SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
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SeaSpine Holdings Corporation
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5770 Armada Drive
Carlsbad, California 92008
NOTICE OF 20202021 ANNUAL MEETING OF STOCKHOLDERS
The annual meeting of stockholders of SeaSpine Holdings Corporation will be held at our principal executive offices located at 5770 Armada Drive, Carlsbad, California 92008, on Wednesday, June 3, 20202, 2021 at 7:00 a.m. local time, for the following purposes:
| 1. | To elect | ||||
| 2. | To ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, | ||||
| 2021. | |||||
| 3. | To approve, on an | ||||
| named executive officers. | |||||
| 4. | To indicate, on an advisory basis, the preferred frequency of holding an advisory vote on the compensation of our named executive officers. | ||||
| 5. | To approve an amendment to our 2015 Employee Stock Purchase Plan. | ||||
| 6. | To approve an amendment to our amended and restated certificate of incorporation. | ||||
| 7. | To transact any other business that may properly come before the annual meeting or any adjournment or postponement thereof. | ||||
Only stockholders of record at the close of business on April 8, 20205, 2021 will be entitled to notice of, and to vote at, the annual meeting or any adjournment or postponement thereof.
All stockholders are cordially invited to attend the annual meeting. Whether or not you expect to attend the annual meeting, please vote online or by phone as described in the accompanying proxy materials or, if you requested that the proxy materials be mailed to you, please complete, sign and date the proxy card that is mailed to you and return it promptly. Even if you plan to attend the annual meeting in person, we encourage you to vote your shares in advance online, by phone, or by mail to ensure that your vote will be represented at the annual meeting.
| By Order of the Board of Directors, | ||||||||
| Carlsbad, California | ||||||||
| April 21, 2021 | /s/KEITH C. VALENTINE | |||||||
| Keith C. Valentine | ||||||||
| Your vote is important. Please vote your shares whether or not you plan to attend the meeting. | President, Chief Executive Officer and Director | |||||||
IMPORTANT NOTICE — CONTINGENT VIRTUAL MEETING
TABLE OF CONTENTS
| Page | |||||
5770 Armada Drive
Carlsbad, California 92008
PROXY STATEMENT FOR THE 20202021 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, JUNE 3, 20202, 2021
The board of directors of SeaSpine Holdings Corporation is soliciting proxies for use at the annual meeting of stockholders to be held on Wednesday, June 3, 20202, 2021 at 7:00 a.m., local time, at our principal executive offices located at 5770 Armada Drive, Carlsbad, California 92008. If you need directions to the location of the annual meeting, please contact us at 866-942-8698. In this proxy statement, the terms "SeaSpine," the "Company," "we," "us" and "our" refer to SeaSpine Holdings Corporation.
We use the internet as the primary means of furnishing proxy materials to our stockholders. We are sending a Notice of Internet Availability of Proxy Materials (the Notice of Internet Availability) to our stockholders with instructions on how to access our other proxy materials online and how to request a printed copy of those materials if so desired. The electronic delivery of our proxy materials will significantly reduce our printing and mailing costs and the environmental impact of the circulation of our proxy materials. The Notice of Internet Availability was first sent or made available on or about April 20, 202021, 2021 to stockholders of record entitled to notice of, and to vote at, the annual meeting.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on June 3, 2020:2, 2021: This proxy statement and our annual report are available electronically at www.proxydocs.com/SPNE.
IMPORTANT NOTICE — CONTINGENT VIRTUAL MEETING
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GENERAL INFORMATION
What am I being asked to vote on?
There are three6 proposals scheduled for a vote:
Proposal No. 1: The election of threetwo Class IIIII directors for a three-year term to expire at the 20232024 annual meeting of stockholders:
•Kimberly J. Commins-Tzoumakas;
•Kirtley (Kirt)Keith C. Stephenson.Valentine.
Proposal No. 2: Ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020.2021.
Proposal No. 3: Approval, on an advisory basis, of the compensation of our named executive officers.
Proposal No. 4: To indicate, on an advisory basis, the preferred frequency of holding an advisory vote on the compensation of our named executive officers.
Proposal No. 5: Approval of an amendment to the Company's Amended2015 Employee Stock Purchase Plan.
Proposal No. 6: Approval of an amendment to our amended and Restated 2015 Incentive Award Plan.restated certificate of incorporation.
Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
We use the internet as the primary means of furnishing proxy materials to our stockholders. We are sending a Notice of Internet Availability of Proxy Materials (the Notice(Notice of Internet Availability) to our stockholders with instructions on how to access our other proxy materials online and how to request a printed copy of those materials if so desired. There is no charge for requesting a printed copy. Please make your request for a printed copy on or before May 22, 202021, 2021 to facilitate timely delivery.
Stockholders may follow the instructions in the Notice of Internet Availability to elect to receive future proxy materials in print by mail or electronically by email. We encourage stockholders to take advantage of the availability of the proxy materials online to help reduce the environmental impact of our annual meetings and to reduce our printing and mailing costs.
What is the record date for the annual meeting?
The record date is April 8, 2020.5, 2021.
How many votes do I have?
Each share of our common stock has one vote on each matter submitted to our stockholders. Only stockholders of record at the close of business on the record date are entitled to vote at the annual meeting or any adjournment or postponement thereof.
What constitutes a quorum?
The presence at the annual meeting, in person or by proxy, of holders representing a majority of our outstanding common stock as of the record date constitutes a quorum at the meeting, permitting us to conduct our business. As of the record date, we had approximately 27,239,15427,954,607 shares of common stock outstanding.
What are my voting choices?
With respect to the election of directors, you may either vote “For” the nominee or you may “Withhold” your vote for such nominee.
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With respect to each of the other proposals to be voted on (other than Proposal No. 4), you may vote “For” or “Against” such proposal or abstain from voting on such proposal.
With respect to Proposal No. 4, you may vote every year, every two years or every three years or abstain from voting on such proposal.
How do I vote?
Stockholders of Record: Shares Registered in Your Name
If your shares are registered directly in your name with our registrar and transfer agent, you are considered, with respect to those shares, the “stockholder of record” and you may vote those shares through any of the ways described below. Whether or not you plan to attend the annual meeting, we urge you to vote by proxy to ensure that your vote is counted.
•Online. You may vote by proxy by visiting www.proxypush.com/SPNE and using your unique control number printed on your Notice of Internet Availability. Please note that to vote online you must do so by 5:00 p.m. Eastern Time on June 2, 2020.1, 2021.
•By Phone. If you received our proxy materials by mail, you may vote by proxy by calling the toll-free telephone number on the proxy card (866-249-5109) and following the recorded instructions. Please note that to vote by phone you must do so by 5:00 p.m. Eastern Time on June 2, 2020.1, 2021.
•By Mail. If you received our proxy materials by mail, you may vote by proxy by completing, signing, dating and returning the proxy card in the self-addressed, postage-paid envelope provided. You should mail the proxy card in plenty of time to allow delivery prior to the meeting. Do not mail the proxy card if you are voting online or by telephone. If you properly complete your proxy card and send it in time to vote, your proxy (one of the individuals named on your proxy card) will vote your shares as you directed. If you sign the proxy card but do not specify how you want your shares to be voted, your shares will be, as permitted, voted as recommended by our board of directors. If any other matter is properly presented at the annual meeting, your proxy will vote in accordance with his or her best judgment. As of the date of this proxy statement, we know of no matters to be acted on at the meeting, other than those discussed in this proxy statement.
•In Person at the Annual Meeting. Assuming the annual meeting is held in person as currently planned, you may attend the annual meeting and vote in person even if you have already voted by proxy. To vote in person, come to the annual meeting, and we will give you a ballot at the annual meeting.
Beneficial Owners: Shares Registered in the Name of a Broker or Bank
If your shares are held in an account at a bank, broker, or other organization, you are the “beneficial owner” of those shares, those shares are considered to be held in “street name" and you should have received a voting instruction form from the organization that holds your shares rather than directly from us. The availability of online voting and voting by phone may depend on the voting procedures of the organization that holds your shares. Assuming the annual meeting is held in person as currently planned, if you wish to vote in person at the annual meeting, you must obtain a “legal proxy” from the organization that holds your shares. A legal proxy is a written document that authorizes you to vote your shares held in street name at the annual meeting. Please contact the organization that holds your shares for instructions regarding obtaining a legal proxy. You must bring a copy of the legal proxy to the annual meeting. In order for your vote to be counted, you must deliver both the copy of the legal proxy and your completed ballot to the inspector of elections at the annual meeting.
May I revoke my proxy or change my vote?
Stockholders of Record: Shares Registered in Your Name
If you are a stockholder of record, you may revoke your proxy and change your vote at any time before votes are cast in any one of the following ways:
•Online. You may change your vote using the online voting method described above, in which case only your latest proxy submitted online prior to 5:00 p.m. Eastern Time on June 2, 20201, 2021 will be counted.
•By Phone. You may change your vote using the phone voting method described above, in which case only your latest telephone proxy submitted prior to 5:00 p.m. Eastern Time on June 2, 20201, 2021 will be counted.
•By Mail. You may revoke your proxy and change your vote by signing and returning a new proxy card dated as of a later date, in which case only your proxy card bearing the latest date received prior to the annual meeting will be counted.
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•In Person at the Annual Meeting. You may revoke your proxy and change your vote by attending the annual meeting and voting in person. However, your attendance at the annual meeting will not automatically revoke your proxy unless you properly vote at the annual meeting or specifically request that your prior proxy be revoked by delivering a written notice of revocation prior to the annual meeting to our corporate secretary.
Beneficial Owners: Shares Registered in the Name of a Broker or Bank
If you are a beneficial owner, the organization that holds your shares (e.g. your broker or bank) can provide you with instructions on how to revoke or change your voting instructions.
What if I don’tdo not provide voting instructions for my shares?
Stockholders of Record: Shares Registered in Your Name
If you are a stockholder of record and you:
•indicate when voting online or by phone that you wish to vote as recommended by our board of directors; or
•sign and return a proxy card without giving specific voting instructions,instructions;
then the persons named as proxy holders will vote your shares in the manner recommended by our board of directors on all proposals discussed in this proxy statement and as they may determine in their best judgment with respect to any other matters properly presented for a vote at the annual meeting.
Beneficial Owners: Shares Registered in the Name of a Broker or Bank
If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, then the organization that holds your shares may generally vote your shares in their discretion on “routine” matters but cannot vote on “non-routine” matters.
The following proposal is considered a routine matter:
•Proposal No. 2: Ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020.2021.
matters. If the organization that holds your shares does not receive voting instructions from you on a non-routine matter, that organization will inform the inspector of elections that it does not have the authority to vote on that matter with respect to your shares. This is commonly referred to as a “broker non-vote.”
What vote is required to elect directors and to approve each proposal?
Assuming a quorum is present, with respect to the election of directors (Proposal No. 1), the threetwo nominees who receive the most “FOR” votes (among votes properly cast in person or by proxy) will be elected.
Assuming a quorum is present, with respect to Proposals No. 2, 3, and 3,5, in each case, the proposal will be approved if a majority of the voting power of the shares entitled to vote at the annual meeting on the subject matter in question represented in person or by proxy vote “FOR” the proposal.
Assuming a quorum is present, with respect to Proposal No. 4, the alternative (every year, every two years or every three years) that receives the greatest number of votes will be designated the stockholders’ preference as to frequency of future voting on the advisory vote on the compensation of our named executive officers.
Assuming a quorum is present, with respect to Proposal No. 6, the proposal will be approved if a majority of the outstanding stock entitled to vote thereon vote “FOR” the proposal and if the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the outstanding shares of our common stock vote “FOR” the proposal.
The inspector of elections will determine whether a quorum is present and will tabulate the votes cast.
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What is the effect of abstentions and broker non-votes?non-votes on quorum and on the proposals?
Quorum. Shares held by persons attending the annual meeting but not voting on one or more proposals, and shares represented by proxies that reflect a "broker non-vote" or that reflect abstentions as to one or more proposals, will be counted as present for purposes of determining the presence of a quorum.
Proposals. Abstentions are treated as shares present in person or by proxy and entitled to vote on the subject matter, so abstaining has the same effect as an "AGAINST" vote for purposes of determining whether our stockholders approved
Proposals No. 2, 3, 5, and 3.6. However, because the election of directors (Proposal No. 1) is determined by a plurality of votes cast, abstentions will not be counted or have any effect on the outcome of that proposal. In addition, with respect to Proposal No. 4, because the alternative (every year, every two years or every three years) that receives the greatest number of votes will be designated the stockholders’ preference as to frequency of future voting on the advisory vote on the compensation of our named executive officers, abstentions will have no effect on the outcome of this proposal.
Broker non-votes, if any, will not be counted as votes cast with regard to the election of directors, and will have no effect on the outcome of that proposal. A broker or other nominee may generally vote in their discretion on routine matters and therefore no broker non-votes are expected on Proposal No. 2, a routine matter. With respect to Proposal No.Nos. 3, 4, and 5, each of which is a non-routine matter, broker non-votes are not entitled to vote on the subject matter and therefore will have no effect on the outcome of those proposals. With respect to Proposal No. 6, which is also a non-routine matter, broker non-votes will have the same effect as an "AGAINST" vote for purposes of determining whether a majority of the outstanding stock entitled to vote thereon voted “FOR” the proposal, however because broker non-votes are not entitled to vote on the subject matter of that proposal.proposal, broker non-votes will have no effect on the outcome of this proposal for purposes of determining whether the proposal received the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the outstanding shares of our common stock.
How can I find out the results of the voting at the annual meeting?
Preliminary voting results will be announced at the annual meeting. Final voting results will be published in our current report on Form 8-K to be filed with the SEC within four business days after the annual meeting. If final voting results are not available to us in time to file a Form 8-K within such four-business day period, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.
Who is paying the costs of soliciting these proxies?
We will pay all of the costs of soliciting these proxies. Our directors, officers and other employees may, without additional compensation, solicit proxies on our behalf in person, by telephone, or by other electronic communication. We will ask banks, brokerage firms, fiduciaries, custodians, and other similar organizations representing beneficial owners to forward the Notice of Internet Availability to beneficial owners, to forward printed proxy materials by mail to beneficial owners who specifically request them, and to obtain beneficial owners’ voting instructions. We will reimburse such organizations for their expenses.
How do I obtain an Annual Report on Form 10-K?
We make available free of charge all of our filings that are made electronically with the SEC, including our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. These filings can be found under the Investors section of our website at www.seaspine.com.
In addition, a copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 20192020 as filed with the SEC without exhibits, will be furnished without charge to any of our stockholders upon written request to us at the address below:
SeaSpine Holdings Corporation
5770 Armada Drive
Carlsbad, California 92008
Attn: Corporate Secretary
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OUR DIRECTORS AND EXECUTIVE OFFICERS
Our amended and restated certificate of incorporation and our amended and restated bylaws provide for the classification of our board of directors into three classes, as nearly equal in number as possible and with staggered terms of office, and provide that upon the expiration of the term of office for a class of directors, nominees for such class shall be elected for a term of three years or until their successors are duly elected and qualified, provided that the term of each director shall continue until the election and qualification of a successor and be subject to such director’s earlier death, resignation or removal.
| Name | Age | Present Position | Annual Meeting at which Current Term Expires | |||||||||||||||||
| Director | 2022 (Class I) | |||||||||||||||||||
| Stuart M. Essig, Ph.D. | 58 | Lead Independent Director | 2021 (Class III)* | |||||||||||||||||
| Michael Fekete | 56 | Director | 2022 (Class I) | |||||||||||||||||
| John B. Henneman, III | 58 | Director | 2022 (Class I) | |||||||||||||||||
| Renee Gaeta | Director | 2023 (Class II) | ||||||||||||||||||
| 2023 (Class II) | ||||||||||||||||||||||||||
| Keith C. Valentine | President, Chief Executive Officer and Director | 2021 (Class III)* | ||||||||||||||||||||||||
Keith Bradley, Ph.D. joined our board of directors in July 2015. Since 1992, Dr. Bradley has been a director of Integra LifeSciences Holdings Corporation. In addition, Dr. Bradley currently serves as member of the compensationaudit and finance and the nominating and corporate governance committees of Integra’s board of directors. Dr. Bradley was a member of the board of directors of Sensor Kinesis between 2015 and 2017. Between1996 and 2003, he was a director of Highway Insurance plc, an insurance company listed on the London Stock Exchange, and has been a consultant to a number of business, government and international organizations. Dr. Bradley was formerly a visiting professor at the Harvard Business School, Wharton and UCLA, a visiting fellow at Harvard’s Center for Business and Government and a professor of international management and management strategy at the Open University and Cass Business School, U.K. Dr. Bradley has taught at the London School of Economics and was the director of the School’s Business Performance Group for more than six years. He received B.A. (Hons) degree from Middlesex University, and M.A. and Ph.D. degrees from the British University of Essex. Dr. Bradley previously served as an adviser to RPH Capital, Canada and as a director and chair of North Star Capital Management Limited and GRS Financial Solutions Limited. We believe Dr. Bradley adds value to our board of directors based on his extensive business experience, his academic background and his experience serving as a member of the board of directors of Integra, our former parent company.
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Stuart M. Essig, Ph.D. joined our board of directors in June 2015 and has served as our Lead Independent Director since July 2015. Dr. Essig currently serves as Managing Director of Prettybrook Partners LLC, which he cofounded in 2012. He is also currently Chair of the Board of Directors of Integra LifeSciences Holdings Corporation, where he has served as Chair since January 2012 and as a director since he joined Integra in December 1997. He was Integra’s Chief Executive Officer from December 1997 until January 2012. Before joining Integra, Dr. Essig was Managing Director of the medical technology practice at Goldman, Sachs & Co. Dr. Essig had 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. Dr. Essig has chaired audit, compensation and nominating and governance committees, served as lead director, and participated in CEO succession processes on the boards of numerous public companies, ranging in size from several hundred million dollars to over $25 billion in levered market capitalization. Dr. Essig currently serves on the Board of Directors of Idexx Laboratories, Availity, and Breg, Inc. He is a Venture Partner at Wellington Partners Advisory AG, a venture capital firm. He also serves as a Senior Advisor to TowerBrook Capital Partners and Water Street Healthcare Partners. He serves on the Leadership Counsel of the Princeton University School of Engineering and Applied Sciences, and the NACD Compensation Committee Chair Advisory Counsel. Dr. Essig previously served on the Board of St. Jude Medical Corporation from 1999 to 2017, prior to its sale to Abbott Corporation. From 2013 until August 2019, he served on the Board of Directors of Owens and Minor, Inc.; from March 2005 until August 2008, he served on the Board of Directors of Zimmer Holdings, Inc.; and from 1998 to 2002, he served on the Board of Directors of Vital Signs, Inc. Dr. Essig has also served on the executive committee, nominating and governance committee and as treasurer of ADVAMED, the Advanced Medical Technology Association. Dr. Essig is also involved in several nonprofit charitable organizations, including from time to time serving on their boards. Dr. Essig received an A.B. degree and graduated with magna cum laude and Phi Beta Kappa honors from the Woodrow Wilson School of Public and International Affairs at Princeton University. Dr. Essig completed his M.B.A. and Ph.D. degrees in Financial Economics from the University of Chicago, Graduate School of Business. We believe that Dr. Essig adds value to our board of directors based on his extensive experience as a member of boards of directors of several private and public companies and his expertise in company-building in our industry.
Michael Fekete joined our board of directors in July 2015. From 2005 to 2009, Mr. Fekete was a Managing Director and Head of West Coast Healthcare Investment Banking for Wells Fargo / Wachovia Securities (acquired by Wells Fargo in December 2008). From 1986 to 2005, Mr. Fekete worked as an investment banker at CIBC World Markets, Oppenheimer & Co., Inc., and L.F. Rothschild & Co., Inc., where he focused on clients in the medical device, pharmaceutical and biotechnology sectors. Mr. Fekete is a director of DFB Pharmaceuticals, LLC, a privately held company with operating and investing activities in the pharmaceutical sector. Mr. Fekete was a director of Sagent Pharmaceuticals, Inc. from July 2013 until it was acquired in August 2016 and Symetis SA from April 2011 until June 2016. Mr. Fekete earned his B.S. in business administration from The Pennsylvania State University. We believe Mr. Fekete adds value to our board of directors based on his experience with advising in capital markets and corporate strategy, his experience in the medical device, pharmaceutical and biotechnology industry and his experience serving as a member of boards of directors of numerous other companies, and in particular, those in the life sciences industry.
John B. Henneman, III joined our board of directors in July 2015. Mr. Henneman has more than 25 years of combined financial and operational management experience in the life sciences industry. Mr. Henneman served as Executive Vice President and Chief Financial Officer of NewLink Genetics Corporation from October 2014 to July 2018, and as its Chief Administrative Officer from July 2018 to November 2018. Prior to joining NewLink Genetics, Mr. Henneman served Integra LifeSciences in various capacities between 1998 and 2014. Before becoming Integra's Chief Financial Officer in 2007, Mr. Henneman served Integra as General Counsel and Chief Administrative Officer, responsible at various times for Integra's business development, regulatory affairs, quality systems, clinical affairs, human resources, information systems and legal affairs functions and the management of Integra's surgical instruments business. Mr. Henneman also serves on the board of
directors of R1 RCM, Inc., a public company based in Chicago providing revenue cycle management services to hospitals, Aprea Therapeutics, Inc., a public biotechnology company based in Boston and Stockholm, Anika Therapeutics, Inc., a public medical device company based in Boston focused on joint preservation and health, and Alafair Biosciences, Inc., a privately-held medical device company based in Austin, Texas. Mr. Henneman received an A.B. in politics from Princeton University and a J.D. from the University of Michigan Law School. We believe Mr. Henneman adds value to our board of directors based on his senior management experience, his service on other boards of directors, and his extensive experience in the areas of finance, financial accounting, legal affairs, business transactions, and mergers and acquisitions.
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Shweta Singh Maniar joined our board of directors in April 2021. Since July 2018, Ms. Maniar has served as Global Leader, Healthcare & Life Sciences Solutions & Strategy, Google Cloud focused in BioPharma at Google, a multinational technology company that specializes in Internet-related services and products, where she leads vision, strategy, and execution of Google Cloud's industry product strategy and go-to-market model. Prior to joining Google, from November 2013 to June 2018, Ms. Maniar worked in various capacities at Genentech, where she led market growth strategies relevant to technology accelerators for therapies and diagnostics. Before Genentech, from February 2012 to July 2013, Ms. Maniar served as Director for the Center of Minimally Invasive Therapeutics at Summa Health. Earlier in her career, Ms. Maniar spent several years working in a research capacity at the Cleveland Clinic and the Austen BioInnovation Institute in Akron where she was primarily focused on medical devices and minimally invasive therapeutics. Ms. Maniar received a B.A. in Economics from the University of California, San Diego. We believe Ms. Maniar adds value to our board of directors based on her thought leadership in areas of strategic focus for our company, such as enabling technologies and data analytics.
Renee Gaeta joined our board of directors in February 2019. Ms. Gaeta currently is Chief Financial Officer of Establishment Labs Holdings, Inc., a publicly traded global medical device company focused on aesthetic technologies. Prior to that, from August 2014 to June 2017, Ms. Gaeta was Vice President and Corporate Controller at Sientra, Inc., a publicly traded global medical aesthetics company, where she was a member of the executive team and headed the finance department. From 2004 to 2014, Ms. Gaeta worked at KPMG, LLP. Ms. Gaeta held various positions at KPMG, most recently as an Advisory Director in the Transactions and Restructuring Group. Ms. Gaeta received her B.S., cum laude, in Accounting from Loyola Marymount University and is a Certified Public Accountant in the State of California. We believe that Ms. Gaeta adds value to our board of directors based on her extensive experience as an executive officer and her expertise in finance.
