Mr. Essig
of the Option Shares and the Unit Shares pursuant to the Securities Act of
1933, as amended (the "Securities Act"). Mr. Essig has not yet advised the
Company as to when registration may be requested. In connection with the
Restricted Units Agreement, the Company incurred a one-time non-cash
compensation charge of $5,875,000 in the fourth quarter of 1997.
George W. McKinney, III, Ph.D. entered into an employment agreement
with the Company in May 1997, which was amended in July 1997, to serve as the
Company's Executive Vice President, Chief Operating Officer and Vice Chairman
of the Board. The employment agreement, as amended, provides for an annual
salary of $240,000, the reimbursement of up to $30,000 of moving expenses in
connection with Dr. McKinney's relocation to the Princeton, New Jersey area
and the grant of options to purchase 300,000 shares of Common Stock at an
exercise price of $4.00 per share, vesting equally over 50 months. He 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 employment agreement
expires on June 30, 2000 and may be terminated earlier by the Company for
reasonable cause or if for any reason Dr. McKinney is not providing services
to the Company.
Compensation Committee Interlocks and Insider Participation
Throughout fiscal 1997, the Compensation Committee of the Company's
Board of Directors consisted of Messrs. Bradley and Caruso. Dr. Caruso was the
acting President and Chief Executive Officer of the Company until the hiring
of Mr. Essig in December 1997.
The Company leases its administrative, manufacturing, research and
principal warehouse 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. Richard E. Caruso, the Chairman and a principal stockholder of
the Company. Dr. Caruso is the President of Cono. The Company paid $189,275 in
rent for this facility during 1997.
The Company leases production, administration and warehouse space in
West Chester, Pennsylvania from Jerry Holtz, who is the brother of David
Holtz, the Vice President, Treasurer of the Company, and the nephew of Dr.
Caruso. Provco Leasing Corporation, a wholly-owned subsidiary of Cono, holds a
first mortgage on the property and has received a collateral assignment of
rents as additional security. The Company paid $180,000 in rent for this
facility during 1997.
-19-
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Throughout fiscal 1997, the Compensation Committee was composed of
Dr. Caruso, at the time the acting President and Chief Executive Officer of
the Company, and Dr. Bradley, a non-employee director.
The following report of the Compensation Committee is required by the
rules of the Commission to be included in the Proxy Statement and addresses
the Company's executive compensation policies for the year ended December 31,
1997. 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 stock option 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 stock option 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 three major
components: base compensation; performance bonuses; 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 and
other companies in similar stages of development.
Performance Bonuses. The Company supplements base compensation with
awards of performance bonuses in the form of cash and stock options. In
establishing bonuses for the fiscal year ended December 31, 1997, the
Compensation Committee sought to reward the efforts and achievements of
certain executive officers during this period.
Stock Options. The Company grants 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 are 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.
-20-
<PAGE>
Chief Executive Officer Compensation. Dr. Caruso served as the
Company's President and Chief Executive Officer during substantially all of
1997 until December 30, 1997, when Mr. Essig joined the Company as President
and Chief Executive Officer. See "--Employment Agreements" for a description
of Mr. Essig's compensation. Dr. Caruso has been the Chairman and Chief
Executive Officer and a principal stockholder of the Company since March 1992.
He became the President of the Company in September 1995, at which time he
commenced receiving an annual salary of $165,000. In light of Dr. Caruso's
significant equity ownership of the Company and his desire to conserve the
Company's cash resources, Dr. Caruso recommended and the Compensation
Committee determined that his 1997 salary would remain at $165,000, without
the grant of any performance bonus or additional stock options. The Committee
believes that Dr. Caruso's total compensation for 1997 is at the lower end of
the range of compensation paid to chief executive officers of the Company's
competitors and other companies in similar stages of development.
The Compensation Committee of the Board of Directors
Richard E. Caruso, Ph.D.
Keith Bradley, Ph.D.
STOCK PERFORMANCE GRAPH
The following line graph and table compare, for the period from
August 16, 1995 (the date on which the Company's Common Stock commenced
trading on the Nasdaq National Market) through December 31, 1997, 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 AMEX Biotechnology Index. The graph assumes that
the value of the investment in the Company's Common Stock and the relevant index
was $100 at August 16, 1995 and that all dividends were reinvested. The closing
market price of the Company's Common Stock on December 31, 1997 was $4.4375 per
share.
Comparison of Cumulative Total Return
Value of Investment of $100 on August 16, 1995
[STOCK PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
8/95 12/95 12/96 12/97
---- ----- ----- -----
<S> <C> <C> <C> <C>
Integra LifeSciences Corporation........................... $100 $141 $108 $ 96
AMEX Biotechnology Index................................... $100 $122 $132 $148
Nasdaq Stock Market - U.S. Index........................... $100 $103 $127 $155
</TABLE>
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted by the graph
and table set forth above. 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, and (ii) filed under either the Securities Act or the Exchange Act.
-21-
<PAGE>
Principal Stockholders
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of February 28, 1998, and as
adjusted to reflect the Reverse Split of Common Stock, 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 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. Except
as otherwise indicated, each person has sole voting power and sole investment
power with respect to all shares beneficially owned by such person.
<TABLE>
<CAPTION>
Shares Shares
Beneficially Owned, as Percentage
Name of Beneficial Owner Owned(1) Adjusted (11) of Class
- ------------------------ -------- ------------- --------
<S> <C> <C> <C>
Richard E. Caruso, Ph.D.............................. 14,472,451(2) 7,236,225 48.3%
105 Morgan Lane
Plainsboro, NJ 08536
Trust Partnership.................................... 14,358,411(3) 7,179,205 48.0%
c/o Richard E. Caruso, Ph.D.
105 Morgan Lane
Plainsboro, NJ 08536
Frances C. Holtz..................................... 14,358,411(4) 7,179,205 48.0%
8111 Marshall Avenue
Margate, NJ 08402
Union Carbide Corporation............................ 3,150,561 1,572,280 10.5%
39 Old Ridgebury Road
Danbury, CT 06817
State of Wisconsin Investment Board.................. 2,777,959 1,388,979 9.3%
121 East Wilson Street
Madison, WI 53703
Stuart M. Essig...................................... -- (5) -- --
Edmund L. Zalinski, Ph.D............................. 161,000(6) 80,500 *
Andre P. Decarie..................................... 114,357(7) 57,178 *
Michael D. Pierschbacher, Ph.D....................... 89,833(8) 44,916 *
George W. McKinney, III, Ph.D........................ 84,201(9) 42,100 *
William M. Goldstein, Esq............................ 37,500(7) 18,750 *
James M. Sullivan.................................... 37,500(7) 18,750 *
Keith Bradley, Ph.D.................................. 15,200(7) 7,600 *
Frederick V. Malek................................... 13,500(7) 6,750 *
All directors and executive officers as a group
(18 persons)......................................... 15,456,130(10) 7,728,065 50.9%
- ------------------------------------------------
(footnotes set forth on following page)
</TABLE>
-22-
<PAGE>
- -------------------------------------------------------------------
(footnotes to table on preceding page)
* Less than one percent (1%).
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual to acquire them within 60 days upon the
exercise of an option are treated as outstanding for purposes of
determining beneficial ownership and the percentage beneficially
owned by such individual.
(2) Includes the 14,358,411 shares held by Trust Partnership, a
Pennsylvania general partnership of which Dr. Caruso is a partner and
the President (also see footnote 3 below). Also includes 42,500
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 71,540
shares issuable upon exercise of the vested portion of options held
by Dr. Caruso.
