Invivo Corporate Governance

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(1) Philosophy and functions of the Board

The primary mission of the Board is to represent and protect the interests of the Company’s stockholders. In so doing, the Board has the legal responsibility for overseeing the affairs of the Company and has certain specified powers and authorities with respect to corporate action provided by the Delaware State statutes. The Board's oversight function can and should be exercised through the election and appointment of competent officers. The Board nevertheless remains responsible for oversight and thus has an obligation to keep informed in order to assist management in formulating and developing plans; it also sets necessary criteria and serves as a body to review and advise management on the operations of the Company. These duties should be discharged by the full Board, the Board’s committees, or the independent members of the Board, as appropriate in the circumstance.

Specifically, the Board, as a body or through its committees or members, should

Select, and set compensation for, the Chief Executive Officer; approve the selection and compensation of senior management; evaluate the performances of the CEO and senior management; periodically review plans for management succession; and assess the soundness of the organizational structure.
Encourage the long-term success of the Company by exercising sound and independent business judgment with respect to significant strategic and operational issues, including major capital expenditures, diversifications, acquisitions, divestitures and new ventures Safeguard the corporate assets by periodically reviewing the financial affairs and policies of the Company and overseeing the Company’s financial reporting process and internal controls.
Oversee the Company’s risk assessment process and ensure that the Company has appropriate procedures in place to manage risks and handle crises. Ensure the Company’s compliance with applicable laws and regulations. Be sensitive to the public and political environment, taking into account the responsibility of the Company to its shareholders, employees, customers, and society.
At least annually, evaluate the effectiveness of the Board as a body, the Audit Committee, Committee on Corporate Governance, and Compensation and Benefits Committee. Determine the structure, composition, and responsibilities of the committees of the Board. Remain knowledgeable about Company affairs and developments through regular attendance at Board and Board committee meetings and review of meeting materials in advance of those meetings.
Remain knowledgeable about stockholder views and concerns through direct communications from stockholders and attendance at annual stockholder meetings. Meet no less frequently than four times each year in executive session to allow full and can did discussion among Board members on matters of importance to the Company and Become exposed to a variety of perspectives on matters of importance to the Company through access to members of senior management and consultation with independent advisors.

(2) Composition of the Board

Under normal circumstances, the size of the Board should be 8-12 members. The Board should have a "balanced" membership, with representation of relevant areas of experience, types of expertise, and backgrounds. A substantial majority of the members of the Board should be independent members. To be considered independent, an outside director may not have a direct or indirect material relationship with the Company. The Board has determined that a material relationship is one which impairs or inhibits - or has the potential to impair or inhibit - a director’s exercise of critical and disinterested judgment on behalf of the Company and its stockholders. In determining whether a material relationship exists, the Board considers, for example, the sales or charitable contributions between InVivo Therapeutics and an entity with which a director is affiliated (as an executive officer, partner or substantial stockholder) and whether a director is a former employee of the Company. The Board consults with the Company’s counsel to ensure that the Board’s determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent director,” including those set forth in pertinent listing standards of the New York Stock Exchange. NASDAQ Stock Exchange, and the AMEX stock exchange as in effect from time to time. The Committee on Corporate Governance reviews the Board’s approach to determining director independence periodically and recommends changes as appropriate for consideration and approval by the full Board.

In addition, the Board has determined that to be independent, all fees paid to a director by InVivo Therapeutics must be in consideration of his/her duties as director or committee member.

Employment of any immediate family member of a director shall be subject to the prior review and approval of the Committee on Corporate Governance.

(3) Qualifications of Members To be considered for membership on the Board, a candidate should meet the following criteria:

Above all, be of proven integrity with a record of substantial achievement in an area of relevance to the Company.
Must have demonstrated ability and sound judgment that usually will be based on broad experience.
Must be able and willing to devote the required amount of time to the Company's affairs, including attendance at Board meetings, Board committee meetings and annual stockholder meetings.
Must possess a judicious and somewhat critical temperament that will enable objective appraisal of management's plans and programs.
Must be committed to building sound, long-term Company growth.

(4) Assessment of the Board

No less frequently than annually, the Board shall assess its effectiveness as a body and take any necessary steps to improve its collective capacity to represent the shareholders in overseeing and guiding the Company. In the event it is believed that an individual director is not making meaningful contributions to the overall effectiveness of the Board, the Chairman of the Board, or if there is no Chairman of the Board, the Chairperson of the Executive Committee, or another Board member, should raise the matter with the Committee on Corporate Governance, which will then seek the views of the other Board members and, if appropriate, make a recommendation to the full Board regarding the future role of the director in question.

(5) Committees of the Board

There are currently six standing committees of the Board:

Audit Committee – – oversees the Company’s financial reporting process and internal controls. This committee is directly responsible for the appointment, engagement and oversight of the independent public accountants and has sole authority to approve audit engagement fees and terms as well as significant non-audit engagements with independent public accountants.

Committee on Corporate Governance – considers and makes recommendations on matters related to the practices, policies and procedures of the Board. This committee has sole authority to retain and terminate director search firms and to approve retention fees and terms.