Kirtley (Kirt) C. Stephenson joined our board of directors in July 2015 and has served as nonexecutive chair since then. Between May 2011 and December 2013, Mr. Stephenson was President of the U.S. Spine business of Integra LifeSciences Holdings Corporation, where he was responsible for sales, marketing, research and development and other related functions. Mr. Stephenson served as President and CEO of SeaSpine, Inc. from 2002 until it was sold to Integra in May 2011. Mr. Stephenson has over 28 years of experience in the medical device industry with 17 years of experience in the spine market. Prior to cofounding SeaSpine, Inc. in 2002, Mr. Stephenson was Vice President of Sales & Marketing at Alphatec, Inc. Mr. Stephenson received a B.A. in Business Administration from the University of Cincinnati and an M.B.A. degree from Xavier University. We believe that Mr. Stephenson adds value to our board of directors based on his extensive experience in the medical device industry and spine business, including as chief executive officer of SeaSpine, Inc. and president of Integra’s U.S. spine business.
Keith C. Valentine has served as our Chief Executive Officer since May 2015, our President since July 2015 and joined our Board of Directors in July 2015. Prior to joining SeaSpine, Mr. Valentine served as President and Chief Operating Officer of NuVasive, Inc. from January 2007 to January 2015 and as President from December 2004 to January 2007, prior to which he served in various senior executive roles in marketing, development and operations since joining NuVasive in 2001. Previously, Mr. Valentine served as Vice President of Marketing at ORATEC Interventions, Inc., a medical device company acquired by Smith & Nephew PLC, and spent eight years in various roles with Medtronic Sofamor Danek including, Vice President of Marketing for the Rods Division and Group Director for the BMP Biologics program, the Interbody Sales Development Effort, and International Sales and Marketing. Mr. Valentine currently serves on the Board of Directors of SI-BONE, Inc., a publicly traded medical device company focused on the treatment of musculoskeletal disorders of the sacro-pelvic anatomy, and serves as chair of its nominating and governance committee. Mr. Valentine received a B.B.A. in Management and Biomedical Sciences from Western Michigan University. We believe that Mr. Valentine adds value to our board of directors based on his extensive experience as an executive officer and director of multiple public and private companies in our industry.
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Executive Officers
Set forth below are the names, ages, position, and certain biographical information of each of our executive officers as of March 31, 2021.
| Name | Age | Position | ||||||||||||
| Keith C. Valentine | 53 | President, Chief Executive Officer and Director | ||||||||||||
| John J. Bostjancic | 50 | Senior Vice President, Chief Financial Officer and Treasurer | ||||||||||||
| Dennis Cirino | 51 | Senior Vice President, Global Spinal Systems | ||||||||||||
| Tyler Lipschultz | 54 | Senior Vice President, Orthobiologics and Business Development | ||||||||||||
| Patrick L. Keran | 49 | Senior Vice President, General Counsel and Secretary | ||||||||||||
| John J. Winge | 52 | Vice President, Sales | ||||||||||||
Biographical information for Mr. Valentine can be found under “—Directors,” above.
John J. Bostjancic has served as our chief financial officer since March 2015 and our treasurer since July 2015 and, in February 2018, was designated a senior vice president. Prior to this, Mr. Bostjancic served as acting chief financial officer of the SeaSpine business within Integra LifeSciences Holdings Corporation since December 2014. Prior to that, he was Integra’s senior vice president of global supply chain from February 2012 through November 2014, where he was responsible for global planning, kitting, distribution, logistics and customer service functions and led the project team implementing the U.S. Food and Drug Administration’s “unique device identifier” rule in 2014. From 2008 until January 2012, Mr. Bostjancic was senior vice president of financial planning & analysis at Integra. Since Mr. Bostjancic joined Integra in 1999, he held roles of increasing responsibility in the finance organization, including corporate controller from 2003 through 2006. Before joining Integra, Mr. Bostjancic was a manager in the accounting standards team at Merck & Co., Inc., a publicly traded global health care company, from 1998 through 1999 and worked in the business assurance organization at PricewaterhouseCoopers from 1993 through 1998. He received his B.S. in accounting from the College of New Jersey.
Dennis Cirino has served as our senior vice president, global spinal systems since July 2018. Mr. Cirino brings over 25 years of spine industry experience with numerous leadership roles in sales and marketing. Prior to joining SeaSpine, he was with NuVasive, Inc., a publicly traded medical device company, where he served in roles of increasing seniority, most recently serving as vice president of market development for computer-assisted surgery. Prior to NuVasive, Mr. Cirino spent ten years at Medtronic, four of which were in Switzerland, where he held senior marketing, development and marketing services positions focused on spinal systems, biologics, and pain stimulation. Mr. Cirino received a B.S./B.A. in Management Information Systems from Duquesne University and an M.B.A. from the University of Notre Dame.
Tyler Lipschultz has served as our senior vice president, orthobiologics and business development since February 2018 and, from July 2015 to February 2018, served as our vice president, orthobiologics and business development. Before joining us, from June 2008 to March 2015, Mr. Lipschultz held positions of increasing responsibility at NuVasive, Inc., a publicly traded medical device company, most recently serving as its executive vice president, global operations and, prior to that, executive vice president, biologics. Prior to joining NuVasive, Mr. Lipschultz was a director at ProtoStar, a medical device incubator that formed Annulex, CVRx, and VERTx, which he co-founded. In 2002, VERTx merged with Spine Wave, where Mr. Lipschultz subsequently served in a variety of roles, including executive vice president and general manager of the mechanical business. Prior to ProtoStar, Mr. Lipschultz held the position of Equity Research Analyst at Piper Jaffray and served in various marketing/product management roles at Stryker, Smith & Nephew, and DePuy. Mr. Lipschultz received a B.A. in economics and business administration from Kalamazoo College and an M.B.A. from the executive program at Krannert School of Management at Purdue University.
Patrick L. Keran has served as our general counsel since October 2015, secretary since June 2016 and, in June 2020, was designated a senior vice president. Prior to joining SeaSpine, Mr. Keran provided strategic and business advisory services to a variety of life sciences companies, including acting as Chief Legal Officer to NAIA Pharmaceuticals, Inc., a privately held international drug development company. From February 2010 to February 2015, Mr. Keran served as president and chief operating officer of Mast Therapeutics, Inc., a publicly held clinical stage biopharmaceutical company, and from August 2006 to February 2010, he served as its general counsel. He also served as Mast’s secretary from September 2006 to February 2015 and served as its principal financial officer from July 2009 to January 2013. Previously, from 2004 to 2006, Mr. Keran was associate general counsel at Ionis Pharmaceuticals, Inc. (formerly known as Isis Pharmaceuticals, Inc.), a publicly held drug discovery and development company. From 1999 to 2004, Mr. Keran practiced corporate law at the law firms of Heller Ehrman
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LLP and Brobeck Phleger & Harrison LLP, specializing in public and private financings, licensing arrangements, mergers and acquisitions and corporate governance matters. Mr. Keran is licensed to practice law in the State of California. Mr. Keran received a B.A. from the University of California at San Diego and a J.D. from the University of California at Berkeley, Boalt Hall School of Law.
John J. Winge has served as ourvicepresident, sales sinceJune2015. From August 2008 to June2015 he served asvicepresident,sales of the U.S. spine division of Integra LifeSciences Holdings Corporation. He was alsovicepresident,marketing for Integra’s U.S.spine division from June 2011 to September 2013. Mr. Winge joined Integra in August 2008 when Integra acquired ThekenSpine, LLC, aprivatelyheldmedical device company focused on spine,where Mr. Winge served asexecutivevice president,sales and played an integral role in building Theken Spine from approximately $6 million to roughly $50 million in annual revenue. Prior to joining ThekenSpinein2004, Mr. Winge led the distribution business for REO Spine as the U.S.distributorforEurosurgical Ltd., a distributor of surgical instrumentation and medical equipmentproducts,from 1999 to 2004. Mr. Winge worked with various independent distributors from 1992 to 1998 as a spine hardware sales representative and manager. Mr. Winge began his medical device career as a sales representative for Sofamor Danek. Mr. Winge received a B.A. ineconomics from the University of Pittsburgh.
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CORPORATE GOVERNANCE MATTERS
Role of the Board of Directors
Our board of directors oversees and provides guidance for our business and affairs. Our board of directors oversees our strategy and business and management’s implementation of them and oversees management.
Our board of directors is committed to fostering a diversity of backgrounds and perspectives so that our board of directors positions our company for the future. The members of our board of directors represent a mix of ages, genders, races, ethnicities, geographies, cultures, and other perspectives that we believe expand our board’s understanding of the needs and viewpoints of our customers, partners, employees, stockholders, and other stakeholders. Since the February 2019, we have welcomed three new independent directors to our board of directors, all of whom were women and one of whom who self-identifies as a member of an underrepresented community, and each of whom brings extensive experience and fresh perspectives to enrich board dialogue and enhance the ability of our board of directors to continue effectively overseeing our business. Most recently, in April 2021, our board of directors welcomed Shweta Singh Maniar. We are confident that Ms. Maniar’s background and experience will complement and enhance the effectiveness of our board of directors.
Board Independence
Our board of directors has determined that all of our directors are independent under applicable rules of the
Nasdaq Stock Market LLC (Nasdaq), other than Mr. Valentine due to his employment by our company. Specifically, the following 7 of our 8 directors/director nominees are independent under applicable Nasdaq rules: Drs. Bradley and Essig and Messrs. Fekete, Henneman and Stephenson, and Mses. Gaeta and Maniar. In addition, our board of directors determined that Kimberly Commins-Tzoumakas, formerly a director, was independent under applicable Nasdaq rules. On March 31, 2021, Ms. Commins-Tzoumakas tendered her resignation from our board of directors and Gaeta.each of its committees, effective that date.
Board Leadership Structure
Our leadership is structured such that the chair of our board of directors and chief executive officer positions are separated. We separate the roles of chief executive officer (Mr. Valentine) and chair of the board of directors (Mr. Stephenson) in recognition of the differences between the two roles. Mr. Valentine is responsible for setting the strategic direction for our company and the day-to-day leadership and performance of our company, while Mr. Stephenson sets the agenda for meetings of our board of directors and acts as an interface between our board of directors and senior leadership team. Mr. Stephenson, an independent director, has extensive executive experience in the medical device industry generally, as well as the specific business segment in which we operate, and brings substantial experience and leadership that enhances the effectiveness of our board of directors as a whole. In addition, because of Dr. Essig's substantial experience as a public company director and his deep executive experience in the medical device industry generally and the specific business segment in which we operate specifically, our board of directors designated Dr. Essig as lead independent director. As lead independent director, Dr. Essig supplements Mr. Stephenson's role as chair and provides an additional resource and liaison between our chief executive officer and our independent directors.
Pursuant to our corporate governance guidelines, our board of directors may choose its chair in any manner that it deems to be in the best interests of our company. Our corporate governance guidelines do not require that we separate the roles of chair and chief executive officer or that we designate a lead independent director. However, our board of directors believes this leadership structure is appropriate for our company at this time. Based on our current circumstances, this structure, together with our other corporate governance practices, provides strong independent oversight of management, while ensuring clear strategic alignment throughout our company.
The Board’s Role in Risk Oversight
Our board of directors is responsible for oversight of risks facing our company, while our management is responsible for day-to-day management of risk. Our board of directors, as a whole, directly administers its risk oversight function. In addition, the risk oversight function is also administered through the standing committees of our board of directors, which oversee risks inherent in their respective areas of responsibility, reporting to our board of directors regularly and involving our board of directors as necessary. For example, the audit committee oversees our financial exposure and financial reporting related risks, and the compensation committee oversees risks related to our compensation programs and practices. Our board of directors as a whole directly oversees our strategic and business risk, including financial risk, through regular interactions with our
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management and, from time-to-time, input from independent advisors. We believe the leadership structure of our board of directors supports its role in risk oversight, with our executive officers responsible for assessing and managing risks facing our company on a day-to-day basis and the chair, lead independent director and other members of our board of directors providing oversight of such risk management.
Board of Directors Meetings
Our board of directors holds at least four regularly scheduled meetings per year and additional special meetings as necessary. During 2019,2020, our board of directors held four11 meetings. Each director is expected to prepare for and attend all regularly scheduled and special meetings of the board and all committees on which the director sits (including separate meetings of independent directors), unless unusual circumstances make attendance impractical. Our board of directors may also take action from time to time by written or electronic consent. Our board of directors meets regularly outside the presence of management (other than the chief executive officer) and the independent directors also hold regular executive sessions without management or any non-independent directors present. Mr. Stephenson chairs these executive sessions.
Each of the directors who served during the past year attended at least 75% of the aggregate of the total number of meetings of our board of directors and meetings of committees on which he or she served.
Committees of the Board of Directors
We have three standing committees: audit, compensation, and nominating and corporate governance. Each of these committees has a written charter approved by our board of directors. A copy of each charter can be found under the Investors section of our website at www.seaspine.com. The current members of the committees are identified in the following table. During 2019,2020, the audit committee held 5five meetings; the compensation committee held 2three meetings; and the nominating and corporate governance committee held 3three meetings.
| Director | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | |||||||||||||||||
| Keith Bradley, Ph.D. | — | X* | — | |||||||||||||||||
| Kimberly | — | X | — | |||||||||||||||||
| Stuart M. Essig, Ph.D. | — | — | X* | |||||||||||||||||
| Michael Fekete | X* | — | X | |||||||||||||||||
| Renee Gaeta | X | — | — | |||||||||||||||||
| John B. Henneman, III | X | X | — | |||||||||||||||||
| Shweta Singh Maniar | — | X | — | |||||||||||||||||
| Kirt C. Stephenson | — | X | ||||||||||||||||||
| Keith C. Valentine | — | — | — | |||||||||||||||||
| ^ | On March 31, 2021, Ms. Commins-Tzoumakas tendered her resignation from our board of directors and each of its committees, effective that date. | ||||
| * | Indicates chair of the committee. | ||||
Audit Committee
All members of our audit committee meet the requirements for financial literacy under applicable SEC and Nasdaq rules. Our board of directors has determined that all members of the audit committee are “audit committee financial experts” under applicable SEC rules and that each has the financial sophistication required under applicable Nasdaq rules. Our board of directors also determined that all members of the audit committee are independent directors, under applicable SEC and Nasdaq rules, including Section 10A of the Securities Exchange Act of 1934, as amended (the Exchange Act). The purpose of the audit committee is to oversee our accounting and financial reporting processes and the audits of our financial statements. This committee’s responsibilities include, among other things:
•appointing our independent registered public accounting firm;
•reviewing the qualifications, independence and quality control procedures of our independent registered public accounting firm and the experience and qualifications of its senior personnel;
•evaluating the performance of our independent registered public accounting firm;
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•approving the audit and non-audit services to be performed by our independent registered public accounting firm;
•establishing procedures for the receipt, retention and treatment of complaints we receive regarding accounting, internal accounting controls or auditing matters;
•discussing with management and our independent registered public accounting firm the results of our annual audit and the review of our quarterly unaudited financial statements;
•determining, based upon review of the annual audit and review of our annual financial statements, whether to recommend to our board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year subject to the audit;
•reviewing, overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;
•discussing with our internal counsel or outside counsel any legal matters brought to its attention that could reasonably be expected to have a material impact on our financial statements;
•preparing the report with respect to our audited financial statements that the SEC requires for inclusion in each of our annual proxy statements;
•reviewing and approving any related party transactions on an ongoing basis;
•reviewing and reassessing, at least annually, its charter and submitting any recommended changes to our board of directors for its consideration; and
•reviewing and evaluating, at least annually, its performance and the performance of its members, including compliance with its charter.
Report of the Audit Committee Related of the Board of Directors
This report of the audit committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
Our management is responsible for the preparation, presentation, and integrity of our financial statements, for the appropriateness of the accounting principles and reporting policies that we use and for establishing and maintaining adequate internal control over financial reporting. RSM US LLP, our independent registered public accounting firm for 2019,2020, was responsible for performing an independent audit of our financial statements and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles.
The audit committee reviewed and discussed with management our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20192020 (the Form 10-K). The audit committee also reviewed and discussed with RSM US LLP the audited financial statements in the Form 10-K. In addition, the audit committee discussed with RSM US LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the PCAOB) and the SEC. Additionally, RSM US LLP provided to the audit committee the written disclosures and the letter required by applicable requirements of the PCAOB regarding RSM US, LLP’s communications with the audit committee concerning independence. The audit committee also discussed with RSM US LLP its independence from our company.
Based on the reviews and discussions referred to above, the audit committee recommended to our board of directors that the audited financial statements be included in the Form 10-K for filing with the SEC.
The foregoing report has been furnished by the audit committee of our board of directors.
Respectfully submitted,
Michael Fekete, Chair
Renee Gaeta
John B. Henneman, III
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Compensation Committee
The committee’s responsibilities include, among other things:
•reviewing at least annually, our overall compensation strategy, philosophy and practices;
•reviewing and approving the corporate goals and objectives relating to the compensation of our chief executive officer, evaluating the performance of our chief executive officer in light of these goals, and determining and approving the compensation of our chief executive officer based on such evaluation;
•reviewing and approving, at least annually, all elements of compensation of all our other executive officers and non-employee directors, and certain other employees;
•determining our policy with respect to change of control and “parachute” payments;payments and perquisite benefits;
•reviewing the need for and approving, at least annually, the risk assessmentterms of our compensation policies with respect to executive officer stock ownership guidelines and practices;to monitor compliance with such guidelines;
•evaluating its performance and the performance of its members, including compliance with its charter; and
•reviewing and reassessing, at least annually, its charter and submitting any recommended changes to our board of directors for its consideration.
With respect to non-employee director compensation, the compensation committee reviews compensation practices and policies at least annually and makes a recommendation to our board of directors as to the amount, form and terms of non-employee director compensation. Our board of directors, taking the compensation committee’s recommendation into consideration, sets the amount, form and terms of non-employee director compensation.
see “Executive Compensation,” below.
Nominating and Corporate Governance Committee
Our board of directors has determined that all members of the nominating and corporate governance committee are independent directors under applicable Nasdaq rules. The purpose of the nominating and corporate governance committee is to assist our board of directors in discharging its responsibilities regarding the identification of qualified candidates to become directors, the selection and recommendation to our board of directors of nominees for election as directors at our annual meetings of stockholders (or special meetings of stockholders at which directors are to be elected), and the selection and recommendation to our board of directors of candidates to fill any vacancies on our board of directors and any committees thereof, the development and recommendation to our board of directors of a set of corporate governance guidelines, oversight of evaluation of our board of directors and taking a leadership role in shaping our corporate governance polices. The committee’s responsibilities include, among other things:
•reporting and making recommendations to our board of directors concerning governance matters;
•recommending the creation of additional committees of our board of directors or the elimination of certain of such committees;
•evaluating its performance and the performance of its members, including compliance with its charter; and
•reviewing and reassessing, at least annually, its charter and submitting any recommended changes to our board of directors for its consideration.
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Director Nomination Process
Director Qualifications
Our goal is to assemble a group of directors that collectively provide an appropriate balance of experience, skills and characteristics that enable our board of directors to fulfill its responsibilities. In evaluating director nominees, the nominating and corporate governance committee and board of directors considers, among others, the following factors:
•fundamental qualities of intelligence, honesty, good judgment, high ethics and standards of integrity, fairness and responsibility;
•experience in corporate management, such as serving as an officer or former officer of a publicly held company;
•a general understanding of marketing, finance and other elements relevant to the success of a publicly traded company in today’s business environment;
•experience relevant to our industry and with relevant social policy concerns;
•experience as a board member or executive officer of other companies; and
•the ability to make independent analytical inquiries.
Other than consideration of the foregoing and other similar factors, there are no specific minimum criteria for director nominees, although the nominating and corporate governance committee may also consider such other factors as it may deem to be in the best interests of our company and stockholders, including the number of other boards of directors on which an individual serves. The nominating and corporate governance committee does, however, believe it appropriate for at least one, and preferably, several, members of our board of directors to meet the criteria for an “audit committee financial expert” under applicable SEC rules, and that a majority of the members of our board of directors are “independent” under applicable Nasdaq rules. The nominating and corporate governance committee also believes it appropriate for our president and chief executive officer to serve as a member of our board of directors. Our directors’ performance and qualification criteria are reviewed annually by the nomination and corporate governance committee.
Identification and Evaluation of Nominees for Directors
The nominating and corporate governance committee identifies nominees for director by first evaluating the current members of our board of directors willing to continue in service. Current members with qualifications and skills that are consistent with the nominating and corporate governance committee’s criteria for board of director service and who are willing to continue in service are considered for re-nomination, balancing the value of continuity of service by existing members of our board of directors with that of obtaining a new perspective or expertise. Before nominating a sitting director for reelection, the nominating and corporate governance committee will also consider the director’s performance on, participation in and contributions to the activities of our board of directors and the director’s past attendance at meetings of the board and on the committees on which he or she served.
If any member of our board of directors does not wish to continue in service or if our board of directors decides not to re-nominate a member for re-election, the nominating and corporate governance committee may identify the desired skills and experience of a new nominee in light of the criteria above. The nominating and corporate governance committee will take into account the advice and recommendations of other members of our board, our chief executive officer and other members of our senior leadership team, and, in its discretion, may seek third-party resources to assist in the selection and/or evaluation process. The nominating and corporate governance committee may also review the composition and qualification of the boards of directors of our competitors, applicable statutory or Nasdaq requirements and recommendations, and may seek input from industry experts or analysts. The nominating and corporate governance committee reviews the qualifications, experience and background of the candidates. In making its determinations, the nominating and corporate governance committee evaluates each individual in the context of our board of directors as a whole, with the objective of assembling a group that can best perpetuate the success of our company and represent stockholder interests through the exercise of sound business judgment. After review and deliberation of all feedback and data, the nominating and corporate governance committee makes its recommendation to our board of directors.
The nominating and corporate governance committee evaluates nominees recommended by stockholders in the same manner as it evaluates other nominees. To date, we have not received director candidate recommendations from our stockholders. In the event that we do receive a director candidate recommendation from a stockholder, the nominating and
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corporate governance committee will conduct an initial evaluation of the proposed nominee and, if it determines the proposed nominee may be a qualified candidate, it will, along with one or more members of our management team, interview the proposed nominee to determine whether he or she might be suitable to serve as a director. If, based on the criteria set forth above and our board of directors’ specific needs at such time, the nominating and corporate governance committee determines the proposed nominee would be a valuable addition to our board of directors, it will recommend to our board of directors such proposed nominee’s nomination. We do not intend to treat stockholder recommendations in any manner different from other recommendations.
Under our corporate governance guidelines and amended and restated bylaws, stockholders wishing to suggest a candidate for director should write to our corporate secretary and provide such information about the stockholder and the proposed candidate as is set forth in our amended and restated bylaws and as would be required by SEC rules to be included in a proxy statement. In addition, the stockholder must include the consent of the candidate and describe any arrangements or undertakings between the stockholder and the candidate regarding the nomination. In order to give the nominating and corporate governance committee sufficient time to evaluate a recommended candidate and/or include the candidate in our proxy statement for next year's annual meeting of stockholders, the recommendation should be received by our corporate secretary at our principal executive offices in accordance with our procedures detailed in the section below entitled “Stockholder Proposals.”
Director CompensationAttendance at Annual Meetings of Stockholders
Although we do not have a formal policy regarding attendance by members of our board of directors at the annual meeting of stockholders, we encourage all of our directors to attend. All of our directors who were standing for re-election last year attended last year’s annual meeting of stockholders.