(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
Partnership.
(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.
(5) The Option and the Restricted Units held by Mr. Essig do not give him
the right to acquire any shares within 60 days of February 28, 1998.
Therefore, pursuant to the rule described in Note 1 above, he
beneficially owns no shares. See "-- Employment Agreements."
(6) Includes 31,250 shares held by the Edmund L. Zalinski Company and
18,070 shares held by Whitehall Court, L.P., a family limited
partnership whose beneficiaries include Dr. Zalinski's children. Also
includes 1,000 shares issuable upon exercise of the vested portion of
options held by Dr. Zalinski.
(7) Represents shares issuable upon exercise of the vested portion of
options.
(8) Includes 8,856 shares held by a revocable trust of which Dr.
Pierschbacher is co-trustee. Also includes 79,229 shares issuable
upon exercise of the vested portion of outstanding options held by
Dr. Pierschbacher.
(9) Includes 62,000 shares issuable upon exercise of the vested portion of
outstanding options held by Dr. McKinney.
(10) See Notes 2 and 5 through 9 above. Also includes 292,260 shares, as
well as 138,328 shares issuable upon exercise of the vested
portion of options, held by eight executive officers of the Company
who are not listed in the table.
(11) Gives effect to the proposed Reverse Split of Common Stock, and
excludes fractional share interests. See "Proposal 1. Reverse
Split of Common Stock."
Stockholder Proposals
In order to be eligible for inclusion in the Company's proxy
materials for the 1999 Annual Meeting of Stockholders, stockholders' proposals
to take action at such meeting must comply with applicable Commission rules
and regulations, must be directed to the Secretary of the Company at its
offices set forth on page one of this Proxy Statement and must be received by
the Company no later than December 17, 1998.
-23-
<PAGE>
Other Matters
A copy of the Company's 1997 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, 1997. 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 Judy Brenna, Director, Corporate
Communications, at the offices of the Company set forth on page one of this
Proxy Statement.
By order of the Board of Directors,
/s/ William M. Goldstein
Plainsboro, New Jersey William M. Goldstein
April 17, 1998 Secretary
-24-
<PAGE>
APPENDIX A
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
INTEGRA LIFESCIENCES CORPORATION
* * *
INTEGRA LIFESCIENCES CORPORATION, a corporation organized
and existing under and by virtue of the Delaware General Corporation Law (the
"Corporation"),
DOES HEREBY CERTIFY THAT:
FIRST: The Board of Directors of the Corporation has adopted
a resolution proposing and declaring advisable and in the best interests of
the Corporation the following amendment to Article FOURTH of the Amended and
Restated Certificate of Incorporation of the Corporation, to read in its
entirety as follows (the "Charter Amendment"):
"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 75,000,000
shares, par value $.01 per share, of which 60,000,000 shares
are designated as Common Stock and 15,000,000 shares are
designated as Preferred Stock.
Simultaneously with the time of filing with the Secretary of
State of a Certificate of Amendment on the date hereof (the
"Effective Time"), each share of Common Stock of the
Corporation issued and outstanding immediately prior thereto
(the "Old Common Stock") shall automatically and without
action on the part of the holder thereof be reclassified and
changed into one-half of one share of Common Stock of the
Corporation, $.01 par value (the "New Common Stock"),
subject to treatment of fractional share interests as
described below. Each holder of a certificate or
certificates which immediately prior to the Effective Time
represented outstanding shares of Old Common Stock (the "Old
Certificates," whether one or more) shall be entitled to
receive, upon surrender for cancellation of such Old
Certificates to the transfer agent designated by the
Corporation, a certificate or certificates (the "New
Certificates," whether one or more) representing the number
of shares of New Common Stock into which and for which the
shares of Old Common Stock formerly represented by such Old
Certificates so surrendered are reclassified under the terms
hereof. From and after the Effective Time, the Old
Certificates shall represent only the right to receive New
Certificates (and, where applicable, cash in lieu of
fractional shares, as provided below) pursuant to the
provisions hereof. No certificates or scrip representing
fractional interests in the shares of New Common Stock will
be
A-1
<PAGE>
issued, and no such fractional share interest will entitle
the holder thereof to vote or to any other rights of a
stockholder of the Corporation. A holder of the Old
Certificates shall receive, in lieu of any fraction of a
share of New Common Stock to which the holder would
otherwise be entitled, a cash amount in United States
dollars equal to the same fraction multiplied by two times
the average closing price of the Common Stock on the Nasdaq
National Market for the five trading days immediately
preceding the Effective Time."
SECOND: The stockholders of the Corporation, at an annual
meeting of stockholders called and held upon notice properly given in
accordance with Section 222 of the Delaware General Corporation Law, have
adopted and approved the Charter Amendment in accordance with the provisions
of Section 212 of the Delaware General Corporation Law; and
THIRD: The Charter Amendment has been duly adopted and
approved in accordance with the provisions of Section 242 of the Delaware
General Corporation Law.
IN WITNESS WHEREOF, said Integra Lifesciences Corporation
has caused this Certificate of Amendment of Amended and Restated Certificate
of Incorporation to be executed by a duly authorized officer of the
Corporation this 25th day of May, 1998.
INTEGRA LIFESCIENCES CORPORATION
By:
-------------------------------------------
Stuart M. Essig
President and Chief Executive Officer
A-2
<PAGE>
APPENDIX B
INTEGRA LIFESCIENCES CORPORATION
1998 STOCK OPTION PLAN
SECTION 1
Purpose
This INTEGRA LIFESCIENCES CORPORATION 1998 STOCK OPTION PLAN
(the "Plan") is intended to provide a means whereby Integra LifeSciences
Corporation (the "Company") may, through the grant of incentive stock options
and non-qualified stock options (collectively, "Options") to purchase common
stock of the Company, par value $0.01 per share ("Common Stock") to Key
Employees and Associates (both as defined in Section 3 hereof), attract and
retain such Key Employees and Associates and motivate them to exercise their
best efforts on behalf of the Company, any Related Corporation (as defined
below), or any affiliate of the Company or a Related Corporation.
For purposes of the Plan, a "Related Corporation" shall mean
either a corporate subsidiary of the Company, as defined in section 424(f) of
the Internal Revenue Code of 1986, as amended ("Code"), or the corporate
parent of the Company, as defined in section 424(e) of the Code. Further, as
used in the Plan (a) the term "ISO" shall mean an Option which qualifies as an
incentive stock option within the meaning of section 422 of the Code; and (b)
the term "NQSO" shall mean an Option which does not qualify as an incentive
stock option.
SECTION 2
Administration
The Plan shall be administered by the Company's Stock Option
Committee (the "Committee"), which shall consist of at least two directors of
the Company, who shall be appointed by, and shall serve at the pleasure of,
the Company's Board of Directors (the "Board"). In the event a committee has
not been established in accordance with the preceding sentence, or cannot be
constituted to vote on the grant of an Option, the "Committee" shall consist
of the entire Board. Each member of such Committee, while serving as such,
shall be deemed to be acting in his capacity as a director of the Company.
