Compensation Committee Charter
The Compensation Committee (the "Committee") shall provide assistance to the Board of Directors (the "Board of Directors") of K2M Group Holdings, Inc. (the "Company") by fulfilling the Committee's responsibilities and duties outlined in this charter.
The Committee shall be comprised of two or more members of the Board of Directors, and, except as may otherwise be permitted by the NASDAQ Listing Rules, each member shall (i) be determined by the Board of Directors to be "independent" under the applicable NASDAQ Listing Rules, (ii) be a “Non-employee ” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended and and (iii) satisfy the requirements of an “outside director” within the meaning of Section 162 (m) of the Internal Revenue Code.
Appointment and Removal
The members of the Committee shall be appointed by the Board of Directors and each member shall serve until such member's successor is duly elected and qualified or until such member's earlier resignation, removal, disqualification or death. The members of the Committee may be removed, with or without cause, by action of the Board of Directors.
Unless a chairperson of the Committee (the "Chairperson") is selected by the Board of Directors, the members of the Committee shall designate a Chairperson by the majority vote of the full Committee membership. The Chairperson of the Committee will chair all regular sessions of the Committee and is responsible for setting the agendas for Committee meetings. In the absence of the Chairperson of the Committee, the Committee shall select another member to preside.
Delegation to Subcommittees
The Committee may form subcommittees composed of one or more of its members for any purpose that the Committee deems appropriate and may delegate to such subcommittees such power and authority as the Committee deems appropriate.
The Committee may delegate to one or more officers of the Company the authority to make grants and awards of cash or options or other equity securities to any non-Section 16 officer of the Company under the Company's incentive-compensation or other equity-based plans as the Committee deems appropriate and in accordance with the terms of such plan; provided that such delegation is in compliance with the plan and the laws of the state of the Company's jurisdiction.
The Committee shall meet periodically as circumstances dictate. The Chairperson of the Board of Directors or any member of the Committee may call meetings of the Committee. All meetings of the Committee may be held telephonically. In addition, unless otherwise restricted by the Company's certificate of incorporation or bylaws, the Committee may act by unanimous written consent in lieu of a meeting.
As part of its review and establishment of the performance criteria and compensation of designated key executives, the Committee should meet separately with the CEO, the Company's principal human resources executive, and any other corporate officers, as it deems appropriate. However, the Committee should meet regularly without such officers present, and shall deliberate and vote with respect to the compensation of the CEO and other corporate officers' without such officers being present.
All non-management directors who are not members of the Committee may attend meetings of the Committee but may not vote. Additionally, the Committee may invite to its meetings any director, management of the Company and such other persons as it deems appropriate in order to carry out its responsibilities. The Committee may also exclude from its meetings any persons it deems appropriate in order to carry out its responsibilities.
A majority of the Committee shall constitute a quorum for the transaction of business and the act of a majority of those present at any meeting at which there is a quorum shall be the act of the Committee.
The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern that the Committee deems appropriate and may, in its sole discretion, retain, obtain the advice of and terminate any compensation consultant, legal counsel or other adviser.
The Committee shall be directly responsible for the appointment, compensation and oversight of any compensation consultant, legal counsel or other adviser retained by the Committee. The Company shall provide appropriate funding, as determined by the Committee, for payment of reasonable compensation to any compensation consultant, legal counsel or other adviser retained by the Committee, as well as funding for the payment of ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
The Committee shall undertake an independence assessment prior to selecting any compensation consultant, legal counsel or other advisers that will provide advice to the Committee as may be required by NASDAQ from time to time. The Committee shall evaluate, on at least an annual basis, whether any work provided by the Committee's compensation consultant raised any conflict of interest. Finally, The Committee shall pre-approve any services to be provided to the Company or its subsidiaries by any of the Committee's compensation consultants.
The following functions shall be the common recurring activities of the Committee in carrying out its responsibilities. These functions should serve as a guide with the understanding that the Committee may carry out additional functions and adopt additional policies and procedures as may be required or appropriate in light of business, legislative, regulatory, legal or other conditions or changes. The Committee shall also carry out any other related responsibilities and duties delegated to it by the Board of Directors from time to time.
Setting Compensation for Executive Officers and Directors
- Establish and review the overall compensation philosophy of the Company.
- Review and approve corporate goals and objectives relevant to CEO and other executive officers' compensation, including annual performance objectives, if any.
- Evaluate the performance of the CEO in light of such goals and objectives and, either as a committee or together with the other independent directors (as directed by the Board of Directors), determine and approve the annual salary, bonus, equity-based incentive and other benefits, direct and indirect, of the CEO.
- Review and approve, or recommend to the Board of Directors, the annual salary, bonus, equity and equity-based incentives and other benefits, direct and indirect, of the other executive officers.
In connection with executive compensation programs:
- review and recommend to the Board of Directors, or approve, new or modified executive compensation programs;
- review on a periodic basis the operations of the Company's executive compensation programs to determine whether they are effective in achieving their intended purpose(s);
- establish and periodically review policies for the administration of executive compensation programs; and
- take steps to modify any executive compensation program that yields payments and benefits that are not reasonably related to executive and corporate performance.
- Establish and periodically review policies in the area of senior management perquisites.
- Consider policies and procedures pertaining to expense accounts of senior executives.