Communications with our Board of Directors
Our stockholders wishing to address questions regarding our business affairs directly to our board of directors, or any individual director, should submit the inquiry in writing to:
SeaSpine Holdings Corporation
Attn: Investor Relations
5770 Armada Drive,
Carlsbad, CA 92008
Stockholders should indicate that they are a stockholder of our company. Depending on the subject matter, investor relations will (alone or in concert with our other personnel, as appropriate): (1) forward the inquiry to the chair of our board of directors or the lead independent director, as appropriate, who may forward the inquiry to a particular director if the inquiry is directed towards a particular director; (2) forward the inquiry to the appropriate personnel within our company; for instance, if it is primarily commercial in nature; (3) attempt to handle the inquiry directly; for instance, if it is a request for information about our company or a stock-related matter; or (4) not forward the inquiry, if it relates to an improper or inappropriate topic or is otherwise irrelevant.
Certain Corporate Governance Documents
Our code of business conduct and ethics, corporate governance guidelines, audit committee charter, compensation committee charter and nominating and corporate governance committee charter are available, free of charge, under the "Investors > Corporate Governance > Governance Overview" section of our website at www.seaspine.com. Our code of business conduct and ethics applies to all our employees, officers and directors. We intend to disclose any amendment to, or a waiver from, a provision of our code of conduct and ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and that relates to any element of the code of ethics definition enumerated in paragraph (b) of Item 406 of Regulation S-K by posting such information on our website at the address specified above. The information on our website is not incorporated by reference in, or considered part of, this proxy statement. We will also provide copies of these documents, as well as our other corporate governance documents, free of charge, to any stockholder upon written request to SeaSpine Holdings Corporation, 5770 Armada Drive, Carlsbad, California 92008.
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Stockholder Engagement
We value the input we receive from our investors. As part of our investor relations program, we engage with our largest investors throughout the year. We solicit their feedback on issues important to them and aspects of our business. In addition, we regularly monitor developments and best practices with respect to corporate governance matters. As part of these activities, in February 2019, our board of directors approved an amendment to our amended and restated bylaws. The effect of the amendment is to limit the supermajority vote required for our stockholders to amend our bylaws to only specified sections of our bylaws. Before such amendment, no section of our bylaws could be amended, unless such amendment was approved by a supermajority vote of our stockholders (that is, the affirmative vote of the holders of at least 66-2/3% of the voting power of all of our then-outstanding shares entitled to vote generally in the election of directors). As amended, other than with respect to certain specific, enumerated sections, our bylaws may be amended, altered or repealed upon the affirmative vote of a simple majority of the voting power of all of our then-outstanding shares entitled to vote generally in the election of directors. We believe this amendment to our bylaws positively impacts stockholder rights.
Policies Regarding Hedging, Derivatives and Pledging
We prohibit our directors and employees, including our officers, and their respective related parties from (1) engaging in short-term trading in our stock, (2) purchasing (including through any designee) any financial instrument including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engage in transactions (including through any designee), that hedges or offsets, or are designed to hedge or offset, any decrease in the market value of our equity securities whether granted to them as part of their compensation or held, directly or indirectly, by them, (3) holding any of our stock in a margin account (unless our stock is held in a non-margin position) or buying or stock on margin, and (4) pledging our stock as collateral for a loan or in any other arrangements.
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DIRECTOR COMPENSATION
Our non-employee director compensation program compensates our non-employee directors for their service with annual retainers and long-term equity-based compensation. Below is a description of the material terms of that program related to director compensation for 2019.2020.
| Board Chair Annual Retainer | $ | 75,000 | |
| Non-Chair Director Annual Retainer | $ | 50,000 | |
| Chair of Audit Committee Additional Annual Retainer | $ | 15,000 | |
| Chair of Compensation Committee Additional Annual Retainer | $ | 15,000 | |
| Chair of Nominating and Corporate Governance Committee Additional Annual Retainer | $ | 15,000 | |
| Lead Independent Director Additional Annual Retainer | $ | 25,000 | |
Policies Regarding Hedging, Derivatives and Pledging
We prohibit our directors and employees, including our officers, and their respective related parties from (1) engaging in short-term trading in our stock, as is equal(2) purchasing (including through any designee) any financial instrument including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engage in transactions (including through any designee), that hedges or offsets, or are designed to such director's aggregate annual retainer divided byhedge or offset, any decrease in the per share fair market value of our commonequity securities whether granted to them as part of their compensation or held, directly or indirectly, by them, (3) holding any of our stock in a margin account (unless our stock is held in a non-margin position) or buying or stock on the grant date,margin, and generally will cover the twelve-month period thereafter. The shares underlying the award will vest with respect to
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Our non-employee director compensation program will vest with respect to 100% of the shares underlying the award on the one-year anniversary of the applicable grant date, subject to continued service through the applicable vesting date. In addition, each award will vest in full upon the director’s death or disability and, if a director stands for reelection at an annual meeting but is not reelected to our board of directors at such annual meeting, any outstanding Annual Award then held by the director will vest in full on the date of such annual meeting.
| 2019 Director Compensation | ||||||
Fees Earned or Paid in Cash (2) | Stock Awards (3) | Total | ||||
Name (1) | ($) | ($) | ($) | |||
| Keith Bradley | 58,750 | 100,000 | 158,750 | |||
| Kimberly J. Commins-Tzoumakas | 43,750 | 200,000 | 243,750 | |||
| Stuart M. Essig | 90,000 | 100,000 | 190,000 | |||
| Michael Fekete | 65,000 | 100,000 | 165,000 | |||
| Renee Gaeta | 43,750 | 200,000 | 243,750 | |||
| John B. Henneman, III | 50,000 | 100,000 | 150,000 | |||
| Kirt C. Stephenson | 75,000 | 150,000 | 225,000 | |||
| Director | Shares of Restricted Stock | Grant Date Fair Value ($) |
| Keith Bradley | 4,720 | 65,000 |
| Kirt C. Stephenson | 5,446 | 75,000 |
| Director | Restricted Stock Awards | Shares Subject to Outstanding Stock Options |
| Keith Bradley | 9,622 | 76,337 |
| Kimberly Commins-Tzoumakas | 13,182 | — |
| Stuart M. Essig | 7,262 | 130,198 |
| Michael Fekete | 7,262 | 83,021 |
| Renee Gaeta | 13,182 | — |
| John B. Henneman, III | 7,262 | 76,337 |
| Kirt C. Stephenson | 13,615 | 117,117 |
Stockholder Engagement
We value the input we receive from our investors. As part of our investor relations program, we engage with our largest investors throughout the year. We solicit their feedback on issues important to them and aspects of our business. In addition, we regularly monitor developments and best practices with respect to corporate governance matters. As part of these activities, in February 2019, our board of directors approved an amendment to our amended and restated bylaws. The effect of the amendment is to limit the supermajority vote required for our stockholders to amend our bylaws to only specified sections of our bylaws. Before such amendment, no section of our bylaws could be amended, unless such amendment was approved by a supermajority vote of our stockholders (that is, the affirmative vote of the holders of at least 66-2/3% of the voting power of all of our then-outstanding shares entitled to vote generally in the election of directors). As amended, other than with respect to certain specific, enumerated sections, our bylaws may be amended, altered or repealed upon the affirmative vote of a simple majority of the voting power of all of our then-outstanding shares entitled to vote generally in the election of directors. We believe this amendment to our bylaws positively impacts shareholderstockholder rights.
Policies Regarding Hedging, Derivatives and Pledging
We prohibit our directors and employees, including our officers, and their respective related parties from (1) engaging in short-term trading in our stock, (2) purchasing (including through any designee) any financial instrument including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engage in transactions (including through any designee), that hedges or offsets, or are designed to hedge or offset, any decrease in the market value of our equity securities whether granted to them as part of their compensation or held, directly or indirectly, by them, (3) holding any of our stock in a margin account (unless our stock is held in a non-margin position) or buying or stock on margin, and (4) pledging our stock as collateral for a loan or in any other arrangements.
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Our non-employee director compensation program compensates our independent registered public accounting firmnon-employee directors for their service with annual retainers and equity-based compensation. Below is a description of the fiscalmaterial terms of that program related to director compensation for 2020.
Annual Retainers
Each non-employee director is entitled to receive annual retainers in the following amounts, pro-rated for any partial year ending December 31, 2020 and directed that management submitof service:
| Board Chair Annual Retainer | $ | 75,000 | |||
| Non-Chair Director Annual Retainer | $ | 50,000 | |||
| Chair of Audit Committee Additional Annual Retainer | $ | 15,000 | |||
| Chair of Compensation Committee Additional Annual Retainer | $ | 15,000 | |||
| Chair of Nominating and Corporate Governance Committee Additional Annual Retainer | $ | 15,000 | |||
| Lead Independent Director Additional Annual Retainer | $ | 25,000 | |||
Annual retainers generally are paid in cash quarterly in arrears promptly following the selection for ratification by our stockholders atend of the applicable calendar quarter, but in no event more than 30 days after the end of such quarter. Non-employee directors may elect to receive shares of restricted stock in lieu of their annual meeting. RSM US LLP audited our financial statements forretainer. If a timely election is made, the fiscal year ending December 31, 2019. One or more representativesapplicable director will be granted on the date of RSM US LLP are expected to be present at the annual meeting of stockholders that occurs in the year following such election such number of shares of restricted stock as is equal to such director's aggregate annual retainer divided by the per share fair market value of our common stock on the grant date, and generally will have an opportunitycover the twelve-month period thereafter. The shares underlying the award will vest with respect to make a statement if they so desire, and will be available to respond to appropriate questions.
Beginning in June 2021, the compensation payable to ratify the selection,each non-employee director who serves on our audit committee, compensation committee and nominating and corporate governance committee was changed such that each member will reconsider whether to retain the firm. Even if the selection is ratified, the audit committeereceive a $5,000 annual retainer for their service in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the audit committee determines that such a change would be in the best interests of our company and our stockholders.
| Year Ended December 31, 2019 | Year Ended December 31, 2018 | |||||
Audit Fees (1) | $ | 818,793 | $ | 897,315 | ||
Audit Related Fees (2) | 25,395 | 20,475 | ||||
Tax Fees (3) | — | — | ||||
All Other Fees (4) | — | 4,265 | ||||
| $ | 844,188 | $ | 922,055 | |||
Equity Compensation
Initial Awards. Each non-employee director who is initially elected or appointed to the Spin-Off, in 2015. Prior to the Spin-Off, Integra had stock options,serve on our board of directors is granted restricted stock, awards, performance stock awards, contract stock awards and restricted stock units outstanding under three plans, the 2000 Equity Incentive Plan, the 2001 Equity Incentive Plan, and the 2003 Equity Incentive Plan. In connection with the Spin-Off, certain Integra equity awards were converted to SeaSpine equity awards under the 2015 Plan (these awards are referred to as “Adjusted Awards”). In general, each Adjustedan Initial Award, on the date he or she is subject to the same terms and conditions as were in effect prior to the Spin-Off.
initially elected or appointed. The principal features of the Plan Amendment are summarized below, but the summary is qualified in its entirety by reference to the Plan Amendment itself. The Plan Amendment is attached to this proxy statement as Appendix A. The full 2015 Plan was filed as Appendix A to our Definitive Proxy Statement on Schedule 14A filed with the SEC on April 19, 2018, and is attached to this proxy statement as Appendix B.
Annual Awards. Each non-employee director serving on our board of directors as of the date of grant (whether directly or by foregoing a righteach annual stockholder meeting is granted restricted stock, referred to receive a payment from us). This fungible pool formula will remain unchanged under the Amended Plan.
Number of Shares | As a % of Shares Outstanding(1) | Dollar Value(2) | |||
| 2018 Inducement Plan | |||||
| Share reserve | 2,000,000 | 7.3 | % | $18,080,000 | |
| Options outstanding | |||||
| Options | 35,737 | 0.1 | % | $323,062 | |
| Weighted average exercise price of outstanding options | $14.25 | ||||
| Weighted average remaining term of outstanding options | 7.28 | ||||
| Restricted stock awards and restricted stock units outstanding | |||||
| RSAs | — | — | % | $0 | |
| RSUs | 74,261 | 0.3 | % | $671,319 | |
Shares remaining available for issuance(3) | 1,878,270 | 6.9 | % | $16,979,561 | |
| 2015 Plan (current) | |||||
Share reserve(4) | 6,235,500 | 22.9 | % | $56,368,920 | |
| Options outstanding | |||||
| Adjusted Awards | 44,400 | 0.2 | % | $401,376 | |
| Options (that are not Adjusted Awards) | 3,123,910 | 11.5 | % | $28,240,146 | |
| Weighted average exercise price of outstanding options | $14.62 | ||||
| Weighted average remaining term of outstanding options | 5.15 | ||||
| Restricted stock awards and restricted stock units outstanding | |||||
| Adjusted Awards | 69,937 | 0.3 | % | $632,230 | |
| RSAs (that are not Adjusted Awards) | 57,006 | 0.2 | % | $515,334 | |
| RSUs (that are not Adjusted Awards) | 695,999 | 2.6 | % | $6,291,831 | |
| Shares remaining available for issuance | 770,465 | 2.8 | % | $6,965,004 | |
| 2015 Plan (if Plan Amendment approved by stockholders) | |||||
| Proposed aggregate increase to share reserve pursuant to Amended Plan | 3,500,000 | 12.8 | % | $31,640,000 | |
| Shares remaining available for grant | 4,270,465 | 15.7 | % | $38,605,004 | |
such meeting. The Amended Plan reflects a broad range of compensation and governance best practices, with these key features:
Beginning in June 2021, the dollar amount on which the number of shares of the restricted stock subject to the Annual Award is based will increase to $125,000 ($175,000 for the board chair). That change was approved by our board of directors, upon the recommendation of our compensation committee and with the advice of Willis Towers Watson, based on an assessment of competitive market data of our peer group.
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2020 Non-Employee Director Compensation
The following table summarizes the Spin-Offcompensation of our non-employee directors for 2020:
| 2020 Director Compensation | ||||||||||||||||||||
Fees Earned or Paid in Cash (2)(3) | Stock Awards (4) | Total | ||||||||||||||||||
Name (1) | ($) | ($) | ($) | |||||||||||||||||
| Keith Bradley | 65,000 | 100,000 | 165,000 | |||||||||||||||||
| Kimberly J. Commins-Tzoumakas | 50,000 | 100,000 | 150,000 | |||||||||||||||||
| Stuart M. Essig | 90,000 | 100,000 | 190,000 | |||||||||||||||||
| Michael Fekete | 65,000 | 100,000 | 165,000 | |||||||||||||||||
| Renee Gaeta | 50,000 | 100,000 | 150,000 | |||||||||||||||||
| John B. Henneman, III | 50,000 | 100,000 | 150,000 | |||||||||||||||||
| Kirt C. Stephenson | 75,000 | 150,000 | 225,000 | |||||||||||||||||
(1)Keith Valentine, our president and chief executive officer, is not included in this table because he is an employee and receives no compensation for his service as a director. See "Executive Compensation and Other Information," below for information regarding the compensation received by Mr. Valentine.
(2) 6,235,500 shares, which shares may be authorized but unissued shares, or shares purchasedThe director identified in the open market. Iftable below elected to receive restricted stock awards in lieu of 100% of his 2020 annual retainer, which awards were granted on June 3, 2020, and vests in equal quarterly installments. Accordingly, the Plan Amendment is approved,dollar amounts in this column represent the aggregate number of shares that may be issued or transferred pursuant to awards under the Amended Plan will be increased by 3,500,000 shares and will be equal to the sum of (1) the number of shares issuable upon exercise or vesting of the number of Adjusted Awards as of the date of the Spin-Off and (2) 9,735,500 shares, which shares may be authorized but unissued shares, or shares purchased in the open market.
| Director | Shares of Restricted Stock | Grant Date Fair Value ($) | ||||||
| Michael Fekete | 5,518 | 65,000 | ||||||
(3)The exercise pricedirectors identified in the table below elected to receive restricted stock awards in lieu of a SAR may not be less thanthe final quarterly payment of their 2019 annual retainer and 100% of their 2020 annual retainer, which awards were granted and vested on June 30, 2020, September 30, 2020 and December 31, 2020 for Dr. Essig and Ms. Gaeta, and on September 30, 2020 and December 31, 2020 for Dr. Bradley and Mr. Stephenson. Accordingly, a portion of the dollar amounts in this column represent the aggregate fair market value of the underlying sharesuch awards determined based on the date of grant (except with respect to certain substitute SARs granted in connection with a corporate transaction) and the term of a SAR may not be longer than ten years. Vesting conditions determined by the plan administrator may apply to SARs and may include continued service, performance and/or other conditions.
| Director | Shares of Restricted Stock | Grant Date Fair Value ($) | ||||||
| Keith Bradley | 2,067 | 32,500 | ||||||
| Stuart M. Essig | 5,010 | 67,500 | ||||||
| Kirt C. Stephenson | 2,385 | 37,500 | ||||||
| Renee Gaeta | 2,783 | 37,500 | ||||||
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(4)RSUs are contractual promises to deliver sharesRepresents the aggregated fair market value of restricted stock awards granted as Annual Awards determined based on the price of our common stock on the grant date in accordance with ASC Topic 718. See Note 6. Equity and Stock-Based Compensation to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the future, which may also remain forfeitable unless and until specified conditions are met. Deliveryyear ended December 31, 2020 for details as to the assumptions used to determine the fair value of the shares underlying RSUs may be deferred underawards. The Annual Awards will vest on June 3, 2021.
The table below indicates the terms of the award or at the election of the participant, if the plan administrator permits such a deferral. Performance shares are contractual rights to receive a range of shares of our common stock in the future based on the attainment of specified performance goals, in addition to other conditions that may apply to these awards. Conditions applicable to RSAs, RSUs and performance shares may be based on continuing service, the attainment of performance goals and/or such other conditions as the plan administrator may determine. In addition, with respect to performances shares and sharesaggregate number of restricted stock subject to vesting, dividends which are paid prior to vesting will be paid to the holder only to the extent that the vesting conditions are satisfied.
| Director | Restricted Stock Awards | Shares Subject to Outstanding Stock Options | ||||||
| Keith Bradley | 8,488 | 76,337 | ||||||
| Kimberly Commins-Tzoumakas | 8,488 | — | ||||||
| Stuart M. Essig | 8,488 | 130,198 | ||||||
| Michael Fekete | 11,246 | 83,021 | ||||||
| Renee Gaeta | 8,488 | — | ||||||
| John B. Henneman, III | 8,488 | 76,337 | ||||||
| Kirt C. Stephenson | 12,733 | 117,117 | ||||||
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EXECUTIVE COMPENSATION
We are a global medical technology company focused on the 2015 Plan since inceptiondesign, development and commercialization of surgical solutions for the treatment of patients suffering from spinal disorders. We have a comprehensive portfolio of orthobiologics and spinal implants solutions to meet the varying combinations of products that neurosurgeons and orthopedic spine surgeons need to perform fusion procedures on the lumbar, thoracic and cervical spine. Our orthobiologics products consist of a broad range of advanced and traditional bone graft substitutes that are designed to improve bone fusion rates following a wide range of orthopedic surgeries, including spine, hip, and extremities procedures. Our spinal implants portfolio consists of an extensive line of products to facilitate spinal fusion in minimally invasive surgery (MIS), complex spine, deformity and degenerative procedures. Expertise in both orthobiologic sciences and spinal implants product development allows us to offer our surgeon customers a differentiated portfolio and a complete procedural solution to meet their fusion requirements. We currently market our products in the United States and in over 30 countries worldwide.
We are dedicated to providing a comprehensive portfolio of innovative, procedurally focused products designed to work together to drive fusion. The latest advancements in bone biology and materials science guide the development of in-house manufactured advanced orthobiologics and proprietary spinal implant technology engineered to address the many nuances of spinal pathology. Our products can be tailored to meet individual patient needs, delivering both clinical and economic value to patients, surgeons, and hospital systems. Our executive management team has extensive experience in the spine and medical technology industries. We believe that our management team, combined with our expertise in orthobiologic sciences and spinal implants product development, will enable us to continue to grow our revenue and increase our presence in the markets we serve.
In March 2021, we announced that we had entered into an agreement to acquire all of the issued and outstanding shares of 7D Surgical, Inc. (7D Surgical), a pioneer in the image-guided surgery market.
Business Performance Highlights
Over the past year, our company has navigated the significant challenges presented by an unprecedented global health pandemic and adapted rapidly – understanding that our employees, our surgeon customers and their patients, and our stockholders and other stakeholders all have been impacted in a material way.
Our business, financial condition and results of operations have been materially and adversely impacted in the near-term, and could be materially and adversely impacted in the long-term, by the COVID-19 pandemic. To date, the impacts include: the deferral of procedures using our products; disruptions or restrictions on the ability of many of our employees and of third parties on which we rely to work effectively, including because of stay-at-home orders and similar government actions; and temporary closures of our facilities and of the facilities of our customers and suppliers. As jurisdictions throughout the world continue to deal with and respond to the individuals and groups listed below. No awards have been granted outpandemic, the degree of the foregoing impacts may increase in scope or magnitude or we may experience additional material adverse impacts in one or more regions.
In the face of extraordinary operational challenges, our senior leadership team led us through a period of substantial uncertainty and responded timely and successfully to the share reserve contemplated bychallenges we faced arising from and related to the Plan Amendment.pandemic, including taking steps to protect the health and safety of our employees and other stakeholders, while ensuring our ability to fulfill our essential business activities and responsibly manage cash flow and expenses without sacrificing long-term growth opportunities and maximization of stockholder value. Key accomplishments included:
•Ensuring no furloughs or layoffs and no financial impact on any employee with a salary of less than $100,000 a year. “Essential” employees who were required to work onsite received a 10% pay premium and shift premiums were provided to employees required to move to second shifts implemented for safety considerations.
• Closing a $100 million financing that well-positioned our company for navigating and remaining opportunistic during the pandemic.
| Name or Group | Number of Shares Underlying RSAs/RSUs Granted (#) | Number of Shares Underlying Options Granted (#) | Number of Shares Underlying Adjusted Awards (#) | |||
| Keith Valentine | 290,051 | 673,785 | — | |||
| John Bostjancic | 132,724 | 200,163 | 19,099 | |||
| Tyler Lipschultz | 133,756 | 188,108 | — | |||
All Current Executive Officers as a Group (6 persons) | 856,049 | 1,540,288 | 24,146 | |||
| All Current Non-Employee Directors as a Group (7 persons) | 304,573 | 483,010 | 202,689 | |||
| All Current Non-Executive Officer Employees as a Group (374 persons) | 918,036 | 1,033,932 | 16,525 | |||
• Significantly expanding our U.S. distribution team though new exclusive or near-exclusive partners in key markets.
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• Initiating a key “enabling technology” collaboration with 7D Surgical in February 2020, which culminated in the heading “Director Compensation” above and will be eligibleMarch 2021 announcement that we entered into an agreement to receive awards under the Amended Plan pursuantacquire 7D Surgical.
Summary of Pay Actions in Response to such policy, which description is incorporated by reference into this proposal.