The Committee shall have full authority, subject to the
terms of the Plan, to select the Key Employees and Associates (both as defined
in Section 3 hereof) to be granted ISOs and/or NQSOs under the Plan, to grant
Options on behalf of the Company, and to set the date of grant and the other
terms of such Options. The Committee may correct any defect, supply any
omission and reconcile any inconsistency in this Plan and in any Option
granted hereunder in the manner and to the extent it shall deem desirable. The
Committee also shall have the authority to establish such rules and
regulations, not inconsistent with the provisions of the Plan, for the proper
administration of the Plan, and to amend, modify or rescind any such rules and
regulations, and to make such determinations and interpretations under, or in
connection with, the Plan, as it deems necessary or advisable. All such rules,
regulations, determinations and interpretations shall be binding and
conclusive upon the Company, its stockholders and all officers and employees
and former officers and employees, and upon their respective legal
representatives, beneficiaries, successors and assigns, and upon all other
persons claiming under or through any of them. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it.
B-1
<PAGE>
SECTION 3
Eligibility
(a) In General. Key Employees and Associates shall be
eligible to receive Options under the Plan. Key Employees and Associates who
have been granted an Option under the Plan shall be referred to as
"Optionees." More than one Option may be granted to an Optionee under the
Plan.
(b) Key Employees. "Key Employees" are officers, executives,
and managerial and non- managerial employees of the Company, a Related
Corporation, or an affiliate of the Company or a Related Corporation who are
selected by the Committee to receive Options. Key Employees of the Company
and/or a Related Corporation shall be eligible to receive ISOs and/or NQSOs.
Key Employees of an affiliate shall be eligible to receive only NQSOs.
(c) Associates. "Associates" are designated non-employee
directors, consultants and other persons providing services to the Company, a
Related Corporation, or an affiliate of the Company or a Related Corporation.
Associates shall be eligible to receive only NQSOs.
SECTION 4
Stock
The maximum number of shares of Common Stock that may be
issued under Options granted under the Plan shall be 2,000,000; provided,
however, that no Key Employee shall receive Options for more than 1,000,000
shares of Common Stock over any one-year period. However, both limits in the
preceding sentence shall be subject to adjustment as hereinafter provided.
Shares issuable 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.
If any Option granted under the Plan expires or otherwise
terminates for any reason whatsoever (including, without limitation, the
Optionee's surrender thereof) without having been exercised, the shares
subject to the unexercised portion of such Option shall continue to be
available for the granting of Options under the Plan as fully as if such
shares had never been subject to an Option; provided, however, that (a) if an
Option is cancelled, the shares of Common Stock covered by the cancelled
Option shall be counted against the maximum number of shares specified above
for which Options may be granted to a single Key Employee, and (b) if the
exercise price of an Option is reduced after the date of grant, the
transaction shall be treated as a cancellation of the original Option and the
grant of a new Option for purposes of counting the maximum number of shares
for which Options may be granted to a Key Employee.
SECTION 5
Granting of Options
From time to time until the expiration or earlier suspension
or discontinuance of the Plan, the Committee may, on behalf of the Company,
grant to Key Employees and Associates under the Plan such Options as it
determines are warranted, subject to the limitations of the Plan; provided,
however, that grants of ISOs and NQSOs shall be separate and not in tandem.
The granting of an Option under the Plan shall not be deemed either to entitle
the Key Employee or Associate to, or to disqualify the Key Employee or
Associate from, any participation in any other grant of Options under the
Plan. In making any determination as to whether a Key Employee or Associate
shall be granted an Option, the type of Option to be granted, and the number
of shares to be covered by such Option, the Committee shall take into account
the duties of the Key Employee or Associate, his or her present and potential
contributions to the success of the Company, a Related Corporation, or an
affiliate of the Company or a Related Corporation, the tax implications to the
Company and the Key Employee or
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Associate of any Option granted, and such other factors as the Committee shall
deem relevant in accomplishing the purposes of the Plan. Moreover, the
Committee may provide in the Option that said Option may be exercised only if
certain conditions, as determined by the Committee, are fulfilled.
SECTION 6
Annual Limit
(a) ISOs. The aggregate Fair Market Value (determined as of the date
the ISO is granted) of the Common Stock 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 incentive stock options under any other
stock option plan of the Company or a Related Corporation) shall not exceed
$100,000. The term "Fair Market Value" shall mean the value of the shares of
Common Stock arrived at by a good faith determination of the Committee and
shall be:
(1) The quoted closing price on the last business day prior to
the specified date, if there is a market for the Common Stock on a registered
securities exchange or in an over-the-counter market;
(2) The weighted 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, if there are no sales on such day but there are such sales
on dates within a reasonable period both before and after such date;
(3) The mean between the bid and asked prices, as reported by
the National Quotation Bureau on the specified date, if actual sales are not
available during a reasonable period beginning before and ending after the
specified date; or
(4) If (1) through (3) above are not applicable, such other
method of determining Fair Market Value as shall be authorized by the Code, or
the rules or regulations thereunder, and adopted by the Committee.
Where the Fair Market Value of shares of Common Stock is
determined under (2) 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.
(b) Options Over Annual Limit. If an Option intended as an ISO is
granted to a Key Employee of the Company or a Related Corporation and such
Option may not be treated in whole or in part as an ISO pursuant to the
limitation in Subsection (a) above, such Option shall be treated as an ISO to
the extent it may be so treated under such limitation and as an NQSO as to the
remainder. For purposes of determining whether an ISO would cause such
limitation to be exceeded, ISOs shall be taken into account in the order
granted.
(c) NQSOs. The annual limits set forth above for ISOs shall not apply
to NQSOs.
SECTION 7
Option Agreements - Other Provisions
Options granted under the Plan shall be evidenced by written
documents ("Option Agreements") in such form as the Committee shall, from time
to time, approve. An Option Agreement shall specify whether the Option is an
ISO or NQSO; provided, however, if the Option is not designated in the Option
Agreement as an ISO or NQSO, the Option shall constitute an ISO if it complies
with the terms of section 422 of the Code, and
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otherwise, it shall constitute an NQSO. Each Optionee shall enter into, and be
bound by, such Option Agreements, as soon as practicable after the grant of an
Option.
In connection with the grant of any Option, the associated Option
Agreement may, in the discretion of the Committee, modify or vary any of the
terms of this Plan, including, without limitation, the terms relating to the
vesting and exercise of Options, both in general and upon termination of
employment or service, disability, and death, the terms relating to the number
of shares issuable upon the exercise of outstanding Options and the treatment
of Options upon the occurrence of certain corporate transactions; provided,
however, that any further increase in the maximum number of shares which may
be granted to an individual in a single grant pursuant to the Plan shall
require such shareholder approval as may be then required under the applicable
rules and regulations under the Code, and that with respect to any grant of an
Option which is intended to be an ISO the terms of the Plan, as in effect on
the date hereof or subsequently amended, and not the terms of the applicable
Option Agreement, shall control. In all other cases, in the event of any
inconsistency or conflict between an Option Agreement approved by the
Committee and this Plan, the terms of the Option Agreement shall control to
the extent provided in the Option Agreement. No Option Agreement may be
amended except in a writing executed by a duly authorized officer of the
Company and the Optionee or his or her permitted successors and assigns.
SECTION 8
Terms and Conditions of Options
Options granted pursuant to the Plan shall include expressly or by
reference the following terms and conditions, as well as such other provisions
not inconsistent with the provisions of this Plan and, for ISOs granted under
this Plan, the provisions of section 422(b) of the Code, as the Committee
shall deem desirable:
(a) Number of Shares. A statement of the number of shares to which
the Option pertains.