- Discuss the results of the shareholder advisory vote on "say-on-pay," if any, with regard to the named executive officers.
- Review and recommend to the Board of Directors the compensation of directors, as well as director's and officer's indemnification and insurance matters.
- Review and recommend to the Board of Directors, or approve, any contracts or other transactions with current or former directors and executive officers ("executive officer" has the same meaning specified for the term "officer" in Rule 16a-1(f) under the Exchange Act) of the Company, including consulting arrangements, employment contracts, severance or termination arrangements and permitted loans made or guaranteed by the Company.
- Consider, on a periodic basis, whether risks arising from the Company's compensation policies and practices for all employees, including non-executive officers, are reasonably likely to have a material adverse effect on the Company.
Monitoring Incentive and Equity-Based Compensation Plans
- Review and approve, or recommend to the Board of Directors, the Company's incentive-compensation plans and equity-based plans that are subject to the approval of the Board of Directors, and oversee the activities of the individuals responsible for administering those plans.
- Review and approve all equity compensation plans of the Company that are not otherwise subject to the approval of the Company's shareholders.
- Review and recommend to the Board of Directors, or approve, all equity-based awards, including pursuant to the Company's equity-based plans.
- Review the Company's regulatory compliance with respect to compensation matters, including ensuring that reasonable efforts are made to structure compensation programs to preserve tax deductibility, and, as and when required, approving performance goals and certifying that performance goals have been attained for purposes of Section 162(m) of the Internal Revenue Code.
- Monitor compliance by executives with the rules and guidelines of the Company's equity-based plans.
- Prepare the compensation committee report on executive officer compensation as required by the SEC to be included in the Company's annual proxy statement or annual report on Form 10-K filed with the SEC.
- To the extent required or deemed appropriate by the Committee, oversee the preparation of a "Compensation Discussion and Analysis" (the "CD&A") for inclusion in the Company's annual proxy statement or annual report on Form 10-K, in accordance with the rules of the SEC, as applicable. The Committee shall review and discuss the CD&A, if any, with management each year and, based on that review and discussion, determine whether or not to recommend to the Board of Directors that the CD&A be included in the Company's annual proxy statement or annual report on Form 10-K, as applicable.
Report regularly to the Board of Directors including:
- following meetings of the Committee; and
- with respect to such other matters as are relevant to the Committee's discharge of its responsibilities.
The Committee shall provide such recommendations to the Board of Directors as the Committee may deem appropriate. The report to the Board of Directors may take the form of an oral report by the Chairperson or any other member of the Committee designated by the Committee to make such report.
- Maintain minutes or other records of meetings and activities of the Committee.
The Committee may periodically review and evaluate its performance, including by reviewing its compliance with this Charter. In addition, the Committee shall review and reassess, at least annually, the adequacy of this Charter and recommend to the Board of Directors any improvements to this Charter that the Committee considers necessary or desirable. The Committee may conduct such evaluations and reviews in such manner as it deems appropriate.
Paul B. Queally, has served as a member of our Board of Directors since 2010 and is Chairman of our Compensation Committee and a member of our Nominating and Corporate Governance Committee. In December 2016, Mr. Queally became a General Partner of WCAS and co-chair of its Investment Committee. Prior to December 2016, Mr. Queally was Co-President of WCAS and a member of its Executive Committee and Management Committee, with a focus on investments in the healthcare industry. Prior to joining WCAS in 1996, Mr. Queally was a general partner at the Sprout Group, which was the private equity arm of Donaldson, Lufkin & Jenrette Securities Corporation. Mr. Queally is a board member of USPI and Aptuit, Inc. Mr. Queally also serves as Chairman of the compensation committee of USPI. Mr. Queally holds a B.A. from the University of Richmond, where he is a member of the Board of Trustees, and an M.B.A. from Columbia University. Mr. Queally was selected to serve as a director because of his affiliation with WCAS, his significant experience working with companies controlled by private equity sponsors, particularly in the healthcare industry, his experience with healthcare investing and his extensive financial background.
Daniel A. Pelak, has served as Chairman of the Board since 2010 and is also Chairman of the Compliance Committee and a member of our Nominating and Corporate Governance Committee and our Compensation Committee. Mr. Pelak has over 30 years of experience as a senior executive in the medical technology industry. He has served as a Senior Industry Executive with Welsh, Carson, Anderson & Stowe (“WCAS”) focusing on healthcare investments since November 2008. He was previously the Chief Executive Officer of Inner Pulse, a privately held medical device company, from September 2005 to July 2008. Before joining InnerPulse, he was the Chief Executive Officer of Closure Medical Corporation, a publicly traded global leader in the development and manufacture of biomaterial-based medical adhesives, from 2002 until its acquisition by Johnson & Johnson in 2005. He began his industry career at Medtronic, Inc., or Medtronic, where he was employed from 1976 to 2002. His executive assignments at Medtronic included Vice President of U.S. Marketing, and later in his career, the worldwide responsibility for three different operating divisions as the Vice President and General Manager. Mr. Pelak serves on the board of directors of the Spectranetics Corporation, Vertos Medical, Inc. and Mardil, Inc. Mr. Pelak holds a B.S. from the Pennsylvania State University. Mr. Pelak was selected to serve as a director because of his experience as an executive in the healthcare industry and his many years of experience with both public and private company board of directors.