The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 31, 2020 for:
officers – Keith Valentine, John Bostjancic and Patrick Keran – initially were set at $588,108, $403,650 and $400,745, respectively. However, as part of broader actions taken to manage expenses and cash spend to preserve liquidity in light of the uncertainty of the full extent of the impact of the pandemic on the economy as a whole, on the industry in which we operate, and on our business, in late April 2020, our senior leadership team, including our named executive officers, voluntarily agreed to a 25% reduction to their respective base salaries from April 26, 2020 through June 20, 2020. As a means to provide incentive to our senior leadership team, in April 2020, each member of our directors and nominees; and
In assessing and rewarding 2020 performance, our compensation committee determined that personthe preset corporate performance metrics that were established in January 2020 no longer provided a meaningful measure of our company’s performance due to the impact of the pandemic. To help ensure our executives are currently exercisable or will be exercisable within 60 days after March 31,not measured unfairly on circumstances beyond their control, our compensation committee considered an appropriate payout under the 2020 annual incentive plan that aligned not only with the named executive officers’ strong performance and leadership in 2020, but also with our company’s actual performance during the year, as outlined above under “Business Performance Highlights.” Following an in-depth review and discussion of 2020 accomplishments and in consultation with Willis Towers Watson, the independent compensation consultant to our compensation committee, the compensation committee determined to use its discretion under the annual incentive program to establish a corporate performance achievement level at 80% for the entire population of annual incentive program participants, including our named executive officers, resulting in Messrs. Valentine, Bostjancic and Keran earning a bonus of $410,000, $165,500 and $164,500, respectively, for 2020. WeThe committee believed this payout appropriately reflected 2020 performance and recognized that the corporate and individual performance metrics under the annual incentive program for the 2020 performance period were established in early 2020, predated the pandemic and did not deem these shares outstanding, however, fortake into account the purposepotential impact of computing the percentage ownershipoutbreak of any other person. Except as otherwise noted, the address for each person listedpandemic on our business or future results of operations. For additional information and factors considered in the table below is c/o SeaSpine Holdings Corporation, 5770 Armada Drive, Carlsbad, California 92008.
| Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percentage Beneficially Owned | ||||
| 5% Beneficial Owners: | ||||||
First Light Asset Management, LLC (1) | 4,440,163 | 16.30 | % | |||
Richard E. Caruso (2) | 2,049,607 | 7.52 | % | |||
Novo Holdings A/S (3) | 1,658,037 | 6.09 | % | |||
Blackrock, Inc. (4) | 1,254,458 | 4.61 | % | |||
| Directors and Named Executive Officers: | ||||||
Kirtley (Kirt) C. Stephenson (5) | 207,273 | * | ||||
Stuart M. Essig (6) | 552,389 | 2.02 | % | |||
Keith Bradley (7) | 128,566 | * | ||||
Kimberly J. Commins-Tzoumakas (8) | 13,182 | * | ||||
Michael Fekete (9) | 138,131 | * | ||||
Renee Gaeta (10) | 13,182 | * | ||||
John B. Henneman, III (11) | 138,307 | * | ||||
Keith C. Valentine (12) | 777,017 | 2.80 | % | |||
John J. Bostjancic (13) | 214,044 | * | ||||
Tyler Lipschultz (14) | 230,424 | * | ||||
All current directors and executive officers as a group (13 persons) (15) | 2,804,893 | 9.76 | % | |||
committee’s decision, please refer to the “Annual Incentive Program” section that follows.
•Enable our company to attract, motivate, and retain highly-qualified senior executives who have the skills to drive our continued growth and success; | ||
•Provide fair and equitable compensation that rewards executives for achieving specified financial goals and other key metrics; | ||
•Link a substantial portion of | ||
•Align the interests of our executives with those of our stockholders, which we believe ultimately will drive stockholder value. | ||
achievement of superior results over an extended time period.
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| Name | Position | ||||
| Keith C. Valentine | President, Chief Executive Officer and Director | ||||
| John J. Bostjancic | Senior Vice President, Chief Financial Officer and Treasurer | ||||
| Senior Vice President, | |||||
Role of the Compensation Committee
The compensation committee of our board of directors, comprised of three independent directors, assists our board of directors in discharging its responsibilities in respect of compensation of our executive officers. Our compensation committee reviews and approves the corporate goals and objectives relating to the compensation of our chief executive officer, evaluates his performance in light of these goals, and determines and approves the compensation of our chief executive officer based on such evaluation.
In setting the compensation of our executive officers, our compensation committee takes into consideration the recommendations of our chief executive officer, who presents the committee with assessments of the performance of our company and individual members of our senior leadership team, including our executive officers, including against pre-established corporate goals, and proposals for executive officer compensation packages. Our chief executive officer also makes proposals regarding the terms of our equity incentive plans, in which all of our employees and directors may be eligible to participate, long-term equity incentive awards under such plans, and the terms of and goals under our short-term incentive plans, including guidelines for each performance period under our annual incentive program. From time to time, other executive officers are invited to make presentations or provide financial or other information to our compensation committee to assist it in setting and assessing the achievement of corporate goals and reviewing other aspects of executive compensation. The compensation committee typically meets in executive session following presentations by management. While our chief executive officer may be present during the compensation committee’s deliberation and determination of other executive officers’ compensation, he is not present during the compensation committee’s deliberation and determination of his own compensation. Our compensation committee’s decisions are made by it in its sole discretion.
With respect to our executive officer compensation program, the compensation committee also: (1) reviews competitive practices and trends to determine the adequacy of our executive compensation program; (2) reviews and considers participation and eligibility in the various components of our total executive compensation package; and (3) as deemed necessary or appropriate, approves employment contracts, severance arrangements, change in control provisions and other agreements.
Role of the Independent Compensation Consultant
During 2020, our compensation committee engaged the compensation consulting firm, Willis Towers Watson (WTW), to provide advice regarding executive officer and non-employee director compensation practices and programs. WTW reports directly to our compensation committee and interacts with our senior leadership team at the committee’s direction. WTW was engaged primarily to assist our compensation committee in its review and assessment of our executive and director compensation program.
WTW was instructed to conduct a peer group analysis, conduct a competitive assessment of our executive and non-employee director compensation programs by compiling market data from the peer group and published surveys, and provide recommendations for changes to our executive and director compensation programs. WTW also provided information and support to our compensation committee with respect to benchmarking on other companies' responses to the COVID-19 pandemic with respect to compensation programs. WTW did not perform work for us in 2020 except under its engagement by our compensation committee. The compensation committee conducted a conflict of interest assessment in August 2020, which included taking into consideration the factors set forth in Rule 10C-1(b)(4) under the Exchange Act and applicable Nasdaq rules, and concluded that WTW was independent and that the engagement of WTW raised no conflict of interest under applicable SEC and NASDAQ rules.
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Stockholder Input on Executive Compensation
Our board of directors believes in proactive engagement, communication and transparency with our stockholders. Each year, we participate in investor conferences and hold meetings with our institutional stockholders to discuss our financial performance, business strategy and corporate governance practices. In evaluating the design of our executive compensation program generally, and the compensation decisions for our named executive officers specifically, our compensation committee will consider stockholder input, including as a result our first advisory “say-on-pay” vote at this year’s annual meeting.
We are committed to ongoing engagement with our investors on a wide range of matters, including executive compensation and corporate governance. Our outreach efforts take place through virtual meetings, in-person meetings (as appropriate under the circumstances) and written correspondence.
Summary Compensation Table
The following table sets forth information concerning the compensation of our named executive officers for our last two completed fiscal years.
| 2020 Summary Compensation Table | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock | Option | Non-Equity Incentive Plan | All Other | ||||||||||||||||||||||||||||||||||||||||||||
| Salary | Bonus | Awards | Awards | Compensation | Compensation | ||||||||||||||||||||||||||||||||||||||||||
| Name and Principal Position | Year | ($) | ($) | ($)(1) | ($)(1) | ($)(2) | ($)(3) | Total ($) | |||||||||||||||||||||||||||||||||||||||
| Keith Valentine | 2020 | 563,164 | — | 438,953 | 676,913 | 410,000 | 4,125 | 2,093,155 | |||||||||||||||||||||||||||||||||||||||
| Chief Executive Officer | 2019 | 565,517 | — | 426,178 | 349,686 | 495,061 | 4,125 | 1,840,567 | |||||||||||||||||||||||||||||||||||||||
| John Bostjancic | 2020 | 387,000 | — | 200,855 | 318,830 | 165,500 | 4,125 | 1,076,310 | |||||||||||||||||||||||||||||||||||||||
| Chief Financial Officer | 2019 | 388,615 | — | 292,515 | 80,003 | 199,875 | 4,125 | 965,133 | |||||||||||||||||||||||||||||||||||||||
| Patrick Keran | 2020 | 380,794 | — | 190,226 | 303,210 | 164,500 | 4,125 | 1,042,855 | |||||||||||||||||||||||||||||||||||||||
| General Counsel | 2019 | 368,116 | — | 184,680 | 151,533 | 196,217 | 4,125 | 904,671 | |||||||||||||||||||||||||||||||||||||||
(1)Represents the grant date fair value, determined in accordance with ASC Topic 718, Compensation-Stock Compensation (ASC Topic 718), of awards of restricted stock units (RSUs) and options, as applicable, granted to the named executive officers. See Note 6 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 for details as to the assumptions used to determine the fair value of these awards. Amounts shown are based on the full grant date fair value of the entire award, regardless of vesting requirements.
(2)Represents amounts paid to the named executive officers under our annual incentive program for corporate and individual performance for 2020.
(3)Amounts consist of matching contributions we made under our 401(k) plan.
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| 2019 Summary Compensation Table | ||||||||||||||||||||||
| Stock | Option | Non-Equity Incentive Plan | All Other | |||||||||||||||||||
| Salary | Bonus | Awards | Awards | Compensation | Compensation | |||||||||||||||||
| Name and Principal Position | Year | ($) | ($) | ($)(1) | ($)(1) | ($)(2) | ($)(3) | Total ($) | ||||||||||||||
| Keith Valentine | 2019 | 565,517 | — | 426,178 | 349,686 | 495,061 | 4,125 | 1,840,567 | ||||||||||||||
| Chief Executive Officer | 2018 | 547,324 | — | 820,371 | — | 618,825 | 4,125 | 1,990,645 | ||||||||||||||
| John Bostjancic | 2019 | 388,615 | — | 292,515 | 80,003 | 199,875 | 4,125 | 965,133 | ||||||||||||||
| Chief Financial Officer | 2018 | 372,335 | — | 375,380 | — | 255,940 | 4,125 | 1,007,780 | ||||||||||||||
| Tyler Lipschultz | 2019 | 388,615 | — | 195,004 | 160,006 | 202,313 | 1,731 | 947,669 | ||||||||||||||
| Senior Vice President, Orthobiologics and Business Development | 2018 | 373,212 | — | 375,380 | — | 243,750 | 4,125 | 996,467 | ||||||||||||||
Narrative to Summary Compensation Table
Base Salaries
Our named executive officers’ base salaries are set by our compensation committee to be commensurate with their positions as named executive officers of a public company and are expected to provide a steady source of income sufficient to permit these officers to focus their time and attention on their work duties and responsibilities.
As of March 3, 2019,1, 2020, the 20192020 annual base salaries for Messrs. Valentine, Bostjancic and LipschultzKeran were increased from $546,364, $375,000 and $375,000, respectively, to $568,220, $390,000 and $390,000, respectively.$369,350, respectively, to $588,108, $403,650 and $400,745. However, as described under “Summary of Pay Actions in Response to COVID-19 Pandemic,” above, as part of broader actions taken to manage expenses and cash spend to preserve liquidity in light of the uncertainty of the full extent of the impact of the COVID-19 pandemic, in late April 2020, Messrs. Valentine, Bostjancic and Keran voluntarily agreed to a temporary 25% reduction to their respective base salaries.
In January 2020,2021, our compensation committee approved base salary increases for 20202021 for our named executive officers. Their base salaries were increased to the following amounts effective as of March 1, 2020:February 28, 2021: Mr. Valentine, $588,108;$615,000; Mr. Bostjancic, $403,650;$416,000; and Mr. Lipschultz, $403,650.Keran, $413,000. The base salary adjustments for Messrs. Valentine and Bostjancic were based on recommendations from WTW following its market-based assessment of the competitiveness of our executive compensation practices, supported by strong individual performance. The base salary adjustment for Mr. Keran was consistent with our internal guidelines for adjustments for employees with comparable 2020 individual performance ratings.
Annual Incentive Program
In February 2019, our compensation committee established an annual incentive program under our Amended and Restated 2015 Incentive Award Plan. The annual incentive program provides annual bonus opportunities for the senior leadership team members designated as participants by our compensation committee, including each of our named executive officers. The annual incentive program is designed to motivate and reward participants for their contributions to the Company.our company. The potential amount of the bonuses awarded is based on corporate and individual performance. Our compensation committee establishes the corporate performance metrics at the beginning of each fiscal year and also determines the relative weight of those metrics. A portion of a participant’s annual bonus will also be determined in the discretion of our compensation committee based on the participant’s individual performance and such other factors as our compensation committee deems appropriate. The payout level for each participant’s annual bonus will range between 0% and 200% of the target bonus amount established by our compensation committee. Generally, a participant must remain employed with us through the date of payment of his or her annual bonus to remain eligible to receive such bonus.
In February 2019,January 2020, our compensation committee established guidelines for the 20192020 performance period of the annual incentive program. The target bonus amount for the named executive officers for 20192020 was 85% of base salary for Mr. Valentine and 50% of base salary for each of Messrs. Bostjancic and Lipschultz.Keran. For 2019,2020, 75% of each participant’s annual bonus was determined based on achievement relative to corporate performance metrics and 25% was determined based on individual performance. The corporate performance metrics for 20192020 were revenue, free cash flow, and product development and launches, weighted 50%, 30% and 20%, respectively. The guidelines set forth achievement levels within each corporate performance metric (from 50% to 150%), though achievement levels are intended as benchmarks, rather than binary requirements or minimums / maximums, and do not mandate linear interpolation between achievement levels. Free cash flow is cash flow from operations, less capital expenditures, both calculated in accordance with GAAP, as adjusted for the impacts to operating cash flows from certain items. Free cash flow is a non-GAAP financial measure within the meaning of Regulation G. Appendix C to this proxy statement includes a reconciliation of such non-GAAP financial measure to the most directly comparable financial measures prepared in accordance with GAAP.
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The table below sets forth the estimated actual results relative to the 100% target of each corporate and individual performance metric. Estimated actual results reflected management’s initial estimate of our company’s performance with respect to the applicable metric and were calculated before all internal and external review and audit procedures were completed and, accordingly, were subject to adjustment. Estimated actual results were provided to our compensation committee in advance of its meeting in January 2020 to determine 2019 bonuses. Differences between estimated and final actual results were considered immaterial (in the case of revenue) or did not affect the final calculation (in the case of free cash flow) - final revenue was $0.1 million less than estimated and final free cash flow was $1.6 million less than estimated - and no adjustment to 2019 bonuses was made for these differences. For revenue and free cash flow, the weighted achievement in the table below reflects linear interpolation between the achievement levels in the guidelines formetrics under the annual incentive program for the 20192020 performance period were established in early 2020, predated the COVID-19 pandemic and did not take into account the potential impact of the outbreak of the pandemic on our business or future results of operations.
On January 28, 2021, the compensation committee met to consider, among other things, the corporate and individual metrics established for the 2020 performance period in light of the impact that the pandemic had on our business and operations, and whether, and the extent to which, to use discretion under the annual incentive program in determining annual incentive payments with respect to the 2020 performance period. In
•the “Non-Equity Incentive Plan Compensation” columneffect of the Summary Compensation Table, above.pandemic on our business and operations and ensuring that compensation appropriately reflects operating performance that is reasonably within management's control;
•the extraordinary efforts of our named executive officers and other members of the senior leadership team to respond timely and successfully to the challenges we faced as a result of the pandemic, including taking steps designed to protect the health and safety of employees and other stakeholders, while ensuring our ability to fulfill our essential business activities and responsibly managing cash flow and expenses without sacrificing long-term growth opportunities and maximization of stockholder value (further described above under “Business Performance Highlights”);
| Corporate Performance Metric | Weight | 100% Target | Estimated Actual Result | Weighted Achievement | ||||
| Revenue | 50% | $156.0 million | $159.2 million | 77% | ||||
| Free Cash Flow | 30% | ($25.0 million) | ($31.5 million) | — | ||||
| Product Launches | 20% | 10 | 11 | 25% | ||||
| TOTAL | 102% | |||||||
•the influence of compensation practices on the ability to attract and retain qualified executive leadership.
In January 2020,2021, our compensation committee established guidelines for the 20202021 performance period of the annual incentive program. Target bonuses under the annual incentive program for the named executive officers for 20202021 will be as follows: 85%100% of base salary for Mr. Valentine, 60% of base salary for Mr. Bostjancic, and 50% of base salary for each of Messrs. Bostjancic and Lipschultz.Mr. Keran. For 2020,2021, 75% of each participant’s annual bonus will be determined based on achievement relative to corporate performance metrics and 25% will be determined based on individual performance. The corporate performance metrics for 20202021 will be revenue, free cash flow, and product development and launches, weighted 50%, 30% and 20%, respectively. The guidelines set forth achievement levels within each corporate performance metric (from 50% to 150%), though achievement levels are intended as benchmarks, rather than binary requirements or minimums / maximums, and do not mandate linear interpolation between achievement levels.
Equity Compensation
In 2018, our compensation committee granted RSUs to each of our named executive officers. In 2019 and 2020, in part to increaseenhance the performanceperformance-based element of our equity compensation and focus on driving long-term stockholder value, rather than grant equity awards consisting solely of RSUs to our named executive officers, our compensation committee granted our named executive officers a combination of stock options and RSUs.
As discussed under “Summary of Pay Actions in Response to COVID-19 Pandemic,” above, and in light of voluntary salary reductions agreed to by our senior leadership team, including named executive officers, and to provide incentive to them, in April 2020, each member of our senior leadership team, including our named executive officers, was granted a non-qualified stock option to purchase shares of our common stock, which fully vested on June 21, 2020, subject to their continued service. The number of shares subject to the stock option granted to Messrs. Valentine, Bostjancic, and Keran was 8,871, 6,089, and 6,045, respectively.
The vesting terms of thesethe equity awards granted to our named executive officers are described in footnotes to the 20192020 Outstanding Equity Awards at Fiscal Year End table set out in under “Outstanding Equity Awards at Fiscal Year-End,” below.
In 2021, based on recommendations from WTW following its market-based assessment of the competitiveness of our executive compensation program, Messrs. Valentine and Bostjancic were granted equity awards with a combined value equal to approximately $2,650,000 and $700,000, respectively. Mr. Keran was granted equity awards with a combined value equal to his
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2021 base salary, or $413,000. These equity award levels increased the alignment of our named executive officer compensation levels with our compensation philosophy and were supported by strong individual and company performance.
Other Elements of Compensation
Retirement Plans
We maintain a 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements. Our named executive officers are eligible to participate in the 401(k) plan on the same terms generally applicable to other full-time employees. We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) plan, and making matching contributions, adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies. We provide matching contributions to our employees equal to 100% of the first 3% of their eligible compensation, up to a maximum matching contribution of $4,125 per employee.
Employee Benefits and Perquisites
Additional benefits available to our employees, including our named executive officers, include medical, dental, and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance and basic life insurance coverage.
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Outstanding Equity Awards at Fiscal Year-End
The following table summarizes the number of shares of our common stock underlying outstanding equity awards for each named executive officer as of December 31, 2019.
| 2019 Outstanding Equity Awards at Fiscal Year End | |||||||||||||||||||||
| Option Awards | Stock Awards | ||||||||||||||||||||
| Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable* | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)* | Market Value of Shares or Units of Stock that Have Not Vested ($)(7) | ||||||||||||||
| Keith Valentine | 1/1/2019 | — | 77,881(3) | 18.24 | 1/1/2027 | 23,365(4) | $ | 280,614 | |||||||||||||
| 3/5/2018 | — | — | — | — | 54,856(5) | $ | 658,821 | ||||||||||||||
| 2/2/2017 | — | — | — | — | 35,939(6) | 431,627 | |||||||||||||||
1/27/2016(1) | 149,074 | — | 14.19 | 1/27/2024 | — | — | |||||||||||||||
8/1/2015(2) | 325,000 | — | 15.68 | 8/1/2023 | — | — | |||||||||||||||
| John Bostjancic | 1/1/2019 | — | 17,818(3) | 18.24 | 1/1/2027 | 16,037(4) | $ | 192,604 | |||||||||||||
| 3/5/2018 | — | — | — | — | 25,101(5) | $ | 301,463 | ||||||||||||||
| 2/2/2017 | — | — | — | — | 15,574(6) | $ | 187,044 | ||||||||||||||
1/27/2016(1) | 64,599 | — | 14.19 | 1/27/2024 | — | — | |||||||||||||||
8/1/2015(2) | 62,000 | — | 15.68 | 8/1/2023 | — | — | |||||||||||||||
| Tyler Lipschultz | 1/1/2019 | — | 35,636(3) | 18.24 | 1/1/2027 | 10,691(4) | $ | 128,399 | |||||||||||||
| 3/5/2018 | — | — | — | — | 25,101(5) | $ | 301,463 | ||||||||||||||
| 2/2/2017 | — | — | — | — | 15,574(6) | $ | 187,044 | ||||||||||||||
1/27/2016(1) | 64,599 | — | 14.19 | 1/27/2024 | — | — | |||||||||||||||
8/1/2015(2) | 60,000 | — | 15.68 | 8/1/2023 | — | — | |||||||||||||||
| 2020 Outstanding Equity Awards at Fiscal Year End | ||||||||||||||||||||||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable* | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)* | Market Value of Shares or Units of Stock that Have Not Vested ($)(9) | |||||||||||||||||||||||||||||||||||||
| Keith Valentine | 4/23/2020(1) | 8,871 | — | 9.93 | 4/23/2028 | — | $ | — | ||||||||||||||||||||||||||||||||||||
| 1/1/2020 | — | 121,830(5) | 12.01 | 1/1/2028 | 36,549(6) | $ | 637,780 | |||||||||||||||||||||||||||||||||||||
| 1/1/2019 | 34,073(4) | 43,808(4) | 18.24 | 1/1/2027 | 15,577(7) | $ | 271,819 | |||||||||||||||||||||||||||||||||||||
| 3/5/2018 | — | — | — | — | 27,428(8) | $ | 478,619 | |||||||||||||||||||||||||||||||||||||
1/27/2016(2) | 149,074 | — | 14.19 | 1/27/2024 | — | — | ||||||||||||||||||||||||||||||||||||||
8/1/2015(3) | 325,000 | — | 15.68 | 8/1/2023 | — | — | ||||||||||||||||||||||||||||||||||||||
| John Bostjancic | 4/23/2020(1) | 6,089 | — | 9.93 | 4/23/2028 | — | $ | — | ||||||||||||||||||||||||||||||||||||
| 1/1/2020 | — | 55,746(5) | 12.01 | 1/1/2028 | 16,724(6) | $ | 291,834 | |||||||||||||||||||||||||||||||||||||
| 1/1/2019 | 7,795(4) | 10,023(4) | 18.24 | 1/1/2027 | 10,692(7) | $ | 186,575 | |||||||||||||||||||||||||||||||||||||
| 3/5/2018 | — | — | — | — | 12,551(8) | $ | 219,015 | |||||||||||||||||||||||||||||||||||||
1/27/2016(2) | 64,599 | — | 14.19 | 1/27/2024 | — | — | ||||||||||||||||||||||||||||||||||||||
8/1/2015(3) | 62,000 | — | 15.68 | 8/1/2023 | — | — | ||||||||||||||||||||||||||||||||||||||
| Patrick Keran | 4/23/2020(1) | 6,045 | — | 9.93 | 4/23/2028 | — | — | |||||||||||||||||||||||||||||||||||||
| 1/1/2020 | — | 52,797(5) | 12.01 | 1/1/2028 | 15,839(6) | $ | 276,391 | |||||||||||||||||||||||||||||||||||||
| 1/1/2019 | 14,765(4) | 18,984(4) | 18.24 | 1/1/2027 | 6,750(7) | $ | 117,788 | |||||||||||||||||||||||||||||||||||||
| 3/5/2018 | — | — | — | — | 11,886(8) | $ | 207,411 | |||||||||||||||||||||||||||||||||||||
1/27/2016(2) | 64,599 | — | 14.19 | 1/27/2024 | — | — | ||||||||||||||||||||||||||||||||||||||
11/1/2015(3) | 60,000 | — | 15.08 | 11/1/2023 | — | — | ||||||||||||||||||||||||||||||||||||||
*In the footnotes below, the vesting that will occur in the future is subject to the officer continuing to be employed with us through the applicable vesting date.