(b) Price. A statement of the Option price which shall be determined
and fixed by the Committee in its discretion, but shall not be less than the
higher of 100% (110% in the case of ISOs granted to more than 10% shareholders
as discussed in Subsection (j) below) of the fair market value of the optioned
shares of Common Stock, or the par value thereof, on the date the Option is
granted.
(c) Term.
(1) ISOs. Subject to earlier termination as provided in
Subsections (e), (f) and (g) below and in Section 9 hereof, the term of each
ISO shall be not more than ten years (five years in the case of more than 10%
shareholders as discussed in Subsection (j) below) from the date of grant.
(2) NQSOs. Subject to earlier termination as provided in
Subsections (e), (f) and (g) below and in Section 9 hereof, the term of each
NQSO shall be not more than ten years from the date of grant.
(d) Exercise.
(1) General. Options shall be exercisable in such installments
and on such dates, not less than three months from the date of grant, as the
Committee may specify, provided that:
(A) in the case of new Options granted to an Optionee in
replacement for options (whether granted under the Plan or otherwise) held by
the Optionee, the new Options may be made exercisable, if so determined by the
Committee, in its discretion, at the earliest date the replaced options were
exercisable, but not earlier than three months from the date of grant of the
new Options; and
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(B) the Committee may accelerate the exercise date of any
outstanding Options, in its discretion, if it deems such acceleration to be
desirable.
Any Option shares, the right to the purchase of which has accrued,
may be purchased at any time up to the expiration or termination of the
Option. Exercisable Options may be exercised, in whole or in part, from time
to time by giving written notice of exercise to the Company at its principal
office, specifying the number of shares to be purchased and accompanied by
payment in full of the aggregate Option exercise price for such shares. Only
full shares shall be issued under the Plan, and any fractional share which
might otherwise be issuable upon exercise of an Option granted hereunder shall
be forfeited.
(2) Manner of Payment. The Option price shall be payable:
(A) in cash or its equivalent;
(B) in the case of an ISO, if the Committee in its discretion
causes the Option Agreement so to provide, and in the case of an NQSO, if the
Committee in its discretion so determines at or prior to the time of exercise:
(i) in Common Stock previously acquired by the Optionee;
provided that if such shares of Common Stock were acquired through the
exercise of an incentive stock option and are used to pay the Option price of
an ISO, such shares have been held by the Optionee 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 of Common Stock were acquired through exercise
of a non-qualified stock option or through exercise of an incentive stock
option and are used to pay the Option price of an NQSO, such shares have been
held by the Optionee for a period of more than 12 months on the date of
exercise;
(ii) in Common Stock newly acquired by the Optionee upon
exercise of such Option (which shall constitute a disqualifying disposition in
the case of an ISO);
(iii) in the discretion of the Committee, in any
combination of (A), (B)(i) and/or (B)(ii) above; or
(iv) 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.
In the event the Option price is paid, in whole or in part, with
shares of Common Stock, 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 Common
Stock surrendered in payment of such Option price.
(e) Termination of Employment or Service. If an Optionee's employment
by or service with the Company (and Related Corporations and affiliates) is
terminated by either party prior to the expiration date fixed for his or her
Option for any reason other than death or disability, such Option may be
exercised, to the extent of the number of shares with respect to which the
Optionee could have exercised it on the date of such termination, or to any
greater extent permitted by the Committee, by the Optionee at any time prior
to the earlier of (i) the expiration date specified in such Option, or (ii) an
accelerated termination date determined by the Committee, in its discretion,
except that, subject to Section 9 hereof, such accelerated termination date
shall not be earlier than the date of the Optionee's termination of employment
or service, and shall not be later than one year after the date of the Key
Employee's termination of employment.
(f) Exercise upon Disability of Optionee. If an Optionee shall become
disabled (within the meaning of section 22(e)(3) of the Code) during his or
her employment by or service with the Company (and Related Corporations and
affiliates) and, prior to the expiration date fixed for his or her Option, his
or her
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employment or service is terminated as a consequence of such disability, such
Option may be exercised, to the extent of the number of shares with respect to
which the Optionee could have exercised it on the date of such termination, or
to any greater extent permitted by the Committee, by the Optionee at any time
prior to the earlier of (i) the expiration date specified in such Option, or
(ii) an accelerated termination date determined by the Committee, in its
discretion, except that, subject to Section 9 hereof, such accelerated
termination date shall not be earlier than the date of the Optionee's
termination of employment or service by reason of disability, and shall not be
later than one year after the date of the Key Employee's termination of
employment. In the event of the Optionee's legal disability, such Option may
be so exercised by the Optionee's legal representative.
(g) Exercise upon Death of Optionee. If an Optionee shall die during
his or her employment by or service with the Company (and Related Corporations
and affiliates), and prior to the expiration date fixed for his or her Option,
or if an Optionee whose employment or service is terminated for any reason,
shall die following his or her termination of employment or service but prior
to the earliest of (i) the expiration date fixed for his or her Option, (ii)
the expiration of the period determined under Subsections (e) and (f) above,
or (iii) in the case of an ISO, three months following termination of the Key
Employee's employment, such Option may be exercised, to the extent of the
number of shares with respect to which the Optionee could have exercised it on
the date of his or her death, or to any greater extent permitted by the
Committee, by the Optionee's estate, personal representative or beneficiary
who acquired the right to exercise such Option by bequest or inheritance or by
reason of the death of the Optionee, at any time prior to the earlier of (i)
the expiration date specified in such Option or (ii) an accelerated
termination date determined by the Committee, in its discretion except that,
subject to Section 9 hereof, such accelerated termination date shall not be
later than one year after the date of death.
(h) Non-Transferability. No ISO and, except to the extent provided in
the related Option Agreement, no NQSO shall be assignable or transferable by
the Optionee otherwise than by will or by the laws of descent and
distribution, and during the lifetime of the Optionee, the Option shall be
exercisable only by him or her or by his or her guardian or legal
representative. If the Optionee is married at the time of exercise and if the
Optionee so requests at the time of exercise, the certificate or certificates
shall be registered in the name of the Optionee and the Optionee's spouse,
jointly, with right of survivorship.
(i) Rights as a Stockholder. An Optionee shall have no rights as a
stockholder with respect to any shares covered by his or her Option until the
issuance of a stock certificate to him for such shares.
(j) Ten Percent Shareholder. If the Optionee owns more than 10% of
the total combined voting power of all shares of stock of the Company or of a
Related Corporation at the time an ISO is granted to him or her, the Option
price for the ISO shall be not less than 110% of the fair market value of the
optioned shares of Common Stock on the date the ISO is granted, and such ISO,
by its terms, shall not be exercisable after the expiration of five years from
the date the ISO is granted. The conditions set forth in this Subsection (j)
shall not apply to NQSOs.
(k) Listing and Registration of Shares. Each Option shall be subject
to the requirement that, if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
covered thereby upon any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting
of such Option or the purchase of shares thereunder, or that action by the
Company or by the Optionee should be taken in order to obtain an exemption
from any such requirement, no such Option may be exercised, in whole or in
part, unless and until such listing, registration, qualification, consent,
approval, or action shall have been effected, obtained, or taken under
conditions acceptable to the Committee. Without limiting the generality of the
foregoing, each Optionee or his or her legal representative or beneficiary may
also be required to give satisfactory assurance that shares purchased upon
exercise of an Option are being purchased for investment and not with a view
to distribution, and certificates representing such shares may be legended
accordingly.
