Compliance Committee Charter

I. PURPOSE

The Compliance Committee (the "Committee") shall provide assistance to the Board of Directors (the "Board of Directors") of K2M Group Holdings, Inc. (the "Company") in providing oversight and guidance for the Company's compliance program (the "Compliance Program") with respect to significant healthcare related legal and regulatory compliance matters.

II. STRUCTURE AND PROCESSES

Membership Requirements

The Committee must have at least three members, a majority of whom must be non-employee directors.

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.

Chairperson

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 of 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 independent members for any purpose that the Committee deems appropriate and may delegate to such subcommittees such power and authority as the Committee deems appropriate.

III. MEETINGS

The Committee shall meet at least quarterly, or more frequently 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 goal to foster open communication, the Committee shall meet with the General Counsel and the Chief Compliance Officer ("CCO") outside the presence of other management at least once a year.

Periodically, as appropriate, the Committee shall coordinate with the Audit Committee to discuss matters of mutual interest within the context of each committee's responsibilities.

All non-management directors that 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.

IV. AUTHORITY AND RESOURCES

The Committee, in discharging its oversight role, is empowered to study or investigate any matter of interest or concern that the Committee deems appropriate. In this regard, the Committee shall have the authority to engage and terminate independent counsel and other advisors, as it determines necessary or appropriate to carry out its duties.

The Company shall provide appropriate funding, as determined by the Committee, for payment of compensation to any advisors that the Committee chooses to engage 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 be given full access to the Company's Board of Directors, the CCO and other corporate executives, employees, service providers or advisors, if any, as necessary to carry out these responsibilities.

V. SCOPE OF RESPONSIBILITIES

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 responsibilities and duties delegated to it by the Board of Directors from time to time.

  1. Assisting the Board in its oversight of legal and regulatory compliance (excluding matters of financial and other matters which are subject to the oversight of the Audit Committee).
  2. Overseeing the Company's Compliance Program (excluding matters of financial and other matters which are subject to the oversight of the Audit Committee), which shall include an annual review of the Company's Compliance Program and policies.
  3. Reviewing the Company's compliance policies and practices, and monitoring compliance in areas of legal and social responsibility and reporting (excluding matters of financial and other matters which are subject to the oversight of the Audit Committee) and making recommendations to the Board with respect to such policies and practices including those involving (i) clinical research, (ii) product development, (iii) sales and marketing, and (iv) product quality.
  4. Review and approval of any revisions to the Company's Code of Conduct annually.
  5. Review of the resources dedicated to the Compliance Program, including financial resources and staffing.
  6. Monitoring the Company's state of compliance by reviewing any regulatory reports, investigation reports and corrective action plans, litigation, and significant legislative or regulatory changes.
  7. In furtherance of the above objectives, the below principles shall continue to be followed:
    1. All compensation of doctors shall be commensurate with and based on the services rendered to the Company and shall not be intended to influence product selection or the delivery of care. No compensation will be paid to any doctor based on usage of the Company's products. Appropriate systems of reporting payments to and services from doctors shall be accurately maintained.
    2. Product design and testing shall be based on the interest of improving patient care and advancing medical technology with adequate consideration given to safety and efficacy.
    3. Government regulations shall be considered and followed using the best interpretation and understanding that can be obtained of those regulations.
    4. The Company shall not engage in off-label advertising, or unfair competitive practices.
    5. The Company shall communicate to its employees and agents the ethical principles of the Company through its Code of Conduct and require them to report any suspected violations to the Committee.
    6. The Company shall develop and communicate written standards, procedures, trainings, and governance systems to implement and support the principles reflected above. The Committee shall establish methods of access for those needing direct contact with the Committee. The Company shall develop and implement procedures designed to ensure compliance with federal health care program requirements.
VI. MANAGEMENT COMPLIANCE TEAM

To assist the Committee in its mission, a Management Compliance Team (the "MCT") shall be created. The MCT shall serve in an advisory capacity to the CCO, and shall consist of the following voting members: CEO/President; CFO; SVP — Engineering & Regulatory; SVP — Global Marketing & Product Development; and CCO. Additionally, the MCT may invite to its meetings any employee of the Company and such other persons as it deems appropriate in order to carry out its responsibilities.