(1)The option fully vested and became exercisable on June 21, 2020.
(2)This option vested in equal quarterly installments over four years, with the first installment vesting on the later of (a) March 31, 2016 or (b) the first anniversary of the officer’s first day of employment with us, at which time the portion of the option that would have vested but for this one-year cliff, vested. This option began vesting for Messrs. Valentine, Bostjancic and Keran in June 2016, March 2016 and August 2016, respectively, and fully vested on December 31, 2019 for each of them.
(3)This option vested as to 25% of the underlying shares on May 1, 2016, and the remaining 75% vested in twelve substantially equal quarterly installments thereafter.
(4)This option vested as to 25% of the underlying shares on January 1, 2020, and the remaining 75% vested or will vest in twelve substantially equal quarterly installments thereafter.
(5)The option vested as to 25% of the underlying shares on January 1, 2021 and the remaining 75% will vest in twelve substantially equal quarterly installments thereafter.
(6)Represents shares subject to RSUs, 12,183 shares, 5,574 shares, and 5,279 shares of which vested on January 1, 2021 for Messrs. Valentine, Bostjancic, and Keran, respectively, and the balance of which will vest in equal installments on each of January 1, 2022 and 2023.
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(7)Represents shares subject to RSUs, 7,788 shares, 5,346 shares, and 3,375 shares of which vested on January 1, 2021 for Messrs. Valentine, Bostjancic, and Keran, respectively, and the balance of which will vest on January 1, 2022.
(8)Represents shares subject to RSUs, all of which vested on January 1, 2021 for each of Messrs. Valentine, Bostjancic and Keran.
(9)The dollar amounts shown in this column are calculated by multiplying the number of shares shown in the adjacent column by the closing market price of our common stock as reported on Nasdaq on December 31, 2020 ($17.45), the last trading day of our fiscal year.
Executive Compensation Arrangements
Keith Valentine Employment Agreement
On April 28, 2015, we entered into an employment agreement with Keith Valentine, pursuant to which he serves as our chief executive officer. Mr. Valentine’s employment commenced May 1, 2015 and, his employment under that agreement was amended on April 30, 2019 to extend Mr. Valentine’s employment with us through the date his employment is terminated. Absent the amendment, his employment with us under the employment agreement would have terminated on May 1, 2019. Mr. Valentine’s employment with us remains “at-will” and may be terminated by either us or Mr. Valentine, with or without cause.
His initial annual base salary was $500,000 and is subject to annual review and may be increased in the discretion of the compensation committee of our board of directors. Mr. Valentine is eligible for an annual bonus opportunity targeted at least at 85% of his annual base salary.
Mr. Valentine received a nonqualified stock option to purchase 325,000 shares of our common stock with a term of eight years and that vested with respect to 25% of the shares on May 1, 2016 and, with respect to the remaining 75% of the shares, vested in equal quarterly installments over the following three-year period, subject to his continued service through the applicable vesting date. If his employment is terminated due to his death or disability, then all the shares subject to this option will vest and become exercisable in full. Mr. Valentine is eligible to receive a discretionary annual equity award as determined by our compensation committee in its sole discretion. The amount, form and mix of such award is determined by our compensation committee in its discretion after giving consideration to annual equity-based awards granted to chief executive officers in our peer group. Every year since and including 2015, Mr. Valentine was granted an equity award, either in the form of a stock option, RSU, or combination thereof, with a value equal to 1.5 times his then-current annual base salary that will vest, with respect to stock options, over a four-year period and, with respect to RSUs, over a three-year period.
If Mr. Valentine’s employment is terminated outside the context of a change in control by us other than for “cause,” or as a result of death or “disability,” or by Mr. Valentine for “good reason” (each, as defined in his employment agreement), then, in addition to accrued amounts:
•he will receive a lump sum payment equal to 2.99 times his annual base salary;
•he will receive company-subsidized healthcare continuation coverage for Mr. Valentine and his dependents for up to eighteen months after his termination date;
•the vesting of any equity awards that are outstanding immediately prior to such termination and that vest solely based on the passage of time will be accelerated; and
•he will be eligible to receive a pro-rated annual bonus for the year in which the termination occurs.
If Mr. Valentine’s employment is terminated within twelve months following a change in control by us other than cause, death or disability, or by Mr. Valentine for good reason, then he will be entitled to receive the same payments and benefits as described above, except he will receive a lump sum payment equal to 2.99 times the sum of his annual base salary and target bonus opportunity.
Mr. Valentine’s right to receive the severance payments described above is subject to Mr. Valentine executing a general release of claims in our favor. In addition, to the extent that any payment or benefit received in connection with a change in control would be subject to an excise tax under Section 4999 of the Code, such payments and/or benefits will be subject to a “best pay cap” reduction, if such reduction would result in a greater net after-tax benefit to Mr. Valentine than receiving the full amount of such payments.
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Mr. Valentine’s employment agreement contains an employee non-solicitation covenant that extends for 18 months following termination of his employment. We agreed to reimburse Mr. Valentine for up to $35,000 in legal fees and expenses incurred in connection with the drafting, review and negotiation of his employment agreement and the option agreement related to the stock option to purchase 325,000 shares of our common stock described above.
Senior Leadership Retention and Severance Plan
In January 2016, our compensation committee adopted the Senior Leadership Retention and Severance Plan, or the Severance Plan. The Severance Plan provides our named executive officers (other than Mr. Valentine, who is not an eligible participant) and the other members of our senior leadership team with certain severance benefits.
Under the Severance Plan, if a participant’s employment is terminated prior to a change in control or more than twelve months following a change in control by us without “cause” (and other than by reason of death or disability) or by the participant for “good reason” (each as defined in the Severance Plan), then the participant will be entitled to a lump sum payment equal to his or her annual base salary, less his or her accrued but unused paid time off.
Under the Severance Plan, if a participant’s employment is terminated within twelve months following a change in control by us without cause (and other than by reason of death or disability) or by the participant for good reason, then the participant will be entitled to the following payments and benefits:
•A lump sum payment equal to two times his or her annual base salary, less his or her accrued but unused paid time off;
•A lump sum payment equal to the estimated monthly premium cost of continuing health care coverage (including, without limitation, medical, dental and vision coverage) for the participant and his or her dependents who are covered immediately prior to the termination under the federal law known as COBRA for twenty-four months; and
•Accelerated vesting of any equity awards that are outstanding immediately prior to such termination and that vest solely based on the passage of time. In addition, as applicable, each such award shall remain exercisable until the date that is twelve months after the date of termination (which, for these purposes, will be deemed to have occurred on the vesting date that would have occurred immediately following the termination, had such termination not occurred) (but in no event beyond the original expiration date of such award).
A participant’s right to receive the severance payments pursuant to the Severance Plan is contingent on his or her executing a general release of claims against us. In addition, to the extent that any payment or benefit received in connection with a change in control would be subject to an excise tax under Section 4999 of the Code, such payments and/or benefits will be subject to a “best pay cap” reduction, if such reduction would result in a greater net after-tax benefit to the participant than receiving the full amount of such payments.
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Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||||
| Equity compensation plans approved by security holders: | ||||||||||
Amended and Restated 2015 Incentive Award Plan (1) | ||||||||||
| Awards granted by Integra LifeSciences Holdings Corporation prior to the Spin-Off and converted to SeaSpine awards in connection with the Spin-Off | 89,377 | $ | 10.46 | — | ||||||
Awards granted following the Spin-Off (2) | 3,351,348 | $ | 11.61 | 1,832,700 | ||||||
| Equity compensation plans not approved by security holders: | ||||||||||
2016 Employment Inducement Incentive Award Plan (3) | — | $ | — | 1,000,000 | ||||||
2018 Employment Inducement Incentive Award Plan (4) | 48,518 | $ | 3.16 | 1,939,750 | ||||||
Policies Regarding Tax Deductibility of Compensation
We aim to design and approve executive compensation plans in a manner that is tax-efficient for us without sacrificing the effectiveness of the incentive programs being offered to executives. The compensation committee considers the effect of applicable tax regulations, including Section 162(m) of the Code, which generally disallows a tax deduction to public corporations for non-qualifying compensation in excess of $1.0 million paid to the “covered employees.” Prior to the 2017 Tax Cuts and Jobs Act, covered employees generally consisted of our chief executive officer and each of the next three highest compensated officers serving at the end of the taxable year other than our chief financial officer, and compensation that qualified as “performance-based” under Section 162(m) was exempt from this $1 million deduction limitation. As part of the 2017 Tax Cuts and Jobs Act, the ability to rely on this exemption was, with certain limited exceptions, eliminated; in addition, the definition of covered employees was expanded to generally include all named executive officers. Although the tax deductibility of executive compensation is an important consideration, the compensation committee may approve compensation that does not qualify for deductibility where it is appropriate to do so. In addition, although we historically considered certain performance-based incentive plans that may have permitted the payment of compensation deductible under Section 162(m), subject to the limited transition relief rules in the 2017 Tax Cuts and Jobs Act, we may no longer be able to take a deduction for any compensation in excess of $1 million that is paid to a covered employee.
Compensation Committee Interlocks and Insider Participation
During 2019,2020, no member of our compensation committee was one of our officers or employees, or was one of our former officers, or had any relationship requiring disclosure under Item 404 of Regulation S-K. During 2019,2020, none of our executive officers served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.
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PROPOSAL NO. 1:
ELECTION OF DIRECTORS
Our amended and restated certificate of incorporation and our amended and restated bylaws provide for the classification of our board of directors into three classes, as nearly equal in number as possible and with staggered terms of office, and provide that upon the expiration of the term of office for a class of directors, nominees for such class shall be elected for a term of three years or until their successors are duly elected and qualified, provided that the term of each director shall continue until the election and qualification of a successor and be subject to such director’s earlier death, resignation or removal.
At the annual meeting, two nominees for director are to be elected as Class III directors for a three-year term expiring at our 2024 annual meeting of stockholders and until such individual’s successor is elected and qualified. The Class II and Class I directors have two years and one year, respectively, remaining on their terms of office.
The nominees for election as Class III directors at the annual meeting, who were recommended for nomination by the nominating and corporate governance committee of our board of directors, are Stuart M. Essig, Ph.D. and Keith C. Valentine, each of whom is currently a member of our board of directors.
Holders of proxies solicited by this proxy statement will vote the proxies received by them as directed on the proxy card or, if no direction is made, for the election of Dr. Essig and Mr. Valentine. Each of them has consented to serving as a nominee, being named in this proxy statement, and serving on our board of directors, if elected. If any nominee is unable or declines to serve as a director at the time of the annual meeting, the proxy holders may vote for any nominee designated by our board of directors to fill the vacancy.
All of our directors have significant leadership experience derived from their professional experience and service as executives or board members of other companies. The process undertaken by the nominating and corporate governance committee in recommending qualified director candidates is described above under “Corporate Governance Matters—Director Nominations Process.”
Vote Required
If a quorum is present at the annual meeting, the two nominees receiving the highest number of votes will each be elected to our board of directors.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF STUART M. ESSIG, PH.D. AND KEITH C. VALENTINE.
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PROPOSAL NO. 2:
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee selected RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021 and directed that management submit the selection for ratification by our stockholders at the annual meeting. RSM US LLP audited our financial statements for the fiscal year ending December 31, 2020. One or more representatives of RSM US LLP are expected to be present at the annual meeting, will have an opportunity to make a statement if they so desire, and will be available to respond to appropriate questions.
Stockholder ratification of the selection of RSM US LLP as our independent registered public accounting firm is not required by Delaware law, our amended and restated certificate of incorporation, or our amended and restated bylaws. However, the selection of RSM US LLP to our stockholders for ratification is being submitted as a matter of good corporate practice. If our stockholders fail to ratify the selection, our audit committee will reconsider whether to retain the firm. Even if the selection is ratified, the audit committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the audit committee determines that such a change would be in the best interests of our company and our stockholders.
Vote Required
Assuming a quorum is present at the annual meeting, this proposal will be approved if a majority of the voting power of the shares entitled to vote on this proposal represented in person or by proxy vote “FOR” this proposal.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THIS PROPOSAL.
Independent Registered Public Accounting Firm’s Fees
The following table represents aggregate fees billed to us by RSM US LLP for services rendered for the year indicated.
| Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||
Audit Fees (1) | $ | 821,650 | $ | 705,165 | ||||
Audit Related Fees (2) | 77,695 | 139,023 | ||||||
Tax Fees (3) | — | — | ||||||
| $ | 899,345 | $ | 844,188 | |||||
| (1) | Audit Fees consist of fees billed for professional services for audit and the review of our quarterly reports on Form 10-Q, statutory audits, and related services that are normally provided in connection with regulatory filings or engagements. | ||||
| (2) | Audit Related Fees consist of fees for services related to an employee benefit plan audit and professional services in connection with SEC registration statements. | ||||
| (3) | We did not engage RSM US LLP to perform any professional services for tax compliance, tax advice or tax planning in 2019 or 2020. | ||||
Our audit committee considered whether the provision of non-audit services is compatible with maintaining the independence of RSM US LLP, and concluded that the provision of such services is compatible with maintaining the independence of our auditors.
Pre-Approval Policies and Procedures
Under the audit committee charter, before our independent registered public accounting firm is engaged to render audit or non-audit services, the audit committee must pre-approve the engagement, except that the pre-approval of non-audit services (other than review and attest services) is not required if such services fall within available exceptions established by the SEC. The audit committee may adopt policies and procedures for the pre-approval of services and the audit committee may delegate to one or more of its members the authority to grant pre-approvals, provided such approvals are presented to the audit committee at a subsequent meeting. If the audit committee establishes pre-approval policies and procedures regarding non-audit services, it must be informed of each non-audit service provided by our independent registered public accounting firm.
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The audit committee has established policies and procedures for the pre-approval of services. Under these policies and procedures, our management submits requests for approval in writing to the audit committee, which reviews such requests and approves or declines to approve the requests.
Except as described below, the audit committee pre-approved all audit and permitted non-audit services provided by RSM US LLP in 2020 and 2019. During 2020, we paid $29,730 for the audit of our 401(k) plan. Such amount is included in the "Audit Related Fees" line item in the table above and represents approximately 3.0% of the total fees paid, and we relied on the de minimis exception to pre-approval provided in Rule 2-01(c)(7)(i)(C) of Regulation S-X promulgated by the SEC. The audit committee determined that the rendering of the services other than audit services by RSM US LLP is compatible with maintaining RSM US LLP’s independence.
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PROPOSAL NO. 3:
ADVISORY VOTE TO APPROVE 2020 NAMED EXECUTIVE OFFICER COMPENSATION
In accordance with the requirements of Section 14A of the Exchange Act and related SEC rules, our stockholders are entitled to cast an advisory vote on the compensation of our named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules in this proxy statement (which disclosure includes the related compensation tables included in the “2020 Named Executive Officer Compensation” section of this proxy statement). The vote does not address any specific item of our compensation program, but rather addresses our overall approach to the compensation of our named executive officers described in this proxy statement.
Although the vote on this proposal is advisory, and therefore not binding on us our or our board of directors, our board of directors and its compensation committee values input from our stockholders and will consider the outcome of the vote in analyzing our compensation philosophy and when making future executive compensation decisions. The vote will not be construed to create or imply any change to the fiduciary duties of our board of directors, or to create or imply any additional fiduciary duties for our board of directors. The approval or disapproval of this proposal by our stockholders will not require our board of directors to take any action regarding our executive compensation practices and will not alter any contractual obligations between us and any of our executive officers or other employees.
As described in more detail in the “Executive Compensation” section of this proxy statement, our executive compensation program is based on a pay-for-performance philosophy and is designed to enable our company to attract, motivate, and retain highly-qualified senior executives who have the skills to drive our continued growth and success; provide fair and equitable compensation that rewards executives for achieving specified financial goals and other key metrics; link a substantial portion of executives’ total potential compensation to our company’s performance on both a long-term and short-term basis; and align the interests of our executives with those of our stockholders, which we believe ultimately will drive stockholder value. Our current executive compensation program primarily includes (1) base salary, (2) annual performance-based incentive compensation, and (3) long-term incentive compensation in the form of stock options and restricted stock units. This equity compensation aligns the long-term interests of executive officers with those of our stockholders and otherwise encourages the achievement of superior results over an extended time period. Our board of directors and its compensation committee reviews our compensation plans and programs on an ongoing basis and periodically make adjustments taking into account competitive conditions and other factors. Please read the section entitled “Executive Compensation” in this proxy statement for additional details about our executive compensation programs, including information about the fiscal year 2020 compensation of our named executive officers. This advisory vote, commonly referred to as the “say-on-pay” vote, gives our stockholders the opportunity to approve or not approve our executive compensation programs and policies by voting on the following resolution:
“RESOLVED, that the stockholders of SeaSpine Holdings Corporation approve, on an advisory basis, the compensation paid to the company’s named executive officers as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K, including the compensation tables and narrative discussion.”
Vote Required
Assuming a quorum is present at the annual meeting, this proposal will be approved if a majority of the voting power of the shares entitled to vote on this proposal represented in person or by proxy vote “FOR” this proposal.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THIS PROPOSAL.
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PROPOSAL NO. 4:
TO APPROVE, ON AN ADVISORY BASIS, THE PREFERRED FREQUENCY OF HOLDING AN ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
In accordance with the requirements of Section 14A of the Exchange Act and related SEC rules, our stockholders are entitled to cast an advisory vote for their preference as to how frequently we should seek future advisory votes on the compensation of our named executive officers. By voting on this, stockholders may indicate whether they would prefer that we conduct future advisory votes on executive compensation every year, every two years or every three years.
After careful consideration of the various arguments supporting each frequency level, our board of directors believes that submitting the advisory vote on executive compensation to stockholders every year is appropriate for our company and our stockholders at this time. Our board of directors believes that holding the advisory vote annually will allow our stockholders to provide timely and direct input on our executive compensation philosophy, policies and practices as disclosed in the proxy statement each year and is consistent with our efforts to engage in an ongoing dialogue with our stockholders on corporate governance matters.
Stockholders are being asked for their views on the frequency of the advisory vote on executive compensation, and are not voting to approve or disapprove the recommendation of our board of directors. Although the vote on this proposal is advisory, and therefore not binding on us or our board of directors, our board of directors values input from our stockholders and will consider the outcome of the vote in determining the frequency of future advisory votes on executive compensation.
Stockholders may cast a vote on the preferred voting frequency by choosing the option of every year, every two years, or every three years (or abstain from voting) when voting on the following resolution:
“RESOLVED, that the stockholders of SeaSpine Holdings Corporation determine, on an advisory basis, that the frequency with which the stockholders wish to have an advisory vote on the compensation of the company’s named executive officers as disclosed pursuant to the SEC’s compensation disclosure rules is:
•Choice 1 - every year;
•Choice 2 - every two years;
•Choice 3 - every three years; or
•Choice 4 - abstain from voting.”
Vote Required
Assuming a quorum is present at the annual meeting, the alternative (every year, every two years or every three years) that receives the greatest number of votes will be designated the stockholders’ preference as to frequency of future voting on the advisory vote on the compensation of our named executive officers.
OUR BOARD RECOMMENDS A FREQUENCY OF “EVERY YEAR” FOR THE FUTURE VOTING ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
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PROPOSAL NO. 5:
APPROVAL OF AN AMENDMENT TO OUR 2015 EMPLOYEE STOCK PURCHASE PLAN
We maintain an employee stock purchase plan called the SeaSpine Holdings Corporation 2015 Employee Stock Purchase Plan, or the Existing ESPP. At the annual meeting we will be asking our stockholders to approve an amendment to the Existing ESPP to increase the number of shares of our common stock available for issuance thereunder by 500,000. Our board of directors approved the proposed amendment, or the ESPP Amendment, effective December 9, 2020, subject to stockholder approval. In this proxy statement, we refer to the Existing ESPP as proposed to be amended by the ESPP Amendment as the Amended ESPP.
The ESPP Amendment is being submitted for stockholder approval to ensure that the Amended ESPP meets the requirements of Section 423 of the Internal Revenue Code, as amended, or the Code. If the ESPP Amendment is not approved by our stockholders, the ESPP Amendment will have no further force and effect, and the Existing ESPP will continue in full force and effect, although there will be only 127,160 shares remaining available for issuance thereunder.
Overview of Proposed ESPP Amendment
Increase in Share Reserve. We strongly believe that an employee stock purchase program is an important incentive and retention tool. As of December 31, 2020, a total of 800,000 shares of our common stock were reserved under the Existing ESPP and, after giving effect to the exercise of outstanding purchase rights on the purchase date occurring on December 31, 2020, there were 127,160 shares of common stock remaining available under the Existing ESPP for future issuance.
If our stockholders approve the ESPP Amendment, an additional 500,000 shares will be reserved for issuance under the Amended ESPP and available for purchase under offering periods commencing on or after January 1, 2021.
If our stockholders do not approve the ESPP Amendment, we will have only 127,160 shares available for issuance under the Existing ESPP.
All of the foregoing share numbers may be adjusted for changes in our capitalization and certain corporate transactions, as described below under the heading “Adjustments.”
The Existing ESPP is not being amended in any material respect other than to increase the share reserve by 500,000 shares.
Determination to Approve the ESPP Amendment
The table below presents information about the number of shares that were subject to outstanding equity awards under our equity incentive plans and the shares remaining available for issuance under those plans, each at December 31, 2020, and the proposed increase in shares authorized for issuance under the ESPP Amendment.
The Existing ESPP, our Amended and Restated 2015 Incentive Award Plan, or the 2015 Plan, and our 2020 Employment Inducement Incentive Award Plan are the only equity incentive plans we currently have in place pursuant to which awards may be granted.