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(l) Withholding and Use of Shares to Satisfy Tax Obligations. The
obligation of the Company to deliver shares of Common Stock upon the exercise
of any Option shall be subject to applicable federal, state and local tax
withholding requirements.
If the exercise of any Option is subject to the withholding
requirements of applicable tax laws, the Committee, in its discretion (and
subject to such withholding rules ("Withholding Rules") as shall be adopted by
the Committee), may permit the Optionee to satisfy the withholding tax, in
whole or in part, by electing to have the Company withhold (or by returning to
the Company) shares of Common Stock, which shares shall be valued, for this
purpose, at their Fair Market Value on the date of exercise of the Option (or
if later, the date on which the Optionee recognizes ordinary income with
respect to such exercise) (the "Determination Date"). An election to use
shares of Common Stock to satisfy tax withholding requirements must be made in
compliance with and subject to the Withholding Rules. The Committee may not
withhold shares in excess of the number necessary to satisfy the minimum
income tax withholding requirements. In the event shares of Common Stock
acquired under the exercise of an incentive stock option are used to satisfy
such withholding requirement, such shares of Common Stock must have been held
by the Optionee for a period of not less than the holding period described in
section 422(a)(1) of the Code on the Determination Date, or if such shares of
Common Stock were acquired through exercise of a non-qualified stock option,
such shares were acquired at least 12 months prior to the Determination Date.
SECTION 9
Capital Adjustments; Corporate Transactions
The number of shares which may be issued under the Plan, the maximum
number of shares with respect to which Options may be granted to any Key
Employee under the Plan, both as stated in Section 4 hereof, and the number of
shares issuable upon exercise of outstanding Options under the Plan (as well
as the Option price per share under such outstanding Options), shall, subject
to the provisions of section 424(a) of the Code, be adjusted, as may be deemed
appropriate by the Committee, to reflect any stock dividend, stock split,
share combination, or similar change in the capitalization of the Company.
In the event of a corporate transaction (as that term is described in
section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), each outstanding Option shall be
assumed by the surviving or successor corporation; provided, however, that, in
the event of a proposed corporate transaction, the Committee may terminate all
or a portion of the outstanding Options if it determines that such termination
is in the best interests of the Company. If the Committee decides to terminate
outstanding Options, the Committee shall give each Optionee holding an
outstanding Option to be terminated not less than seven days' notice prior to
any such termination by reason of such a corporate transaction, and any such
Option which 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, as provided in Section 8(d) hereof the
Committee, in its discretion, may accelerate, in whole or in part, the date on
which any or all Options become exercisable.
The Committee also may, in its discretion, change the terms of any
outstanding Option to reflect any such corporate transaction, provided that,
in the case of ISOs, such change is excluded from the definition of a
"modification" under section 424(h) of the Code.
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SECTION 9A
Change in Control
Notwithstanding any other provision of the Plan to the contrary, all
outstanding Options shall become fully vested and exercisable upon a Change in
Control of the Company. "Change in Control" shall mean any of the following
events:
(a) 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 Securities
Exchange Act of 1934, as amended (the "Exchange Act")) immediately after which
such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
under the Exchange Act) of 50% 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 clauses (i), (ii) and (iii) of paragraph (c)
of this Section 9A shall not be a Change in Control under this paragraph (a);
(b) The individuals who, as of February 27, 1998, are members of the
Company's Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least two-thirds of the Board of Directors; provided, however,
that if the election, or nomination for election by the shareholders, of any
new director was approved by a vote of at least two-thirds of the members of
the Board of Directors who constitute Incumbent Board members, such new
directors shall for all purposes be considered as members of the Incumbent
Board as of February 27, 1998; 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;
(c) 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: (i) more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors of (x) the corporation resulting from such Business Combination (the
"Surviving Corporation"), or (y) 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 (ii) 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;
(d) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company; or
(e) acceptance by shareholders of the Company of shares in a share
exchange if the shareholders of the Company immediately before such share
exchange do not own, directly or indirectly, immediately following such share
exchange more than 50% of the combined voting power of the outstanding
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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.
SECTION 10
Acquisitions
Notwithstanding any other provision of this Plan, Options may be
granted hereunder in substitution for options held by directors, key
employees, and associates of other corporations who are about to, or have,
become Key Employees or Associates of the Company or a Related Corporation as
a result of a merger, consolidation, acquisition of assets or similar
transaction by the Company or a Related Corporation. The terms, including the
option price, of the substitute options 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 options in substitution
for which they are granted.
SECTION 11
Amendment or Replacement of Outstanding Options
The Committee shall have the authority to effect, at any time and
from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding Options under the Plan and to grant in
substitution therefor new Options under the Plan covering the same or a
different number of shares of Common Stock but having a per share purchase
price not less than the greater of par value or 100% of the Fair Market Value
of a share of Common Stock on the new date of the grant. The Committee may
permit the voluntary surrender of all or a portion of any Option to be
conditioned upon the granting to the Optionee under the Plan of a new Option
for the same or a different number of shares of Common Stock as the Option
surrendered, or may require such voluntary surrender as a condition precedent
to a grant of a new Option to such Optionee. Any new Option shall be
exercisable at the price, during the period, and in accordance with any other
terms and conditions specified by the Committee at the time the new Option is
granted, all determined in accordance with the provisions of the Plan without
regard to the price, period of exercise, and any other terms or conditions of
the Option surrendered.
SECTION 12
Amendment or Discontinuance of the Plan
The Board from time to time may suspend or discontinue the Plan or,
subject to such shareholder approval as may be then required under the
applicable rules and regulations of the Code, may amend it in any respect
whatsoever. Notwithstanding the foregoing, no such suspension, discontinuance
or amendment shall materially impair the rights of any holder of an
outstanding Option without the consent of such holder.
SECTION 13
Rights
Neither the adoption of the Plan nor any action of the Board or the
Committee shall be deemed to give any individual any right to be granted an
Option, or any other right hereunder, unless and until the Committee shall
have granted such individual an Option, and then his or her rights shall be
only such as are provided by the Option Agreement.
Any Option under the Plan shall not entitle the holder thereof to any
rights as a stockholder of the Company prior to the exercise of such Option
and the issuance of the shares pursuant thereto. Further, notwithstanding any
provisions of the Plan or the Option Agreement with an Optionee, the Company
shall have
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the right, in its discretion, to retire an Optionee at any time pursuant to
its retirement rules or otherwise to terminate his or her employment or
service at any time for any reason whatsoever.
SECTION 14
Indemnification of Board and Committee
Without limiting any other rights of indemnification which they may
have from the Company and any Related Corporation (and any affiliate), 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 Option 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
own behalf.
SECTION 15
Application of Funds
The proceeds received by the Company from the sale of Common Stock
pursuant to Options granted under the Plan shall be used for general corporate
purposes. Any cash received in payment for shares upon exercise of an Option
to purchase Common Stock shall be added to the general funds of the Company
and shall be used for its corporate purposes. Any Common Stock received in
payment for shares upon exercise of an Option to purchase Common Stock shall
become treasury stock.
SECTION 16
Shareholder Approval
This Plan shall become effective as of February 27, 1998 (the date
the Plan was adopted by the Board); provided, however, that if the Plan is not
approved by the Company's shareholders within 12 months before or after said
date, the Plan and all Options granted hereunder shall be null and void and no
additional options shall be granted hereunder.