The MCT shall meet on a regular basis at the discretion of the CCO to review, be informed, and provide guidance on any nominations of healthcare providers (HCPs) to serve the Company in an advisory or teaching roles. Prior to the MCT considering HCP nominations, such requests must already be covered and approved in the Company's annual Needs Assessment budget or have been approved by the Chairman of the Committee or CCO as a legitimate, unanticipated bona fide exception to such annual Needs Assessment.



Committee Members

Mr. Daniel Pelak
Mr. Daniel Pelak

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.

 

Mr. Brett Brodnax
Mr. Brett Brodnax

Brett P. Brodnax, has served as a member of our Board of Directors since September 2011 and is a member of our Compliance Committee. Mr. Brodnax is the President and Chief Development Officer of United Surgical Partners International or USPI. Before joining USPI in 1999, he was an executive with the Baylor Health Care System in Dallas, where he gained extensive experience creating physician and hospital partnerships and developing surgical facilities. Mr. Brodnax holds a B.S. and M.S. in Industrial Engineering from Texas A&M University and an M.B.A. from the University of Texas at Dallas.  Mr. Brodnax has served on a number of boards, including the board of Ameripath, Inc. Mr. Brodnax was selected to serve as a director because of his experience as an executive in the healthcare industry and as a director on the boards of a number of other healthcare companies.

 

Mr. Carlos A. Ferrer
Mr. Carlos A. Ferrer

Carlos A. Ferrer, has served as a member of our Board of Directors since September 2010 and is a member of our Audit Committee and our Compliance Committee. Mr. Ferrer is a partner at Peloton Equity and Ferrer Freeman & Company, LLC (“FFC”), of which he is also a founding member. Prior to co-founding FFC in 1995, Mr. Ferrer was a Managing Director at Credit Suisse First Boston from 1989 through 1995, where he was responsible for the firm’s investment banking activities in the healthcare industry. He has served on the board of directors of many FFC portfolio companies and currently participates as director on the boards of AgaMatrix, Inc., Arcadia Solutions and Health Plan One. He graduated from Princeton University in 1976. Mr. Ferrer was selected to serve as a director because of his affiliation with FFC, his experience with healthcare investing and his extensive financial background.

Dr. John P. Kostuik
Dr. John P. Kostuik

John P. Kostuik, M.D., is a co-founder of the Company and has served as Chief Medical Officer and a member of our Board of Directors since January 2004. Dr. Kostuik is a member of our Compliance Committee. In addition, he served as the Chairman of our Board of Directors from 2004 to 2009. Dr. Kostuik was a recognized leader in orthopedic surgery for over 40 years. From 1991 to 2003, he served as the Chief of Spine Surgery at Johns Hopkins School of Medicine and he is generally recognized as a leading teacher, surgeon and authority on spinal disorders. Dr. Kostuik is a founder, member and past president of the North American Spine Society. He is a past president of the Scoliosis Research Society and an Honorary Fellow of the Belgium and Japanese Orthopaedic Societies. Dr. Kostuik has published more than 150 scientific articles, lectured in 38 countries and taught 150 fellows from ten countries. Dr. Kostuik holds an undergraduate degree and an M.D. from Queen’s University in Kingston, Ontario, completed post-graduate surgical training at the University of Toronto and is a Fellow of the Royal College of Surgeons of Canada in Orthopedics. Dr. Kostuik was selected to serve as a director because of his valuable perspective and experience as Chief Medical Officer and a co-founder of the Company and as a former academic surgeon, as well as his leadership and reputation within the global spine surgery community, medical expertise and industry knowledge.