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| Number of Shares | As a % of Shares Outstanding(1) | Dollar Value(2) | |||||||||
| 2015 Plan | |||||||||||
Share reserve under the 2015 Plan(3) | 9,735,500 | 35.1 | % | $169,884,475 | |||||||
| Options outstanding | |||||||||||
Adjusted Awards(4) | 39,479 | 0.1 | % | $688,909 | |||||||
| Options (that are not Adjusted Awards) | 3,231,248 | 11.7 | % | $56,385,278 | |||||||
| Weighted average exercise price of outstanding options | $14.36 | ||||||||||
| Weighted average remaining term of outstanding options | 4.66 | ||||||||||
| Restricted stock awards (RSAs) and restricted stock units (RSUs) outstanding | |||||||||||
| Adjusted Awards | 69,937 | 0.3 | % | $1,220,401 | |||||||
| RSAs (that are not Adjusted Awards) | 66,419 | 0.2 | % | $1,159,012 | |||||||
| RSUs (that are not Adjusted Awards) | 647,594 | 2.3 | % | $11,300,515 | |||||||
| Shares remaining available for issuance under the 2015 Plan | 4,011,104 | 14.5 | % | $69,993,765 | |||||||
| 2020 Plan | |||||||||||
| Share reserve under the 2020 Plan | 2,000,000 | 7.2 | % | $34,900,000 | |||||||
| Options outstanding | |||||||||||
| Options | 34,327 | 0.1 | % | $599,006 | |||||||
| Weighted average exercise price of outstanding options | $14.68 | ||||||||||
| Weighted average remaining term of outstanding options | 8.98 | ||||||||||
| RSAs and RSUs outstanding | |||||||||||
| RSAs | — | — | % | $0 | |||||||
| RSUs | 34,001 | 0.1 | % | $593,317 | |||||||
| Shares remaining available for issuance under the 2020 Plan | 1,928,257 | 7.0 | % | $33,648,085 | |||||||
| Amended ESPP | |||||||||||
| Proposed aggregate increase to share reserve pursuant to ESPP Amendment | 500,000 | 1.8 | % | $8,725,000 | |||||||
| Shares remaining available for grant assuming approval of the ESPP Amendment | 627,160 | 2.3 | % | $10,943,942 | |||||||
| (1) | Based on 27,729,000 shares of our common stock outstanding as of December 31, 2020. | ||||
| (2) | Based on the closing price of our common stock on December 31, 2020 of $17.45 per share. | ||||
| (3) | Does not include (a) the number of shares subject to outstanding Adjusted Awards as of December 31, 2020, or (b) the 197,319 shares that have become available for issuance under the 2015 Plan as a result of the forfeiture of Adjusted Awards since the adoption of the 2015 Plan through December 31, 2020 pursuant to the terms of the 2015 Plan. | ||||
| (4) | We use the term “Adjusted Awards” to refer to certain Integra equity awards that were converted to SeaSpine equity awards under the 2015 Plan. | ||||
In determining whether to approve the ESPP Amendment our board of directors considered the following:
•Unless the ESPP Amendment is authorized and approved by our stockholders, we will deplete our shares available for issuance under the Existing ESPP in the near future. As a result, we will be unable to use the Existing ESPP as an incentive and retention tool for employees that benefits all of our stockholders. The increase in the share reserve proposed by the ESPP Amendment will enable us to continue our policy of equity ownership by employees as an incentive to contribute to our success
•We expect the proposed aggregate share reserve under the ESPP Amendment to provide us with enough shares for three years, assuming employee participation in the Amended ESPP is consistent with historical levels, as reflected in our three-year burn rate for the Existing ESPP, and further dependent on the price of our shares and hiring activity during the next few years. We cannot predict our future share usage under the Amended
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ESPP, the future price of our shares or future hiring activity with any degree of certainty at this time, and the share reserve under the Amended ESPP could last for a shorter or longer time.
•In fiscal years 2018, 2019 and 2020, the end of year overhang rate was approximately 41.9%, 39.2%, and 38.5%, respectively (which overhang rates were 42.8%, 40.0%, and 38.9%, respectively, if Adjusted Awards were included). If the ESPP Amendment is approved, we expect our overhang at the end of 2021 will be approximately 37.4% (which overhang rate would be 37.7% if Adjusted Awards are included). Overhang is calculated by dividing (1) the sum of the number of shares subject to equity awards outstanding at the end of the fiscal year plus shares remaining available for issuance for future awards at the end of the fiscal year by (2) the number of shares outstanding at the end of the fiscal year.
•In fiscal years 2018 2019 and 2020, we issued a total of approximately 160,059, 119,602, and 153,302 shares, respectively, under the Existing ESPP, for an annual equity burn rate of 0.9%, 0.6% and 0.6%, respectively. This represents a three-year average burn rate of 0.7% with respect to our Existing ESPP. In fiscal years 2018, 2019 and 2020, equity awards representing a total of approximately 853,467 shares, 900,791 shares and 1,615,566 shares, respectively, were granted under our equity plans (including shares issued under the Existing ESPP but not including the Adjusted Awards), for an annual equity burn rate of 4.6% 4.7%, and 5.8%, respectively. This represents a three-year average burn rate of 5.0% with respect to all of our equity plans. Equity burn rate is calculated by dividing (1) the number of shares subject to equity awards granted during the fiscal year by (2) the number of shares outstanding at the end of the period.
In light of the factors described above, and the fact that the ability to continue to grant equity compensation is vital to our ability to continue to attract and retain employees in the extremely competitive labor markets in which we compete, our board of directors determined that the increase to the share reserve under the Existing ESPP pursuant to the ESPP Amendment is reasonable and appropriate at this time. Our board of directors will not create a subcommittee to evaluate the risk and benefits for issuing shares under the Amended ESPP.
Summary of the Amended ESPP
The principal features of the Amended ESPP are summarized below, but the summary is qualified in its entirety by reference to the Existing ESPP and the ESPP Amendment, which are attached as Appendix A and Appendix B, respectively, to this proxy statement.
Purpose
The purpose of the Amended ESPP is to assist our eligible employees in acquiring a stock ownership interest in our company and to help our eligible employees provide for their future security and to encourage them to remain in our employment.
Securities Subject to the Amended ESPP
If the ESPP Amendment is approved by our stockholders, an aggregate of 1,300,000 shares of our common stock will be available for purchase under the Amended ESPP. The common stock made available for purchase under the Amended ESPP may be authorized but unissued shares, treasury shares or shares reacquired in private transactions or open market purchases. In computing the number of shares of common stock available for purchase, shares subject to rights granted to participants to purchase shares of common stock under the Amended ESPP that terminate prior to exercise will be available for future grants of rights to purchase shares of common stock under the Amended ESPP.
All of the foregoing share numbers may be adjusted for changes in our capitalization and certain corporate transactions, as described below under the heading “Adjustments.”
Administration
The Amended ESPP is administered by the compensation committee, which has broad authority to construe the Amended ESPP and to make determinations with respect to the terms and conditions of each offering period under the Amended ESPP, awards, eligible participants, designated subsidiaries and other matters pertaining to plan administration.
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Eligibility
Our employees are eligible to participate in the Amended ESPP if they are customarily employed by us or any participating subsidiary and, immediately after the grant of an option, would own (directly or through attribution) stock possessing less than 5% of the total combined voting power or value of all classes of our common or other class of stock, or the stock of any subsidiary corporation of ours.
Eligible employees become participants in the Amended ESPP by enrolling and authorizing payroll deductions by the deadline established by the administrator prior to the relevant offering date. Directors who are not employees are not eligible to participate. Employees who choose not to participate, or are not eligible to participate at the start of an offering period but who become eligible thereafter, may enroll in any subsequent offering period.
As of January 1, 2021, the most recent enrollment date, there were 411 employees who were eligible to participate in the Amended ESPP, 213 of whom had elected to participate.
Offering Periods and Purchase Periods
The Amended ESPP is intended to qualify under Code Section 423 and stock will be offered under the Amended ESPP during offering periods. The length of the offering periods under the Amended ESPP will be determined by our compensation committee and may be up to 27 months long. Employee payroll deductions will be used to purchase shares on each purchase date during an offering period. The purchase dates will be determined by the compensation committee for each offering period, but will generally be the last trading day in each purchase period. The compensation committee may, in its discretion, modify the terms of future offering periods.
The Amended ESPP is currently implemented by 24-month “offering periods.” A new 24-month offering period will commence on each of January 1 and July 1 during the term of the Amended ESPP. Each offering period is comprised of up to four six-month purchase periods. Purchase dates are set for the last trading day in each six-month purchase period during an offering period and will generally occur on each of June 30 and December 31 (unless such days are not trading days).
If the fair market value of our common stock on any purchase date is less than or equal to the fair market value on the first trading day of that offering period, then that offering period will immediately terminate and each participant in the terminated offering period will automatically participate in the offering period commencing on the January 1 or July 1 immediately following the date on which the original offering period terminated.
Enrollment; Contributions
The Amended ESPP permits participants to purchase common stock through payroll deductions of up to 15% of their eligible compensation. The Amended ESPP provides that there shall be a limit on the number of shares a participant may purchase during an offering period, which will be 1,500 shares per offering period unless otherwise determined by the administrator prior to the commencement of an offering period. The administrator has determined that this limit will be a maximum of 2,500 shares times the number of purchase periods in such offering period for offerings under the Amended ESPP. In addition, no employee will be permitted to accrue the right to purchase stock under the Amended ESPP at a rate in excess of $25,000 worth of shares during any calendar year during which such a purchase right is outstanding (based on the fair market value per share of our common stock as of the first day of the offering period).
After an employee authorizes us to deduct a certain percentage of his or her compensation for the purchase of shares under the Amended ESPP, we will make such deductions from his or her paycheck each pay period during an offering period and hold the accumulated amounts in a bank account until the completion of the offering period. An employee will not receive any interest on the amounts of compensation that we accumulate for the purchase of shares under the Amended ESPP. We may use all funds held by us under the Amended ESPP for any corporate purpose, and we are not obligated to segregate such funds.
Purchase Rights
On the first trading day of each offering period, each participant automatically is granted a right to purchase shares of our common stock. The right to purchase expires at the end of the offering period or upon termination of employment, whichever is
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earlier, but is exercised at the end of each offering period to the extent of the payroll deductions accumulated during such purchase period.
Purchase Price
The purchase price of the shares will be 85% of the lower of the fair market value of our common stock on the first trading day of the offering period or on the applicable purchase date. The fair market value per share of our common stock under the Amended ESPP is generally the closing sale price of our common stock on the Nasdaq Stock Market on the date for which fair market value is being determined, or if there is no closing sales price for a share of our common stock on the date in question, the closing sales price for a share of common stock on the last preceding date for which such quotation exists. The closing price per share of our common stock on the Nasdaq Stock Market on March 15, 2021 was $19.18.
Withdrawal; Termination of Employment
Participants may end their participation at any time during an offering period, provided that written notice is delivered no later than fifteen days prior to the exercise date of the offering period. Participants will be paid their accrued payroll deductions that have not yet been used to purchase shares of common stock. Participation ends automatically upon termination of employment with us.
Adjustments
If there is any increase or decrease in the number of issued shares of common stock as a result of a stock split, reverse stock split, stock dividend, combination or reclassification of the common stock, or any other increase or decrease in the number of shares of common stock effected without receipt of consideration by the company, the administrator may proportionately adjust (i) the aggregate number of shares of common stock authorized for issuance under the Amended ESPP; (ii) the number of shares of common stock subject to outstanding purchase rights which have not yet been exercised; and (iii) the price per share of outstanding purchase rights.
Unless provided otherwise by the administrator, if there is a proposed dissolution or liquidation of the company, the offering period then in progress will be shortened by setting a new exercise date, and will terminate immediately prior to the consummation of such proposed dissolution or liquidation.
If there is a proposed sale of all or substantially all of the assets of the company or the merger of the company with or into another corporation, each outstanding purchase right under an ongoing offering period will be assumed or an equivalent right substituted by the successor corporation or a parent or subsidiary of the successor corporation. In the event that the purchase rights are not assumed or substituted, the offering period will be shortened by setting a new exercise date and any offering periods then in progress will end on the new exercise date. The new exercise date will be before the date of the applicable transaction.
Transferability
A participant may not transfer rights granted under the Amended ESPP other than by will, the laws of descent and distribution.
Amendment and Termination
The administrator of the Amended ESPP has the right to amend, suspend, or terminate the Amended ESPP at any time and from time to time to the extent that it deems advisable. However, absent the approval of our stockholders, the plan administrator may not amend the Amended ESPP (i) to increase the maximum number of shares that may be purchased under the Amended ESPP or (ii) in any manner that would cause the Amended ESPP to no longer be an “employee stock purchase plan” within the meaning of Section 423 of the Code. No further offerings will take place once all shares of common stock available for purchase thereunder have been purchased unless our stockholders approve an amendment authorizing new shares under the Amended ESPP.
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Federal Income Tax Consequences Associated with the Amended ESPP
The material federal income tax consequences of the Amended ESPP under current federal income tax law are summarized in the following discussion, which deals with the general tax principles applicable to the Amended ESPP. The following discussion is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. Foreign, state and local tax laws, and employment, estate and gift tax considerations are not discussed due to the fact that they may vary depending on individual circumstances and from locality to locality.
The Amended ESPP, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Section 423 of the Code. Under the applicable Code provisions, no income will be taxable to a participant until the sale or other disposition of the shares purchased under the Amended ESPP. This means that an eligible employee will not recognize taxable income on the date the employee is granted an option under the Amended ESPP (i.e., the first day of the offering period). In addition, the employee will not recognize taxable income upon the purchase of shares. Upon such sale or disposition, the participant will generally be subject to tax in an amount that depends upon the length of time such shares are held by the participant prior to disposing of them. If the shares are sold or disposed of more than two years from the first day of the offering period during which the shares were purchased and more than one year from the date of purchase, or if the participant dies while holding the shares, the participant (or his or her estate) will recognize ordinary income measured as the lesser of (i) the excess of the fair market value of the shares at the time of such sale or disposition over the purchase price or (ii) an amount equal to 15% of the fair market value of the shares as of the first day of the offering period. Any additional gain will be treated as long-term capital gain. If the shares are held for the holding periods described above but are sold for a price that is less than the purchase price, there is no ordinary income and the participating employee has a long-term capital loss for the difference between the sale price and the purchase price.
If the shares are sold or otherwise disposed of before the expiration of the holding periods described above, the participant will recognize ordinary income generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price and we will be entitled to a tax deduction for compensation expense in the amount of ordinary income recognized by the employee. Any additional gain or loss on such sale or disposition will be long-term or short-term capital gain or loss, depending on how long the shares were held following the date they were purchased by the participant prior to disposing of them. If the shares are sold or otherwise disposed of before the expiration of the holding periods described above but are sold for a price that is less than the purchase price, the participant will recognize ordinary income equal to the excess of the fair market value of the shares on the date of purchase over the purchase price (and we will be entitled to a corresponding deduction), but the participant generally will be able to report a capital loss equal to the difference between the sales price of the shares and the fair market value of the shares on the date of purchase.
New Plan Benefits
Benefits under the Amended ESPP will depend on the employees’ enrollment and contribution elections, and the fair market value of the shares of our common stock at various future dates. Therefore, it is not possible to determine the benefits that will be received in the future by participants in the Amended ESPP. No shares of common stock have been issued with respect to the 500,000 share increase contemplated by the ESPP Amendment that stockholders are being requested to approve under this proposal.
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Plan Benefits under the Existing ESPP
As of December 31, 2020, each of our named executive officers and the other groups identified below have purchased the following shares of our common stock under the Existing ESPP since its inception:
| Name or Group | Shares Purchased (#) | Aggregate Purchase Price ($) | ||||||
| Keith Valentine | 12,007 | 93,162 | ||||||
| John Bostjancic | — | — | ||||||
| Patrick Keran | 8,136 | 55,737 | ||||||
| All Current Executive Officers as a Group (6 persons) | 43,326 | 327,180 | ||||||
| All Current Non-Employee Directors as a Group (7 persons) | — | — | ||||||
| All Current Non-Executive Officer Employees as a Group (208 persons) | 477,853 | 3,911,923 | ||||||
Vote Required
Assuming a quorum is present at the annual meeting, this proposal will be approved if a majority of the voting power of the shares entitled to vote on this proposal represented in person or by proxy vote “FOR” this proposal.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE TO APPROVE THIS PROPOSAL.
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PROPOSAL NO. 6:
APPROVAL OF AN AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Introduction
Our board of directors is requesting that our stockholders approve an amendment and restatement of Article IX of our amended and restated certificate of incorporation the primary purpose of which is to, among other things, add a provision to Article IX to provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal courts of the United States shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, or the 1933 Act. We refer to this provision as a federal forum provision and we refer to the proposed amendment and restatement of Article IX of our amended and restated certificate of incorporation as the Article IX Amendment.
Article IX of our amended and restated certificate of incorporation already includes a forum provision, which we refer to as the Delaware forum provision, which provides that, unless we consent in writing to the selection of an alternate forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any of our directors, officers or employees to us or to our stockholders, (iii) any action asserting a claim against us or any of our directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws, or (v) any action asserting a claim against us or any of our directors, officers or employees governed by the internal affairs doctrine. In addition, Article XI also already provides that any person purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the provisions of Article IX.
If the Article IX Amendment is approved by our stockholders and implemented, Article IX would also be amended to: (a) clarify that, with respect to the Delaware forum provision, if the Court of Chancery does not have, or declines to accept, jurisdiction, another state court or a federal court located within the State of Delaware shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for the claims covered by the Delaware forum provision, and that the Delaware forum provision does not apply to claims or causes of action brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended; (b) provide that any person purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of and consented to the provisions of Article IX; (c) specify that the existence of any consent in writing by us to the selection of an alternate forum in accordance with Article IX shall not act as a waiver of our consent right as set forth in Article IX with respect to any current or future actions or claims; and (d) specify that the failure to enforce any provision of Article IX would cause us irreparable harm and we shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce such provision.
Our board of directors declared the Article IX Amendment advisable and determined it to be in the best interests of our company and our stockholders for the reasons discussed below.
Background and Effect of the Article IX Amendment
In March 2018, the U.S. Supreme Court held that certain federal securities claims may be brought in either state or federal court and that when brought in a state court, they cannot be removed to federal court. Following that decision, a number of public companies adopted federal forum provisions in their governing documents. In March 2020, the Delaware Supreme Court upheld the validity under Delaware law of federal forum provisions. Following that decision, our board of directors considered a federal forum provision from a legal and policy perspective. Our board of directors considered that a federal forum provision allows for the consolidation of multi-jurisdiction litigation, avoidance of state court forum shopping and inconsistent court decisions, and efficiencies in managing the procedural aspects of securities litigation. Our board of directors also considered that a federal forum provision only regulates the forum in which a plaintiff may file claim and does not restrict the ability of a plaintiff to bring a claim or the remedies available if a claim is ultimately successful. Given these considerations, our board of directors determined that it is in the best interests of our company and our stockholders to adopt a federal forum provision in our governing documents. Therefore, in December 2020, our board of directors unanimously approved an amendment to our amended and restated bylaws to add a federal forum provision. In February 2021, our board of directors unanimously approved, subject to stockholder approval, the addition of a federal forum provision to our amended and restated certificate of incorporation as well, in the form of the Article IX Amendment.
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Although we are seeking approval of the Article IX Amendment for the reasons cited above, if the Article IX Amendment is approved and implemented, the Article IX Amendment could discourage claims or limit investors' ability to bring a claim in a judicial forum they find favorable. For example, some plaintiffs might prefer to litigate causes of action arising under the 1933 Act in a state court because it may be more convenient or viewed as being more favorable to them, or for other reasons. In addition, while the Delaware Supreme Court has ruled that federal forum provisions are "facially valid" under Delaware law, there is uncertainty as to whether courts in other jurisdictions will enforce federal forum provisions. If a federal forum provision is found to be unenforceable in a particular action, we may incur additional costs associated with resolving such an action or the validity of the provision on appeal. Conversely, a federal forum provision might impose additional litigation costs on plaintiffs who assert that the provision is not enforceable or is invalid. The existing federal forum provision in our amended and restated bylaws may have these effects even if our stockholders do not approve the Article IX Amendment.
If the Article IX Amendment is approved by our stockholders, it will become effective upon filing of a certificate of amendment to our amended and restated certificate of incorporation with the Delaware Secretary of State setting forth the Article IX Amendment, which we anticipate doing as soon as practicable following stockholder approval, and our board of directors will consider whether to retain the federal forum provision in our amended and restated bylaws. If the Article IX Amendment is not approved by our stockholders, our board of directors would consider whether to amend our amended and restated bylaws to remove the federal forum provision set forth therein.
Language of the Article IX Amendment
If the Article IX Amendment is approved and becomes effective, Article IX of our amended and restated certificate of incorporation would read as follows:
A.Unless the Corporation consents in writing to the selection of an alternate forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, jurisdiction, another state court or a federal court located within the State of Delaware) shall, to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by, or other wrongdoing by, any director, officer or employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation or any director, officer or employee of the Corporation arising pursuant to any provision of the DGCL or the Certificate of Incorporation or the Bylaws of the Corporation, (iv) any action to interpret, apply, enforce or determine the validity of this Certificate of Incorporation or the Bylaws of the Corporation, or (v) any action asserting a claim against the Corporation or any director, officer or employee of the Corporation governed by the internal affairs doctrine. This Paragraph A shall not apply to claims or causes of action brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended.
B.Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.
C.To the fullest extent permitted by law, any person purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to the provisions of this Article IX. If any provision or provisions of this Article IX shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article IX (including, without limitation, each portion of any sentence of this Article IX containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.
D.The existence of any consent in writing by the Corporation to the selection of an alternate forum either in accordance with Paragraph A or B of this Article IX, shall not act as a waiver of the Corporation’s consent right as set forth in this Article IX with respect to any current or future actions or claims.
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E.The failure to enforce any provision or provisions of this Article IX would cause the Corporation irreparable harm and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce such provision or provisions.
Vote Required
Assuming a quorum is present at the annual meeting, this proposal will be approved if a majority of the outstanding stock entitled to vote thereon vote “FOR” this proposal and if the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of our voting stock, voting together as a single class, vote “FOR” this proposal.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE TO APPROVE THIS PROPOSAL.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 31, 2021, for:
•each person or group of affiliated persons who, to our knowledge, owns more than 5% of our common stock;
•each of our named executive officers;
•each of our directors and nominees; and
•all of our current executive officers and directors as a group.
We have determined beneficial ownership in accordance with applicable SEC rules, and the information reflected in the table below is not necessarily indicative of beneficial ownership for any other purpose. Under applicable SEC rules, beneficial ownership includes any shares of common stock as to which a person has sole or shared voting power or investment power and any shares of common stock which the person has the right to acquire within 60 days after March 31, 2021 through the exercise of any option, warrant or right or through the conversion of any convertible security. Unless otherwise indicated in the footnotes to the table below and subject to community property laws where applicable, we believe, based on the information furnished to us, that each of the persons named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.
The information set forth in the table below is based on 27,947,786 shares of our common stock issued and outstanding on March 31, 2021. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stock subject to options, warrants, rights or other convertible securities held by that person that are currently exercisable or will be exercisable within 60 days after March 31, 2021. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Except as otherwise noted, the address for each person listed in the table below is c/o SeaSpine Holdings Corporation, 5770 Armada Drive, Carlsbad, California 92008.
| Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percentage Beneficially Owned | ||||||||||||
| 5% Beneficial Owners: | ||||||||||||||
First Light Asset Management, LLC (1) | 5,352,885 | 19.15 | % | |||||||||||
Tru St Partnership LP and Provco Leasing Corporation (2) | 2,004,847 | 7.17 | % | |||||||||||
Blackrock, Inc. (3) | 1,862,042 | 6.66 | % | |||||||||||
| Directors and Named Executive Officers: | ||||||||||||||
Kirtley (Kirt) C. Stephenson (4) | 223,468 | * | ||||||||||||
Stuart M. Essig (5) | 567,180 | 2.02 | % | |||||||||||
Keith Bradley (6) | 139,538 | * | ||||||||||||
Michael Fekete (7) | 152,137 | * | ||||||||||||
Renee Gaeta (8) | 19,251 | * | ||||||||||||
John B. Henneman, III (9) | 136,795 | * | ||||||||||||
| Shweta Singh Maniar | — | * | ||||||||||||
Keith C. Valentine (10) | 867,639 | 3.04 | % | |||||||||||
John J. Bostjancic (11) | 252,628 | * | ||||||||||||
Patrick L. Keran (12) | 234,254 | * | ||||||||||||
All current directors and executive officers as a group (13 persons) (13) | 3,145,761 | 10.61 | % | |||||||||||
—
| * | Represents beneficial ownership of less than 1%. | ||||
(1)First Light Asset Management, LLC (First Light) is deemed to be the beneficial owner of 5,352,885 shares of common stock by virtue of the fact that it acts as an investment adviser to certain persons holding separately managed accounts with First Light, each of whom has the right to receive or the power to direct the receipt of dividends from, or the
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proceeds from the sale of, those shares. Mathew P. Arens is also deemed to be the beneficial owner of these shares because he controls First Light in his position as managing member and majority owner of First Light. Mr. Arens also directly holds 120,000 in an individual capacity with sole control and 34,000 shares held in a joint account over which he shares control. The address of First Light and Mr. Arens is 3300 Edinborough Way, Suite 201, Edina, MN 55435. The foregoing information has been included solely in reliance upon, and without independent investigation of, the disclosures contained in the Schedule 13G/A filed by First Light with the SEC on January 8, 2021.