SECTION 17
No Obligation to Exercise Option
The granting of an Option shall impose no obligation upon an Optionee
to exercise such Option.
SECTION 18
Termination of Plan
Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on
February 26, 2008, which date is within ten years after the date the Plan was
adopted by the Board (or the date the Plan was approved by the shareholders of
the Company, whichever is earlier), and no Options hereunder shall be granted
thereafter. Nothing contained in this Section
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18, however, shall terminate or affect the continued existence of rights
created under Options issued hereunder and outstanding on February 26, 2008,
which by their terms extend beyond such date.
SECTION 19
Governing Law
With respect to any ISOs granted pursuant to the Plan and the Option
Agreements thereunder, the Plan, such Option Agreements and any ISOs granted
pursuant thereto shall be governed by the applicable Code provisions to the
maximum extent possible. Otherwise, the laws of the state of Delaware shall
govern the operation of, and the rights of Optionees under, the Plan, the
Option Agreements and any Options granted thereunder.
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APPENDIX C
INTEGRA LIFESCIENCES CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
(Effective as of July 1, 1998)
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. PURPOSE................................................................................................ C-3
2. ADMINISTRATION......................................................................................... C-3
3. ELIGIBILITY............................................................................................ C-3
4. STOCK.................................................................................................. C-4
5. GRANT OF OPTION........................................................................................ C-4
6. PARTICIPATION.......................................................................................... C-4
7. EXERCISE OF OPTION.................................................................................... C-5
8. EMPLOYEE'S RIGHT TO SURRENDER OPTION AND/OR CEASE
PAYROLL DEDUCTIONS.................................................................................... C-5
9. TERMS AND CONDITIONS OF OPTIONS....................................................................... C-6
10. INDEMNIFICATION OF COMMITTEE.......................................................................... C-8
11. AMENDMENT OF PLAN..................................................................................... C-8
12. EFFECTIVE DATE OF PLAN................................................................................ C-8
13. ABSENCE OF RIGHTS...................................................................................... C-9
14. APPLICATION OF FUNDS.................................................................................. C-9
15. MISCELLANEOUS......................................................................................... C-9
</TABLE>
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INTEGRA LIFESCIENCES CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
(Effective as of July 1, 1998)
1. PURPOSE
This Employee Stock Purchase Plan (the "Plan") is intended to
encourage stock ownership by all eligible employees of Integra LifeSciences
Corporation (the "Company") and of certain of its "subsidiary corporations"
(as defined in ss.424(f) of the Internal Revenue Code of 1986, as amended (the
"Code")) so that they may acquire a, or increase their, proprietary interest
in the success of the Company. It is further intended that options issued
pursuant to this Plan shall constitute options issued pursuant to an "employee
stock purchase plan," within the meaning of ss.423 of the Code. The Company's
Board of Directors (the "Board") may, from time to time, approve participation
in the Plan by employees of any subsidiary corporation of the Company and/or
of any "parent corporation" of the Company (as defined in ss.424(e) of the
Code).
2. ADMINISTRATION
The Plan shall be administered by the Stock Option Committee (the
"Committee") of the Board. Acts approved by a majority 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. 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.
The Committee shall have full and final authority, in its discretion
but subject to the express provisions of the Plan: (a) to interpret the Plan;
(b) to make, amend, and rescind rules and regulations relating to the Plan;
(c) to determine the terms and provisions of the instruments by which options
shall be evidenced; and (d) to make all other determinations necessary or
advisable for the administration of the Plan. No member of the Board or of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted hereunder. Any and all
authority of the Committee may be delegated by the Committee to a Plan
Administrator.
3. ELIGIBILITY
(a) General Rule. Except as provided in paragraph (b) below
and subject to ss.9(e), each employee of the Company or a participating
subsidiary corporation shall be eligible for option grants described in ss.5.
(b) Exceptions. An employee will not be eligible to
participate in the Plan if he or she is customarily employed by the Company or
a participating subsidiary corporation for twenty (20) hours or fewer per week
or if he or she is customarily employed by the Company or a participating
subsidiary corporation for not more than five (5) months in any calendar year.
Further, an employee who is classified by the rules of the Committee as a
"temporary employee" and who has been employed for less than six months, will
not be eligible to participate in the Plan. In addition, in no event may an
employee be granted an option if such employee, immediately after the option
is granted would own stock possessing five (5) percent or more of the total
combined voting power or value of all classes of stock of the Company or of
its parent corporation (if any) or of a subsidiary corporation. For purposes
of determining stock ownership under this paragraph, the rules of ss.424(d) of
the Code (relating to attribution of stock ownership) shall apply, and stock
which the employee may purchase under outstanding options shall be treated as
stock owned by the employee.
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4. STOCK
The stock subject to the options shall be shares of the Company's
authorized but unissued or reacquired as Treasury shares $.01 par value common
stock ("Common Stock"). The aggregate number of shares of Common Stock which
may be issued under options shall not exceed one million (1,000,000); provided
that such number shall be adjusted if required by ss.9(h).
5. GRANT OF OPTION
(a) Grant of Option. Employees shall have the right to
purchase shares of Common Stock through payroll deductions under options
granted as of July 1, 1998 (or, in the Committee's discretion, as soon as
administratively practicable thereafter) and as of the first business day of
each subsequent January (the "Grant Dates"). Each employee who meets the
eligibility requirements of ss.3 shall be granted an option on the first Grant
Date coinciding with or immediately following the date he or she becomes an
eligible employee, and on each succeeding Grant Date, provided he or she
continues to meet the eligibility requirements of ss.3. The term of the first
option term shall be six (6) calendar months (or, in the Committee's
discretion may be fewer than six (6) calendar months); the terms of the second
and succeeding options shall be twelve (12) calendar months (from January 1 to
December 31).
If an individual becomes an eligible employee after the
commencement and before October 1 of an Option Term, he or she shall be
granted an option as of the first business day of the first calendar quarter
(i.e., the first business day occurring on or after April 1, July 1, or
October 1) (collectively, the "Delayed Grant Dates") coinciding with or
immediately following his or her eligibility date, provided he or she
continues to meet the eligibility requirements of ss.3.
(b) Limit on Number of Shares Purchasable Under Option. In
no event may the number of full shares purchased by an employee under an
option granted pursuant to paragraph (a) above exceed 8,000 for an Option
Term; provided that such number shall be adjusted if required by ss.9(h). The
share limit in the preceding sentence shall be prorated in the case of an
employee who is granted an option on a Delayed Grant Date. Further, the
aggregate number of full shares of Common Stock purchasable under an option
for an Option Term shall be subject to the limitations described in ss.9(e)
and ss.9(k).
6. PARTICIPATION
(a) Payroll Deductions. Subject to rules established by the
Committee from time to time, an eligible employee may elect to participate in
the Plan by making payroll deductions (as a whole percentage of the employee's
basic rate of compensation each pay, subject to the limits set forth in
paragraph (b) below) for each Option Term in which the employee is eligible to
participate. For purposes of this Plan, "basic rate of compensation" shall
mean an employee's basic hourly rate or salary from the Company and its
participating subsidiary corporations, excluding any commissions, bonuses,
overtime, or other extra or incentive pay.
(b) Maximum Payroll Deduction. The maximum total payroll
deductions for any employee for an Option Term may not exceed fifteen (15)
percent of the employee's basic rate of compensation (as defined in paragraph
(a) above) for the Option Term (or, if the employee has a Delayed Grant Date,
for the portion of the Option Term during which the employee is eligible to
participate).