Compensation and Benefits Committee – makes recommendations on organization, succession, the election of officers, consultantships and similar matters, and consults on matters concerning executive compensation and on pension, savings and welfare benefit plans. This committee has sole authority to retain and terminate compensation consultants who advise on director or executive compensation and sole authority to approve retention fees and terms.

Executive Committee – acts for the Board when formal Board action is required between meetings on matters already approved in principle by the full Board or to fulfill the formal duties of the Board.

Finance Committee – considers and makes recommendations on matters related to the financial affairs and policies of the Company.

Committee on Public Policy and Social Responsibility – advises the Board and management on Company policies and practices that pertain to the Company’s responsibilities as a global corporate citizen, its obligations as a pharmaceutical company, and its commitment to high standards of ethics and integrity.

It is the Board’s philosophy that matters of significance should be considered and, where appropriate, acted on by the full Board. The Board’s committees should function to perform the duties reserved to them by statute, regulation or charter, and to identify and focus issues for discussion by the full Board. At least annually, their respective members shall evaluate the effectiveness of the Audit Committee, Committee on Corporate Governance, and Compensation and Benefits Committee.

The Committee on Corporate Governance recommends the composition of the Board’s committees in consultation with the Chairman of the Board, or if there is no Chairman of the Board, with the Chairperson of the Executive Committee. Committee assignments are subject to the approval of a majority of the full Board. Committee assignments should reflect the expertise and interests of Board members, with the goal of ensuring that Committee members have the requisite background and expertise to participate fully on the committees on which they serve. There is not mandatory rotation of Board members among committees.

(6) Continued Service on Board After Change in Career; Retirement of Directors

In the event that a director changes his or her primary position, the director will advise the Chairman of the Board of such change, or if there is no Chairman of the Board, the Chairperson of the Executive Committee, who will then consult with the Committee on Corporate Governance regarding the director’s continued service on the Board. The Committee will review each situation on an individual basis, taking into consideration the background, expertise and expected continued contribution of the director. It is expected that a director shall not hold office beyond the next succeeding annual meeting after attaining the age of 72.
It is expected that a director who also is an employee of the Company will not be a candidate for reelection following termination of regular full-time employment.

(7) Other Service

The Board recognizes that individuals should limit the number of boards on which they serve so that they can give proper attention to each board responsibility. However, the philosophy of the Board is not to set an invariant limit on the number of boards on which a director may serve. In the event that a director wishes to join the board of another company, it is expected that the director will advise the Chairman of the Board, or if there is no Chairman of the Board, the Chairperson of the Executive Committee, of his or her intention. The Chairman of the Board or Chairperson of the Executive Committee, as the case may be, will then consult with the Committee on Corporate Governance regarding whether the new commitment will allow the director to continue to fulfill his or her obligations to the Company. It is expected that a director will refrain from serving as a director, officer, employee or consultant with any competitive business during service with the Company and for three years or for a reasonable period of time, as determined by the Board of Directors, after service with the Company ends.

(8) Compensation of Directors

The Committee on Corporate Governance should regularly review the compensation that is provided to the directors of the Company and make recommendations to the Board regarding any appropriate modifications. The Compensation and Benefits Committee shall be responsible for engaging consultants and experts to assist with this process if necessary. Compensation provided to directors should remunerate the directors fairly for their service to the Board. It should also support the Company’s goal of attracting and retaining the most qualified persons to the Board.
Directors’ compensation should include stock-based components to align the interests of the directors with those of the stockholders of the Company. The Board has determined that the Company’s compensation goals are met by a compensation package that includes meeting fees, retainer arrangements, deferred compensation opportunities, and stock options. In addition, directors joining the Board prior to January 1, 1996 are eligible to receive a retirement benefit; this benefit is not available to directors joining the Board after December 31, 1995.
As with all independent directors of the Company, directors who serve on the Audit Committee may not be paid remuneration by the Company other than the compensation provided to all directors of the Company. Directors who are current employees of the Company do not receive any additional compensation for their services as directors.

(9) Stock Ownership Guidelines

On joining the Board, each director must own at least one share of stock, with a target ownership level of 5,000 shares to be achieved by each director within five years of joining the Board or as soon thereafter as practicable. Shares held in the InVivo Therapeutics Common Stock account under the Plan for Deferred Payment of Directors’ Compensation will be included in the target goal. Upon the request of a director, the Committee on Corporate Governance will consider if modification of the target ownership level is appropriate in view of a director’s personal circumstances.

(10) Chairmanship of Meetings

In the absence of the Chairman of the Board, or if there is no Chairman of the Board, in the absence of the Chairperson of the Executive Committee, the senior independent director present shall preside at all meetings of the stockholders and the Board of Directors.

(11) Director Orientation and Continuing Education

The Committee on Corporate Governance shall oversee the education and acculturation of new directors through an orientation program developed by management that exposes the director to the Company’s business and strategies, allows for formal and informal interaction with members of management, and facilitates the building of relationships with other Board members. The Committee on Corporate Governance and management shall identify and communicate external and internal training and educational opportunities for continuing directors in areas of importance to the Company.