(2)Tru St Partnership LP (Tru St) may be deemed the beneficial owner of 1,997,068 shares of common stock. Provco Leasing Corporation is the corporate general partner of Tru St. Provco Leasing is also the beneficial owner of 7,779 shares of common stock. Tru St and Provco Leasing may be deemed to share the power to vote or direct the vote with respect to, and the power to dispose of or direct the disposition of, 2,004,847 shares of common stock. The address of Tru St is 795 E. Lancaster Avenue, Suite 200, Villanova, PA 19085, and of Provco Leasing is 1105 N. Market Street, Suite 602, Wilmington, DE 19810. The foregoing information has been included solely in reliance upon, and without independent investigation of, the disclosures contained in the Schedule 13G/A filed by Tru St and Provco Leasing with the SEC on February 16, 2021.
(3)Blackrock, Inc, may be deemed to be the beneficial owner of 1,862,042 shares of common stock, and has sole dispositive power over all of these shares and. has sole voting power over 1,792,209 of these shares. The address of Blackrock, Inc. is 55 East 52nd Street, New York, NY 10055. The foregoing information has been included solely in reliance upon, and without independent investigation of, the disclosures contained in the Schedule 13G filed by Blackrock, Inc. with the SEC on February 2, 2021.
(4)Consists of 9,700 shares of common stock held by the Kirtley & Leslie Stephenson 2014 Trust, 96,651 shares of common stock held by Mr. Stephenson, and 117,117 shares of common stock that Mr. Stephenson has the right to acquire pursuant to outstanding options which are exercisable within 60 days of March 31, 2021. Mr. Stephenson is a trustee of the Kirtley & Leslie Stephenson 2014 Trust and he has shared investment power over the shares held by it.
(5)Consists of 436,982 shares of common stock held by Dr. Essig, and 130,198 shares of common stock that Dr. Essig has the right to acquire pursuant to outstanding options which are exercisable within 60 days of March 31, 2021.
(6)Consists of 63,201 shares of common stock held by Dr. Bradley, and 76,337 shares of common stock that Dr. Bradley has the right to acquire pursuant to outstanding options which are exercisable within 60 days of March 31, 2021.
(7)Consists of 19,251 shares of common stock held by Ms. Gaeta.
(8)Consists of 69,116 shares of common stock held by Mr. Fekete, and 83,021 shares of common stock that Mr. Fekete has the right to acquire pursuant to outstanding options which are exercisable within 60 days of March 31, 2021.
(9)Consists of 60,458 shares of common stock held by Mr. Henneman, and 76,337 shares of common stock that Mr. Henneman has the right to acquire pursuant to outstanding options which are exercisable within 60 days of March 31, 2021.
(10)Consists of 302,814 shares of common stock held by Mr. Valentine, and 564,825 shares of common stock that Mr. Valentine has the right to acquire pursuant to outstanding options which are exercisable within 60 days of March 31, 2021.
(11)Consists of 92,497 shares of common stock held by Mr. Bostjancic, and 160,131 shares of common stock that Mr. Bostjancic has the right to acquire pursuant to outstanding options which are exercisable within 60 days of March 31, 2021.
(12)Consists of 68,127 shares of common stock held by Mr. Keran, and 166,127 shares of common stock that Mr. Keran has the right to acquire pursuant to outstanding options which are exercisable within 60 days of March 31, 2021.
(13)Consists of 1,432,792 shares of common stock and 1,712,969 shares of common stock acquirable pursuant to outstanding options which are exercisable within 60 days of March 31, 2021.
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EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes securities available under our equity compensation plans as of December 31, 2020 (in thousands, except per share data).
| Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||||||||||||||
| Equity compensation plans approved by security holders: | ||||||||||||||||||||
Amended and Restated 2015 Incentive Award Plan (1) | ||||||||||||||||||||
| Awards granted by Integra LifeSciences Holdings Corporation prior to the Spin-Off and converted to SeaSpine awards in connection with the Spin-Off | 39,479 | $ | 12.31 | — | ||||||||||||||||
Awards granted following the Spin-Off (2) | 3,945,261 | $ | 11.76 | 4,011,104 | ||||||||||||||||
| Equity compensation plans not approved by security holders: | ||||||||||||||||||||
2016 Employment Inducement Incentive Award Plan (3) | — | $ | — | — | ||||||||||||||||
2018 Employment Inducement Incentive Award Plan (4) | 61,777 | $ | 2.48 | — | ||||||||||||||||
2020 Employment Inducement Incentive Award Plan (5) | 68,328 | $ | 7.38 | 1,928,257 | ||||||||||||||||
(1)The Amended and Restated 2015 Incentive Award Plan is a broad-based incentive plan, which allows for the grant of stock options, restricted stock, dividend equivalents, stock payments, RSUs, performance shares, other incentive awards, stock appreciation rights (or SARs), and cash awards to employees, consultants and non-employee directors. If an award under the plan is forfeited, expires or is settled for cash, any shares subject to such award may, to the extent of such forfeiture, expiration or cash settlement, be used again for new grants under the plan. In addition, shares tendered or withheld to satisfy tax withholding obligations associated with an award may be used again for new grants under the plan. However, the following shares may not be used again for grant under the plan: (1) shares tendered by a participant or withheld by us in payment of the exercise price of an option; (2) shares subject to SARs that are not issued in connection with the stock settlement of the SAR on its exercise; and (3) shares purchased on the open market with the cash proceeds from the exercise of options. SeaSpine was incorporated in Delaware on February 12, 2015 in connection with the spin-off of the orthobiologics and spinal implant business of Integra LifeSciences Holdings Corporation, a diversified medical technology company, or Integra. The spin-off occurred on July 1, 2015.
(2)Includes 647,594 shares and 66,419 shares subject to outstanding RSUs and RSAs, respectively, none of which have an exercise price. The weighed-average exercise price of outstanding options, warrants and rights excluding such outstanding RSUs is $14.36.
(3)In 2016, we established the SeaSpine Holdings Corporation 2016 Employment Inducement Incentive Award Plan (the 2016 Inducement Plan). The plan is a broad-based incentive plan which allows for the issuance of stock-based awards, including non-qualified stock options, restricted stock awards, performance awards, RSUs and SARs, to any prospective officer or other employee who has not previously been an employee or director of SeaSpine or an affiliate or who is commencing employment with SeaSpine or an affiliate following a bona-fide period of non-employment by SeaSpine or an affiliate. No awards have been granted under the 2016 Inducement Plan and no awards will be granted under the 2016 Inducement Plan in the future.
(4)In 2018, we established the SeaSpine Holdings Corporation 2018 Employment Inducement Incentive Award Plan (the 2018 Inducement Plan). The terms of this plan are substantially similar to the terms of the Amended and Restated 2015 Incentive Award Plan with three principal exceptions: (1) incentive stock options may not be granted under the 2018 Inducement Plan; (2) there are no annual limits on awards that may be issued to an individual under the 2018 Inducement Plan; and (3) awards granted under the 2018 Inducement Plan are not required to be subject to any minimum vesting period. Includes 49,277 shares subject to outstanding RSUs, none of which have an exercise price.
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The weighed-average exercise price of outstanding options, warrants and rights excluding such outstanding RSUs is $12.25. No awards will be granted under the 2018 Inducement Plan in the future.
(5)In 2020, we established the SeaSpine Holdings Corporation 2020 Employment Inducement Incentive Award Plan. The terms of this plan are substantially similar to the terms of the 2018 Inducement Plan. Includes 34,001 shares subject to outstanding RSUs, none of which have an exercise price. The weighed-average exercise price of outstanding options, warrants and rights excluding such outstanding RSUs is $14.68.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since January 1, 2018,2019, there has not been, nor is there currently proposed, any transaction in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years and in which any of our directors or executive officers, any nominee for director, any beneficial owner of more than 5% of any class of our voting securities or any of their respective affiliates or immediate family members, had, or will have, a direct or indirect material interest.
Potential Conflicts of Interest
SeaSpine was incorporated in Delaware on February 12, 2015 in connection with the spin-off of the orthobiologics and spinal implant business of Integra LifeSciences Holdings Corporation, a diversified medical technology company, or Integra. The spin-off occurred on July 1, 2015. Following the Spin-Off,spin-off, Integra and SeaSpine have operated, and will continue to operate, independently, and neither will have any ownership interest in the other. Our executive officers and board of directors have fiduciary duties to our stockholders. Likewise, any such persons who serve in similar capacities at Integra have fiduciary duties to Integra stockholders. Therefore, such persons may have conflicts of interest or the appearance of conflicts of interest with respect to matters involving or affecting more than one of the companies to which they owe fiduciary duties. For example, there may be the potential for a conflict of interest when SeaSpine or Integra looks at acquisitions and other corporate opportunities that may be suitable for each of them. Any potential conflicts that arise will be addressed on a case-by-case basis, keeping in mind the applicable fiduciary duties owed by the directors of each company. From time to time, we may enter into transactions with Integra and/or its subsidiaries or other affiliates. There can be no assurance that the terms of any such transactions will be as favorable to SeaSpine, Integra, or any of their subsidiaries or affiliates as would be the case where there is no overlapping director. See “Policies and Procedures for Related Party Transactions” below for a discussion of certain procedures we have adopted to address any such potential conflicts that may arise.
Policies and Procedures for Related Party Transactions
Our board of directors has adopted a written related person transaction policy to set forth the policies and procedures for the review and approval or ratification of related person transactions. Pursuant to this written policy, we will review all transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships) in which we are a participant and the amount involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest (or, if the amount involved is $120,000 or less, our general counsel has determined it is a related person transaction based on the facts and circumstances). For purposes of the policy, a “Related Person” means:
(a) any director or executive officer of the company, any nominee for election as a director of the company, and any person known by the company to be an “immediate family member” of such director, executive officer, or nominee for director; and
(b) any person known to the company to be the beneficial holder of greater than 5% of any class of the company’s securities, and any person known by the company to be an immediate family member of any such beneficial holder.
If our general counsel determines that a proposed transaction is a transaction for which approval is required under the policy, the proposed transaction will be submitted to the audit committee for consideration at its next meeting or, in specified circumstances, to the audit committee chairpersonchair or, if the transaction involves the audit committee chairperson,chair, to the nominating and corporate governance committee chairperson.chair. The circumstances in which the proposed transaction will be submitted to the audit committee chairpersonchair (or the nominating and corporate governance committee chairperson)chair) include transactions in the ordinary course of our business with another company or charitable or non-profit organization with which the related person’s interest derives solely from his or her employment or other position that does not involve policy-making decisions with such company or organization, and the related person is not directly involved in the transaction and the related person does not have a personal
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interest in the transaction, certain charitable contributions by us to a charitable or non-profit organization at which a related person’s only relationship is as an employee or director, and when our general counsel determines that it is impracticable or undesirable to wait until the next audit committee meeting to submit a transaction for approval.
The applicable reviewing party will consider all relevant facts and circumstances, including (if applicable), the materiality of the related person transaction, the actual or perceived conflict of interest between us and the related person, the extent of the related person’s interest in the transaction, applicable state corporation and fiduciary obligation laws and rules, applicable disclosure requirements, our code of business conduct and ethics, our corporate governance guidelines, and the best interests of the company and our stockholders. The related person transaction may be approved by the applicable reviewing party if it concludes that approving the related person transaction is in the best interests of our company and of our stockholders.
Indemnification of Officers and Directors
Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, and may indemnify our employees and other agents, to the fullest extent permitted by the Delaware General Corporation Law (the DGCL). The DGCL prohibits a company from limiting the liability of its directors for the following:
•any breach of the director’s duty of loyalty to the company or to its stockholders;
•acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
•unlawful payment of dividends or unlawful stock repurchases or redemptions; and
•any transaction from which the director derived an improper personal benefit.
Our amended and restated certificate of incorporation does not eliminate a director’s duty of care and, in appropriate circumstances, equitable remedies, such as injunctive or other forms of non-monetary relief, remain available under the DGCL. This provision also does not affect a director’s responsibilities under any other laws, such as the federal securities laws or other state or federal laws.
In addition to the indemnification required in our amended and restated certificate of incorporation and amended and restated bylaws, we have entered into indemnification agreements with each of our current directors and officers. These agreements provide for the indemnification of our directors and officers for certain expenses and liabilities incurred in connection with any action, suit, proceeding or alternative dispute resolution mechanism, or hearing, inquiry or investigation that may lead to the foregoing, to which they are a party, or are threatened to be made a party, by reason of the fact that they are or were a director, officer, employee, agent or fiduciary of our company, or any of our subsidiaries, by reason of any action or inaction by them while serving as such officer, director, agent or fiduciary, or by reason of the fact that they were serving at our request as a director, officer, employee, agent or fiduciary of another entity. In the case of an action or proceeding by or in the right of our company or any of our subsidiaries, no indemnification will be provided for any claim where a court determines that the indemnified party is prohibited from receiving indemnification, including any determination that any such indemnification by us is against public policy as expressed in the Securities Act. We believe that these amended and restated bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
We maintain general liability insurance covering certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers, whether or not we would have the power to indemnify such person against such liability under the DGCL or the provisions of our amended and restated certificate of incorporation or amended and restated bylaws.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.
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DELIVERY OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Notices of Internet Availability of Proxy Materials or other annual meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or only one set of other annual meeting materials addressed to those stockholders (unless otherwise requested by one or more of such stockholders). This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
Brokers with account holders who are our stockholders may be householding our proxy materials. A single Notice of Internet Availability of Proxy Materials may be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from us (if you are a stockholder of record) or from your broker (if you are a beneficial owner) that we or they will be householding communications to your address, householding will continue until you are notified otherwise or until you notify your broker or us that you no longer wish to participate in householding.
If, at any time, you no longer wish to participate in householding and would prefer to receive a separate Notice of Internet Availability, of Proxy Materials, or if you currently receive multiple copies and would like to request a single copy, you may (1) notify your broker, (2) direct your written request to our Corporate Secretary at SeaSpine Holdings Corporation, 5770 Armada Drive, Carlsbad, California 92008 or (3) contact us by telephone at 866-942-8698. Upon written or oral request to us, we will promptly deliver a separate copy of the Notice of Internet Availability of Proxy Materials or annual report and proxy statement, to any stockholder at a shared address to which a single copy of such material was delivered.
STOCKHOLDER PROPOSALS
The deadline for submitting stockholder proposals for inclusion in our proxy statement and form of proxy relating to our 20212022 annual meeting of stockholders must be received at our principal executive offices no later than December 21, 2020,22, 2021, which is 120 days before the anniversary of the date this proxy statement was released to our stockholders. These proposals must comply with the requirements as to form and substance established by the SEC for such proposals in order to be included in our proxy statement and form of proxy.
Stockholder proposals for consideration at our 20212022 annual meeting of stockholders, but not for inclusion in our proxy statement and form of proxy, must be delivered to the attention of our corporate secretary in writing at our principal executive offices no earlier than the close of business on February 3, 20212, 2022 and no later than the close of business on March 5, 2021,4, 2022, which dates are 120 calendar days and 90 calendar days before the first anniversary of the date of our 20202021 annual meeting of stockholders. Under our amended and restated bylaws, the proposal must be submitted by a stockholder who is a stockholder of record when the notice that must accompany a stockholder proposal is delivered and at the date of the 20212022 annual meeting. Stockholders are advised to review our amended and restated bylaws which also specify requirements as to the form and content of the notice that must accompany a stockholder proposal. If the date of our 20212022 annual meeting of stockholders is advanced by more than 30 days or delayed by more than 70 days from the first anniversary date of our 20202021 annual meeting of stockholders, then, to be timely, the required notice and stockholder proposal must be delivered as described above not earlier than 120 days prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. If the stockholder fails to give notice by the applicable dates, then the persons named as proxies in the proxies solicited by our board of directors for the 20212022 annual meeting may exercise discretionary voting power regarding any such proposal.
ANNUAL REPORT
Any person who was a beneficial owner of our common stock on the record date for the annual meeting may request a copy of our annual report, and it will be furnished without charge upon receipt of a written request identifying the person so requesting a report as our stockholder on such record date. Requests should be directed to SeaSpine Holdings Corporation, 5770 Armada Drive, Carlsbad, California 92008, Attention: Corporate Secretary.
OTHER MATTERS
We do not know of any business other than that described in this proxy statement that will be presented for consideration or action by the stockholders at the annual meeting. If, however, any other business is properly brought before the meeting, the persons named as proxies in the proxies solicited by our board of directors will vote the shares represented by proxies in their discretion regarding any such other business.
| By Order of the Board of Directors | |||||
| San Diego, California | |||||
| April 21, 2021 | /s/KEITH C. VALENTINE | ||||
| Keith C. Valentine | |||||
| President, Chief Executive Officer and Director | |||||
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APPENDIX A
SEASPINE HOLDINGS CORPORATION
AMENDED AND RESTATED
2015 INCENTIVE AWARDEMPLOYEE STOCK PURCHASE PLAN,
ARTICLE I.
PURPOSE, SCOPE AND ADMINISTRATION OF THE PLAN
1.1 Purpose and Scope. The purpose of the SeaSpine Holdings Corporation 2015 Incentive AwardEmployee Stock Purchase Plan (the “Plan”(as amended from time to time, the “Plan”) is to promote the success and enhance the valueassist employees of SeaSpine Holdings Corporation, a Delaware corporation (the “Company”“Company”) by linkingand its Designated Subsidiaries in acquiring a stock ownership interest in the individual interests of Employees, Consultants, and membersCompany pursuant to a plan which is intended to qualify as an “employee stock purchase plan” under Section 423 of the BoardCode and to thosehelp such employees provide for their future security and to encourage them to remain in the employment of the Company’s stockholders and by providing such individuals with an incentive for outstanding performance to generate superior returns to the Company’s stockholders. The Plan is further intended to provide flexibility to the Company and its subsidiaries in their ability to motivate, attract, and retain the services of those individuals upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent. In addition, the Plan is intended to govern Awards granted pursuant to the adjustment of awards originally granted under the Integra LifeSciences Holdings Corporation Third Amended and Restated 2003 Equity Incentive Plan (the “Subsidiaries.Integra Plan”) in accordance with the terms of the Employee Matters Agreement (each, an “Adjusted Award”).
DEFINITIONS
Whenever the following terms are used in the Plan, they shall have the meaningsmeaning specified below unless the context clearly indicates otherwise.to the contrary. The singular pronoun shall include the plural where the context so indicates.
2.1 “Administrator“Agent” ” shall meanmeans the brokerage firm, bank or other financial institution, entity that conductsor person(s), if any, engaged, retained, appointed or authorized to act as the general administrationagent of the Plan as provided in Article 11 hereof. With referenceCompany or an Employee with regard to the duties of the Administrator under the Plan which have been delegated to one or more persons pursuant to Section 11.6 hereof, or which the Board has assumed, the term “Administrator” shall refer to such person(s) or the Board, as applicable, unless the Committee or the Board has revoked such delegation or the Board has terminated the assumption of such duties.
2.6 “Compensation” of an Employee shall mean the common stockregular straight-time earnings, base salary, annual cash bonus or commissions paid to the Employee from the Company or any Designated Subsidiary on each Payday as compensation for services to the Company or any Designated Subsidiary, before deduction for any salary deferral contributions made by the Employee to any tax-qualified or nonqualified deferred compensation plan of the Company, par value $0.01 per share.any Designated Subsidiary, including prior week adjustments and overtime, but excluding vacation pay, holiday pay, jury duty pay, funeral leave pay, military pay, incentive compensation, one-time bonuses (e.g., retention or sign-on bonuses), fringe benefits, education or tuition reimbursements, imputed income arising under any Company or Designated Subsidiary group insurance or benefit program, travel expenses, business and moving reimbursements, income received in connection with any stock options, stock appreciation rights, restricted stock, restricted stock units or other compensatory equity awards and all contributions made by the Company or any Designated Subsidiary for the Employee’s benefit under any employee benefit plan now or hereafter established. Such Compensation shall be calculated before deduction of any income or employment tax withholdings, but shall be withheld from the Employee’s net income.
2.9 “Eligible Employee” means an Employee of the Company or any Designated Subsidiary who does not, immediately after an Option is granted, own (directly or through attribution) stock possessing five percent or more of the total combined voting power or value of all classes of Stock or other stock of the Company, a Parent or Subsidiary who qualifies as a consultant or advisor(as determined under Section 423(b)(3) of the applicable rules of Form S-8 Registration Statement or (b) any other individual who is determined by the Administrator to be a Consultant forCode). For purposes of the Plan.
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to participate in an Offering if: (a) such Employee has been in the employ of the Company or any Designated Subsidiary for less than two years (or any shorter period); (b) such Employee’s customary employment with the Company or any Designated Subsidiary is twenty (20) hours or less per week and/or not more than five (5) months per calendar year (or any lesser number of hours per week or months per calendar year); (c) such Employee is a “highly compensated employee” of the Company or any Designated Subsidiary (within the meaning of Section 414(q) of the Code), or is such a “highly compensated employee” (i) with compensation above a specified level, (ii) who is an officer and/or (iii) is subject to the disclosure requirements of Section 16(a) of the Exchange Act; and/or (d) such Employee is a citizen or resident of a foreign jurisdiction and the grant of an Option under the Plan or with respect to an Offering is prohibited under the laws of such foreign jurisdiction, or compliance with the laws of such foreign jurisdiction would cause the Plan or such Offering to violate the requirements of Section 423 of the Code;provided, that any exclusion in that certain Separationclauses (a), (b), (c) and Distribution Agreement dated on or about June 30, 2015 (as amended or otherwise modified from time(d) shall be applied in an identical manner under each Offering to time), by and betweenall employees of the Company and Integra.all Designated Subsidiaries, in accordance with Treasury Regulation Section 1.423-2(e).
(a) If the Common Stock is (i) listed on any established securities exchange (such as the New York Stock Exchange, the NASDAQ Capital Market, the NASDAQ Global Market and the NASDAQ Global Select Market), (ii) listed on any national market system or (iii) listed, quoted or traded on any automated quotation system, its Fair Market Value shall be the closing sales price for a Share as quoted on such exchange or system for such date or, if there is no closing sales price for a Share on the date in question, the closing sales price for a Share on the last preceding date for which such quotation exists, as reported in The Wall Street Journalor such other source as the Administrator deems reliable;
(b) If the Common Stock is not listed on an established securities exchange, national market system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a Share on such date, the high bid and low asked prices for a Share on the last preceding date for which such information exists, as reported in The Wall Street Journalor such other source as the Administrator deems reliable; or
(c) If the Common Stock is neither listed on an established securities exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Administrator in good faith.
2.16 “New Exercise Date” shall have such meaning as set forth in Section 3.35.2(b) hereof.
commence and end on the Share Limit as 1.82 Shares for every one Share subject thereto. In order that the applicable regulations under the Code relating to Incentive Stock Options be satisfied, the maximum number of Shares that may be issued under the Plan upon the exercise of Incentive Stock Options shall be 7,000,000 Shares. Notwithstanding the foregoing, to the extent permitted under Applicable Law and applicable stock exchange rules, Awards that provide for the delivery of Shares subsequent to the applicable grant date may be granted in excess of the Share Limit if such Awards provide for the forfeiture or cash settlement of such Awards to the extent that insufficient Shares remain under the Share Limit at the time that Shares would otherwise be issued in respect of such Award.
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2.24 “Plan Account” shall mean a bookkeeping account established and maintained by the Company in the name of each Participant.
2.25 “Section 423 Option” shall have such meaning as set forth in Section 3.1(b) hereof.
2.26 “Share” means a share of Common Stock.