(c) No Interest on Payroll Deductions. Payroll deductions
made under the Plan will be held as general assets of the Company or a
participating subsidiary, and will not be credited with any interest.
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(d) Participation after Surrender or Cessation of Payroll
Deductions. Each employee who has satisfied the eligibility requirements of
ss.3 but who has elected to surrender his or her option or to cease payroll
deductions in accordance with ss.8 (or, as described in paragraph (f) below,
is deemed to have surrendered his or her option) for an Option Term, shall be
granted an option in accordance with ss.5 in subsequent Option Terms, provided
the employee continues to meet the eligibility requirements of ss.3. However,
such employee must submit a new payroll deduction agreement under paragraph
(a) above in order to begin payroll deductions for a subsequent Option Term.
(e) No Contract to Purchase. Electing to make payroll
deductions for any Option Term will not constitute a contract to purchase any
of the Common Stock purchasable under an option.
(f) Waiver of Rights. An employee who fails to elect to
participate in the Plan for an Option Term in the manner and within the time
provided under paragraph (a) above shall be deemed to have surrendered the
option granted to the employee for such Option Term and shall have no further
rights under the Plan with respect to such surrendered option.
7. EXERCISE OF OPTION
(a) Method of Exercise. Unless the employee has surrendered
his or her option and withdrawn his or her payroll deductions in accordance
with ss.8(a) (or is deemed to have surrendered his or her option under
ss.6(f)), as of the last business day of each Option Term (the "Exercise
Date"), the employee will be credited for such number of full shares of Common
Stock as his or her accumulated payroll deductions shall be sufficient to pay
for in full, subject to the limitations of ss.5(b).
(b) Return of Excess Payroll Deductions. Any payroll
deductions remaining after the employee exercises an option for an Option Term
shall be refunded to the employee.
8. EMPLOYEE'S RIGHT TO SURRENDER OPTION AND/OR CEASE PAYROLL DEDUCTIONS
(a) Surrender of Option and Withdrawal of Payroll
Deductions. An employee may elect to surrender his or her option for any
Option Term and withdraw any payroll deductions already made for the Option
Term under the Plan by giving written notice to the Company. However, in order
for such surrender to be effective for the Option Term, the employee's written
notice must be received by the Company on or before the sixtieth (60th)
calendar day prior to the end of the Option Term. All of such employee's
payroll deductions will be refunded to him or her as soon as practicable after
the Company receives the employee's notice of withdrawal, and no further
payroll deductions will be made from the employee's pay until the employee
completes a new payroll deduction agreement in accordance with ss.6(a) for a
subsequent Option Term. As to any option so surrendered, the employee shall
have no further right of any nature at any subsequent time.
(b) Cessation of Payroll Deductions. Without withdrawing any
payroll deductions already made for the Option Term, an employee may elect to
terminate his or her participation in part during an Option Term by ceasing
payroll deductions for the remainder of the Option Term. However, in order for
such election to be effective for the Option Term, the employee must give the
Company written notice of such election in accordance with procedures
prescribed by the Committee. An employee who elects to cease payroll
deductions for an Option Term shall not be eligible to resume payroll
deductions during such Option Term.
(c) No Effect on Later Participation. An employee's
surrender of an option and/or cessation of payroll deductions for an Option
Term will not have any effect upon his or her eligibility to participate in
the Plan for subsequent Option Terms.
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(d) Surrender Upon Termination of Employment. Upon
termination of the employee's employment during an Option Term for any reason,
including retirement, payroll deductions made by the employee for such Option
Term will be refunded to the employee, or, in the case of death, to the person
or persons entitled thereto under ss.9(g).
9. TERMS AND CONDITIONS OF OPTIONS
Stock options granted pursuant to the Plan shall be evidenced by
agreements in such form as the Committee shall prescribe, provided that all
employees granted such agreements shall have the same rights and privileges
(except as otherwise required under the Plan), and provided further that such
agreements shall comply with and be subject to the terms and conditions set
forth below.
(a) Number of Shares. Each option shall state the maximum
number of shares to which it pertains.
(b) Option Price. The per share exercise price of an option
shall be the lesser of (i) 85% of the per share fair market value of the
Common Stock as of the Grant Date (or the employee's Delayed Grant Date) for
the Option Term, or (ii) 85% of the per share fair market value of the Common
Stock as of the Exercise Date for the Option Term. In making such
determination, during such time as the Common Stock is listed upon an
established stock exchange or exchanges, the per share "fair market value"
shall be deemed to be the quoted closing price on the last business day before
the Grant Date, Delayed Grant Date, or Exercise Date, whichever is applicable.
During such time as the Common Stock is not listed upon an established stock
exchange, the per share fair market value shall be determined by the Committee
by a method sanctioned by the Code, or rules and regulations thereunder. The
fair market value per share is to be determined in accordance with Treas. Reg.
ss.ss. 1.421-7(e) and 20.2031-2. Subject to the foregoing, the Committee in
fixing the exercise price shall have full authority and be fully protected in
doing so.
(c) Medium and Time of Payment. The exercise price of an
option shall be payable in United States dollars upon the exercise of the
option and shall be payable only by accumulated payroll deductions made in
accordance with ss.6.
(d) Term of Option. No option may be exercised after the end
of the Option Term in which the option was granted.
(e) Accrual Limitation. No option shall permit the rights of
an employee to purchase stock under all employee stock purchase plans,
intended to qualify under ss.423 of the Code, of the Company and its parent
corporation (if any) and subsidiary corporations to accrue at a rate which
exceeds $25,000 in fair market value of such stock (determined at the time
options are granted) for each calendar year in which the option is outstanding
at any time. For purposes of this paragraph (e) -- (i) the right to purchase
Common Stock under an option accrues when the option (or any portion thereof)
first becomes exercisable during the calendar year; (ii) the right to purchase
Common Stock under an option accrues at the rate provided in the option but in
no case may such rate exceed $25,000 of fair market value of such Common Stock
(determined on the Grant Date of such option) for any one calendar year; and
(iii) a right to purchase Common Stock which has accrued under one option
granted pursuant to the Plan may not be carried over to any other option.
(f) Termination of Employment. In the event that an employee
ceases to be employed by the Company and its participating subsidiary
corporations for any reason during the employee's participation in an Option
Term, such individual shall be deemed to have surrendered his or her option
for such Option Term and his or her accumulated payroll deductions shall be
refunded in accordance with ss.8(d).
Whether an authorized leave of absence for military or
governmental service shall constitute termination of employment for the
purposes of the Plan shall be determined by the Committee in accordance with
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applicable law, which determination, unless modified by the Board (in
accordance with applicable law), shall be final and conclusive.
(g) Nontransferability. Neither payroll deductions made by
an employee, nor any rights with regard to the exercise of an option or to
receive stock, nor any rights to a return of payroll deductions under the Plan
may be assigned, transferred, pledged or otherwise disposed of in any way by
the employee. Any such attempted assignment, transfer, pledge or other
disposition shall be without effect. Notwithstanding the foregoing, any rights
to a return of payroll deductions under the Plan after surrender of an option
due to an employee's death, as described in ss.8(d), may be transferred by
will or the laws of descent and distribution. An option may be exercised only
by the employee.