2.27 “Subsidiary” shall mean any entity that is a subsidiary corporation of the Company (as defined in Sections 424(e) and 424(f)within the meaning of Section 424 of the Code respectively).and the Treasury Regulations thereunder. In addition, with respect to any sub-plans adopted under Section 7.1(d) hereof which are designed to be outside the scope of Section 423 of the Code, “Subsidiary” shall include any corporate or noncorporate entity in which the Company has a direct or indirect equity interest or significant business relationship.
2.28 “Trading Day” shall mean a day on which the principal securities exchange on which the Common Stock is listed is open for trading or, if the Common Stock is not listed on a securities exchange, shall mean a business day, as determined by the Administrator in good faith.
2.29 “Withdrawal Election” shall have such meaning as set forth in Section 6.1(a) hereof.
ARTICLE III.
PARTICIPATION
3.1 Eligibility.
(a) Any Eligible Employee who shall be employed by the Company or a Designated Subsidiary on a given Enrollment Date for an Offering Period shall be eligible to participate in the Plan during such Offering Period, subject to the requirements of Articles IV and V hereof, and the limitations imposed by Section 423(b) of the Code and the Treasury Regulations thereunder.
(b) No person who qualifies as a Greater Than 10% Stockholder mayEligible Employee shall be granted an Incentive Stock Option unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. Any Incentive Stock Option granted under the Plan may be modified bywhich permits the Administrator, withParticipant’s rights to purchase Shares under the consentPlan, and to purchase stock under all other employee stock purchase plans of the Participant,Company, any Parent or any Subsidiary subject to disqualifySection 423 of the Code (any such Option from treatment as an “incentive stock option” under Section 422or other option, a “Section 423 Option”), to accrue at a rate which exceeds $25,000 of the Code. To the extent that the aggregate fair market value of such stock (determined at the time the Section 423 Option is granted) for each calendar year in which any Section 423 Option granted to the Participant is outstanding at any time. For purposes of the limitation imposed by this subsection,
(i) the right to purchase stock under a Section 423 Option accrues when the Section 423 Option (or any portion thereof) first becomes exercisable during the calendar year;
(ii) the right to purchase stock under a Section 423 Option accrues at the rate provided in the Section 423 Option, but in no case may such rate exceed $25,000 of fair market value of such stock (determined at the time such option is granted) for any one calendar year; and
(iii) a right to purchase stock which has accrued under a Section 423 Option may not be carried over to any other Section 423 Option; provided that Participants may carry forward amounts so accrued that represent a fractional share of stock and were withheld but not applied towards the purchase of Shares under an earlier Offering, and may apply such amounts towards the purchase of additional Shares under a subsequent Offering.
The limitation under this Section 3.1(b) shall be applied in accordance with Section 423(b)(8) of the Code and the Treasury Regulations thereunder.
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3.2 Election to Participate; Payroll Deductions
(a) Except as provided in Section 3.3 hereof, an Eligible Employee may become a Participant in the Plan only by means of payroll deduction. Each individual who is an Eligible Employee as of the Enrollment Date of the applicable Offering may elect to participate in such Offering and the Plan by delivering to the Company a payroll deduction authorization no later than the tenth (10th) calendar day prior to the applicable Enrollment Date.
(b) Subject to Section 3.1(b) hereof, payroll deductions with respect to which “incentive stock options” (within the meaning of Section 422an Offering Period (i) shall be equal to at least one percent (1%) of the Code,Participant’s Compensation as of each Payday during the applicable Offering Period, but without regardnot more than fifteen percent (15%) of the Participant’s Compensation as of each Payday during the applicable Offering Period or $25,000 and (ii) may be expressed as a whole number percentage. Amounts deducted from a Participant’s Compensation with respect to an Offering Period pursuant to this Section 3.2 shall be deducted each Payday through payroll deduction and credited to the Participant’s Plan Account.
(c) Following at least one (1) payroll deduction, a Participant may decrease (to as low as 0%, which shall be considered an election to withdraw pursuant to Section 422(d)6.1 hereof) the amount deducted from such Participant’s Compensation during an Offering Period upon ten (10) calendar days’ prior written or electronic notice to the Company; provided, however, that a Participant may not decrease the amount deducted more than two (2) times per Offering Period. A Participant may not increase the amount deducted from such Participant’s Compensation during an Offering Period.
(d) Notwithstanding the foregoing, upon the termination of an Offering, each Participant in such Offering shall automatically participate in the immediately following Offering at the same payroll deduction percentage as in effect at the termination of the Code) are exercisableprior Offering, unless such Participant delivers to the Company a different election with respect to the successive Offering in accordance with Section 3.1(a) hereof, or unless such Participant becomes ineligible for participation in the first timePlan.
3.3 Leave of Absence. During leaves of absence approved by a Participant during any calendar yearthe Company meeting the requirements of Treasury Regulation Section 1.421-1(h)(2) under the Plan and all other plansCode, an individual shall be treated as an Employee of the Company or any “parent corporation” or “subsidiary corporation”Designated Subsidiary that employs such individual immediately prior to such leave.
ARTICLE IV.
PURCHASE OF SHARES
4.1 Grant of the Company (as defined in Section 424(e) and 424(f) of the Code, respectively) exceeds one hundred thousand dollars ($100,000), the OptionsOption. Each Participant shall be treated as Non-Qualified Stock Optionsgranted an Option with respect to an Offering on the applicable Grant Date. Subject to the extent required bylimitations of Section 4223.1(b) hereof, the number of the Code. The rule set forth in the preceding sentence shall be applied by taking Options and other “incentive stock options” into account in the order in which they were granted and the fair market value of stockShares subject to a Participant’s Option shall be determined as of the time the respective options were granted. In addition,Exercise Date by dividing (a) such Participant’s payroll deductions accumulated prior to the extentapplicable Exercise Date and retained in the Participant’s Plan Account on such Exercise Date by (b) the applicable Option Price; provided that any Options otherwise failin no event shall a Participant be permitted to qualify as Incentive Stock Options, such Options shall be treated as Non-Qualified Stock Options.
4.2 Option Price. The Option Price per Share subject to eachbe paid by a Participant upon exercise of the Participant’s Option and Stock Appreciation Righton the applicable Exercise Date for an Offering shall be set byequal to eighty-five percent (85%) of the Administrator, but shall not be less than one hundred percent (100%)lesser of the Fair Market Value of a Share on (a) the dateapplicable Grant Date and (b) the applicable Exercise Date; provided that in no event shall the Option or Stock Appreciation Right, as applicable, is granted (or, as to Incentive Stock Options, on the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). In addition, in the case of Incentive Stock Options granted to a Greater Than 10% Stockholder, such price shall not be less than one hundred ten percent (110%) of the Fair Market Value of a Share on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code).
(a) On the applicable Exercise upon TerminationDate for an Offering, each Participant shall automatically and without any action on such Participant’s part be deemed to have exercised his or her Option to purchase at the applicable Option Price the largest number of Service. Awards describedwhole Shares which can be purchased with the amount in this Article 9 are exercisable or distributable,the Participant’s Plan Account, subject to Sections 4.1 and 5.3 hereof. The balance, if any, remaining in the Participant’s Plan Account (after exercise of such Participant’s Option) as applicable, only whileof such Exercise Date shall be returned to the Participant is an Employee, Directorin one (1) lump-sum payment in cash within thirty (30) days after such Exercise Date.
(b) As soon as practicable following the applicable Exercise Date, the number of Shares purchased by such Participant pursuant to Section 4.3(a) hereof shall be delivered (either in share certificate or Consultant, as applicable. The Administrator, however,book entry form), in its the Company’s
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sole discretion, may provide that such Award may be exercisedto either (i) the Participant or distributed subsequent to a Termination of Service as provided under(ii) an applicable Program, Award Agreement, payment deferral election and/oraccount established in certain events, including without limitation, the Participant’s death, retirementname at a stock brokerage or disabilityother financial services firm designated by the Company. If the Company is required to obtain from any commission or agency authority to issue any other specified Terminationsuch Shares, the Company shall seek to obtain such authority. Inability of Service.
(c) 4.4 Transferability of Rights. An Option granted under the Plan shall not be made, including, without limitation: (a) cash or check, (b) Shares (including, in the case of payment of the exercise price of an Award, Shares issuable pursuant to the exercise of the Award) held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences, in each case, having a Fair Market Value on the date of delivery equal to the aggregate payments required, (c) delivery of a written or electronic notice that the Participant has placed a market sell order with a broker with respect to Shares then-issuable upon exercise or vesting of an Award, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate payments required; provided, however, that payment of such proceeds is then made to the Company upon settlement of such sale, (d) other form of legal consideration acceptable to the Administrator, or (e) any combination of the foregoing. The Administrator shall also determine the methods by which Shares shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
ARTICLE V.
PROVISIONS RELATING TO COMMON STOCK
5.1 Common Stock Reserved. Subject to adjustment as provided in Section 5.2 hereof, the satisfactionmaximum number of these conditionsShares that shall be null and void and of no effect, except to the extent that such disposition is permitted by clause (i) of this provision; and
5.2 Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of Shares which have been authorized for issuance under the then-applicable lawsPlan but not yet placed under an Option, as well as the price per share and the number of descent and distribution.
(b) Dissolution or Liquidation. In the sole discretionevent of the Administrator.
(c) Merger or Asset Sale. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each outstanding Option shall be assumed or an equivalent Option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the Option is not assumed or substituted, any Offerings then in progress shall be shortened by setting a New Exercise Date and any Offerings then in progress shall end on the New Exercise Date. The New Exercise Date shall be before the date of the Company’s proposed sale or merger.
5.3 Insufficient Shares. If the Administrator determines that, on a given Exercise Date, the number of Shares with respect to which Options are to be exercised may exceed the number of Shares remaining available for sale under the Plan on such Exercise Date, the Administrator shall make a pro rata allocation of the Shares available for issuance on such Exercise Date in as uniform a manner as shall be practicable and as it shall determine in its sole discretion whether cashto be equitable among all Participants exercising Options to purchase Shares on such Exercise Date, and unless additional shares are authorized for issuance under the Plan, no further Offerings shall be given in lieutake place and the Plan shall terminate pursuant to Section 7.5 hereof. If an Offering is so terminated, then the balance of fractional Shares or whether such fractionalthe amount credited to the Participant’s Plan Account which has not been applied to the purchase of Shares shall be eliminated by rounding down.
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rights and privileges of a stockholder of the Company when, but not until, Shares have been deposited in the casedesignated brokerage account following exercise of any his or her Option.
ARTICLE VI.
TERMINATION OF PARTICIPATION
6.1 Cessation of Contributions; Voluntary Withdrawal.
(a) leaveA Participant may cease payroll deductions during an Offering and elect to withdraw from the Plan by delivering written or electronic notice of absence approvedsuch election (a “Withdrawal Election”) to the Company in such form as may be established by the Administrator and within ten (10) days prior to the Exercise Date for such Offering (or such other period of time as may be established by the Administrator). A Participant electing to withdraw from the Plan may elect to either (i) withdraw all of the funds then credited to the Participant’s Plan Account as of the date on which the Withdrawal Election is received by the Company, (b) transfer between locations of the Company or between the Company and any of its Affiliates or any successor thereof, or (c) change in status (Employeewhich case amounts credited to Director, Employee to Consultant, etc.), provided that such change does not affect the specific terms applyingPlan Account shall be returned to the Participant’s Award.
(b) A Participant’s withdrawal from the Plan shall not have any effect upon his or her eligibility to consent or withdrawal of consent, Participantsparticipate in any similar plan which may contact their local human resources representative.
(c ) A Participant who ceases contributions to Adjusted Awards, referencesthe Plan during any Offerings shall not be permitted to employment or service, or terminationresume contributions to the Plan during such Offering.
6.2 Termination of employment or service, in this Plan (including the incorporated terms and conditions of the Integra Plan, as deemed modified by the preceding sentence) andEligibility. Upon a Participant’s ceasing to be an Eligible Employee, for any reason, such Participant’s Option for the applicable award agreementOffering shall automatically terminate, he or she shall be deemed to referhave elected to employmentwithdraw from the Plan, and such Participant’s Plan Account shall be paid to such Participant or, service,in the case of his or termination of employment or service, with the Company or Integra, whichever is the applicable service recipient with respecther death, to the Participant following the Distribution. All determinations and interpretations relatingperson or persons entitled thereto as set forth in an applicable beneficiary designation form (or, if there is no such applicable form, pursuant to the applicationapplicable law), within thirty (30) days after such cessation of thisbeing an Eligible Employee, without any interest thereon.
ARTICLE VII.
GENERAL PROVISIONS
7.1 Administration.
(a) The Plan and the incorporated terms and conditions of the Integra Plan (including the deemed modifications thereto) shall be madeadministered by the Administrator and shall be final and binding upon the Participants, the Company and all other interested persons
(i) To establish and terminate Offerings and Offering Periods;
(ii) To determine when and how Options shall be granted and the provisions and terms of each Offering (which need not be identical);
(iii) To select Designated Subsidiaries in accordance with Section 7.2 hereof; and
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(iv) To construe and interpret the Plan, the terms of any Offering under the Plan and all Programs and Award Agreements,the terms of the Options and to adopt such rules for the administration, interpretation, and application of the Plan and any Program as are not inconsistent with the Plan,consistent therewith and to interpret, amend or revoke any such rules. The Administrator, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, any Offering or any Option, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective, subject to Section 423 of the Code and the Treasury Regulations thereunder.
(c) The Administrator may adopt rules or procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures. Without limiting the generality of the foregoing, the Administrator is specifically authorized to adopt rules and to amend any Program or Award Agreement provided that the rights or obligationsprocedures regarding handling of the holderparticipation elections, payroll deductions, payment of the Award that is the subjectinterest, conversion of any such Program or Award Agreement are not materially adversely affected by such amendment, unless the consentlocal currency, payroll tax, withholding procedures and handling of the Participant is obtained or such amendment is otherwise permitted under Section 12.10 hereof. Any such grant or award under the Plan need not be the samestock certificates which vary with respect to each Participant. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code.local requirements. In its soleabsolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the CommitteeAdministrator under the Plan except with respectPlan.
(d) The Administrator may adopt sub-plans applicable to mattersparticular Designated Subsidiaries or locations, which under Rule 16b‑3 undersub-plans may be designed to be outside the Exchange Act,scope of Section 162(m)423 of the Code, or theCode. The rules of any securities exchange or automated quotation system on whichsuch sub-plans may take precedence over other provisions of this Plan, with the Shares are listed, quoted or traded are required to be determined in the sole discretionexception of the Committee.
(e) All expenses and liabilities incurred by the Board, in the Company’s charter or Bylaws or in any charter of the Committee or as required by Applicable Law or, a majority of the Administrator shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all members of the Administrator in lieu of a meeting, shall be deemed the acts of the Administrator. To the greatest extent permitted by Applicable Law, each member of the Administrator is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Affiliate, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist inconnection with the administration of the Plan.
7.2 Designation of Subsidiary Corporations. The Board or Committee shall designate from among the Subsidiaries, as determined from time to time, the Subsidiary or Subsidiaries that shall constitute Designated Subsidiaries. The Board or Committee may designate a Subsidiary, or terminate the designation of a Subsidiary, without the approval of the stockholders of the Company.
7.3 Reports. Individual accounts shall be maintained for each Participant in the Plan. The Company shall provide each Participant whose Option is exercised with an information statement in accordance with Section 6039(a) of the Code and the regulations promulgated thereunder. The Company shall maintain a procedure for identifying certificates of shares of Stock sold upon the exercise of Options in accordance with Section 6039(b) of the Code.
7.4 No Right to Employment. Nothing in the Plan shall be construed to give any person (including any Participant) the right to remain in the employ of the Company, the authority to granta Parent or amend Awardsa Subsidiary or to take other administrative actions pursuant to this Article 11; provided, however,that in no event shall an officeraffect the right of the Company, be delegatedany Parent or any Subsidiary to terminate the authority to grant Awards to, or amend Awards held by, the following individuals: (a) individuals who are subject to Section 16employment of the Exchange Act, or (b) officers of the Company (or Directors) to whom authority to grant or amend Awards has been delegated hereunder; provided, further, that any delegation of administrative authority shall only be permitted to the extent it is permissible under the Organizational Documents and other Applicable Law. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation or that are otherwise included in the applicable Organizational Documents, and the Board or Committee, as applicable, mayperson (including any Participant) at any time, rescind the authority so delegatedwith or appoint a new delegatee. At all times, the delegatee appointed under this Section 11.6 shall serve in such capacity at the pleasurewithout cause, which right is expressly reserved.
7.5 Amendment, Suspension and Termination of the Plan
(a) The Board may, in its sole discretion, amend, suspend or terminate the Committee, as applicable, and the Board or the Committee may abolish any committeePlan at any time and re-vest in itself any previously delegated authority.
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(b) In the event of any transaction or event described in Section 12.2(a) hereof or any unusual or nonrecurring transactions or events affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in Applicable Law or Applicable Accounting Standards, the Administrator, in its sole discretion, and on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargementthe ongoing operation of the benefitsPlan may result in unfavorable financial accounting consequences, the Administrator may, to the extent permitted under Section 423 of the Code, in its discretion and, to the extent necessary or potential benefits intended to be made available under the Plandesirable, modify or with respect to any Award underamend the Plan to facilitatereduce or eliminate such transactions or events or to give effect to such changes Applicable Law or Applicable Accounting Standards:
(i) altering the Share Limit and the Individual Award Limits and adjustments of the manner in which shares subject to Full Value Awards will be counted).
(ii) Ifshortening any Offering so that the Offering ends on a Change in Control occurs and a Participant’s outstanding Awards are not continued, converted, assumed, or replaced by the surviving or successor entity in such Change in Control (but after taking into account the requirements of Section 12.2(d)(i)), then immediately prior to the Change in Control such outstanding Awards, to the extent not continued, converted, assumed, or replaced, shall become fully vested and, as applicable, exercisable, and all forfeiture, repurchase and other restrictions on such Awards shall lapse immediately prior to such transaction, provided that, to the extent the vesting of any such Award is subject to the satisfaction of specified performance goals, such Award shall vest at the greater of (A) the target level of performance, pro-rated based on the period elapsed between the beginning of the applicable performance period and the date of the Change in Control, or (B) the actual performance level as of the date of the Change in Control (as determined by the Administrator) with respect to all open performance periods (and the vesting pursuant to this clause (ii) shall constitute “full vesting” for purposes of this Section 12.2(d)(ii)). Subject to Section 12.2(d)(i) above, upon, or in anticipation of, a Change in Control, the Administrator may cause any and all Awards outstanding hereunder to terminate at a specific time in the future,new Exercise Date, including but not limited to the date of such Change in Control, and shall give each Participant the right to exercise such Awards during a period of time as the Administrator, in its sole and absolute discretion, shall determine. For the avoidance of doubt, if the value of an Award that is terminated in connection with this Section 12.2(d) is zero or negativeOffering underway at the time of such Changethe Administrator action; and
(iii) allocating Shares.
Such modifications or amendments shall not require stockholder approval or the consent of any Participant.
(c) Upon termination of the Plan, the balance in Control, such Awardeach Participant’s Plan Account shall be terminated upon the Change in Controlrefunded as soon as practicable after such termination, without paymentany interest thereon.
7.6 Use of consideration therefor.
by any individual who is then subject to compliance with all Applicable Law and to such approvals by any listing, regulatory or governmental authority as may, inSection 16 of the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under the PlanExchange Act shall be subject to any additional limitations set forth in any applicable exemption rule under Section 16 of the Exchange Act (including any amendment to Rule16b-3of the Exchange Act) that are requirements for the application of such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all Applicable Law.exemptive rule. To the extent permitted by Applicable Law,applicable law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such Applicable Law.applicable exemptive rule.
7.11 Tax Withholding. The Company or any Parent or any Subsidiary shall be entitled to require payment in cash or deduction from other compensation payable to each Participant of any sums required by federal, state or local tax law to be withheld with respect to any purchase of Shares under the Plan or any sale of such shares.
7.12 Governing Law. The Plan and Headings, Referencesall rights and obligations thereunder shall be construed and enforced in accordance with the laws of the State of Delaware.
7.13 Notices. All notices or other communications by a Participant to Sectionsthe Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof (including without limitation the Company’s stock plan administrator).
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7.14 Conditions To Issuance of Shares.
(a) Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries evidencing Shares pursuant to the exercise of an Option by a Participant, unless and until the Board or the Committee has determined, with advice of counsel, that the issuance of such Shares is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any securities exchange or automated quotation system on which the Shares are listed or traded, and the Shares are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Board or the Committee may require that a Participant make such reasonable covenants, agreements, and representations as the Board or the Committee, in its discretion, deems advisable in order to comply with any such laws, regulations or requirements.
(b) All certificates for Shares delivered pursuant to the Plan and all Shares issued pursuant to book entry procedures are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state or foreign securities or other laws, rules and regulations and the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded. The Committee may place legends on any certificate or book entry evidencing Shares to reference restrictions applicable to the Shares.
(c) The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of any Option, including a window-period limitation, as may be imposed in the sole discretion of the Committee.
(d) Notwithstanding any other provision of the Plan, unless otherwise determined by the Committee or required by any applicable law, rule or regulation, the Company may, in lieu of delivering to any Participant certificates evidencing Shares issued in connection with any Option, record the issuance of Shares in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).
7.15 Equal Rights and Privileges. Except with respect to sub-plans designed to be outside the scope of Section 423 of the Code, or Exchange Act. The titles and headingsall Eligible Employees of the sections in the Plan are for convenience of reference only and, in the eventCompany (or of any conflict,Designated Subsidiary) shall have equal rights and privileges under this Plan to the text of the Plan, rather than such titles or headings, shall control. References to sectionsextent required under Section 423 of the Code or the Exchange Act shall include any amendment or successor thereto.
* * * * * *
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APPENDIX B
SECOND AMENDMENT TO THE
SEASPINE HOLDINGS CORPORATION
2015 EMPLOYEE STOCK PURCHASE PLAN
On December 9, 2020, subject to stockholder approval, our board of directors amended and its Related Corporations and Affiliates operate in order to assurerestated Section 5.1 of the viability of Awards granted under theSeaSpine Holdings Corporation 2015 Employee Stock Purchase Plan to individualsread in such other countries.full as follows:
5.1 Common Stock Reserved. Subject to adjustment as provided in Section 5.2 hereof, the maximum number of the Committee, and all other determinations and actions of the CommitteeShares that shall be made or takenavailable for sale under authority granted by any provision of the Plan shall be conclusive and shall bind all parties. Nothing in this subsection (b) shall be construed as limiting the power of the Board or the Committee to make the adjustments described in Sections 8.3 and 8.4.
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APPENDIX C
Non-GAAP Financial Measures
This document contains references to free cash flow, a non-GAAP financial measure. Free cash flow is cash flow from operations, less capital expenditures, both calculated in accordance with GAAP, as adjusted for the impacts to operating cash flows from certain items. Free cash flow is used by management when assessing our sources of liquidity, capital resources, and quality of earnings. Management believes it provides focus on generating cash to fund operations and research, focuses executives on expense control and is expected to lead to long-term shareholder value creation. We believe this non-GAAP financial measure is helpful to investors in understanding our capital requirements and provides an additional means to reflect the cash flow trends of our business. Free cash flow should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated.
| For the Year Ended December 31, 2020 | ||||||||
| Net cash used in operating activities (GAAP) | $ | (24,599) | ||||||
| Purchases of property and equipment | (16,085) | |||||||
| Free cash flow (Non-GAAP) | $ | (40,684) | ||||||
| For the Year Ended December 31, 2019 | ||||
| Net cash used in operating activities (GAAP) | $ | (20,277 | ) | |
| Purchases of property and equipment | (12,834 | ) | ||
| Free cash flow (Non-GAAP) | $ | (33,111 | ) | |
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