(h) Recapitalization. Subject to any required action by the
stockholders, the share limits of ss.4 and ss.5(b) and the number of shares of
Common Stock covered by each outstanding option, and the price per share in
each such option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock of the Company
resulting from a subdivision (stock-split) or consolidation (reverse-split) of
shares or the payment of a stock dividend (but only on the Common Stock) or
any other increase or decrease in the number of such shares affected, without
receipt of consideration by the Company.
Subject to any required action by the stockholders, if the
Company shall be the surviving corporation in any merger or consolidation,
each outstanding option shall pertain and apply to the securities to which a
holder of the number of shares of Common Stock subject to the option would
have been entitled. A dissolution or liquidation of the Company or a merger or
consolidation in which the Company is not the surviving corporation, shall
cause each outstanding option to terminate, provided that each employee
granted an option under this Plan shall, in such event, have the right
immediately prior to such dissolution or liquidation, or merger or
consolidation in which the Company is not the surviving corporation, to
exercise his or her option.
In the event of a change in the Common Stock of the Company
as presently constituted which is limited to a change of all of its authorized
shares with par value into the same number of shares with a different par
value or without par value, the shares resulting from any such change shall be
deemed to be Common Stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock
or securities of the Company, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive
provided that each option granted pursuant to this Plan shall not be adjusted
in a manner that causes the option to fail to continue to qualify as an option
issued pursuant to an "employee stock purchase plan" within the meaning of
ss.423 of the Code.
Except as expressly provided in this paragraph (h), an
employee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any stock dividend, any other
increase or decrease in the number of shares of stock of any class, or any
dissolution, liquidation, merger, or consolidation or spin-off of assets or
stock of another corporation; and any issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to the
option.
The grant of an option pursuant to the Plan shall not affect
in any way the right or power of the Company to make adjustments,
reclassification, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
(i) Rights as a Stockholder. An employee shall have no
rights as a stockholder with respect to any shares of Common Stock covered by
his or her option until the date the option is exercised in accordance with
the terms of the Plan. No adjustment shall be made for dividends (ordinary or
extraordinary,
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whether in cash, securities or other property) or distributions or other
rights for which the record date is prior to the date such stock certificate
is issued, except as provided in paragraph (h) above.
(j) Investment Purpose. Each option under the Plan shall be
granted on the condition that the purchases of Common Stock thereunder shall
be for investment purposes and not with a view to resale or distribution,
except that in the event the Common Stock subject to such option is registered
under the Securities Act of 1933, as amended (the "Securities Act"), or in the
event a resale of such stock without such registration would otherwise be
permissible, such condition shall be inoperative if in the opinion of counsel
for the Company such condition is not required under the Securities Act or any
other applicable law, regulation or rule of any governmental agency.
(k) Adjustment in Number of Shares Exercisable. If the
aggregate number of shares purchased under options granted under the Plan
exceeds the aggregate number of shares of Common Stock specified in ss.4, the
Company shall make a pro rata allocation of the shares available for
distribution so that the limit of ss.4 is not exceeded, and the balance of
payroll deductions made by each participating employee shall be returned to
him or her as promptly as possible.
(l) Other Provisions. The option agreements authorized under
the Plan shall contain such other provisions as the Committee shall deem
advisable, provided that no such provision may in any way be in conflict with
the terms of the Plan.
10. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have
as directors or as members of the Committee, the members of the Committee
shall be indemnified by the Company against the reasonable expenses, including
attorneys' fees actually and necessarily incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, 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 option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Committee member is
liable for negligence or misconduct in the performance of his or her duties;
provided that within sixty (60) days after institution of any such action,
suit or proceeding a Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
11. AMENDMENT OF PLAN
The Committee may, to the extent permitted by law, from time to time,
with respect to any shares of Common Stock not subject to options at the time,
suspend, discontinue, revise or amend the Plan in any respect whatsoever
except that no such revision or amendment may permit granting of options under
this Plan to persons other than employees of the Company, its parent
corporation (if any) or a subsidiary corporation, or otherwise cause options
issued under it to fail to meet the requirements of ss.423 of the Code.
Furthermore, the Plan may not, without the approval of a majority of the votes
cast 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, be amended in any manner that will change the
number of shares subject to the Plan.
12. EFFECTIVE DATE OF PLAN
The Plan will become effective as of July 1, 1998, or as soon as
administratively practicable thereafter, subject, however, to approval by the
holders of at least a majority of the Common Stock present or represented,
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and entitled to vote, at a special or annual meeting of the stockholders at
which a quorum is present held within twelve (12) months before or after
February 27, 1998 (the date the Plan was approved by the Board). If the Plan
is not so approved, the Plan shall not become effective.
13. ABSENCE OF RIGHTS
The granting of an option to a person shall not entitle that person
to continued employment by the Company or a participating subsidiary
corporation or affect the terms and conditions of such employment. The Company
or any subsidiary corporation shall have the absolute right, in its
discretion, to terminate an employee's employment, whether or not such
termination may result in a partial or total termination of his or her option
under this Plan.
14. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock
pursuant to options will be used for general corporate purposes.
15. MISCELLANEOUS
(a) Provisions of Plan Binding. The provisions of the Plan
shall, in accordance with its terms, be binding upon, and inure to the benefit
of, all successors of each employee participating in the Plan, including,
without limitation, such employee's estate and the executors, administrator or
trustees thereof, heirs and legatees, and any receiver, trustee in bankruptcy
or representative of creditors of such employee.
(b) Applicable Law. Delaware law shall govern all matters
relating to this Plan except to the extent it is superseded by federal law.
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INTEGRA LIFESCIENCES CORPORATION
105 MORGAN LANE
PLAINSBORO, NEW JERSEY 08536
PROXY - Annual Meeting of Stockholders - Monday, May 18, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard E. Caruso and Stuart M. Essig
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 Corporation
(the "Company") held of record by the undersigned on April 8, 1998 at the
Annual Meeting of Stockholders to be held on Monday, May 18, 1998 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 1, 2, 3 AND 5; FOR ALL NOMINEES LISTED FOR
ELECTION OF DIRECTORS UNDER PROPOSAL 4; AND IN ACCORDANCE WITH THE PROXIES'
JUDGEMENT UPON OTHER MATTERS PROPERLY COMING BEFORE THE MEETING AND ANY
ADJOURNMENT OR POSTPONEMENT THEREOF.
(Continued, and to be signed, on Reverse Side)
- -------------------------------------------------------------------------------
Please mark your
/X/ vote as in this
example
FOR all nominees WITHHOLD
listed (except as AUTHORITY Nominees:
marked to the To vote for all nominees Keith Bradley
contrary below) listed at right Stuart M. Essig
4. ELECTION OF Richard E. Caruso
DIRECTORS / / / / George W. McKinney,
III
James M. Sullivan
Edmund L. Zalinski
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, write the nominee's name below)
- -----------------------------------------------
FOR AGAINST ABSTAIN
1. Proposal to approve and adopt an amendment to / / / / / /
the Company's Amended and Restated Certificate
of Incorporation to effect a one-for-two
reverse split of Common Stock.
2. Proposal to approve and adopt the Integra / / / / / /
LifeSciences Corporation 1998 Stock Option
Plan.
3. Proposal to approve and adopt the Integra / / / / / /
LifeSciences Corporation Employee Stock
Purchase Plan.
5. Proposal to ratify the appointment Coopers & / / / / / /
Lybrand L.L.P. as the Company's independent
auditors for the fiscal year ending December
31, 1998.
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 MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE
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DATE
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SIGNATURE
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DATE
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NOTE: Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign with full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
